Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2007 Autodesk Incorporated Financial Results Conference Call. My name is Melanie, and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session at the end of this conference. (Operator Instructions). As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Ms. Sue Pirri, Vice President of Investor Relations. Please proceed.

Thank you, operator. Good afternoon everyone, and thank you for joining us today, as we report results for our fourth quarter of fiscal 2007. With me are Carl Bass and Al Castino. Today's conference call is being broadcast live through an audio webcast. In addition, a replay of the call will be available via webcast on our website, www.autodesk.com/investor. During the course of this conference call, we will make forward looking statements regarding future events and the future performance of the company, including information regarding the restatement of our past financial statements, our guidance for the first and second fiscal quarters and for fiscal year 2008, the factors we use to estimate our guidance in those periods, our competitive position, our future business prospects and revenue growth, our market opportunities and trends for our products in various geographies. We caution you that such statements reflect our best judgment based on factors currently known to us, and that actual events or results could differ materially. Please refer to the documents we file from time to time with the SEC and specifically our 10-K for fiscal year 2006, our 10-Q for the quarter ended April 30, 2006 and our periodic 8-K filings including the 8-K filed with today's press release. These documents contain and identify important risks and other factors that may cause the actual results to differ from those contained in our forward-looking statements. In adherence to regulation Fair Disclosure, Autodesk will provide quarterly information and forward-looking guidance in its quarterly financial results press release and this publicly announced financial results conference call. We will not provide any further guidance or updates on our performance during the quarter, unless we do so in a public forum. Autodesk does not assume any obligation to update the forward-looking statements provided to reflect events…

Thanks Carl. Once again, Autodesk delivered great performance. Net revenues in the quarter were $497 million, 19% higher than last year. For the full year, net revenues grew 21% to $1.840 billion. Each of our geographies grew substantially compared to the fourth quarter of last year. Revenue in the Americas was $203 million, an increase of 15%. For the year, revenue in the Americas increased 21% to $734 million. EMEA revenues were $189 million, an increase of 26% as reported and 15% constant currency. For the year, EMEA revenues were $687 million, an increase of 23% and 21% constant currency. Asia-Pacific increased 18% to $105 million. Revenues in Japan decreased slightly compared to last year. Excluding Japan, revenues in Asia-Pacific increased 34% compared to last year. Fluctuations in foreign currency exchange rates had an immaterial impact on revenue compared to the fourth quarter of last year. For the year, revenues in Asia-Pacific increased 17% to $418 million. On a constant currency basis, revenues increased 20% in fiscal 2007. Looking at the divisions, Platform Technology revenue increased 5% over the fourth quarter of last year to $201 million. Consistent with our increased focus on moving customers to vertical and 3D products, both AutoCAD and LT grew more slowly this quarter. Revenue from LT increased 7% compared to the fourth quarter of last year. Total LT upgrade revenue declined compared to last year, because of strong cross-grades from LT to higher priced products. Quarterly AutoCAD revenue increased 4% compared to last year. Maintenance revenue from AutoCAD subscriptions increased 36% compared to last year, while upgrade from AutoCAD decreased again as planned. For the year, PTD revenue increased 10% to $806 million. Quarterly Manufacturing Solutions revenue was $98 million, an increase of 31% over last year. As Carl mentioned, AutoCAD Mechanical had another…

