Autodesk Blasts Activist Investors After Sachem Head Moveby
CEO Carl Bass says activists are focused on short term
Comments come after fund reveals 5.7 percent stake in Autodesk
Autodesk Inc. Chief Executive Officer Carl Bass criticized activist investors for focusing only on short-term returns, after Sachem Head Capital Management disclosed a stake and said it wanted to start talks with the developer of design software.
Sachem Head, the fund run by Scott Ferguson that has taken on animal health-care group Zoetis Inc. and IT provider CDK Global Inc., built a 5.7 percent stake in Autodesk and intends to engage management on topics from financials to cost structure, according to a filing Wednesday.
“I don’t think these guys care one bit about return on investment. I think active investors, as the name suggests of their behavior, they are here for a short hit,” Bass said at a Tokyo press event. “You could cut every expense in almost every technology company and get better returns for the short term, and I would almost guarantee you would have no long-term future.”
Bass’s sharp comments contrast with the response lately among executives who find themselves in activists’ crosshairs, some of whom are giving in faster than ever to avoid the costs and reputational risks of a potential proxy fight. Sysco Corp. took six days to give board seats to activist shareholder Nelson Peltz and his partner at Trian Fund Management. Citrix Systems Inc. added Jesse Cohn, who oversees U.S. activism for Elliott Management Corp., to its board 47 days after he asked.
Bass, who has run the company since 2006, has been moving it toward cloud-based software subscription services, which generally boost recurring revenue and earnings in the long run. Autodesk shares jumped 25 percent last month, rebounding from a two-year low close on Oct. 1.
The CEO said Thursday he was willing to discuss the future of the business with shareholders, without mentioning Sachem Head specifically.
“I’m always open to listen to shareholders,” Bass said Thursday. “Engaging on building a long-term sustainable franchise, that’s good for customers, is a profitable business, that treats employees well -- I’ve never found an activist investor with any interest in the subject.”
Autodesk, based in San Rafael, California, has a market value of about $13 billion and an estimated price-to-equity ratio of 85.9, compared with the 72.8 average for application software industry peers compiled by Bloomberg Intelligence.
Bass said he hasn’t had direct interactions with the fund. Activist investors tend to buy at least 5 percent of a company’s stock and flag their intention to actively engage corporate executives and directors to boost shareholder returns by disclosing their holding in a filing.
“The simplest thing that you could ever do in running a company is to increase short-term returns. It’s by far the easiest job that we would ever be asked to do as an executive,” Bass told reporters.