Autodesk 2003 Annual Report Download - page 40

Our international operations expose us to significant regulatory, intellectual property, collections, exchange
fluctuations and other risks, which could adversely impact our future net revenues.
We anticipate that international operations will continue to account for a significant portion of our
consolidated net revenues. Risks inherent in our international operations include the following: unexpected
changes in regulatory practices and tariffs, difficulties in staffing and managing foreign operations, longer
collection cycles for accounts receivable, potential changes in tax laws and laws regarding the management of
data, greater difficulty in protecting intellectual property and the impact of fluctuating exchange rates between
the U.S. dollar and foreign currencies in markets where we do business.
Our international results may also continue to be impacted by general economic and political conditions in
these foreign markets or in specific large foreign markets. In particular, war in the Persian Gulf or the potential
economic impact from concerns about SARS could disrupt trade and market relationships in a way that could
harm our business. These and other factors may adversely impact our future international operations and
consequently our business as a whole.
Our risk management strategy uses derivative financial instruments in the form of foreign currency forward
and option contracts for the purpose of hedging foreign currency market exposures, which exist as a part of our
ongoing business operations.
If we do not maintain our relationship with the members of our distribution channel, our ability to generate net
revenues will be adversely affected.
We sell our software products both directly to customers and through a network of distributors and resellers.
Our ability to effectively distribute our products depends in part upon the financial and business condition of our
reseller network. Computer software dealers and distributors are typically not highly capitalized and have
previously experienced difficulties during times of economic contraction, such as current worldwide economic
conditions, and may do so in the future. In addition, the changing distribution models resulting from the Internet,
from increased focus on direct sales to major accounts or from two-tiered distribution may impact our reseller
network in the future. No single customer, distributor or reseller accounted for more than 10 percent of our
consolidated net revenues in fiscal 2003, 2002 or 2001. However, we rely significantly upon major distributors
and resellers in both the U.S. and international regions and the loss of or a significant reduction in business or
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 resellers should be unable to meet their
obligations with respect to accounts payable to us, we could be forced to write off such accounts, which could
have a material adverse effect on our results of operations in a given period.
Product returns could exceed our estimates and harm our net revenues.
With the exception of contracts with some distributors, our sales contracts do not contain specific product-
return privileges. However, we permit our distributors and resellers to return products in certain instances. For
example, we generally allow our distributors and resellers to return older versions of products which have been
superceded by new product releases. We anticipate that product returns will continue to be impacted by product
update cycles, new product releases such as AutoCAD 2004 and software quality.
We establish reserves for stock balancing and product rotation. These reserves are 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 these reserves, actual product returns may differ from our reserve
estimates, and such differences could harm our business.
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