Leica Acquires ERDAS, LH Systems; Expands its Focus on the GIS/RS Market

By Adena Schutzberg

Swiss Leica GeoSystems announced Friday April 27, 2001 that it had purchased ERDAS, Inc (image analysis software) and obtained the remaining 50% of shares in LH Systems (aerial photography) from joint owner, BAE Systems.Leica will pay about US$30M plus stock for ERDAS and about US$15M for the remainder of LH Systems.

Leica has been growing its GIS and Mapping Division since last year's IPO, which yielded enough cash to purchase US-based Cyra Technologies Inc.(3D scanning company focusing on engineering clients), US-based Laser Alignment, Inc.(high-precision 3D guidance and automated machine control systems producer) and to increase holdings in AED Graphics AG (Germany-based GIS software).

In a conference call for investors on Monday April 30, Hans Hess, Leica CEO explained that he wants a strong foothold in the "emerging" GIS/RS marketplace.He quoted statistics estimating the current market at US$2 billion, with an expected 20% increase in the coming years to top out at about US$5 billion 2005.This total includes hardware, software and services.Leica eventually hopes to hold 10% of the entire marketplace.

Leica reasons that each of the new acquisitions now owns 45% of its respective market, giving Leica an immediate and significant market share.Leica described its competitors this way: Z/I Imaging, a company 60% owned by Intergraph, and LH Systems together own 80-90% of the photogrammetry market.ERDAS' main competitor is Canada-based PCI with about 20% of the market, followed by Earth Resource Mapping with about 15%.

Leica has given ERDAS' and LH Systems' management teams incentives to stay on and has committed to giving the two companies reasonable freedom to develop their brands.At the same time, Leica will try to integrate all of their GIS/RS offerings.

Leica is taking on no debt in the acquisitions.ERDAS had US$23.5 million in sales last year with about US$3 million in profit.LH Systems had $US35 million in sales with about US$5 million in profit.The ERDAS acquisition is anticipated to close in May with LH Systems to follow in June of 2001.

The acquisitions will definitely give Leica a large part of the GIS/RS market.Leica will have a strong imagery data capture side (LH Systems), analysis (ERDAS) as well as GIS and surveying hardware and software.With the ERDAS acquisition, Leica draws itself even closer to ESRI, a long time ERDAS partner.This relationship alone will help open up new markets.The challenge for Leica will be to integrate the offerings carefully.Leica's largest clients, government mapping agencies, utilities, telcos and environmental firms can surely use all of these products and services - and the company hopes that is exactly what they will choose to do.

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Published Tuesday, May 1st, 2001

Written by Adena Schutzberg



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