One of the most interesting aspects of the Autodesk Q2 earnings call was a short discussion on R&D expenditures. Autodesk was making the case that it was poised to withstand the economic downturn, however long it may last, because it has been managing budgets to eliminate unnecessary costs, defer what is necessary and can be deferred, and spending in ways that will allow the company to emerge ahead of its competitors at the end of the downturn.

So, naturally, an analyst asked about Autodesk’s R&D expense which, at 24% of revenue, is on the high side for a PLM company. (In the last fiscal year Autodesk spent 25% of revenue on Research and Development; ANSYS, 15%; PTC, 17%; MSC, 17%; and Dassault Systèmes 23%.)

Carl Bass, Autodesk CEO, said: “If you looked at every one of our ratios, I don’t think any of them are acceptable … I think R&D is off, I think G&A is off, sales and marketing are way off.”

The analyst then asked what projects had been sidelined to reach this level of R&D spend. Bass responded: “I think one of the tendencies during a downturn is to get rid of your new initiatives — companies sometimes reflexively do that and I think it is the wrong answer. And we carefully worked to make sure that the new initiatives that we thought they were promising were actually funded and some of the things that were more mature products, which we were going at a certain rate — just imagine slowing those down. I think along with that, there were a handful of projects that we didn’t think they would actually bear fruit in any reasonable timeframe, and so I think down economies make it easy to make those decisions, so I think there was some projects that we killed but we were very careful to make sure that we had a balanced portfolio coming out of this and that our mature products generate lots of the revenue and lots of the profit, we’re still being funded at good levels, as well as some of the newer initiatives.“

I don’t know which projects were funded and which were sidelined, but I can only applaud Autodesk’s willingness to invest in product development – both for new markets and to expand its strategic importance to existing customers – when a lot of its customers and competitors are looking only to cut budgets to preserve profit margins.

(Transcript text from Seeking Alpha.)