Paris, France, February 14, 2007 ─ Dassault Systèmes (DS) (Nasdaq: DASTY; Euronext Paris: #13065, DSY.PA) reported financial results for the fourth quarter and year ended December 31, 2006.

Bernard Charlès, Dassault Systèmes President and Chief Executive Officer, commented, “2006 was a remarkable year for DS.  We delivered strong financial results growing revenue by 27% in constant currencies and earnings per share by 15%. We successfully integrated two major acquisitions within a twelve-month period. And we redesigned our 25-year strategic partnership with IBM to jointly expand the enterprise PLM offering sold by IBM and to transition to a DS-managed PLM indirect channel. Thanks to everyone’s focus across DS on innovation and execution to serve our customers, DS reached an important leadership milestone, with a total PLM market share estimated at 25%.

“Our market leadership reflects the confidence that our customers and partners have placed in us and our passion to invent new approaches to help them take advantage of the 3D virtual world as a vehicle for advancing innovation, global collaboration and productivity.

“During 2006 we completed our first ten years as a public company. Over this timeframe, DS has established a strong performance track record, delivering compound annual growth of 18% for revenues and 15% for earnings and maintaining a very attractive financial model. 2006 also serves as a very solid foundation for the coming years. With leading brands in growing markets, I believe we are well-positioned to attain our 2005-2010 goals of doubling both revenue and earnings.” 

Fourth Quarter and Full Year 2006 Financial Summary

Dassault Systèmes completed the acquisition of ABAQUS, Inc. in October, 2005 and MatrixOne Inc. in May, 2006 and has accounted for these acquisitions pursuant to U.S. GAAP (“GAAP”). In addition to GAAP information, this press release presents supplemental non-GAAP financial information which reflects certain adjustments to our GAAP information. The supplemental non-GAAP financial information adjusts our GAAP financial information to exclude: (i) deferred revenue adjustments, (ii) amortization of acquired intangibles, (iii) stock-based compensation expense and (iv) one-time tax restructuring effects. See Attachment A of this press release for an explanation of these adjustments, and tables which set forth the most comparable GAAP financial measures and a reconciliation of the GAAP and non-GAAP financial data.

Fourth Quarter 2006 Financial Highlights:

GAAP total revenue increased 15% to €349.4 million (20% in constant currencies) for the 2006 fourth quarter on a 14% increase in software revenue and a 21% increase in services and other revenue.  

Non-GAAP total revenue increased 13% to €353.2 million (18% in constant currencies) with non-GAAP software revenue increasing 11% (17% in constant currencies) and non-GAAP services and other revenue rising 21% (27% in constant currencies). CATIA and SolidWorks new seats licensed in the quarter increased 4% to 23,280 seats.

From a regional perspective, all regions contributed to the increase in non-GAAP revenue, led by the Americas with 28% growth (39% in constant currencies) and Asia with 7% growth (19% in constant currencies).  Europe increased 7% year-over-year, following a very strong performance in the year-ago quarter. 
 
From a segment perspective, both Product Lifecycle Management (“PLM”) and SolidWorks achieved strong growth.  Specifically, non-GAAP PLM revenue increased 12% to €293.9 million (18% in constant currencies), and included non-GAAP ENOVIA revenue of €71.1 million. Non-GAAP SolidWorks revenue increased 14% to €59.3 million (20% in constant currencies). 

GAAP earnings per diluted share increased 14% to €0.66 in the 2006 fourth quarter, on higher GAAP operating income and financial revenue and a lower effective tax rate. 

Non-GAAP earnings per diluted share increased 7% to €0.72 in the 2006 fourth quarter, primarily reflecting higher operating income and financial revenue and a lower effective tax rate.

Full Year 2006 Financial Highlights:

GAAP total revenue increased 24% to €1.16 billion (26% in constant currencies) on a 23% increase in GAAP software revenue and a 29% increase in GAAP services and other revenue.

  
Non-GAAP total revenue increased 25% to €1.18 billion (27% in constant currencies) reflecting a 24% increase in non-GAAP software revenue (26% in constant currencies) and a 29% increase in non-GAAP services and other revenue (31% in constant currencies). CATIA and SolidWorks new seats licensed increased 9% to 78,684.

