AUTODESK INC. $14 (Nasdaq symbol ADSK; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 226.3 million; Market cap: $3.2 billion; Price-to-sales ratio: 1.4; WSSF Rating: Average) makes computer-assisted design software that lets engineers and architects visualize, simulate and analyze the performance of their products early in the design process. This saves time and money, and improves the quality of the finished product.
Slowing construction activity has hurt demand for Autodesk’s products. In response, the company plans to cut 10% of its workforce and consolidate some of its facilities. Severance and related expenses will cost it $65 million to $75 million. These cost-cutting plans should lower its annual expenses by $130 million.
To put these figures in perspective, Autodesk earned $0.45 a share, for a total $104.5 million, in its third fiscal quarter, ended October 31, 2008, up 28.6% from $0.35 a share, or $84.8 million a year earlier. If you disregard a number of non-recurring expenses and gains, earnings per share rose 14.3%, to $0.56 from $0.49. Revenue improved 12.8%, to $607.1 million from $538.4 million. These gains were largely the result of favourable foreign exchange rates and strong sales in emerging markets. International sales account for about 80% of Autodesk’s revenue.
Like Symantec, Autodesk must spend heavily on research to protect its market share. It spent $135.2 million, or 22.3% of its revenue, on research in its latest quarter, up 9.7% from $123.2 million, or 22.9% of its revenue, a year earlier.
Should gain from infrastructure surge
Increasing government spending on infrastructure projects should help spur demand for Autodesk’s design software. The company’s strong balance sheet should also let it keep buying smaller software companies that enhance its current technology or expand its geographic presence. Autodesk is debt-free, and holds cash of $933.2 million, or $4.12 a share.
Autodesk’s shares are down 66% from $41.68 in June 2008. They now trade at 10.4 times the $1.35 a share that Autodesk likely earned in its fiscal year ended January 31, 2009.
Autodesk is a buy.
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