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GZ: ... got stuck though and I got a little delayed... but, uhhh... . Well, listen I really appreciate... .

JW: OK, excuse me, do we have the tape started?

LG: Yes.

JW: We're video taping this, as agreed.

GZ: (Interrupting). Yeah, I know--that's OK.

JW: I just want to make clear that this recording is copyright 1992 Autodesk Inc. All rights reserved. All participants in this on-record interview acknowledge that it is being recorded and that this recording or any derivative therefrom, including but not limited to transcripts, quotations, or edited extracts may be used in any matter by Autodesk Incorporated. No participant in this interview is a public figure.

GZ: OK--that's fine. I'll just remind 'ya that this is a newspaper interview and that we'll just treat it as such. Ah, well listen, I appreciate the chance to come by and talk with y'all cause, let's see, Autodesk is a very interesting company and, uh, you know, for reasons that have to do with the fact that, uh, they're just so many things we can get to... we haven't--haven't really paid it a lot of, much attention in the couple of years I've been covering software--I also cover personal computers--but, uh, I've had a chance to do some--a little bit of boning up on the company and, you know, I'm real grateful that I had a chance to come by and talk because, uh, there's really, is no substitute for talking to senior management when it comes to assessing how a company is doing or what it's up to so, uh, I hope that... now I don't know what kind of time frame you had, but I hope we can get through a lot of things and, I, I hope also you'll appreciate that, uh, you know, a lot more about the company than I do and I will benefit by whatever time you can, you can share with me because, ah, naturally I have a lot of qu... you know... there's a lot of things I'm trying to come to grips with and... and in a lot of ways you're the best people to help me.

JW: We have until five.

GZ: Okay, allright, great, great. Ahhh... is there anything you guys wanted to mention in kicking it off, or, or, no, cause, cause otherwise I can just explain that in a lot of ways, uh, this is sort of straightforward, uh, we're--we're interested in profiling the company partly because it's, it's at a crossroads, partly because it's in tr... , you know there's some interesting issues around uh, uh, the the personalities and the, the.

JW: I thought we weren't here to discuss personalities. That's what you said.

GZ: Yeah, yeah, right. We're not going to discuss personalities. That's right. But the personalities... . People run this company, right?

JW: People run every company.

GZ: Right, and so when you write about companies, you can't avoid writing about people, and so there are some interesting folks here and the technology that you guys have... you guys have always, a strong reputation for technical excellence in the software business in particular, uh, I think that, you know, even, even in, even, even the investment community is aware that that's very important, and, and, and so, uh, uh, we'll be able to talk a little about that too. Ah, I wanted to, I wanted to, uhhh, I'm interested in talk, in talking to you all, and I hope that for some of 'ya if there are some question, that I can't pose to you within the time that we have or I just happen to forget to ask 'em, uh, which is my main nemesis in these interviews is, uh, is forgetting things, uh, that we can... maybe I can get back to you. I mean, Al, I've talked to you on the phone a couple times, but, but, in particular, John, because since this is my first opportunity to talk with you, and, uh, I was going to direct some initial questions to, to, you. Uh, so, I hope that, that, that's OK, so, basically, ah, I wanted to, I wanted to talk about, ah, the, ah, some of the management, some of the issues about the company that you've raised, and, and I actually wanted to get to 'em, get to some of them specifically, because, I th... uh, uh, a little bit down the road, because I think we can get at some of these questions of the company's future and the strategies being put into place, and likewise. But I want to open with a few general questions about how, uh, you start... , why you chose to express your misgivings about, uh, uh, Autodesk management in a, this sorta semi-public fashion, and, and, what you felt the, uh, the ramifications would be from that. I know there's a passing reference in, in the letter... in, in, the, the letter that, that you were aware that, that you had, uh, thought about the consequences of, of distributing it, but why didn't you just sort of sit down with 'em, with, with people face to face, and...

JW: (Interrupting). Well, first I disagree with your characterisation of Information Letter 14 as speaking of misgivings. You've read Information Letter 14, I trust?

GZ: Uh, huh. Okay. We'll rephrase it to, to just say ``an expression of your thoughts.'' Why didn't you choose to express your thoughts to management in private, face to face...

JW: I have, on numerous occasions, as I continue to. Information Letter 14 is--you will note the number 14 appears in it...

GZ: (Interrupting). I know they're thirteen others but...

JW: (Interrupting). Twelve others.

GZ: Twelve others... that's fine. The question I've got though is that, you know, you, you in distributing something like this to a wider audience you naturally, uh, uh, as you yourself mentioned, copies were going to get out to people...

JW: (Interrupting). Well...

GZ: well, well, outside the family and

JW: well, would you like me to answer that question or would you like to make a speech?

GZ: Well, I'm trying to get you to stay, stay on that question rather than dissect the question.

JW: Well, no--you asked me a question in which you began by asking ``your misgivings about the management of Autodesk.'' Information Letter 14 was not about misgivings about the management of Autodesk. I explicitly stated in the beginning that I had no desire whatsoever either to replace the current management of Autodesk or to take a rôle in it myself. I forget on which page, but it's right at the beginning.

GZ: Okay... .

JW: Information Letter 14 is not about misgivings about the management of Autodesk. It is not about misgivings about Autodesk, so much as it's about, like the twelve Information Letters that preceded it, the state of the industry, what companies must do to compete in it, and it is entirely in keeping with the Information Letter I wrote ten years ago in which this company was organised.

GZ: (Interrupting). Okay, did you think...

JW: The industry is changing, companies must adapt, and it was necessary to allow everybody in the company--not just two or three people at the top--but every manager within the company and most employees within the company, to understand the competitive environment within which our company competes is shifting. You can't shift the mindset of an entire company by talking to a group of five managers.

GZ: Do you undermine senior management by distributing a paper like this?

JW: No.

GZ: You don't.

JW: All of the senior management who was in charge then are in charge now. We've reorganised a little bit, but...

GZ: Well, Al Green is outgoing, I mean, I mean one could say, ad hoc, that senior management was undermined, I mean in the sense that, that...

JW: You could say that. It's not true.

GZ: Well, all right, again, I mean, I mean, ah, you know the, the question really is, whatever your intentions, I mean, wasn't it inevitable that if you distribute pretty harsh criticisms of senior management like that, that it's going to undermine them, it's going to make it difficult for them to function...

JW: Information Letter 14 does not contain what I consider to be harsh criticisms of management. It contains specific questions about Autodesk's strategy--a strategy which was largely coherent with the time that I was managing the company. Information Letter 14 is a letter about the fact that the company's strategy must change, that the strategy that worked when I was president in '83, '84, and '85, and when Al was president in the subsequent years is not the best strategy for Autodesk entering the 1990's.

GZ: Okay. I mean, uh, I mean, while you didn't personally single out individual managers, I mean, you did say, on page 30, ``I was so appalled at what I heard at one management meeting that I vowed never to attend another management meeting, and I never have.'' I, I mean, that's taking somebody to the woodshed by, by any measure if, if, you're, you're so, you're so frustrated by, uh, you know, ``what disturbed me so much about this incident was the way management seemed to be taking their marching orders from the accounting rules rather than the real world.''

JW: Well, well, you see...

GZ: (Interrupting). That's a criticism. That's expressing misgiving about management.

JW: That is a criticism about how United States public companies are run. Autodesk is a United States public company. I think you will find that most of the company you talk to--very few which have been encouraged to go out and report disappointing short-term results to make the investments that are necessary to adapt to a changing market. Autodesk, yes Autodesk had that problem. Autodesk does not have that problem any more. Information Letter 14 was the only way that I knew of to cause Autodesk to adopt a long term survival strategy for this company. We could continue to run margins of fifty percent or sixty percent for one year or two years, but we intend to be in business for the next ten, twenty, thirty... fifty years, and it was necessary to put the issues squarely in front of everybody. You can't go out and say, ``We have a secret plan for the evolution of the market.'' You can't go the shareholders with that. You have to say, ``The market has changed; the competitive environment has changed; the opportunities are unbounded, and as the management of this company we are going to make the investments that are necessary to exploit that opportunity.''

GZ: Okay. Frankly, I, uh, you know, admire, a lot of the candour, and, you have, as with with regards to, the, the, climate in which companies operate under, particularly with the public equity market and the pressure that brings, okay, but... . This, really... . (Turning to Al Green.) What's, what's your professional training?

AG: My background is finance.

GZ: Are you an accountant?

AG: No, I'm not.

GZ: No, okay, you've got uh, what, an MBA in finance...

AG: Something like that.

GZ: Yeah, because, I mean, cause, cause one of the things, I mean, one of my questions was, was if you preside over the installation of a CEO and chairman whose background is in finance, is in, in you know, whose skills are in manipulating financial assets, ah, why would is surprise you that you get a company that starts acting like...

JW: Al Green is the best manager I have ever met and I endorsed his installation, as you choose to term it, as president of Autodesk, because I had never met anybody in my life before Al Green who I thought could run this company during a period of rapid growth. It was all I could do to run this company from zero to 50 million dollars a year. Al Green ran this company from 50 million dollars a year to more than a quarter of a billion. His record of success quite adequate as far as I'm concerned, and much better than I was expecting, I must say, at the point he took the company over. The company has continued to... . When I talk about ``taking their marching rules from accountants,'' I'm not talking about Al Green; I'm talking about the analysts on Wall Street, I'm talking about people that are looking at...

GZ: (Interrupting). No, you, you, you, but you say the way management, and you're clearly referring to Autodesk management, seem to be taking their marching orders from the accounting rules rather than the real world. I don't want to get hung up on whether or not you were criticising your own management.

JW: I don't understand why that's an important issue to you, whether I was criticising management or not. I was criticising strategy.

GZ: No, the issue... yeah, cause the important issue to me... you're right--that wasn't, but the important issue is, does public criticism like that undermine your, your management's ability to lead and you said that there was no other way to get these issues on the table for people to grapple with. And that may be, I mean, you, you lived through it, I didn't, so I mean, I mean, I'm not dismissing that, I'm just saying that what happened before you reached that point in terms of the discussions you presumably did have that, that you grew frus... , you know, you felt weren't being productive, what, what happened during that period of time. Why couldn't you get your message across, cause you're obviously an articulate, forceful speaker. Why couldn't they understand what you were saying?

JW: Because, I believe--and I don't think it's appropriate to discuss this meeting or that meeting or who said what when a year, 18 months, 24 months ago--I believe that the reason that Autodesk did not change its strategies prior to Information Letter 14 was that the entire environment--the entire change in the market that was presented in Information Letter 14 had never really been laid out before. I think you'll find other people in the industry that consider it to be an expressive...

GZ: (Interrupting). But you could have laid it out privately to these folks.

JW: I could have, but then they would have to have taken it to everybody else in the company anyway, because this is a company that is not run from the top. It is a company in which innovation comes from the bottom, and if individuals in all of our business units are not aware that the expectations of the users and the customers, of the opportunity in our market, if they're not aware of that, then they're not going to understand orders that are given to them from the executive office. This is a creativity business, and in a creativity business the people that are doing the creating have to understand the environment they're in. We've been a very, very successful company for a long time, and when you've been very successful with one formula, it's very difficult to change it. It's very difficult to understand that the world is changing. If you look at the companies in 1982 that did not make the transition from the 8 bit machines to the IBM PC, you see companies that were making so much money, doing so well with their old strategy, and the message was undoubtedly--and I think if you look at the history of those companies in many cases the executive suite knew what they had to do, but they just couldn't get the people who were doing the work to change their mindset. That's what we had to do. And in terms of what memo went to what person at what time, the important things to focus on is that Autodesk has, since April of last year, changed its strategy, has implemented virtually every... not in terms of implementing recommendations... but is addressing these things and is moving into these future with a strategy that is consistent with what will survive in this new environment.

GZ: I want to cover that, because they're a lot, they're a lot of things that, that, in specific I want to cover on that. The, the, uhm, now, when, when you, you're, you're, uh, some way through this ninety day period in which you'll be, you'll be back here, is that? Is that? What, what day are we on now, do you know?

JW: I don't actually count the days. I arrived in mid-January.

GZ: In mid January--so presumably you'll stay 'till mid-March, or is it a little open-ended?

JW: Uh, that would be mid-April.

GZ: I'm sorry, uh, uh, mid-April--would it, would you be staying--is it open ended, or is that sort of firm?

JW: Ahhh, it's firm to the extent that I expect to be able to take care of everything I came over here to do during that period of time. I'm quite confident of that and I think we're on track.

