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  1. 1. Research Report: Carol Bartz Profile Autodesk, Inc July 16, 2007 ADSK 5,167 Employees $ 1.83 B Sales TTM Sales Growth: 17% Op Margin: 21.7% IT Software During her fourteen year tenure as CEO, Carol Bartz, transformed Autodesk from a small, single product com- MCV Ranks : pany, into one of the largest software providers in the Industry: 1 world. Today she is one of the most prominent business CEO: 1 leaders in the U.S. and Carol Bartz occupies the position of Team: 1 “executive chairman” of Autodesk’s board with her hand- picked successor, Carl Bass, in the CEO position. Where 3D Convert Subscript. Convert Intl. Sales Carl Bass is a substantive but unflashy engineer, Carol Bartz is a consum- 70% mate “power player” and a high energy, high visibility figure. The two per- 60% % of Total sonalities meld into a potent combination of sizzle and steak for Autodesk. Revenue 50% 40% It is a balance of personalities and skills that are critically important to 30% Autodesk as its CAD/CAM industry segment matures. 20% 10% 0% Carol Bartz’s deep understanding of the software industry, developed 2007 2006 2005 through stints with Sun Microsystems, DEC, and 3M, helped her navi- Sour ces: Company &MCV gate the challenge of growing Autodesk beyond its entrepreneurial roots. Bartz grew up in the Midwest and received a degree in computer Material ADSK Filings: 06/14/07 ADSK 2006 Employee Stock Plan is 600 50% amended to extend post-termination exercise win- ADSK 500 40% dow from 3 to 6 months. 400 06/04/07 Company announces that it has com- 30% 300 pleted voluntary review of the Company’s 1/1988 20% 200 – 8/2006 stock option grant practices which re- 100 10% sulted in aggregate pre-tax, non-cash charges of 0 0% $34.8 million over the entire period. Fiscal 2007 Q1:08 Q4:07 Q3:07 Q2:07 Q1:07 Q4:06 Q3:06 Q2:06 financial statements filed with the SEC. Revenue Oper. Inc. OpMargin 05/17/07 Company announces that while it is in the process of restating prior years’ financial Jan fiscal year Sources: Company & M CV statements to reflect the additional compensation expenses associated with past stock option grant- science for the University of Wisconsin at Madison. By the late 1970s, she ing processes, the Company is also recording was working in positions of increasing responsibility in product and sales/ other minor adjustments related to reseller incen- marketing roles at 3M and DEC. She moved to Sun Microsystems in the tives on its subscription program. These adjust- eighties just as the company was growing from a start-up with four em- ments increase revenue approx. $15 million and ployees into a public company having over a billion dollars in revenue. decrease deferred revenues for fiscal 2006 (Jan FY) and fiscal 2005 approx. $5 million. 05/02/07 Board members Mary Alice Taylor and Carol Bartz’s key skill set is her ability to bridge the creative chaos of Steve Scheid announce that they will not seek re- cutting edge software development with the necessary management election to the Autodesk Board of Directors. structure and operations processes to create an efficient but entrepre- 05/02/07 Company reiterates that it is seeking the neurial corporate culture. She is widely admired and known for her advice of the SEC’s Office of Chief Accountant reputation as a tough, but fair, leader. When ADSK’s revenue dropped (“OCA”). May 3, 2007, submitted to the OCA 13% post 2001 due to economic slowdown and new dotcom competitors, certain financial statement information arising out she immediately called for a 7% reduction of the then 3,715 person com- of adjustments related to accounting for stock- pany. Despite staff reductions, 100% of those laid off expressed an interest based compensation expense as a result of a vol- in returning to ADSK when the company’s prospects improved. While at untary review by ADSK’s audit committee re- Sun Microsystems in the eighties, her expertise and ability was so valued garding timing of past stock option grants and other related issues. by CEO Scott McNeely that when she was considering a job elsewhere, he 04/04/07 ADSK received non-compliance notice fired the VP of Marketing to make room for the upcoming star and gave from NASDAQ Stock market, in accordance with her the position. Rule 4310(c)(14), for delayed filing of Form 10- Bartz has said that she turned Autodesk around three times during her tenure as CEO: Copyright 2007 Management CV, Inc. All rights are strictly reserved to the publisher. Redistribution or reproduction is prohibited without express permission. Data are collected from the subject companies, their officers, and other primary sources believed to be reliable but Management CV makes no warranty as to the accuracy, suitability, or timeliness of the data or opinions expressed herein. For redistribution permission, subscriptions, or other questions please call 301.320.4228 or visit
