3-D design and engineering software maker Autodesk (NAS: ADSK) released a great set of third-quarter numbers that exceeded analyst expectations. The California-based company managed this because of strong revenues across all geographies. Let's take a closer, Foolish look at Autodesk's designs.
Figuring it out
The company's total revenues went up by 15%, to $549 million, mainly due to strong demand for new licenses of its simulation and computer-aided design products, including newly introduced product suites. Net income rose 36%, to $72.8 million, aided by cost controls and robust growth in revenues across all of the company's major markets.
Rival Ansys (NAS: ANSS) , on the other hand, saw third-quarter revenue rise 24%, to $172 million, and net income increase by 26%, to $45.5 million, on the back of its acquisition of Apache Design Solutions.
Coming back to Autodesk, a geographical breakdown shows that revenues increased 10% in EMEA (Europe, Middle East, and Africa), 12% in the Americas, and an astounding 28% in the Asia-Pacific region.
Surprisingly, the company's architecture, engineering and construction (AEC) business saw an 11% growth year to date, in spite of a forecast indicating a slowdown in the commercial construction space in the U.S. Revenues from AEC suites also bucked the trend by growing 40% year on year, aided by Autodesk's penetration into the government sector. But, that's not all.
Autodesk's stash of cash
On a year-to-date basis, the company managed to turn 19% of its revenue into free cash flow and build up a war chest of $1.5 billion of cash and equivalents. This is fantastic, as the company can use this cash to acquire other businesses that own key technologies that would augment its product portfolio. Speaking of which, the company made 10 small acquisitions within the quarter that could potentially boost the company's competitive edge in the long run.
For all you tablet heads out there
Autodesk sure knows how to keep things relevant and interesting. The company has been making applications such as Sketchpad for Apple's (NAS: AAPL) iPad and Google's (NAS: GOOG) Android devices in order to reach a wider audience much faster than it used to in the good old days of packaged software. The company recently announced a new mobile application for Apple's iPad called Autodesk ForceEffect. The app allows users to easily and quickly build designs at a conceptual stage and get immediate feedback on design performance conveniently on the go with their iPad. The application could prove to be a boon for students as well as engineers.
Even more goodies
Besides the mobile apps, Autodesk also unveiled a set of 3-D design, engineering, and entertainment software along with more design suites. The software suites encompass a complete set of tools that help customers create products, structural designs, and even blockbuster films -- one example being the famous James Cameron movie Avatar, which was released in December 2009.
In September, the company released Autodesk Cloud, which is a collection of Web-based applications and services.
Firing on all cylinders
Despite the dismal situation in Europe, Autodesk's largest market, it has continued to be the biggest spender on R&D among companies of similar size. CEO Carl Bass voiced his opinion that the failure of a company in terms of innovation would pose a larger threat to its position than the economic threat from Europe. Hence, if a company cuts down on its R&D activities, it could potentially lose its technological edge to competitors. The consequences could be bad if any business gets caught unawares by an economic recovery, only to discover that its rival has come up with an even better product.
Last year, some people criticized the big guns at Hewlett-Packard (NYS: HPQ) for spending on acquisitions rather than on research and development. While Autodesk's R&D spends rose by 8.5% in the previous financial year, HP slashed R&D spends by 20%. But then, a higher expenditure on research does not really guarantee a company's success. But given the level of competition for software companies like Autodesk, they must either innovate or die.
The Foolish bottom line
Autodesk seems to have beaten the economic blues for now, but the fact that the company receives a large chunk of revenues from Europe means that continued turmoil in the economy could spell trouble for the company. A business that makes design software for engineering applications could certainly be hit by a downturn in the construction industry.
However, its 3-D applications are also used by students, film producers, and product designers, so relevance does exist in other ways. It will be interesting to see how the next few quarters pan out for Autodesk.
What do you think about the company's prospects? Leave your comments in the box below. Also don't forget to add Autodesk to your watchlist. It's free and helps you to stay in touch with all the latest news and analysis for your favorite companies.
At the time this article was published Fool contributor Keki Fatakia does not hold shares in any of the companies mentioned in this article. The Motley Fool owns shares of Apple, Autodesk, Google, and International Business Machines. Motley Fool newsletter services have recommended buying shares of Google and Apple. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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