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In a bid to expand its cloud services offering, Autodesk Inc. (ADSK - Analyst Report) recently unveiled a new set of products including solutions and services for building design & construction, civil infrastructure, plant design and digital entertainment professionals. The company also unveiled a new 3D design and software portfolio for manufacturers.
The 2013 family of Autodesk products can seamlessly collaborate with Autodesk 360 (previously known as Autodesk Cloud), a family of hybrid cloud-based and on-premises software solutions launched in 2011. This helps Autodesk customers not only to store their work and gain access to the related designs and engineering documents through web browsers and mobile devices, but also to work and view, edit and share designs from anywhere through any web-enabled device, thereby eliminating the location issues.
Moreover, the new suites offer higher speed in modeling designs due to the infinite computing ability of the cloud. In addition to sophisticated new features, such as high-performance 3D visual communication, simulation and collaboration, designers, engineers and digital artists with Autodesk subscriptions are provided with additional cloud storage of up to 25 MB. We believe that the new cloud based products will boost Autodesk’s subscriber base going forward.
According to Forrester, the global market for cloud computing will grow from $40.7 billion in 2011 to more than $241.0 billion by 2020. Both private and public cloud markets are expected to grow at a significant rate primarily due to higher computing speed and agility, which is available at a lower cost. As per data available from Delloitte, cloud-based applications will replace 2.34% of enterprise IT spending in 2014, finally rising to 14.49% by 2020.
We believe that this tremndous growth in cloud computing bodes well for Autodesk. The new design suites reflects Autodesk’s gradual shift in focus on providing software over the web. The company is also increasing its penetration in the mobile market by developing software for smartphones and Apple’s (AAPL - Analyst Report) iPad. We believe that these initiatives will boost Autodesk’s top-line growth going forward.
To build its cloud computing portfolio, Autodesk has been on an acquisition spree lately. We believe that these acquisitions, particularly of the web-based communities, will boost the company’s cloud offerings going forward. The acquisitions reflect Autodesk’s strategy of expanding its digital prototyping solutions, which is expected to cater to manufacturers of all sizes, enhancing their ability to design, visualize and simulate their products before they are built.
In our view, the company’s improvements and innovations in 3D design technology and product portfolio provides a competitive edge. Moreover, Autodesk’s expanding product portfolio and broadening industry and geographic reach will help it sustain its longer-term growth strategy of providing high-volume, lower-cost CAD software. We believe this will likely drive earnings going forward. However, foreign exchange fluctuations and increasing competition are the primary headwinds.
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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