Good day, ladies and gentlemen, and welcome to the first quarter fiscal 2010 Autodesk Incorporated earnings conference call. (Operator Instructions) I would now like to turn the call over to Mr. Dave Gennarelli. Please proceed, sir.

Thanks, Operator. Good afternoon. Thank you for joining our conference call to discuss our first quarter fiscal 2010. With me today are Carl Bass, our Chief Executive Officer; Mark Hawkins, our CFO; 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 at Autodesk.com/investor. As noted in our press release, we have published our prepared remarks on our website in advance of this call. Those remarks are intended to replace extended formal comments and we will not repeat them on this call. During the course of this conference call, we will make forward-looking statements regarding future events and the future performance of the company, such as our guidance for second quarter of fiscal 2010, 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 the anticipated benefits of acquisitions and cost savings initiatives. 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 the documents we file from time to time with the SEC, specifically our Form 10-K for fiscal year 2009 and our periodic 8-K filings, including the 8-K filed with today’s press release and prepared remarks. 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 this 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 and non-GAAP results is provided in today’s press release and prepared remarks, and on our website at Autodesk.com/investors. And now I would like to turn the call over to Carl Bass.

Thank you. Good afternoon, everybody. We are going to try a new format for the earnings process this quarter that we hope works for you. The intent is to give you a detailed review of the quarter in prepared remarks that we will post on our IR website. You will, however, miss out on my dramatic reading of the script but we hope that this approach provides you with more time to review the information and allows us to spend the time more wisely really doing question-and-answers. But before taking questions, I just want to emphasize a few points from the prepared remarks. I think the main question that people continue to want to know is about the health of the global economy and whether we are seeing stabilization. And I think just as you think that particular regions and economies entered the recession at different times, it stands to reason that certain economies will recover before others come out of them. You know, from our point of view, the global markets are still in decline and I would say we are not seeing the same level of decline we previously see but we are also not seeing signs to lead us to believe that a recovery is imminent. With the global economy so vastly different than it was at this time last year, I think year-over-year comparisons have become less meaningful, while sequential variations provide a better indicator of how our business is trending, and we are going to provide both where appropriate. Our revenue in the first quarter was $426 million, a decline of 29% year over year and 13% sequentially. Our non-GAAP earnings came in better than expected at $0.18 per share as we made significant progress in our expense reduction efforts. As generally expected, the international…

(Operator Instructions) And your first question comes from the line of Ross MacMillan with Jefferies.

Thanks a lot. So maybe the first one on the cost side, you are outputting costs this quarter at $326 million non-GAAP. That’s down about $46 million from last quarter, so annualize that, $184 million of annualized savings. So assuming that’s just really the first riff, the one that you explicitly laid out on January 15th, that looks like it’s running well ahead of plan. Can you just talk to that? Because it seems to be a much deeper cut, if you will, in round one. Thanks.

Ross, I think there were a number of things here and it’s hard to parse specifically. We started cost-cutting actions some time last year, towards the end of last year. They layer in at all kinds of different rates and so just taking one snapshot, one quarter over another and extrapolating out from there doesn’t actually get you quite to the right map. I would say, however, one of the things that we did do in the first quarter is way beyond headcount reductions -- we dug into other expenses where we thought there was more opportunity to make cuts and we continued to do that. So some of it is purely related to headcount but there were a number of other cuts that are layered in there.

Just to echo on to Carl’s point, I think, Ross, the best way to think about it is the number he called out, $250 million year-on-year, is a pretty clean way to think about it in terms of comparing it to the actual for ’09. I think the other thing to think about is if that OpEx, you are going to see the benefit in Q2, largely in Q2 going forward, so just go ahead and apply your seasonality accordingly but that’s what you should expect.

So just to be clear, that $250 million is really just a headcount reduction and any other discretionary cost-savings or other that you would get on top of that could lead to incremental cost-savings, fiscal ’11 versus fiscal ’09?

No, Ross -- this is a combination of all kinds of expense reductions that are in there together.

Okay, that’s --

-- all the actions and as Mark said, the cleanest way to think about it is year over year, 250.

That sounds fair. But that $250 million, that’s a fiscal ’11 number, right?

The $250 million --

Or fiscal ’10, I beg your pardon.

