Aspen Technology

Aspen Technology

Aspen Tech, a rapid growing, 13-year-old software firm has created its financing needs due to the following aspects of business strategy. On the one hand, the enterprise attached great importance to business expansion and development. Through acquisition of a UK subsidiary and initial public offering, the company achieved a great success in both its sales growth and scales acceleration. On the other hand, the company always excelled in the research and development of products though the whole industry. As a major player in the process simulation segment of the software industry, the Aspen Tech is not only creative and specialized in products making, but also customer-oriented in its service and supports. In terms of sales and marketing, unlike other rival companies, Aspen Tech allowed customers to test its software to compare its product with that of competitors. What’s more, it offered its customers special treatment, such as allowing its customers to pay in annual installments. Aspen Tech laid more emphasis to quality rather than price, which earned the company considerable customer loyalty.
However, what accompanied with the increasing demand and its success in both reputation and revenues is an operating cash shortfall and increased foreign exchange risk exposure due to large order amounts from abroad and huge oversea costs. Because of the special treatment they offer to customers, most customers, including foreign buyers, choose to pay in installments, which is the key reason for the large corporation’s cash shortfall. Aspen Tech used financial instruments such as forward contracts and sales of foreign currency receivables to manage its sales-related exposures, but didn’t use any financial contracts to manage its expense-related foreign exchange exposures.
It is reasonable for the company to maintain their marketing strategy. The main reasons lie in two aspects: given the objective of the firm’s hedging policy, its hedging program met the goal and...