The Dark Night of the Soul

The last quarter of Autodesk's fiscal year has always been the most difficult. Ending in January, it includes Autodesk's Annual Week of Rest, when the company closes for between one and two weeks, the U.S. Thanksgiving holiday, the industry-wide stand-down around the Fall COMDEX show, and the impact on near-term sales of products announced at COMDEX but not yet shippable. In January of 1991, Autodesk ended its six-year string of consecutive quarters with rising sales and earnings by reporting earnings over two million dollars less than the preceding quarter, and only slightly more than the corresponding quarter the previous year. On January 25, 1991, the date of the announcement, the stock dropped from 52 to 40 1/4—shedding more than 22% of its value in a single day. There were plenty of reasons, however, to consider this an aberration—this quarter included all the war-nerves attendant to the “Desert Shield” military build-up following the invasion of Kuwait, and the eruption of a full-scale shooting war, “Desert Storm,” with the U.S. bombing Baghdad a mere week before Wall Street bombed ACAD. Autodesk stock quickly recovered its losses and, by March 7, closed at 53.

The next three quarters resumed the growth in sales and earnings, making the January 1991 quarter seem an isolated event. Behind the numbers, however, were hidden increasingly desperate efforts to stimulate sales and, by cutting expenses in all sectors of the company, increase profit. Reducing investment in marketing, sales promotions, and new product development was eating the seed corn and guaranteed that when the final undoing came, it would be especially severe.

In December 1991, when Volker Kleinn and I visited Sausalito and won acceptance for our turn-around plan, I heard no hint that there was a problem with the January quarter. It was only after I arrived in Sausalito for my three-month stint as “Manager of Technology” that I learned, early on the Saturday morning after my arrival, that the quarter about to end was heading for a train wreck of Wagnerian proportions—not just a “flat quarter,” but earnings per share plunging to levels not seen in three years.

Legally, as soon as the shortfall became known within the company, we were obligated to report it publicly. There were several timid suggestions of press releases or analyst meetings in Sausalito, but I felt that if we'd screwed up so royally we should have the courage to walk into the lion's den in Manhattan and admit it in front of the institutional shareholders whom we'd impoverished to the extent of half a billion dollars or so. Only that, coupled with a concrete and realistic plan for turning around the company which signaled an end to business as usual at Autodesk, could restore enough confidence in Autodesk to make at least some of our major shareholders hang on.

The alternative was Autodesk's stock going into free-fall, which essentially guaranteed a hostile takeover, because however poor the short-term prospects may look, a company with more than $200 million in sales, $50 million in profit, $200 million in the bank, no debt, and half a million customers becomes, at some price, attractive to somebody.

We scheduled a special shareholders' meeting in New York for January 30th, 1992, with individual meetings with key shareholders in New York and Boston on the following day. I decided that only by putting my personal reputation and the company's on the line did we stand a prayer of restoring confidence after blowing a quarter so badly, so I made a very long and very candid assessment of the company's strengths and weaknesses when it was my turn to speak. The same day the Autodesk meeting was held, George Bush and Boris Yeltsin met in Manhattan a few blocks from the Autodesk meeting. Their meeting, which proclaimed the “end of the cold war” was rather more amicable than the meeting between Autodesk's owners and their hired managers. The day after the announcement, Autodesk stock, already having plunged from its 1991 high of more than 60, dropped from 34 1/2 to 28 3/4 despite Autodesk's repurchasing more than half a million shares that day. The drop wiped out more than $140 million in shareholder net worth on that single day. The stock continued to drop, finally bottoming at 23 1/2 on February 19, 1992.

We'd have liked to have made the presentation to Autodesk employees first, but that would be illegal in the U.S. since we were disclosing financial results which would affect the stock. So, I scheduled an all-company meeting for Saturday, February 1, 1992 in Marin Veterans' Auditorium in which we'd repeat the presentation to the shareholders, and also have each business unit manager present their plans for the coming year. We hoped thereby to ameliorate the morale hit of the stumble and stock plunge by rolling out an ambitious, concrete plan for recovery. Despite its being a beautiful, sunny day, almost all of Autodesk's 700+ California employees spent the afternoon in the darkened auditorium. I decided to make the theme of the meeting the tenth anniversary of the original meeting which created Autodesk—our hopes and dreams then—the current situation—and the promise that the future held for Autodesk if and when we overcame our current short-term problems.

