We catch up with Carl Bass one week after he leaves Autodesk. The big guy leaving the biggest CAD company had caught us – and many others – by surprise. What really happened? Here is a transcript of our call.
But first, Carl wants to discuss the regulations that govern what he is about to say.
Carl: When it comes to signing legal papers, we have a bunch of people trying to figure out stuff, but, under the law, we have to file all of this information with the SEC. It has to be totally truthful.
In general, the difference between stuff like product stuff, how big the crowd is at a show…that’s one thing. Actually, the law allows for what they call puffery, but when it comes to filing the legal documents for the regulatory meetings and things, they don't have a sense of humor at all about it.
EngCom: Okay, alright. Sure, I understand.
Carl: Things like the press release that we put out, or the other documents, they're all filed with the SEC. They're signed off by everybody. For the people who have wanted these conspiracy theories, if it really was a conspiracy, we would actually have to document it.
Does that make sense?
EngCom: You're saying that there was a misinterpretation of why you left Autodesk?
Carl: I’ll give you an example. There was a huge thing on Twitter that I got fired because of my comments that were published the day before in Pando. There were a ton of people who were convinced that I got fired because what I've been saying about Trump.
EngCom: Right. That's my favorite theory [joke]. What did happen, then? Was it the activists?
Carl: Here's what happened. About two years ago, I went to the board and said, "It's getting time for me to step down. I've been doing this job a while.” And it was time to hand off the reins. I think, from the company perspective, it was time for a new leader. It was time for me to go do other things that I have interest in doing.
Last fall, we came up with a plan that we were starting to execute to do that transition. Then, in November, these two activists—one in particular—showed up and said they wanted to see some changes in the company for one reason or another. They worked themselves onto the board.
As it turned out, their influence on the board has not been significant. Many people, like in our case, these activists, they invest in everything from oil, to retail, to engineering software. They don't know much about this business. They took advantage of the business transition that was going on and said, "Profitability should be higher.” Whatever. But, during the course of the year, they basically didn't say anything.
When they showed up, we collectively—meaning me, the board and the management team— decided that this was a bad time to do a transition. As you look for the successor CEO, it would be really difficult to either attract an outside CEO to a situation where there are activists on the board. That would mean people looking over your shoulder, criticizing you.
It would also be unfair, whether the new CEO was an internal or external candidate, to have these people there. It would be a bad way to start being CEO. There's a lot of work to do in the first year of being CEO: building your team, keeping the wheels on the bus rolling and manage the business. The last thing you need to be dealing with are acrimonious board members.
EngCom: Was the board having problems with changing the licensing model?
Carl: Actually, the activists liked the licensing model change; the board likes it; everybody likes it. It's exceeding our expectations from the business perspective.
EngCom: So, that licensing model change is not in doubt. They are going to go through with it?
Carl: Not at all. No change in direction at all.
EngCom: So, what were the activists having a problem with?
Carl: A year ago, they didn't like the stock price because there was a lot of uncertainty. Now they love the stock price.
EngCom: What would you say the uncertainty came from?
Carl: We hadn't gone through the transition yet. We still were in perpetual license.
Look back at Adobe. For the first few years of their transition, the stock market doubted the validity of the new business model and then, subsequently for the last year, it's fallen in love with it. We made that change last year. There are a lot of things we could've done wrong. The stock market doesn't like uncertainty. Now that we've already done it and there are two quarters that are good—and, in addition, a partial quarter. People can see the results. They got really happy about the business model.
EngCom: Adobe was providing an example of switching to term licensing for the software industry. But if you look at Adobe’s performance [after the transition], they bottomed out and then it came back up. Where would you say Autodesk is, if along a similar trajectory?
And, again, does the board still have faith that this was the right approach?
Carl: Totally. There is seriously nobody who doubts the model. You'll see it continue with incremental changes. No dramatic changes. The two things we did: we decided to change from a perpetual license post-maintenance to the subscription model. Then we decided to move software to the cloud. You can talk to Andrew and Amar, but you'll see. On both those things, I would be shocked if either of those changed.
EngCom: You're saying there's no going back to perpetual license? Even though Autodesk was the first in the CAD industry to do that? You don't think that was a risk?
Carl: Yes, but guess what? The CAD industry is a little bit behind the rest of the world.
EngCom: Yes, agreed, but there's a bit of a risk involved with being the first.
Carl: Yeah. I think you've already seen PTC is starting to follow the new business model; possibly Dassault. They're all putting their toes in the water. Five years from now, I will be shocked if there's anybody who still sells perpetual software. It's just a question of timing. The world is not going back; Autodesk is not going back.
EngCom: You can't name anybody on the board voting against that switching the business model?
Carl: No. Let's be clear, and this is again, where I think outsiders, for the most part, on the boards are not involved in those decisions. That is a management team decision. Boards get involved in the selection of new CEOs, the hiring/firing of CEOs, prediction planning. They're involved in corporate governance. Certainly they have an oversight role, but things like moving to the cloud, that's a decision the management team makes.