GZ: What... um, there are a number of companies in the software industry, some of them which you admire, namely Borland and, uh, Microsoft, which have, as their chief executives, uh, people who might, you might say, are, they are cut from the same the same cloth as your, as yourself. Technical people who have, um, a keen grasp of, of management and business issues. Um, it's served both Microsoft and, and, and Borland for the chief executives of those companies to to be, uh, you know, founders, who, who still, roll up their sleeves with, with programmers at their, at their companies. Why not you? What, what, what's... you would seem to be the ideal candidate.

JW: I disagree with your statement. You said, ``You would seem... you seem to be cut from the same cloth.'' Every human being is different from every other human being. I don't believe there's much similarity between Bill Gates and Phillippe Kahn except that they both run highly successful software companies. I don't think there's much similarity between either of those two and myself. I think it's very convenient to put people in a box, saying this person is standard entrepreneur issue 1B--runs software company--I'm an engineer; I'm a programmer; I'm a technologist. I have no interest in running a large U.S. public company and I never have. It was the means to the end to be able to accomplish the technological work that I wish to achieve.

GZ: The, the sad fact is, is that if you look at the successful software companies and you look at the unsuccessful ones, uh, the Ashton-Tates and the Lotuses, they don't have that person there. The Borlands and the Microsofts, the Symantecs--they do.

JW: I disagree with you. The largest software company in the world is IBM. It isn't run by a software guy.

GZ: Would you be happy with their record? (Laughs condescendingly.) Would 'ya, would 'ya...

JW: Fifteen per cent compounded growth for a century? Yes, sir, I'd be happy with that record.

GZ: All right, their record in software, their record in software.

JW: Excuse me, excuse me. I did not say that, I spoke of their growth record...

GZ: (Interrupting). All I'm, all I'm, all I'm saying is that, uh, you know, you know...

JW: (Interrupting). Would you like to make a speech, or would you like me to answer your question?

GZ: (Condescendingly.) You know what I was talking about, I was talking about PC software companies, I was not talking about mainframe computer companies. Within the class of PC software companies of which AutoCAD clearly is a member, there are certain features...

JW: (Interrupting). It is not. It is not. It is not. Sir, it is not a member of the PC software companies. This is a very different business. You're likening us to companies that sell mass market products, at retail in a competitive environment, through mail order. We are an engineering software company, whose product is bought by professionals who pay ten times as much money for our product as they pay for the products of the companies you've named. And the model of our business... it is simply wrong to liken our business to Microsoft or Borland. We are like MacNeil Schwendler Corporation, like Swanson Analysis Systems, like PDA...

GZ: (Interrupting). What kind of CEOs do those companies have?

JW: They have experienced business managers who understand the operation of a company in a long-term, evolving market.

GZ: And is that your ideal for a CEO for Autodesk?

JW: I don't have an ideal for a CEO for Autodesk. Autodesk doesn't... and again, I think you are again making a statement that I believe to be unfounded in fact. I don't believe companies are run by Superman CEO's. I think that companies that are run by Superman CEO's live only as long as the Superman happens to do the job well and die with his first mistake. I think that successful companies are run by teams of people which include individual strong players who understand every aspect of the business. The CEO is the head of that team. But whether that CEO has a technical background, and has a marketing and a sales person and a finance person and a legal person on that team, or vice versa, does not matter.

GZ: (Interrupting). Is the team in place here at Autodesk, or, or do you think it needs to be augmented, and what way does it need to be?

JW: I believe we have an excellent team in place at Autodesk, and I think our record is indicative of that.

GZ: So, uh, I mean my understanding is, that, is, is, will   Volker be staying on as the CEO, or is he an interim person, and if so...

JW: No, Volker is on an interim assignment as Chief Operating Officer, not Chief Executive Officer.

GZ: Okay, so, what, I mean, what, in terms of Alvar's replacement, then, what, what is your thinking about, about that? You need someone who will just fit in, with the strong team that 'ya have already?

JW: (Interrupting). I don't need. I'm not on the CEO search committee; that's a board matter. And the board, is the board, which is charged by the investors...

GZ: (Interrupting). You are on the board, no, right?

JW: No, I'm not on the board.

GZ: You're not on the board anymore.

JW: I haven't been since 1988.

GZ: All right. (Long pause.) And what I'd say is, would, would, could you, can you imagine professional managers, of a stature that you'd want to be CEO, that would join this company knowing that you have a looming presence and a huge sway over the course of the company. Could they see it in themselves to, to see that as an asset, and as opposed to something to basically be afraid of?

JW: If they believe that, then I don't believe they should or would take the job, because if they believed that they'd believe something that isn't true. I don't have a looming presence over this company. I have an influence perhaps as a founder of the company as somebody who has been involved in product development, both in AutoCAD and in new products, but I believe you'll find if you talk to people, that between the time that I resigned as chairman in 1988 and the time I wrote Information Letter 14, I was not looming around behind the company, I was sitting at home developing new products, and that is what I intend to go back to doing in Switzerland just as soon as I can.

GZ: (Long pause.) OK. Uh, was there anything in particular that, that, uh, sparked, moved you to, to write this Information Letter 14, in the, in the, uh, in the letter itself you talk about how you don' wanna be seen as a stalking horse, but that there were folks within the company who you respected and who had made big contributions to the company who had, who had conveyed their concerns to you. Was that part of the reason, that prompted you or, or were the things you noticed yourself, or...

JW: No, I acted in what I believed to be the best interests of the company I own more than 850,000 shares of stock in. I wrote Information Letter 14 because I felt it was necessary, and the most effective way to protect, and to cause my investment to grow further.

GZ: I just meant that, in terms of wh, wh, why you did it then--was there any pre-, precipitating factors, or was it just a whole bunch of things, too, too, too many to, to number for me or to lay out for me?

JW: No, there wasn't any precipitating event other than I finished my previous project and decided to spend some time...

GZ: (Interrupting). You had some free time, to, to, look at the questions...

JW: Well, if you'd like me to answer your question, I'll be glad to; if you'd like to make a speech, go ahead. No, I had been working on the '286 version of AutoCAD and had turned that over to the AutoCAD development group at the end of, uh, 1990, and then decided to take some time to go out and look at the industry, buy some Windows software, learn a little bit more about the contemporary channels, look at the competition, and survey the competitive environment. Information Letter 14 was the result of that process.

GZ: Okay, okay. Had you used Windows before then, or, or had you been familiar with it?

JW: I had used Windows back in 1985.

GZ: Why, why does it come, I mean, I mean I'd have to say that I, with, with respect certainly to, to Windows, uh, uh, ya' know, I'd say I'd agree with you wholeheartedly, it seems like the company was late, late in recognising the importance of Windows and has been late to market with it, uh, uh...

JW: No, I disagree with that. We had a Windows project underway for both our AutoSketch and AutoCAD before Information Letter 14 was written. It's a major, job, particularly, well, in fact, we were one of the first to market on OS/2 with any product... and our Windows product essentially inherited all the work we'd done on the OS/2 product. It's not an easy job to put a product the size of AutoCAD under the existing 16 bit Windows. It's a major commitment of people for us, but I don't consider us late to market.

GZ: In the letter, you exhorted the company to move more quickly in the Windows area...

JW: That was one of many recommendations, but... I, I was actually quite happy with our progress with the Windows AutoCAD except perhaps in terms of the relative priorities versus some other platforms. I think...

GZ: (Interrupting). But that's the whole game. I mean, the relative priorities, is, is a lot of the game. I mean, you know, that's, that seemed to be what you were complaining about was prioritising and...

JW: (Interrupting). I think you must have read a different letter than the one I wrote. No, I was focusing on the marketing opportunities that we had. I felt that this was a product which, when done, should not simply be made available but rather aggressively marketed because we had a substantial opportunity to broaden the market. This is also not a one product company. We sold more than half a million copies of AutoCAD, in fact more than 600,000, we've also sold half a million copies of low-cost CAD, both AutoSketch and Generic CADD, and those are products that are in the retail channel--those are products which it was important for us to get on Windows as soon as possible and to increase our focus on Windows in the retail world.

GZ: (Interrupting). And so you were happy with the way that worked out, in terms of...

JW: I'm very happy with our position there.

GZ: Okay, okay, good. Uh, this, this, this one, one point, you thought I'd asked for, you, you, you said, ``I've decided to take all the heat personally for putting these issues on the agenda. I'm not a stalking horse for anybody, and I don't want to suffer--I don't want anybody to suffer just because I happen to agree with them.'' Did, did you end up taking any heat for putting this stuff on the agenda, or...

JW: Not really.

GZ: What was the reaction, of, of folks to the, to the letter?

JW: Ahhhh, I think it was, uh, a little like when you fire a shotgun in an aviary, there was silence at first...

GZ: (Interrupting). In a, in a, in an ``ave-ary''?

JW: In an aviary.

GZ: Aver-arary, okay.

JW: You know, where they have birds?

GZ: Um-hummm.

JW: There was kind of a period of silence, then a few little twitters began, and then a large amount of conversation. It had really the effect I intended it to have--it caused everybody to say ``What is our strategy? What are we doing? What are the opportunities out there? What are the foregone opportunities that simply staying on our existing strategy may create?'' And that's really the point. I mean, how can I possibly impugn the performance of the management of Autodesk when Autodesk has just finished the most successful year in its entire history? We have highest sales, highest profit, largest number of new products, greatest market share, broadest international distribution, more employees, more technology in the lab, more products scheduled for introduction next year than ever, okay. That's not a record of failure. The fact that our earnings were lower in the fourth quarter than some people on Wall Street expected because we sell to the two most cyclical industries in the world, construction and building, and we're in the middle of a depression, is not anything that has to do with Autodesk strategy. We began this year with about a 70% market share in the CAD business, we ended the year with a 71% market share in the CAD business--71.4 I believe it is. That's not a company that's being clobbered by competition. That's not a Lotus being clobbered by itself. That's a company that needs to build on the base that we have, and expand that base with additional products, with additional platforms such as Windows, to broaden to the point that we are a broadly diversified company. That has been our goal since the foundation of the company. We have been in the multimedia market for several years; we're in the retail market--we're increasing all that focus as time goes on.

GZ: Is there, is is there any, I mean I sense from reading, uh, the, the letter that you feel the company should be in the class of a Microsoft or a Borland over the long run that, that, I mean, you talk about, you know, uh, the, the industrial empires that are kind of being created by these software companies and, and, and, I mean in terms of, in terms of a, a record compared to most industries, Autodesk's record is, is, is, is stunning but the growth rate has lagged at out some of the, of some of the, of, of, say the Novell, Borland, and Microsoft would be kind of the, you know, the triumvirant (sic.) of, of, of, of, of, real, real, real big ones.

JW: Novell's kind of a hardware company, still.

GZ: (Condescendingly.) Well, no, you can tell them that. Explain that to Ray. He'll be interested to hear what you have to say on that but, uh, the, uh...

JW: Look at their revenue. Their revenue has...

GZ: (Interrupting). All right, listen, so, so all I'm asking is that the, is there, do 'ya feel that Autodesk oughta be in that class so that your standard of measuring them, of measuring Autodesk, is, is, is that much higher, it's not just are you outgrowing uh, uh, the, the U.S. industry, it's are we keeping up with Borland and Microsoft and, uh, these...

JW: (Interrupting). I don't think we're keeping up with Borland and Microsoft. I believe that Autodesk... . I own no equities other than Autodesk, basically. The reason for that is that I do not believe there is any other company I can invest in which is better positioned to be one of the largest industrial companies in the twenty-first century...

GZ: (Interrupting). My question was about whether, whether or not you feel any sense of frustration that you haven't kept up in growth rate with these companies, who, whose growth rate has been, you know, uh, uh, uh, higher than yours...

JW: You use ``you'' both to mean me and the company, which do you mean?

GZ: (Interrupting). You, you.

JW: Me, I don't have a growth rate, I'm an investor...

GZ: (Interrupting). No, I'm saying, are you frustrated that Autodesk's growth rate has not been as high as, as, as these companies I've mentioned?

JW: (Interrupting). No,

GZ: (Continuing.) And is that, do you feel, that, that, you know, it ought to be in that class?

JW: I believe that Autodesk, I, I don't use the word ``ought''--I believe it will be in that class, and it will be in that class when we expand... when two things happen, when we expand the base we've built, and when the investments we've already made come to market. The fact that, for example, this year about 90% of our revenue is AutoCAD. Our...

