|Autodesk Has Designs on New Business Model|
The shift to subscription-based pricing should pay off in the long term
We believe Autodesk's long-term growth depends on its ability to provide more value per customer and attract subscribers to its platforms. It has moved aggressively into the mobile and social markets through acquisitions like Socialcam, Instructables, and Pixlr. In addition, it has been an early mover into the cloud market, relative to close competitors, through its Autodesk 360 platform. The company's key growth enablers will include desktop rental, cloud services, and consumption-based pricing models. Given the premium placed on agility and the use of all-digital processes, we expect Autodesk's products to resonate well with current and future clients. Key growth segments will include simulation, consumers, and PLM. In these segments, we think Autodesk has the opportunity to disrupt incumbents with its relatively cheap and easily deployable products such as Sim 360 and PLM 360. With management's new onus on driving recurring revenue, it expects 70% of group revenue to be recurring by fiscal 2018 (from about 40% today). Financially, the recurring revenue model is attractive, as it provides more long-term revenue, financial predictability, and flexibility.