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Autodesk (ADSK +3%) is enjoying a nice lift today after the WSJ reported that activist investor Starboard Value is looking to spark a proxy battle at the 3D computer-aided design (CAD) software developer. The news comes following a few disagreements between ADSK and Starboard, which has a $500 mln stake (~1% of shares) in ADSK, noting today in a letter to the shareholders that the stock is underperforming the broader software market in recent years.

• Starboard dove into many details underlying its disagreements, touching on consistently missed Investor Day targets, lack of management credibility, and past governance concerns. The hedge fund also noted that ADSK spends much more than its peers, causing operating margins to underperform the industry. On that note, Starboard mentioned that there was insufficient clarity surrounding the financial impact of ADSK's recent cost-cutting measures, which included trimming its workforce by 9%.
• Starboard sees tremendous value that ADSK is failing to extract. The company's software is a staple within the construction industry; it is also used extensively across other sectors where design is critical, such as automotive, media, and entertainment. Given its footprint, Starboard is looking for much better performance, particularly in terms of margins. The hedge fund plans to nominate directors for election at ADSK's upcoming Annual Meeting to push for 45% adjusted operating margins by FY28 (Jan) and higher incremental margins on top-line growth.
• This is not the first time Starboard has had complaints. Last year, the activist investor was adamant that ADSK oust CEO Andrew Anagnost, citing similar reasons from today for the shakeup. While Starboard did not mention the CEO in its letter today, Mr. Anagnost could have a fight on his hands. ADSK has survived past attempts by Starboard to keep its representatives off the Board, turning to the courts last summer, who ruled in ADSK's favor regarding not needing to reopen the window to nominate positions for a contested election at its Annual Meeting.

ADSK is coming off a disappointing Q4 report, headlined by several variables casting doubts on guidance, including tariff impacts and the consequences of its headcount reduction. At the time, Andrew Anagnost stated that ADSK would be reallocating the savings of its lowered headcount toward its strategic priorities, such as the cloud and AI. Clearly, Starboard does not approve of this direction, requiring more details involving these priorities.

Given its past success in achieving its demands, Starboard Value's letter today may mark the start of some meaningful changes at ADSK. While macroeconomic headwinds can inject volatility over the next few months, Starboard is confident that ADSK should be performing at a much higher level. Shareholders are in agreement, pushing shares higher today in anticipation of Starboard getting its way in some form.