Thanks, Al. Before we take your questions, I would also like to talk about the new fiscal year. As you can tell from the guidance Al just provided, we believe fiscal 2008 will be our fifth consecutive year of outstanding financial performance. I would like to share with you some of the reasons for our optimism. A number of the headwinds we faced in 2007 will subside in 2008. Customer adoption of our Linux-based Advanced Systems is significantly improving and our Japanese business is stabilizing. The substantial year-over-year decrease in three-step upgrade revenue has passed, as our annual product retirements become less significant by design. The options review is almost behind us. Our business performed remarkably well during the distraction of the review, but it was a distraction. Customer demand for Autodesk Solutions remains very strong. Once again, revenue from new seats and emerging businesses was approximately two-thirds of total revenues for the year. As we start our launch of our new family of products around the world, we continue to enjoy strong underlying market demand. Growth in our 2D business continues to be strong. Revenue from new seats of 2D grew 13% in fiscal 2007. This is important because 2D growth fuels our future opportunity for 3D migration. Our 3D Solutions continue to gain momentum. Our model-based 3D products reached 24% of total revenue in the fourth quarter. And we are still in the early stages of penetrating our large installed base of 2D users. We estimate that less than 50% of our growing 2D base has added in 3D, leaving significant opportunity for future growth from our own base. And in addition, we continue to win market share from other legacy 3D systems, as customers adopt our mainstream solutions. Subscription continues to demonstrate robust growth. As you know, subscription reduces volatility and provides a consistent high margin revenue stream in place of the annual focus on upgrades. Finally and most importantly, I am optimistic because of the market trends that continue to drive growth in our business; sustainability, expanding consumer choice, infrastructure investment around the globe, growth in emerging economies, the drive to keep data digital, and the growth in the use of animation in films, TV and games. Our customers want solutions that make them more competitive in a phase of these important worldwide trends. Autodesk is providing these solutions. Operator, we are ready for questions.

(Operator Instructions). Our first question comes from the line of Steve Ashley with Robert Baird. Go ahead.

Hi. I wonder if you might be able to breakout for us what the AutoCAD new seat license growth might have been in the period.

We are not going to break it out at this point.

Well, maybe I could ask a question about the platform revenue. The platform revenue grew about 5% this period, had grown 9% in the previous quarter. And you have talked about that being a goal or maybe growing that low double-digits. Can you comment on mid single-digit growth there, and what if you still think, a low double-digit growth rate is reasonable there? Thank you.

Yeah, I think the previous guidance we gave is still fair ground. What I would say though is and we were very pleased by the growth in our other products, the vertical products, the 3D products, subscription. So, in some ways, it was a movement of revenue from one bucket to the other. But I am still thinking of around a 10% growth rate for that business is more than reasonable.

Great. Thanks so much.

Our next question comes from the line of Jay Vleeschhouwer with Merrill Lynch. Go ahead.

Thanks. Good afternoon. Carl, how are you thinking about the relative growth rates of the verticals in fiscal '08? When you look at fiscal '07, it looks like MSD minus the Alias acquisition grew about as fast as the former ISD at around 20% and Building significantly outgrew both. So, what's your thinking about how that might play out in '08? In addition, can you comment on the recent internal reorg with the abandonment of ISD and the movement of some resources around the company?

Jay, that abandonment term sounds so harsh.

I know. I was struggling for a multi-syllabic word.

Okay. Let me start with the short words. In terms of the relative growth, I don't expect much change. I think if you were to look at the product lines, I think extrapolating the product lines forward is probably the best indication of what you should expect to happen. So, I think the Building market continues to do really well on a worldwide basis and I expect that to continue. And I think in the other markets, a 20% kind of growth rates are what we expect. I don't see any dramatic shift. But one thing you have to be aware of is a [part here], which leads to the second question, was there any other reorganization? In this year, we will be reporting differently, as a number of products have moved. And so, let me just comment on the reorg, and then we can go back and maybe Al will comment on the reporting of that. Reorg was really done to accomplish a couple of things. What we really are beginning to see from our customers is this desire for the integration of our products that no building exists independent of the land on which it stands. And so, the idea of bringing our architecture, engineering, and construction products together was a very important thing, as well as a number of the other things, we are seeing this convergence, this real desire for our products to interoperate. So, we did a number of things in the reorg really to accomplish that from a structural point of view. We've been working on it. And for those of you who have seen things at like Autodesk University, we've been talking about it for a number of years. But we just wanted to put in the structural reinforcement that makes sure that the company operated in a way that we were starting to see interoperability and the meshing of the products. So with that, you will see reporting that's different this year. What I would say is we have not decreased our commitments to the infrastructure solutions at all. As a matter of fact, what we thought is, we move the component parts to places where they would work better with the other parts of the division. And so, the civil engineering part of ISD is now with the newly renamed Architecture Engineering and Construction group, formerly known as BSD and a geospatial part is with the platform division. So if anything, we see this as a bigger investment in what was formerly known infrastructure, and certainly not abandonment.

