Autodesk 2001 Annual Report Download - page 29

26 FY 01 Autodesk, Inc.
and acquisitions may negatively impact our business. In
addition, such investments and acquisitions may con-
tribute to potential fluctuations in quarterly results of
operations. The fluctuations could arise from merger-
related costs and charges associated with eliminating
redundant expenses or write-offs of impaired assets
recorded in connection with acquisitions. These costs or
charges could negatively impact results of operations for a
given period or cause lack of a consistent increase quarter
to quarter in our operating results and financial condition.
We periodically make investments in related entities, such
as Buzzsaw.com and RedSpark, which typically do not
expect to earn significant revenues in the initial period of
operations and which incur considerable start-up costs.
Such investments may negatively impact our results of
operations and financial condition.
Fluctuations in the price of our common stock
due to net revenues or earnings shortfalls or
the volatility of the market generally may
cause the market price of our stock to decline,
which could harm our business.
The market price for our common stock has experienced
significant fluctuations and may continue to fluctuate sig-
nificantly. The market price for our common stock may be
affected by a number of factors, including the following:
net revenues or earnings shortfalls and changes in esti-
mates or recommendations by securities analysts; the
announcement of new products or product enhance-
ments by us or our competitors; quarterly variations in our
or our competitors’results of operations; developments in
our industry; and general market conditions and other fac-
tors, including factors unrelated to our op erati ng
performance or the operating performance of our
competitors.
In addition, stock prices for many companies in the tech-
nology sector have experienced wide fluctuations that
have often been unrelated to the operating performance
of such companies. After periods of volatility in the mar-
ket price of a particular company’s securities, securities
class action litigation has often been brought against that
company. We are currently involved in this type of litiga-
tion, and may become involved in this type of litigation in
the future. This type of litigation is often expensive and
diverts management’s attention and resources, which
could adversely affect our financial condition or results of
operations. Such factors and fluctuations, as well as gen-
eral economic, political and market conditions, may cause
the market price of our common stock to decline, which
could harm our business.
General economic conditions may reduce our
net revenues and harm our business.
As our business has grown, we have become increasingly
subject to the risks arising from adverse changes in
domestic and global economic conditions. Because of the
recent economic slowdown in the U.S., many industries
are delaying or reducing technology purchases. The
impact of this slowdown on us is difficult to predict, but it
may result in reductions in sales of our products, longer
sales cycles and increased price competition. As a result, if
the current economic slowdown continues or worsens, we
may fall short of our revenue expectations for any given
quarter in fiscal 2002 or for the entire year. These condi-
tions would negatively affect our business and results of
operations. In addition, weakness in the end-user market
could negatively affect the cash flow of our distributors
and VARs who could, in turn, delay paying their obligations
to us. This would increase our credit risk exposure, which
could harm our profitability and financial condition.
Business interruptions could adversely affect our
business.
Our operations are vulnerable to interruption by fire,
earthquake, powers loss, telecommunications failure and
other events beyond our control. Our facilities in Northern
California are currently subject to electrical blackouts as a
consequence of a shortage of available electrical power. In
the event these blackouts continue or increase in severity,
they could disrupt the operations of our affected facilities.
In connection with the shortage of available power, prices
for electricity have risen dramatically, and will likely con-
tinue to increase for the foreseeable future. Such price
changes will increase our operating costs, which could in
turn hurt our profitability.
Item 7A. Quantitative and Qualitative
Disclosure About Market Risk
Foreign currency exchange risk
Our earnings and cash flows are subject to fluctuations
due to changes in foreign currency exchange rates. Our
risk management strategy utilizes foreign currency for-
ward and option contracts to manage our exposures of
underlying assets, liabilities and other obligations, which
exist as part of our ongoing business operations. Contracts
are primarily denominated in Euro, Swiss francs, Canadian
dollars, British pounds and Japanese yen. We do not enter
into any foreign exchange derivative instruments for trad-
ing or speculative purposes.
A sensitivity analysis was performed on our hedging port-
folio as of January 31, 2001. This analysis indicated that a