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Saturday, 11/24/2018 9:59:07 AM

Saturday, November 24, 2018 9:59:07 AM

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Autodesk - >>> 2 Tech Stocks That Have Defied the Downturn


By Jon Swartz

Nov. 23, 2018

While FAANG shares were declawed this earnings season, a pair of tech companies with rich histories escaped the wreckage.

The third-quarter earnings of Autodesk (ADSK) and Citrix Systems (CTXS) offer parallel narratives of reinvention, helmed by dynamic new CEOs who have led successful turnarounds by pursuing new markets that have led to profitability and significant bumps in share prices.

Look no further than their stocks this year: Autodesk is up 28% and Citrix 21%, while the S&P 500 is down 0.5%.

Autodesk shares spiked 9% in extended trading Tuesday after the company reported earnings of 29 cents a share on revenue of $660.9 million, compared with a loss of 12 cents on revenue of $515.3 million a year ago.

The results and fourth-quarter guidance—42 cents a share on sales of $705 million, at the midpoint—beat Wall Street forecasts. Autodesk also announced the intention of its largest acquisition, $875 million, for PlanGrid, a maker of construction-productivity software.

“It’s a story about the evolution of Autodesk, the promise of the cloud, and how any company of importance needs to have a software-as-a-service element,” Autodesk CEO Andrew Anagnost told Barron’s in a phone interview.

His plan, to pivot Autodesk from Oscar- and Emmy-winning computer-aided-design software maker to a cloud and software-as-a-service subscription model for “people who make things” such as buildings, roads, movies, games, and bridges, has led to a record $2 billion in fiscal 2018 revenue and guidance for $2.5 billion in its current fiscal 2019. Its stock has nearly tripled to $135.04 per share from $47 in September 2015, giving it a current market value of $29.5 billion. (It was up 9.7% on Wednesday alone.)

Anagnost did not make changes blindly: Before becoming Autodesk CEO in June 2017, the former rocket scientist worked in product and marketing for 20 years at the 36-year-old company, based in San Francisco.

Anagnost and Chief Financial Officer Scott Herren wanted to flip Autodesk’s reliance on software licenses, which accounted for 60% of its total revenue as recently as 2013, to a subscription model, while at the same time implementing a cloud-computing platform to make it easier for contractors, architects, and engineers to collaborate on building projects. Today, 96% of Autodesk’s revenue is via product subscriptions.

The story is eerily similar at Herren’s previous employer, Citrix.

Another long-time employee took over the reins as CEO about a year ago, and devised a plan to transform the virtual-private-network company to a hybrid-cloud solution one while also shifting to a subscription model.

CEO David Henshall, a 15-year company veteran who previously was chief financial officer and chief operating officer, told Barron’s that Citrix is “well ahead” of its plan to double revenue by 2020.

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The 29-year-old company’s third-quarter results last month marked its fifth consecutive quarter of beating Wall Street expectations. Citrix recorded earnings of $1.40 per share and revenue of $732.5 million. Subscription-based revenue jumped 37%, year-over-year, to $112 million, and now accounts for 15% of total revenue, versus 10% a year ago.

The results pushed shares of the company up 2% the day after it announced results. In the past 12 months, Citrix has gained more than $2.5 billion in market value, to its current $14.4 billion. Shares closed up 0.7% on Wednesday, to $106.89.

The secret to its success? “We want to help customers face the future of a mobile work force,” Henshall told Barron’s, noting a recent McKinsey Group study that predicts a shortage of 90 million to 95 million medium-to-high-skilled workers globally by 2020. “Companies want to embrace the cloud, but it takes a while to manage the past while embracing the future.”


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