Okay, that's fair. Now, as a part of that and the outlook for the verticals, what are your expectations for adding to sales capacity in the year? There is some discussion out there that you may in certain regions and some verticals selectively add and qualify certain of the resellers for added capacities to drive vertical growth, can you comment on that?

Yes, we are continuing our, I'd say multi-year program, say a channel, capacity and capability. As I tried to point out before when people have asked about this, the important number to look at is the number of people actually selling on behalf of Autodesk within our resellers as opposed to the actual number of resellers. And we think we've done a good job in winnowing down the number of channel partners. And now, we are looking to expand those. And in some cases that expansion is geographic and in some cases that expansion is to verticals. If you just go back for a second, Jay, it only makes sense that we are able to add this much revenue by adding that much sales capacity. This was a direct sales force. You would see the correlation much more closely. But if you look back, over the last four years, we've added more than $1 billion in revenue. And obviously, we have had to do that with 85% of the business going through our channel partners.

Right. And then lastly on Japan, you talked about issues previously of both capacity and capability there. What's the latest on that?

What I said in my prepared remarks is Japan is stabilizing. But I would say it's still not meeting our expectations. We have made a number of leadership changes because we think that's part of the problem. And then we think there are other issues that I have referred to before, things that taken to the structural characteristics of the market in the reseller channel and we are making changes there as well.

Thanks Carl.

You are welcome, Jay.

Our next question comes from the line of Richard Davis with Needham & Company. Go ahead. John Mayeta - Needham & Company: Hey, thanks very much. It's actually John Mayeta for Richard. First question I had, Carl, can you actually repurchase shares in the open market, or do we have to wait till the SEC comes back and you are able to actually file your financials.

We can't purchase any shares until we are back on file. John Mayeta - Needham & Company: Okay. And then product road map question. With regards to simulation, currently, obviously there is something you partnered with ANSYS to fill that gap. Longer-term, is that something that you actually build out internally or is that something you do a little tuck-in acquisition? How do we think about simulation in the long-term?

So, I think when you look at simulation analysis, the first thing to remember is, simulation analysis for us covers all of our markets, and so where ANSYS is really focused on the mechanical design market. And we will continue to partner with ANSYS, but I think you will also see us as we've done in the past year, continue to make acquisitions in simulation analysis. When you look at the vision, we have kind of laid out what's important to our customers, it's really this whole idea of building digital prototypes. And that's true whether it's a bridge, whether it's a car or whether it's a building. And in order to do that we need more technical capabilities. So, I think you'll see acquisitions. But in general, they follow more and more of the small tuck-in type of acquisitions. John Mayeta - Needham & Company: Got it. Thanks very much.

You're welcome.

Our next question comes from the line of Peter Kuper with Morgan Stanley. Go ahead.

Great, thanks very much. Just making sure I've got the number straight on the currency, foreign exchange rate, rather before I think we had those about $1.28 to the euro, is that right versus then of course where we are going here from a currency given the Q1 guidance?

We never gave you the exact rate, but basically what we tell you is, on the date of our call we look at the market rate and we back off a few cents on several cents just to be conservative in case if dollar were to appreciate. But we don't give the exact rate.

Okay. So, I guess I am getting a benefit. You are actually being more concerned if the dollar weakens; you have got a pretty large boost considering your internal plans. We're taking kind of start, just a touch for the next quarter and the quarter after, but we are also looking for an even stronger euro to the dollar. So, I guess, what I am getting at is, how much are we rebasing here in the guidance? We are just a little more conservative overall due to the back half of the year feels to it or is there something else we should be looking at for why the guidance was a little bit light in the first half of the year versus the back half?

We understand your guidance draw by the way. So, it's like identical what we said last quarter, except we have added the Q2 guidance. And in terms of the mix by a quarter, it doesn't really differ that much from prior years, if you take a hard look at it. It's fairly equivalent. There is always timing of promotions and the (inaudible) happiness, things like that they go on and can change the seasonality somewhat, but it's fairly close to prior years.

Okay. All right. Thanks.

Our next question comes from the line of Phil Winslow with Credit Suisse. Go ahead.

