Autodesk 2002 Annual Report Download - page 29

Our international operations are subject to currency fluctuations. To minimize the impact of these
fluctuations, we use foreign currency option contracts and forward contracts to hedge our exposure on anticipated
transactions and forward contracts to hedge our exposure on firm commitments, primarily certain payables and
receivables denominated in foreign currencies. Our foreign currency instruments by policy have maturities of
less than three months and settle before the end of each quarterly period. The principal currencies hedged during
fiscal 2002 were the Euro, British pound, Canadian dollar and Japanese yen. We monitor our foreign exchange
exposures to ensure the overall effectiveness of our foreign currency hedge positions.
Risk Factors Which May Impact Future Operating Results
We operate in a rapidly changing environment that involves a number of risks, many of which are beyond
our control. The following discussion highlights some of these risks and the possible impact of these factors on
future results of operations. If any of the following risks actually occur, our business, financial condition or
results of operations may be adversely impacted, causing the trading price of our common stock to decline.
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 slowdown in the U.S. and other countries’
economies, many customers are delaying or reducing technology purchases. The impact of this slowdown on us,
particularly in countries that contribute a significant portion of our net revenues, is difficult to predict, but it may
result in reductions in sales of our products, longer sales cycles, slower adoption of new technologies, and
increased price competition. In addition, weakness in the end-user market could negatively affect the cash flow
of our distributors and resellers who could, in turn, delay paying their obligations to us, which would increase our
credit risk exposure. Any of these events would likely harm our business, results of operations and financial
condition.
Our operating results fluctuate within each quarter and from quarter to quarter making our future revenues
and operating results difficult to predict.
Our quarterly operating results have fluctuated in the past and are likely to do so in the future. These
fluctuations could cause our stock price to change significantly or experience declines. Some of the factors that
could cause our operating results to fluctuate include, among other things the timing of the introduction of new
products by us or our competitors, changes in marketing or operating expenses, changes in product pricing or
product mix, platform changes, delays in product releases, distribution channel management, changes in
compensation practices, the timing of large systems sales, and general economic conditions, particularly in
countries where we derive a significant portion of our net revenues.
We have also experienced fluctuations in operating results in interim periods in certain geographic regions
due to seasonality or regional economic conditions. In particular, our operating results in Europe during the third
quarter are usually impacted by a slow summer period, and the Asia Pacific operations typically experience
seasonal slowing in the third and fourth quarters.
Additionally, our operating expenses are based in part on our expectations for future revenues 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. Further, gross margins may be adversely affected if
our sales of low-end computer-aided design products and AutoCAD upgrades, which historically have had lower
margins, grow at a faster rate than sales of our higher-margin products.
Existing and increased competition in the design software market may reduce our net revenues and profits.
The software industry has limited barriers to entry, and the availability of desktop computers with
continually expanding capacity at progressively lower prices contributes to the ease of market entry. The design
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