Remarks for the Tenth Anniversary Meeting

February 1st, 1992
by John Walker

Ten years ago, on a Saturday at the end of January 1982, I held the first meeting to organise Autodesk.

I don't recall having the time to think where the company would be or what I'd be doing ten years later.

Certainly, if I'd tried to guess, I'd never have expected I'd be in Manhattan meeting with a group of investors who have, collectively, lost more than half of a billion dollars because they put their trust in our company, trying to explain why they should continue to believe in us.

I have a pretty vivid imagination, but I'm no Franz Kafka.

This is Autodesk's dark night of the soul. What should have been a celebration of 10 years of achievement has now become instead a turning point.

Whether it is a turning point that reverses Autodesk's decline and launches our next great spurt of growth—repeating, in the early 90s the giddy history of 1982 through 1985, or only an inflection point where slow decline accelerates into collapse, will be determined by what we do in the next 12 months—in every day of the next year that begins at this instant.

Today, as in that meeting 10 years ago, we will begin to organise ourselves for growth and success.

Our resources are immensely greater. Autodesk has never been stronger. Our sales, earnings, cash in the bank, market share, influence among customers around the globe, number of employees, channels of distribution, and breadth of products are all at all-time highs.

But we are vulnerable as never before.

We are vulnerable to a hostile takeover. If these were the takeover crazed years of the mid-80s it would have been a done deal already. And as our stock hits new lows, the stock market as a whole is hitting new highs and interest rates are at 25 year lows. Only rapid progress in re-establishing investor confidence, reflected in the price of our stock, can eliminate this peril.

We are vulnerable to competition. Our competitors know, more than ever before, that they must destroy Autodesk in order to realise their evil designs for the future of CAD. We must expect them to seize on Autodesk's “crisis” and “stumble” to attempt to take away our dealers and customers. And they know that the market we utterly dominate, DOS, is rapidly disappearing.

We are vulnerable to diversion of our management resources from vital tasks. Like it or not, management is going to have to spend a lot of time on investor relations; when you betray a bunch of people, you can't refuse to return their calls. We must expect that shareholder suits will be filed, and defending Autodesk will take further management time. When stocks suffer a rapid decline, there are often inquiries into so-called “suspect trading” in the company's stock; none of this poses any real danger to the company, but it consumes additional management attention. And finally, management will have to spend extra time on external communication aimed at restoring confidence in Autodesk.

It's a matter of credibility. As in '82, today Autodesk doesn't have any. We must earn it back, and we must start now.

We earn back our credibility through performance.

We attain that performance through professionalism.

Professionalism is a big thing that's the sum of little things.

It's meetings that start on time, have a clear agenda, and end on schedule.

It's decisions that, once made, stay made and aren't second-guessed by every person every day.

It's confidence in our mission and our strategy, avoiding the destructive carping that sows the seeds of doubt and failure.

It's never passing on work to another person until it is as excellent as we can make it.

It's treating our customers as if they paid our salaries. They do.

It's regarding each commitment we make as a personal promise to deliver, a promise that will hurt other people as well as ourselves if we don't keep it.

These little things, and a host of others, add up to a big thing—professionalism. And professionalism is the way we succeed.

The metamorphosis begins here and now. Every minute is precious. Judgement is the asset we must not lose in the midst of a time of crisis.

I'd like to turn things over to Al Green now. He'll describe our recent fun-filled trip to New York and Boston, and then we'll tell you exactly what we told our Wall Street investors Thursday last.

Then we'll invite the business unit managers to explain to you how each of their business units will contribute to Autodesk's ambitious but essential goals for next year. Then Volker will describe what we must begin to do to succeed.

In that first crazy year of Autodesk, in order to succeed we had to perform, get serious, learn about the business we were in, and build credibility.

Well, here we go again.

Often, as I talk to people around here, I hear the word “tradition.” “Autodesk has traditionally done this or that.” Tradition is the excuse we use for failing to ask that essential question, “Why are we doing this?” Ten years ago there were no traditions, only opportunities and ideas to turn them into success.

Today there are no traditions except the ones we make from now on.

Let's get on with it.

