Tag Archives: ADBE

ADSK bubble trouble

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Autodesk has now recorded ten successive quarters of losses totaling $1.289 billion.

Autodesk’s share price had been rapidly rising during the previous nine lossy quarters. If last quarter’s $119.8 million loss was business as usual, why did the ADSK share price plummet? At the time of writing, it’s $23.65 down on its pre-Q3-results high.

Alongside the usual we’re-doing-great stuff in the Q3 announcement, Autodesk announced big layoffs, with another 13% of the workforce to go. Merry Christmas, employees. This follows on from another 10% who were axed last year. Don’t think I’m gloating about this. I’m not; these are real people with real jobs, many of them undoubtedly very good people, and they have my sympathy.

But doesn’t the market love companies cutting jobs? Maybe not when the bill is going to be $135 to $149 million when the CEO states it’s not going to cut costs anyway:

Every penny generated reinvested back in the company – just in different areas: digital infrastructure and construction products. We’ll hire at least that number back. Not cost cutting. Rebalancing.

It may not have helped if traders noticed the Autodesk CFO selling stock on 24 November, a few days before the 2018 Q3 financials were out? This was smart, because he made about $113,000 more on that transaction than he would have if he had sold on 29 November. I’m not suggesting there was anything improper about this, but it was hardly a confidence-inspiring move.

Edit: From R. Scott Herren via Twitter: “…that sale was a 10b5-1 planned sale setup more than 6 months ago. You can find that info on the SEC filing.”

But I suspect it’s just Autodesk’s ongoing failure to pull itself out of the loss trough and desperate-looking need to shed workers that has started to erode confidence in the veracity of its repetitive “Another Great Quarter!” narrative. Maybe the market has started to look a bit deeper than just giving Autodesk a simplistic “it’s OK, revenue always dips when moving to subscription” free kick? Maybe the oft-quoted “new subscriptions” metric has lost its shine as it becomes apparent that subscription numbers aren’t directly proportional to income?

I’ve said it before, but ADSK ain’t ADBE. Different products, different customers, different history, different pricing strategies, different results.

Autodesk’s high-price strategy with poor customer acceptance and big losses differs markedly from Adobe’s low-price strategy with reasonable customer acceptance and merely reduced profits during the transition. Here is Adobe’s record, before and after giving up selling perpetual software licenses. Note the lack of red ink.

All is not well with Autodesk’s subscribe-or-GTFO plan, and it looks like people other than customers have started to notice. Autodesk’s bubble has been pricked and some rapid deflation has occurred. Time will tell whether this is a blip or a trend.

Disclaimer: I am not a financial analyst. This is not financial advice. Make your own decisions.

ADSK celebrates two full years of losses

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Autodesk Reports Strong First Quarter Results, says the press release.

Autodesk co-CEO Amar Hanspal:

Broad-based strength across all subscription types and geographies led to another record quarter for total subscription additions and a fantastic start of the new fiscal year. Customers continue to embrace the subscription model, and we’re expanding our market opportunity with continued momentum of our cloud-based offerings, such as BIM 360 and Fusion 360.

 
Autodesk co-CEO Andrew Anagnost:

We’re executing well and making significant progress on our business model transition as evidenced by our first quarter results. We’re starting the year from a position of strength and are excited to kick off the next phase of our transition when we offer our maintenance customers a simple, cost effective path to product subscription starting next month.

Thanks to this fantastic progress into the exciting new customer-embraced rental-only business model, Autodesk has now recorded eight successive strong quarters of losses totalling $969 million. Another strong quarter like this one will see those losses exceed a billion dollars, and then it will really be time to crack open the champagne.

Here’s how those results look. Green shows profit; red shows loss. The black lines are trend lines. The thick one is linear, the thin one is a 4-quarter moving average.

Here’s an Adobe graph for comparison; it covers a wider date range. The linear trend line is not directly comparable because the Adobe graph includes a recovery phase which Autodesk has yet to enter.

Both graphs represent GAAP results that do not reflect deferred revenue (money that is received but not counted immediately). Autodesk is still making a loss in non-GAAP terms, but a smaller one than shown in the graph. Full details of Autodesk’s financials are available here. Make your own financial decisions based on your own interpretations and/or using the advice of parties better qualified than myself.