-- compare FY -- well, when you think about FY09, you look at the actual, you take $250 million out, and that’s what you should land at in FY10 in terms of the OpEx reduction.

Perfect. One other one, just on the revenue side, just on the maintenance line, I think we’ve had a couple of quarters now of negative maintenance billings but that line item seems to be declining -- in fact, it was up sequentially so really not that much change from last quarter. How should we think about the progression of that? Do you feel like that’s stabilizing around these levels, that we’ve seen that now for a couple of quarters?

A couple of things here -- one is you know what’s driving the maintenance billings, basically, Ross, from that standpoint, which is fundamentally the number of seats that are in place and also the renewal rates, and hence that’s a real driver of what’s actually happening here. And so you can see that that rate of growth has declined in terms of the year-on-year growth from that standpoint. So in terms of going forward, we’re not really giving guidance per line item going forward, if you will, but I think it’s important to look at that trend and watch what’s been happening to the velocity year-on-year and understanding the underlying drivers.

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

I had a question for you around your revenue guidance range -- you guided 395 to 420, which is a tighter range, being $25 million versus the $40 million range you’ve guided to over the last few quarters. I was wondering if we should take this as does this imply that your visibility is better than the last few quarters? And then from a geographic standpoint, I was wondering how should we -- should we be expecting now -- do you think we are going to get back to stability in the July quarter for the Americas, meaning revenue could be flat? But do you still see the rate of change decelerating in Asia-Pac and EMEA? Thank you.

Sure, Heather. The first thing I would say is I would take the narrower range as an indicator that visibility is better, but it’s less than perfect. So I think we -- you know, at these lower levels, we have more confidence with this and as I kind of mentioned in the opening remarks, we see the rate of deceleration slowing and so I think we have more confidence and that’s why we went out with the range that we did. I think in terms of geo-stability, I mean, the first thing about North America is clearly slowing down in deterioration may even be bottoming in North America. We’re not really sure yet what’s going on. In some ways, that’s the $200 million question for us. I mean, my nervousness is clearly more outside of North America these days than it was let’s say in the last few quarters, where we experienced the greatest declines in North America. You know, I am worried about Western Europe and differentially -- I mean, I think the U.K. is much closer mirroring what’s going on in the U.S. economy. I think we’ve seen places like Germany and France hold up pretty well in our numbers but I have some concern, and I think Asia is kind of mixed.

Okay. And should we be expecting -- is there -- you’ve taken a lot of cost out of the business and obviously you are ahead of plan on the cost side in terms of taking it out. Is there more that we should expect as we look out over the course of the next 12 to 18 months if you get to a point where revenue just gets to a stable ground and it’s neither declining nor growing? Would you still be looking then to take more costs out? Or after these costs cuts, is it really going to be all about revenue growth to get your margins higher?

I think the primary focus, kind of one, two, and three is going to be revenue generation and how to stimulate demand in this environment, you know, and chasing the deals that are actually out there. What I would say is on the cost cutting side, if it stabilized at these levels, I would imagine possibly some cost savings but not through things like headcount reduction. I think, you know, one of the things is when you kind of turn the magnifying glass inward and start looking at all the places where you think there’s opportunities to save, you turn up more than you ever expected and I think that’s no doubt true here. And I think with the addition of Mark, I think we will have someone who can full-time focus on some of the cost-cutting.

Absolutely. I will be heavily looking at just ways to be more efficient, looking at things end-to-end and just ways to continue to help us be stronger as we go through the recession and come out of it at some point.

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

Good afternoon -- just a couple of quick ones here; gross margin, down 200 basis points quarter over quarter. I think you mentioned in the script it was somewhat seasonal so do you expect gross margin will bounce back to over 90% in Q2?

I think you will see some bounce-back here, Mike. I am not going get real specific there but certainly we have some seasonality as it relates to annual releases and such but I think you could see some bounce-back.

I think one of the problems with gross margins in this quarter is that we ship all the new products out, including those that are on subscription and so the costs go up. That’s what drives the seasonality.

Okay, that makes sense. And then can you talk about the change in upgrade pricing that’s going to hit in March next year where you are basically moving away from tiered upgrade pricing? I assume the drive behind it is really to push customers to subscription but can you just kind of elaborate on that and talk about maybe what response from customers has been?

