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Article by DailyStocks_admin    (11-11-08 10:16 AM)

The Daily Magic Formula Stock for 11/11/2008 is Autodesk Inc. According to the Magic Formula Investing Web Site, the ebit yield is 12% and the EBIT ROIC is >100 %.

Dailystocks.com only deals with facts, not biased journalism. What is a better way than to go to the SEC Filings? It's not exciting reading, but it makes you money. We cut and paste the important information from SEC filings for you to get started on your research on a specific company.


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BUSINESS OVERVIEW

GENERAL

Autodesk is one of the world’s leading design software and services companies. We offer products and solutions to customers in the architectural, engineering, construction, manufacturing, geospatial mapping and digital media markets. Our state of the art software products enable our customers to experience their ideas before they are real by allowing them to create and document their designs and to visualize, simulate and analyze real-world performance early in the design process by creating digital prototypes. These capabilities give our customers the flexibility to optimize and improve their designs before they actually begin the building process, helping save time and money, improving quality and fostering innovation. Our 2D horizontal design solutions, AutoCAD and AutoCAD LT, are two of the most widely used general design software tools in the world. In addition, we offer a range of discipline-specific design and documentation tools including our 2D vertical design solutions and our 3D model-based design solutions.

We believe that our ability to make technology available to mainstream markets is one of our competitive advantages. By innovating in existing technology categories, we bring powerful design products to volume markets. Our products enable improvements in design innovation and productivity. They are designed to be easy to learn and use, and provide customers low cost of deployment and low total cost of ownership. Our product and software architectures allow for extensibility and integration. Most of our solutions are Windows PC-based.

We have a large global community of resellers, third-party developers and users, which provides us with a broad reach into volume markets. Our reseller network is extensive and provides our customers with global resources for the purchase and support of our products as well as resources for effective and cost-efficient training services. We have a significant number of registered third-party developers who create products that run on top of our products, and thereby further extend our reach into volume markets. Our installed base of millions of users has made Autodesk’s products a worldwide design software standard. Users trained on Autodesk products are broadly available both from universities and the existing workforce, reducing the cost of training for our customers.

Our strategy is to deliver advanced solutions to create and leverage digital design data, in order to improve our customers’ productivity throughout the design, build, manufacture and management of the customers’ projects. To execute against this strategy we are focused on delivering strong new product releases, migrating our customers to more advanced technologies, expanding our offerings in adjacent markets and to adjacent users, as well as growing our business in emerging economies. We attempt to release new product versions on a regular basis and synchronize our major product retirements with those releases. Our most recent major product releases occurred in March 2008.

Segments

We are organized into two reportable operating segments: the Design Solutions Segment, which accounted for 87% of our net revenue in fiscal 2008, and the Media and Entertainment Segment, which accounted for 12% of our net revenue in fiscal 2008. A summary of our condensed net revenue and results of operations for our business segments is found in Note 11, “Segments,” in the Notes to our Consolidated Financial Statements.

The Design Solutions Segment derives revenue from the sale of licenses for software products and services to customers who design, build, manage or own building, manufacturing and infrastructure projects. The principal products licensed by the Design Solutions Segment include the following:


•

our general design products, including AutoCAD and AutoCAD LT (2D horizontal products), which accounted for 38% of our net revenue in fiscal 2008,


•

our discipline-specific products, including AutoCAD-based products (2D vertical products), which accounted for 16% of our net revenue in fiscal 2008 and


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our 3D model-based design and documentation products (Autodesk Inventor products, Revit products, AutoCAD Civil 3D and NavisWorks products), which accounted for 23% of our net revenue in fiscal 2008.

In addition to software products, the Design Solutions Segment offers a range of services including consulting, support and training, largely dedicated to enhancing our ability to sell our software products. During fiscal 2008, the Design Solutions Segment consisted of three business divisions: Platform Solutions and Emerging Business Division and Other; Architecture, Engineering and Construction Division; and Manufacturing Solutions Division.

The Media and Entertainment Segment is comprised of two business lines: Animation, including design visualization, and Advanced Systems. Our animation products provide advanced tools for 3D modeling, animation, rendering solutions, and design visualization and visual effects production. Our Advanced Systems products provide color grading, editing, finishing and visual effects, compositing, media mastering and encoding technology, and increase the productivity of creative professionals. The Media and Entertainment Segment derives revenue from the sale of products to creative professionals, post-production facilities, and broadcasters for a variety of applications, including feature films, television programs, commercials, music and corporate videos, interactive game production, web design and interactive web streaming. In addition, the animation products (3ds Max and Maya) are often used by customers of our Design Solutions Segment.

Corporate Information

We were incorporated in California in April 1982 and were reincorporated in Delaware in May 1994. Our principal executive office is located at 111 McInnis Parkway, San Rafael, California 94903 and the telephone number at that address is (415) 507-5000. Our internet address is www.autodesk.com. The information posted on our website is not incorporated into this Annual Report on Form 10-K. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge on our Investor Relations Web site at www.autodesk.com as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

PRODUCTS

Design Solutions Segment

The Design Solutions Segment accounted for 87% of overall net revenue in fiscal 2008. The principal product offerings from the different divisions of the Design Solutions Segment are as follows:

Platform Solutions and Emerging Business Division and Other

The Platform Solutions and Emerging Business Division and Other accounted for 53% of the Design Solutions Segment revenue and 46% of overall net revenue in fiscal 2008. The division’s revenue includes revenue from sales of licenses of our 2D horizontal products, AutoCAD and AutoCAD LT, as well as, our 2D industry-specific product, AutoCAD Map 3D, and revenue from Autodesk Consulting. The division’s principal product offerings include the following:

• AutoCAD

AutoCAD software, which is our largest revenue-generating product, is a customizable and extensible computer-aided design (CAD) application for 2D drafting, detailing, design documentation and basic 3D visualization. AutoCAD provides digital tools that can be used independently and in conjunction with other specific applications in fields ranging from construction to manufacturing to geospatial, civil engineering and process plant design.

• AutoCAD LT

AutoCAD LT software is used for 2D drafting and detailing by design professionals who require full DWG file format compatibility and document sharing capability without the need for software customization or certain advanced functionality. Users can securely share all design data with team members who use AutoCAD or Autodesk products built on AutoCAD. AutoCAD LT is our second largest revenue-generating product.

• AutoCAD Map 3D

AutoCAD Map 3D software provides mapping functionality to engineers and geospatial professionals who need to integrate CAD and geographic information system (“GIS”) data. It contains the complete AutoCAD toolset to enhance productivity, and also offers specialized functionality for map cleanup, geospatial analysis, and access to GIS data sources. Integrated GIS tools provide mapping and analysis functions for visualization and evaluation of design and asset management products.

Architecture, Engineering and Construction Division

The Architecture, Engineering and Construction Division accounted for 25% of the Design Solutions Segment revenue and 22% of overall net revenue in fiscal 2008. Autodesk Architecture, Engineering and Construction Division solutions enable customers and their clients to reduce inefficiencies in building design, civil engineering, construction and management, supporting information and management needs throughout the building lifecycle. The division’s solutions include the most advanced technology for building information modeling (“BIM”), AutoCAD-based design and documentation productivity software, dynamic civil modeling and collaborative project management. BIM, a paradigm for building design, documentation and construction, enables users to exchange and analyze complex design and construction information in digital form, and through its use enables users to create sustainable or “green” building designs through analysis of materials, quantities, energy use, and lighting in a virtual model. The division’s principal product offerings include the following:

• Revit Products

Purpose-built for BIM, the Revit products collect information about a building project and coordinate this information across all other representations of the project so that every drawing sheet, 2D and 3D view and schedule is based on internally consistent and complete information from the same underlying building database. The Revit products, including AutoCAD Revit Suite, Revit MEP and Revit Structure, provide an intuitive state-of-the-art model-based design and documentation system for architects; mechanical, electrical and plumbing (MEP) engineers; structural engineers; design-build teams; and other design and building industry professionals.

• AutoCAD Architecture

Designed for architects and built on the AutoCAD platform, AutoCAD Architecture software supports existing 2D design practices while enabling users to gradually introduce increasingly powerful industry-specific features to gain efficiency and improve coordination. It offers flexibility in implementation and collaboration, using industry-leading DWG technology, the efficiency of real-world building objects and AutoCAD-based design and documentation productivity for architects.

