INDUSTRY

MSC.Software Corporation today announced preliminary revenue results for the third quarter ended September 30, 2006. For the third quarter ended September 30, 2006, the Company expects to report revenue in the range of $58 - $60 million compared to revenue of $75.6 million in the third quarter last year, which included $2.6 million of revenue associated with the Company's PLM business which was sold in March 2006 (of the total $2.6 million of PLM revenue, $1.5 million was software revenue and $1.1 million was services), and $7 million in software revenue that resulted from restatement adjustments related to software revenue recognition. The net restatement adjustments arise from software revenue recognized in the third quarter of last year for transactions that occurred prior to January 2005. Adjusting for PLM and the accounting restatement impact in the third quarter last year, it is estimated that software license revenue decreased by approximately 15% in the 2006 third quarter, while maintenance revenue was essentially flat and services declined by approximately 28%. Additionally, revenue in this range may result in a small GAAP net loss for the quarter. In reviewing the fourth quarter results for 2005, it is important to note that PLM revenue reported in the quarter totaled $2.9 million (of the total $2.9 million of PLM revenue, $1.7 million was software and $1.2 million was services). The net restatement adjustment for software revenue in the fourth quarter last year was approximately $6 million. The revenue range and revenue growth rate are estimates and may change pending the Company's management and independent auditor's completion of their normal quarterly closing and review procedures. "We believe that the third quarter financial results reflect the challenges associated with the transition to selling enterprise simulation solutions," said Bill Weyand, CEO and Chairman of MSC.Software. "These challenges result in delayed purchase decisions on the part of our major customers, a longer approval processes within their organizations and the lengthening of sales cycles. In addition, recognition of certain enterprise simulation software revenue in the quarter was deferred to future periods." "The transition to larger transactions makes the timing of closing these transactions harder to predict," continued Mr. Weyand. "We are seeing very positive feedback from our customers on our new enterprise simulation solutions, and we are encouraged with the momentum we are building in our pipeline and with the activity being generated by our IBM/MSC strategic alliance. In addition, we have and will continue to evaluate our cost structure going forward."