There's no dissenter on either of the two vectors.
EngCom: Were there some questions, maybe fine tuning of how to move to the new business model?
Carl: No, no. You're just barking up the wrong tree. Why do you have this sense that there was some dissent?
EngCom: The company has not been profitable. There must have been some protests. I can only attribute that to the business model changing. Could you give me something else that that would be attributable to?
Carl: No, this is one objection.
Let's back up. Activists are just investors. They invested some money a year and a half ago. They've made a bunch of money. I expect over the next year, they'll sell their stock and they'll invest in another company. This is what they do. This is their business.
EngCom: Yes, but dissent has been reported, though. There were fights with the activist investors. You're denying that?
Carl: Deny. I'll tell you it didn't happen. It's completely not true.
EngCom: Alright. You were applying for this for two years, Carl. You told Autodesk that you were leaving?
Carl: Slightly longer than two years ago, we had the conversation.
EngCom: You had better things to do? I'm looking at a picture of you in your woodshop.
Carl: When you see my brand-new metal shop, you will understand.
EngCom: So, you’ll be working in the shops? For the time being, or until your non-compete clause runs out?
Carl: No, no, no. I'm on the board of Autodesk. I’m not going to be competing with Autodesk. I'm staying on the board. I'm not going to build any CAD software.
EngCom: I'm sure you could, but just not allowed to?
Carl: No, I could tomorrow if I was to step down from the Autodesk board. But I’m not going to.
EngCom: You're back to building things, then?
Carl: Yes, I'm really interested in, have invested in and am an advisor to probably close to a dozen companies. I'm going to keep working with a number of these small companies. Others are actually quite large in size.
EngCom: Yeah, you're on the board of HP, aren't you, too?
Carl: I'm on the board of HP. I'm on the board of Zendesk. I'm advisory to about 10 or 12 small companies. Some of them are private. A company called Planet, the people who put cubesats into space. Yeah, I'm an investor and an advisor to a whole bunch of these.
I'll be doing some advising for Google X, on some of their moon shots. I have a whole range of stuff and what I'm more interested in doing is building in my shop. I have a couple of things I've invented that I'd like to try to turn into profits.
Carl: That's what I'm off to do.
EngCom: Am I see your projects on Kickstarter?
Carl: I'm not sure.
EngCom: Right. You can probably provide all the investment you need.
This business of naming two successors? Another first in our industry though I’m hearing this happens often enough in business – co-CEOs. Did you pick them?
Carl: This is important so let's go through this. I could've announced yesterday and said I was staying around until they found a new CEO. That's done sometimes. It's not ideal and there’s a couple reasons why. External candidates don't take it that seriously if the old CEO is there. They start to wonder "Is this guy really leaving?" Outgoing CEOs have sometimes changed their mind along the way and made it difficult for the board. They're like, "Yeah, I've been leaving, but if the replacement is [this person], I'm not leaving." That becomes dysfunctional.
Most important to me, though, was that this way [leaving immediately] forces an urgency for the board to make a decision. If I were still there, they'd be casually going, "Yeah, we're working on finding a successor." Now there's an urgency and I think they now have a very short time frame.
EngCom: Yes, a very short time frame. Most of the company did not know about your plans of leaving, Was there an inner circle, perhaps?
Carl: This is another one of those things where you have to go back to the law. The moment we officially decide that I'm leaving, I think we have four business days to report it to the SEC. From the moment there is a firm decision. Yet, the planning and thinking about this has been going on for months, and as I said, the initial planning started years ago. The actual decision to resign, when I gave my resignation letter to the board, was on Monday, and we announced it Tuesday morning. That's completely statutory. It's driven by the law.
There is no way I could've said to everyone months ago that I was leaving. It's not constructive in a large organization, to have a lot of people walking around wondering about the leader, the leadership team, or the successor. It's not very productive.
EngCom: It was very sudden then, for all of the people at Autodesk, right?
Carl: Oh yeah. The people who first heard about it on Tuesday, they were very surprised. Which I'd say is not a testament to the suddenness of the decision. It's a testament to us being able to keep it secret.
I think, as a team, one of the biggest things we worry about, and generally Clay and their team worry about, are leaks. The worst thing is, information leaks before you're prepared to talk about it. I was actually very proud of the organization because it was big news. We didn't read about it weeks beforehand.
EngCom: I'm surprised it didn't get out because, certainly, there were signs. Like you exercising your stock options. That was public information, right?
Carl: Yeah. About the sale of stock options, I had actually put that plan in place months before. It even was triggered by the price and stuff. Our company’s executives are strongly discouraged from selling outside of 10b5-1 plans. There's only certain times you can put plans in place. When you put a plan in place, it's at least 90 days before sale can take place. The way you do that is say, "I'm going to sell the shares if the price is more than X." Then that takes place in subsequent months or years. I think every piece of stock I've ever sold in the last probably 10 years, has all been through these stock plans. I've never woken up in the morning and called my broker, so to speak.