Hi guys. I just wanted to spend a moment on the operating expense side of the house as far as guidance goes. May be margins are a little bit below where they should for the first half, but above for the second half. I wonder if you can give us a sense for just investing there, sales, marketing and R&D and sort of what your initiatives when you look out over the course of this year?

I think we talked about already continuing to make sure that invest in channel capacity. That's an important thing that we have been continuing to do. And we think it continues to be important. When you look at a number of the growth drivers like 3D or emerging economies, obviously it involves more capability as well as capacity. So, we are going to keep investing there. And we really kept our R&D investment pretty consistent over the last three or four years 19%, 20% of revenue in R&D. We intend to keep that so as the revenue goes up continue to invest. So, I don't see a big mix shift when you look at the big line items.

And then, any progress on any particular vertical, last year it was sort of a focus on manufacturing, any changes this year?

No, I think we have talked about manufacturing, we continue to believe that it's our biggest opportunity. But the other markets are doing very well and they are very important as well.

Okay, great. Thanks guys.

Our next question comes from the line of Chris Sailer with Goldman Sachs. Go ahead.

Hi guys. Just a quick question on the timing of the filing of the financial statements that maybe after that happens any. How can we expect the buyback to go?

The goal of buyback hasn't changed. So, as employees exercise stock option, and give them the employee stock repurchase program, our goal continues to be to offset any dilutions in those programs. So, the buyback don't necessarily tie to that amount quarter-by-quarter. But, over the course of total quarters, we want to pretty much be offsetting the dilution from those programs. That's what we intend to do with it.

Okay. And timing of the financial statements?

We have a number of processes that go through with the auditors. And then we are going to pre-clear with SEC. So, we can't really control that right now. We are going to get it done as quickly as we can. That's all I can tell you.

Okay. Sounds good. Thanks.

Our next question comes from the line of Philip Alling with Bear Stearns. Go ahead.

Thanks very much. Carl, I wanted to come back to the comments that you've made with respect to the less than 15% figure as far as the 3D penetration into your 2D base. Just wanted to get a bit more color there. So, the denominator in that is inclusive of LT and AutoCAD on a total installed base, that's my assumption there. And also if you could just give us a sense about what has your experience been as far as your LT users that have decided to purchase a 3D solution?

When we usually talk about this we don't include LT in the denominator. But, what we have seen is a fair number of LT users moving to our vertical products. And certainly the LT user in some ways is very different than the AutoCAD user. So, we would never expect the same kind of migration from LT to the vertical and 3D products. But we have seen there, we are seeing a healthy crossgrade there.

Okay. Just with respect to acquisition revenue in the quarters from Alias and Constructware, I believe that you had said in the year-ago quarter that you had about $3 million in Alias revenue there. Could you let us know what the figures were for the quarter you just reported and what they were for Constructware as well?

We are not doing quarterly updates anymore. The problem with that is, it is very tough to say what organic is versus acquisition at some point, because we fully integrate this in our business with our sales group, with our products. What we did say at the beginning of the year is we thought that acquisitions would add about 5% to our growth rate for the year and that's still in the ballpark. But it's very tough for us now to accurately split it up quarter-by-quarter.

Could you then give us any color in terms of how you think those businesses have done since you have acquired them?

They have performed according to expectations and beyond. And they have done very well for us, both on the manufacturing side and the animation side.

Okay. And I guess the final question from me. There was an earlier comment about the deceleration in growth in the platform technology divisions that you report. In any way, does that reflect some of the changes that you made in incentives for your resellers with respect to the sale of the AutoCAD solution? Or how should we be thinking about that going forward?

Well, the key point; the goal of that distribution chain is to incent resellers to sell the higher end products. So, I hope it has something to do with that. That's what we are trying to do. We really want our resellers to add value by selling vertical products and by selling 3D products, that's one of the goals. There were other things going on during the quarter. So, we had crossgrades in LT that did well. We also had a fairly tough compare. In Q4 of last year, we had that last three quarters of upgrades. So the compare is tougher. But keep in mind, our strategy is to migrate our customer and that means our resellers to the higher end products. That's what we want to do.

Thanks so much.

