Good day, ladies and gentlemen, and welcome to the third quarter 2009 Autodesk Incorporated earnings conference call. (Operator Instructions) I would now like to turn the presentation over to Dave Gennarelli, Director of Investor Relations. Please proceed.

Thanks, Operator. Good afternoon. Thank you for joining our conference call to discuss our third quarter of fiscal 2009. With me today is Carl Bass, our Chief Executive Officer; and Sue Pirri, Vice President of Finance. Today’s conference call is being broadcast live via webcast. In addition, a replay of the call will be available by webcast at Autodesk.com/investor. During the course of this conference call, we will make forward-looking statements regarding future events and the future performance of the company, our guidance for the fourth quarter of fiscal 2009, the factors we used to estimate our guidance, our future business prospects and financial results, our market opportunities and strategies, trends for our products and trends in various geographies and anticipated benefits as acquisitions. We caution you that such statements reflect our best judgment based on factors currently known to us and that actual events or results could differ materially. Please refer to documents we file from time to time with the SEC, specifically our Form 10-K for the fiscal 2008 and our 10-Qs for the first and second quarters of fiscal 2009, and our periodic 8-K filings, including the 8-K filed with today’s press release. These documents contain and identify important risks and other factors that may cause our actual results to differ from those contained in our forward-looking statements. Forward-looking statements made during the call are being made as of today. If the call is replayed or reviewed after today, the information presented during the call may not contain current or accurate information. Autodesk disclaims any obligation to update or revise any forward-looking statements. We will provide guidance on today’s call but will not provide any further guidance or updates on our performance during the quarter unless we do so in a public forum. During the call we will discuss non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles. A reconciliation of the GAAP to non-GAAP results is provided in today’s press release and on our website. In addition, we will quote a number of percentage increases as we discuss our financial performance. Unless otherwise noted, each percentage represents a year-over-year growth rate showing the third quarter of fiscal 2009 as compared to the third quarter of fiscal 2008. And now I would like to turn the call over to Carl Bass.

Good afternoon, everyone and thank you for joining us. Today we reported the financial results for our third quarter of fiscal 2009. Revenue for the quarter increased 13% over last year to $607 million. As we previously stated, the sharp downturn in the global economy had a substantial impact on our results for the quarter. The economy is impacting our customers in various ways. Many are unable to secure credit financing. Construction and media and entertainment projects of all sizes are being delayed or cancelled. Lack of credit for small and medium sized manufacturing firms is making it difficult for them to invest in their businesses. Even large manufacturers are cutting spending significantly in response to lower end user demand and their inability to secure financing or issue debt. As we discuss the details of our results this quarter, I will talk about some of the actions we are taking in an effort to stimulate demand in this environment. I will also go over the actions we are taking to better align our cost structure, with the reality of this difficult operating environment. As we look at our business by geography, revenue performance in the Americas declined 1% and was more significantly impacted by the U.S. market than in previous quarters. Canada and Latin America continued to be relative bright spots for the Americas. As the financial crisis spread globally, we started to experience economic headwinds in some of our international markets. We saw growth rates slow in many of our Asia-Pacific companies, as compared to growth in the same quarter last year. Despite that, revenue in Asia-Pacific increased 12% as reported and 9% constant currency. Performance in EMEA remained healthy despite some pockets of weakness. EMEA revenue increased 27% as reported and 20% constant currency. Revenue from emerging markets…

Thanks, Carl. Net revenue was $607 million, an increase of 13% as reported and 9% constant currency. Revenue from new seats grew 6%. Total upgrade revenue, including cross-grade, decreased 4%. Maintenance revenue increased 31% to $186 million. Breaking revenue down by segment, platform solutions increased 11% to $269 million. Revenue from our manufacturing solutions division increased 22% to $124 million. Moldflow contributed approximately $12 million in the quarter. Revenue from our Inventor family of products increased 8%. During the quarter, we shipped approximately 9,000 commercial seats of Inventor and Moldflow and approximately 44,000 seats of our manufacturing products in total. Our AEC segment increased 8% to $134 million. Revenue from our Revit family of products grew 23%. We shipped approximately 32,000 commercial seats of Revit, Civil 3D, NavisWorks, and Robobat. Sales of Civil3D have been greatly impacted as the AEC market has been hit hard in this environment. Revenue from our media and entertainment segment was $73 million, an increase of 9%. Revenue from advanced systems was flat. Animation revenue increased 16%, driven by continued strong demand for our 3DS Max product. Moving to the rest of the income statement, gross margins were 91% on a GAAP basis and 93% non-GAAP. Our operating margin was 23% GAAP and 29% non-GAAP. During the quarter, we adjusted accruals for our annual performance based incentive plans to reflect our current performance. In addition, as Carl mentioned, we reduced our operating expense run-rate by implementing a hiring freeze in October, as well as by reducing discretionary spending. These actions resulted in lower expenses and higher operating margins, net income, and earnings per share than we originally expected. Our tax rate in the quarter was 23% GAAP and 25% non-GAAP. The lower-than-expected tax rate is due to a foreign tax refund related to prior years.…