From a regional perspective, 2006 non-GAAP revenue increased 24% in Europe, 28% in the Americas (29% in constant currencies) and 22% in Asia (29% in constant currencies).  As a percentage of total non-GAAP revenue, Europe accounted for 47%, the Americas 31% and Asia 22%.

Bernard Charlès commented, “DS 2006 financial performance was driven by broad-based strength.

• CATIA had a very good year, growing almost twice the estimated 6% growth of the CAD market, with strategic wins and increased penetration of the supply chain and target industries. As the number one PLM CAD software, we continue to see good opportunities to extend our leadership. Looking ahead, CATIA should be a key beneficiary of our new go-to-market model for the PLM indirect channel.
• SIMULIA grew twice as fast as the overall simulation market on expanding relationships with its largest customers as well as a broad level of interest across a diversified set of industries. We expect our simulation performance in 2006 to have led to market share gains for DS in this segment of the PLM market.
• SolidWorks delivered a significant increase in revenues. Working closely with its dynamic network of resellers, SolidWorks has consistently outpaced market growth and won nearly two-thirds of its new business from conversion of legacy 2D seats.
• DELMIA attained important wins during 2006. We believe that the adoption of our digital manufacturing solutions by our largest customers underlines the potential of our solutions to enable global and flexible production systems.
• ENOVIA finished 2006 with the most comprehensive collaborative offering in the PLM market, following the acquisition of MatrixOne in May 2006. We have significantly increased our ability to serve our eleven targeted industries.”      

From a segment perspective, non-GAAP PLM revenue grew 26% to €959.4 million (28% in constant currencies) on broad strength. Non-GAAP PLM revenue included non-GAAP ENOVIA revenue, which increased 64% (66% in constant currencies) to €199.7 million. SolidWorks non-GAAP revenue grew 20% to €218.1 million (22% in constant currencies) and represented 19% of non-GAAP total revenue. 

GAAP earnings per diluted share increased 1% to €1.51. GAAP operating income decreased 2% to €245.9 million. These results largely reflected the impact of amortization of acquired intangibles in connection with 2005 and 2006 acquisitions. 

Non-GAAP earnings per diluted share increased 15% to €1.83, on strong growth in non-GAAP operating income.  Specifically, non-GAAP operating income increased €46.3 million or 17% to €316.2 million in 2006. The non-GAAP operating margin was 26.9% for the full year 2006, in line with the Company’s financial objective. 

Cash flow and other financial highlights

Net operating cash flow was €38.3 million and €262.9 million for the fourth quarter and year ended December 31, 2006, respectively. Cash and short-term investments totaled €459.2 million and long-term debt was €204.3 million at December 31, 2006.

Business Outlook

Thibault de Tersant, Senior Executive Vice President and CFO, stated, “By achieving all of our objectives for 2006, attaining our revenue and earnings growth objectives and meeting our profitability goals, we have demonstrated our ability to select the right acquisitions and to integrate them while achieving double-digit core revenue growth. 

“Looking to 2007, our objectives are to deliver a good level of non-GAAP revenue and earnings growth accompanied by a stable operating margin in comparison to 2006.  Specifically, we are raising our 2007 non-GAAP constant currency revenue growth objective to 12% to 13% from the range of 11% to 12% given in October 2006. We are initiating our 2007 non-GAAP earnings per share growth objective of 9% to 12% growth, with acceleration in earnings growth as we move through the year. And we expect a stable non-GAAP operating margin of about 27% thanks to profitability improvements enabling us to make PLM channel investments as well as compensating for unfavorable changes in currency exchange rates.”  

The Company’s objectives are prepared and communicated only on a non-GAAP basis and are subject to the cautionary statement set forth below.