  2. 2. Carol Bartz Research Report: Profile Autodesk, Inc Page 2 of 3 July 16, 2007 ADSK Market Cap: $ 10.4 B ROE: 30% ROA: 18% EBIT: 21% IT Software • First in 1992, when she effectively diversified Autodesk- which had K. Previous noncompliance notice from NASDAQ been a single product firm, generating 99% of its revenue from its Auto- received 9/13/06 due to the delays in filing the CAD product. Company’s 10-Qs Q206 and Q306. • Next, during the dotcom years when the company faced increased 03/22/07 Autodesk’s Board approves an amend- ment to the Company’s 1998 employee stock pur- competitive pressure from new market entrants as well as a dramatic post- chase plan (the “ESPP”) in response to the Com- 2001 economic slowdown that affected demand for their customer’s ser- pany’s temporary suspension of all contribution to vices and reduced software budgets. At the same time, the company was and exercise of stock purchased. Board identified investing heavily in R&D and aggressively betting on its future. fiscal 2008 participants and target awards ranging • The third time was prior to her departure in 2006, laying the strategic from 16.67% to 100% of each participant’s base groundwork that her successor Carl Bass continues to follow of trans- salary. Payout formula is related to fiscal revenue forming ADSK products to take advantage of global networking and col- growth and non-GAAP operating margin levels. laboration. She has said that this latest product transformation could take Participants must remain an employee for entire up to ten years to complete. fiscal year 2008 to be eligible for bonus. 03/22/07 Board amended Sections 2.5 and 3.3 of the Company’s Bylaws to provide (i) for majority Bartz’s key responsibility in her new role as Executive Chairman is to voting in director elections except in contested continue to build ADSK’s market share in emerging markets, the elections and (ii) that stockholder director nomina- growth engine driving demand for CAD/CAM software, as commer- tions must include a written statement that the cial building and infrastructure projects burgeon in emerging econo- nominee intends to tender his or her irrevocable mies like India, China, and Eastern Europe. resignation upon his or her election or re-election, which shall become effective only upon the nomi- Autodesk Revenue nee’s failure to receive the requisite number of 13% votes. 02/27/07 Autodesk issues a press release announc- 12% Fiscal '07 ing $38 to $45 million restatement due to incorrect 44% Revenue processing of option grant dates. Monthly broad- $1.83 B based employee grants were made during 8/00- 13% 2/05 under an administrative process where the grant dates were typically chosen after the fact to 18% coincide with low trading prices during the month Tech. Manufac. Building Infrastructure Media of the applicable grant. No evidence of officer or Sources: Company & M CV director backdating of personal stock option grants. The option backdating audits cost the Com- Bartz has forged her professional success and high profile govern- pany approximately $3 million in fees and ex- ment appointments into a highly effective “personal brand” that can penses, not including the financial restatements. help Autodesk. She has perhaps become the most renown and exciting 02/23/07 Board Audit Committee completes exten- component of Autodesk’s “brand” internationally. Bartz was appointed sive review of the Company’s stock option prac- to President Bush’s Council of Advisors on Science and Technology tices and related accounting issues assisted by in- (PCAST) in 2006. Bartz also serves on the Board of Directors of Cisco dependent outside counsel at Hogan & Hartson LLP and forensic auditors at Pricewaterhouse- Systems, Network Appliance, and the Foundation for the National Medals Coopers. The Company expects to record addi- of Science and Technology. She has said publicly that she harbors no po- tional pre-tax, non-cash charges for stock-based litical aspirations, but in her role on PCAST she is one of a select group compensation expense related to past option grants of industry leaders expected to play a key role in shaping and setting the in the range of $38 to $45 million over the 18 year government’s high tech agenda. period of the review. Approx. $23 to $26 million of charges apply to the income statements for fis- Carol Bartz’s compensation as executive chairman is very generous cal 2003 through 2006. The remainder, which is and reflects the need to keep her active and visible on behalf of the applicable to prior fiscal years, will be recorded as Company at this critical juncture in Autodesk's history. We think her a charge to retained earnings as of 1/31/02. Such new role and compensation plan gives her ample incentive to stay with charges would have the effect of decreasing net Autodesk. Her unusual role as a part-time executive chairman (her em- income and retained earnings as reported in the Company’s historical financial statements. ployment contract calls for her to work up to 20 hours per week) provides a generous $500,000 annual salary, though she is excluded from the man- Copyright 2007 Management CV, Inc. All rights are strictly reserved to the publisher. Redistribution or reproduction is prohibited without express permission. Data are collected from the subject companies, their officers, and other primary sources believed to be reliable but Management CV makes no warranty as to the accuracy, suitability, or timeliness of the data or opinions expressed herein. For redistribution permission, subscriptions, or other questions please call 301.320.4228 or visit