Thanks, Sue. While the turbulence in the global economy has slowed our business, we are focused on trying to stimulate demand while adjusting our cost structure appropriately. In the process, we will balance these actions with investing in our future. Slow-downs such as these present an opportunity for us to realign our business. Investments become more targeted, divestments occur, efficiency rises, and resources get realigned. We are already working on many initiatives, including pricing, bundling, and portfolio management to improve our business and strengthen the company. Autodesk has navigated through several economic downturns in its 26 years of existence and has emerged from each stronger [and in better] position competitively. I am confident that however long or deep this global economic downturn is, Autodesk will remain the world leader for 2D and 3D design software and the company will be even stronger and more efficient and more competitive when markets turn around. With close to $1 billion in cash and virtually no debt, our balance sheet is very strong. Our solid financial position and longstanding market leadership will serve us well as we work with our customers and partners to navigate through this economy together. With that, I will turn it back over to the Operator so we can take your questions.

(Operator Instructions)

While the Operator is polling for questions, I would like to announce that we will be at the Credit Suisse conference in Phoenix December 3rd and the Barclays conference in San Francisco on December 9th. And now I will turn the call back over to the Operator for the first question.

Thank you. Your first question comes from the line of Steve Ashley with Robert W. Baird.

I guess my first question will relate to the guidance for the next quarter, obviously below what the consensus was looking for. Is there any extenuating circumstances related to that guidance? For instance, in terms of the pipeline that might need to drain itself? Just wondering how indicative that quarter is of us looking out beyond it and representative of what we can expect, or was there anything one-time in nature about the guidance?

No, I don’t think there’s anything particularly one-time about the guidance. I think what we see in terms of demand out there -- this is where we forecast rather than anything peculiar about this quarter. I mean, I think the most important thing is what we have seen and to give you any indication of when things turn around, I think what we feel is we need to see functioning financial markets. We need to see liquidity in the system. Our customers depend upon it to run our business and I think truthfully if you look right now, we don’t have functioning financial systems to the level that allowed normal businesses to do their job. And in an environment in which people can’t get credit, the first things on their minds is not how much more software do I need to buy.

And then in terms of the restructuring that sounds like it will take place during the fourth quarter, is there any benefit from the expense savings baked into the earnings guidance into the margins of the fourth quarter, or is that -- I’m just trying to understand the timing of when those benefits will be realized.

You will most likely see more expenses in the fourth quarter as we go about cutting expenses. You always see a spike before you see the realization. I think you will start to see it in the first quarter and then throughout the rest of the year.

So just to clarify, there could be some costs associated with severance or associated with this that would be one-time that would --

Yeah, for example, getting out of leases and things like that. There’s -- there could be lots of one-time charges associated.

And was that in the non-GAAP earnings guidance?

No.

Okay. Thank you.

(Operator Instructions) Your next question comes from the line of Phil Winslow with Credit Suisse. Please proceed.

You all mentioned that the backlog was $6 million at the end of the quarter, down 23. I just want to get a sense of where you are targeting that next quarter. Do you expect to build that up back to the previous levels next quarter or is this going to take a couple of quarters?

You know, we don’t do a lot of forecasting around backlog, Phil, to tell you the truth, so I think it will really depend on end user demand for the products, where it comes. The nature of the products, the timing in the quarter -- there are a lot of things that affect actually what ends up in backlog at the end of the quarter but we really don’t spend a lot of time trying to forecast backlog.