• First quarter non-GAAP total revenue objective of about €282 to €287 million, non-GAAP EPS of about €0.31 to €0.32 and non-GAAP operating margin of about 18% to 19%
•  2007 non-GAAP total revenue objective of about €1.29 to €1.30 billion, representing about 12-13% growth in constant currencies
•  2007 non-GAAP EPS of about €2.00 to €2.05, representing about 9% to 12% growth
• 2007 non-GAAP operating margin of about 27%
• Objectives based upon exchange rate assumptions for the first quarter and full year of  US$1.30 per €1.00 and JPY 155 per €1.00

The non-GAAP objectives set forth above do not take into account the following accounting elements: deferred revenue write-downs estimated at approximately €8 million for 2007; stock-based compensation expense estimated at approximately €13 million for 2007, and amortization expense for acquired intangibles estimated at approximately €11 million per quarter. These estimates do not include any new stock option or share grants, or any new acquisitions in 2007.

 
Strategy, Technology, Customers and Partnerships

Dassault Systèmes and IBM Expand Strategic Partnership, with IBM to Sell Additional DS Solutions.  DS and IBM recently announced a significant expansion of their 25-year partnership.  Under the terms of the new agreement, both IBM and DS will increase the scope of their responsibilities, with IBM selling DS’s expanded portfolio of PLM solutions, and DS assuming management of the PLM indirect sales channel through a transition expected to be completed in early 2008.

Boeing Simulates and “Manufactures” 787 Dreamliner at Industry-First Event with 3D PLM from Dassault Systèmes.  On December 6, 2006 Boeing completed a virtual roll-out of its 787 Dreamliner.  This first-ever virtual rollout was not simply an animation of the completed airplane, but a virtual simulation and validation of the entire manufacturing process.  Dassault Systèmes’ PLM solutions used by Boeing on the 787 Dreamliner include DELMIA for virtual planning and production, CATIA for virtual product design, and ENOVIA VPLM for enterprise-wide collaboration. 
 
OMRON Corp., a Leading Manufacturer of Control Equipment for Factory Automation, Integrates DELMIA Automation into its New Generation of Control and Network Solutions. DELMIA Automation V5 enables the optimization and validation of a given manufacturing process in a 3D virtual environment from control design processes to the shop floor environment. By performing pre-validation in 3D, “virtual commissioning”, DELMIA Automation V5 allows control departments to work in parallel and share information with mechanical and electrical departments earlier in the development process, optimizing engineering processes. 

Conference call information  
Dassault Systèmes will host a teleconference call today, Wednesday, February 14, 2007 at 3:00 PM CET/2:00 PM London/9:00 AM New York.  The conference call will be available via the Internet by accessing http://www.3ds.com/corporate/investors/. Please go to the website at least fifteen minutes prior to the call to register, download and install any necessary audio software.  The webcast teleconference will be archived for 30 days.  Financial information to be discussed in the call will be available on the Company’s website prior to commencement of the teleconference at http://www.3ds.com/corporate/investors/. Additional investor information can be accessed at http://www.3ds.com/corporate/investors/ or by calling Dassault Systèmes’ Investor Relations at 33.1.40.99.69.24.

Cautionary statement regarding forward-looking statements: Statements above that are not historical facts but express expectations or objectives for the future, including but not limited to statements regarding our financial performance objectives are forward-looking statements (within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended).  Such forward-looking statements are based on management's current views and assumptions and involve known and unknown risks and uncertainties.  Actual results or performances may differ materially from those in such statements due to, among other factors: (i) currency fluctuations, particularly the value of the U.S. dollar or Japanese yen with respect to the euro; (ii) reduced corporate spending on information technology as a result of a decrease in the market demand for our products and services; (iii) difficulties or adverse changes (a) affecting our partners or our relationships with our partners, including our longstanding, strategic partner, IBM, and (b) arising from the current reorganization of our PLM sales channels;  (iv) new product developments and technological changes; (v) errors or defects in our products;  (vi) growth in market share by our competitors; and (vii) the realization of any risks related to the integration of  MatrixOne or any other newly acquired company and internal reorganizations. Unfavorable changes in any of the above or other factors described in the Company’s SEC reports, including the Form 20-F for the year ended December 31, 2005, which was filed with the SEC on June 30, 2006, could materially affect the Company's financial position or results of operations.