  3. 3. Carol Bartz Research Report: Profile Autodesk, Inc Page 3 of 3 July 16, 2007 ADSK P/E: 33x ROI: 27% Institutional Ownership: 89% IT Software agement EIP. She will likely play an important role in helping ADSK main- 01/19/07 The Company entered into a new em- tain sales momentum in the Asia/Pacific region. ployment agreement with Carol Bartz, Executive Chairman and former CEO, replacing and super- The majority of Carol Bartz’s substantial compensation over the years seding earlier 4/7/92 agreement. Previous agree- has come from long term stock holdings and she remains the firm’s sin- ment deemed Bartz a part-time employee, with a $500k annual base salary to be granted as stock gle largest individual shareholder. Both she and current CEO Carl options or other equity grants at the Board’s Bass enjoy substantial equity stakes in the firm. We view this as very discretion. The Company agreed to continue to positive for other shareholders. Bartz put a 10B5-1 structured sales ar- nominate Ms. Bartz to serve as a member of the rangement in place and is in the process of liquidating what we expect will Board of Directors and upon the employment be a significant portion of her nearly 4,000,000 share holdings. Her large termination, Bartz will continue to be eligible for recent stock sales don’t materially reduce her overall bullish holdings of all benefit plans, policies and arrangements ap- ADSK in our view, although sustained selling on her part would raise a cau- plicable to other senior executives - excluding tion flag for other investors. Bartz’s exercise of long-standing options and participation in the Company’s Executive Incen- sales of stock seem prudent from an estate standpoint. tive Plan. 12/14/06 Employment agreement with Carl Recent Insider and executive sales are a diligence note for investors. Auto- Bass, President & CEO and ADSK granting Mr. Bass an annual base salary of $700k. Mr. Bass desk’s executives sold over $83 million in stock during June 2007, but this will be eligible to participate in the Company’s occurred at the conclusion of a year long “quiet period” during a voluntary Executive Incentive Plan at a target level of not stock option back-dating grant review. The formal review found immaterial less than 100% of his annual base salary, subject amounts of inappropriate option back-dating. It is the single blemish on to the terms of the Plan. Either party may ter- Carol Bartz’s otherwise stellar CEO tenure. Other recent sales are more minate the employment relationship upon thirty concerning; the single largest stock sale of $23 million was by Mary Alice days written notice. For termination without Taylor, a former board member, who was likely consolidating her position Cause or resignation for Good Reason, Bass will prior to leaving the Autodesk board of directors. receive one year’s salary and 12 months acceler- ated vesting on any option or stock awards Bartz is a seasoned leader whose continued close involvement on Auto- (other than those based on performance) and a desk’s board, particularly in helping the company realize opportunities period of not less than six months to exercise any vested stock options on or after the date of in the global market, is a key element to the company’s continued suc- the Agreement. cess. Bartz has said publicly that she is excited about helping expand 12/13/06 Autodesk receives additional emerging markets for Autodesk products and that “the work is too exciting NASDAQ Staff Determination letter stating that to give up.” However, at age 59 she has a daughter heading off to college the Company is not in compliance with the con- and at least a decade of productive work life ahead of her. While her com- tinued listing requirements set forth in Rule pensation and stature at ADSK give her every reason to stay, it is not uni- 4310(c)(14) due to delayed filing of Form 10-Q maginable that she could take up another challenge. We would watch her for Q306 quarterly report. In response to the relative level of stock holding in the Company as the best indicator of receipt of this letter, the Company will provide her continued interest and effort. NASDAQ with an update on the status of the ongoing voluntary stock option review. Pending Nancy Davis-Kho End a decision by the NASDAQ Listing Panel, the Company’s shares will remain listed on the NASDAQ Stock Market. Copyright 2007 Management CV, Inc. All rights are strictly reserved to the publisher. Redistribution or reproduction is prohibited without express permission. Data are collected from the subject companies, their officers, and other primary sources believed to be reliable but Management CV makes no warranty as to the accuracy, suitability, or timeliness of the data or opinions expressed herein. For redistribution permission, subscriptions, or other questions please call 301.320.4228 or visit