Okay, great. And then I guess when you do look at your maintenance stream there, it’s a little different than other software companies. Going into a downturn obviously license revenue’s affected but how do you think of the growth rate of that maintenance stream?

I mean, I think because of the nature of our maintenance revenue or more shorter term contracts than many others have, I think it relies on several things. It relies on new license sales and then attach and renewal rates. So I would see a slowing. I think you will see less slowing generally speaking of maintenance than you would of new licenses. A lot of people recognize that there’s no economic advantage to getting off maintenance, that they have to make up the difference when they come back on and so unless people are really strapped for cash, they wouldn’t generally make those choices.

Your next question comes from the line of Jay Vleeschhouwer with Merrill Lynch.

Thanks. Carl, I would like to follow-up on that last comment with respect to maintenance, you had a pretty significant decline sequentially in deferred maintenance, which is now back to where it was as of the end of fiscal ’08 in terms of absolute level, so what did you actually see in terms of maintenance declines or refusal to sign up maintenance at the time of new license sales? I mean, at least one of your competitors has been able to hold maintenance pretty constant, if not improved, so in your case this was certainly a pretty significant reversal of these this quarter.

The biggest change in there, Jay, is FX, so the big change in there is currency, not actual attach and renewal rates.

Okay. On the other hand, the number of new customers taking on maintenance has continued to slow year-round. The number of new signings is less than half the previous several quarter average, so that would seem to be some indication of obviously weakness in the new license business but do you think that number of new signings, new subscribers is going to continue to tail off significantly from here?

I don’t know if it tails offs significantly from here -- a little bit hard to say, but definitely a decline in the rates, whether it stays at that level or not. I can’t really provide much guidance on that.

Okay. Just a couple of last things -- in terms of your visibility, one thing we noted in a CAD and TLM user survey a couple of months back that we did is that your customer base in particular has fairly short procurement cycles, shorter than the group on average. Most of your customers, according to the survey, seem to be within that three month procurement cycle, maybe three to six at most. So is that something that you actually see yourselves and can manage to, given that your customers do tend to have fairly quick turnaround time normally in terms of buying?

Yeah, I mean, there’s no doubt that our customers have shorter buying cycles. I mean, particularly when you throw in PLM and people are buying $20 million, three or five-year implementations with -- you know my opinion on the subject -- with no visible return on investment. It doesn’t surprise me much that it takes a lot of time to make that decision. You know, in my opinion, the time should be almost infinite. But people going out and buying design and engineering software do actually -- it’s one of the requirements for an engineer or an architect doing their job, so a lot is tied to just the number of people employed doing those jobs, and most of our customers as they hire new engineers and architects and they come on staff, they are handed new copies of software. They are the -- you know, the converse is obviously true as well.

All right, and then finally how will the environment or your new cost reduction plans have an affect, if any at all, in terms of your direct or indirect sales capacity expansion plans?

We would like to maintain -- I think one of the most important things in this downturn is that we continue to work on our channel capacity. The real shame of this would be coming out of a downturn with any reduction in channel capacity. As you saw, I mean, there’s still some parts of the world that where business is phenomenally good, our emerging markets are continuing to grow, we’ve talked about the fact that we don’t believe we have adequate coverage there; more coverage will lead to greater sales, so we are really re-jiggering where we are doing that expansion and capacity and capability to meet today’s economy. But I would like to see us continue to expand that within reason, much more tempered certainly given the environment.

Okay. Thanks, Carl.

(Operator Instructions) Your next question comes from the line of Richard Davis with Needham. Richard Davis - Needham & Company: A quick question with regard to the [inaudible] -- with the financial markets being [inaudible] --

Richard, you sound exactly like -- like you’re in the airport and the speaker announcements for boarding the plane, which I think is only appropriate for you but I can’t understand a word you said. Richard Davis - Needham & Company: Okay.

Sorry. Richard Davis - Needham & Company: I’ll circle back [inaudible].

Okay. The connection is awful.

Your next question comes from the line of Michael Olson with Piper Jaffray.

All right, thanks. Okay, a couple of real quick ones -- would you say that you are seeing customers actually slowing down the number of purchases and upgrades, or are customers just downgrading their purchases by buying lower cost offerings, or is it a combination of the two?