GZ: (Interrupting). Is that up, down over the, over the, is that about the same as it's always been...

CA: About the same.

JW: I mean, over the long term it's down because it used to be 100%, but you're...

GZ: (Interrupting). Yeah, but over the last few years, over the last years, about the same.

JW: We expect that to be substantially less next year, perhaps at least to the say 87%-85% level. When you invest in something like multimedia, for example... we've invested in multimedia, we have I think a very large, perhaps commanding market share in the professional video production market. That's not a very large market, but that's a base that you can grow from--whoever owns that tools market is in the best position when the consumer explosion occurs in multimedia. We are not interested, and I don't believe we should be interested, speaking as an investor, in going head to head and battling it out in the C compiler wars, the spreadsheet wars, the word processing wars... . For everybody that enters that battles, only one tends to win, and there's a lot of losers along the way. Our strategy is very different. Find a market that is not mature yet, that is not developed yet, in which a relatively small investment can gain us a large market share, and a market which as the speed of computers, the graphics performance, the storage capacity inevitably increases, will become more and more viable and expand into a consumer market. That is precisely what we did with AutoCAD. AutoCAD... if you'd been interviewing me, as nobody did in '83, talking about ``the failure of Autodesk in 1983''--we were just bumping along with a very slow growth rate and would have continued to bump along forever until the PC/AT came out. The PC/AT, the '286 machines, made Autodesk, because it gave us a platform with the power we needed. In multimedia it takes something like the introduction of the MPC. In scientific modeling, which we're entering in a month with the first desktop molecular modeler, it will take the 50 megahertz '486 or '586 machine to really make that. But if you get there first, if you own the market share in the market--if you own the market share in the market when nobody takes it seriously because it's so small, then you have the beachhead that you need to expand beyond that without making vast $100 million bets and taking away market share from Borland and Microsoft. That's our strategy. We control today... every thing in this room, other than people, was manufactured. Every single thing was manufactured. The central part of manufacturing in the world today, today, is drafting, and we have an overwhelming market share in that process. That gives us the base at the centre of the design process. We can move earlier the design process into conceptual design, product presentation, rendering--on the tail end of the design process, into testing, manufacturing from that base. But we are in the drafting shop and, today, that is the point that every design passes through. If you look at those other markets in manufacturing, in architecture, in geographical information systems, they're easily distinct. That's a niche market. Yeah, that one's a quarter billion dollar niche market--that one's a half billion dollar niche market. Control of the the centre of the process, control of the design database, is what Autodesk--is what AutoCAD--gives us today. We can drop product after product after product into that market; we already have--our solid modeler, which has sold more than 60,000--last week we shipped a major update to it--we have contractual arrangements with ESRI, who is the Number One player in geographical information systems, we're cooperating with SDRC, one of the leading players in mechanical design, and we are, through these arrangements, putting products through our channel, into our customer locations, that provide the solution that the designers and engineers need.

GZ: (Interrupting). Lemme, lemme askya, in that, in that regard because, because again from, from in reading about Autodesk in some of the, some of the, um, ex... uh, initiatives you have in different areas are quite intriguing, but, I'm, I'm kinda struck by a tension between being a, I mean, you're still largely a one product company, in, in terms of the revenue stream you have currently, and, and, I see, you know, there's, and, and a lot of the things you're talking about are basically leveraging off of your core strength in (grunts) in design software and how do you, how would you, uh, describe to me wh..., where, uh, uh, is, is it, are you the design software company, or are you a, you know, software company that just happened to have, hit this mother lode in this one design area but you really are a general, you know, a general diversified company that you plan on having, you know, ho- hopefully, you plan on on hitting something big in some rela... -area that may not be related to design, or is design pretty much the thing that, that pretty much knits it together for 'ya? And anybody can jump in and answer that one all right, I mean, but, but, uh...

JW: Well, I don't know which of the eight questions you've asked you'd like me to answer first, but, I think when you characterise us as a one product company, we're an unusual one product company, in that most of the other one product companies you've named have not had the retail product of their product rise from $1000 to more than $4000 over the last ten years. That rise has been the consequence of additional capabilities being put in that one product which...

GZ: (Interrupting). I'd like to talk about pricing, separately, but, but this question, this question of whe... of whe... of, of where you're heading, is it, is it, to be a design software company or, or to be, you know, in...

JW: We intend to be the leader in design software, and we intend to be a significant player in other industries including multimedia, including scientific modeling, including information systems. And if you look at our business unit organisation, each of those business units is chartered as being one of the top players in that area,

GZ: Okay, let's, let's talk about that, that, that, uh, that, uh, that, not in great detail, but, but, briefly, in the information systems area, all right, you're referring to the, on line, uh...

JW: Xanadu and AMIX.

GZ: AMIX, right, right, and uh, the multimedia, you've got products in that, and you've got more coming.

JW: We have three products already launched and more coming.

GZ: Okay, and the scientific modeling, you've got this product next month? Is that the int... is that the first product in that, in that...

JW: And in our retail products division...

GZ: Yeah, Chaos,   already, right, yeah...

JW: Course, that's over on the edge because we've had a retail products division in Bothell Washington that sells Generic CADD, the Home Series, AutoSketch, and also distributes the scientific products Chaos and CA Lab, and they'll be doing additional retail products in various areas, not necessarily limited to CAD in the future.

GZ: Let, let, let, let me ask you about, uh, information and     multimedia, uh, uh, again just, just briefly because, I mean, these are big subjects, we could spend all afternoon just on them, but, I, I'd didn't want to throw things, throw out some, some reactions I had, just, just some ideas, uh, I mean, the parent company for, of The Wall Street Journal, is in the electronic information business, Dow Jones News Retrieval, I don't know--I don't know if--presumably you've used it, uh, uh, ah, what can you bring to, uh, bring, to, to that kind of business that the current players who, you know, are really, look, you know, are really, look, you know, leveraging all that information that they've got--proprietary information or, or maybe they've brokered it, in case of Dow Jones, you know, they have a whole, they're, they're, they're, they broker information for, that, other people, that other newspapers and publications have... what, what's, is there something unique you can bring, or, what, what's, what's the the formula there you're, you're, you're, you're working with?

JW: The most powerful thing in the world--a new idea. What, if you're talking about AMIX, which is the online service component of what we're doing, AMIX is to Dow Jones News Retrieval and CompuServe as financial futures are to a bank. In your own newspaper, nobody took financial futures seriously until they'd established a strong beachhead. You could say, well, there's forward contracts and banks and they've been around for fifty years, and yet suddenly not only did an entire multi-billion dollar market appear out of nowhere, it now uses up a large part of the back end of your paper. What we are doing is creating the first information market, and that is something that is very fundamentally different from selling the kind of online services...

GZ: (Interrupting). Yeah, I don't actually, and, and I mean, because, because I, I can't grasp it, but I don't see that distinction. I mean seems to me that, all, uh, you're distributing information... you can... marketplace seems like a nice marketing idea, but it's fundamentally the same kind of business as, as Dow Jones News Retrieval would be.

JW: No sir. I would recommend you read their brochure and the background...

GZ: Give it to me in a nutshell. What, what am I missing? ... that I don't, that I haven't grasped it... what am I missing?

JW: Your statement is, is wrong.

GZ: (Interrupting). Why?

JW: We're not distributing information in any fashion. We're providing a place where information buyers and information sellers can do transactions and we make our money on the transactions. We are not setting prices, we not deriving contracts, we are providing a market...

GZ: (Interrupting). So you're something like, like an, like an auctioneer of information, or, or...

JW: (Interrupting). We're like nothing you've ever seen and if you look, at for example today, at the market for market research, in PC trends, in financial research, the entire market for financial market newsletters, the market for consulting, in any one of these fields there's an extremely inefficient market. It costs the consultant--he spends half his life marketing himself. If we can allow himself to market himself and market his product at a cost which is a small fraction, we believe we will create an efficient market in expertise.

GZ: So, it's geared towards, then, not publications then or published information, but sort of the information locked up in peoples' minds that maybe consultants or advisers, is that...

JW: Published information in the sense of products--we can distribute software for $5 and have both the seller and buyer and us make money on it. That channel doesn't exist today...

GZ: Okay, electronically...

JW: Electronically...

GZ: Okay, all right, so but, but I should think of it more in terms of the expertise of these consultants or software, rather than, rather than, another, another vehicle to, to get people to buy a magazine, essentially--the contents of a magazine.

JW: That is one unique aspect of it. On Dow Jones News Retrieval, for example, you cannot, as you can today with AMIX, if you open an account, request consulting from Mitch Kapor--he   was our second customer. Mitch is on the system; he will do consulting for you. You may not be able to pay his price. As additional people with expertise come on that system, we will be providing a vehicle for anybody who can pay the price to call on industry leading figures...

GZ: (Interrupting). And so it create efficiencies for them in terms of finding customers.

JW: They don't have to spend all their time making phone calls marketing their expertise.

GZ: Let's talk about multimedia a little bit although, uh, uh, how important do 'ya think uh, content is to the whole uh, equation of this and, again, anybody can jump in on this one, I mean, I mean, the, the, you've got Bill Gates thinks content's important enough so that he's trying to buy the rights to electronic, uh, art, I mean, uh, from my talks with Apple, uh, they seem to think content's im- im- im- important in the sense that, uh, say, uh, I don't know if you're familiar with a company called ETAK, uh, geographic, geo-coded information, you might just want to buy it all, the information, the geo-coding and just slap into whatever device you've got there. Do, do you, um, or you could be in, in the software tools business, you could be the kind of Adobe of multimedia and, and make something that just isn't needed in, in, in the process, but um, whu, whu, whu, I happen to think myself and this, this again may be, may be premature to come to this conclusion, but the personal productivity business for this multimedia is, I think, going to be the smallest part of it, and, and just wondering, are, do you see the content part of it as, as, important.

JW: How do you define the ``personal productivity part.''

GZ: Well, forget I said, that, all right. Let's just, d'ya, d'ya, d'ya, d'ya, d'ya, see content as important to the equation in multimedia, or, or is it a, is it--can you pursue it in pure software, as a pure software opportunity.

JW: Well, content is software.

GZ: (Condescending, like your second grade home-room teacher.) Well, what I mean by software is com-pu-ter pro-grams, and what I mean by con-tent is stuff that most people think of as artifacts, films, books, pictures, you get the idea, okay, so, so that's what I mean--I don't mean software in the, in the sense that Sony talks about it, okay?

JW: Well, I believe that there is, as multimedia plays out, there will be plenty of money to be made in every sector of the business. I think if you look at Sony's business, for example...

GZ: (Interrupting). But I asked you, if you needed, if you needed content, okay? Do you need content?

JW: For multimedia to become a large, retail, consumer business, content is necessary.

GZ: How do you go about getting it?

JW: That's not necessarily the sector we'll choose to address...

GZ: Okay, that's what I'm asking; so you're not going to address the content...

JW: (Interrupting). I did not say that. You're putting words in my mouth again. What you asked me, if I could answer your question, is ``do you believe content is important?'' Content is very important, but the people that make VCRs do not necessarily also make the tapes.

GZ: (Interrupting). Okay, so let's move from that, since you, since you've agreed that content is important do you think it's important for Autodesk to be in the content business?

JW: Perhaps. Our director of that business unit isn't here, I shouldn't put words in his mouth, but I believe Autodesk can make plenty of money purely selling tools. I believe we can probably make more money selling content, but many of these so-called content businesses tend to be very low margin publishing type businesses rather than high margin businesses and you have to analyse it from a business standpoint. If the dynamics of your business end up looking more like a record company than a software business, you have to say ``how does that fit our business model?'', ``how does that fit our distribution channel?'' It's not clear to me that the content--the content may be sold through record stores rather than through the software channels that we have. And one has to analyse those questions; it gets extraordinarily difficult when there isn't any market at all out there now. It's like the early days of microprocessors; Intel was selling primarily development systems rather than chips. You have to seed the market with the development systems; you have to get the tools into the hands of the content creators before the market begins to develop.

GZ: Do you have any kind of time frame within your own mind, any kind of gut feel for, how, that, how long that development process will take. Is it five years, ten years, two, or...

JW: Well, of course, we're not really in control of it...

GZ: (Interrupting). I know, I just asked for your gut, I just asked for your gut sense of it, though (condescendingly) I know you're not in control of it.