• AutoCAD Civil 3D

AutoCAD Civil 3D provides a surveying, design, analysis, and documentation solution for civil engineering, including land development, transportation, and environmental projects. Using a model-centric approach that automatically updates documentation as design changes are made, AutoCAD Civil 3D enables civil engineers, designers, drafters, and surveyors to significantly boost productivity and deliver higher-quality designs and construction documentation faster. With AutoCAD Civil 3D, the entire project team works from the same consistent, up-to-date model so they stay coordinated throughout all project phases.

• Autodesk Buzzsaw and Autodesk Constructware

Autodesk Buzzsaw and Autodesk Constructware online collaboration and project management solutions enable increased project visibility, project reporting, project management, and integrated design review. These solutions help users simplify and centralize all project-related documents and information to connect with their project team, regardless of organizational or geographical boundaries. The primary markets targeted are the homebuilding, retail, hospitality, commercial construction, infrastructure and engineering industries.

Manufacturing Solutions Division

The Manufacturing Solutions Division accounted for 22% of the Design Solutions Segment revenue and 19% of overall net revenue in fiscal 2008. The division provides the manufacturing industry with comprehensive design, data management and Digital Prototyping solutions, enabling customers to rapidly adopt 3D model-based design, create and validate designs in a simple 2D/3D environment, and manage designs from the conceptual design phase through the manufacturing phase. The division’s principal product offerings include the following:

• Autodesk Inventor Products

Autodesk Inventor products, including Autodesk Inventor Suite and Autodesk Inventor Professional products, account for a majority of the Manufacturing Solution Division’s revenue. The Autodesk Inventor products deliver AutoCAD Mechanical software for 2D drawing and detailing, Inventor software, and data management software in one solution. Inventor software is a 3D mechanical design creation tool that provides users a 3D assembly-centric solid modeling system and 2D drawing production system together with digital prototyping functionality. Customers who purchase Autodesk Inventor Professional products have access to a comprehensive, integrated design solution that combines Inventor software, AutoCAD Mechanical, data management, stress analysis and dynamic simulation.

• AutoCAD Mechanical

AutoCAD Mechanical software offers purpose-built 2D mechanical design and engineering tools that are seamlessly compatible with all AutoCAD-based applications. AutoCAD Mechanical accelerates the mechanical design process by providing standards-based libraries of parts and tools for automating design tasks.

Media and Entertainment Segment

The Media and Entertainment Segment accounted for 12% of overall net revenue in fiscal 2008. Principal product offerings in the Media and Entertainment Segment’s Animation and Advanced Systems business lines include the following:

Animation

• Autodesk 3ds Max

Autodesk 3ds Max software provides 3D modeling, animation and rendering solutions that enable game developers, design visualization professionals and visual effects artists to create realistic digital images, animations and complex scenes and to communicate abstract or complex mechanical, architectural, engineering and construction concepts.

• Autodesk Maya

Autodesk Maya software provides 3D modeling, animation, effects and rendering solutions that enable film and video artists, game developers and design visualization professionals to create engaging, lifelike digital images, realistic animations and simulations, and extraordinary visual effects.

Advanced Systems

• Autodesk Flame, Autodesk Inferno and Autodesk Flint

Autodesk Flame, Autodesk Inferno and Autodesk Flint systems are our scalable line of interactive real-time visual effects and graphics design solutions. These products offer scalable performance to service a wide range of client workflows from interactive broadcast design to real-time high-resolution film work. They also offer the ability to interactively create, composite and edit highly challenging sequences that merge live action with computer-generated imagery using 3D graphics and mixed resolutions.

• Autodesk Smoke and Autodesk Fire

Autodesk Smoke and Autodesk Fire systems are our scalable line of interactive real-time non-linear and non-compressed online editing and finishing systems that enable editors to edit, conform and finish television commercials, broadcast programming, film trailers and feature films as well as other high-value media content in mixed resolutions.

PRODUCT DEVELOPMENT AND INTRODUCTION

We continue to enhance our product offerings and develop new products to meet changing customer demands. Research and development expenditures were $485.3 million or 22% of fiscal 2008 net revenue, $406.3 million or 22% of fiscal 2007 net revenue and $303.2 million or 20% of fiscal 2006 net revenue. Our software is primarily developed internally; however, we do contract services from software development firms, consultants and independent contractors to supplement our development efforts. Additionally, we acquire products or technology developed by others by purchasing or licensing some or all of the assets or stock of the entity that owns rights to the products or technology.

The majority of our basic research and product development is performed in the United States, China and Canada. Translation and localization of foreign-market versions, as well as some product development, is performed in other local markets, particularly in Singapore and Switzerland. We generally translate and localize our products into French, Italian, German, Spanish, Japanese and various Chinese dialects.

We actively recruit and hire experienced software developers. We also use independent firms and contractors to perform some of our product development activities. We plan to continue to increase our product development operations internationally over the next several years. We believe that our ability to conduct research and development at various locations throughout the world allows us to optimize product development, lower costs, and integrate local market knowledge into our development activities. We continually assess the significant costs and challenges, including intellectual property protection, against the benefits of our international development activities. For example, in January 2008, we purchased the remaining 72% of Hanna Strategies Holdings, Inc. (“Hanna Strategies”), a company that had previously been providing development services for us, primarily in China.

In addition, our business strategy has historically depended in part on our relationships with a network of over 3,100 third-party developers who develop and sell their own products that further enhance the range of integrated solutions available to our customers.

The technology industry is characterized by rapid technological change in computer hardware, operating systems and software. In addition, our customer’s requirements and preferences rapidly evolve, as do their expectations of our software. To keep pace with these changes, we maintain an aggressive program of new product development to address demands in the marketplace for our products. We dedicate considerable technical and financial resources to research and development to further enhance our existing products and to create new products and technologies. We continually review these investments in an effort to ensure that we are generating sufficient revenue or gaining a competitive advantage to justify their costs. For further discussion regarding risks from our product development and introduction efforts, see Item 1A, “Risk Factors.”

MARKETING AND SALES

We license or sell our products and services in over 160 countries primarily through indirect channels consisting of distributors and resellers. To a lesser extent we also transact directly with customers who are primarily large corporations. Our indirect channel model includes both a two-tiered distribution structure, where distributors sell to resellers, and a one-tiered structure where Autodesk sells directly to resellers. We have a network of approximately 1,700 resellers and distributors worldwide. For fiscal 2008, approximately 87% of our revenue was derived from indirect channel sales through distributors and resellers and we expect that the majority of our revenue will continue to be derived from indirect channel sales in the future. We employ a variety of incentive programs and promotions to align our reseller channel with our business strategy. Sales through one distributor, Tech Data Corporation and its affiliates, accounted for 14%, 12% and 11% of our net revenue for fiscal 2008, 2007 and 2006, respectively. No other distributor or reseller accounted for 10% or more of our revenue.

Our customer-related operations are divided into three geographic regions, the Americas, Europe/Middle East/Africa (EMEA) and Asia Pacific, and are supported by global marketing and sales organizations. These organizations develop and manage overall marketing and sales programs and work closely with a network of domestic and international sales offices.

We also work directly with reseller and distributor sales organizations, computer manufacturers, other software developers and peripherals manufacturers in cooperative advertising, promotions and trade-show presentations. We employ mass-marketing techniques such as web casts, seminars, telemarketing, direct mailings and advertising in business and trade journals. We have a worldwide user group organization and we have created online user communities dedicated to the exchange of information related to the use of our products.

In addition to sales of new software licenses, we generate revenue through our Autodesk Subscription Program and Autodesk Upgrade Program. These programs are available for a majority of our products and offer our customers two alternatives to migrate to the most recent version of our products.

Under the Autodesk Subscription Program, customers who own a perpetual use license for the most recent version of the underlying product are able to purchase maintenance that provides them with unspecified upgrades when-and-if-available, and are able to download e-Learning courses and receive online support over a one year or multi-year subscription period. Revenue from our Subscription Program is reported separately on our Consolidated Statements of Income and is referred to throughout this document as maintenance revenue.

Concurrent with the release of a new product version, the Autodesk Upgrade Program allows customers, who are not on the Subscription Program, to purchase upgrades, but only to the extent that they are still on a supported version of the product. Typically, the cost to upgrade is based on a multiple of the number of versions the customer is upgrading. An existing customer also has the option to upgrade to a different, discipline-specific or 3D product, which generally has a higher price, for a premium fee; we refer to this as a crossgrade. The cost of a crossgrade is substantially less than the cost of purchasing a new license and is available to subscription customers as well. Revenue from our upgrade and crossgrade programs is reported on our Consolidated Statements of Income in License and other.