EngCom: Is that what they call a "planned sale"?
Carl: Yeah, that's a planned sale. In the case of Autodesk, every executive and every board member is strongly discouraged from selling outside planned sales. We don’t go out and just sell it, either. Same thing with buying stock. And you can't buy and sell within short amounts of time.
There are a huge number of restrictions on it that somebody could've looked and said, "You know, Carl's selling and that may indicate he's leaving in some period of time.” I've been very candid with everybody and said, "As CEO of a public company, you get a huge amount of your net worth tied up in a single stock." Every wise financial advisor would tell you that a more diversified portfolio is healthier.
I've always said, "I'm totally committed to Autodesk. The stock does well, but that doesn't mean I'm going to have my entire net worth tied up in Autodesk stock."
EngCom: Okay. You still have some significant ownership in Autodesk?
Carl: I still have a huge amount of Autodesk stock right now. It's tens of millions of dollars. I have a lot.
EngCom: Tell me about the people that you picked to replace you. Andrew and Amar, they're temporary CEO’s, right?
Carl: Yeah, and by the way, in this case, I didn't pick them. The board collectively picked them. I think they're each responsible for different things going forward. Andrew's been responsible for a lot of the business model, and Amar's been responsible for products. You know these guys. Andrew knows a tremendous amount about products. And Amar knows a tremendous amount about marketing and the business.
They were the two most natural selections for people to keep things going, but the truth is, they're also well regarded by the executive team and it'll fall on the shoulders of the entire executive team to keep things moving until the next CEO is chosen. Jeff will keep doing what Jeff does. Steve will keep selling. Scott will continue to be responsible for finance. It really is a team effort, running a company.
EngCom: No big changes in the next level of management underneath you?
Carl: No, I think Amar and Andrew have been very clear that they're not changing anything. When there's a new CEO, they'll naturally be changes, but until then I think they're keeping it very stable.
EngCom: Right. What about your CTO, Jeff Kowalski?
Carl: I hired Jeff right out of college, so I've known Jeff for a fair amount of time. Jeff is a very smart and very talented guy. Jeff has the perfect job for him. I don't think he has any interest in the CEO job, in a company like Autodesk. Yeah, there's too much other stuff you have to do. Jeff is fantastic at what he does. I think he really enjoys thinking about how things are going to be in the future, and he's been incredibly important in leading the company through the technology changes, and I think he wants to keep doing that. Thinking about all the other things that are on the plate of a CEO -- I don't think he has any interest in those.
EngCom: Am I reading too much into your departure to predict that Autodesk will stop being a product centered company, as it had become during your tenure? Will it go back to being a sales and marketing driven?
Carl: I think it's too early to predict anything. I think under the interim leadership of Amar and Andrew, like I said, I wouldn't expect many changes at all in anything. In a three-month time frame, you're not going to be able to pick up on that.
But it’s fair to say when a new CEO is chosen, they should have complete latitude. I think in terms of who the board chooses, that'll be the first sign about what [the direction] is. I've talked to a number of investors over the last couple of days, and the single thing they've told me that is most important is to continue to find a leader who understands the product issue. While they are not necessarily hands-on building the products, they have the same kind of vision for the industry and closeness to the products. That's how big investors believe you continue to build Autodesk as a great company.
EngCom: Do you think one of the co-CEO could be the next CEO? Or is there a global executive search going worldwide right now?
Carl: Yeah. I think there are a number of people within the company who are very capable of taking over, but it's the obligation of the board to try to find the best person in the world to do this. There's a search going on. We've hired a search firm. I think within the next few months, a decision will be made, and the new CEO will be announced.
I think even if you look back to the time, if you remember, when I took over, there were many people who doubted. Carol was kind of the star, in many ways. They thought, "Oh no. Who did they hand the company over to? Things are going to go bad with this quirky guy taking over."
I took over. I would say during the first year, I don't think there were many changes. It takes a while to change direction in a meaningful way. You can make the instant decisions, but not those long-term product vision and cultural changes. They take place over years. They don't take place over the short term.
I expect this ... You have all the people who had a huge hand in what Autodesk has become in the last seven years. I think Autodesk will retain its core values.
EngCom: So, you now become an ordinary board member, not chairman of the board?
Carl: No, no, no. There's been a chairman of the board for a long time, Crawford Beveridge. Crawford still is chairman and I'm just a member of the board.
This is disclosed in the legal documents, I will stay as a board member certainly through June of this year. Then I will be re-nominated and stay for another year. I'll be on the board for at least a year and a half. Then the decision will come down for me and the company. Sometimes it's helpful to have the old CEO around. Other times, there's a shelf life to the old CEO. New people don't need the old CEO looking over their shoulders. That's all in the future, so 18 months from now, we'll figure out if it makes sense for me to stay.
[End of formal interview]