Several readers have asked why Autodesk set up access to a $250 million line of credit this week, when it has over $800 million in the bank. Some incorrectly see this as proof the company is doing more poorly than its success contrawise shows.
Here's some reasons why Autodesk might want to set up a line of credit:
* They might be counting on using the $800 million to generate income, roughly $80 million a year through investments. Higher yields are possible when you don't dip into the nest egg.
* Remember Autodesk's promise to grow 15% a year? That $80 million or so in investment income adds about 4% to Autodesk's annual growth rate. In contrast, borrowing from the line of credit has no impact on the revenue growth figures.
* Autodesk might be figuring on the coming credit crunch perhaps being problematic for its expansion plans, and so set up this credit deal ahead of time, rather than later when it's more expensive or less accessible. This deal is good until 2012.
* By its nature, a line of credit (a bank loan) is not used unless needed. It's just there for backup; the associated fees are a tax write-off. Autodesk may never use the credit, but has it in case it comes across a worthwhile acquisition.
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Speaking of acquisitions, how about Autodesk acquiring RAND? That way it could own its own dealer network, the way that Bentley Systems does.