Our ability to effectively distribute our products depends in part upon the financial and business condition of our distributor and reseller networks. Computer software resellers and distributors are typically not highly capitalized and have previously experienced difficulties during times of economic contraction and may do so in the future. While we have processes to ensure that we assess the creditworthiness of dealers and distributors prior to selling to them, if their financial condition were to deteriorate they might not be able to make repeat purchases. The loss of, or a significant reduction in, business with any one of our major international distributors or large resellers could harm our business. Our reliance on distributors and resellers subjects us to other risks; see Item 1A, “Risk Factors,” for further discussion.

We intend to continue to make our products available in foreign languages. We believe that international sales will continue to comprise the majority of our net revenue. Economic weakness in any of the countries where we generate a significant portion of our net revenue, including the United States, could have an adverse effect on our business. A summary of our financial information by geographic location is found in Note 11, “Segments” in the Notes to Consolidated Financial Statements.

CUSTOMER AND RESELLER SUPPORT

We provide technical support and training to customers through a leveraged support model, augmented by direct programs designed to address certain specific needs. Our customers rely primarily on the resellers and distributors from which they purchased licenses to our products for technical support; however, we do provide certain direct support for Media and Entertainment Segment Advanced Systems customers. We support the resellers and distributors through technical product training, sales training classes, the Internet and direct telephone support. We also provide online support directly to our customers through our Subscription Program. There are also a number of user group forums in which customers are able to share information.

EDUCATIONAL PROGRAMS

We offer education programs and specially priced software purchasing options tailored for educational institutions, students, and faculty to train the next generation of users. We also offer classroom support, including standardized curricula developed by educators, instructor development, and a rich assortment of online learning resources. Users trained on our products are broadly available both from universities and the existing workforce, reducing the cost of training for our customers.

DEVELOPER PROGRAMS

One of our key strategies is to maintain an open-architecture design of our software products to facilitate third-party development of complementary products and industry-specific software solutions. This approach enables customers and third parties to customize solutions for a wide variety of highly specific uses. We offer several programs that provide marketing, sales, technical support and programming tools to developers who develop add-on applications for our products. Over 3,100 developers in the Autodesk Developer Network create interoperable products that further enhance the range of integrated solutions available to our customers.

BACKLOG

We typically ship products shortly after receipt of an order, which is common in the software industry. Our aggregate backlog is primarily comprised of deferred revenue. Deferred revenue consists primarily of deferred maintenance revenue from our Subscription Program. To a lesser extent, deferred revenue consists of deferred license and other revenue derived from Autodesk Buzzsaw and Autodesk Constructware, consulting services and deferred license sales. Backlog also includes current software license product orders which have not yet shipped. The category of current software license product orders which we have not yet shipped consists of orders from customers with approved credit status for currently available license software products and may include both orders with current ship dates and orders with ship dates beyond the current fiscal period.

Aggregate backlog was $521.5 million at January 31, 2008, of which $506.1 million was deferred revenue and $15.4 million related to current software license product orders which had not yet shipped at the end of the fiscal year. Aggregate backlog was $395.8 million at January 31, 2007, of which $378.8 million was deferred revenue and $17.0 million related to current software license product orders which had not yet shipped at the end of the fiscal year. Deferred revenue increased over the prior year primarily due to an increase in deferred maintenance revenue resulting from the success of our Subscription Program. We expect deferred maintenance revenue to continue to increase in the future. We do not believe that aggregate backlog as of any particular date is necessarily indicative of future results.

CEO BACKGROUND

Carl Bass joined Autodesk in September 1993 and serves as Chief Executive Officer and President. From June 2004 to April 2006, Mr. Bass served as Chief Operating Officer. From February 2002 to June 2004, Mr. Bass served as Senior Executive Vice President, Design Solutions Group. From August 2001 to February 2002, Mr. Bass served as Executive Vice President, Emerging Business and Chief Strategy Officer. From June 1999 to July 2001, he served as President and Chief Executive Officer of Buzzsaw.com, Inc., a spin-off from Autodesk. He has also held other executive positions within Autodesk. Mr. Bass is also a director of McAfee, Inc.

Carol A. Bartz joined Autodesk in April 1992 and serves as Executive Chairman of the Board. Ms. Bartz’ present duties include enhancing relationships with Autodesk’s key customers, partners, governments and investors along with focusing on activities designed to improve the business climate for Autodesk. From April 1992 to April 2006, Ms. Bartz served as Chairman of the Board, Chief Executive Officer and President. Ms. Bartz is also a director of Cisco Systems, Inc., Intel, Inc. and Network Appliance, Inc. Prior to joining Autodesk, Ms. Bartz held various positions at Sun Microsystems, Inc., including Vice President, Worldwide Field Operations from July 1990 through April 1992.

George M. Bado joined Autodesk in October 2002 and serves as Executive Vice President, Worldwide Sales and Services. From October 2004 to April 2006, Mr. Bado served as Senior Vice President, DSG Worldwide Sales and Consulting. From October 2002 to October 2004, Mr. Bado served as Vice President, DSG Worldwide Sales. Prior to joining Autodesk, Mr. Bado served as a consultant to the Board of Directors of ChipData, Inc., a venture backed start up involved in electronic design verification from May 2002 to October 2002. Prior to that, Mr. Bado was Executive Vice President, Sales and Consulting for Innoveda, Inc., an electronic design automation software company, from July 2001 to April 2002 (Innoveda, Inc. was acquired by Mentor Graphics Corporation in April 2002) and from March 2000 to June 2001 was Executive Vice President, Operations for Centric Software, Inc., a product lifecycle management solutions company.

Jan Becker joined Autodesk in September 1992 and has served as Senior Vice President, Human Resources and Corporate Real Estate since June 2000. Ms. Becker previously served in other capacities in the Human Resources Department at Autodesk.

Alfred J. Castino joined Autodesk in August 2002 and serves as Senior Vice President and Chief Financial Officer. Prior to joining Autodesk, Mr. Castino was Chief Financial Officer for Virage, Inc., a video and media communication software company from January 2000 to July 2002. Prior to this, Mr. Castino served as Vice President of Finance and then Senior Vice President and Chief Financial Officer at PeopleSoft, Inc., an enterprise software company, where he worked from September 1997 to August 1999. Mr. Castino holds a CPA certificate from the State of California. Mr. Castino is also a director of Synopsys, Inc.

Jay Bhatt joined Autodesk in August 2001 and serves as Senior Vice President of Autodesk AEC (Architecture, Engineering and Construction) Solutions. From August 2001 to February 2004, Mr. Bhatt served as Vice President, Corporate Development and Strategic Planning. From March 2000 to July 2001, he served as Chief Financial Officer and senior vice president of Business Development of Buzzsaw.com, Inc., a spin-off of Autodesk. Prior to that, Mr. Bhatt worked as an investment banker and as a transactional attorney.

Chris Bradshaw joined Autodesk in September 1991 and has served as Senior Vice President and Chief Marketing Officer, Worldwide Marketing since September 2007. Prior to this, Mr. Bradshaw served as Senior Vice President, Worldwide Marketing from March 2007 to September 2007, as Vice President of Worldwide Marketing from January 2007 to March 2007, Vice President of Autodesk’s Infrastructure Solutions Division (ISD) from February 2003 to January 2007, and from August 2001 to January 2003, he was Vice President of Autodesk Building Collaboration Services. He served as senior vice president of sales and marketing for Buzzsaw.com, Inc., a spin-off of Autodesk, from September 1999 to August 2001 and as sales development director for Autodesk’s AEC (Architecture, Engineering and Construction) products in the Asia-Pacific region from July 1997 to August 1999. He has also held other executive and non-executive positions at Autodesk.

Moonhie Chin joined Autodesk in February 1989 and has served as Senior Vice President Strategic Planning and Operations since March 2007. From January 2003 to March 2007 she was Vice President Strategic Planning and Operation, and served as Vice President of Business Operations for Location Services from September 2000 to January 2003, and Vice President of Business Administration from June 1999 to September 2000. She has also held other non-executive positions at Autodesk.

Pascal W. Di Fronzo joined Autodesk in June 1998 and has served as Senior Vice President, General Counsel and Secretary since March 2007. From March 2006 to March 2007 Mr. Di Fronzo served as Vice President, General Counsel and Secretary and served as Vice President, Assistant General Counsel and Assistant Secretary from March 2005 through 2006. Previously, Mr. Di Fronzo served in other business and legal capacities in our Legal Department. Prior to joining Autodesk, he advised high technology and emerging growth companies on business and intellectual property transactions and litigation while in private practice.