JW: I believe that within five years we will see substantial consumer presence at home. But, understand, I don't believe there's going to be this thing called ``the multimedia market'' any more than there's a thing called the ``graphics market'' today. There will simply be a time when every computer has sound capability and video capability and it's integrated with everything else the computer does. You aren't going to buy a separate multimedia box; it will simply be part of what you use in a business environment or a home environment. These pieces will come together.

GZ: Okay, okay. Uhhhm, you, you made an interesting reference in, in this to the, to the Cyberspace project which, I, I think     you refer to in one of the story because I did mention it, uh, uh, the Autodesk project in a story I did on, on virtual reality, but, how, how, uh, you know, uh, I looked at... the, the point of, of getting attention for the company doing something cutting edge like that, uh, I think is well, well taken. What, whu, whu, whu, what, what do you, uh, uh, I've been trying to talk with people and see where the commercial prospects really lie for virtual reality and, and uh, you have one of the project that seems farthest along in terms of commercialisation.

JW: We'll be shipping in third quarter.

GZ: Yeah. Do, do, do you, I mean, do you see, is this the, you know, as some would have us to believe, the, uh, uh, you know, a whole new way of relating to electronics, or is it more something that's just going to be incremental, sorta like multimedia, just end up being kind of an aspect of the computing experience but not necessarily, we're not going to necessarily, uh, uh, it's not necessarily gonna be a, an industry its, its, in itself, uh...

JW: I believe the latter; it will be an aspect of the industry. In the Sixties there was what was called ``the computer graphics industry'' and it was companies like Adage and so forth who sold graphics devices. And today every machine Sun sells has graphics in it, but it's not a graphics machine, it's just that graphics is the way you get at the machine. In virtual reality, eventually, I believe, elements of that technology will become mainstream parts of the way people interact with computers...

GZ: (Interrupting). The glove, for, um, is there anything you can single out? Is the glove one of those features you think is...

JW: Well, I'd rather not talk about specific pieces of hardware since it's kind of talking about mice versus trackballs in 1968--I mean, the technology is a way to provide more direct human interaction with computers, in the same sense that the mouse was an improvement over the keyboard. Whether the glove, whether infrared head position sensors, whether goggles you wear, or LCD screens, whatever, the technology is not the point. We're struggling along with extraordinarily crude technology today; we're about where Xerox PARC was with the Alto in the mid-1970's. They had something that was extraordinarily expensive, made only in tiny quantities, that they were using to work on how you would use--how people would use this technology when it became widely available. Not until the Macintosh, almost 10 years later, was that technology available at an affordable price. I don't think it'll take ten years for at least the first elements of virtual reality...

GZ: (Interrupting). What... the product that you guys have for later this year, is, is it predicated on any particular hardware?

JW: You can use it with a mouse and a VGA.

GZ: Oh, okay.

JW: You can enter with the PC hardware you have now, and it will support everything up to the highest end.

GZ: Okay, is it, and, and, and, and, and what, what, what, what, a lot, uh, makes you define it as, as, cybersp, cyber, virtual reality? Is, is it, is it, I mean, if we're not using any special headgear or special, uh, uh hand hardware, what, what, what...

JW: (Interrupting). Well, that's not virtual reality. Virtual reality is the emulation of a three-dimensional environment inside the computer.

GZ: Okay, so, and so how are you doing that--how are you achieving it if, if not, if not through the means of, of uh, of the hardware?

JW: The hardware has nothing to do with it. Virtual reality--a 3D CAD system is a primitive virtual reality system.

GZ: (Interrupting). Yeah, I guess. (Louder.) I guess! I mean, I guess!

JW: I believe that...

GZ: Okay.

JW: What our Cyberspace does is allow the definition of a virtual world and then allows interaction between human being or beings and the objects within that world. You can put on the headgear, you can walk around inside the world. You can climb and you can you can pick things up and drop things, or, you can do the very same thing with a mouse and a VGA. It's a lot more real if you do it with the headgear.

GZ: Well, if you do it with the mouse and the VGA, how is it different than the CAD software you have out there now, uh, what, what, I mean, whu, how is it different?

JW: Because it knows about physics amongst other things--the fact that objects collide with one another, that there's gravity in the world, that things deform when you pull on them. It's a model of the world.

GZ: Okay, okay.

JW: And I suppose you could say that the very highest end CAD systems have that capability also, but that's the very, very high end of CAD and none of them really provide access to that--to the world builder. They're really concerned with the, engineer...

GZ: (Interrupting). Do any of your systems qualify in that very high end that you're talking about, then?

JW: AME, yes...

GZ: AME, would, would, would have some of that knowledge of the world...

JW: Yeah. It knows about differences between objects and intersections and clearance fits...

LG: 'Ya ever seen this, um, this product?

GZ: (Pause.) Uh.

LG: You ever seen (unintelligible) uh, okay...

GZ: Yeah, yeah, yeah, I, I haven't seen a demo of, of the Cyberspace product but I have seen a lot of VPL's stuff and NASA's stuff and the stuff at UNC, ah, but, uh...

JW: You've seen AutoCAD?

GZ: Yeah.

JW: You've seen AME?

GZ: No, no, that I haven't.

JW: You've seen our multimedia products?

GZ: Uhhhh, maybe I have, maybe I haven't, doesn't stick in my mind.

JW: Generic CADD?

JW: (Pause.) AutoSketch?

GZ: AutoSketch, well, I can come back for a demo of that one. I mean I'd certainly be, I'd certainly be, you know, glad to do that. I mean, this, this, this was kind of uh, uh, so why don't we do that.

JW: Home Series? I mean, we've shipped thirty thousand of them.

GZ: Mea, mea culpa, okay, mea culpa, I'm a Macintosh. Actually I'm a, a big Macintosh user and so, I, and I don't, I don't use your Macintosh CAD so, I would be most familiar with Macintosh software, but, uh. Okay, all right, so, uhhhhh, all right, well what, eh, it, it, it, it, can, can we, uhhhh, uh, break down, I guess to the, to the essentials of, ah, where, what are some of the changes that have been made over the past year, why you think they'll, uh, you know, help the company and maybe, maybe we can go through some of them and just discuss a little bit why they're going to benefit the company.

JW: Would you prefer to direct that to me or the people that are making the changes?

GZ: S, sa, same, you know, same thing. Same thing, I mean, just jump in, I mean, just jump in, you know.

AG: We're looking at, you know, certainly in the early part   of the year the reorganisation was probably the news at that point, and what we've done, if you look at the history of the company, we've grown from a small company to still a centralised large company. And what happens in an environment like that, you generally get displaced authority and responsibility. I mean, the people can make decisions in the company, but they may not have the corresponding responsibility for those. This was an attempt to put the authority and responsibility of each product in that product group, so rather than a person at the top essentially controlling what happens with each product, you really put the authority and responsibility in the hands of the people doing the job. What that has done... it has essentially pushed, once again, the authority and responsibility down the organisational chart into the hands of the people (inaudible).

GZ: Is, is there any tangible, so far, you see from that?

AG: Uh, you know, I, I, certainly, you know, I'm sure Ruth can can attest...

RC: (Laughs.)

AG: But, you know, once you, uh, what happens with a typical organisation, with, with marketing, finance, product development, you always, no matter what the company is, you end up with communication problems between the departments. What this does, it puts all of those functions into the hands, once again, of the people who are doing the job. The people who produce the products are now responsible for marketing those products, they're responsible for coming up with budgets for those products, they're responsible for the profitability of those products. And that's what we're seeing: we're seeing the responsibility pushed down into the people...

GZ: (Interrupting). All, all I asked was, do you see any tangible benefits from that, is there anything you can point to?

JW: A tangible benefit is that every single business unit is delivering a product this year, with a launch plan that was developed within that business unit. We're not shortchanging the smaller business units in favour of the AutoCAD business unit. If that business unit is bringing in 3% of the revenue, it should have 3% of the resources. Not fifty, not zero, but something appropriate to the size of its market and our commitment in it. And we've been able to delegate to the heads of those business units the authority, the power, the money, the people to get the job done, and they're getting it done.

GZ: Is there one example you might single out of a particular business unit that you're either especially pleased of, the way it's responded to this kind of...

AG: (Interrupting). Actually, I think all of them, every single one.

GZ: (Interrupting). Name one. You, you name one (unintelligible). Well, see, you seem, you're on, you're saying, I mean, I obviously, I cannot even contemplate trying to mention all of them so, so, what, what, what comes to mind, is, is, is one worth mentioning.

RC: Well, obviously, as the only business unit represented here, AutoCAD, one of the things that the reorganisation has done for the business unit is really allowed us to bring the product marketing and the technology people together as a group, to really...

GZ: (Interrupting). They used to be separate.

RC: Yes, like many other organisations that...

GZ: (Interrupting). They were functionally organised. And so now, and so now you have, R&D people within your, your business unit, or...

RC: We have R&D, we have technology, we have marketing, and we many of the other traditional functions which you find in a company.

GZ: And so you're, sorta of like a, uh, uh, uh, a CEO of a, of a company, in uh, in effect, right, cause you obviously, well, except for the finance arm?

RC: We have our own finance, also, within the groups, so that allows us to really take a look at what is happening in the marketplace, really review any trends that we might see happening in the marketplace, take a look at what's happening with sales, and also to go out and move much quicker as far as what we may have done and the implementation of some technologies that...

GZ: (Interrupting). When did that take effect? Uh, for you?

RC: That was the first of July, and we had been working on it for a couple of months prior to that.

GZ: Okay, okay, and, uh, uh, so you got about nine months, you got close to, close to eight months under your belt.

RC: A gestation period.

GZ: Uh, can you see, I mean, uh, are there, can you single out some, you know, tangible benefit about, I mean, are you seeing faster results in product development?

RC: Definitely. Definitely. We are getting much faster results. Time to market for product now has increased, I would say, by a good 50%.

??: Decreased.

RC: Sorry, sorry guys!

GZ: What was it taking you get a product to, to market?

RC: That might vary, but by having all the people working together in teams, or smaller teams, we've really been able to cut down, cut across a lot of functional lines. And the result of that really is the number of products that we're going to be shipping this year.

AG: More of a parallel development stream.

RC: Correct, correct.

JW: Yes, we had never worked on, for example, Release 13 of AutoCAD until we finished Release 12. And Release 13 is actually well along the road now because the AutoCAD Business Unit has the resources that it can spread among...

GZ: (Interrupting). That's what you mean parallel developments, okay, so you're working on not just the next version but the one after that at the same time. What, you, you, Al, come on, you're just about to release 13...

JW: Twelve.

GZ: Twelve. But, so, you presumably now have fourteen under development as well, is that...

RC: Thirteen.

GZ: But you don't have fourteen under development.

JW: Well, (sputters). Major components of fourteen are the underpinnings of thirteen. We're about to...

GZ: (Interrupting). (Shouts.) Well, maybe, you just gave me as an example, I'm not trying, this isn't a trick question, I'm just presuming since you said you now do two of 'em uh, that, I, I can't...

AG: We're eight months into this. Correct me if I'm wrong, but we're already six months into Release thirteen, which means that six months ago we had twelve and thirteen going in parallel. And we're now six months into that: Release twelve will be coming out mid-point of next year, at which point we'll be a year into the development of thirteen. Under the old environment we would have been starting thirteen at that point.

GZ: Okay.

JW: And not even at that point. We would really be starting thirteen not just after the first customer ship of Release 12, but after...

GZ: (Interrupting). After the bug fixes...

JW: Not so much bug fixes, but remember AutoCAD runs on the Macintosh and the Sun and the DecStation...

GZ: (Interrupting). And these were all the cross-platform. so that really slowed you down, hah!, that really slowed you down, okay.

RC: And, and I also want to address John's point. Many of the things we're working on in Release 13 really are the underpinnings for Release 14, 15, and the CAD system of the future.

GZ: Okay. So this is a major upgrade in the, that sense, too.

RC: Absolutely.

GZ: Yeah, okay, well that's a good example.

CA: I have another example too. Retail Products, I think, is worth mentioning.

GZ: (Interrupting). What's, what's your name again, uh...

CA: Carolyn Aver.

GZ: Carolyn Aver, I'm sorry Carolyn, yeah, uh...

CA: Okay. Our Retail Product division comes from our Generic subsidiary. We bought Generic Software, pretty much left them alone, within the Generic product line. They did take on responsibility for AutoSketch along the way, but for the most part it was really focused on Generic. Having really given them the full responsibility of a business unit, they have made numerous presentations to the management group and we've really endorsed them to become a fully retail products, uh, business unit. They've come out--one of the things John alluded to before--is the Home Series, which is a low-end $59 product that   focuses on baths, or kitchens. Those products have done extremely well. They'll be coming out this year with a number of products that are completely outside of the CAD industry...