You know, we’ve seen the numbers go down. We certainly haven’t seen people choosing different products. You know, as a matter of fact, if you look, a number of the numbers around 3D products, the more sophisticated, complex products actually did really quite well and so I think what you are seeing is the people are choosing to buy new tools are looking for the best tools to make them the most competitive. We are not really seeing a movement within our range towards lower-priced products.

Okay, and then second as far as EMEA held in there in Q3, but Americas obviously decline in Q3 and I think it’s pretty clear the economic situation in EMEA seems to be following a similar path to what we have been seeing here, so is there any reason not to expect in EMEA that we will see a year-over-year revenue decline in the coming quarters?

You know, a revenue decline, I mean, I’m certainly not seeing anything resembling that. Whether or not it follows, I mean, what we saw during the quarter were there were small pockets, particularly places like the U.K. that seemed to be a mirror reflection of what is going on in the U.S. You know, going through the bursting of a real estate bubble, heavy reliance on financial markets as part of the economy. What we found striking and continuing through today is how resilient and the growth in the other parts of Europe, so emerging parts of Europe obviously, Eastern Europe, Russia, but a lot of Russia was -- a lot of Europe was particularly strong during the quarter and doesn’t show signs. I mean, we are obviously being cautious. We are monitoring the situation closely but we are not actually seeing that. It’s one of the things that is truthfully a little bit puzzling as we try to parse what went on during the quarter. The same thing in parts of Asia -- there’s parts that are really strong. Other parts are showing signs of weakness and patterns are not exactly clear yet.

All right, thanks.

Your next question comes from the line of Ross MacMillan with Jefferies.

Thanks. Quite a few have been answered here but maybe just on the other income line -- that’s obviously gone negative I presume because of the hedging strategy, so should we assume that because of the hedging costs, you are going to have negative interest and other income over the next few quarters?

I wouldn’t presume that. Sue, do you want to --

No, I don’t think that you should -- there was -- some of this was -- some of the loss there was from hedging and some was from the re-valuation of the balance sheet due to FX. So I think as we see -- it’s going to be mostly because of the balance sheet re-valuations related to currency and that will cause the fluctuation more than anything about the hedging strategy necessarily.

The announcement on the hedging is relatively small and will be small regardless, given the kind of conservatism of our hedging strategy and so it will always be dwarfed by the other things.

And certainly the volatility in the currency rates in the last quarter was higher than we’ve seen in a long time and made the cost of the hedges fluctuate quite wildly and hopefully we won’t see that in the future.

Okay, and then just on the 5% run-rate cost reduction, I guess two questions -- one is how did you -- why did you choose that kind of level of reduction? I’m just trying to understand the thinking behind that. And then secondly, what sort of areas are we likely to see the headcount cost -- sorry, the headcount reduction? Where can you trim back? Thanks.

So I think we looked and we modeled many, many scenarios for next year, taking into account lots of things, including what we perceived to be volume-based on end user demand, a lot to do with currency. You know, the one thing we really feel like is in our control is our costs, and so we looked at it and we thought how do we get ahead of the costs if business stays at this level, or even deteriorates and we wanted to make sure we were ahead of the curve. We had done a number of things starting last quarter. We certainly didn’t feel those were enough, given what we have seen out there and let me reiterate -- what we keep looking at for the signs of something is for liquidity being back in the credit markets, at the point in which banks are exchanging money, banks are lending money to businesses, that’s when some of the construction projects, some of the media and entertainment projects will move forward. It’s when manufacturers have enough money to build up inventory to make payroll, so that’s where we are really looking. When you look at the cost reductions, we are looking across a broad range of things, obviously starting with the discretionary spending programs, lots in travel and entertainment. We’re doing a re-evaluation of our product portfolio. I think if you look, we are like many companies. We probably have kind of the 80-20, in that 80% of our revenue comes from 20% of the products or something in that neighborhood, so we are looking at what goes on in the other 80% of the portfolio and how important is that to the ongoing health of the business. We also have a very large temporary workforce where we go use professional advisers, have outside consultants as well as just a temporary workforce. So obviously we are reducing things there. In many places, we have facilities where we are looking at consolidation so just a -- there’s a number of initiatives across the board that we think we’ll be able to accomplish, this kind of reduction in expenses. And really what I see right now is this is a balancing act for us. I think -- I would love to do a pool of where you guys think GDP growth is next year. We’re uncertain about it and so we are doing our best to try to guess where it is and we want to be ahead of that curve and we thought that this was certainly at this point in time the appropriate balance between maintaining the health of particularly our channel partners being able to serve our customers well and at the other time, preserving margins and running a profitable, healthy business.

