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04 January 2005

UGS to Acquire Tecnomatix; Acquisition a Major Milestone in Expanding UGS Leadership in High-growth Digital Manufacturing

FOR RELEASE Tuesday, January 4, 2005

PLANO, Texas – UGS, a leading global provider of product lifecycle management (PLM) software and services, today announced a definitive agreement to acquire all of the outstanding equity of Tecnomatix Technologies Ltd. (NASDAQ: TCNO), the leader in Manufacturing Process Management (MPM) software solutions for the automotive, electronics, aerospace and other manufacturing and processing industries, for approximately $228 million in cash, or $17.00 a share.

The transaction represents another strategic milestone for UGS as it continues to expand its suite of software solutions in order to provide value across a product’s entire lifecycle.  Today’s announcement demonstrates the company’s continuing dedication to leadership in the high-growth sector of digital manufacturing – a PLM strategy that focuses on improving every aspect of how a company builds its products.  CIMdata, a leading PLM consulting and research firm, estimates that investments in digital manufacturing initiatives by industrial companies are expected to grow by more than 25 percent annually over the next three years.  UGS has reported a nearly 100 percent increase in digital manufacturing-related revenue over the last four quarters.

UGS currently deploys Tecnomatix software in conjunction with its Open Manufacturing Backbone (OMB), a globally-scalable technology backbone designed to transform the process of digital manufacturing through an open environment in which third-party software applications can interoperate.  As a result of the transaction being announced today, UGS now expects to speed up the integration with Tecnomatix solutions and deliver these solutions as an integral component of both its OMB and its E-factory digital manufacturing solution more quickly and seamlessly.

“Integrating Tecnomatix into UGS is a natural but significant step in our digital manufacturing strategy and should accelerate our ability to deliver this premier software on behalf of UGS and Tecnomatix customers,” said Tony Affuso, chairman, CEO and president of UGS.  “Customers that have committed to digital manufacturing technology from Tecnomatix and/or UGS can expect to see enhanced delivery of even deeper and richer capabilities going forward as we more fully integrate our respective solutions. 

“We believe that the Tecnomatix team brings to the table a tremendous amount of industry knowledge and deep expertise in digital manufacturing technology.  We expect the combination of the Tecnomatix team with UGS’ PLM- and digital manufacturing-leading capabilities to enable UGS to provide unparalleled technical understanding and the deepest and broadest coverage on a worldwide basis in the digital manufacturing market.”

Formalizing an Existing Relationship

The transaction – which, subject to the receipt of required regulatory approvals, is expected to close by the end of the first quarter 2005 – marks the formal linkage between UGS and Tecnomatix, which have been working closely together through a strategic alliance since 2002.  Following the close of the transaction, the companies intend to offer a fully integrated solution of Tecnomatix MPM to UGS Teamcenter® users while continuing to offer Tecnomatix’ leading open standalone MPM solution integrated with the PLM environment of choice for its customers.  In addition, the companies intend to announce additional technology enhancements later this year.

“We are confident that the combined technologies and know-how of both companies will enable us to offer the best manufacturing planning and execution solution for the benefit of all customers," said Harel Beit-On, chairman of Tecnomatix.  “In addition, unlike with other technology acquisitions, this one is prefaced by more than two years of close collaboration between our companies, so the formal integration of Tecnomatix technologies into UGS’ digital manufacturing solution promises to go very smoothly. 

“The two organizations have been working well for the past two years and the Tecnomatix employees are looking forward to becoming a part of the leading PLM team in UGS.”

Continued Investment in Business

The Tecnomatix transaction marks UGS’ fourth technology acquisition since the company launched independent operations in May 2004.

“UGS continues to grow its franchise through its dedication to offering the world’s best product lifecycle management software to its customers, and the addition of Tecnomatix to the UGS family is a major step forward in that effort,” Affuso said.  “Along with sustained internal spending on research and development, these acquisitions have added significant value to our technology platform, which was already second to none in the PLM industry.”

About UGS

UGS is a leading global provider of product lifecycle management (PLM) software and services with more than 3.3 million licensed seats and 42,000 clients worldwide.  The company promotes openness and standardization and works collaboratively with its clients in creating enterprise solutions enabling them to transform their process of innovation and thus begin to capture the value of PLM. 

About Tecnomatix Technologies Ltd.

Tecnomatix Technologies Ltd. (NASDAQ: TCNO) provides the world’s leading Manufacturing Process Management (MPM) solutions for the automotive, electronics, aerospace and other manufacturing and processing industries. Tecnomatix eMPower solutions for MPM enable the design, simulation, and execution of production processes, and provide real-time control and visibility throughout shop-floor operations. More than 5000 companies worldwide are using eMPower solutions to reduce operating costs, accelerate product introductions, and shorten time-to-volume -- while maintaining high levels of product and process quality. With offices in over 20 countries, Tecnomatix supports such global leaders as BMW, Boeing, Comau, Ford, GM, Mazda, Philips, Schneider Electric and Volkswagen. For more information, visit www.tecnomatix.com.

The statements in this news release that are not historical statements, including statements regarding future product integration and development and the benefits of the proposed transaction, are forward-looking statements within the meaning of the federal securities laws. These statements are subject to numerous risks and uncertainties, many of which are beyond UGS’ control, which could cause actual results to differ materially from such statements, including the risks that the proposed transaction is not consummated or that UGS does not realize the expected benefits. The company has included a discussion of other pertinent risk factors in the final offering memorandum relating to our 10% Senior Subordinated Notes, a copy of which is available from the company.  The company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Note:  UGS, Teamcenter and E-factory are registered trademarks of UGS Corp. or its subsidiaries in the United States and in other countries.  All other trademarks, registered trademarks or service marks belong to their respective holders.