Autodesk Recovering

The market has been steadily recovering over the last month. Autodesk’s (Nasdaq:ADSK) stock has also recovered significantly since their last quarter results. Despite their bleak view of the economy, the market was impressed with their quarterly performance. Q1 revenues fell 29% to $426 million and recorded a 13% fall over the previous quarter. Their lean cost structure efforts initiated last quarter helped them earn $0.18 per share. The street was estimating revenues of $419 million with EPS of $0.08. They are continuing their cost control efforts and are estimating an additional savings of $120 million in fiscal 2010.

During the quarter, they saw international geographies, especially the emerging economies’ performance decline more sharply than the performance of the Americas. While Autodesk had been focusing on the emerging markets, they had recognized the headwinds in the last quarter and the results were no surprise. EMEA revenues of $167 million fell 35% over the year on a reported basis or 24% over the year on a constant currency basis. Americas’ revenues fell 15% over the year to $164 million. Asia Pacific revenues of $95 million fell 36% over the year while revenues from emerging economies fell 42% to $59 million.

Segment wise, while all of their major product categories saw year on year declines, 3D solutions performed better than their 2D products. 3D design solutions revenues fell 16% to $122 million and contributed 29% of the quarter’s revenue. 2D horizontal and vertical product revenues fell 39% to $208 million. Within 2D, the combined revenue from AutoCAD and AutoCAD LT itself fell 42% over the year. One of the major reasons for the performance of 2D was that the job losses continue and customers are cutting back on the total number of seats purchased, and as you can imagine, people cut the archaic stuff, not the cutting edge. Hence, in a trade-off between 2D versus 3D, 3D typically survives.

Going forward, Autodesk is looking at revenues of $395-$420 million with EPS of $0.15-$0.20.

They still haven’t managed to increase the contribution of their subscription and maintenance revenue, even though they have been making significant efforts towards the cause. For instance, they have proposed a change in upgrade pricing that will hit in March next year where they are moving away from the tiered upgrade pricing to push customers to subscription. Hopefully, they will see some benefit from this move.

The stock is trading at $22.03 with a market capitalization of nearly $5 billion. Still a good company with an extremely sticky product with a high exit barrier. (Trust me, I know, because I have marketed a product against them!)