Thank you.

Your next question comes from the line of Heather Bellini with UBS.

Thank you. Carl, I apologize if maybe someone has already asked this because I am jumping back and forth between calls but essentially --

Is the other call better?

No, they’re both -- I’ve seen better news from both companies, how about that? My question for you guys would be what type of churn are you factoring in or when you look out to next year, are you expecting? And what I am referring to is customers how may be -- could customers renew fewer seats? What are you expecting to see happen, given that the workforce is shrinking in a lot of the industries that you serve, not just those, others as well? And also the average upgrade cycle for those who aren’t on maintenance, what would you expect to happen to the upgrade cycle? Would you expect people to -- would you expect people to delay purchases and can you give us some sense there if it’s every three years now, could it go to four years, et cetera?

So what I would say is first of all, we are very tied to the number of employees in the industry. Now, certainly with the specific job functions, like mechanical engineers, designers, architects. That will continue to be the primary -- that will continue to be the primary driver. So often when we see people -- for example, failing to renew their subscriptions, it’s because the total workforce, the total headcount requiring the tools has gone down. So if you think about it, our correlation will be with that workforce. There are a couple of mitigating factors. There are certainly places in the world we talked about a little bit in prepared remarks where license compliance is big because piracy is still a huge issue, so we have many more users in the world who use our software than actually pay for it. That’s one of the offsets there. The other places, you know, in tough economic times, the value of our offerings is very attractive and so I didn’t think this was a particularly appropriate call to spend a lot of time on color commentary about particular wins in the quarter but you know, particularly like in our very competitive markets like manufacturing, many people who are using high-priced software are converting to much lower-priced software. You know, when they recognize the value they can get from our products in comparison, there’s no doubt that we continue to win business there. Just looking at the raw numbers, we continue to gain market share on an absolute basis and when you look below it, you realize in units, we do even better than on revenue. So there are a couple of offsets but I think -- I think your thesis is absolutely right of the best predictor of where our business is is really tied to the number of people employed in the industries using the tools.

Okay, and then can you also comment for those not on maintenance what the average upgrade cycle is right now for say AutoCAD users?

You know, this --

The customers that are not on maintenance now -- I mean, the amount of revenue we are getting from that is so small it’s not worth you really spending a lot of time on.

Okay.

It just really isn't. You know, you’ve got to remember that now it’s such that if they don’t upgrade after the third year, their license expires and they would have to purchase a new seat, so there is not a lot of flexibility for them to let it go a whole lot longer or they have to buy a new seat and there’s significant economic penalties for that.

Okay, so headcount is the key metric -- thank you very much.

Your next question comes from the line of Donovan Gow with American Technology Research.

With the downturn, could you comment a little bit on if that’s affected your appetite for share buy-backs at all, particularly given that, or even your ability to buy back shares, given the large cash balance that’s offshore? And then also as you look to next year and cost reduction efforts, do you have any particular margin targets still in mind?

So as it relates to buy-backs, we’ve always said that we will buy back stock to offset employee stock programs. We made a big purchase this year of about 8 million shares. We’ve not nearly had that number of shares exercised through any of our programs. I’m very mindful of cash these days. I think as I’m seeing from our customers, as I’m seeing from the banks out there, I think this is a time in which hording cash is not a bad strategy and I think that I want to do everything we can possibly do to preserve our cash positions. I think it’s one of our strengths and should the economies of the world get any worse, I think it’s going to become an even more precious commodity. So with little money in the U.S. or with more money offshore and the penalty for bringing that money back, it’s a very inefficient use of our cash to buy back stock. And so I would not do that. I think we have to -- we’ll reevaluate as we see how the economy goes, as well as when people look, probably not until the new Congress, you know, new tax laws including repatriation.

Okay, and on the margin front?

You know, I won’t give any specific guidance at this point. Obviously what we have tried to do is take matters in our own hand in terms of the expenses. You know, revenues, we’re trying to do everything we can to really stimulate demand but at this point, it’s really just a mathematical by-product of how much revenue is there. So at this point, I wouldn’t want to give targets around margins.