Amar Hanspal joined Autodesk in June 1987 and serves as Senior Vice President, Platform Solutions and Emerging Business. From January 2003 to January 2007, Mr. Hanspal served as Vice President of Autodesk Collaboration Solutions. He served as Vice President of Marketing of RedSpark, Inc., a spin-off of Autodesk focused on building a collaborative product development system for the discrete manufacturing industry, from April 2000 to December 2001. He has also held other executive and non-executive positions at Autodesk.

Robert Kross has served as Senior Vice President of the Manufacturing Solutions Division since March 2007. Since joining Autodesk in November 1993, Mr. Kross has served as Vice President of the Manufacturing Solutions Division from December 2002 to March 2007 and a director in the Manufacturing Division from February 1998 to December 2002. Prior to that, he was President and co-founder of Woodbourne Inc., a provider of parametric design tools that was acquired by Autodesk in 1993.

Marc Petit joined Autodesk in October 2002 and serves as Senior Vice President, Media and Entertainment. Since joining Autodesk, he has served as Vice President of Product Development and Operations for the Media and Entertainment Division from October 2002 to March 2007. Prior to joining Autodesk, Mr. Petit was Vice President of Operations for Aptilon Health, an online interactive marketing company.

MANAGEMENT DISCUSSION FROM LATEST 10K

Strategy

Our goal is to be the world’s leading 2D and 3D design software and services company for the architecture, engineering, construction, manufacturing, geospatial mapping and digital media markets. Our focus is to offer our customers the ability to visualize, simulate and analyze real-world performance early in the design process to foster innovation, enhance quality, and save time and money. Worldwide business trends such as globalization, sustainability, investment in infrastructure, and the price of oil are creating pressure on our customers to increase innovation while improving productivity. Our customers are seeking differentiation through design, and we believe our products provide a competitive advantage to succeed in this environment.

We believe that our ability to make technology available to mainstream markets is one of our competitive advantages. By innovating in existing technology categories, we bring powerful design products to volume markets. Our products are designed to be easy to learn and use, and to provide customers low cost of deployment, low total cost of ownership and a rapid return on investment. In addition, our software architecture allows for extensibility and integration.

We have created a large global community of resellers, third-party developers and customers, which provides us with a broad reach into volume markets. Our reseller network is extensive and provides our customers with global resources for the purchase and support of our products as well as resources for effective and cost efficient training services. We have a significant number of registered third-party developers, creating products that operate with our software products, further extending our reach into volume markets. Users trained on our products are broadly available both from universities and the existing work force, reducing the cost of training for our customers. To train the next generation of users, we offer education programs, including classroom support, standardized curricula, instructor development, and specially priced software-purchasing options.

Our growth strategy derives from these core strengths. We continue to increase the business value of our desktop design tools in a number of ways. We improve the performance and functionality of existing products with each new release. Our most recent product release commenced in March 2008. Beyond our 2D horizontal design products, we develop products addressing industry-specific needs including 2D vertical and 3D model-based products. We continually strive to improve our product functionality and specialization by industry while increasing product interoperability and usability. By doing this, we drive technology democratization and increase customer loyalty.

In addition, we believe that migration of our customers from our 2D horizontal products to our 2D vertical products and 3D model-based design products, presents a significant growth opportunity. For fiscal 2008, revenue from 3D model-based design products increased 26% as compared to the prior fiscal year, and Autodesk shipped more than 159,300 commercial seats (which includes new seats and crossgrade seats) of 3D model-based design products, including 76,400 seats of Revit, 52,500 seats of Autodesk Inventor and 30,400 seats of AutoCAD Civil 3D. While the rate of migration to 2D vertical products and 3D model-based design products varies from industry to industry, adoption of 2D vertical products and 3D model-based design software should increase the productivity of our customers in all industries and result in richer design data. However, this migration also poses various risks to us. In particular, if we do not successfully convert our 2D horizontal customer base to our 2D vertical products and 3D model-based design products as expected, sales of our 2D horizontal products may decrease without a corresponding increase in customer seats of our 2D vertical products and 3D model-based design products, we would not realize the growth we expect and our business would be adversely affected.

Expanding our geographic coverage is a key element of our growth strategy. We believe that rapidly growing emerging economies present significant growth opportunities for us. In fiscal 2008, revenue from emerging economies increased 40% as compared to fiscal 2007. Revenue from emerging economies represented 17% of fiscal 2008 net revenue as compared 14% of fiscal 2007 net revenue. Conducting business in these emerging economies presents significant challenges, including intellectual property protection and software piracy, which remain substantial problems.

Another significant part of our growth strategy is to continue to move customers to our Subscription Program. We strive to sell subscription contracts to all new customers, migrate existing upgrade customers to subscription contracts and renew subscription contracts with existing subscription customers. This business model results in a more efficient sales process than our traditional upgrade process and reduces volatility in our revenue. Moving customers to our Subscription Program ensures that we have more customers on current versions of our products, increases customer loyalty and increases the likelihood that they will migrate to our 3D model-based design products. All revenue from our Subscription Program is Maintenance Revenue on our Consolidated Statements of Income. Maintenance revenue grew 31% in fiscal 2008, as compared to growth of 54% in the prior fiscal year. Our subscription base has grown substantially over the past several years and now consists of nearly 1.5 million users. As a result, while we expect growth in maintenance revenue from our Subscription Program in the future to continue to be strong, we expect the growth rate to be lower than in the past.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in conformity with U.S. generally accepted accounting principles. In preparing our consolidated financial statements, we make assumptions, judgments and estimates that can have a significant impact on amounts reported in our consolidated financial statements. We base our assumptions, judgments and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions or conditions. We regularly reevaluate our assumptions, judgments and estimates. We believe that of our significant accounting policies, which are described in Note 1, “Business and Summary of Significant Accounting Policies,” in the Notes to Consolidated Financial Statements, the following policies involve a higher degree of judgment and complexity. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our financial condition and results of operations.

Revenue Recognition. Our accounting policies and practices are in compliance with Statement of Position 97-2, “Software Revenue Recognition,” as amended, and SEC Staff Accounting Bulletin No. 104, “Revenue Recognition.”

Overview of Fiscal 2008 Results of Operations

The primary goals for fiscal 2008 were to continue our delivery of market-leading products and solutions to our customers and to drive revenue growth and increases in operating margins and operating cash flow. During fiscal 2008, we released our 2008 family of products, offering our customers continued advancements in design and authoring productivity as well as digital prototyping and product lifecycle management capabilities. During fiscal 2008, as compared to fiscal 2007, net revenue increased 18%, income from operations increased 27% and operating cash flow increased 23%.

Net revenue for fiscal 2008 increased due to an increase in license and other revenue of 14% and an increase in maintenance revenue from our Subscription Program of 31%. Net revenue for our 2D products and 3D model-based design products increased 13%, and 26%, respectively, during fiscal 2008, as compared to the prior fiscal year. A critical component of our growth strategy is to continue to add new 2D horizontal users, while migrating our customers to our higher value 2D vertical and 3D model-based design products.

Our total operating margin increased from 19% of net revenue in fiscal 2007 to 21% in fiscal 2008. This improvement is primarily due to an increase in our Media and Entertainment Segment’s operating income by $34.2 million in fiscal 2008 compared to the prior fiscal year. The increase in operating income from our Media and Entertainment Segment was due to higher gross margins from Advanced Systems resulting from a shift to sales of our Linux-based systems, a shift to system sales comprised of more software and less hardware and a 22% increase in net revenue from our Animation products. These increases were partially offset by an increase in amortization of acquisition-related intangibles of $11.3 million in fiscal 2008 as compared to fiscal 2007. We continue to invest in growth and productivity initiatives and, over the longer term we intend to continue to balance investments in revenue growth opportunities with our goal of increasing our operating margins. Our operating margins are very sensitive to changes in revenue, given the relatively fixed nature of most of our expenses, which consist primarily of employee-related expenditures, facilities costs, and depreciation and amortization expense. For fiscal 2009, we expect total costs and expenses to increase in absolute dollars, but decline slightly as a percentage of net revenue resulting in overall operating margin improvement as compared to fiscal 2008. We will continue to balance investments in revenue growth opportunities with our focus on increasing profitability.

