No End in Sight: Autodesk CEO

During Autodesk's Q3 conference call with financial analysts, Steven Ashley of Robert W. Baird asked about Autodesk's revenues for the next three months:

Are there any extenuating circumstances related to that guidance [for Q4]? For instance, in terms of the pipeline that might need to drain itself?

(Gotta love that colorful language!) "No," responded Autodesk ceo Carl Bass. He's also the acting CFO, and here's what he sees needs to happen for the economic crisis to come to an end:

• A financial system functioning to the level that allows business to do its job.
• Liquidity in the system.: banks exchanging money, and lending money to businesses
• Some of the stalled construction projects, media, and entertainment projects moving forward.

"And in an environment in which people can’t get credit, the first things on their minds is not, 'How much more software do I need to buy?'" 

- - -

Phil Winslow of Credit Suisse noted that Autodesk upgrade revenues had declined, and so wanted to know if the recession was affecting the growth rate of maintenance (subscription) revenues.

Due to Autodesk's relatively short term maintenance contracts (1 year), Mr Bass thinks those revenues will be affected by:

• New license sales.
• Attach and renewal rates.
• How cash strapped companies are.
• Companies determining that they have no economic advantage to quitting, because they have to make up the difference [to Autodesk] when they come back on subscription.

"So I would see a slowing, [but a] less slowing, generally speaking, of maintenance than you would of new licenses." 

(In related news, the Wall Street Journal reports that the construction industry has its empty palms outstretched to the government: "Home builders are lobbying Congress for a $250 billion stimulus package, arguing that financial markets won't recover until home prices stop falling.")

- - -

Jay Vleeschhouwer of Merrill Lynch wondered why Autodesk had "a pretty significant decline" in deferred maintenance, when a major competitor remained constant [Dassault, I figure]. (Deferred maintenance is where Autodesk collects $$$ from a one-year subscription, but must split the amount into four, and then recognize each as quarterly revenue.)

Mr Bass had a one-word explanation: "FX." That's the foreign currency exchange effect, which is now negative for firms based in the USA. "The big change in there is currency, not actual attach and renewal rates."

Mr Vleeschhouwer persisted: "On the other hand, the number of new customers taking on maintenance has continued to slow year-round. The number of new signings is less than half the previous several quarter average..."

Mr Bass agreed there was a decline in the rates, but could not predict whether that would change [for the better].

- - -

But not all is gloom and doom, as Mr Bass reminds us:

...there’s still some parts of the world that where business is phenomenally good, our emerging markets are continuing to grow...

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To end things off, a little humor:

Heather Bellini of UBS: "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: "No, they’re both--. I've seen better news from both companies: how about that?"

Source.

("No end in sight" is based on Autodesk's refusal to predict its revenues beyond Q4.)

More coverage of the Autodesk conference call in today's upFront.eZine.

Comments

[CAD services dude]

Re emerging markets, Mr Bass' perceptions are quite accurate. India (where I'm sitting) is minimally affected by the global meltdown due to low exposure (direct or indirect) to sub-prime securities.

AutoCAD has a huge user base here, and it will probably rack up significant revenues for Autodesk.