Sure -- a couple of things. One thing that’s going on is we’ve certainly been doing a number of policy changes over the last half-dozen years to encourage our customers to be on subscription and we’ve outlined numerous times we think the benefits both to us and to the customers of being on subscription. The second thing about subscription, or about upgrades, is they become a much less meaningful part of the business as planned. And we’ve kind of mapped out for you over the years how we thought that would decline and that in contrast, we hope subscription would rise even at a greater rate than our upgrades declined, and that in fact is exactly what’s played out. So now that we have only a handful of people who are doing the historical buy a product and upgrade at some point in the future, we are really looking for simplification, along with an encouragement to move to subscription. I hope that makes sense.

Your next question comes from the line of Blair Abernethy with Thomas Weisel Partners.

Thank you. If we can just go back for a minute on the subscription business, Carl, I wonder if you could talk to how that business actually is performing in this environment, i.e. with the new customers -- are you seeing more of a shift towards subscription from the perpetual? And also on the existing book of business, what are the renewal rates like on the subscription?

I would say what we are seeing our rates, the attach rates and new licenses being similar to what we have seen historically. The big issue for us in some of the declines we are seeing come from the fact that new license sales are down. So it’s the volume of new license sales, not the rate at which customers are choosing to attach to subscription. I think when you look at renewal, and we never gave specific numbers, but I think you -- we are seeing a decline in our renewals. A lot of it is just tied to -- unlike other companies whose subscription or maintenance programs are tied to the enterprise, ours is tied to the number of seats and with less engineers, architects, and designers working at certain firms, they are not seeing the need to upgrade 100%, so we have a fair number of renewals in which it looks like it’s less than 100 but that’s just because 100 engineers have become 90 engineers or 80 engineers during the downturn.

Okay, great. And in your prepared remarks, you talked about a large transaction in the quarter. I’m just wondering if you can shed some more color on that and how much of that might have been booked in the quarter?

It was a very large transaction -- it was the largest, actually, in our history but it was actually -- it was a five-year deal and I think about it, a couple of things that were important to me were really just the strategic nature of it -- it was very large, multi-disciplinary firm committing over a five-year timeframe to our technology because they saw the advantage. I mean, it’s nice to have the biggest deal. Two other things -- we never really want to break out the bookings on that on a specific deal basis and as you know, our deals are not really much -- no single deal is a large part of our overall revenue. It’s unusual for us to have even a single year in a deal be half a percent of revenue. I mean, these are relatively small but there was a more thematic thing that I think comes out of this, which I also had in the prepared remarks, that we have seen places where we are dealing directly with the customers. So our major accounts and the major accounts at our reseller partners -- those have held up better than our more transactional business.

Your next question comes from the line of Steven Koenig with Keybanc Capital Markets.

I would wonder about the commentary on direct versus indirect. I understand that you don’t break out the specific revenues from certain deals but if you don’t consider the large enterprise deal, did direct grow or just not decline as much as indirect? You know, any sort of commentary or metrics there would be helpful. And secondly, I would like to -- I do have a follow-up about your channel.

Okay. I’ll do some math, why don’t you ask the follow-up?

Okay. In the channel, as we’ve talked to the channel partners, we’ve heard complaints that there’s increased competition between channel partners for maintenance renewals. I am wondering if this is something that you have seen historically and/or is it something that you are concerned about in terms of maintaining the health of channel partners? And related to that question, I am wondering what kind of qualitative commentary can you give about the general state of your channel ecosystem in terms of number of partners or the general health of that channel as we move sequentially through the quarters here into this recession?

Okay, so what I would say is I never like to see it when there’s huge amounts of competition between our channel partners in a negative kind of way. I mean, our channel partners are independent businesses and they are out there to compete and do the best they can every day but when their attention turns solely to competing with other channel partners, that’s obviously unproductive. I would say times of scarce resources, you see it inside a company, you see it outside and as deals have become scarcer, I am sure there’s more competition going on out there. As regards to the overall health of our channel, I mean, just as it’s hard on our business, it’s got to be hard on our channel partners. However, many of our channel partners have been with us a long time, many of them are quite entrepreneurial and quite resilient and the thing that I have been most impressed with is how innovative they have been during this downturn and it’s got to be a difficult me for them but many of them are finding ways to get through it. You know, I had one channel partner in particular said to me the other day you know, I’ve been a channel partner for more than 20 years. I’ve been here through good cycles and bad cycles, through when the economy was great, when the economy was terrible, when you had good products, when you had bad products, and we’ve made it through -- we’ll make it through this one. And I think there’s a sense of that amongst a lot of our channel partners. They are scrambling, they are doing things differently than they otherwise would have done, or might have designed it, but I think they will make it through.