We generate a significant amount of our revenue in the United States, Japan, Germany, United Kingdom, Italy, France, Canada, China, South Korea and Australia. The weaker value of the U.S. dollar relative to foreign currencies had a positive effect of $47.4 million on operating income in fiscal 2008 compared to fiscal 2007. Had exchange rates from fiscal 2007 been in effect during fiscal 2008, translated international revenue billed in local currencies would have been $71.2 million lower and operating expenses would have been $23.8 million lower. Foreign currencies had a minimal effect on financial results for fiscal 2007. Changes in the value of the U.S. dollar may have a significant effect on net revenue in future periods. We use foreign currency option collar contracts to reduce a portion of the current quarter exchange rate effect on the net revenue of certain anticipated transactions.

Throughout fiscal 2008, we maintained a strong balance sheet, generating $708.5 million of cash from operating activities as compared to $576.6 million during the previous fiscal year. We finished fiscal 2008 with $957.7 million in cash and marketable securities, of which $8.4 million is classified as long-term. This is an increase from the $777.9 million balance at January 31, 2007. We managed to achieve this increase while repurchasing 12.1 million shares of our common stock and continuing to invest in our business through acquisitions, including Robobat, NavisWorks and Hanna Strategies and investments in other growth initiatives. Comparatively, during the prior fiscal year we repurchased 4.2 million shares of our common stock, completed the acquisition of Constructware and invested in a 28% interest in Hanna Strategies. We completed fiscal 2008 with a higher deferred revenue balance and higher accounts receivable balance as compared to the previous fiscal year. Our deferred revenue balance at January 31, 2008 included $433.8 million of customer maintenance contracts related to our Subscription Program, which will be recognized as maintenance revenue ratably over the life of the contracts, which is predominantly one year.

Results of Operations

Fiscal 2008 Net Revenue Compared to Fiscal 2007 Net Revenue

License and Other Revenue

License and other revenue are comprised of two components: all forms of product license revenue and other revenue. Product license revenue includes revenue from the sale of new seats, revenue from the Autodesk Upgrade Program and revenue from the Autodesk Crossgrade Program. Other revenue consists of revenue from consulting and training services, revenue from the Autodesk Developers Network, Autodesk Collaborative Solution hosting revenue, Autodesk’s Location Services Division and revenue from Advanced Systems product support.

Growth in license and other revenue during fiscal 2008, as compared to fiscal 2007, was primarily due to growth in new seat revenue for most major products driven by the release of our 2008 family of products. Total license and other revenue increased 14% for fiscal 2008 as compared to the prior fiscal year. As a percentage of total net revenue, license and other revenue was 75% for fiscal 2008, 77% for fiscal 2007 and 82% for fiscal 2006.

We rely significantly upon major distributors and resellers in both the U.S. and international regions, including Tech Data Corporation and its affiliates, who accounted for 14%, 12% and 11% of Autodesk’s consolidated net revenue for fiscal 2008, 2007 and 2006, respectively.

During fiscal 2008, we made changes to our Partner Incentive Programs to incent our value-added resellers to shift their focus to selling 2D vertical products and 3D model-based design products. These new programs, which are accounted for as a reduction to net revenue, drive a consistent treatment of incentives around the world by further reallocating incentives from our 2D horizontal products, AutoCAD and AutoCAD LT, to 2D vertical and 3D model-based design products. We believe that changes to our Partner Incentive Programs are having the intended effect of shifting our resellers’ focus to selling 2D vertical and 3D model-based design products.

Revenue from the sale of new seats increased 19% from fiscal 2007 to fiscal 2008. The increase is due to an 18% increase in revenue from new seats of our 2D products, primarily AutoCAD LT, AutoCAD, AutoCAD Mechanical and AutoCAD Architecture. The increase was also due to a 30% increase in revenue from new seats of our 3D model-based design products (Revit products, Autodesk Inventor products, AutoCAD Civil 3D, and NavisWorks software). The increase in new seat revenue was driven primarily by higher average sales prices per seat and volume growth in both our 2D design and 3D model-based design products.

The positive effect of the weaker value of the U.S. dollar relative to foreign currencies also contributed to the increase in total net revenue in fiscal 2008 as compared to fiscal 2007. In addition, we experienced growth in net revenue in all three of our geographic regions and strong growth in the emerging economies of Europe, Middle East, Africa and Asia Pacific.

Upgrade revenue, which includes crossgrade revenue, decreased by 17% during fiscal 2008 as compared to the prior fiscal year, as expected. The decrease in upgrade revenue was driven primarily from the relatively smaller size of the upgradeable base of our AutoCAD-based products in fiscal 2008 as compared to the upgradeable base of our AutoCAD-based products in fiscal 2007, due to more customers on our Subscription Program. In addition, during the second half of fiscal 2008 and fiscal 2007, AutoCAD LT customers could crossgrade to any other product at a promotional rate, which contributed approximately $9.1 million to upgrade revenue in fiscal 2008 as compared to $21.4 million in fiscal 2007. We expect revenue from upgrades to continue to decline as we continue to execute on our strategy of moving customers to our Subscription Program.

Revenue from the sales of services, training and support, included in “License and other,” are immaterial for all periods presented.

Maintenance Revenue

Maintenance revenue consists of revenue derived from our Subscription Program. Under this program, customers are eligible to receive unspecified upgrades when-and-if-available, downloadable training courses and online support. We recognize maintenance revenue from our Subscription Program ratably over the maintenance contract periods. Maintenance revenue increased 31% for fiscal 2008 as compared to the prior fiscal year. As a percentage of total net revenue, maintenance revenue was 25% for fiscal 2008, 23% for fiscal 2007, and 18% for fiscal 2006. Our Subscription Program, available to most customers worldwide, continues to attract new and renewal customers by providing them with a cost effective and predictable budgetary option to obtain the productivity benefits of our new product releases and enhancements. We expect maintenance revenue to continue to increase both in absolute dollars and as a percentage of total net revenue as a result of increased Subscription Program enrollment, which is now at nearly 1.5 million users; however, we expect these growth rates to be lower than in the past. This shift away from upgrades toward a more predictable and sustainable maintenance revenue stream from the Subscription Program is consistent with our long-term strategy.

Due to the increase in our subscription base over time, the relative upgradeable installed base of the AutoCAD-based products not on subscription during fiscal 2008 was smaller than the upgradeable installed base of the AutoCAD-based products not on subscription during fiscal 2007. Maintenance revenue from subscriptions substantially exceeded revenue from upgrades in fiscal 2008.

Aggregate backlog at January 31, 2008 and January 31, 2007 was $521.5 million and $395.8 million, respectively, of which $506.1 million and $378.8 million represented deferred revenue and $15.4 million and $17.0 million, respectively, related to current software license product orders which have not yet shipped at the end of each respective fiscal year. Deferred revenue consists primarily of deferred maintenance revenue from our Subscription Program. To a lesser extent, deferred revenue consists of deferred license and other revenue derived from Autodesk Buzzsaw and Autodesk Constructware services, consulting services and deferred license sales. Backlog from current software license product orders which we have not yet shipped consists of orders for currently available license software products from customers with approved credit status and may include orders with current ship dates and orders with ship dates beyond the current fiscal period.

Net Revenue by Geographic Area

Net revenue in the Americas region increased by 9% during fiscal 2008, as compared to fiscal 2007, primarily due to a 22% increase in maintenance revenue from our Subscription Program. Revenue from new seats in the Americas increased 2% during fiscal 2008 as compared to fiscal 2007 driven by new seat revenue from our 3D model-based design products offset by a decline in new seat revenue from our 2D products compared to the prior fiscal year. Revenue from upgrades decreased by 14% in the Americas during fiscal 2008 compared to the prior fiscal year. Growth in the Americas was also impacted by a slowing economy that impacted growth rates for all of our products in the fourth quarter of fiscal 2008. Had exchange rates during fiscal 2007 been in effect during the same period of fiscal 2008, translated net revenue in the Americas would have been $0.1 million lower in fiscal 2008.

Net revenue in the Europe, Middle East and Africa (“EMEA”) region increased by 27% during fiscal 2008, as compared to fiscal 2007, primarily due to a 37% increase in new seat revenue and 40% increase in maintenance revenue from our Subscription Program. Revenue from new seats in EMEA increased during fiscal 2008 as compared to fiscal 2007 driven by new seat revenue from our 2D design products and 3D model-based design products. These increases were partially offset by 24% decrease in revenue from upgrades. EMEA’s growth during fiscal 2008 was primarily due to growth in the local emerging economies and the United Kingdom, Germany, France, Belgium and Austria. Had exchange rates during fiscal 2007 been in effect during the same period of fiscal 2008, translated net revenue in EMEA would have been $66.7 million lower in fiscal 2008.

