Schnitger Corporation

Autodesk: MFG reports record; is AEC back?

Autodesk reported results last week for the fourth quarter and full year ended January 31, 2011 that pretty much blew past expectations and continued the strong trends seen over the last several quarters, albeit with a bit of deceleration in many of the individual revenue categories. Total Q4 revenue of $592 million was up 12% from a year ago, ahead of Wall Street’s expectations and higher management’s own range of $575 million to $590 million. Standouts were Platform Solutions and Emerging Business (PSEB), where revenue jumped 18% over Q4 2011 and the Americas, where revenue was up 17% year/year. While they didn’t beat the overall average (hard to do when PSEB is over a third of revenue), the company’s Manufacturing and AEC business segments each recorded record revenue.

CEO Carl Bass gave one of the best quotes ever in an earnings press release: “As we kick off fiscal 2013, we aim to delight our customers with our ever-improving product portfolio while delivering continued revenue and profitability growth.” “Delighting customers” — definitely marketing-speak, but creates such a positive image of a desire to exceed expectations.

The company provided lots of detail to slice and dice; to summarize:

Unlike most other engineering software companies, Autodesk did not lower its forecast for 2013, instead simply reiterating its November 2011 statement that “Net revenue for fiscal 2013 is expected to increase by at least 10% compared to fiscal 2012.” That increase would put revenue at about $2.4 billion. For FQ1, the company now expects total revenue of $575 million to $590 million, which would be growth of 9% to 12%.

During the earnings call, Mr. Bass continued to tease Autodesk’s PLM offering, saying that he views the potential market for these solutions as a $3 billion “opportunity to disrupt and democratize”. Without giving any details, he said that companies of all sizes have been piloting PLM 360, “from small companies deploying PLM for the first time to large enterprises that have become disenchanted by existing legacy PLM systems.” Mr. Bass recognizes that, in many cases, his potential PLM customers have already have a PLM system which Autodesk will not be able to displace. He said that many accounts want to “Chernobyl their PLM installation. They want to entomb it in concrete and surround it with more modern flexible tools. They want to reach parts of the organization that, because of difficulty or expense, they couldn’t get their PLM systems to reach. We’re having a surprising amount of success in the larger customers, which is — I would have thought we had more to prove there early on, and it would have taken a little bit longer to develop. But in some ways, our best customers are those that know PLM, understand PLM and know where they find it wanting.”

But it’s not all about large enterprises, or even about enterprise IT. Mr. Bass said that over 50 million downloads have been recorded for the company’s Windows, Mac, iOS, Android and Web-based apps in just 18 months, representing both immediate brand-building and the potential for long-term revenue.

When asked by an investor about whether Autodesk is selling into its installed base or to new accounts, Mr. Bass said something very important: “In almost every case, customers have some of our software. So we don’t make as big a distinction between new and existing customers. We do look at the role we play in the value to the customer. So there are places we were, front and center, the most important product that they use to do their design and engineering work. There are other places where we play a peripheral role. A lot of [our strategy] is moving from those peripheral roles to more central roles … When you go from a small niche player [to the most important product they use] within a firm, you’re actually changing the quality of the relationship in some material way. It’s not just gaining more share within the company, you’re changing your relationship with the customer.”

Add together “changing the relationship” with “delighting our customers” and mix in 50 million downloads … Autodesk is a potent force that could, if all is executed well, change the dynamic in engineering software. Let’s face it: customers want to be delivered more than they asked for or thought they needed, they want things to be easier rather than harder. If Autodesk can deliver on all of these promises, it might just be unstoppable.

Autodesk, too, is hosting an investor event this week. If there’s anything new, I’ll update.

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