Thursday, February 26. 2009

Bass Somber on Autodesk's Quarterly Numbers

Carl Bass, CEO of Autodesk, somberly began his quarterly call with investors and analysts by indicating his disappointment with the company's quarterly and yearly report and said that the news was not at all what he is accustomed to delivering during investor calls. Bass however believes that Autodesk is positioned well for any potential investments as a result of the recently passed U.S. stimulus package. The company reported that their direct business held up better than that of their partner channel.

"All aspects of our business is being impacted by this slowdown," said Carl Bass, CEO. Declines in revenue were seen across all geographies. Bass said that emerging economies will be an opportunity after this economic downturn. But the company is going through a restructuring phase that includes a hiring freeze, travel restrictions and reduction in head count. The global economic environment has impacted Autodesk's ability to forecast beyond the first quarter of the new fiscal year and they expect a loss for this quarter. The full benefit of restructuring will not be realized until the second quarter. Operating cash flow will be negative for the first quarter as well. The company expects their operating margins to increase throughout the coming year if the economic situation remains the same. Asked by an analyst if he could see a bottom to the market, Bass said that looking broadly on all the economic indicators, not just his sales, "I don't really see any signs [of a bottom]."

When asked a "geography" question by an analyst who wanted to know what regions were not affected by the economy or were relatively strong, Bass joked that Antarctica and maybe Greenland were unaffected, "but perhaps not Iceland as we have seen." More seriously he noted that, "Maybe China or India...but I haven't seen an unscathed territory out there."  

Asked about what the company might do with its cash position, Bass indicated that at these stock prices, the company monitors the situation and might consider a buy back of shares. Regarding possible acquisitions Bass said that, "Our tolerance for acquisitions has gone way down in this market."

Asked if he was considering a more drastic cut back in the company expenses and size given that the analyst asking the question believed that Autodesk could not sustain the revenue levels from the emerging markets, Bass conceded that he did not know what the appropriate level of his company's size should be but would watch carefully during the current year. The same analyst thought that perhaps the company should return to levels seen in 2002 and not 2006 as Bass had indicated earlier in the call. Bass said, however, "We need to size this business considerably smaller."

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