GZ: (Interrupting). Oh will they?

CA: Yeah. We can't tell you what they are...

GZ: (Interrupting). You can say what, what areas they are, okay...

CA: They're working on three different products, come to mind now...

GZ: (Interrupting). In this, the, the, the, the Generic Software, you, that's the result of an acquisition, that you, that you made, that's run as a...

CA: (Interrupting). That turned into Autodesk Retail Products.

GZ: Turned into Autodesk Retail Products. But, and when was that made, that acquisition?

CA: The acquisition was made in '89, '88-'89, and as part of the restructuring that turned Retail Products. So they've really changed the direction of that organisation over the last six months because they've been given the ability to run as a business unit. They're projecting revenue increases of over, I think, 75% and are really planning on building a pretty big market out of that, so there's another thing that...

GZ: (Interrupting). Okay. And moving into areas outside of, of, CAD. Okay.

AG: Going back to the original question of what has happened in the reorganisation--another large part of that that we're seeing results from right now... . Last year we went into the reorganisation of Europe. Before, we were operating in Europe out of a subsidiary in England, Switzerland, and Sweden. Now what we've done is we've set up offices in virtually every country of Europe--the reason here being that we now have a direct staff in those countries that are supporting application developers, that are supporting the customers, that are supporting the dealers. This was always removed--one level of distribution removed because that was happening from Switzerland. So once again we've put more staff, more capital into each of the countries in Europe. We're seeing quite a lot of results from that. Probably the most obvious is Germany. Germany, Italy, Spain are countries that are doing incredibly well as a...

GZ: (Interrupting). What's the, what's the overseas sales, uh, the, the, the breakdown of revenue, uh, is it...

CA: About 55% international, 45% United States.

AG: Now that's international--that's not just Europe.

GZ: Yeah, yeah, but so, so you're, you're basically hiring more nationals or more folks within these individual markets and...

AG: We always, even when we had subsidiaries in Japan, in Scandinavia, Switzerland, we always hired nationals but, yes, as we're going into each country, we're staffing them entirely with nationals of those countries.

GZ: Have you been adding more people in Europe, I mean, at a higher rate than you would in the U.S. or, or, uh...

AG: We were last year, and...

GZ: (Interrupting). You were last year, okay, and you've got to the point you wanted.

JW: And that saw a virtual double in sales in several of those markets last year.

GZ: Did'ya? Yeah, I mean, I mean, I mean, Germany in particular, I mean...

CA: Germany, Italy...

JW: Spain.

CA: Spain.

GZ: Doubled. Last year.

CA: In local currency terms.

JW: Just about.

GZ: Well, with dollar... . Locally doubled.

CA: In local currency. (Laughs.) Sorry, still all the caveats of (unintelligible).

AG: But still again, last year, last year, what I'd like to point out...

GZ: (Interrupting). Are you talking about the calendar year, or you're tellin' me 'bout, or the fiscal year...

CA: Fiscal. We're a January.

GZ: Talking about the fiscal year. Okay, okay. Your fiscal year ends January 31st, so, so it's roughly, it's roughly, it's roughly the year 91 we're talking about when you say it doubled. Okay.

AG: But last year, going through that restructuring, had an impact on our profitability, because we believed it was something we needed to do to expand that market and help revenues. That did, in fact, happen and we got the benefit of that this year. So, you know, that's part of the reorganisation that's...

JW: And we're now doing that in the Far East and we've reorganised the United States--the Americas--Malcolm's division, on that model. So, we now have a clear division of the company in the product related activities which the business unit managers like Ruth are responsible for and the geography related sales/customer related activities which are organised in Europe, Americas, and Far East. So we have a much more manageable structure in terms of what the CEO sees, in terms of who's responsible for each territory--who's responsible for each product. In each one of those heads, has essentially complete discretion to run their territory or their business area within budget.

GZ: Okay, okay. Uhhm, okay, uhh, let me hop around on a couple of things because, uh, I'm (cough--unintelligible), the, the whole issue of, of AutoCAD's pricing uh, which was, uh, uh discussed some in your memo John, and I, and I, don't know where that, that stands but, but have you, have you, uh, taken steps to, ah, I, ah, to, to, uh, respond in some way to, to, to, your, your, your, your concern that maybe, maybe it's priced too, too high or the premium is a little too much of a good thing, or, or...

JW: I don't believe it's priced too high. I don't believe I said that. Again, I come back to my statement that there is a difference between a retail product and a professional product that's a lot more than just the price. If you look at the half million CAD systems we've sold at $600...

GZ: (Interrupting). What you did say was, ``It would seem wise to revisit the question of AutoCAD's price and ask whether it is consonant with the pricing of software products which will maintain and expand their leadership in the 1990's.'' So, did you revisit the question and what, what did you come to the conclusion...

JW: We did, and we found that AutoCAD was encountering no price pressure whatsoever in the market. In fact, in Japan we sell AutoCAD for more than twice the U.S. price, in Germany we sell it for close...

GZ: (Interrupting). Hah, hah. Well, they deserve it,  uh, but, uh...

JW: Excuse me, let me finish, because I'm about to say something that's rather important. In Germany we sell it for close to twice the U.S. price, in India we sell it for a fraction of the U.S. price, in the Soviet Union we sell it for 25,000 roubles, whatever that's worth today--we price the product based on where it has to be in that market based on what engineers are paid in those markets, based on what companies can afford in order to carry out our market share strategy. In the United States we are not seeing competitive products take away sales from AutoCAD based on price, so in that environment there is no reason at this point to change the pricing of AutoCAD.

GZ: Okay, okay. Uh, the, the, another thing you mentioned in there that, that sort of relates to, to pricing and, and, uh, I wanted to ask 'ya about was, was the, the uh, the nightmare scenario, of Microsoft, uh coming up with, uh, I think a nicely named product, ``Windows Engineer,'' uh, and, and, as you, you know, within a share, within a year their market share exceeded fifty percent, I, I think, that is a nightmare scenario, I, I don't think Microsoft could, could make anything go off that well, but, but do you have any sense that someone, maybe, that some other company, whether it's Microsoft or, or other big company could, I mean, actually has that intention to jump into this market?

JW: I know of one big company that does. That's us. And in March we're shipping AutoCAD for Windows at a $99 premium to all   of our installed base and we intend to have a lot more than 50% market share by the end of this year.

GZ: All right, but is there any, you know, is, has Microsoft, I mean, has Bill, Bill actually admired your memo, as I know you, you must know and, and did he take your advice? Did Phillippe Kahn take your advice. Did Jim Manzi take your advice?

JW: As far as I can tell, in Bill's memo he said they weren't interested in markets like that. I think that the wise people in this industry such as Phillippe and Bill and Jim Manzi recognise that there are difference between retail mass market products and professional products and that one of the things that they would have to do is not simply put the product in Egghead, but rather build the kind of dealer/distribution/support channel that Autodesk has spent ten years building. That's the way professional products are sold and people who have taken the retail tack... we've had retail competitors in lots of markets including companies such as IBM over the last ten years, and they've never been able to crack the distribution channel. We're not just talking about CAD software--we're talking about the other things these professionals buy like drafting tables, like high-end plotters, are typically sold through a dealer environment. And we have, at this moment, complete control of that dealer environment.

GZ: So you don't have any sense, that there's anything brewing then...

JW: I do not.

GZ: Okay, okay.

MD: There are always things brewing. There are any number of competitors out there that would love to dethrone us. I don't think there's anything brewing in terms of a competitive threat that's...

GZ: (Interrupting). Uh, uh, from someone the size of a Microsoft, or a Borland, or uh...

AG: Actually, in the history of the company, the nightmare scenario is the one where we're competing against IBM, Computervision, McDonnell-Douglas, and everyone else in '84-'85, I think at that time, if you wanted to lose sleep, that's the...

GZ: (Interrupting). Yeah, those are the people to worry about, yeah.

AG: And they all came in with very competitive products. I remember Crossroads by McDonnell-Douglas looked as though it was aimed right at our heart but, once again, the whole issue revolved around the distribution of the product.

JW: And also, the customers invested in it. If you had put the entire asset base of your architectural practice, or the drawing base of your factory into AutoCAD, and you've trained all your people on AutoCAD, you have to have a compelling reason, and I mean, let's face it, this is a world in which there's such a thing as software piracy, and the fact that people will pay $3500 for another copy of AutoCAD versus just stealing one indicates that the channel is delivering productivity to them--that it's worth paying for.

GZ: Given that, were, were you engaging in some hyperbole then, uh, in this section of the memo, trying to, uh, maybe, I don't know, what, just spark concern, where maybe there wasn't, there wasn't, uh, or spark some sense of urgency, is that, what's the idea to be, sort of, exaggerate the straits the company was in?

JW: Ahhhh, no, I was not attempting to exaggerate the straits the company was in, I was attempting, in titling it ``The Nightmare Scenario'' to describe a situation the company could be in if the company did not have a strong, well-positioned Windows product in both the retail market and the professional market. We will be launching both the retail product and the professional product this year. The retail product--the first retail product will be Sketch for Windows, and that will be shipped in second   quarter.

GZ: And that's the first Windows product the company will have shipped?

JW: It will actually be the second because AutoCAD will be the first.

GZ: And when is AutoCAD coming...

RC: March 1st.

GZ: March first, okay, yeah my question at the beginning about this late, late for Windows, I mean, I mean clearly, ah, ah, of the, of the major category leaders, uh, as far as I can tell, you're the, you're the, you're the, uh last to come in with a Windows product and that, that, that, that's the only sense in which I meant it was late. You might not be late according into your own internal compass, but, but, uh, has it it cost 'ya much to be, to, to be coming out in March as opposed to, uh, six months ago or...

JW: Well, first of all, in terms of category leaders, it will be the first professional CAD systems to come out on Windows...

GZ: (Interrupting). Okay, but I meant, you're the leader in that. I'm comparing you with other, with other category leaders.

JW: In terms of cost today, Windows, 16 bit Windows, Windows 3.0-3.1 is not a competitive platform for CAD. It is substantially slower than a raw '386 machine, and not until...

GZ: (Interrupting). Just running, running the, running, the DOS version...

JW: Running the DOS version which runs in 32 bit mode.

GZ: Okay, okay.

JW: When Windows NT or 32 bit Windows comes out, then Windows will be a competitive platform. At this point, until that happens, professional CAD under Windows will be a relatively painful thing to do. Our goal is to get the product into the market. And there are people who can benefit from the inter-application operability, cut and paste...

GZ: (Interrupting). You, you don't see a, a wholesale shift to your Windows products...

JW: We expect a wholesale shift to the 16 bit product which will then turn into a flood when 32 bit Windows comes out. We will have a 32 bit Windows product at the same time 32 bit Windows becomes generally available. That's the point that Windows will become a workstation platform comparable to Sun or the new Macintosh with System 7. Everybody has to wait for that, and getting there before that happens is really getting there early, in a sense.

GZ: Uh, so, lemme say something on this general subject of Windows cause I, cause I cover Microsoft and, probably pretty intensively and, and I've been around the block in '88 and '89, in particular, late '88--uh, late, late, late '89 and early '90, about, uh, Windows and its future and what it meant for peoples', uh, application strategies and, uh, I mean, uh, how would you guys characterise yourselves... were you, were you, wait-and-see, doubters, uh, were you ju, on the bit, Windows bandwagon but, like you said, for technical reasons it didn't pay to, uh, really push it, uh, what, what was...

JW: We were, really there, depending on how you look at it, we were there before everybody else, but in a different way. We were one of the very first on the OS/2 bandwagon...

GZ: (Interrupts, snorting derisively.)

JW: Let me finish--let me finish--let me finish. If you'd like me to... . Windows and OS/2 are, from an application programmer's standpoint, essentially the same system. You change some of the function calls, you change some of the guts, but in fact they are basically the same. So, at the time... Windows was not a viable platform for CAD, I would say not for anything until Windows 3.0. Okay, so we were up on OS/2 1.0 long before Windows 3.0 came along. So we had the API calls, we had the dialogue box interface, we'd squeezed all of that into the memory model, all of which come directly over to Windows.

GZ: Okay, so you were able to recoup the investment in that OS/2 work.

