Editors Note:

Businesses moving to the cloud are in the news every day. Some store their data there and others operate out of the cloud. Autodesk is following other software vendors including Microsoft and Adobe are ending direct one time sales of their software in favor of monthly subscriptions that lock in revenue as long as the consumer continues to use their software.


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ADSK - Autodesk - Company Description

Autodesk operates as a design software and services company worldwide. Their software is used to design buildings, design equipment, machines, products, etc. The software is licensed directly and through a network of resellers. Autodesk goes beyond 3D imaging and allows 3D printing of the design using the Moldflow process in the software.

Autodesk is the premier software of this type in the market today. There are competitors but Autodesk is the largest by far. Competitors are Adobe, Ansys Inc and Dassault Systems. Mattel announced in February it was introducing 3D toy printing at home with the "Thingmaker" in cooperation with Autodesk.

In February the company said it was going to lay off 10% of its workforce or about 925 jobs as it transitioned to the cloud.

Shares collapsed with the market in January but began to rebound in February after the cloud announcement. The company said revenue will increase long term because the cloud model is subscription based. In Q4 they added 190,000 subscribers to the cloud product.

They reported adjusted Q4 earnings of 21 cents compared to estimates for 10 cents. Revenue of $648 million beat estimates for $636 million. They guided for a loss of 12-17 cents for Q1 on revenue of $500-$520 million because of their restructuring process. They are taking an $85 million charge for the layoffs. As part of the movement to the cloud they are going to end sales of their software suite that was previously sold direct by Autodesk and by resellers. That willdepress revenue in the short term but increase it significantly in the long term.

By the end of 2017 they are going to terminate all the existing "perpetual licenses" and force current users into the cloud model. Apparently "perpetual" means different things to different people.

Autodesk had been under fire from two activist shareholders and they resolved that last week when they added three directors to the board. Sachem Head and Eminence Capital agreed to certain standstill and voting provisions to get the board seats. Joining the board are Scott Ferguson from Sachem, Rick Hill, chairman at Tessera Technologies and Jeff Clark, CEO at Kodak.

Shares rallied on the news of the new board members are appear ready to break over current resistance at $58 to retest the December highs at $65.

With a ADSK trade at $58.75

Buy May $60 call, currently $2.85, initial stop loss $54.25.


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