SDRC was a leading company specializing in MCAE and PLM software.
History
SDRC was formed by engineers, led by then associate professor Dr. Jason R. Lemon, from the University of Cincinnati in 1967, as a consulting company specializing in structuraldynamics, or how mechanical parts vibrate. US Steel was a primary customer and early investor, until selling their shares to General Electric in the early 80's. To aid in its consulting, the company wrote software to simulate and predict vibration. Companies began asking for rights to use this software, and thus SDRC entered the software market. In the 70s, SDRC became known as a Finite Element and Modelling company, and during the 80s and 90s became one of the leading companies in solid modeling and analysis. SDRC is well known globally as one of the first to coin the term "MCAE" in the 70's. Dr. Lemon left SDRC in 1982 to form a new start up in 1983, International TechneGroup Incorporated; focused on applying CAE early in product development to lead design, a methodology known as CP/PD. Among several technologies pioneered by SDRC, it was one of the first companies to introduce a Product Lifecycle Management solution, as a result of its joint venture with Control Data. The product, Metaphase, eventually became the sole property of SDRC.
Financial Scandal
On September 14, 1994, SDRC announced that it would be forced to restate its previously-announced earnings. Months later, it was revealed that the Company had overstated its revenue over the three previous years by a combined total of $68 million, citing improprieties in its Far East reseller operations. After the scheme was disclosed, $30 million in SDRC software was discovered in a warehouse at Cincinnati/Northern Kentucky International Airport.
Company executives fined
On April 11, 1997, the former chairman of SDRC and four other former company executives agreed to pay $1.5 million to settle charges that the Milford software company artificially inflated earnings and revenues from 1992 to 1994. Vice president Tony Tolani paid the government $1 million; Chairman/CEO Ron Friedsam was fined $100,000; CFO Ron Hoffman paid $200,000, VP Robert Fischer, $157,000; and Controller Dick LaJoie, $25,000. The resulting class-action shareholder lawsuit was settled on November 21, 1997, with SDRC agreeing to pay $37.5 million in payouts to affected shareholders.
Auditors sanctioned
The SEC also sanctioned the KPMG audit partners responsible for independent audits of company financials at the time. Philip Present and William Scanlon were sanctioned by the SEC, with restrictions on their accounting practice and ability to represent public companies imposed by SEC action. " Present and Scanlon were also aware that audit differences, representing 22% of the net income originally reported by SDRC for 1993, were not reflected in SDRC's 1993 financial statements"
Acquisition
SDRC was purchased by EDS in 2001 for a reported $950 million. SDRC was merged with EDS subsidiary UGS Corp.. The new combined company operated as EDS PLM Solutions from 2001 through 2004. EDS sold off its CAD/PLM software business to a group of private equity firms in 2004. The new UGS Corp. operated as an independent, privately held company before being purchased by Siemens AG in 2007.