Our next question comes from the line of Brendan Barnicle with Pacific Crest Securities. Go ahead.

Thank you. As a follow-up to that question, as you have made the changes and incented the channels to sell more of the vertical products, there has been some changes in the channels and some resellers are no longer in it. Has that process normalized now? Are we through the changes there and that sort of a stable state of resellers now?

We would always say that we constantly monitor our channel partners for their performance. And so, I think it's an ongoing process, just like you would manage an internal sales force. You can't rest on the work that was done three years ago or something like that. So, I don't think you should expect to see from us anything too dramatic, but I think you'd be going too far to say that we are just going to be passive about how the channel performs.

And several of the big promotions ended with the end of the fiscal year. As you look out to next year, what are those promotion plans going to be? Is it similar to what we have seen in the past?

Let me just take the opportunity a second to remind you that some of the promotions are actually driven by us and many promotions that you guys encounter out there are actually driven by our resellers. And so, we only have a handful of promotions during the year, trying to get some strategic initiatives accomplished. And so, we have very few promotions planned and much of what you will see is stuff related to our channel partners. What you will see is things from us like there is much more systematic moving up of the incentives from one set of products to the other.

Can we assume from that, Carl, that it's fewer promotions this year than last year?

No, I wouldn't expect that. I think, what I was really trying to say is sometimes when you encounter a promotion, it's really hard to tell if that's an Autodesk inspired one or one that channel partners created on their own.

And Brendan, you should keep in mind that the level of promotion of last year was just normal. We have promotions every year and there hasn't been anything unusual going on.

Great. And then, Al, as you look at the increase in the tax rate, the 25%, 26%. How should we be modeling that? Is that going to increase quarterly or are we going to be modeling 25.5% through the year? Any additional color you can give us there?

The best thing to your model right now is to use that range of 25%, 26%. What I said in the past is the tax rate is based on, first of all, the mix of foreign and US earnings. We have a higher tax rate in the US than we do internationally. We have a very efficient tax structure internationally. And also it's based on the assumption of how much of the foreign based cash needs to be repatriated back to the US. And of course when it comes back to US, you obviously have to pay taxes on it. And then the third thing of course that impacts it is changes in the tax legislation in various countries, including the US. But if you look it at this year, the mix of earnings has gone more heavily to the US recently. And just the fact that we have been very successful in gaining productivity and particularly in the US, we have been driving that for several years, and that's helped us get more profitable in the US. The second piece of it though is, Japan has been less profitable than we planned. And the issues we've been doing and that helps drive us the other way. Then on the tax legislation front, there used to be something called a FSC, foreign -- here what it stood for, but it was related to our exports. We used to get a tax credit and that changed to something called ETI, extra-territorial credit, and that got eliminated this year, replaced by a different program that we can't take advantage of. So, that costs us something in that rate too. So there are always factors like that that can change, but right now I'd stick with that range.

Great. Thank you.

Our next question comes from the line of Brent Thill with Citigroup. Go ahead.

Thanks. Carl, on Japan you mentioned it is stable. How do you think about the business when it's back up and running at the level that you would like to see? Is that a six-month turnaround or are we looking at another year in terms of just high level view of how much longer you think it's going to take?

Brent, what I would say is, it's really still not meeting our expectations. The revenues grew 3% sequentially. And when I think about it, it is a little bit hard to predict. The first thing we had to see is this flattening out and moving to a slight improvement, we've made a number of changes. And I hope to see steady improvement throughout the year.

Okay. So, the 13% to 15% revenue growth for next year assumes that Japan will just be stable, not improving?

Let's put it this way, we were fully aware of the Japan situation when we prepared our guidance.

Okay. And then just on new seat growth, that number looks to have faded through the year. I think it faded in Q4 of last year. Anything that we should read into the growth rate relative to the last couple of quarters?

No, I think if you look at industry revenue, it increased 15% over the same quarter last year and for the fiscal year, it grew 20%. So, I am pretty pleased with that kind of growth rate.

Thanks.

Our next question comes from the line of Brad Manuilow with AmTech. Go ahead.

Hey guys, just a quick question to follow-up on the tax rate guidance. Is that a GAAP or non-GAAP estimate for the tax rate?