JW: We were, in fact, running under Windows 3.0 a couple of weeks after we got the System Development Kit. Going from that point to having something that performs, is professionally packaged, has the appropriate documentation and help file--that takes time. But we didn't lose any of our investment is OS/2, and it got us on Windows much sooner than we would have been there otherwise.

GZ: Okay, well when did 'ya, when did you, uh, I mean th, th, there are points, points in here where you reflect about, you know, can we, can we throw more, you know, get, be more intense about this, did, was there a point in time when you decided, yeah, we've just gotta ratchet up the energy level that we have behind the Windows AutoCAD project? When, when would that have been?

RC: As soon as we saw that it was going to be a commercially viable product, and that it was going to bring some...

GZ: (Interrupting). So sometime soon after May, of, of 90 then, uh...

JW: Really before that. We'd shifted most of our people onto Windows well before Information Letter 14.

RC: Well before that.

GZ: Ok, okay.

AG: Oh, that was '91, did you say '90?

GZ: Uh, when was Windows 3.0 introduced? May of 90, May of 90?

JW: 90, yeah.

GZ: Yeah, that's what I'm talkin' about, so it's around May of '90, I'm askin' 'ya whether prior to the introduction of 3.0 did ya do all this shifting of resources or was it, was it, after, yeah, cause this, this, this memo is a, is a whole eleven months after Windows shipped and by then it was, I'd say...

RC: We already had the resources working on...

AG: We were already working on...

GZ: (Interrupting). Yeah, I'm asking you when, though, I mean was it after May of '90 that you...

JW: (Interrupting). Well, Ruth wasn't in charge of that at the time. I was in the middle of the product at the time, so perhaps I should give you the facts. We were working with the 3.0 SDK before 3.0 ever shipped. We were a Windows developer receiving the SDK and putting the product on there as soon as anybody else...

GZ: (Interrupting). And was there a point in time where you decided, hey, let's really throw a lot more resources behind getting this Windows product done?

JW: Yes, and that--I don't recall the precise month--the month that the whole OS/2 blowup happened, when we realised that nobody...

GZ: (Interrupting). Oh, with IBM, okay, so January, so so January 91.

JW: No, no. That was some time earlier that it was clear that OS/2 2.0 wasn't going to come along...

GZ: (Interrupting). Oh, okay. All right, you're talk, okay, all right, all right, I thought, you, mid, mid, '90, okay.

JW: We work very closely with Microsoft. And what we were hearing from Microsoft during this entire period of time was that OS/2 was the engineering platform of choice. And it only became clear in mid-90 that it wasn't going to be, and that...

GZ: (Interrupting). But didn't it become clear to 'ya in mid-'90, just a few months after Windows shipped, then, you're saying. That's, that's mid-'90, I mean, May...

JW: Is this a Congressional investigation?

GZ: I'm just, it's, it's important, I'm just, it's important that I get some sense of accuracy about when it was.

JW: I don't spend all of my time writing down logs of what of what happened...

GZ: (Interrupting). Well, could somebody check on that, uh, uh, because, because...

JW: I don't understand why this is important. We were working... we were, as we always have, on every potential platform that may be a contender to be on the engineer's desk. And that means we were working on OS/2 1.0, the 2.0 prereleases, the Windows 3.0 SDK, all at the same time. In terms of the point that we said, ``Look, OS/2 just isn't going to make it in the near future, let's move all those people over to Windows and stop working on OS/2,'' I don't recall what month that was, and I don't think that's...

GZ: (Interrupting). Well, all, all I'm saying is that in April of '91 you said ``We have to revisit the level of support we're planning for Windows'' and prior to that, page 13 you say, and it's, this is quite true, ``this makes getting caught out without a Windows version of your program just about the worst possible thing that can happen to a DOS application vendor these days.'' That's true, and 'ya talked about how the, uh, ``one central and virtually unquestioned tenet of Autodesk's strategy has been platform independence'' and I thought you made some, um, astute, uh, analysis of the, of the problem with that and you said, ``we have to revisit the level of support we're planning for Windows.'' So in April of '91 there's some, there's some sense here that, that (guttural) there, there wasn't enough support for, for, for Windows. Uh, that's, that's the only, that's the only thing that, that the English seems to indicate here.

JW: There is? There is? I...

GZ: (Continuing, ignoring attempt to reply.) ``A similar failure to comply with the ground rules for Windows applications may hurt us severely...

JW: (Interrupting). Yes...

GZ: (Continuing, ignoring attempt to reply.) ``and every week that passes without our thinking about how to address this problem adds to the danger.'' So it's clear that there was some danger in April of '91 that you weren't giving Windows enough attention.

JW: There is some ``danger'' in February of 1992 that we are not giving Silicon Graphics, or Hewlett-Packard, or any other contender...

GZ: (Interrupting). (Condescendingly.) Well, if you were exaggerating there, you can, you can tell me, you can say, ``I just was exaggerating.''

JW: Are you cross--examining me, or would you like me to answer in...

GZ: (Interrupting). (Condescendingly, with a big grin.) You can perceive my questions in any way you want. I'm just trying to, to use the materials at hand here.

JW: Sir, I would answer your questions a lot more if you would listen to my answers and let me finish and not interrupt every answer that I give and...

GZ: (Interrupting). If we had, eight, or ten, or three days, yeah, you know, but we have a couple hours, and we have to move the thing along. I'm sorry about that, but it's not me who put the time constraints on it.

JW: It's you who were late. (Pause.) Let's go on then. I think, in...

GZ: (Interrupting). But that's the question, though, the question is, is...

JW: (Interrupting). I have felt, ever since it became clear to me that OS/2 was not going to become the platform of choice, that there was a great urgency in getting onto Windows, because at that point there was no other possible contender on the horizon unless IBM suddenly came back with an OS/2, as now they may be, but that in any case Windows was going to be the first platform after DOS that dominated the desktop of our prospects. At that point, and at the point that I wrote that I believed that 32-bit Windows was much sooner to hit the market than it now is. I was talking about 32-bit Windows there, and I expected at that point 32-bit Windows would be shipping before the end of the year. If 32-bit Windows is a '93 project, I feel much less urgency than I...

GZ: Okay, okay, all right, fair enough, that explains, that's, that's, that's, a good explanation for it, uh, I, I, I mean the terminology and the shorthand often, prevents us from, you know...

JW: Well recognise, that memo was not written for you, it was written for people within Autodesk that understand...

GZ: (Interrupting). (Shouts.) Oh, I know, I, this is why I'm asking you questions about it. Because I'm tryin' to understand what you really meant. If I didn't really, if I didn't care about that, I, I would just take the words at the face value and move on. But I do care about trying to understand what you, what you meant in this, in a, in a, in a, in a passages. Uh, okay, all right. (Long pause.) One, one of, one of the things about the, about the, uh, analysts, and I talked to some analysts after the meet, I may talk to 'em all, but after a couple you got the flavour of it, uh, um, (guttural) hah, one, one of the things that was funny is that, I mean, here you try to explain to them, hey, we're trying to tell you something that we think's better for the long term of the company, you know, try to focus on that, don't try to get caught up in, you know, you have a tendency to be short-term, course the reaction was totally short term--people, people just felt, you know, ehhhh, the short term looked terrible to them, they're very, uhhh, I would say, ah, people were very disappointed, I mean, in, from the standpoint that, that, uh, uh, they didn't understand, they, they, they, they really didn't hear you, in, in that sense and, and, and I just, I, I, I, I think that, that, uh, you, you guys strike me as people I would, stick, stick to your guns and, and, and, and keep your eye on the ball but, but how do you, how do you manage these expectations of Wall Street and how, uh, is there, I mean, are you imper, can you be impervious to their wrath, or their dissatisfaction, I mean, is there just a way to say, well we're just going to put the blinders on and we're not going to care what they're going to say and just do our game plan, I mean...

CA: (Interrupting). I think that's what we've done, and we certainly haven't changed our strategy in the last week, coming back from the meeting. So, I think that...

GZ: (Interrupting). You, you didn't feel, you didn't all go, get a stiff drink after that meeting, or something, uh?

JW: I believe that if you talk to the investors you find many of the investors far more sophisticated to what high-tech companies have to do in times of recession than many of the analysts are.

GZ: Yeah, yeah, well that's, that's, that's, that's certainly, uh, do you have, what, big institutional, are you referring to big institutional investors.

CA: Yes. And we met, that evening, with a number of institutional investors as well as the entire next day.

GZ: (Interrupting). So separately...

JW: And in Boston as well as New York.

CA: We went to Boston on Friday.

GZ: And you talked with representatives from these, these are funds, some funds or another, uh...

CA: I think we calculated that within 24 hours of the meeting we had talked to something close to 50% of our shareholders.

GZ: Really?

CA: Face to face.

GZ: Wow. And the reaction from those guys was...

CA: For the most part very supportive.

GZ: Okay, cause the, the, uh, quite a few of them are long-term holders, long-term holders of, of your shares. Okay, okay, uh...

JW: And they didn't all necessary buy in at the top, either.

GZ: Hah, hah, hah, hah! Let's hope not! Right, (unintelligible), but, um, okay, so, so you feel that, uh, you've been able to kind of poll some of these folks and, and you feel that you have, maybe the analysts have been queasy about all this but, but the institutional investors are, are, understand what you're trying to, uh...

CA: I don't know if poll is the right word. It isn't that we go out and ask for their advice; we've had the opportunity in a smaller group...

GZ: (Interrupting). No, I meant, I meant you told them after, you told them what you were doing, you, you got their, you took their pulse, yeah?

CA: Right. And in a small group we were able to, you know, continue to address their concerns.

JW: And I don't believe it's accurate to characterise all the analysts as negative. I've read a lot of the analysts' reports and it's one thing to say ``we're worried about the next quarter of the next year'' but many of the analysts do focus on the market share, on the strategy of the company, on the fact that we actually gained market share last year, and we're well positioned in this. I think the analyst is really serving two communities. There's what's going to happen next quarter vs. what's going to happen 12 months, 24 months out.

GZ: Yeah, no, that's true, you're right, yeah, you're right. Uh, one concen that came up with them was, was about this leadership question uh, and maybe we can, you know, I mean, is, is, who's leading the company and there's a concern about the, the, uh, interim status of, of, of John and, and, and, and, uh   Volker and, and concern about who your replacement will be and, uh, what, uh, what, what, what can we, uh, can we, what, what can we expect with regards to, to that, uh...

AG: Well, I think as far as, you know, if there's any... and once again going back and quoting another, another newspaper, you know, you, which said ``and we have the three lame ducks, Green, Walker, and Kleinn,'' I would say, if you look at what has happened in the company during the last few months, there's probably more activity coming out of this company than there has been for quite some time. So I would hardly consider what is happening the strategy of a group of lame ducks. At this point, once again, I'm the CEO of the company, Volker came over here in the newly-created position of Chief Operating Officer and, to be quite frank, that's a position I should have created about a year ago. Believe me, that certainly...

GZ: (Interrupting). With him... with him in it, I mean, or, or, or, just, but just a position...

AG: Not necessarily with him in it, but, I mean, creating that position with someone in there. I mean, the amount of stress that has relieved just in the period of time he's been here has certainly made a...

GZ: (Interrupting). Does it make you want to stay?

AG: Well, I'm not going away--I'm not disappearing. I'm staying as Chairman of the company but, you know, I've been doing this for quite some time and, in fact, I've been talking about for the last two years of getting out of this on a day-to-day basis. If you want to imply anything from Information Letter 14, it probably prolonged my not getting out of here by that period of time until I felt that the company was...

JW: (Interrupting). Of the three lame ducks, Al is continuing to hold his position of Chairman for the foreseeable future, Volker is continuing to be Vice President of European Operations, which is the job that he wants, and I'm continuing to work on software development. So after we hire a new CEO, everybody will remain in a rôle that they currently have, interim changes notwithstanding.

GZ: Will you also have a new COO then, as well?

AG: That's really up to the CEO, but what I would do is when he comes in, I would highly recommend it to him. Before the reorganisation--I forget how many direct reports I had, but it was in the twenties. After the reorganisation, it only went down to about 18.

GZ: (Interrupting). In the twenties? You had direct reports in the twenties?

AG: That's the way the company evolved. Well, even after the reorganisation it only got down to about 18. Once you put a COO in there, which takes responsibility for the business units, and then essentially then you have...

GZ: (Interrupting). Okay, all the business units report to, to...

