Autodesk 2012 Annual Report Download - page 83

• general market, economic, business and political conditions, including the impact of sales in particular geographies,
• the ability of governments around the world to meet their financial and debt obligations, and finance infrastructure
• lower growth or contraction of our upgrade or maintenance programs,
• fluctuations in foreign currency exchange rates and the success of our hedging activity,
• failure to expand our AutoCAD and AutoCAD LT products customer base to related design products,
• the timing of the introduction of new products by us or our competitors,
• the success of new business or sales initiatives and increasing our portfolio of product suites (“suites”),
• failure to maintain our revenue growth and profitability,
• the financial and business condition of our reseller and distribution channels,
• weak or negative growth in the industries we serve, including architecture, engineering and construction, manufacturing
• failure to accurately predict the impact of acquired businesses or to identify and realize the anticipated benefits of
• perceived or actual technical or other problems with a product or combination of products,
• unexpected or negative outcomes of matters and expenses relating to litigation or regulatory inquiries,
• failure to achieve anticipated levels of customer acceptance of key new applications,
• restructuring or other accounting charges and unexpected costs or other operating expenses,
• pricing pressure or changes in product pricing or product mix,
• platform changes,
• timing of product releases and retirements,
• failure to continue momentum of frequent release cycles or to move a significant number of customers from prior
product versions in connection with our programs to retire major products,
• failure to achieve and maintain planned cost reductions and productivity increases,
• changes in tax laws or regulations, tax arrangements with foreign governments or accounting rules, such as increased use
of fair value measures and the potential requirement that U.S. registrants prepare financial statements in accordance with
International Financial Reporting Standards (“IFRS”),
• changes in sales compensation practices,
• dependence on and the timing of large transactions,
• failure to effectively implement our copyright legalization programs, especially in developing countries,
• our inability to rapidly adapt to technological and customer preference changes, including those related to cloud
computing, mobile devices, and new computing platforms,
• failure to achieve sufficient sell-through in our channels for new or existing products,
• renegotiation or termination of royalty or intellectual property arrangements,
• interruptions or terminations in the business of our consultants or third party developers,
• the timing and degree of expected investments in growth and efficiency opportunities,
• failure to achieve continued success in technology advancements, and
• natural disasters such as the earthquakes and tsunami in Japan in March 2011.
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affected by a slower summer period, and our Asia Pacific operations typically experience seasonal slowing in our third and
fourth quarters.
Our operating expenses are based in part on our expectations for future revenue and are relatively fixed in the short term.
Accordingly, any revenue shortfall below expectations could have an immediate and significant adverse effect on our
profitability. Greater than anticipated expenses or a failure to maintain rigorous cost controls would also negatively affect
profitability. Further, gross margins may be adversely affected if our sales of Creative Finishing products and consulting
services, which historically have had lower margins, grow at a faster rate than sales of our higher-margin products and services.
If we do not maintain good relationships with the members of our distribution channel, or achieve anticipated levels of sell-
through, our ability to generate revenue will be adversely affected. If our distribution channel suffers financial losses, becomes
financially unstable or insolvent, is negatively impacted by the recent consolidation between two important distributors, or is
not provided the right mix of incentives to sell our products, our ability to generate revenue will be adversely affected.
We sell our software products both directly to end-users and through a network of distributors and resellers. For the fiscal
year ended January 31, 2012, approximately 84%, of our revenue was derived from indirect channel sales through distributors
and resellers, and we expect that the majority of our revenue will continue to be derived from indirect channel sales in the
future. Our ability to effectively distribute our products depends in part upon the financial and business condition of our
distributor and reseller network. Computer software distributors and resellers typically are not highly capitalized, have
previously experienced difficulties during times of economic contraction and experienced difficulties during the past several
years. We have processes to ensure that we assess the creditworthiness of distributors and resellers prior to our sales to them. In
the past we have taken steps to support them, and may take additional steps in the future, such as extending credit terms and
providing temporary discounts. These steps, if taken, could harm our financial results. If our distributors and resellers were to
become insolvent, they would not be able to maintain their business and sales, or provide customer support services, which
would negatively impact our business and revenue.
We rely significantly upon major distributors and resellers in both the U.S. and international regions, including the
distributor Tech Data Corporation and its global affiliates (“Tech Data”). Tech Data accounted for 17%, 16% and 14% of our
total net revenue for the fiscal years ended January 31, 2012, 2011 and 2010, respectively.
On October 27, 2011, Tech Data purchased certain assets of Mensch und Maschine Software (“MuM”) in Europe. MuM
has been a European distributor of our products in that region. The acquisition concentrates additional sales through Tech Data
and on a consolidated basis would have accounted for 21% of our revenue for the fiscal year ended January 31, 2012,
respectively if the acquisition had occurred on February 1, 2011. Although we believe that we are not substantially dependent
on Tech Data, including following the acquisition of certain assets of MuM, if Tech Data were to experience a significant
disruption with its business or if our relationship with Tech Data were to significantly deteriorate, it is possible that our ability
to sell to end users would be, at least temporarily, negatively impacted. This could in turn negatively impact our financial
results.
Over time, we have modified and will continue to modify aspects of our relationship with our distributors and 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 distributors or 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. These events could have a material adverse
effect on our financial results.
A significant portion of our revenue is generated through maintenance revenue; decreases in maintenance attach or renewal
rates or a decrease in the number of new licenses we sell negatively impacts our future revenue and financial results.
Our maintenance customers have no obligation to attach maintenance to their initial license or renew their maintenance
contract after the expiration of their initial maintenance period, which is typically one year. Our customers' attach and renewal
rates may decline or fluctuate as a result of a number of factors, including overall global economy, the health of their
businesses, and the perceived value of the maintenance program. If our customers do not attach maintenance to their initial
license or renew their maintenance contract for our products, our maintenance revenue will decline and our financial results
will suffer.
In addition, a portion of the growth of our maintenance revenue has typically been associated with growth of the number
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2012 Annual Report