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Autodesk Q3 Earnings Call Transcript
Author: 123jump.com Staff
123jump.com
Last Update: 12:35 AM ET December 07 2008


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Autodesk, design software developer third quarter revenues increased 13% to $607 million. Diluted earnings per share increased 29% to 45 cents. The company expects fourth quarter revenue between $525 million and $550 million and earnings per share between 13 cents and 19 cents.

 
When you look at the cost reductions, we are looking across a broad range of things, obviously starting with the discretionary spending programs, lots in travel and entertainment. We’re doing a re-evaluation of our product portfolio. I think if you look, we are like many companies. We probably have kind of the 80-20, in that 80% of our revenue comes from 20% of the products or something in that neighborhood, so we are looking at what goes on in the other 80% of the portfolio and how important is that to the ongoing health of the business.

We also have a very large temporary workforce where we go use professional advisers, have outside consultants as well as just a temporary workforce. So obviously we are reducing things there. In many places, we have facilities where we are looking at consolidation so just a -- there’s a number of initiatives across the board that we think we’ll be able to accomplish, this kind of reduction in expenses. And really what I see right now is this is a balancing act for us. I think -- I would love to do a pool of where you guys think GDP growth is next year. We’re uncertain about it and so we are doing our best to try to guess where it is and we want to be ahead of that curve and we thought that this was certainly at this point in time the appropriate balance between maintaining the health of particularly our channel partners, being able to serve our customers well and at the other time, preserving margins and running a profitable, healthy business.

Ross MacMillan – Jefferies & Co.

Thank you.

Operator

Your next question comes from the line of Heather Bellini with UBS. Please proceed.

Heather Bellini – UBS

Hi. Thank you. Carl, I apologize if maybe someone has already asked this because I am jumping back and forth between calls but essentially --

Carl Bass

Is the other call better?

Heather Bellini – UBS

No, they’re both -- I’ve seen better news from both companies, how about that? My question for you guys would be what type of churn are you factoring in or when you look out to next year, are you expecting? And what I am referring to is customers who maybe -- could customers renew fewer seats? What are you expecting to see happen, given that the workforce is shrinking in a lot of the industries that you serve, not just those, others as well? And also the average upgrade cycle for those who aren’t on maintenance, what would you expect to happen to the upgrade cycle? Would you expect people to -- would you expect people to delay purchases and can you give us some sense there if it’s every three years now, could it go to four years, etc.?

Carl Bass

So what I would say is first of all, we are very tied to the number of employees in the industry. Now, certainly with the specific job functions, like mechanical engineers, designers, architects. That will continue to be the primary -- that will continue to be the primary driver.

So often when we see people -- for example, failing to renew their subscriptions, it’s because the total workforce, the total headcount requiring the tools has gone down. So if you think about it, our correlation will be with that workforce. There are a couple of mitigating factors. There are certainly places in the world we talked about a little bit in prepared remarks where license compliance is big because piracy is still a huge issue, so we have many more users in the world who use our software than actually pay for it. That’s one of the offsets there.

The other places, you know, in tough economic times, the value of our offerings is very attractive and so I didn’t think this was a particularly appropriate call to spend a lot of time on color commentary about particular wins in the quarter but you know, particularly like in our very competitive markets like manufacturing, many people who are using high-priced software are converting to much lower-priced software. You know, when they recognize the value they can get from our products in comparison, there’s no doubt that we continue to win business there. Just looking at the raw numbers, we continue to gain market share on an absolute basis and when you look below it, you realize in units, we do even better than on revenue. So there are a couple of offsets but I think -- I think your thesis is absolutely right of the best predictor of where our business is, is really tied to the number of people employed in the industries using the tools.

Heather Bellini – UBS

Okay, and then can you also comment on for those not on maintenance what the average upgrade cycle is right now for say AutoCAD users?

Carl Bass

You know, this --


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