Autodesk, the software company that pioneered the automation of architectural and engineering drafting with their CAD/CAM (Computer-Aided Design/Computer-Aided Manufacturing) software has announced that the California-based company is laying off approximately 1,200 employees in a planned restructuring.
Like most software companies they are reorganizing the company as they transition from desktop-based perpetually-licensed software to cloud-based subscription models.
Of course, shifting to a cloud-based system impacts revenues as up-front larger payments are transitioned to lower initial subscription costs and the spread-out of licensing revenues which replace annual maintenance agreements. So it should come as no surprise to see a reduction-in-force to maintain margins, earnings-per-share, and to reduce the run rate.
The company’s announcement, written in corporate-speak, is fairly normal for this type of restructuring.
“Autodesk today announced a restructuring plan to focus on the company's strategic priorities of completing the subscription transition; digitizing the company; and re-imagining manufacturing, construction, and production. Through the restructuring, Autodesk seeks to streamline the organization and re-balance resources to better align with the company’s priorities. By realigning its investments, Autodesk is positioning itself to meet its long-term goals, including keeping non-GAAP spend flat in fiscal 2019.”
“Autodesk plans to reduce staffing levels in the near-term by approximately 13%, or approximately 1,150 positions, and to consolidate certain leased facilities. The company anticipates taking a pre-tax restructuring charge in the range of $135 million to $149 million. Approximately $91 million to $100 million in pre-tax charges will be taken in the fourth quarter of fiscal 2018. The remaining charge will be taken in fiscal 2019.”
“Autodesk is undergoing a business model transition in which it has discontinued most new perpetual license sales in favor of subscriptions and flexible license arrangements. As part of this transition, Autodesk discontinued new maintenance agreement sales for most individual products at the end of the fourth quarter of fiscal 2016 and for suites at the end of the second quarter of fiscal 2017. During the transition, revenue, margins, EPS, deferred revenue and cash flow from operations will be impacted as more revenue is recognized pro-ratably rather than up front and as new product offerings generally have a lower initial purchase price. The company has introduced new metrics to help investors understand its financial performance during and after the transition, as shown below.”
This should serve as a red-flag warning to companies who depend heavily on the declining desktop model.
For individuals looking to purchase used ‘industrial-strength” computers, bargains in refurbished models abound. It is often cheaper to purchase a used computer than replace a failing disk. I never thought I would see industrial-strength networked printers priced lower than their respective toner cartridges.