Remarks for the Special Shareholders' Meeting

New York: January 30th, 1992
by John Walker

Precisely ten years ago at this moment, a meeting was underway in the living room of my house in California. The meeting had already run for several hours, and it would continue for several more. It would be the first of many meetings which would culminate, in April of 1982, with the foundation of Autodesk, Inc.

I had gathered the brightest, most dedicated, and most resourceful programmers I knew of in the world, because I believed that an opportunity, perhaps unique in our lifetimes, was opening before us—an opportunity to create a software company which could become, in time, one of the worldwide leaders of an industry only entering its infancy.

Today, we who now own the company that was created ten years ago through the efforts and imagination of those people and the many who joined their cause over the years, have assembled in a different place, under different circumstances, in a very different yet strangely similar world to discuss the past, the present, and the future of our company.

To the past belong the efforts that created Autodesk's great success and the errors that lie at the heart of our current difficulties. In the present, we turn our attention to fixing the problems and remedying the omissions as we return our focus to the basic, simple principles upon which Autodesk's success has always been founded. In the future lay opportunities for Autodesk beyond even the febrile imagination of its founders a decade ago. Autodesk is uniquely positioned, I believe, among companies in the S&P 500, to grow into one of the great industrial enterprises of the twenty-first century. Seizing that opportunity, fulfilling the promise, and rewarding every investor who has placed his trust in Autodesk will require the kind of courage, imagination, and effort upon which Autodesk's early success was founded. But having ten years ago today started a company with little money, no employees, no products, and no dealers to sell them, I am confident that with the position Autodesk commands in the industry and the resources at our disposal we can, with your support, achieve the success that Autodesk has worked toward and that is due you as our investors.

At that first meeting ten years ago, and ever since, I have attempted to be as candid as possible about both the risks and the opportunities before our company. What we were trying to do was so difficult and so important that we didn't have the time to waste trying to fool one another. When I spoke to the founders of Autodesk, I told them that if they chose to join our venture, to expect the most difficult and exhausting year of their lives; sustained hard work with little immediate compensation, in pursuit of rewards beyond bounds, with no certainty of success. When I speak to the employees of Autodesk Saturday afternoon, I shall repeat those words.

I will be as candid with you today as I have been throughout the history of Autodesk. As a fellow shareholder, I share your concerns, disappointment, and anger over the current state of our company. I have devoted much of my time over the last year attempting, in various ways, to cause Autodesk to come to terms with the problems which, in my opinion, have finally brought us here today and which, now, at last are beginning to be resolved.

Although I have spoken sharply about Autodesk's strategies and Autodesk's management on several occasions, I continue to hold more than 850,000 shares of Autodesk stock, essentially all the equities I own, and I have never seriously considered selling my investment in Autodesk. Why? Because I believed, and I continue to believe, that no other company in which I could invest has as much potential for growth: short-, medium-, and long-term, as Autodesk. The problems which Autodesk must now focus on correcting stem, in my opinion, from continued neglect of the development of the business in a misguided attempt to meet short-term financial goals. These problems can be resolved only by managing the business, not the stock—making the investments required to return Autodesk to the rapid growth that it once enjoyed. High margins and upside earning surprises are the consequences of rapid growth, not the cause. Focusing on results rather than causes, valuing a penny this quarter over a market share point that will yield rising sales and earnings over the next decade, lays the seeds for the kind of dismaying performance Autodesk has reported today. As Autodesk acts to correct years of inaction and neglect, the short-term results, in terms of margins, will get worse before they get better. But as the foundation for sustained growth is laid over the next 12 months, the results will become apparent to all.

I would like to briefly explain the source of Autodesk's success as I see it and the nature of the challenge we face today. Technology does not evolve along a smooth, constant course. I use the term “technological transition” to describe those moments of discontinuous change that punctuate the long periods of steady, easily predictable development. Major technological transitions in our century have included the replacement of the vacuum tube with the transistor and the introduction of the integrated circuit. Technological transitions are times of enormous opportunity for businesses aware of the changes underway and positioned to benefit from them. Technological transitions are times of great peril to complacent leaders of industries being transformed, unwilling or unable to change when the expectations of their customers are being reshaped.

