Autodesk 2008 Annual Report Download - page 96

period. The majority of these goals are defined by quarterly targets. The majority of our partner incentive
reserves reduce license and other revenue in the current period. The remainder relates to incentives on our
Subscription Program and reduces deferred revenue in the period the subscription transaction is billed. This
reduction in deferred revenue results in a reduction of maintenance revenue over the maintenance contract
period. We also permit our distributors and resellers to return products subject to certain limitations. Consistent
with our experience in fiscal 2008, we anticipate that product returns will continue to be driven by new product
releases, product update cycles and software quality.
We establish revenue reserves for incentives under our Partner Incentive Program and for product returns.
Partner incentive reserves are based on achievement against purchase quotas for each distributor and reseller. We
also establish product return reserves based on historical experience, estimated channel inventory levels and the
timing of new product introductions and other factors. While we maintain strict measures to monitor our partner
incentive and product return reserves, actual incentives or product returns may exceed our reserve estimates, and
such differences could harm our business.
Existing and increased competition may reduce our net revenue and profits.
The software industry has limited barriers to entry, and the availability of desktop computers with
continually expanding performance at progressively lower prices contributes to the ease of market entry. The
markets in which we compete are characterized by vigorous competition, both by entry of competitors with
innovative technologies and by consolidation of companies with complementary products and technologies. In
addition, some of our competitors in certain markets have greater financial, technical, sales and marketing and
other resources. Furthermore, a reduction in the number and availability of compatible third-party applications
may adversely affect the sale of our products. Because of these and other factors, competitive conditions in the
industry are likely to intensify in the future. Increased competition could result in continued price reductions,
reduced net revenue and profit margins and loss of market share, any of which would likely harm our business.
We believe that our future results depend largely upon our ability to offer products that compete favorably
with respect to reliability, performance, ease of use, range of useful features, continuing product enhancements,
reputation and price.
We have been named as a party in lawsuits related to our historical stock option practices and related
accounting, and we may be named in additional litigation in the future, all of which could result in an
unfavorable outcome and have a material adverse effect on our business, financial condition, results of
operations, cash flows and the trading price for our securities.
Three lawsuits have been filed against us and our current officers and certain of our current and former
directors and officers relating to our historical stock option practices and related accounting. See Note 6,
“Commitments and Contingencies” in the Notes to Consolidated Financial Statements for a more detailed
description of these proceedings. These actions are in the preliminary stages, and the ultimate outcomes could
have a material adverse effect on our business, financial condition, results of operations, cash flows and the
trading price for our securities.
We may become the subject of additional private or government actions in the future, including stockholder
or employee litigation. Litigation may be time-consuming, expensive and disruptive to normal business
operations, and the outcome of litigation is difficult to predict. The defense of lawsuits may result in significant
expenditures and the diversion of our management’s time and attention from the operation of our business, which
could impede our business. All or a portion of any amount we may be required to pay to satisfy a judgment or
settlement of any claims may not be covered by insurance.
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