The range of 25 to 26 actually covers both, the GAAP and non-GAAP. And there is a slight difference because of the FAS 123R, which is beyond the scope of this telephone call. It is very complex. The GAAP rate would tend to be a bit higher, higher range.

And you also wanted to have Al, repeat the reconciliation three or four or five times during the course of this phone call.

Second question, how much of the growth in deferred maintenance was driven by renewals versus newer crossgrades?

We don't split it up that way. But I can tell you renewals are very healthy and the renewal rates are very highly based across all of the products. And then, we are also getting high attach rates as we sell new products. So, it's really across the board. Renewals and attach rates on new seats are very high and in all products now, including 2D. And that's how you get the subscription grow to 25% revenue.

Okay. Thanks.

Our next question comes from the line of Michael Huang with ThinkEquity. Go ahead.

Thanks very much. Couple of questions for you. The first, in terms of customers demanding more of an integrated product offering from Autodesk; are you guys where you need to be right now to tie the products together? And how much work, if not, still remains there? Do you actually believe that an integrated offering actually could be a lever for new seat growth or more of a lever for win rates or retention rates? Thanks very much.

So, I think we are beginning to see customers want integration and let's talk about it in two senses. One is in terms of their workflow and so we talked about it earlier, integrated analysis, integrated simulation. So, that maybe taking our Revit product and integrating it with structural analysis. But it's true across our market. So, that's one thing they want. They also want the integration across products. People want to use products like Max and Maya for a conceptual design. They also want to use those products for design visualization. As well as I talked about, when you think about the things that are inside a building for example; our people design that with software like Inventor. So, people want that integration as well. Where we are? We've been working on it for a year or so. We will continue to work on it. We are not done at all, but we think this is a unique advantage that Autodesk has and that over time, it will lead to more growth.

Great. And another question, just in terms of the reseller channel. Obviously, it's nice that you guys are looking to add some channel capacity. Could you help us understand what type of programs that you might be rolling out this year to drive further productivity in the reseller channel? I know that you've been able to get the resellers to invest in headcount, domain expertise, training programs, etcetera. Are there any new programs that are in the works that could help squeeze more productivity out of the reseller?

No, I don't want to pick all of your worries. We are not trying to squeeze the productivity out of the resellers. We're really trying to continue to invest alongside them. Our relationship with our channel partners goes back many, many years. And so, it's really one of mutual benefit. Like I said before, the way we added a billion dollars of revenue over the last four years is mostly with their hard work. And so, we're going to continue to invest alongside of resellers. When you look specifically at programs, I don't think there's much, that's very new. What we are doing is continuing the same programs that we believe have been successful over the last couple of years. I think on the productivity side, what you will see is greater unification in our channel programs. So, we historically had differences on our channel practices between the different geographies and we've been unifying them as a way to save cost to get more efficient, and really take the best practices from each of the geographies and make it one process for all of Autodesk.

Great. Thanks very much, guys.

Our next question comes from the line of Sasa Zorovic with Oppenheimer and Company. Go ahead.

Thank you. So my first question would be regarding, you were mentioning that your market share is improving. I was wondering if you could comment into particularly against whom and how this purchase of the UGS by Siemens alters this any?

Yes. I think when we talk about gaining market share, I think there are number places we gain market share. So, remember ours just a manufacturing market in a second, Sasa. So just take it generally. The comments were really about all the markets we've participated. And we continue to believe we are winning market share. And for me the sign of that is really if you look, certainly at revenue growth, but more specifically if you look at new seat revenue growth, or new seats, both are good measures by which we have done very well at gaining market share. I think if you look more specifically at the manufacturing market, I think what we continue to do is; the comments for there is that many of our competitors are getting longer in the tooth in the manufacturing market. This is all legacy software that they are selling at prices that no are longer appropriate in this market. And we continue each quarter to win considerably sized deals from each of these competitors. I think it will be interesting to see, specifically to your question, what happens with the UGS acquisition. For many of us who have been in this business for a number of years, we have witnessed the acquisition of engineering software companies by industrial conglomerates. So far we haven't yet seen a successful one. And so, I would bet dollars to donuts. The private equity will have another shot at UGS within a few years, so we are not basing anything particularly. We think we will continue to do well, based on the strength of our products. We continue to think we are in the best position in terms of the breadth of our Manufacturing Solutions as well as I think we have the right products, right there where the market is. And so, I am very fond of it and I think in some ways, the UGS's private equity owners deciding to sell with somewhat of an ambition of competing in the market was going to be too difficult.

