Autodesk 2008 Annual Report Download - page 95

Our investment portfolio is composed of a variety of investment vehicles in a number of countries which are
subject to economic factors, interest rate trends and market volatility. If general economic conditions create a
decline in interest rates, deterioration in the credit rating of our investments, or illiquidity in the financial
marketplace, we may experience a decline in interest income, an inability to sell our investments, or an
impairment in the value of our investments.
We invest our cash, cash equivalents and marketable securities with and in the custody of financial
institutions with high credit ratings and limit the amounts invested with any one institution, type of security and
issuer. However, we are subject to general economic conditions, interest rate trends and volatility in the financial
marketplace that can affect the income that we receive from our investments, the value of our investments, and
our ability to sell them. In the United States, for example, if the Federal Reserve continues to lower interest rates,
the yields on our portfolio securities may decline. Any one of these factors could reduce our interest income,
which in turn could impact our overall net income and earnings per share.
At January 31, 2008, we had auction rate securities with an estimated fair value of $8.4 million ($9.0 million
cost basis) included in non-current “Marketable securities” due to their lack of liquidity. These AAA-rated
auction rate securities, which met our investment guidelines at the time the investments were made, have failed
to settle at monthly auctions since August 2007. The failed auctions resulted in the interest rate on these
investments resetting at a premium as a result of a lack of liquidity for the underlying investment. We determined
that these securities are temporarily impaired because the securities are fully insured, we earn a premium interest
rate on the investments, the duration of the auction failures are believed to be a temporary market condition, and
we have the intention and ability to hold the securities until the market value can be realized. However, in the
future, if these issuers are unable to successfully close future auctions and their credit deteriorates, we may be
required to adjust the carrying value of the investment through an impairment charge.
If we do not maintain our relationships with the members of our distribution channel, or achieve anticipated
levels of sell-through, our ability to generate net revenue will be adversely affected.
We sell our software products both directly to customers and through a network of distributors and resellers.
Our ability to effectively distribute our products depends in part upon the financial and business condition of our
reseller network. Computer software distributors and resellers are typically not highly capitalized and have
previously experienced difficulties during times of economic contraction and may do so in the future. While we
have processes to ensure that we assess the creditworthiness of dealers and distributors prior to our sales to them,
if their financial condition were to deteriorate, they might not be able to make repeat purchases. We rely
significantly upon major distributors and resellers in both the United States and international regions, including
Tech Data Corporation and their affiliates, which accounted for 14% of our consolidated net revenue for fiscal
2008 and 12% of our consolidated net revenue for fiscal 2007. Over time, we have modified and will continue to
modify aspects of our relationship with our resellers, such as their incentive programs, pricing to them and our
distribution model, to motivate and reward them for aligning their businesses with our strategy and business
objectives. Changes in these relationships and underlying programs could negatively impact their business and
harm our business. In addition, the loss of or a significant reduction in business with those distributors or
resellers or the failure to achieve anticipated levels of sell-through with any one of our major international
distributors or large resellers could harm our business. In particular, if one or more of such resellers were unable
to meet their obligations with respect to accounts payable to us, we could be forced to write off such accounts
and may be required to delay the recognition of revenue on future sales to these customers, which could have a
material adverse effect on our results of operations in a given period.
Incentives under our Partner Incentive Program and product returns could exceed our estimates and harm our
net revenue.
We provide our channel partners incentives through our Partner Incentive Program. This is a short-term plan
that uses monetary rewards to motivate distributors and resellers to achieve business goals in a specified time
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2008 Annua
l Report