AG: ... to the COO, and then you have essentially the officers of the company reporting to the CEO. It looks very much like a structure should... I don't know what it should look like--but it feels more like a structure should feel like, from this end.

CA: Let me just say one more thing to that, and that is that, as far as the management team goes, the rest of us have been here anywhere from, if you look at some of our general managers are brand new, to myself who's been with the company for seven years. And so, even though there is some transition in some of those positions, I'm not going anywhere and I think the rest of the management team...

GZ: (Interrupting). There's a lot of stability.

JW: And all of our business unit managers, except those that have recently joined, were promoted from within, within the company. So there hasn't really been a tremendous shift in people; we just have a structure that works a lot better in terms of running a company of this size. We grew from almost from $50 million to $250 million without ever shuffling around the reorganisation, and it just accretes to a point where you have too many people to one person for them to be able to effectively manage.

GZ: Okay. Do, do you expect the CEO to be from within or without, or, uh...

AG: We have a search firm who's analysing this--they're looking on the outside--they came up with a list of some very qualified people in the industry that they thought they should contact. Once again, they've broken that down to a short list; they're now contacting those people. There's some good talent out there. So we will interview and see what happens from there, but right now we're trying to find the best possible candidate from a world-wide search.

GZ: Uhhh do, do you have any kind of time frame, or...

AG: Just based on a gut feel of the process so far, it looks as though probably somewhere in the, I would imagine, April-ish time frame, probably in a sense.

GZ: So that's not that far away, that we're talking about, okay. What uh, I mean, what, what advice will you give to someone about, um, the proper relationship to form with John Walker?

AG: (Long pause.) To a great degree, a person who comes in will probably have had relationships somewhat like that in other companies. I mean, in a lot of companies you have situations where you have founders and you have CEO's that come in that are not founders. If you look at the relationship between John and I--I've known John for eight years. I consider the relationship to be a good one. I can think of a lot of other relationships with other founders of other companies that would have been quite painful. So, to a great degree, I would expect that the person coming should have those interpersonal skills already in place. I will be on as Chairman of the Board and whatever coaching or assistance I can give that person I certainly will, but to a great degree I would hope they would possess those skills when they come into the company.

JW: And if I can talk about the other side of that relationship... . It's a little difficult to talk about a personal relationship with somebody that you haven't met. I will certainly say to the new CEO what I've said to Al on many occasions: I'm not interested in running this company. I, as a shareholder, am interested in this company being very successful and fulfilling its potential. If, I think, any time in the last six years, since Al had become president, he had said, ``John, you're not helping. Just be a shareholder,'' I would have said, ``That's fine with me. If you'd like me just to sit home and program, I'll sit home and program; if you'd like me to just be a shareholder, I'll be a shareholder.'' I have no interest whatsoever in pulling strings or being a hidden power. I have an interest in developing products that I believe are very important for this company. That's what I want to do, and nothing will make me happier than getting back on the plane to Switzerland and going off and disappearing for three years developing new products for this company, and I hope that, when the new CEO comes in and takes charge that he will have no need to interact with with me other than calling me on the phone every now and then or seeing demos of the new products I develop. I had that relationship with Al from '86...

GZ: (Interrupting). Is that, was the, that was that the relationship you had with Al from, what, '86 through, or, in...

JW: Through this week. I mean, we would speak, about two or three times a year for a couple of hours...

GZ: (Interrupting). On the phone, on the tel, tel, telephone?

JW: No, in person.

GZ: Person.

JW: And everything went just fine in that regard. I don't believe there really was any great conflict. It's not a conflict issue. It's an issue of a company that needed to change its fundamental mindset, from top to bottom. Not Al's mindset, not Carolyn's mindset, not Malcolm's mindset, but everybody all over the company. And that's a process that companies have to every now and then if they want to survive when the rules are changing.

GZ: (Interrupting). Agreed.

JW: And that's the process that I'm hoping to contribute to here. I'm hoping to get it done as soon as possible.

GZ: Has it been painful for, for the organisation to go through this?

AG: In some parts, I would imagine there was pain associated with it, but the opposite side of that coin is just denying it and doing nothing about, and losing your competitive edge would be even more painful. So I think everybody realised it. It's one of those things that, ``Oh Damn, I hate it when he's right,'' but the other option is totally to ignore it and I think everybody in the company looked at this and said, ``Yes, there are things that need to be done.'' And rather than just denying that the letter was ever written or denying that we were in that position, everybody pulled together and I think the company is in a lot stronger position for it. And, in fact, if you want to look at being on the receiving end of that, I think it would Damn healthy for a lot of other companies in the United States to go through the same self-analysis.

GZ: I, I, I, you can make a long list, yeah.

JW: I have to say, ten years ago I held this meeting in my     living room and 16 people came on a Saturday. Well, last weekend we held a meeting in the Marin Civic Centre, voluntary meeting, Saturday afternoon... we filled the Civic Centre with employees of the company...

GZ: Was that to, explain, uh...

JW: It was to explain what we going to try to accomplish in the next ten years...

GZ: This was coincident with the analysts' meetings? Is that, is that...

JW: Right after we got back from the analysts' meeting.

CA: But it was also...

AG: (Interrupting). With the beginning of the second decade of the company.

GZ: Well was it the tenth anniversary, this was the actual tenth anniversary?

CA: A few days after.

GZ: Oh wow. So it was kind of a bittersweet party, or, or, (chuckles)...

JW: I wouldn't describe it as bittersweet at all. I mean, the first thing there were some cynics saying that we might get turnout of fifty people, and we literally filled the Civic Centre.

GZ: Which was, what, several thousand?

CA: We don't have that many people.

GZ: Sixteen hundred...

JW: Six to eight hundred, we only have seven hundred employees in the U.S. But we had essentially complete turn--out of all Bay Area employees voluntarily came to this thing, and I think that really indicates the spirit. I mean, this was a voluntary meeting, primarily to hear the senior management and the business unit management describe what we're going to try to accomplish in the next year and the next ten, and everybody showed up, startling some people who didn't think they would.

GZ: Did you give an address?

JW: Yes.

GZ: So, and you did and, and they all, okay, so, so you made presentations.

JW: And we demoed all the new products and talked about them.

RC: And it was two o'clock on a sunny Saturday afternoon in Marin...

GZ: (Interrupting). When you started, or, yeah. When did it, when did it end?

LG: Five, five-thirty.

GZ: Five, five, that's fairly efficient in these, hah, hah, they are talking...

??: We got kicked out.

GZ: You got kicked out. (Laughter.) Yeah, okay, okay. Well, I mean do you see, I mean, there's obviously been a therapeutic, um, effect from this Information Letter and, as you mentioned, I guess there was no, no 13 but there were twelve before that. Will, will there be a 15 at some point?

JW: Well, there was no 9, actually.

GZ: There was no 9, either?

JW: There was a 12.

GZ: There was a 12...

JW: There was a 12 and 13, but I just missed 9, and...

GZ: Oh, oh, okay, all right, sorry then.

JW: If you read my book, The Autodesk File, there's a story about one where 9 disappeared.

GZ: Oh, okay.

JW: No, the... I, I will write one if I feel the need. Right now, I think that Information Letter 14 stands, in my opinion, as an accurate portrayal of the transitions we're going through right now and probably--I don't see at this point, unless some huge surprise happens like Microsoft withdraws Windows or something, that the competitive environment is going to change very much. It didn't change very much between '82 and '90, really, in terms of our market. And, I don't expect to see any kind of really radical shifts beyond the kinds that I discussed there. If I do, I'll certainly bring them to the attention of people. I hope that as Autodesk becomes a more reactive, rapidly moving, rapid time to market company--the changes we've made over the last year are all to that end--that we will be able to adapt more smoothly to the changes in the competitive environment, rather than with a big lurch as was necessary this time.

GZ: But you, you, but you see, you, you, your, yourself returning to, the, the programming work you want and, and in terms of the follow-through on the implementation of all these things, you're, won't be involved in that.

JW: I don't see any need to be. I believe that we have strong managers who, with the support of a CEO that understands the opportunity we have, can bring the products to market. I'm not an expert in developing marketing plans or putting together roll-out plans or in public relations. We have people who are, and they're the ones who have to do that. If I'm an expert at anything, it's finding opportunities that we should be getting into that are going to pay off in four or five years out, and that's something that's best done with a very small group of people with very limited funds, and then brought to the attention of the company when that opportunity begins to manifest itself.

GZ: What, what, what are some of the programming accomplishments that you're, you're most proud of, or you think had the biggest benefit for Autodesk in, you know, over, uh, in the second half of the, of the Eighties rather than the whole course of the company, but what, what are some of the things that in recent times that, you, you felt had the, had the...

JW: I think making the prototype of AME, demonstrating that we       could integrate solid modeling with AutoCAD, is the one that springs to mind as the most important for the company. That's really what let us position ourselves as something a lot different from a drafting company. Nobody else had ever, essentially, included solid modeling as an integral part of a CAD system.

GZ: When did that happen?

JW: The prototype was completed on July 20th, 1989.

GZ: Okay. And and, then, uh, is, is that typical, I mean, and then, then, some, cause someone has told me this story, then you, did, did you, did you hand, that, do you then hand that off to, uh...

JW: Yeah, I typically hand that prototype off to a product division... well, the prototype is presented. People say ``Is this a worthwhile thing to do?'' That happened to be one that was accepted very quickly. I've done others that never have been accepted, and that's fine too. But then a software development process begins. That was a complicated one because we were selling a stand-alone product as a solid modeler at the time at at a $5000 price point, and I was proposing integrating it with AutoCAD and selling it for $500. So that's not the kind of decision you just throw up the coin and make instantly, but the decision was made to do that. A major software development effort that lasted the better part of a year began, and involved close to a dozen people...

GZ: (Interrupting). Were you involved in that?

JW: No. I was not involved in that. I was off...

GZ: (Interrupting). So you handed off that prototype and then...

JW: (Interrupting). And went on to work on the next project.

GZ: Okay. Now, so, is that the, your typical style, to do, to to, bring a, a, a, a, a, a, a, a program to that point where you can then hand it off to a development team?

JW: No, I have also was...

GZ: (Interrupting). Okay. You will finish a product, too...

JW: I did the product after that, CA Lab, entirely myself with     the help of one other person, all the way to shipment.

GZ: Oh, okay.

JW: I did...

GZ: (Interrupting). Wait, I'm, I'm, I'm sorry, I've got to catch up with you, you. (Pause.) CA Lab was done after, or before AME.

JW: After AME.

GZ: After AME. And when did you finish that one, do you recall?

JW: I don't recall it, I'm sorry.

GZ: That would'a been '91, though, or, '90, or...

JW: That was, probably late '89.

GZ: Oh late '89, oh, okay, okay, so shortly, on the heels of...

RC: (Interrupting). Release 12.

JW: Well then, in another mode, I was involved in the down and dirty debugging of Release 11. I often jump into debugging the final phase of AutoCAD and proofreading manuals because I've written lots of pieces of it and I have knowledge that kind of spreads over the product. In general, if Ruth or somebody says, ``John, we need you to help on this,'' and convinces me that's the best way I cen benefit the company, I'll jump in and do it.

GZ: How do you usually broach the subject with him, E-mail, or, uh...

RC: E-mail, or just ask.

GZ: Just, what, call him up and ask him, I mean...

RC: Just ask. You can always find him by E-mail.

GZ: Yeah, yeah. Uh, okay, okay, so, so, you, you, you got a variety of experiences here between just doing a, doing a product like CA Lab from, from start to finish, and...

JW: With one other person.

GZ: With one other person, okay. Was that person in Switzerland with you, or, or...

JW: No, no, I was here in California.

GZ: Oh, you were in California at the time for CA Lab? Oh, okay. When did you move?

JW: May of last year.

GZ: May of last year, okay. Sorry. Uh, well so you moved shortly after, after, after uh this memo.

JW: Yeah. I had announced that I was going to move before the end of 1990...

GZ: (Interrupting). Oh, okay. And prior to that, prior to that you were, you were living here. You were living in, living in California. Okay, uh so that's why you saw more of him, then.

JW: No, I would not say saw more of me. My communication was primarily E-mail or telephone...

GZ: (Interrupting). Even when you lived here.

JW: ... even when I was living in Muir Beach. I think I actually, for the last 6 months, I've gotten to the U.S. more than I got from Sausalito from Muir Beach in '89.

GZ: (Laughs.) Um, so, so even something like debugging, now what, uh, AutoCAD 12, when was that rel-, that was, that was the, that's the current release of AutoCAD.