Then my second question would be around your guidance giving. Specifically how do you build in anticipation of certain GDP growth rates and such? And in particular, how some of the data that we have seen come out today, specifically is already incorporated or is not incorporated. And how you see the macro to a very micro picture that you look in the various geographies where you sell and based on which you provide your guidance?

Well, Sasa I will tell you. We don't try to predict the economy. I typically look at the economy that we have now and assume it's going to continue. We have invested, our stellar vision of investing in a model that we do with an external economic consulting firm. And they do factor in many factors that are specific to countries and industries. And I think, in our case we need to get to that level to understand our business. And then we found that model is very useful in understanding the forecast in each of the country level and also industry level areas of the forecast. But, in terms of overall macro, again I don't make some assumption that I can give the -- what's going to happen to the economy and I simply take a current economic situation and it's going to continue.

So, is your guidance more a bottom-up base mainly from the particular resellers and then rolling all of that up or what's it really going to be sort of?

No, I think it's a combination of both touchdown and bottoms-up and we use this metric model that Al talked about. It's a way to triangulate. So, we certainly look at our sales pipeline, and met with our channel partners. We look at the continuation of our business as I have suggested before. Extrapolating our business is often a very good indication of where it is going. And we can bind them with some other factors, very specific to the products or particular launches or some condition in a particular country. But we really use them in a more holistic way to come up with our guidance and put the factors together to analyze it.

Of course, one of the most important things to understand Sasa is, there is no economic indicator you can take outside the company and predict our business. We tried ourselves and the correlation we get is lousy. You really need to get to the country and the industry specific factors, that's what we do. And we all have data you can't get to and we look at that. As a matter of fact, that's clearly one of the inputs.

Thank you.

Our next question comes from the line of Heather Bellini with UBS. Go ahead.

Yeah, hi Carl. I was just wondering the 3D growth that you experienced this year I think it was 40% or 41%. Can you just give us an idea of how sustainable you think this growth is, as you look out to this fiscal year and what your expectations are for 3D? Thank you.

I think our 3D growth is sustainable. I mean, in some ways, the reason we often talk about the penetration rate into the 3D base is really an indication of that. We don't think we are in at some point where the curve is flattening out. So, we continue to think that we can do that. We also talked about the addition of new 2D users, because we think over time that many, if not most, or cheap 2D users will also add 3D tools to their toolset. So, we look at that, but we feel good about it. And as I made couple of comments ago. I think we continue to believe that our situation competitively has been strengthening and we feel really good about this mixed launch of products that's coming after spring. And, so we feel really good about the position that puts us in. And so I think, people have asked, and Heather you may have been amongst them, is there a point of inflation in the curve in the 3D adoption? And we are not prepared to say that already. Although, certainly in certain products, we have seen an acceleration of adoption. Particularly, in the building space, when you look at Revit, you see something like that. So, I think there are some fits and starts in the adoption of many of these 3D products or more complex products. But, I also think there is a lot of room to grow.

Thank you.

Our next question comes from Daniel Cummins with Banc of America. Please go ahead.

Thanks. Yeah, several of my questions have been answered. Can you give us a sense of what the rate of spending growth is on two areas; one would be market development funds in the channel. We are seeing obviously a big expansion in the number of 3D training offerings. And secondly, product development centers overseas and particularly in emerging markets.

Well, we haven't really broken out our market development funds. But when you look at our overall sales and marketing, it's pretty much straight-lined with our revenue. It has been proportional to our revenue all along. And I would continue to expect the same thing to go on. In terms of product development, we have always been slightly different in that. We have been very diverse. And we have been very distributed in our product development. For the kinds of products we build that are very complex, technical products. Our primary thing is looking for the particular talent necessary to build those products. Some of that is in the United States, but certainly it's overseas. But the primary determinant is not really cost. It turns out to be talent. And so, we continue to look for those areas of talents outside the United States. And I would say, over the last year or two, certainly the mix has shifted, so that we have a higher proportion of engineers in software development happening outside the United States, than inside the United States.

