Software company Autodesk Inc. (ADSK) announced that it has completed the acquisition of Blue Ridge Numerics, Inc., a provider of computational fluid dynamics (CFD) software, for approximately $39.0 million in cash. However, the deal is subject to certain working capital adjustments.
Charlottesville-based Blue Ridge Numerics, Inc. is a provider of fluid flow and heat transfer simulation software for automotive, medical, aerospace, consumer products and other industries. The company’s CFD software relies on the finite element analysis technique to virtually generate comprehensive engineering simulations widely used in products like pumps, fans or turbines and in mechanical, electrical or plumbing systems in buildings.
Blue Ridge’s CFD 2010 was the first design tool of its kind, providing a CAD-driven design study environment for electronics engineers, enabling the creation of multiple scenarios through virtual simulations, thereby making the design process simpler and more efficient, not to mention less time-consuming. The recently announced CFD 2011 is even more advanced, enabling 3D simulation.
Autodesk’s 3D business is doing well. The company’s 3D products make nearly one-third of its top line and we anticipate that increasing 3D adoption will drive significant top-line growth over the long term.
The Blue Ridge acquisition should enable the company to enhance its 3D tools, which are growing in importance, given the increased use of the software for film-making, video game development and television industries. Autodesk’s 2D product is already well entrenched and the acquisition could also hasten the conversion from 2D to 3D. The company’s margins should benefit if this happens, since 3D is a higher-margin business.
The acquisition also brings on board a large number of engineers with particular expertise in automated fluid flow, thermal simulation decision making and digital prototyping areas.
Autodesk also plans to support multi-CAD integrations on behalf of Blue Ridge Numerics customers.
Currently, Autodesk offers its cost-effective Digital Prototyping tools to a large number of manufacturers across the consumer products, building equipment, automotive and transportation industries.
On March 1, 2011 Autodesk completed the acquisition of Scaleform Corporation, a provider of user interface solutions focused on the games industry for $36 million in cash. The Blue Ridge acquisition is Autodesk’s second acquisition in the first quarter of 2012.
In the recently concluded fourth quarter of 2011, Autodesk posted strong results coupled with a robust balance sheet, which did not have any debts. Cash and cash equivalents were $1.47 billion in the quarter versus $1.14 billion in the previous quarter.
During the reported quarter, Autodesk posted earnings of 27 cents per share, which was in line with the Zacks Consensus Estimate, primarily driven by strong revenue growth.
For the first quarter of 2012, Autodesk expects the GAAP EPS to be in the range of 21 cents to 24 cents. Non-GAAP EPS is expected in the range of 34 cents to 37 cents in the quarter. The Zacks Consensus Estimate is currently pegged at 30 cents per share for first quarter of 2012.
For the first quarter of 2012, Autodesk expects revenues in the range of $510.0 million to $525.0 million while for fiscal 2012; Autodesk expects revenues to increase 10.0% year over year. The Zacks Consensus Estimate for fiscal first quarter 2012 is pegged at $522 million and for the full-year 2012 is estimated to be $2.16 billion.
The outlook provided by the company included the impact of two acquisitions, which were closed during the first quarter of 2012. However, the latest acquisition of Blue Ridge Numerics is not expected to have an impact on Autodesk’s first quarter results, so the guidance remains unchanged following the announcement.
Over the long term, we remain positive on the stock and have an Outperform recommendation, given its operating margin leverage and strong revenues due to stability in the end market, increased demand for 3D products, expanding market share, a diversified product pipeline, cost control and strategic acquisitions. However, foreign exchange headwinds and intense competition from companies such as Adobe Systems Inc. (ADBE), Parametric Technology Corp. (PMTC) and Avid Technology Inc. (AVID) remain concerns.
Currently, Autodesk has a Zacks #3 Rank, which translates into a short-term Hold rating on the stock (1-3 months).
ADOBE SYSTEMS (ADBE): Free Stock Analysis Report
AUTODESK INC (ADSK): Free Stock Analysis Report
AVID TECH INC (AVID): Free Stock Analysis Report
PARAMETRIC TECH (PMTC): Free Stock Analysis Report
Zacks Investment Research