Net revenue in the Asia Pacific (“APAC”) region increased 18% during fiscal 2008, as compared to fiscal 2007, primarily due to an 18% increase in new seats revenue, a 32% increase in maintenance revenue from our Subscription Program, and a 9% increase in revenue from upgrades. Revenue from new seats in APAC increased due to strong new seat revenue from our 2D products and 3D model-based design products. Net revenue growth in APAC during fiscal 2008 occurred primarily due to growth in the local emerging economies, Japan, South Korea and Australia. Had exchange rates during fiscal 2007 been in effect during the same period of fiscal 2008, translated net revenue in APAC would have been $4.4 million lower in fiscal 2008.

We believe that international net revenue will continue to comprise a majority of our total net revenue. Economic weakness in any of the countries that contributes a significant portion of our net revenue could have an adverse effect on our business in those countries. Changes in the value of the U.S. dollar relative to foreign currencies could significantly affect our future financial results for a given period. International net revenue represented 69% of our net revenue in fiscal 2008 and 66% of our net revenue in fiscal 2007. Net revenue in emerging economies grew by 40% from fiscal 2007 to fiscal 2008, primarily due to revenue from the EMEA emerging economies, China and India. This growth was a significant factor in our international sales growth during fiscal 2008.

Net Revenue by Operating Segment

Net revenue for the Design Solutions Segment increased 19% during fiscal 2008, as compared to fiscal 2007, primarily due to a 21% increase in new seat revenue and a 32% increase in maintenance revenue from our Subscription Program. These increases were partially offset by a 17% decrease in upgrade revenue in fiscal 2008 as compared to fiscal 2007. Maintenance revenue increased to 26% of Design Solutions Segment revenue during fiscal 2008 compared to 24% in fiscal 2007.

Net revenue for the Media and Entertainment Segment increased 10% during fiscal 2008, as compared to fiscal 2007. During fiscal 2008, net revenue from our Animation business line increased 22% due to increases in revenue from our animation products 3ds Max and Maya. Net revenue growth from Advanced Systems was flat as compared to the prior fiscal year due to the migration of our Advanced Systems solutions from SGI hardware to PC-based hardware systems which have a lower price but generate better margins.


MANAGEMENT DISCUSSION FOR LATEST QUARTER

Results of Operations

License and Other Revenue

License and other revenue are comprised of two components: all forms of product license revenue and other revenue. Product license revenue includes revenue from the sales of new seats, revenue from the Autodesk Upgrade Program and revenue from the Autodesk Crossgrade Program. Other revenue consist of revenue from consulting and training services, revenue from the Autodesk Developers Network, Autodesk Collaborative Solution hosting revenue, Autodesk’s Location Services business and revenue from Advanced Systems product support.

Total license and other revenue increased 12% during the three months ended July 31, 2008, as compared to the same period of the prior fiscal year. This growth was primarily due to the 9% increase in commercial new seat revenue from our 3D model-based design products and 2D products during the three months ended July 31, 2008. This increase was largely driven by the release of our 2009 family of products. During the three months ended July 31, 2008, approximately 23 points of the 9% increase was due to higher average net revenue per seat, offset by approximately 14 points due to decreases in the number of seats sold. During this quarter there was less correlation between revenue growth and seat growth due to changes in our mix of geographies and products, proportion of maintenance in the user base, currency exchange rates, and average selling prices, and we expect this trend to continue. As a percentage of total net revenue, license and other revenue was 71% for the three months ended July 31, 2008 and 75% for the three months ended July 31, 2007.

Total license and other revenue increased 12% during the six months ended July 31, 2008, as compared to the same period of the prior fiscal year. This growth was primarily due to the 16% increase in commercial new seat revenue from our 3D model-based design products and 2D products during the three and six months ended July 31, 2008, respectively. These increases were largely driven by the release of our 2009 family of products. During the six months ended July 31, 2008, approximately 19 points of the 16% increase was due to higher average net revenue per seat, offset by approximately 3 points due to decreases in the number of seats sold. During the six months ended July 31, 2008 there was less correlation between revenue growth and seat growth due to changes in our mix of geographies and products, proportion of maintenance in the user base, currency exchange rates, and average selling prices, and we expect this trend to continue. As a percentage of total net revenue, license and other revenue was 72% for the six months ended July 31, 2008, respectively, and 75% for the six months ended July 31, 2007.

Also contributing to the increase in license and other revenue, upgrade revenue, which includes crossgrade revenue, increased by 27% and 2% during the three and six months ended July 31, 2008, respectively, as compared to the same periods of the prior fiscal year. The increases in upgrade revenue were driven primarily by a promotion during the second quarter of fiscal 2009, which encouraged customers to upgrade to our most current products. In addition, we ran an AutoCAD LT crossgrade promotion to incent customers to migrate from AutoCAD LT to any other Autodesk product. Over the long term, we expect revenue from upgrades to decrease as we continue to move customers onto our maintenance program.

Revenue from the sales of our services, training and support, included in “License and other,” represented less than 4% of net revenue for all periods presented.

Maintenance Revenue

Under our maintenance program, customers are eligible to receive unspecified upgrades when and if available, downloadable training courses and online support. We recognize maintenance revenue ratably over the maintenance contract periods. Maintenance revenue increased 36% during the three months ended July 31, 2008, as compared to the same period of the prior fiscal year. Approximately 27 points of the 36% increase was due to increases in program enrollment and approximately 9 points of the increase was due to higher net revenue per maintenance seat for the three months ended July 31, 2008 as compared to the same period of the prior fiscal year. As a percentage of total net revenue, maintenance revenue was 29% and 25% for the three months ended July 31, 2008 and 2007, respectively.

Maintenance revenue increased 34% during the six months ended July 31, 2008, as compared to the same period of the prior fiscal year. Approximately 25 points of the 34% increase was due to increases in program enrollment and approximately 9 points of the increase was due to higher net revenue per maintenance seat for the six months ended July 31, 2008 as compared to the same period of the prior fiscal year. As a percentage of total net revenue, maintenance revenue was 28% and 25% for the six months ended July 31, 2008 and 2007, respectively. Our maintenance program, available to most customers worldwide, continues to attract new and renewal customers by providing them with a cost effective and predictable budgetary option to obtain the productivity benefits of our new releases and enhancements when and if released during the term of their contracts. We expect maintenance revenue to continue to increase both in absolute dollars and as a percentage of total net revenue as a result of increased program enrollment, which at July 31, 2008 consisted of more than 1.6 million users; however, we expect these growth rates to be lower than in the past.

Aggregate backlog at July 31, 2008 and January 31, 2008 was $591.4 million and $521.5 million, respectively, of which $562.6 million and $506.1 million, respectively, represented deferred revenue and $28.8 million and $15.4 million, respectively, related to current software license product orders that had not yet shipped at the end of each respective period. Deferred revenue consists primarily of deferred maintenance revenue. To a lesser extent, deferred revenue consists of deferred license and other revenue derived from Autodesk Buzzsaw and Autodesk Constructware services, consulting services and deferred license sales. Backlog from current software license product orders that we have not yet shipped consists of orders for currently available licensed software products from customers with approved credit status and may include orders with current ship dates and orders with ship dates beyond the current fiscal period.

Net Revenue by Geographic Area

Net revenue in the Americas region increased by 4% during the three months ended July 31, 2008, as compared to the same period in the prior fiscal year, primarily due to a 23% increase in maintenance revenue and a 32% increase in revenue from upgrades. These increases were partially offset by a 20% decrease in revenue from new seats in the Americas. Net revenue in the Americas region increased by 4% during the six months ended July 31, 2008, as compared to the same period of the prior fiscal year, primarily due to a 17% increase in maintenance revenue partially offset by a 7% decrease in revenue from new seats in the Americas. Growth in the Americas was affected by a slowing economy that impacted growth rates for all of our products in the three and six months ended July 31, 2008.