Okay, and then just a last question, if we could just circle back on Europe for a second -- I mean, what gives you confidence there in particular that Europe as a whole is not going to follow what you have seen in the Americas?

I wouldn’t go so far as to say confidence. What I was willing to say is, you know, explain what we saw in the third quarter and leading up to today. I think our sales teams remain confident about that but you know, I think if there’s anything we all should have learned over the last three to six months, all of our ability to predict has been pretty limited and so if we saw certain portions of Europe decline, it would not surprise me terribly. You know, the best I can do right now is report here’s what we’ve seen, here’s what the teams on the ground are seeing and you know, we’re monitoring the situation closely.

You know, I think one of the things, Donovan, to remember is that there are areas in our territory that we call EMEA that are still essentially greenfield for us, where we don’t have a sales presence or resellers and so we can go into an environment that is essentially new to us and by adding resources in these areas like Russia or the Middle East, it’s incremental revenue to us despite the fact the economy there may be a little bit slower. We haven’t had a presence there at all.

And you know, just to be clear, I mean, when we looked at many of our regions, even in the developed economies, they continue -- I mean, to post those kind of results, Europe stayed strong and so I feel like the best I can do is tell you what the facts are. You know, you guys have access to all of the economic data we do in terms of trying to project what that’s going to look like going forward.

Okay, great. Thank you, guys.

But you know, there really were some regions that were surprisingly strong. Certainly they don’t correlate closely with what you read in the newspaper.

Your next question comes from the line of Sterling Auty with J.P. Morgan.

Thanks. As you look at the next quarter guidance, can you give us an indication of how much of that fall-off sequentially is directly attributed to your assumptions for FX?

So we do have a hedge in place for FX, which limits the downside, so a fair amount of it is due to volume and the rest is due to FX.

But aren’t you hedging the next exposure or are you actually hedging revenue directly?

Well, it’s a -- the hedge actually, if effective, goes into revenue.

Okay. And then as you were talking about running the different scenarios and models, which of the revenue segments do you think is hardest hit as you look both to next quarter or just qualitatively into next year from the economic situation?

You know, I’ll give you a direct answer in a second but you know, I’ll repeat myself -- the problem our customers are experiencing is a lack of access to credit and financing and that’s across the board. Businesses for different reasons rely on access to those credit markets. Having said that, I think the one that you see most directly impacted is the building industry. That’s the one where projects have been delayed. You know, you are even seeing kind of the mothballing of projects in process. People are sealing them off and waiting until there is more money to continue those projects. You know, the interesting thing about building even the largest institutional builders rely on financing to make those projects go forward, so I would say it’s building and then manufacturing and M&E are both about the same. But the building is the one that kind of turns off the fastest with the lack of project financing.

All right. Thank you.

Your next question comes from the line of Sunil Dapdrinder with Sentinel Asset Management.

Yeah, thanks. Carl, you had pretty good growth in the European markets and some of the Asian markets, especially emerging markets. The crisis is globally basically, the credit crisis. Those customers who are not hit by the crisis, are they paying by cash or how are they paying you guys?

So one of the things to remember, just generally -- we’re fortunate we don’t have to talk about this, but in many parts of the world, we do two tiers of distribution. So our end users buy from value-added resellers and the resellers in turn buy from distributors and much of the stock for the distributors comes from us, so we get paid by distributors. So there’s at least one and sometimes two intermediaries between us and the end user customer. I think it depends a lot on local market conditions, how they are actually paying for this, but you know generally speaking, our distributors are large organizations that, you know, it’s a business to business transaction of fairly large numbers.

And you are not facing any problems from the distributors in the -- in terms of your payments basically?

No, you know, most of our distributors first of all handle products from multiple companies. They are very large companies. Many of the distributors are much larger than we are. Where I think you would expect to see payment problems first is resellers collecting from end users and then the distributors collecting from the resellers. We are pretty far up the food chain from that so we haven’t seen it. I think there’s other business in the world that will be more affected by that sooner than we would be.

Okay. On the fourth quarter guidance in terms of the revenues, you just mentioned about the main reason for the downside is the volume. How much is the downside because of the discounting, because you are engaged into promotions, offering rebates and early retirements and so forth? So how much is the downside factored by the promotional effect here?

