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Autodesk Inc. (ADSK - Analyst Report) has inked an agreement to acquire Horizontal Systems, a cloud-based Building Information System (BIM) solutions provider. Pursuant to the deal, Horizontal’s BIM solutions are expected to be incorporated into Autodesk 360. Financial details of the deal, which is expected to close in the fourth quarter of fiscal 2012 (Jan 31, 2012)  were not disclosed.

The acquisition is expected to boost Autodesk’s cloud-based BIM. Autodesk and Horizontal clients will now enjoy the benefits of more efficient workflows, easy availability of project data and simplified business processes, resulting in higher profitability and quality product delivery. The Horizontal acquisition will provide added strength to Autodesk’s Architecture, Engineering and Construction (AEC) business segment.

Horizontal systems would be Autodesk’s second acquisition in quick succession in the BIM segment. In October, the company acquired U.K.-based Micro Application Packages Ltd. (MAP Software), a provider of computer-aided design (CAD), computer-aided manufacturing (CAM) and estimating software that lends support to the mechanical, electrical and plumbing (MEP) industry.

Recommendation

The recent acquisitions in the CAD and gaming middleware sections will provide the company with long-term opportunities, particularly in the web-based communities that are most likely to boost the company’s cloud offerings going forward.  

Moreover, Autodesk has no debt and with a healthy balance sheet, the company has the necessary liquidity to continue as the leading developer of 3D designs, with the scope of making favorable acquisitions as required. Additionally, the company’s improvements and innovations in 3D design technology and product portfolio provides a competitive edge.

However, foreign exchange fluctuations combined with increasing exposure to Europe and customer concentration are the headwinds going forward.  Additionally, increasing competition from Adobe Systems Inc. (ADBE - Analyst Report) and Parametric Technology Corp. remains a concern.

We have a Neutral recommendation on Autodesk’s shares in the long term. Currently, Autodesk has a Zacks #3 Rank, which translates into a short-term (1-3 months) ‘Hold’ rating.

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