MacNeal-Schwendler grows 50% with acquisition: software designer buys Costa Mesa high-tech firm.

MacNeal-Schwendler Corp., a Los Angeles-based software company, will boost its size by more than 50 percent with the shareholder approval of a proposal to acquire another high tech company, PDA Engineering Inc. in Costa Mesa, for about $60 million.

Shareholders of MacNeal-Schwendler approved the proposal to buy PDA late last week. Larry McArthur, president of MacNeal-Schwendler, said prior to the shareholder meeting last Thursday that early proxy returns had indicated the proposal would be approved.

In the fiscal year ended Jan. 31, MacNeal-Schwendler reported revenue of $76.1 million. In its last fiscal year, PDA had revenue of about $40 million, said McArthur.

The acquisition is a stock-purchase agreement at a prearranged price of $15.15 per share.

The deal is one of a series of ongoing changes at MacNeal-Schwendler that officials said could boost potential sales from under $500 million to the $2 billion range.

In addition to acquisitions, those changes include increased spending on research and development, and conversion to more commercial work.

"We are the industry leader right now in size and profits and market share, and our phones are going constantly with companies that want to merge with us. The industry is consolidating and we're in the front," McArthur said.

MacNeal-Schwendler was founded in 1962 by Chairman Richard MacNeal. It has about 25 percent of the worldwide market for computer software that tests the performance, reliability and safety of new products, according to company representatives.

Most of the products are large component parts like wings of aircraft or sections of automobiles but other items include contact licenses. For example, with a MacNeal-Schwendler software program, an automobile designer can test certain parts or products without having to actually manufacture the item.

Until recent years, MSC's primary customers were defense and aerospace firms, which at one point comprised as much as 80 percent of its business. That has shrunk to about 30 percent now and the company's primary customers are automobile-related clients.

Last week, just before shareholders were scheduled to vote on the PDA acquisition, MacNeal-Schwendler, whose shares are traded on the American Stock Exchange, released its latest quarterly results.

For the three months ended July 31, it reported revenue of $21.1 million vs. $20.6 million in the same 1993 period, and net income of $2.9 million vs. $3 million.

McArthur said the dip in net income was the result of a big increase in research spending. He said in the same 1993 quarter, the company spent $5.6 million on research compared to $6.9 million in the recent period.

He noted the company has begun increasing its spending on research to develop new testing software that will be usable by more people. Right now, he said, most of the company's software users have doctorate degrees in engineering. The company wants to develop software that can be used by product analysts who have four-year college degrees.