Autodesk Poised for Recovery

By Battle Road Research, an equity research firm.

Autodesk's(ADSK Quote) AutoCAD is the dominant software brand for architectural and building design, with over 9 million users of its flagship software.

Over the last decade, the San Rafael, Calif., company has virtually vanquished its competitors in this market, including privately held Bentley Systems.

Autodesk was founded in 1982 by John Walker, one of the authors of AutoCAD. Together, with a band of co-founders who helped commercialize the product, Autodesk became the leading PC-based application for architectural drawings. The company came public in 1985, offering 1.6 million shares at $11 per share.

Best known for its AutoCAD software package, Autodesk's applications stretch across building design. Civil engineering accounts for an estimated 55% of sales, mechanical product design as much as 25% of revenue, and video editing and animation for the entertainment and video game markets, the remaining 20% of sales.

We have been concerned for some time about Autodesk's exposure to the architecture, engineering and construction (AEC) sectors, which have dramatically reined in their spending on automation and IT services in the last year.

However, company revenue appears to have stabilized at an annual clip of about $1.6 billion, down from the $2.3 billion that it recorded in calendar 2008. While we are not predicting a quick snapback to previous revenue levels, the company is poised to participate in a global recovery, should there be a pickup in software spending in the economically sensitive customer segments that it serves.