In 1998 Avid bought Softimage from Microsoft for $285 million. Today, Softimage has been sold to Autodesk for $35M. Admittedly back then the deal included DS, but has Autodesk just done the deal of the year? To find out more about how this deal came about and what it means to the 3D visual effects community we spoke to Marc Stevens, GM of Softimage and Marc Petit, Sr. VP, Autodesk Media & Entertainment.

Softimage was founded in 1986 by National Film Board of Canada filmmaker Daniel Langlois. The company was later bought by Microsoft in 1994. Microsoft bought Montreal-based SoftImage for $130 million. AVID subsequently bought Softimage in 1998 for $285 Million. This price included DS – now AVID DS. To give the deal some perspective in 1998 Softimage ran on Windows NT and SGI (remember them).

Under the terms of the deal, Redmond based Microsoft ended up owning about 9 percent of Avid. and Intel Corp. also held a substantial interest in the company. At that time AVID issued a press release saying that they would not be “retreating from the Mac”. Rick Keilty then product manager for Media Composer, said Avid’s video editing package “will remain exclusively on the Mac, even though Softimage – and Avid- developed video finishing products will focus on other platforms”. Of course they did not and that led to Apple offering Final Cut Pro. But in 1998 Final Cut was not a product and AVID owned the lucrative offline editing space.

Demo at Siggraph 2008

Fast forward to today and AVID is losing money, a lot of money at a time when it is hard to get lines of credit and global markets are diving into a recession. But problem with turning around AVID are different than those facing Softimage itself. XSI, especially with the latest version and with ICE has been regaining popularity – as seen by the huge queues at the Softimage stand at Siggraph this year. While the accounts from Softimage are not released, in the last quarter Gary Greenfield, Avid’s chairman and CEO commented in an investor briefing that Softimage contributed $4M to AVID, which one could annualise to sales of about $16M a year, placing the sale price of Softimage at a sensible multiple to earnings, especially given the current climate. As valuable as Softimage is to Autodesk it does not appear so much as a firesale as a strategic sale by AVID’s new management to lighten their portfolio and refocus on their core business.

AVID has revenue of $638.2 million in the last 9 months which annualizes to $850M, so Softimage represents only 1.8% of their annual sales. While they will make $35M selling Softimage, their net loss for the quarter was $66.4 million.

AVID installed a new management team at the beginning of the year and it is this team that after reviewing the company as a whole decided to sell the division. The Softimage business unit acts as a separate operating unit, with its own very motivated sales and marketing team, so the split was not going to be messy or relatively complex.

The new team at AVID, according to Marc Stevens, General Manager of Softimage, decided that to grow in the 3D market they would need to make a very significant investment and thus the best thing for both Softimage and AVID was to sell the division, “at that point we started a pretty extensive process, we spoke to a lot of people, … Autodesk was not the first company approached by AVID” he commented to fxguide.

Stevens does not agree that the sale is related to the current economic global crisis, ” AVID knew that they had a pretty valuable asset, they were not in a rush to get rid of it at any price”. “Once Marc (Petit) saw the possibility, they moved very quickly”. When we asked point blank, Mark Petit, Autodesk Senior vice president, said that they thought they could sell more XSI than AVID had, and that Autodesk was a better fit than AVID for Softimage, he went on to say that with Autodesk’s much stronger channels, “we can now give XSI much more coverage than they had before, we have a big presence in the educational channels so they can expect to see an acceleration of usage, and… we can get tools into the hands of younger people earlier”.

Softimage Product Integration upon completion of the acquisition

Marc Petit at Autodesk NAB User Group 2008

Autodesk intends to continue developing and selling Softimage’s core product line, while integrating certain Softimage technology into future versions of Autodesk solutions and products. Inside AVID Inc, Steven’s describes Softimage as a “virtual business unit”, it reported into the video unit, and was not financially a separate entity, – “but it had its own dedicated, sales marketing and product team”. At Autodesk Marc Petit, believes that ” people know what tools they want and they have emotional ties to their products”, but he admits in such mergers their will be job losses related to finding economies of scale and reducing redundant overlap.

One product that will certainly benefit from the deal is the Face Robot software, this will continue to be developed, and the product already works with Max and Maya, “but the perception has been you had to use it only with XSI and that is absolutely not true” explains Stevens.

The press release for the deal spins the deal a little towards the gaming market, XSI is primarily used for films, but does not have Renderman support. XSI users now via Autodesk may now have new opportunities to get to Renderman, and Autodesk certainly carries a lot of weight at PIXAR. XSI does have some very real technology advantages in real time performance something Autodesk is keen to exploit especially in the gaming market, but not exclusively there.

Petit believes a key technology moving forward is FBX, as 3D becomes data centric he sees FBX as very central to the softimage XSI product integration. Softimage has its own interoperability technology Crosswalk, which is a platform for data transfer and this already talks to FBX, but Steven’s sees this as also a key area for growth and further research. Petit comments that with FBX extensions into lighting as being of great interest to film studios, “FBX is the backbone of the data centric pipeline, it is “definitely something we are looking at, the ability to convey sophisticated data, shaders, creative intent, colour information, other decisions- we have a lot of work going on in that domain” says Petit.

In terms of related technology, Autodesk also gets all the old Matador, Elastic Reality and related technology that XSI inherited from AVID. Although Petit joked that they did have quite a bit of lot of keyers and paint technology already inside Autodesk.

All current relationships between Softimage and third party companies is expected to continue – but Syflex is one relationship that did not exist with Autodesk, given their own technology, similarly XSI lacks a fluid simulation, although ICE seems a perfect place to expand XSI to include this. Both Petit and Stevens agree that in these areas there will be the opportunity for technology sharing both ways. “in mergers there are always redundancies, so we will be looking into those and identifying them eventually,”, on resellers and sales channels, ” we will do integration planning once the deal is closed, but in the short term don’t expect to see any difference, but over time we have a lot of overlapping distribution channels. Petit would not be drawn on exact pricing but he thinks that the market sees the “current pricing as fair”. The deal will not be finalized for a month. The first public joint marketing or appearance will be at Siggraph Asia in December, “it will be our first public appearance”

Petit points to the move as a great example of Autodesk’s commitment to the post and animation industries. Many companies are not buying or merging, nor expanding in anyway due to the economic crisis, but both Petit and Stevens both work in Montreal, their teams know each other, and they believe that the economic crisis that now faces the global community is a storm and ” we thought it was very natural to go together, and to weather the storm together”.

Autodesk now has the most powerful portfolio of 3D products that any company has had since the birth of 3D. Petit points to others making significant 3D investments: companies such as Nvida move with Mental Images, Microsoft’s R&D investments, Adobes move to include 3D in flash and Google with products such as Sketch up, Maxon and others.
Still one could be concerned whether this move will reduce the competition in the 3D market, Petit replies that “3D is coming everywhere and the business,… the landscape has completely changed… we are ready for a good fight, we think we are a leader but in the long run we expect it to be a very competitive and heated market place”.