All right, just one follow-up, Steve -- we don’t historically disclose the exact percentages but let me just give you a sense of direction. First of all, we have some big deals in every period, so it’s kind of hard to back one out and not back others out, but I think probably just to give you a sense of direction, our direct year-on-year is showing some growth compared to the overall statistics of the revenue for the company, so hopefully that gives you a directional flavor.

Your next question is from the line of Richard Davis with Needham & Company. Richard Davis - Needham & Company: Thanks, and thanks for doing the call this way, too -- a question for you; I doubt if this is a big deal for you but I need to ask it, so a lot of companies have said hey, we’re not canceling our maintenance because we don’t want to pay the up-front again to the full bore, even a discounted bore, because we think we are going to hire these guys back. Can you tell, is there any sense and is it meaningful or material for you guys if there’s a bunch of seats that are out there that are not used by people but people are paying for, and the reason is is obviously when the recovery comes, trying to gauge how fast you fill that up. So that’s the question I have.

Well, I’m glad you like the format, Richard. I’m kind of missing out on that reading part. And now we’ve got that up-front disclosure taking the majority of the time, so we have shifted the responsibility. You know, it’s not -- we don’t have perfect knowledge of what actually gets put into production but I would also say compared to some of the other companies I am sure you talk to in the more enterprise like companies, they have more punitive pricing policies than we do. Ours, it’s not as obvious that if you don’t have people in their seats that you won’t want to renew. Maybe said more straightforwardly, people are actually taking seats off maintenance if they don’t have people in the chairs doing work, and that seams to make economic sense for them. I can’t tell that that’s perfectly so but we are seeing more of that. And I think we are seeing less of the other phenomena, where people are just going along for the ride. I think particularly given the severity of the downturn, and we certainly parts of our installed base that have 30%, 40% drop in employees. They are just not putting in for insurance. They are trying to do everything they possibly can to make sure their business stays healthy. Richard Davis - Needham & Company: Got it -- so it sounds like you guys will be a fairly concurrent, you know, your business will be concurrent with the improvement in your demand as opposed to a lag, it would seem to me.

Yeah, I think we will be concurrent and there are a couple of facts that I think actually kind of turbo-charge it a little bit. I think there’s some built-in stuff going on -- one of the other phenomena we are seeing in addition to, you know, in addition to something like the maintenance revenue, which would be really kind of linear with the add-back of jobs. What we are seeing is in the accounts that we keep winning deals, you know, competitive swap-outs and stuff like that, they are tending to be smaller than they were in the past, so if somebody would have done 20 seats replacing a competitive product, they are doing that same pilot and evaluation with five seats, full well knowing that you have to go 20 and from 20 to 100 but right now, they are working through it with smaller numbers. So I am seeing a bunch of places where it feels like we are kind of putting some stuff away in the bank. Richard Davis - Needham & Company: Got it. Thank you very much.

Your next question comes from the line of Brent Thill with Citigroup.

Thanks. Carl, you mentioned the rate of the deceleration is slowing yet your guidance is still showing a quarterly deceleration. Can you just give us a sense of what you have been seeing linearity wise, you know, month by month, if you can just in terms of what trend lines you have seen? I am curious -- did the rate of deceleration happen in the first quarter or is that something that you are planning for the second quarter?

I mean, the linearity in the quarter hasn’t changed substantially at all. It’s the same linearity -- it’s at a greatly reduced level but it’s the same linearity and I think what we are seeing now is -- a little bit of what we are seeing is the averaging of lots of different effects. I mean, I think you have to drill down country by country and try to give you some flavor geographically, and you have to drill down by product line or product type, and we try to give some color around product type. And what we are really measuring is the overlay of all those factors coming together. And so I say right now, we really think business is not declining at the same rate in the U.S. but as I said before, I have concerns about what’s starting to happen in parts of Europe and what’s happening in parts of Asia, and so what we are trying to do is just guess between those two factors going on simultaneously. A more rapid decline in EMEA and parts of Asia and more stabilization in the U.S.