The introduction of the microprocessor-based personal computer in the mid 1970's was the technological transition that spawned the industry in which we now compete. It was clear to me when I founded Autodesk in 1982 that the personal computing industry was in the midst of a second technological transition, triggered by the advent of 16 bit microprocessors and the entry of major computer vendors, notably IBM. Almost overnight, not only did the computing power, available memory, graphics capability, and reliability of computers expand by a large factor, the expectations of the users of these machines, no longer hobbyists and experimenters, but now professionals who viewed the computer as a business tool as prosaic as a typewriter and as essential as a telephone, grew accordingly.

Leaders of the market, hardware and software, who failed to realise the changes underway in 1982, or were unwilling to make the risky and painful decisions required to adapt to the new environment rapidly disappeared as their competitors set the standards for the new era. Today we can scarcely recall their names. I founded Autodesk in 1982 because I understood the technological transition that was underway and the opportunities it was creating. I believed, and the success of Autodesk has proven me correct, that by raising the standards of the previous era, meeting the expectations of users dismissed as “unrealistic” by competitors, and expanding the envelope of applications of the desktop computer into areas conventional wisdom deemed “forever the province of the mainframe or workstation”, we could succeed in creating a product which would become the world standard of its industry in that era. I was willing to fail four times, if necessary, before finding the product which was in the right place at the right time. While nothing about technological entrepreneurship is easy, if you're willing to keep trying and you have the staying power to remain in the game as it's changing during a technological transition, there's no secret to success other than hard work and responding to the needs of your customers. In other words, basic business.

oday, in 1992, we are in the midst of the most significant technological transition since the introduction of the IBM PC a decade ago. This transition is associated with the rapid adoption of Microsoft Windows as a standard application platform, but its importance transcends any one product or hardware environment. What is happening today is that all of the barriers, hardware and software, that once distinguished personal computers from engineering workstations are being erased. The ease of use, power and breadth, and fundamental production values that recently characterised expensive high-end professional computer applications are now being equaled and exceeded by mass market software sold in great volumes at a fraction of the price, usable on widely-available, affordable, industry standard computers. Whichever contender or contenders for the position of the next standard application platform prevails in the end: Windows, OS/2, Motif, Macintosh, or NeXTStep, the expectations of its users will be similar, and will far outstrip those of the users of software of the DOS generation.

In 1982, the standards of personal computer software and the price of entry into the market rose dramatically and continued to rise over the years. We accepted those standards, met them and raised them further, and rapidly established AutoCAD as the de-facto worldwide standard for computer aided design. All of our financial success over the last decade has been a consequence of this achievement. Today, AutoCAD holds a commanding market share lead in the DOS CAD market: in excess of 70%, and that lead has continued to grow over the past 12 months at the expense of our competitors.

So now what?

In the immediate future, Autodesk must and will accomplish many things, and shortly I'll give you an overview of what we're going to do this year, and when. But really only one milestone matters, and that's the one we're going to remain focused upon. We must, at the end of this current technological transition, emerge with the same or greater market share for CAD on the new standard platform, whatever it may be, as we currently command in the DOS market. If we achieve this goal, Autodesk's success in the next decade is assured. If we fail, nothing else will matter.

As you weigh our plans for the next year, ask yourself these questions. Do I believe that the market for computer-aided design is a short-term opportunity, or a business that will continue to grow and expand for decades to come? If computer aided design, for example, continues to grow at a compounded rate of 25% per year between now and the year 2020, what is the net present value of each market share point in that business, on the platform that emerges as the standard over those years? What is the prudent, conservative course for a business whose product is virtually synonymous with computer-aided design on the platforms of the 1980s: to invest in its business and do whatever is required to remain the standard in the 1990s, or to optimise margins at the expense of rate of growth and long-term market share?

Today, the computer aided design industry is still in its infancy. In the most basic sector of the business, two-dimensional drafting, most drawings are still done on drawing boards without a computer. The standards for three dimensional design, solid modeling, conceptual design in architecture, interactive mechanical engineering, facility planning, geographic information systems, and integrated flexible manufacturing have yet to be established. Each is a market with a potential as great or greater than our current AutoCAD business, and all are poised to grow at an accelerating rate for the foreseeable future. Autodesk is well positioned to become the leader in every one of these areas, and work is currently underway on the products which will establish our leadership.

I would like to briefly show you one of those products: AutoCAD for Windows. This is not a fuzzily-defined research and development effort from the laboratory; it will be shipped to customers on March 1st, 1992. We expect that by the end of this year, AutoCAD for Windows will have garnered overwhelming market share in the Windows-based market for professional CAD systems.

