Prosolvia AB - The Real Story Behind the Virtual Reality Company

Prosolvia AB - The Real Story Behind the Virtual Reality Company
Prosolvia AB Chronology


• January 1987 - Two Swedish Graduates from Chalmers University of technology founded Prosolvia AB

• January 1987- January 1997 - During the first 10 years Prosolvia became the worlds global leading Virtual Reality and Simulation company with focus in Defense Simulators, Numerical and 3D Simulation for Design and Manufacturing Simulation. The company grew profitably from 2 employees to over 225 employees, 14 offices with no external financing or external equity.
The Prosolvia Group, consisted of the following key groups:
- Prosolvia Research and Technology - specialized in numerical simulation and mechanical design, electronics, and software development
- Prosolvia Systems manufacturing simulation
- Prosolvia Clarus visual stimulation
For details see: http://prosolvia.blogspot.com/2007/07/what-has-happened-with-prosolvias.html


• June 1997 – April 1998 The Company went public on the Stockholm Exchange and raised $ 46 million during the IPO at $100 million market capitalization, reaching a market capitalization value of $ 512 million by April 1998. The company used the capital to accelerate the growth; the number of employees went up from 225 to 586 from 1997 to 1998. This resulted in a significant revenue increase of 94% (1997 to 1998) but also increased costs making the company more vulnerable from cash flow perspective.

• April 1997 - The financial newspaper Dagens Industri (followed by other news papers) alleged irregularities related to accounting. The shares took a significant hit and had a negative impact on customers.

• May 1997 - Prosolvia board (CEO included) ordered an extra audit from its auditors Cooper & Lybrand of the first quarter figures to meet the allegations. The auditors conducted a detailed review and found the accounting to be correct. In addition Stockholm Exchange department for Market Surveillance started an inquiry lead by Ernst & Young. The company was placed on the so-called "observation list" during the inquiry period. Finally Stockholm Exchange department for Market Surveillance presented a report from Ernst & Young that found Prosolvia’s accounting to be correct. As a result Prosolvia was fully reinstalled on the Stockholm Exchange.

• June 1998 – The media storm did not decrease by these measures. In an aim to help the company and restore the positive image the Board persuaded the companies CEO and (second-in-command) to resign. As a part of this decision several key members of the original team that help building the company over 10 years also left. The CEO decided to move to USA.

• June 1998 – A New management was put in place. This new management lacked the strength and entrepreneurial spirit that had made Prosolvia successful over 10 years; they focused on reorganizations and internal company activities. As a result the company reported a loss for the first time in its 11 years history. The Founders had to lend the company some $3.5M to cover the cash short fall. The management found it necessary to find an external business partner.

• August 1998 – Several companies were eager to invest in Prosolvia including ABB, GE, etc.
but the Board and Prosolvia’s new CEO Mr. Ekener insisted in selecting the Government Controlled investment group Industrifonden as a partner. Industryfonden promised to invest $35 Million to provide long term for growth which would minimize any lay off requirements. Industrifonden required that the Founders agreed to sell their shares (67% of the company) at significantly reduced value. This was not the Founders preferred choice as they believed that a government controlled company was not the right partner for Prosolvia.
However, the Board majority voted in favor to accept Industrifonden to keep the company intact. Consequently, the Founders sold all their Prosolvia shares, discontinued all theirs relations with Prosolvia and the former CEO moved permanently to USA.

• October 1998 – Industrifonden immediately reappointed a new management and their own CEO and declared to the shareholders and customers that they are long term stable key owner committed to Prosolvia’s financially support Prosolvia’s and future development. Reassured by this the new management interrupted the aggressive cost cutting measures as well as back up partnership alternatives initiated by the former management.


• October - November 1998 - The financial newspaper Dagens Industri now attacked Industrifonden accusing them that the Prosolvia’s take over broke the rules of their government founded Charter. They claimed that Industrifonden was set up to invest in small companies not in Public companies. This became a very sensitive matter as Sweden’s Finance Minister was a member of the Industrifonden’s Board. Fueled by this new media storm the Swedish Political opposition initiated a Parliamentary inquiry lead by the Chairman of Konstitutionsutskottet.


