Autodesk 2014 Annual Report Download - page 94

2013 Annual Report
2014 Form 10-K 20
 the potential impact on relationships with existing customers, vendors and distributors as business partners as a result
of acquiring another business;
 the potential that due diligence of the acquired business or product does not identify significant problems;
 the potential for incompatible business cultures;
 significant higher than anticipated transaction or integration-related costs;
 potential additional exposure to fluctuations in currency exchange rates; and
 exposure to litigation or other claims in connection with, or inheritance of claims or litigation risk as a result of, an
acquisition, including but not limited to, claims from terminated employees, customers, or other third parties.
We may not be successful in overcoming such risks, and such acquisitions and investments may negatively impact our
business. In addition, such acquisitions and investments have in the past and may in the future contribute to potential
fluctuations in our quarterly financial results. These fluctuations could arise from transaction-related costs and charges
associated with eliminating redundant expenses or write-offs of impaired assets recorded in connection with acquisitions and
investments. These costs or charges could negatively impact our financial results for a given period, cause quarter to quarter
variability in our financial results or negatively impact our financial results for several future periods.
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, 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 fiscal
2014 and fiscal 2013, approximately 84% and 83%, respectively, 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 24% and 23% of our total net
revenue for fiscal 2014 and 2013, respectively. Although we believe that we are not substantially dependent on Tech Data, 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.
Because we derive a substantial portion of our net revenue from a small number of products, including our AutoCAD-based
software products and suites, if these products are not successful, our revenue will be adversely affected.