Demo AutoCAD For Windows

At this point, I vaulted from the stage to do a (carefully-scripted) demo of the in-development version of AutoCAD Release 11 for Windows, concentrating on the user interface enhancements, clipboard support, and programmability. AutoCAD Release 11 for Windows was finally announced on March 10, 1992 (see page ).

Next, I'd like to share with you the list of products we'll be introducing in the next fiscal year, starting on February 1st. I'm calling this year “the year of the harvest,” because virtually every investment we've made in technology, product acquisitions, and new business areas will result in delivery of new products to new customers in this year. In addition to the new products we'll be launching, virtually every existing product in our line will be replaced with a new release.

FY 93 Product Release Schedule

In addition to the launch of AutoCAD for Windows, which I've just shown you, in the first quarter we'll also be introducing AutoCAD Release 11 on the Macintosh, the Hewlett-Packard 700 Series, and the Silicon Graphics IRIS Indigo. Adding to our existing support of the Sun SPARCStation and the DECStation, AutoCAD will thus be available on a wide variety of workstation-class hardware.

In the first quarter, we'll be shipping the first major upgrade to our Advanced Modeling Extension to AutoCAD, AME 2.0. To date, we have delivered more than 60,000 copies of Autodesk's solid modeling solution, and AME 2.0 strengthens the links between two- and three-dimensional design, improves accuracy, and provides a programming interface that enables it to serve as the foundation for a series of mechanical engineering applications.

Our Multimedia business unit will ship Release 2 of 3D Studio, the award-winning three dimensional modeling, rendering, and animation tool. The previous release of 3D Studio has already captured a substantial market share in the professional video production market. Images created with 3D Studio were featured recently on the PBS television series “This Old House”, and appear on the “White House—Explorations in Design” disc prepared to celebrate the 200th anniversary of the White House: this disc was used in a course taught last week by First Lady Barbara Bush. Release 2 of 3D Studio will strengthen its position through improved ease of use and image quality, while broadening the market to include preparation of renderings and animations from CAD models directly imported from AutoCAD.

Our new Scientific Modeling business unit will launch its first product, HyperChem for Windows, also in the first quarter. HyperChem for Windows brings serious, research-grade molecular modeling technology into the reach of every bench chemist in the world. Fast, powerful, and easy to use, HyperChem is poised to repeat the AutoCAD success story within the chemical, pharmaceutical, and biotechnology industries. Like AutoCAD, HyperChem stands to benefit from the ever-improving price-performance of desktop computers, and can form the core of a family of products built upon its open architecture.

Our Retail Products division in Bothell, Washington will introduce three new products in first quarter. The first, Generic CADD 6.0, actually jumped the gun—we started shipping it last week. It is a major update to the market leader in low cost two dimensional drafting, and embodies virtually every capability requested by users of previous releases. Generic CADD for the Macintosh will be updated with the shipment of Release 2.0. Finally, the next module in our ground-breaking Home Series: Decks will be shipped. In the few months since its introduction, the Home Series has created an entirely new category in the CAD market: ready-to-use, application-tailored design software for do-it-yourselfers. The four existing modules: Home, Kitchen, Bathroom, and Landscape have sold more than 30,000 copies already, and are finding shelf space in hardware stores as well as existing software outlets.

The second quarter will see the shipment of AutoCAD Release 11 on the IBM RS-6000 PowerStation. For the first time, AutoCAD will be available on the same hardware as CATIA, and will provide an entrée into large mechanical design accounts. Significantly, development of the RS-6000 version of AutoCAD was performed entirely by our new European Software Centre in Neuchâtel Switzerland, which will also manufacture the product for distribution worldwide.

The highlight for the second quarter is the first domestic customer shipment of AutoCAD Release 12. Release 12 begins by delivering what most CAD users ask for most frequently: speed. AutoCAD Release 12 is the fastest AutoCAD ever, and its drawing speed is reinforced by major ease of use enhancements including interactive editing and dialogue boxes that update AutoCAD to the age of graphical user interfaces. Incorporated in AutoCAD Release 12 are hundreds of user-requested capabilities and the customers who are now testing it seem unanimous in their evaluation of it as the most significant release of AutoCAD in years.