And just to clarify, I’m sorry, the Europe and Asia data points, is that something that you are seeing that was new or is this just a continuation of the trend that you are seeing?

I think it’s a macroeconomic effect that you see spreading and I think in some places, it looks like parts of Western Europe -- well, the U.K. looks almost simultaneous, you know, it’s almost concurrent or months behind the U.S. Germany and France held up much longer yet you are starting to see economic indicators out of there that say things are going the other direction. And when I look, some of the places have some of the same factors. You know, there’s some issues in the banking industry, there’s some in terms of the housing boom and bust. Others are less so, and so without practicing economics without a degree here, it’s hard to say perfectly what’s going to happen in each of those countries but certainly it’s an area of concern right now.

Thanks, Carl.

Your next question is from the line of Greg Dunham with Deutsche Bank.

Yes, thanks for taking my question. I want to revisit the concurrent or lag effect, if and when -- I should say when there is a recovery. Given some of the policy shifts to subscription, should we expect that kind of the up-tick on a revenue standpoint for Autodesk is going to be necessarily more muted now than say three years ago when you are more license driven?

You know, I think if you do the -- if you divide the math out, what you generally see historically, and even through this time, roughly speaking, about two-thirds of our revenue comes from new license and a third comes from that other category of what historically was upgrades and now is primarily subscription. What I think you will see is a pop in the new license revenue that’s really concurrent with jobs being added back and increased optimism about the economic outlook. The part that will be slightly more muted is the subscription but it’s only a third of it and I think it will be outweighed by what goes on with what I talked about with the new seats and the number of people who have adopted new technology. You know, and our confirmation around this new technology is why we talked a little bit about the difference between 3D and 2D. The places where we’ve seen the greatest decline in our business has been in the more traditional parts of the business. The 3D where people understand the advantages of, we continue to win business there and we continue to win a lot of competitive deals there, and that’s where I think we will see the greatest pop when the recovery comes.

That makes sense, and one follow-up, if you’ll permit -- on that note, you mentioned areas you are investing in. What are those areas?

I think we continue to make sure our channel is healthy. I think we continue to make sure that we have a broad product portfolio, so some of the moves that you saw us making before, you know, a continuation on things we are doing around analysis and simulation, or digital prototyping initiatives. We are continuing to do that. So right now, we are at the point in the cost adjustment cycle where we are -- strategically I think we are on the right track. We are trying to get rid of those costs that really are just by-products of inefficiency, so we are just trying to get some of the friction out of the system. We are not making big decisions anymore about where we are investing and divesting.

Exactly. Again, just to kind of -- this overall theme, the investments are happening to drive top line and you can see that in all of Carl’s answer and we are trying to get efficiency everywhere else, so --

Yeah. One of the things we thought was important as we made these cuts is to still come out of the downturn with a balanced portfolio, making sure we had investments in some of our new initiatives as well as obviously supporting our more traditional products. And I think the same thing -- we think there are areas in the world that will come out of this. You know, we gave kind of an aggregate number for emerging economies but if you were to break that down, you can see real differences among them and I think on the last call, I highlighted -- you know, I think some of the emerging economies have real structural problems and long-term problems. Other ones I think have seen a decline but I think they will pick up. You know, the second category, I see places like India, China, Brazil doing fairly well and some decline over the last year, whereas I think there are parts of the Middle East and Russia that may have more long-term structural problems.

Your next question is from the line of Phil Winslow with Credit Suisse.

This is Dennis for Phil -- can you discuss the 2D/3D trends that you saw as it pertains to the differentiated graphics elements specifically?

Yeah, I mean, there’s not a great difference in terms of the change between 2D and 3D in the different geographies. If you were to look at different geographies and you broke it down country by country, you would see differential rates of adoption of 3D over time. And so our installed base looks different country by country. But there wasn’t a big difference country by country right now. 3D continued to perform better on a worldwide basis and the most difficult were the smaller 2D transactions.

Okay, and for Q2, what should we be expecting for a tax rate and interest income?

