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Autodesk Inc. (ADSK - Analyst Report) recently announced the acquisition of its long time partner Vela Systems, a leading provider of cloud-based field management software for the construction industry. However, details of the transaction were not available. Autodesk said that the acquisition will have no material effect on guidance provided on March 17, 2012.
Vela Systems develops web-based software and mobile applications primarily used for Building Information Modeling (BIM) in the construction management industry. BIM refers to a building design methodology that creates a reliable digital representation of the building to facilitate design-related decision making, construction planning, high-quality construction document production and performance predictions including cost estimates.
Vela Systems brings BIM directly into the field, which helps to smoothen up the construction management process. Its technology is unique in the sense that other BIM applications can only be used in the office environment and in job trailers. However, Vela’s flagship web-based platform can be accessed from any where on any device. Its mobile portfolio includes applications for Apple’s (AAPL - Analyst Report) iPad tablet and Research In Motion’s (RIMM) Blackberry smartphone.
Autodesk plans to integrate Vela Systems products with its project management software portfolio that includes Navisworks. We believe that the Vela Systems acquisition will not only boost Autodesk’s presence in the construction management industry but will also expand its growing cloud and mobile services over the long term.
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.
Autodesk has been expanding its cloud services offerings lately through the integration of Autodesk’s 2013 family of products with Autodesk 360 (previously known as Autodesk Cloud), a family of hybrid cloud-based and on-premises software solutions launched in 2011.
Autodesk has also been acquiring companies particularly of web-based communities in order to boost its cloud offerings. 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.
These efforts should enable Autodesk to take advantage of the tremendous growth potential in cloud computing.
In our view, the company’s innovations in 3D design technology provide 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 that 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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