Disaster in progress – Autodesk continues to lose heavily

This post originally contained assertions about Autodesk’s financials that were based on flawed understanding, and has been removed. It’s not really possible to delete things from the Internet, so if you ever want to relive the joy of seeing me get things spectacularly wrong, feel free to use the Internet Archive to do so.

10 Comments

  1. I hadda do sum cipherin’ for a better view of the future.

    Five years of the vastly improved ACAD 2017 will eat $10,080 USD at $1,680 per, or 0.97¢ per working hour.

    Five years of antiquated 2016 adds up to $6,920 for the $4,195 license and $545 per year for pretty much four upgrades (historic licensing). That’s 0.67¢ per working hour (2,080 honest billable hours per year).

    Now, I reckon that’s about a 146% increase in geniune cash money wanked away to reach the same result. Maybe I’m a little slow, and perhaps my kinetic trigonometry is a touch rusty, but I surely don’t understand how paying nearly 50% more per seat would be saving my business money.

    A $1,384 rental plan would break even. An annual $1,000 rental plan would actually help the customers, fulfill the promise, and maybe even retain a few. Sticking with ACAD <2016 without subscription is even more cost effective.

    If I had finished third grade and gone on to buy a business degree, maybe I would be in a position to destroy a profitable company with the stroke of a crayon.

    Power. Sad.

    • Bill, you are being too generous to Autodesk. It’s worse than you stated, because it’s not the same result. At the end of 5 years on maintenance, you will have a perpetual license of AutoCAD 2020ish which you can keep using as long as it still works. At the end of 5 years on rental, having paid a lot more money, you will have nothing.

      • And, in my excitement I added one rental year too many. It’s only a slight 135% nudge instead of that ridiculous 146% over six years I erroneously posted. Silly me. Maybe Autodesk accounting is hiring. The equivalent difference between eleven or twelve inches of rectal licensing reach. Still gonna hurt.

      • “….which you can keep using as long as it still works”

        To be fair, this could be what, maybe 8 to 10 years depending on the ability and willingness to upgrade hardware and O/S. Today, you’d be at risk running Windows XP (with an online machine) to support say, AutoCAD 2008. But then if you buy a new PC with Win10, good luck getting AutoCAD 2008 to install, activate, run, print, etc.

  2. I’m all for bashing Autodesk, but I think in order to present an even picture of what is going on you need to include the deferred revenue in your post. Deferred revenue is money Autodesk has received, but can’t count into their revenue until a date in the future. Previously Autodesk was able to capture all of the money a customer paid for a seat of AutoCAD since they only got that one year of the version and then paid a subscription for future years (which they counted as all revenue when received). Accounting wise this was great since you got all of the cash to hit as revenue when you got it. This appears to be the reason we as customers had to be subjected to yearly releases of the software rather than incremental release versions each year like Bentley does things.

    With the new model the money Autodesk receives for a yearly rental must be broken up by each month. So before Autodesk could say I got $10,000 of revenue for selling a seat. Today Autodesk can say they got revenue of $1,680, but can only count $420 as revenue in the quarter. The other $1,260 goes into a pot called deferred revenue. They get to claim that money over time.

    Deferred revenue appears to have gone from $1.24 billion to $1.52 billion in the second quarter which is $300 million of cash that hasn’t hit the books. If we take a look at the loss through the 2nd quarter it looks suspiciously like the overall picture of Autodesk’s financial health hasn’t changed much.

    Disclaimer: Have received stuff from Autodesk for free in the past and in the future. I too am not an accountant or financial person.

    • You beat me to it, Christoper, on the topic of deferred revenue. This is another negative for Autodesk going all-subscription: it has now $1.5 billion in deferred income. This is the subscription income that it cannot declare as income, because 1-year of subscription income must be declared 25% per quarter.

      So there is $1.5 billion in a bank account that Autodesk cannot spend on useful things, like R&D. The pile of unusable cash is growing, according to Autodesk. This may explain why the new-feature count in AutoCAD has shrunken for the last several releases.

    • Christopher Fugitt is correct. When you switch to a SaaS or subscription model with yearly subscriptions your accounting changes. The initial 12 months will look terrible on your books as you only get to recognize revenue monthly even though you have taken the cash. The remaining months then sit on your books as a liability. Cash on hand is rising if you look at the Adsk financials. So is deferred revenue.

      You must look at the P&L and the Balance Sheet to get the full picture.

      I went through this with my company in 2008 when we began switching to a subscription model. The P&L will look terrible during that transition. Not the full picture however.

  3. Unfortunately vast amounts of misinformation here and none of you are clearly accountants or business minded people. If you paid attention to Autodesk’s recent Investor Day presentations you’ll notice that the results are going exactly as planned. In the transition to the subscription model there will be a short term dip in earnings, which should later rebound with strong growth.

    I recommend you listen careful to the earnings calls and if you need outside opinion read the wall street analyst reports. All very positive.

  4. Gentlemen, thank you. You are entirely correct about my failure to take deferred income into account. I will be dealing with this failure shortly.

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