So for the -- as far as the tax rate is concerned, I think you can think about the 25% to 26% range, and as far as interest income, I would just look at your historical numbers and think about it that way, okay?

Your next question is from the line of Steve Ashley with Robert W. Baird.

This is Jack Miller filling in for Steve. At your analyst day, you talked about the economy creating an opportunity for customers to re-evaluate their design vendors and in the prepared remarks you called out you are doing business with some enterprises that you haven’t before, so the question is have you seen any changes in your competitive win rates recently, or percentage of the business that’s coming from competitive displacements? And I guess with that large deal that you called out, a competitive displacement, do you see anymore opportunities of that magnitude on the horizon?

Let me start backwards -- we really don’t forecast big deals of that size. That historically was a very large one. However, generally speaking, we have seen the trend that we discussed at investor day continue. We continue to win competitive deals. They tend -- as I pointed out before, they are tending to be smaller deals where people are being more cautious and conservative in the way they go about piloting and benchmarking different applications. But I think we’ve done two things really well -- pure replacements of competition and the other ones is where we’ve had deeper account penetration, where it might have already been a heterogeneous account. But one of the things about our software is, particularly as people are starting to examine their cost structures, they might find -- take for example mid- to large-sized manufacturing company. They will find that the total cost of ownership of our software might be five to seven times less that of the competitive software. And if they are using it in two different departments up until now, there’s a lot of latitude extended to these departments to make independent decisions. Under the cost-cutting microscope that most companies have in place right now, those things are not going unnoticed and we are really being the beneficiary of that.

Great, and then if I could get a follow-up on the Americas region -- the majority of that is North America but there’s also some emerging economies in that region, so I’m just wondering the 5% sequential decline in the Americas region, is that a good proxy for North America or was there a meaningful difference?

There was some variation in there. We actually had some -- you know, without getting into too much detail, we had some reasonable progress in South America that actually was a little bit different than North America, but not a huge variance. I don’t want to go country by country but I would say if you think about some of the things that were happening in South America, we actually had a little bit of a differentially better growth rate than the average for the Americas.

Your next question comes from the line of Israel Hernandez with Barclays Capital.

Carl, can you talk about the government indicated that you saw some sort of relative strength within the government vertical. Can you kind of talk about what type of projects governments are spending? And are you doing anything to perhaps increase your footprint within the government vertical to capture a greater proportional share of the dollars if some of this fiscal stimulus stuff comes out to -- you know, becomes available?

So our government business has done considerably better than the rest of the business, and specifically as you look at things like stimulus packages, you are seeing all kinds of government agencies spending. You know, we are seeing it on infrastructure projects we’ve heard a lot about. But you know, people forget that extends to lots of buildings, so it’s not just the roads and bridges and damns -- it’s also ports and airports and lots of government-owned buildings. I would say what we are doing is we are trying to put our net in the stream of money coming out of there. It’s coming out of the government at a faster rate than it ever has before. You know, and we have a much bigger investment in it but it’s also a different kind of sales process than we are used to in the private sector. The other thing to do is I wouldn’t limit it to just the United States. There are a number of other countries around the world that also have stimulus packages in place and we could argue which are more effective but some of them are actually turning out money, either more money proportionally speaking relative to the size of their economy, or possibly more effectively than the United States is doing it, and so we are working in places like that. You know, we are looking at things like rail and road projects in a number of places, as well as either the rebuilding or the installation of new infrastructure around the world.

And are these deals sourced principally through channels or do you have to go in there more of a direct sale?

It has a higher component of direct but we certainly have channel partners working around the world with us.

Your next question is from the line of Keith White with Morgan Stanley.

Thank you, guys. Two questions for you -- one is sort of a follow-on on that; have you guys -- I know the federal government, [they mandate] [inaudible]. Have you seen with the stimulus package a sort of a spillover effect into perhaps a non-government business that is not directly with the government but sort of people tooling up to be able to bid on some of those government contracts? Has that had any kind of significant impact on your business, would be question number one. And the second question I had was just on bundles. You talked about [inaudible] at the analyst day. What kind of progress are you making and what kind of reception have you gotten from the customer base on the bundles you have out there?

