Autodesk Second Quarter: Who needs PLM?

August 12, 2010 – Autodesk’s revenues for the quarter ending in the most recent quarter rebounded more sharply than its peers in the engineering software business.  Overall revenues rose 14% in the quarter ended July 31, 2010 when compared with the like quarter a year earlier.  In contrast, PTC reported a 7% revenue increase and Ansys’ sales rose 13% in the quarter ended June 30, 2010.  Dassault Systèmes reported a 16% sales increase (in US dollars) in the second calendar quarter. But after adjusting for the acquisition of IBM’s PLM Software business, revenues appear flat.

Autodesk's Net Income
Autodesk's revenues remain below the peaks set in 2008, but profits rebounded sharply in the most recent quarter.

Parsing Autodesk’s sales growth by product lines, Autodesk’s Manufacturing Systems Division bested all others by growing 19%.  It was followed by the much larger Platform division, which grew 18%. (The Platform division sells plain AutoCAD, its low-priced cousin, AutoCAD LT, and a grab bag of software for mapping, freehand drawing, piping design, and other purposes.) Sales of Autodesk’s Construction division rose 8%, and the Media and Entertainment division grew 6%. The big winner in Autodesk’s software portfolio is AutoCAD, whose sales jumped 21% year-to-year. It accounts for 34% of Autodesk’s total revenues.

Autodesk's Quarterly Revenue by Business Segment
Autodesk's manufacturing and entertainment divisions were the only segments to show sequential sales gains.

Thanks to cost cutting in the previous quarters, Autodesk’s profits soared 4.7 fold to $59.9 million on the modest revenue increase.  That’s just shy of the $62 million Dassault Systèmes earned in its most recent quarter.

What’s interesting about Autodesk’s success is that its products consist almost entirely of single-user desktop tools that engineers use to do their jobs faster.  Relatively little of Autodesk’s income comes from what its rivals call “product lifecycle management” (PLM) software that combines engineering applications with fiendishly complex enterprise-level software for managing engineering data.

Comparing Autodesk’s performance with that of comparable competitors, it appears that single-user applications are growing more briskly than PLM software.  Dassault Systèmes SolidWorks unit grew a respectable 12% (in US dollars) while Ansys grew 13%.  PLM companies are investing vast sums to develop complicated PLM software that few customers seem inclined to buy right now.  Autodesk’s strategy of keeping its products relatively simple and relatively low priced appears to be besting the competition as we emerge from the worst recession since the 1930s.

Cash per share at the end of the quarter was $4.77, down from $5.40 the previous quarter. Autodesk is salting away cash in long-term investments.