• December 1998 – The Parliamentary inquiry became a very uncomfortable process for the Swedish government and run almost daily in the news. Consequently, the Government Controlled investment group Industrifonden decided not to follow through with its $35 Million investment in spite of its promises to shareholders, media and employees

• December 28 - 1998 Prosolvia AB new Board and Management was forced to file for bankruptcy after its main shareholder the Government Controlled investment group Industrifonden, refused to provide further funding for the company.

• January 1999 – April 2005 Prosolvia’s shareholders, former employees and lenders started legal procedures against Industrifonden Management for the breach in agreement. In a classical “wag the dog” diversion tactics Industrifonden initiated a Media Campaign blaming the former Management and the auditors and trying to reopen the case for cleared alleged irregularities related to accounting during the 1997 period. Thanks to its political influence these tactics were successful and lead eventually to a large trial against the auditors (Coopers & Lybrand) and former Management. The trial resulted in at all allegations against the auditors (Coopers & Lybrand) and former Management (including the Founders ) were dismissed. The Founders won the case and received the proper recognition from media, shareholders and management.

What has happened with Prosolvia’s Technologies after 1998?

The Prosolvia Group, consisted of the following key groups:
- Prosolvia Research and Technology - specialized in numerical simulation and mechanical design, electronics, and software development
- Prosolvia Systems manufacturing simulation
- Prosolvia Clarus visual stimulation


1. Prosolvia Research and Technology

This company was purchased by Frontec Research & Technology and later by Sigma/Teleca an IT an international consulting group that provides IT services and R&D outsourcing in development and integration of software and electronics

2. Prosolvia Clarus

Prosolvia Clarus products & organization have been most successful:

2.1 EON Software
This is the largest and fastest growing part still independent. The EON software was bought and created the foundation for EON Reality, Inc., the world's leading interactive visual content management software provider. By using EON software solutions companies can now effectively capitalize on existing investments in Product Lifecycle Management (PLM) to increase sales, communicate product functionality more effectively, and decrease the cost of service, training and technical support. Many large corporations such as Suzuki, Siemens, John Deere, Atlas Copco, Toyota, Tetra Pak, Boeing, Bombardier, Intel, Peterbilt, Lexus, Hon, Samsung, Shimano, Audi, and Nokia are using EON's software solutions. http://www.eonreality.com/


2.2. Oxygen Software
The Oxygen software was bought and created the foundation for Opticore which started to market its products in 1999. The company operates within the market for high-end, 3D real-time and photorealistic visualization. Opticore have a market leading position in its area with a customer list of over 180 clients, including a majority of the worlds major automotive OEMs, design firms and design studios. http://www.opticore.com/
Autodesk acquired Opticore in 2007 http://www.carbodydesign.com/archive/2007/06/20-autodesk-acquires-opticore/
http://gp.se/gp/jsp/Crosslink.jsp?d=913&a=353607
http://investors.autodesk.com/phoenix.zhtml?c=117861&p=irol-newsArticle&ID=1016330&highlight=

2.3 The Medical Simulation Software
The Medical Simulation Software software was bought and created the foundation for Mentice is a leading supplier of virtual reality (VR) based applications within the field of medicine, with special attention to the area of minimally invasive surgery. The company has complete product portfolios in the areas of endovascular and cardiovascular intervention, laparoscopy and arthroscopy.
Mentice is heading the broader introduction of surgical education based on modern simulation technology as a tool in the clinical learning process to improve education and training, reduce cost of education, and increase patient safety. http://www.mentice.com/

2.3 The Prosolvia Organization in Germany
Key Members of The Prosolvia’s Organization in Germany became Opticore distributors and later formed RTT a Virtual Reality, 3D Software, Real-time Technology focused on for Automobile design http://www.rtt.ag/rtt/index.html
3. Prosolvia Systems manufacturing simulation

3.1 Digital Plant Division
Tecnomatix technologies purchased Prosolvia Digital Factory Division in 1998, the Numerical Simulation Part for Manufactoriong In 2005, UGS purchased Tecnomatix Technologies Ltd. On January 24, 2007 the German electronics giant Siemens AG announced that they would acquire UGS for $3.5 billion. When the deal completed, UGS became part of Siemens Automation & Drives group as the UGS PLM Software division. UGS will provide hardware, software and services for Siemens' so called digital factory.

3.2 Robotic simulation part
ABB technologies purchased Prosolvia’s Robotic simulation Division in 1998.

The combined marked value of these groups is estimated to far exceed the peak market cap value of the Prosolvia group