Net revenue in EMEA increased by 31%, or 15% increase on a constant currency basis, during the three months ended July 31, 2008, as compared to the same period of the prior fiscal year, primarily due to a 50% increase in maintenance revenue, a 22% increase in new seat revenue and a 25% increase in revenue from upgrades. EMEA’s growth during the second fiscal quarter was primarily due to growth in the local emerging economies, as well as in Germany, France, Italy, Sweden and Belgium. The positive effect of the weaker value of the U.S. dollar relative to the euro, the British pound and other European currencies also contributed to the increase in net revenue in EMEA. Had exchange rates from the three months ended July 31, 2007 been in effect during the three months ended July 31, 2008, translated net revenue in EMEA would have been $32.2 million lower. Net revenue in EMEA increased by 28%, or 13% increase on a constant currency basis, during the six months ended July 31, 2008, as compared to the same period of the prior fiscal year, primarily due to a 27% increase in revenue from new seats and a 52% increase in maintenance revenue. These increases were partially offset by a 2% decrease in revenue from upgrades. EMEA’s growth during the six months ended July 31, 2008 was primarily due to growth in the local emerging economies, as well as in Germany, France, Italy, Belgium and Sweden. The positive effect of the weaker value of the U.S. dollar relative to the euro, the British pound and other European currencies also contributed to the increase in net revenue in EMEA. Had exchange rates from the six months ended July 31, 2007 been in effect during the six months ended July 31, 2008, translated net revenue in EMEA would have been $62.4 million lower.

Net revenue in APAC increased by 18%, or 11% increase on a constant currency basis, during the three months ended July 31, 2008, as compared to the same period of the prior fiscal year, primarily from a 15% increase in new seat revenue, a 36% increase in maintenance revenue and a 22% increase in revenue from upgrades. Net revenue growth in APAC during the three months ended July 31, 2008 occurred primarily in Japan, the APAC emerging economies, as well as in Australia and South Korea. Had exchange rates from the three months ended July 31, 2007 been in effect during the three months ended July 31, 2008, translated net revenue in APAC would have been $9.6 million lower. Net revenue in APAC increased by 22%, or 14% increase on a constant currency basis, during the six months ended July 31, 2008, as compared to the same period of the prior fiscal year, primarily from a 19% increase in new seat revenue, a 42% increase in maintenance revenue and a 25% increase in revenue from upgrades. Net revenue growth in APAC during the six months ended July 31, 2008 occurred primarily in Japan, the APAC emerging economies, as well as in Australia and South Korea. Had exchange rates from the six months ended July 31, 2007 been in effect during the six months ended July 31, 2008, translated net revenue in APAC would have been $19.7 million lower.

We believe that international net revenue will continue to comprise a majority of our total net revenue. Economic weakness in any of the countries that contributes a significant portion of our net revenue could have an adverse effect on our business in those countries. Changes in the value of the U.S. dollar relative to other currencies could significantly affect our future financial results for a given period. International net revenue represented 74% and 68% of our net revenue for the three months ended July 31, 2008 and 2007, respectively, and 73% and 69% of our net revenue for the six months ended July 31, 2008 and 2007, respectively. Net revenue from emerging economies grew by 40% between the three months ended July 31, 2007 and the three months ended July 31, 2008, primarily due to revenue from emerging economies in EMEA and the Americas. Net revenue from emerging economies grew by 40% between the six months ended July 31, 2007 and the six months ended July 31, 2008, primarily due to revenue from emerging economies in EMEA, APAC and the Americas. This growth was a significant factor in our international sales growth during the three and six months ended July 31, 2008.

Net Revenue by Operating Segment

We have four reportable segments: Platform Solutions and Emerging Business and Other (“PSEB”), Architecture, Engineering and Construction (“AEC”), Manufacturing Solutions (“MSD”) and Media and Entertainment (“M&E”). Location Services, which is not included in any of the above reportable segments, is reflected as Other. Autodesk has no material inter-segment revenue.

Net revenue for PSEB increased 12% during the three months ended July 31, 2008, as compared to the same period of the prior fiscal year, primarily due to a 12% increase in revenue from AutoCAD. Revenue from AutoCAD LT increased 6% over the same period in the prior fiscal year; second quarter fiscal 2009 AutoCAD LT revenue was impacted by very strong sales in the first quarter in advance of a second quarter price increase instituted with the 2009 release of AutoCAD. Net revenue for PSEB increased 11% during the six months ended July 31, 2008, as compared to the same period of the prior fiscal year, primarily due to a 17% increase in revenue from AutoCAD LT. Revenue from AutoCAD increased 7% over the same period in the prior fiscal year.

Net revenue for AEC increased 21% during the three months ended July 31, 2008, as compared to the same period of the prior fiscal year, primarily due to a 27% increase in revenue from Revit. Net revenue for AEC increased 25% during the six months ended July 31, 2008, as compared to the same period of the prior fiscal year, primarily due to a 40% increase in revenue from Revit. Also contributing the increases in AEC’s net revenue during the three and six months ended July 31, 2008 was an increase in revenue from the Autodesk NavisWorks and Autodesk Robobat products.

Net revenue for MSD increased 32% during the three months ended July 31, 2008, as compared to the same period of the prior fiscal year, primarily due to a 28% increase in revenue from Autodesk Inventor products and a 25% increase in revenue from AutoCAD Mechanical. Net revenue for MSD increased 29% during the six months ended July 31, 2008, as compared to the same period of the prior fiscal year, primarily due to a 27% increase in revenue from Autodesk Inventor products and a 27% increase in revenue from AutoCAD Mechanical. Also contributing to the increases in MSD’s net revenue for the three and six months ended July 31, 2008 was revenue from the Autodesk Moldflow products.

Net revenue for M&E increased 12% during the three months ended July 31, 2008, as compared to the same period of the prior fiscal year primarily due to the 19% increase in net revenue from our Animation business line. The increase in Animation revenue was primarily due to a 45% increase in revenue from Autodesk 3ds Max. Net revenue for M&E increased 13% during the six months ended July 31, 2008, as compared to the same period of the prior fiscal year primarily due to the 21% increase in net revenue from our Animation business line. The increase in Animation revenue was primarily due to a 44% increase in revenue from Autodesk 3ds Max. Net revenue growth from Advanced Systems for the three and six months ended July 31, 2008 was 4% as compared to the same periods in the prior fiscal year.


CONF CALL

David Gennarelli

Thanks, Operator. Good afternoon. Thank you for joining our conference call to discuss our second quarter fiscal 2009. With me today is Carl Bass, our Chief Executive Officer; and Sue Pirri, Vice President of Finance.

Today’s conference call is being broadcast live via webcast. In addition, a replay of the call will be available by webcast at Autodesk.com/investor.

During the course of this conference call, we will make forward-looking statements regarding future events and the future performance of the company, our guidance for the third and fourth quarters of fiscal 2009 and full year fiscal 2009, the factors we used to estimate our guidance for those periods, our future business prospects, revenue and earnings growth, our market opportunities, trends for our products and trends in various geographies, and the anticipated benefits of acquisitions.

We caution you that such statements reflect our best judgment based on factors currently known to us and that actual events or results could differ materially. Please refer to the documents we file from time to time with the SEC, specifically our Form 10-K for fiscal year 2008 and our 10-Q for first quarter of fiscal 2009, and our periodic 8-K filings, including the 8-K filed with today’s press release. These documents contain and identify important risks and other factors that may cause our actual results to differ from those contained in our forward-looking statements.

Forward-looking statements made during the call are being made as of today. If this call is replayed or reviewed after today, the information presented during the call may not contain current or accurate information. Autodesk disclaims any obligation to update or revise any forward-looking statements.

In adherence with regulation FD, Autodesk will provide quarterly information and forward-looking guidance in its quarterly financial results press release and this publicly announced conference call. We will not provide any further guidance or updates on our performance during the quarter unless we do so in a public forum.

During the call, we will discuss non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles. A reconciliation of the GAAP and non-GAAP results is provided in today’s press release and on our website.

In addition, we will quote a number of percentage increases as we discuss our financial performance. Unless otherwise noted, each percentage represents a year-over-year growth rate showing the second quarter of fiscal 2009 as compared to the second quarter of fiscal 2008.

And now I would like to turn the call over to Carl Bass.

Carl Bass

Good afternoon, everyone and thank you for joining us. Today, Autodesk reported solid financial results for our second quarter of fiscal 2009. Revenue for the quarter increased 18% over last year to $620 million. Diluted earnings per share were $0.39 on a GAAP basis and $0.56 non-GAAP. Both revenue and EPS grew beyond our expectations. We also managed our operating expenses very well, stemming from initiatives we implemented in the first quarter.

Overall, we are very pleased with our performance in the quarter and I’ll get right into some of the highlights.

By geography, our results varied. The Americas posted 4% growth for the quarter and there were a number of positive trends. We were pleased with the rebound we saw in our business in Canada and we posted a record quarter in Latin America. We also continued to make inroads with our government business in the U.S., where we posted solid results of federal agencies, state agencies, and city level departments.

We believe our business in the Americas has stabilized and we are taking actions to drive stronger performance going forward.