The promotions are not a big part of it.

In fact, the retirement programs, legacy programs are things that we run on a regular basis so that wouldn’t be any different than any other third quarter.

Okay. On the quarter just reported, you talked about two receipts. When you look at the overall user growth, it was just about 7% also. Most of the growth looks like [inaudible] from the [inaudible]. Could you comment on what was the [inaudible] growth? It looks like it was [negative] probably. If you can just give color on that.

The seat numbers that you see include educational units and the commercial -- there was growth in commercial seats.

There was no growth in the commercial seats?

There was growth.

There was growth in commercial seats.

Okay. And on the expense side --

We have to go to the next question.

Thank you.

Your next question comes from the line of Atul Bagga with ThinkEquity.

Thank you for taking my question. You highlighted a couple of pockets of growth in Q3. you talked about media and entertainment, some parts of emerging markets. When you are looking for fourth quarter guidance, are you baking any contribution from these pockets or are you expecting a decline in these markets as well?

I mean, we’re trying to factor in the fact that all of these margins may slow down. I would expect it to do it on a relative basis, that some of those pockets are going to continue I believe, and as I said in the prepared remarks, I think the emerging economies are absolutely going to continue to grow. We’ve all seen the announced slow-downs in terms of the GDP growth in places like China and the Middle East but they are still growing and as Sue pointed out, in many of those places we are under-represented in that those that represent new opportunities for us. I think we saw a strong 3D growth. You know, we’ve talked about 3D growth over the years. That’s about our products being compelling for people getting to new technology. There’s still an aspect of -- you know, people, just like we do when we talk about retooling during this downturn to be more competitive as we come out of it, our customers are doing the same thing and so they are looking for high-valued tools, they are looking for high productivity tools which we provide. And so you are seeing a lot of people move to 3D tools and as a matter of fact -- and when I answered the previous question, we didn’t see a move to 2D. People are regressing, people recognize the need to go to more high performance tools and I expect the 3D to continue to be relatively strong.

So in terms of the conservatism that you baked into your guidance, would you say that fourth quarter guidance, you had been more conservative than you had been in the previous guidance?

You know, rather than characterize conservatism, what I would really say is we believe it’s a much more volatile environment to which we usually give guidance. We have tried to -- you know, we’ve widened the range. Usually we look out and we can look out quarters and have a high degree of accuracy. We have already seen volatility, enormous volatility in the past. There’s large fluctuations in currency that are going on and every day brings with it new news, and so at this point in time what I would say is we certainly see a very volatile environment and an unpredictable environment, rather than saying it’s conservative guidance.

(Operator Instructions) Your next question comes from the line of Daniel Cummings with [Limerock] Research.

Thanks. Can you hear me? I’m thinking back to the analyst day, maybe the past few years where Al had that slide that had the 45-degree line and it kind of represented your week-over-week linearity or performance against that line. And I’m curious whether the guidance for the January quarter, does that reflect the week-over-week performance recently? So I’m thinking like the last three to four to five weeks, are you sticking closer to that line moving through time here, or are you getting a little bit further apart? Really, are things really worsening week over week or not right now?

You know what I would say is what we saw is the slope of the line changed right around when Lehman Brothers failed. So if you think -- you know, as the news really got out late September, early October, we saw the slope of the line change dramatically. I would say since then, we haven’t seen much change but there was clearly an inflection point right around when credit tightened. You know, I don’t need to go into a whole [inaudible] of what happened then but that’s the point in time in which we saw a shift.

Okay, and Al seemed to think there really aren’t any short-term tools at your disposal to help the dealers come back into line there with week-over-week linearity and you indicated that that’s really not your balance sheet at work here. That’s Keybanc. But do you think in the short-run, there might be other things you could do to put more money to work there to help the channel?

I think we are evaluating it day by day. You know, in some ways our distributors actually play that function, certainly in the parts of the world that are two-tiered distribution and I would imagine distributors and resellers are already having those conversations, you know, about extending payment terms and things like that. I mean, our ability to affect end user demand on a very short-term basis is small and as I answered Heather’s question, if you don’t have a new user or you already have laid off 20% of your workforce, you don’t need new software. So a lot of it is really just tied to the number of people in the workforce and need to do it and I think that’s probably more accurate. When you look at the levers we have, there are some things we can do around pricing and promotion and we’ve talked about that. I spent some time at this analyst day in New York talking about bundling and there’s things you will see from us in Q4, in Q1 around bundling that we think will actually trigger more demand. So I think there are some things, although I don’t think there’s much to do on a weekly basis but we are in really, really close contact with our resellers and distributors, you know, watching not only our business but understanding what others are doing in this environment as well.