Think about it: if we're living in the information age, and the 1990s have begun with the global triumph of market economies, then why the devil don't we have any markets for information? In second quarter, the American Information Exchange will open for general customer trading. Already operating in a pilot phase as market makers and sellers are recruited, the American Information Exchange is a computer-mediated free market for information, expertise, and consulting services. As unlike existing online services as NASDAQ is next to a fruit stand, the Information Exchange has been hailed by industry leaders including Mitch Kapor, Portia Isaacson, and Esther Dyson as one of the most significant innovations of the decade. An information market is as central to the information age as currency futures are to international trade. We are opening the world's first information market this year, and you're all welcome to try it for yourselves.

Our Windows presence will be augmented by the second quarter release of AutoSketch for Windows, which incorporates innovative user interface capabilities which make it, perhaps, the easiest-to-use precision drawing tool ever.

HyperChem for the Silicon Graphics IRIS will be shipped in second quarter, providing a high performance migration path, totally compatible with HyperChem for Windows, that spans the performance spectrum from the affordable Indigo to machines in the supercomputer class.

The second quarter will also see shipment of Release 2 of our Three Dimensional Drafting product, a low cost tool for conceptual design and modeling in 3D.

Quietly, our virtual reality project has moved from research to development to product, and in the third quarter our efforts in that arena will culminate in the shipment of Autodesk Cyberspace, which allows third party developers to create virtual environments and interact with them. In helping our customers apply virtual reality technology to their own areas of application and incorporating it within our own products, we'll be setting the standards for three-dimensional user interfaces. As the tumult in the market for two dimensional graphical user interfaces settles down and clear standards emerge, the contest to define standards for 3D is just beginning. We believe that this technology will be absolutely central to the next generation of computer aided design systems, and we intend to be the leader in the field.

Third quarter will also see shipment of local language versions of AutoCAD Release 12 in Europe and Asia. In addition our Multimedia group will launch Release 1.5 of Animator Pro, which includes a new capability called “Lights, Camera, Action” that makes animation more accessible to the novice user.

Versions of the Home Series products will be released for Microsoft Windows in third quarter, along with the introduction of its complement: the Office Series.

In fourth quarter, AutoCAD will enter the field of parametric design with the delivery of the AutoCAD Constraint Manager. Based on a constraint solution architecture we believe to be the best in the industry, it will integrate constraint-based parametric design directly into AutoCAD, making it accessible to any AutoCAD user. This product will work with existing versions of AutoCAD Release 12 and will not require an update of AutoCAD.

We'll ship the first update of HyperChem for Windows in fourth quarter, and we'll continue the migration of our products to Windows with the roll-out of Generic CADD for Windows. Thus, by this time next year, all of our CAD products from the Home Series to AutoCAD will be available on Windows.

With so many new and updated products coming to market next year, and faced with Autodesk's reputation of failing to broaden its focus beyond a single product, AutoCAD, it is necessary to discuss what has changed: why Autodesk will succeed this time when it has failed so many times before. I've frequently said that Autodesk doesn't launch new products, it jettisons them, pushing them off the loading dock without the promotion and support required to give them a chance in the marketplace. Despite this neglect of products developed at great expense, few of Autodesk's products have actually ever flopped. Each of our multimedia products: Autodesk Animator, Animator Pro, and 3D Studio have the largest market share in their categories on the PC hardware. The Advanced Modeling Extension for AutoCAD is the most widely used solid modeler in the world. Between Generic CADD and AutoSketch, Autodesk leads the market for low cost drawing tools worldwide. Our Science Series products, CA Lab and Chaos, both introduced with essentially no budget for retail promotion, have actually doubled their sales forecasts for this year. Autodesk products have won award after award, and have been favourably reviewed in publications around the globe and over the years.

There's no column in the financial statement labeled “missed opportunities”, yet it's only opportunities foregone out of a misguided short-term focus and unwillingness to invest in developing a market as we did in the early days of AutoCAD, which separate Autodesk from widely-diversified software companies such as Microsoft and Borland. Fortunately, the opportunities that Autodesk has missed in the past remain open: they have not yet been seized by competitors. As Autodesk moves to exploit them, we shall prove by example that Autodesk has changed.

