Aspen Technology, Inc: Currency Hedging Review HBS

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Aspen is a software company which was established in 1982. The company mainly provides simulation solutions to process manufacturing companies. The main industry which the company focuses on is chemical processing. The entire idea began with the project of Advanced System for Process Engineering in MIT in 1976. This project was than acquired by Lawrence Evans whom founded Aspen. In a very short amount of time Aspen became a major player in the simulation part of the software industry. The company started off as a privately owned firm but in 1995 turned into a publicly traded company with a capitalization of 200 million dollars. The leading product of Aspen is Aspen Plus; we have to note that 48 % of sales were stemming from
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The sale of receivables also depends on the purchasing willingness of counterparties. Aspen could find itself in a contracting finance cycle if the deferred payments are not paid on time and the finance institutions are willing to accept any further long term installment receivables. We also have to note that the company has further liabilities such as the 4 million dollar subordinated debenture to the Massachusetts Capital Resource Company. In the case of delayed payments of receivables, the purchasing unwillingness of finance institutions towards future sale of receivables and currents loans could trigger bankruptcy of Aspen. The long term deferment plan increases business but poses grave risk for the cash flow of the company. We also have to note that positive cash carries great significance as Aspen is now a publicly traded company, the cash flow could directly affect the stock price of the company and therefore influence the interest of investors towards Aspen. The company is also subjected to foreign exchange exposures due to the sales in foreign markets. The data shows us that 48 % of Aspen’s revenues come from United States, 31 % comes from Europe, 12 % from Asia and 9 % from other regions of the world. This subjects the company to have a hedge plan for British pounds, Yen, Yuan, Mark. We have to distinguish the fact that the company has hedging for receivables however this does not apply to expenses. We can come to the conclusion that the

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