Can I ask one more?

Sure.

Carl, you mentioned the animation revenue being perhaps a little bit below expectations because of the early announcement. And you cited the option review as somewhat of a distraction. Is there anything else that you could cite as a factor preventing you from hitting the high-end of the revenue guidance?

No, I think I was quite happy with where we came out for both; revenue for the year and revenue for the quarter. I think we were at the high end of the ranges. I think we are on-track. We had much less variability and volatility this year than in the years passed. So I felt, we did a much better job with our guidance. I think we hit it well. I think if you want to look to the biggest factor that prevented us from outperforming any of the numbers. It would certainly be the performance in Japan.

Okay. Thanks.

Our next question comes from the line of John McPeake with Prudential Equity Group. Go ahead.

Thank you very much. Just getting back to economic activity and a country near Japan, China; could you share with us what your year-over-year growth and the percentage of revenues that came from China were in the quarter?

We tend not to break out individual countries, but when we have spoken about our emerging economies as a whole, we've talked about it being somewhere to two to three times the rate of the more developed economies. Growth rates in the 40%, 50%, 60% range for individual countries. It varies. And one other thing that I was would say, when you look at our emerging economies, they are more volatile than our other ones. The other ones are much more predictable. So, you will have a good quarter and a bad quarter. But overall, we seen growth rates two to three times those of let's say, US growth rates. And it continues to be very strong. We also asked talked about getting to 15% of revenue from emerging economies. So, I think that’s another way of looking at it and you can kind of back into how quickly their growth is relative to the other places by looking at that?

In fact, looking at Asia, we also did relatively very well in India last quarter, and we feel very good about that this coming year too.

Great. Okay. Thank you.

Our next question comes from the line of Vik Churamani with Lehman Brothers, go ahead.

Hi, just a quick clarification on guidance, and also for this current quarter it looks like when you run the math for earnings you guys came in at around $0.48, and then for Q1 and Q2 earnings is coming close to $0.40 to $0.41 and about $0.41 to $0.42, and then full year to about $1.79 to $1.80. Does that sound reasonable, Al?

I can't give you EPS guidance. I am hearing such things that are reasonable, but I can't give EPS guidance.

Okay. And then just on Q4, Europe was relatively strong.

If we could back up for a second, your numbers were terribly close on both ends of the range. You might want to back and look at those.

Okay. I just wanted to double check that, because I am assuming the tax rate and then the interest income. It blows out the numbers a little bit. But any how --

Hold on. So, if you look at your operating margins, you would expect operating margins to increase with more revenue of course. So, if you apply that higher operating margin rate to the higher revenue rate, I think you will come up with a different number than you mentioned in your range.

Okay, will double check that. In Q4 Europe was strong, could you comment in terms of some of the softness in the US and what your expectations might be as you go in to the first half of the year?

I think the US did very well this year overall. We were really pleased. As a matter of fact remember with that tax rate, one of the reasons we talked about the tax rate going up is because of the shift to the US. So, there was really good growth in the US this year. And like I said, looking forward, I expect the trends to continue. Just as you think about it, the thing that continues to please me is that across our diversified business, both geographically and by industry, all of the sectors, with just one exception, really seem to be doing well.

Okay. And then just lastly, do you expect any positive benefit from Vista, given the lack of compatibility of the older products going into fiscal '08?

No. I wouldn’t look for any short-term benefit from Vista. As much as I am understanding is, I think people will upgrade to Vista at almost the rate at which new PCs are sold. There doesn't seem to be a big movement amongst our customer base to run out, and certainly get early versions of Vista. I think over time as Vista becomes the dominant operating system, you will see people moving off older versions.

Okay, great. Thank you.

Operator, I think we'll wrap up here. We have run over our allotted time. So, everyone thank you for calling. Operator?

Ladies and gentlemen, thank you for your participation in today's conference. That does conclude today's presentation. You may now disconnect your lines.