So a couple of things, the first thing -- absolutely there’s a spillover effect that will happen, so when you look at a lot of this government spending, it will be done in many cases primarily by the private sector. We are not seeing huge revenue kicks yet because it kind of goes back to the thing that I was saying before -- tooling up right now is people doing experiments and pilots and prototypes in which they buy a couple of seats of software to pilot a process or a new workflow. So for example if they used to do construction drawings in a 2D way and they are moving to building information modeling, they would be buying a handful of seats of Revit. What that will eventually mean if these companies are awarded the contracts, they will buy considerably more software and so we do imagine a lot of the government stimulus spending will actually look to us like money that came through the private sector. The second question was about the suites -- we have a handful of suites out there already. It’s a little bit early. You know, first reception seems good. I think the feedback is great value for the customers, very much appreciated but a little too early to tell. And probably by next quarter we’ll be able to give you a better update.

Excellent. Thanks, guys.

(Operator Instructions) Your next question is from the line of Sterling Auty with J.P. Morgan.

Carl, there’s lots of comments through this call about the direct sales and some of the improved, or the performance of the direct sales. What I am kind of curious about is how you are managing the direct sales versus channel, meaning how are the channel partners reacting to the increased exposure and increased activity that you are doing direct, on the direct side?

So what I would say is first of all, I mean, if you really look at our sales a little bit closer, there’s a real continuum of sales. There are a handful of accounts that Autodesk works with directly. There are ones where we work with our channel partners where we take the lead. There are ones where they take the lead all the way down to the very transactional ones that you would see with a large national reseller. So there’s a variety of ways we work and we somewhat arbitrarily cut it into two halves to describe it. Generally speaking, these two parts of the business are very complementary. Our channel partners appreciate when we win direct business because, for example, if we were to go into large OEM and win business there, the spillover effect to the suppliers is a big one. Same thing if we were to win a big account like we announced with an AEC firm with 5,000 seats, those are not the only ones working on those projects. It also often-times at the direct accounts, it creates lots of opportunities for our resellers in terms of providing services, providing consulting or training. So it’s a very symbiotic relationship within the ecosystem that I think works well, and I don’t see it at all as a zero-sum game where we are doing it. I think there’s something, however, that we were trying to point out that was slightly different, which was this idea that in these difficult times, when either us or our partners have a chance to work closely with their customers, we can help them solve important business challenges. Where I think we are struggling more is the customers who just woke up one day and said I need a copy of this and would go on a website and buy one. That’s the -- you know, and that’s a little bit of an exaggeration but that kind of more impulsive, small-size transaction is not happening at nearly the rate and that’s true on a worldwide basis.

Okay, and then the follow-up question is on the maintenance subscription -- as you look at the comments you made about the renewal rates in headcount, et cetera, I know you don’t want to get into a granular forecast but is it at least reasonable to believe that that revenue line could actually get to the point where it declines on a year-over-year basis before it starts to get better?

I think it’s reasonable that that possibility could happen.

I think the primary driver of this is going to be new seat sales.

Exactly.

Your next question is from the line of Dan Cummings with Lime Rock.

Thank you. Carl, relative to your comments about kind of change on the margin in some geographies, I was curious if that, if you could talk more functionally around AEC versus manufacturing? Thank you.

Yeah, I mean, I think on a worldwide basis, the AEC industry has been hit harder than manufacturing has been hit. And I think media and entertainment is a little different by geography but certainly there were parts of media and entertainment that have been hit hard. So I think generally speaking, AEC has seen the greatest layoffs, the greatest reduction in project spending and our business has consequently been more hurt there than in other places.

In terms of your most recent greater concerns, is it manufacturing or is it still a mix or AEC?

You know, I’d be more concerned about things like jobs and credit, which I think now is probably three or four quarters, certainly three quarters I’ve been talking about jobs and credit as being the most important things. I think those are the primary drivers. They affect the industry slightly differentially but fundamentally neither one of these I think is going to see huge improvement unless those two drivers get better. Banks, you know, banks will need to lend money and businesses have to start by feeling more optimistic and eventually by putting more people back to work.

With no further questions in the queue, I would like to turn the call back over to Mr. Dave Gennarelli for any closing remarks. Sir.

That concludes our call for today. If you have any further questions, you can reach me at 415-507-6033. Thank you.

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect and have a great day.