Based in San Raphael, CA, Autodesk’s (NASDAQ: ADSK) AutoCAD is the dominant brand in architectural and building design, with over nine million users of its flagship software. Over the last decade, Autodesk has virtually vanquished its competitors in this market, including privately-held Bentley Systems.

Autodesk was founded in 1982 by John Walker, one of the original authors of the company’s flagship AutoCAD software package. Together, with a band of co-founders who helped commercialize the product, Autodesk became the leading PC-based application for architectural drawings. The company came public in 1985, offering 1.6 million shares at $11.00 per share.

Best known for its AutoCAD software package, Autodesk’s applications stretch across building design, civil engineering, an estimated 55 percent of sales, mechanical product design, as much as 25 percent of revenue, and video editing and animation for the entertainment and gaming markets, the remaining 20 percent of sales.

We have been concerned for some time about Autodesk’s exposure to the architecture, engineering and construction (AEC) sectors which have dramatically reigned in their spending on automation and IT services in the last year. However, company revenue appears to have stabilized at an annual clip of about $1.6 billion, down from the $2.3 billion that the company recorded in calendar 2008. While we are not predicting a quick, snap-back to previous revenue levels, the company has the opportunity to participate in a global recovery, should there be an pick up in software spending in the economically sensitive customer segments that it serves.

Most of Autodesk’s revenues stem from PC based software, and the company should be a beneficiary of the Microsoft Windows 7 upgrade cycle. Microsoft’s long-awaited new operating system, Windows 7, addresses many of the shortcomings of Microsoft’s Vista, which was its first operating system debacle in many years.

Our view is that pent up demand exists for Windows 7, since many businesses have delayed purchases of new computers and software, due to Vista’s shortcomings, as well as the general economic malaise. The Windows upgrade cycle should drive an upgrade cycle for PC software developers whose products run on Windows 7, such as Autodesk. Autodesk recently announced that nine of its products, including its mainstream AEC and mechanical desktop products, now support Windows 7.

Finally, a weak dollar will benefit Autodesk since over 60 percent of its sales come from outside of the United States.

While it will be several quarters before Autodesk begins to show growth, revenue has stabilized, the company has exposure to the Windows 7 upgrade cycle, and derives over half of its revenues from overseas markets —all of which bode well for its future.