See for yourself. With so many new products and with their vital strategic importance to our company, if Autodesk continues to bungle new product launches, it'll be obvious to everybody before long. In addition to aggressively launching our new products and updates to existing products, we have substantial opportunities to broaden the market for our existing products, especially AutoCAD, as we make up for our silence of the past few years. Release 11 of AutoCAD, the version we're currently shipping, is a comprehensive three dimensional design tool that includes solid modeling and supports a host of industry-specific applications, yet in the minds of potential customers it is often perceived as a “2D drafting package”. As we communicate what we're doing, we'll also be selling what we have, and we'll grow the market for AutoCAD beyond the drafting shop.

Is the market for CAD saturated? Well, what do you mean by CAD? Even if you limit CAD to professional, two dimensional, production drafting the market is far from saturation. Every shop with one or two copies of AutoCAD and five or six drafters still on the board represents future revenue for Autodesk. Every company with dozens of drafters and no CAD system is an opportunity that awaits Autodesk's effective communication of the productivity benefits of CAD. In the larger world of CAD, where the “D” stands for “Design”, Autodesk has yet to scratch the surface. With the launch of our upgraded solid modeler and constraint design package this year, we'll begin to deliver the products we need to address this market. As we communicate the benefits to our customers and begin to accumulate success stories in the real world, the momentum will begin to build.

Autodesk doesn't need to be “turned around”. It's already pointed in the right direction; it just needs to get moving again. Over the past two years, in Europe, we've made the kinds of investments in Autodesk's future that are needed now in the rest of the world. This quarter, Europe met its forecast sales, and we anticipate continued strong growth throughout the next year. Europe is a prototype for the changes we are already putting into place in the Americas and the Asia/Pacific region. Our success in Europe demonstrates the soundness of that strategy and the benefits that flow from its patient and professional execution.

Returning Autodesk to rapid growth and high profitability doesn't require any arcane knowledge or superhuman capabilities. It's simply a matter of controlling costs, making realistic forecasts, meeting schedules, promoting aggressively, selling effectively, satisfying customers, and developing products based on the needs of the marketplace. In other words, what any competent, professionally-run business must do in order to grow and prosper.

Last December, I met with the management and directors of Autodesk and, speaking as a shareholder as well as a founder of the company and employee, I asked whether it was their goal that Autodesk remain on the course I charted for it a decade ago: as a rapidly-growing, broadly diversified, highly profitable, industry leading software company. They said yes. I took them at their word. I agreed to come and help in the difficult task that lay ahead. The market position, products—current and under development, reputation, financial strength, and people that Autodesk have today equip us for success in this endeavour. The road will be long and hard. The perils are many. But the opportunity is beyond calculation, and the reward will be worth it. We are living through a period, spanning decades, in which the entire process of design and manufacturing of every product, in every industry, in every nation, will come to incorporate the computer as an integral part. In the truest sense, the world is becoming digital. Autodesk is in the best position of any company to bring about this technological transition and to benefit from its achievement.

I believe that Autodesk today is at the threshold of a second spurt of growth fully as powerful as that which characterised our early years. If we act now, we can see our company and our investment in it grow as in those heady times. If we fail to act, we shall lose everything we've worked so hard for over this last decade.

We are already at work. Remedying the damage born of years of inaction is not the work of one week or two. Changes are already underway; results will become evident as the year progresses. I do not ask for your trust. Trust must be earned through performance, and Autodesk's recent performance merits skepticism, not confidence. I ask only for your support as we do what must be done to rescue our company, and for the time to accomplish what we are undertaking. The results will speak for themselves.

It is my pleasure now to introduce Volker Kleinn, Vice President for European Operations and Chief Operating Officer of Autodesk, who will describe the specifics of the recovery of Autodesk of which he is the chief architect.

Company Meeting: Concluding Remarks

I made this brief statement at the end of the company meeting, following all the product demonstrations and presentations by the business unit managers.

And now, as in 1982, it's over. Now, as then, we go home and think over what we've heard and how much we each want to contribute to seizing this unique opportunity we share.

The world of 2002 in which we celebrate our 20th anniversary may be filled with wonders that not one person in ten million today believes are remotely possible.

Those wonders will exist if we make them so. If we succeed in this endeavour, our 20th anniversary will celebrate a triumph we can barely imagine today.

Our goals for the next year are ambitious.

They must be.

Our goals for the next decade are mindboggling. Perhaps a century hence people will look back at a time called The Golden Age of Engineering and think, wistfully, “to have been there, then.”

Let it begin.