To strengthen its grip on structural fabrication and detailing technology, Autodesk Inc. (ADSK - Analyst Report) recently announced its decision to acquire some of the technology assets of Graitec, including its Advance Steel and Advance Concrete product lines and the employees of the concerned divisions of the company.
The proposed acquisition will help Autodesk to play a pivotal role in the industry’s migration to Building Information Modeling (BIM) and the development of model-based workflows for structural engineers, detailers, fabricators and contractors. The acquisition is expected to be completed during the fourth quarter of fiscal year 2014. However, financial details of the transaction were not divulged.
Autodesk has always adopted an aggressive acquisition strategy to develop its business over the last couple of years. The company acquired four companies and nine business combination and technology units during fiscal 2013, for a total of $273.3 million.
The company continues to expand its product portfolio through the acquisition of small start-ups that are easy to integrate into its own business line. We believe that Autodesk will continue to pursue strategic acquisitions in order to expand its offerings over the long term.
Although acquisitions are good for the company but it will take considerable amount of time for the company to gain from these acquisitions. We are concerned about the decline in the top line.
Revenues declined for the second straight quarter (down 1.2% in the second quarter), primarily due to a downturn in some of the company’s end markets, which negatively impacted the company’s products like AutoCAD and AutoCAD LT in the quarter.
In spite of considerable efforts, the company is witnessing revenue decline in the different geographical regions. The global markets have not fully recovered from the great recession. Most of them, particularly Southern and Central Europe, emerging economies and BRIC (Brazil, Russia, India and China) countries, continue to suffer from volatile macro-economic conditions.
We believe that this will remain a major headwind over the next couple of years. So, it might be difficult for the company to reap benefits from these acquisitions. Autodesk is focusing on expanding its mobile applications for both Apple’s (AAPL - Analyst Report) iOS and Google’s (GOOG - Analyst Report) Android platform, which will further drive market share, going forward.
However, sluggish macro-economic environment, weakness in emerging markets, customer concentration and increasing competition from Adobe Systems Inc. (ADBE - Analyst Report) are the major concerns. Moreover, continued investments in new acquisitions are expected to hurt margins in the near term.
Currently, Autodesk has a Zacks Rank #5 (Strong Sell).