BREAKFAST WITH THE FOOL
Friday, August 27, 1999
"Failure is success if we learn from it."
-- Malcolm Forbes
Autodesk Earnings Broken Record
Brian Graney (TMF Panic)
Computer-aided design (CAD) software maker Autodesk (Nasdaq: ADSK) announced weaker-than-expected fiscal second quarter earnings last night. The company turned in EPS of $0.01, down sharply from last year's $0.46 (which included one-time charges and gains). Backing out amortization of goodwill and purchased intangibles boosts the EPS figure to $0.09, which is still short of the First Call mean estimate of $0.11. In an effort to turn the company around and "relevel the business," chairman and CEO Carol Bartz announced job cuts that will reduce Autodesk's workforce by 10%.
The company cranked up the same excuse broken record it has used to explain away year-over-year earnings declines in the prior two quarters, blaming the shortfall on product transition factors and slack demand for its core PC design software products. Indeed, revenues slumped 10.5% to $203 million, similar to the 12.5% slide in Q1. However, the company is making matters worse by not controlling total costs and expenses, which climbed 13% in the period. As a result, operating margins are falling fast and now stand at a mere 1.3%, which is not even close to last year's figure of 22%.
Fearing the product transition explanation may be wearing a little thin on investors who have watched 42% of the company's market value evaporate so far this year, Bartz offered up a new spin on things. It seems that customers are more interested in Web-based applications than the plain-vanilla offerings Autodesk has been serving up. In response, the company will be plowing some of the cost savings it reaps from the job cuts into developing Internet-enabled products. However, it will take some time for the new Web efforts to ramp up, suggesting Audodesk's shareholders will get more doses of the broken-record blues in Q3 and Q4.
News to Go
Interventional and implantable medical devices maker Medtronic (NYSE: MDT) announced that it will get into a new line of business by acquiring ear, nose, and throat surgical products maker Xomed Surgical Products (Nasdaq: XOMD) for $800 million in stock, or $60 per share.
Toy retailer Toys "R" Us (NYSE: TOY) said CEO Robert Nakasone has decided to resign his position due to "differing views regarding the direction of the company." Current chairman and former CEO Michael Goldstein will step into Nakasone's shoes until a replacement is found.
Quicken and TurboTax developer Intuit (Nasdaq: INTU) reported a pro forma loss of $0.26 per share for the fourth fiscal quarter, which beat the First Call mean estimate for a loss of $0.33 per share in the period. Net revenues jumped 28% in the period to $150 million.
Coffee retailer Starbucks Corp. (Nasdaq: SBUX) posted an 8% increase in August same-store sales compared to a year ago. Total sales during the month rose 25% to $135 million.
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