Outside of the Americas, our business in EMEA and Asia-Pacific continues to underpin our overall revenue growth. Combined, these regions increased 26% in the second quarter. Even at constant currency, this growth rate was 13% overall, with pockets of exceptional growth.

Revenue in our emerging markets grew 40% and represented 18% of our total revenue for the quarter.

Looking forward, our international business remains very strong. We are confident in our ability to maintain the momentum and volume of business we are winning internationally.

Moving on to product performance, our model-based 3D design solutions -- Inventor, Revit, Civil 3D, NavisWorks, Robobat, and Moldflow -- posted solid results and increased 36% to $166 million.

3D revenue was 27% of total revenue for the quarter. Excluding Moldflow, our 3D solutions grew 31% to $159 million. We shipped over 36,000 commercial seats of these products.

During this quarter and going forward, we saw less correlation between revenue growth and seat growth, due to changes in our mix of geographies and products, proportion of maintenance in the user base, currency exchange rates, and average selling prices.

Turning to our 2D products, revenue from 2D vertical products remained strong and increased 16% compared to the second quarter of fiscal 2008. AutoCAD grew a solid 12%, while LT grew 6%. LT growth was impacted by very strong sales in the first quarter, in advance of the price increase instituted with the release of AutoCAD LT 2009.

In addition to delivering strong results for the quarter, we closed four small acquisitions, including REALVIZ, Kynogon, Square One Research, and Green Building Studio. The technologies acquired with these firms advance our base of robust solutions for visualization, simulation, and analysis, as well as technology used to create energy efficient buildings.

We also closed the acquisition of Moldflow in the quarter. This acquisition will augment our presence in the manufacturing industry. Moldflow has already made a meaningful contribution to our business and we believe there are abundant opportunities to provide a fully digital development process for plastic injection part and mold design.

Before we take a closer look at the financials, I’ll give you an update on our CFO transition. As you may know, Al recently left the company. To date, we have narrowed the search to several highly qualified candidates and we are working our way through the interview and selection process. We are hopeful that we can identify and announce a candidate within the next month or so. In the meantime, we have a very deep bench of highly experienced people in our finance organization to bridge the transition.

I think you all know Sue Pirri. She is leading our finance efforts, so I’ll turn the call over to her for a more detailed discussion of the results.

Sue Pirri

Thanks, Carl. Net revenue in the quarter was $620 million, an increase of 18% as reported and 10% constant currency. License revenue increased 12% to $440 million. Revenue from new seats grew 8% in the quarter. Total upgrade revenue, including cross-grade, increased 27%.

AutoCAD LT had an unusual impact on performance in both of these areas this quarter. New seat growth was impacted by the very strong sales of LT in the first quarter. Excluding LT, revenue from new seats grew 13% in the second quarter.

Upgrade revenue was driven by an LT cross-grade promotion in sending customers to migrate from LT to any other Autodesk product. As an example of the program’s effectiveness, over half of the migrating LT seats moved to 3D. In addition, upgrade revenue was driven by a retirement promotion designed to get customers to upgrade to our most current products.

Maintenance revenue increased 36% in the quarter to $180 million. Combined, upgrade revenue and maintenance revenue increased 34%.

Looking at the geographies, revenue in the Americas was $203 million, an increase of 4%. EMEA revenue was $267 million, an increase of 31% as reported and 15% constant currency. Revenue in Asia-Pacific was $115 million, an increase of 18% as reported and 11% constant currency.

Breaking down revenue by segments, platform solution and emerging businesses had a good quarter, increasing revenue 12% to $270 million. Both AutoCAD and AutoCAD Map showed solid growth. AutoCAD LT revenue increased 6% this quarter; however, year-to-date LT revenue has grown 17%.

Total revenue from our manufacturing solutions division increased 32% to $131 million. Moldflow, which was acquired during the quarter, contributed almost $7 million, which was higher than our expectations when we closed the transaction. We are pleased that their sales force was able to achieve these results with minimal disruption and finished the quarter strongly.

Excluding revenue from Moldflow, growth in manufacturing was 25%. Revenue from our Inventor family of products increased 28%. During the quarter, we shipped more than 10,000 commercial seats of Inventor and Moldflow, and approximately 56,000 seats of our manufacturing products in total.

Our AEC segment increased revenue 21% to $144 million. Revenue from our Revit family of products grew 27%. We shipped approximately 26,000 commercial seats of Revit, Civil 3D, NavisWorks and Robobat. Once again, during this quarter and going forward, we saw less correlation between revenue growth and seat growth due to changes in our mix of geographies and products, proportion of the maintenance and user base, currency exchange rates, and average selling prices.

Revenue from our media and entertainment segment was $69 million, an increase of 12%. Revenue from Advanced Systems increased 4%. Animation revenue saw continued strength, increasing 19% driven by 3DS Max.

Moving to the rest of the income statement, gross margins were 90% on a GAAP basis and 91% non-GAAP. Operating expenses were $501 million GAAP, $449 million non-GAAP. Our operating margin was 19% GAAP and 28% non-GAAP.

Our tax rate in the quarter was 28% GAAP and 26% non-GAAP.

GAAP diluted earnings per share increased 3% to $0.39. Non-GAAP diluted EPS was $0.56, an increase of 27% over the second quarter of last year. At the end of the quarter, there were 225 million shares outstanding.

Compared to the second quarter of last year, the impact of foreign currency exchange rates was $42 million favorable on revenue and $11 million unfavorable on expenses. Compared to the first quarter, the foreign currency impact was $7 million favorable on revenue and had an immaterial impact on expenses.

Turning to the balance sheet, cash and investments were $970 million. During the quarter, we issued 900,000 shares from employee stock plans, generating $15 million in cash. We did not repurchase any shares this quarter but as a reminder, we repurchased approximately 8 million shares in the first quarter.

Cash from operating activities increased 63% to $209 million. Deferred revenue was up 37% year-over-year to $563 million.

Unshipped product orders, or shippable backlog, increased $11 million sequentially to $29 million. Total backlog, including deferred revenue and unshipped product orders, was $591 million, an increase of $158 million over last year.

Our channel inventory remains below three weeks. DSOs were 48 days this quarter, decreasing sequentially due to seasonally lower maintenance billings than last quarter.

Now let’s talk about the rest of 2009; in preparing our guidance, we’ve considered the significant strengthening of the U.S. dollar versus other major currencies in the last few days. While we can’t predict where currency exchange rates will move in the future, we are confident in our currency assumptions for the third quarter, as we have already locked in those rates. For the fourth quarter, we believe it is prudent for us to be conservative than usual in our currency assumptions. As a result, if the dollar does not continue to strengthen, our estimates may prove to be overly conservative.

For the third quarter, we expect our revenue to be in the range of $625 million to $635 million. GAAP earnings per diluted share are expected to be in the range of $0.40 and $0.42. Non-GAAP EPS is expected to be between $0.54 and $0.56, excluding $0.07 related to stock-based compensation and $0.07 for the amortization of acquisition related intangibles.

For the fourth quarter, we are assuming an increase in the underlying level of business relative to our previous guidance. We are also assuming that the U.S. dollar will continue to strengthen. As a result, we are now expecting our revenue to be in the range of $660 million to $680 million; GAAP earnings per diluted share are expected to be in the range of $0.52 and $0.56; non-GAAP EPS is expected to be between $0.64 and $0.68, excluding $0.08 related to stock-based compensation and $0.04 for the amortization of acquisition related intangibles.

For fiscal year 2009, we expect our revenue to be in the range of $2.5 billion and $2.53 billion, which represents growth at 15% to 16%. Full year GAAP earnings per diluted share are now expected to be in the range of $1.72 and $1.78. Non-GAAP EPS is expected to be in the range of $2.24 and $2.30, excluding $0.29 related to stock-based compensation and $0.23 for the amortization of acquisition related intangibles and in-process research and development.

Now, I’d like to turn the call back to Carl.

Carl Bass

Thanks, Sue. So to wrap things up, we had terrific execution in the second quarter. We have positioned ourselves well for future growth and for an eventual rebound in the U.S. economy. The strength of our products and our highly diversified model has allowed us to weather the headwinds in the U.S. and capitalize on the international markets, where we are seeing very strong growth.

We believe there are still untapped opportunities in all of our markets and we are working hard to realize them. We have close to $1 billion in cash, excellent cash flow, and very little debt.

The demand for our products remains strong and we are seeing an increase in our underlying business. We also continue to improve our competitive position by investing in our products, channels, and infrastructure.

Our strategy is working well and we are disciplined in its execution.

With that, I will turn it back over to the Operator so we can take your questions.

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