RC: That, we're working on that will be shipped in the second quarter of this year.

GZ: And you, you actually worked on debugging of, of that, that...

RC: John...

JW: Debugging and development of some pieces of it, yes.

RC: But he has a major feature that, that John implemented within this release.

JW: Well, and I think in terms of continuity, I was working on that feature before I got on the plane to Switzerland. I got off the plane and went on working on it and submitted it from Switzerland. So in terms of what I was doing, moving to Switzerland made absolutely no difference at all.

GZ: Is there, is there anything cumbersome about the physical separation?

RC: No.

JW: We've been that way since '82. Many of our programmers still work from home...

GZ: (Interrupting). Oh really...

JW: ... and we're all linked together by fast data links and E-mail and, in fact, in Switzerland I'm a faster data link than I was in Muir Beach. So...

GZ: You, it, does it actually come faster?

JW: It's...

GZ: (Interrupting). It's close.

JW: Well, it was 9600 baud, now it's 56 kb, so...

GZ: That's, that's, hah, uh. And you work from home?

JW: Often, although I work more out of the office...

GZ: (Interrupting). Oh there is an office, though? There is an office there. Um... (Pause.)

JW: It's not just a technical centre. We're actually going to be doing our manufacturing and shipping from there. We're centralising...

GZ: (Interrupting). This is--how do you pronounce the name of the town?

JW: The canton is Neuchâtel. We're in the town of Marin, M-A-R-I-N.

GZ: M-A-R-I-N-that couldn't have been a coincidence.

JW: It was entirely a coincidence.

GZ: So, so a lot of your programmers do, do work at home, uh, so, uh, within the AutoCAD project, uh, the different releases, you, you, you, now you have a, an R&D manager that reports to you, right, or...

RC: I have a counterpart who's a Chief Technical Officer.

GZ: Ah, okay, that's a chief, okay, so the chief technical officer, he's probably got the AutoCAD project, uh, feature list, broken up into different groups, and then each group member reports to 'em or something. They must get together and see each other, but the members of the, of those groups, some of them may be working at home.

JW: Yeah. They'll typically come in once a week, or...

GZ: Okay, okay. Okay, a lot of people talk, I mean, a lot of people talk about this place having, you know, this culture of the programmer, and the, I mean, whu, how does that evidence itself, just, just in, in, uh, I mean, I, some people said to me they let you bring your dog to work, uh, I, I, I, I don't exactly consider that the litmus test of a, a great employer, but, uh...

RC: The AutoCAD business unit's finance manager brings his dog and parrot to work, so I don't think it's unique to programmers.

CA: Not to mention the credit manager brings her dog to work.

JW: And that was the first dog.

CA: And she was the first dog. It started in accounting.

JW: In terms of the programmer culture, I've never understood this ``programmer culture'' per se, in the sense that within the first eight months of the company, essentially right after we started shipping our first product, we immediately had more people in marketing and sales that we had programming, and have ever since. In the mid-'80s, when we were so successful and nobody was writing stories about is, the word on the Street was that, well, we were a company with mediocre product and great marketing, and...

GZ: (Interrupting). (Laughs.)

JW: ... and that was the common slam that our competitors would throw against us, okay? And so, I mean, that we have always been a very aggressive marketing/sales/distribution company. We've built a dealer channel that didn't exist, and we control that channel, and it's a great asset of this company. You don't succeed at that if you have a mediocre product. You gotta have a good product. But if I look at this company, I don't see it as being unbalanced in those regards...

GZ: (Interrupting). Well, I wasn't suggesting it's unbalanced, but I'm just saying there seems to be a lot of, a fair amount, of, I mean, it's unusual for the kind of candid debate that you, you have had. I mean, you, you, you mentioned, you know, there are other companies, there certainly plenty of other companies that are ripe for it, more in the older industrial sectors of the economy, but, I mean, a lot of these companies are very hierarchical, I mean, you gotta remember, we don't just, uh, our readers just aren't in California, I mean, you know, you gotta, you know, when I had this conversation with you the first time on the phone, I, I tried to impress upon you that maybe you took it as a matter of course that you might have a candid discussion with John about, you know, how things were going, but in a lot of companies, it's considered very unusual, you know, the, the wisdom comes from the top and it goes down.

AG: But I think the unusual part of the company is that the type of--the reason that attracted the people here in the beginning was probably that structure...

GZ: (Interrupting). Well, that, that, that, I'm asking 'ya, I'm tryin' to...

CA: (Interrupting). Can I jump in on this?

GZ: Yeah.

CA: That's as much Al's style as it is John's. I mean, that's a credit to Al's management style and, I would guess, John, not putting words in your mouth when you were talking about Al earlier, it's exactly because Al doesn't come in and say ``I know everything and therefore you're going to do it my way,'' that the organisation has developed the way it has. And so that's as much Al's style, you know, as much as anything else.

JW: This isn't a matter of some, you know, California life style company or something like that. We do things that are effective and productive. And if a programmer works at home and works 16 hours a day--if he'd had to spend two hours commuting to the office, that's a productivity gain. If it weren't a productivity gain, we wouldn't do it that way. Many of the things that other companies are talking about--telecommuting, well, that's kind of exotic, I guess it's becoming pretty commonplace now--well we've been doing it since 1982. And it was tough in 1982... you know, like mailing floppy discs around, okay, but...

GZ: (Interrupting). Were you mailing floppy discs...

JW: We were mailing floppy discs.

GZ: Through the U.S. Postal Service, you're talking about...

JW: Through the U.S. Postal Service, that's right, that's right. We were mailing the AutoCAD source code around and we did that until, well '84 was when we got the first E-mail that worked.

GZ: Hah. That's funny... .

RC: Also, our programming staff has very good business sense. They will ask, ``Why do you want this particular functionality or this feature set in a product?,'' and what is the market case for it and are we, in fact--is this going to be the quote-unquote ``twenty-five million dollar feature.'' So, before they program, they're very. vary careful and clear about wanting to know what this is going to do to us and for us in the market place.

JW: And in terms of who we recruit, if you look at our employees throughout the company, our technical people are not, for the most part, mathematicians, super experts in R&D--many of them came out of AutoCAD dealer environments. Many of them were customers who started using...

GZ: (Interrupting). Your programmers...

JW: ... and, and became programmers, that's right...

GZ: (Interrupting). That's, that's unusual.

JW: So we've tried to bring people--and on the sales side at least as much--throughout the whole...

GZ: (Interrupting). Many, of your, your, many of your programmers come out of, come out of the user community or, the dealer community...

JW: That's right. Because we've encouraged our dealers to become software developers. Those developers develop products--there's 400 products that work with AutoCAD...

GZ: (Interrupting). How many programmers would you say ya' have at the company then, uh, I mean world, world wide, what would the world wide number be, I mean, we're talking 500, uh...

RC: No, no, no, no, no. Two fifty--three hundred.

GZ: Two fifty.

JW: No. It's about 150. 165 was the number I used to use last year, but that doesn't count some people overseas.

GZ: So less than 200.

RC: Less than 200 is accurate.

GZ: Huh. Whu, whu, are you, um, trained as uh, double-E or computer science or, uh...

JW: General engineering.

GZ: General engineering. What, you have a BA or, uh...

JW: BS.

GZ: Are advanced degrees common here, or...

JW: We have people with them; we have people without them.

GZ: Yeah. Okay. Hmmm. Uh.

RC: Common sense is probably more preferable.

GZ: Are you an engineer?

RC: No.

GZ: No. You're not. Okay. What's, what's your background?

RC: Eleven years with General Electric in manufacturing.

GZ: Uh huh. Back East?

RC: Back East--southern California.

GZ: When did you join?

RC: 1988.

GZ: Oh, eighty-eight, okay. Uh, did, have you over the last year or so increased the number of programmers you have in response to, is that, that was one of the things, that, that, that came up was the, the, the, need to put more resources into, into creating software, is that, have you, have you, is there anything specific there that about how many you've added or, or is it, uh...

RC: We've added about sixty people to the AutoCAD business unit and...

GZ: (Interrupting). Sixty programmers?

RC: No about half of them have been programmers.

GZ: In the past year, this is, or...

RC: In the past six months.

GZ: Okay, added thirty...

RC: (Interrupting). And if you know of any highly-qualified programmers, I'd love to talk to them.

GZ: Hah, hah. Why, you're still looking for more, huh.

RC: Yes, yes.

GZ: And now why have you done that?

RC: Because we felt that we really need to go back in and invest in the core technology and invest back into AutoCAD and the modeling extension and other sets of products that we know that we're going to be bringing to market over this year and next year.

GZ: Uh, okay, so when you say invest, then what, what you mean, you need to have more people working on the basic stuff...

RC: On the basic product, and on additional products sets that we plan to bring to market.

GZ: Okay, and so the effect will be, you'll have faster time to market plus richer products, or...

RC: Most definitely.

GZ: But both of those, is where you're going.

JW: And understand, when we talk about a one product company, the AutoCAD business unit can be a fifteen product company in five years all by itself, and many of those products can be generating revenue on the AutoCAD scale, in terms of going into vertical markets, addressing specific customer profiles. So we're diversifying both in the other business units and within the AutoCAD business unit and many of those additional people are working on new products within the AutoCAD business unit. One of which is announced and will be shipped in fourth quarter--the constraint manager.

GZ: Okay. (Long pause.)

LG: We're getting about to the end of our time, but one of the things that to an earlier question, I'm not sure if, (unintelligible), you were starting to talk about the market opportunity for Autodesk since early on, you know. Do you think you can elaborate on that?

GZ: Okay, sure.

JW: Well, I think there's kind of the, what I call the short-term, like two or three year opportunity and the long-term opportunity. The long-term opportunity is that this company can sell software into every part of the manufacturing process, of every product that is made over the next thirty years. And that's what we're working on--that is the opportunity. That is something that isn't going to go away this quarter or next quarter; that is something that none of the mainframe CAD companies that are currently addressing very, very small very, very expensive markets are targeting. That's something that even a retail drafting product that came out cannot address. The big picture is that around the year 2020 or 2030 there'll be 10 billion people on this planet, not 5 billion, and those 5 billion people will be using products which means that in the next 20 to 25 years, on this planet, we're going to manufacture as much stuff as has ever been manufactured up until now. And it's out goal to be participants in every part of that manufacturing process. That's what this company's trying to do, and that's not something that 'ya do next quarter or the quarter after, but it's something that each one of those products that comes out fills in a piece of that puzzle, so that in ten years you have a factory which is totally automated, from conceptual design to manufacturing, and each component of software in that chain is a component of software that comes from Autodesk--whether it's something we've written ourselves, or something we're selling, or something we've acquired the technology--that's not the point. The point is that we have a solution for the entire manufacturing process, for the entire architectural design process, for the facility management process, for the mapping process. Each one of those markets is an enormous market of which drafting is one little piece of the puzzle...

GZ: (Interrupting). Which is, which is, your, your core right now...

JW: Our core is drafting and that is the single most lucrative piece if everything stays the way it stays now. I do not believe that in 15 years there will be people running milling machines all over the world, the way there are now. That's going to become automated, and in the largest manufacturers it already has, but that's going to spread out throughout the entire economy around the world.

GZ: So you see a rôle for your software in that automation process...

JW: Without doubt. I don't see anybody else even working on it right now.

RC: And in different markets, too. Not just manufacturing. John's statement about facilities, about architectural, about geographic information systems, about mapping is really what we're all about.

GZ: Okay, okay. Well one thing that would be good for me is I'd, I'd like to be able to, to talk to, uh, some folks within, sort of, the greater Autodesk community like some dealers and some, uh, uh, either large or typical customers, uh, to get some sense as to how people put your products to work for them and also to, get a, with the dealers, to get just a better understanding of this dealer network and, and, uh, that should give me a little bit better idea as to, as to, uh, uh, the comp, you know, the company's viewed, uh, but, and then at the end of the thing, it'd be nice to know that there was somebody I can, I can call with some followup question about some of the things that I've learned so, so, uh, I'd, I'd appreciate it if some can, some people can make some more time on that but, uh, thanks for, uh, getting together on this thing, and uh, uh, it's, uh, I'm glad, uh, I was able to get you guys and it sounds like a very uh, interesting, interesting situation and, (sarcastically) huh, I'll try to find out, find out more, find more it.

RC: Thanks.

AG: Okay.

Exeunt omnes.