Your next question comes from the line of Richard Sanders with Clovis Capital.

I wanted to just quickly get some more information on your hedging policy. I didn’t quite understand the response to the question before -- you said you hedge the top line of your foreign revenues, is that correct? Rather than the spread between the costs and the revenue?

We are hedging the revenue, not entirely all of it, and for us it’s principally in the Euro denominated and the Yen denominated currencies.

And how far out do your hedges go for 2010?

We’re in the process of implementing 2010 right now, so we’re just beginning that process.

But generally speaking, ours were for the next quarter.

Yes.

Okay, so 2010 will be more at current exchange rates?

Yes.

Okay, and then in terms of your --

No, 2010 will be whatever 2010 turns out to be. We --

No, I meant -- I meant on the hedge.

Yes, yes.

All right, and then on the sales and marketing expense line, how much variability is there to revenues in that? And I mean more how much of that goes to kind of the commission accelerator for the channel when they hit certain targets, et cetera? So how much will that decline with revenues, or go up conversely?

Well, the commission -- I mean, commissions and accelerators are a decent size piece and typically where you see it is in the fourth quarter with accelerators in a timeframe when we are well above our plan for the beginning of the year, which obviously is not the case this fourth quarter. So you shouldn’t see lots of variance as a result of changes there. We did point out already that across the company, we made accruals to -- you know, made adjustments to our accruals for all of the performance-based plans, so it doesn’t just affect sales and marketing. In fact, it affects every expense line.

Your final question comes from the line of Sterling Auty with J.P. Morgan. Please proceed.

I just want to go back, Carl, to a comment that you made -- I think you said that you just didn’t see the European revenue declining year over year and I just wondered is that just here in the fourth quarter what you are thinking or you just don’t think the economic environment would deteriorate to a point where we would see year-over-year declines from that geography moving forward? Let me just leave it at that.

I mean, the most straightforward I can be about this, Sterling, is we saw 20% constant currency growth during the quarter. That’s a long ways from going negative. You know, could Europe unwind in the way that the Americas has? Without speculating on that, what I am saying is through now, we saw really strong growth in many places across product lines. We did see some of the places that you would expect, like I mentioned the U.K., were noticeably weaker and reflects what you hear and read and know about their economy. There are other places that were counter-intuitive in terms of their really strong performance and what I would say right now is our sales force and sales management teams, you know, our distributors and resellers on the ground, while not overly optimistic about next year’s prospects still sees -- I mean, they would still see strong growth out there and when people have gone out -- in our talking with them, as others have gone out and surveyed them, they continue to see strong growth and they have been particularly resilient out there.

So even just looking at the next quarter then, as you look at the guidance that’s given, you are basically indicating then a further precipitous fall-off in North America and the other regions to kind of get down to that 525 to 550, or is it more concentrated within North America?

I would say we are allowing for the possibility of pockets, you know, there’s some in Asia, there’s some in the Americas. You know, there could be some in Europe. I don’t think you will see declines year over year, certainly in Europe, which was the question but I think we’re saying that given the deterioration in the economy, we could imagine that there are pockets in various places. Certainly as you look out, we’ve read reports many companies reporting are talking about weaknesses in Japan. You’re seeing a slow-down in China and other places, so we can certainly imagine slow-downs in those places. What I was really trying to reflect was what we have seen in Europe -- you know, this is our opportunity to give you the best possible insight into what we saw during the quarter. That’s what we saw in Europe, that’s as we sit here today, you know, the insight that we get from our sales team looking forward.

Ladies and gentlemen, this concludes our Q&A session. I would like to turn the call over to Mr. Dave Gennarelli for closing remarks.

Thanks, Operator. That concludes our call this afternoon. If you would like to speak to investor relations, you can reach me at 415-507-6033. Thanks.

Thank you for your participation in today’s conference. This concludes our presentation and you may now disconnect. Have a good day.