Autodesk 2001 Annual Report Download - page 26

23
Autodesk, Inc. FY 01
Risk Factors Which May Impact Future
Operating Results
We operate in a rapidly changing environment that
involves a number of risks, many of which are beyond our
control.The following discussion highlights some of these
risks and the possible impact of these factors on future
results of operations.
You should carefully consider these risks before making an
investment decision. If any of the following risks actually
occur, our business, financial condition or results of opera-
tions may be adversely impacted. In that case, the trading
price of our common stock could decline, and you could
lose all or part of your investment.
Our operating results fluctuate within each
quarter and from quarter to quarter making
our future revenues and operating results diffi-
cult to predict.
Our quarterly operating results have fluctuated in the past
and are likely to do so in the future. These fluctuations
could cause our stock price to significantly fluctuate or
experience declines. Some of the factors that could cause
our operating results to fluctuate include, among other
things the timing of the introduction of new products by
us or our competitors, changes in marketing or operating
expenses, changes in product pricing or product mix, plat-
form changes, delays in product releases, competitive
factors, distribution channel management, changes in com-
pensation practices, the timing of systems sales and
general economic conditions.
We have also experienced fluctuations in operating results
in interim periods in certain geographic regions due to
seasonality or regional economic conditions. In particular,
our operating results in Europe during the third quarter
are usually impacted by a slow summer period, and the
Asia/Pacific operations typically experience seasonal slow-
ing in the third and fourth quarters.
Additionally, our operating expenses are based in part on
our expectations for future revenues and are relatively
fixed in the short term. Accordingly, any revenue shortfall
below expectations could have an immediate and signifi-
cant adverse effect on our business. Further, gross margins
may be adversely affected if our sales of low-end CAD
products and AutoCAD upgrades, which historically have
had lower margins, grow at a faster rate than sales of our
higher-margin products.
Because we derive a substantial portion of our
net revenues from a limited number of prod-
ucts, if these products are not successful, our
net revenues will be adversely affected.
We derive a substantial portion of our net revenues from
sales of AutoCAD software, AutoCAD upgrades, and prod-
ucts that are interoperable with AutoCAD. As such, any
factor adversely affecting sales of AutoCAD and AutoCAD
upgrades, including product life cycle, market acceptance,
product performance and reliability, reputation, price
competition and the availability of third-party applica-
tions, would likely harm our operating results.
Existing and increased competition in the
design software market may reduce our net
revenues, profits and market share.
The software industry has limited barriers to entry, and the
availability of desktop computers with continually expand-
ing capabilities at progressively lower prices contributes to
the ease of market entry. Since customers increasingly rely
on the Internet, new platforms and technologies can be
expected to be developed in the design industries. The
design software market in particular is characterized by vig-
orous competition in each of the vertical markets in which
we compete, both by entry of competitors with innovative
technologies and by consolidation of companies with com-
plementary products and technologies. In addition, the
availability of third-party application software is a competi-
tive factor within the CAD market. Because of these and
other factors, competitive conditions in the industry are
likely to intensify in the future. Increased competition could
result in price reductions, reduced net revenues and profit
margins and loss of market share, any of which could harm
our business. Furthermore, some of our competitors have
greater financial, technical, sales and marketing and other
resources.
We believe that our future results depend largely upon our
ability to offer new products, and to continue to provide
existing product offerings, that compete favorably with
respect to reliability, performance, ease of use, range of
useful features, continuing product enhancements, repu-
tation, price and training.
Our efforts to develop and introduce new
products expose us to risks such as costs
related to product defects, large expenditures
that may not result in additional net revenues
and dependence on third party developers.
Rapid technological change as well as changes in cus-
tomer requirements and preferences characterize the
software industry. The software products we offer are
internally complex, and despite extensive testing and