PhillyDeals: Exton product-sensor firm sold

PTC Inc. , of Needham, Mass., bought Exton's ThingWorx.
PTC Inc. , of Needham, Mass., bought Exton's ThingWorx.
Posted: January 02, 2014

Your vehicle and its builders, your washing machine and the power company, your supermarket's produce case, and the tractor that harvests your vegetables: They're all talking about you and what you want - or will be soon, thanks to electronic sensors and the software being written to link them into an "Internet of things."

ThingWorx, a not-yet-profitable Exton software firm that helps companies exploit the user data that "smart connected products" are starting to send one another other via WiFi, Bluetooth, and remote cloud computer servers, has been sold to publicly traded industrial software-maker PTC Inc., of Needham, Mass., by owners including Safeguard Scientifics of Wayne and founders Russell Fadel and Rick Bullotta for $112 million.

PTC will pay an extra $18 million to the founders and other owners if sales rise as expected over the next two years. The company employs about 50, who expect to become part of PTC.

ThingWorx, which expects sales of about $10 million in fiscal 2014 from licensing its systems for use by sensors on medical scanners, mining equipment, and other machines, says manufacturers such as General Electric, software-based firms such as Oracle, Google, Twitter, and, and system integrators have used its software "to connect and collect streams of data coming from online products" and "to build business applications that listen to and analyze those data streams," PTC chief executive James Heppelmann told analysts in a conference call Tuesday.

PTC has industrial software of its own, but has reported flat sales in the last year and expects only "lackluster" growth in the near future, analyst Yun Kim wrote in a report to clients at Janney Capital Markets.

Kim endorsed Heppelmann's view that machine connectivity "will be the single most significant disruptive force in the marketplace . . . as products become smarter." But the analyst pointed out that having cool new technology doesn't guarantee profits any time soon.

On the call, Heppelmann said ThingWorx hopes to sell more systems that will, for example, automatically alert factories and their maintenance contractors when it's time to add oil or replace parts: "There's an explosion of possibilities."

PTC was developing similar software but found that ThingWorx was "years ahead of everybody," Heppelmann added. He said Fadel would remain ThingWorx's president.

Fadel told investors that ThingWorx will serve not only factories, but "smart agriculture, smart buildings. . . ."

"Everything from smart minds, smart cities, and so much more," Heppelmann added, according to a transcript of the conference call.

Fadel and Bullotta previously founded Lighthammer Software Development Corp., also in Exton, and sold it to SAP AG, whose U.S. headquarters is in Newtown Square, in 2005, then left to start ThingWorx. The $18 million "earn-out" that is part of PTC's purchase price includes incentives designed to make it worth the founders' while to stay at least two years, PTC hopes.

Safeguard, which led a $5 million investment in the firm in 2011 and an additional $8 million investment in 2012, said in a statement that it expected to collect $40.5 million in gross income from the sale, plus $6.5 million from the earn-out.

That works out to a profitable four times Safeguard's total investment - or more, if the earn-out comes through, Safeguard managing director Erik B. Rasmussen said in a statement.

215-854-5194 @PhillyJoeD

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