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Autodesk In Pain

Posted on Friday, Sep 4th 2009

According to a recent report, the CAD market is expected to grow at a CAGR 0f 11% through 2012, but the quarterly reports of some major industry players are hardly pleasing. Autodesk (NASDAQ:ADSK) was one of the worst-hit companies in the segment.

Autodesk  reported Q2 revenues of $415 million, which represented a drop of 33% over the year and 3% over the quarter. The 33% fall was significantly higher than competitors’ revenue declines. For instance, Dassault Systèmes’ and PTC’s revenues fell 17%, and revenues at Ansys actually grew 10% over the year. Autodesk’s 3% quarterly decline was also much worse than competitors’ as Dassault grew 5% over the year and PTC a marginal 0.4%.

In fact, Dassualt, known for the Solidworks 3D modeling software, surpassed Autodesk’s quarterly revenues of $415 million with $423 million revenues. Solidworks also crossed their one millionth seat in March earlier this year, a sign of their growing market share.

The revenues for new seats and maintenance are dependent on the overall R&D budget spends of the various industries – primarily the auto, engineering and construction segments. Amid the current recession, R&D budgets have been drastically cut, thus hurting new seat license revenues.

Autodesk’s license revenues fell 48% to $231 million, but maintenance revenues saw marginal growth of 3% over the year to $184 million. Maintenance billings were down 11% over the year compared to 14% in the prior quarter. Dassault’s new license revenues also fell over the year, by 40%, but their maintenance revenues grew significant 15.

Autodesk’s Manufacturing segment contributed $98 million in the quarter, registering 4% growth over the previous quarter and a 25% decline over the previous year. Platform segment revenues of $145 million declined 6% over the quarter and 39% over the year. The Architecture, Engineering and Construction segment also registered a decline of 29% over the year, but managed to eke out 2% growth over the quarter to contribute $128 million in the quarter, while the Media & Animation segment registered a 32% decline over the year and remained flat over the quarter at $47 million.

Revenue from Autodesk’s model-based 3D design solutions fell 25% over the year and 2% over the quarter to $124 million. Revenue from 2D horizontal and vertical products registered a steeper decline of 38% over the year and 6% over the quarter to $194 million. Combined revenue from AutoCAD and AutoCAD LT fell 39% over the year and 7% sequentially.

Despite Autodesk’s focused efforts to increase revenues in emerging economies, this market’s revenues were worst hit, reporting declines of 45% to $63 million. However, there was sequential growth in the region. Revenues from Europe, the Middle East and Africa fell 41% to $157 million. Asia-Pacific revenues declined 34% to $99 million while the Americas revenues fell 21% to $159 million.

Earlier this year, Autodesk had turned to severe cost-cutting , a move which was expected to reduce expenses by $250 million over the year. The company is well ahead of their target, and based on the costs for the first half of the year, they expect to save $300 million in expenses over the year.

Autodesk is also working on managing their partners’ costs. They have migrated from releasing software with customers as beta users to a system in which new products are vetted, improved and then released to the channel, thus ensuring that Autodesk bears the cost of product development.

They recently announced the acquisition of certain assets from BOSS International to expand their water resources analysis capabilities for the architecture, engineering and construction industry. According to Autodesk, “StormNET for stormwater management analysis, RiverCAD for floodplain analysis, and WaterNET for water distribution analysis will be more closely integrated with [our] model-based design solutions, including AutoCAD Civil 3D, to help engineers streamline workflows, reduce errors and boost productivity.” This addition to Autodesk’s portfolio should help improve the design and simulation process and reduce the time required to complete projects.

Within the segment, the company expects that growth will be driven by Knowledge-Based Engineering solutions, which will not only help reduce design time and costs but also ensure a user experience that will simulate environment conditions. The addition of the BOSS products to Autodesk’s portfolio is a reflection of this trend.

While many are still doubtful of a quick recovery, Autodesk believes that demand is stabilizing. To help sales in their architecture, engineering and construction segment, the company is pushing for government agencies to require 3D modeling software to be used in federal stimulus-funded infrastructure projects. Last year, Autodesk sold 105,000 seats for their AEC products, and the segment grew 9% over the year. However, revenues have fallen 29% over the year in the current quarter alone

Autodesk expects Q3 revenues of $400 million to $420 million with EPS of $0.18-$0.23. Analysts expect revenues of $419.1 million with earnings of $0.21 per share.

The stock is trading at $22.56 with a market capitalization of $5.2 billion.

Hardly any design software vendors have made radical changes or launched any truly new products n recent years. At best, most new releases are upgrades of earlier versions. However, of late, vendors are looking to improve their user interfaces to make them “more intuitive, less obtrusive, and easier to learn.” Must be the Apple factor rubbing off.

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Dassault systems is more known for its CATIA software than solidworks. CATIA is their bread winner in CAD. They purchased solidworks to cover lowend CAD users. It is like saying Oracle is known for MySQL.

Dasher Friday, September 4, 2009 at 6:16 PM PT

Yes, but Autodesk is not in pain because of CATIA, I can guarantee you. Autodesk’s chief competitor is Solidworks. That’s the point we make here, primarily.

The high end of the CAD market has been losing ground to the mid-market solutions for a long time now.

Sramana Mitra Friday, September 4, 2009 at 6:22 PM PT

Your points well taken.

I was only commenting on the statement of ‘Dassalut known for the solidworks software’.

Also the main bread winner for auto CAD is its 2D software while for Dassault and PTC are their high end 3D software. They do overlap/compete in the mid market solutions. But comparing their revenues need to take that into consideration.

Dasher Saturday, September 5, 2009 at 11:55 AM PT