Autodesk 2003 Annual Report Download - page 38

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 AutoCAD LT, upgrades and systems products, which historically have had lower margins, grow at a
faster rate than sales of our higher-margin products.
Existing and increased competition may reduce our net revenues 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 fairly mature and 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 have greater financial, technical, sales and marketing and
other resources. Furthermore, a reduction in the number and availability of comparable 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 revenues 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 rely on third party technologies and if we are unable to use or integrate these technologies, our product
and service development may be delayed.
We rely on certain software that we license from third parties, including software that is integrated with
internally developed software and used in our products to perform key functions. An example of this type of
software is the ACIS geometric solid modeler we license from Spatial. These third-party software licenses may not
continue to be available on commercially reasonable terms, and the software may not be appropriately supported,
maintained or enhanced by the licensors. The loss of licenses to, or inability to support, maintain and enhance any
such software could result in increased costs, or in delays or reductions in product shipments until equivalent
software could be developed, identified, licensed and integrated, which would likely harm our business.
In addition, for certain of our products and services, we rely on third party hardware and services. Financial
difficulties or even failure of these third parties may impact our ability to deliver such on-line collaboration
applications and, as a result, may adversely impact our business.
Disruptions with licensing relationships, independent developers and third party developers could adversely
impact our business.
Independent firms and contractors perform some of our product development activities, while other
technologies are licensed from third parties. Licenses may restrict use of such technology in ways that negatively
affect our business. We generally either own or license the software developed by third parties.
Because talented development personnel are in high demand, independent developers, including those who
currently develop products for us, may not be able or willing to provide development support to us in the future.
Similarly, we may not be able to obtain and renew license agreements on favorable terms, if at all, and any
failure to do so could harm our business.
Our business strategy has historically depended in part on our relationships with third-party developers, who
provide products that expand the functionality of our design software. Some developers may elect to support
other products or may experience disruption in product development and delivery cycles or financial pressure
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