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Shift To Cloud Forcing Autodesk Layoffs, But Cloud Is Good

Autodesk announces big layoffs on the horizon but the company says it has nothing to do with macro or company based economics. Instead, the downsizing is in response to its move to the cloud.

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San Rafael, California, based Autodesk is laying off hundreds of workers across work sites around the world as it streamlines operations as a result of its massive shift to a cloud-software delivery model company, according to a report in The Marin Independent Journal.

Restructuring For The Cloud Era

“We are restructuring so we can focus resources on areas that will accelerate the move to the cloud and transition to a subscription-based business,” Autodesk CEO Carl Bass reported in a statement. “As we progress through our business model transition, we continue to take a comprehensive look at our company to see where we can be more effective and efficient.”

Autodesk will reduce staffing levels by approximately 10 percent, or around 925 positions, as well as consolidate some leased facilities. The company anticipates taking a pre-tax charge of $85 – $95 million in connection with the restructuring.

Not An Indication of Macro Economics

Autodesk is not a newly struggling company, and while this restructuring due to its shift to the cloud means many will be forced to leave the company, Autodesk reiterated that it expects to be at the high end of its guidance ranges for billings, revenue, and non-GAAP ESP, in the fourth quarter of its fiscal 2016.

“To be clear, the restructuring announced today is not related to anything we are seeing in the macro-economic environment. We ended fiscal 2016 on a high note with very strong fourth-quarter billings growth and continued demand for our subscription offerings. Solid revenues, coupled with continued cost-controls, led to better than expected non-GAAP EPS during the quarter. I’m pleased we were able to deliver these results at such a critical moment in Autodesk’s transition.”

Additional details regarding the company’s fourth quarter financial results and restructuring plan will be provided on the company’s regularly scheduled earnings conference call to be held on February 25, 2016.

Earnings Conference Call and Webcast

Autodesk will host its fourth quarter conference call on February 25th at 5:00 p.m. ET. The live broadcast can be accessed at http://www.autodesk.com/investors. Supplemental financial information and prepared remarks for the conference call will be posted to the investor relations section of Autodesk’s website simultaneously with this press release.

A replay of the broadcast will be available at 7:00 pm ET at http://www.autodesk.com/investors. This replay will be maintained on Autodesk’s website for at least 12 months.

Architosh Analysis

Downsizing while announcing quarterly results are on target for the high end of the guidance range clearly signals optimization goals rather than any economic concerns. It will be interesting to see where these additional savings get directed in the form of future efforts. While Autodesk is determined to move to an all subscription-based software company, some of its competitors are looking at this move as an opportunity and working to provide customers the cost flexibility of both “perpetual” and “subscription” licenses.

Because offering customers choice is such an obvious advantage if the cost to serve that choice is relatively low, one can assume that either it is not low for Autodesk or the company has more compelling reasons for moving all software to a cloud-based subscription model. On this latest point, Autodesk has been forward about its ambitions with the cloud without giving away its end-game plans. Those plans likely hold the key to why Autodesk is pushing so hard to go all-in with subscriptions.

One thing that Autodesk—and other rivals—are doing with pushing towards cloud-based, subscription software models, is opening up solution workflows to any device and any platform no matter where you work in the world. Home or office, hotel or airport, Mac or PC, Android or iOS, Autodesk to its credit is a leader in this new revolution in how professionals in AEC and manufacturing industries are accessing data and software solutions.

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