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Updated from May 18


(ADSK) - Get Autodesk, Inc. Report

, which raised guidance at its analyst day in March, handily beat first-quarter estimates after the close Tuesday and boosted its outlook for the full fiscal year for a second time.

But the company also said second-quarter earnings could fall short of estimates, even on stronger-than-expected sales. Investors appeared to be honing in on that lower-than-expected operating margin; recently, shares of Autodesk were down $1.59, or 4.7%, to $32.10.

Rich Parower, portfolio manager of the Seligman Global Technology fund, cautioned Tuesday against reading too much into the initial reaction to Autodesk's guidance, noting the company should be able to achieve the higher end of its range. "They've got a lot of product and market momentum behind them right now," said Parower, whose firm is one of the top holders of Autodesk shares. "They had very strong results" in the first quarter.

Analysts echoed that sentiment Wednesday and advised investors to buy on weakness. "The fundamentals have strengthened in our view, and with raised annual guidance the stock is relatively less expensive than it used to be," Oppenheimer analyst Sasa Zorovic wrote in a note Wednesday. (Zorovic has a buy rating on Autodesk; Oppenheimer hasn't done any banking with the company.)

Piper Jaffray analyst Gene Munster believes the Street is overreacting to tweaks in the expense structure. "It's not that the operating margin is getting worse; it's more that the Street wants the operating margin to increase at a higher rate, given the revenue upside," he wrote. But "we believe managing to an operating margin target and investing incremental revenue into growing the Autodesk business is the right strategy to better position the company for the long term." (He has an outperform rating on Autodesk; his firm hasn't done banking with the company.)

San Rafael, Calif.-based Autodesk said it expects second-quarter revenue to range from $260 million to $270 million, with second-quarter GAAP earnings ranging from 22 cents to 26 cents a share and pro forma EPS ranging from 26 cents to 30 cents. Analysts' estimates call for second-quarter revenue of $256.4 million and earnings of 30 cents a share.

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That guidance reflects increasing investment in initiatives in its China business, lifecycle management and marketing programs, management said on a postclose conference call. "The last thing we want to do is disappoint anybody," CEO Carol Bartz said. "We're not trying to sandbag the guidance."

Autodesk also raised its guidance for the full fiscal year ending January 2005. The company expects revenue to range from $1.1 billion to $1.125 billion and earnings to range from $1.29 to $1.36 a share on a GAAP basis, and $1.44 to $1.51 a share on a pro forma basis. The company's previous guidance for fiscal 2005 called for revenue ranging from $1.05 billion to $1.07 billion, with operating margins of 15% to 17%, GAAP earnings of $1.06 to $1.15 a share, and earnings excluding charges of $1.27 to $1.36 a share. The consensus estimate on Wall Street calls for full-year sales of $1.076 billion and earnings of $1.36 a share.

With about two-thirds of the boost in revenue guidance coming from the first half of the year, Bartz noted the company has tough comparisons in the second half of the year. "There's no reason to ram a big fourth-quarter

estimate in there right now," she said. "It doesn't make sense."

Driven by a strong release of the AutoCAD 2005 family of products during the first quarter, Autodesk posted a 41% jump in revenue to $297.9 million from $210.8 million a year earlier.

Under generally accepted accounting principles, Autodesk reported first-quarter net income of $42.5 million, representing a nearly sixfold increase from $7.5 million a year earlier. On a per-share basis, net income totaled 36 cents a share, up from 7 cents a share a year earlier.

Excluding charges, the design software and digital content company said it earned pro forma net income of $48.8 million, or 41 cents a share, in the first quarter, which ended April 30. That compared to pro forma net income of $7.5 million, or 7 cents a share, a year earlier.

Wall Street analysts expected Autodesk to earn pro forma net income of 30 cents a share on $270.7 million in revenue in the first quarter, according to Thomson First Call. At its analyst day March 30, Autodesk raised its first-quarter guidance, saying it expected to earn between 23 cents and 28 cents a share on a GAAP basis, 27 cents to 32 cents a share, excluding restructuring charges, and revenue between $265 million and $275 million.

Operating margins in the first quarter improved by 15 percentage points from a year ago, reaching 18% on a generally accepted accounting principles basis. They reached 21% on a pro forma basis.

Viewed by some investors as a margin story, Autodesk said it should achieve fourth-quarter operating margins in the high-20% range. Autodesk has been in the midst of a restructuring to cut costs, but the company lowered its estimate for total restructuring costs to $37 million from $28 million in part as a result of attrition.