Autodesk 2004 Annual Report Download - page 45

by securities analysts; the announcement of new products or product enhancements by us or our
competitors; quarterly variations in our or our competitors’ results of operations; developments in our
industry; one-time events such as acquisitions and litigation; and general market conditions and other
factors, including factors unrelated to our operating performance or the operating performance of
our competitors.
In addition, stock prices for many companies in the technology sector have experienced wide
fluctuations that have often been unrelated to the operating performance of such companies. Historically,
after extended periods of volatility in the market price of a company’s securities, a company becomes more
susceptible to securities class action litigation. This type of litigation is often expensive and diverts
management’s attention and resources.
Our efforts to develop and introduce new products and service offerings expose us to risks such as limited
customer acceptance, costs related to product defects and large expenditures that may not result in additional
net revenues.
Rapid technological change as well as changes in customer requirements and preferences
characterize the software industry. We are devoting significant resources to the development of
technologies, like our Linux based applications in the Discreet Segment, and service offerings to address
demands in the marketplace for increased connectivity and use of digital data created by computer-aided
design software. As a result, we are transitioning to new business models, requiring a considerable
investment of technical and financial resources. Such investments may not result in sufficient revenue
generation to justify their costs, or competitors may introduce new products and services that will achieve
acceptance among our current customers, adversely affecting our competitive position. In particular, a
critical component of our growth strategy is to convert our 2D customer base, including customers of
AutoCAD, AutoCAD LT, and related vertical industry products, to our 3D products such as Autodesk Inventor
Series or Autodesk Revit. However, should sales of AutoCAD, AutoCAD upgrades and AutoCAD LT products
decrease without a corresponding conversion of the customer seats to 3D products, our results of
operations will be adversely affected.
Additionally, the software products we offer are complex, and despite extensive testing and quality
control, may contain errors or defects. These defects or errors could result in corrective releases to our
software products, damage to our reputation, loss of revenues, an increase in product returns or lack of
market acceptance of our products, any of which would likely harm our business.
Our business could suffer as a result of risks associated with strategic acquisitions, divestures and investments.
We periodically acquire or invest in businesses, software products and technologies that are
complementary to our business through strategic alliances, equity investments and the like. For example,
in February 2003 we acquired assets of Linius Technologies, Inc., in March 2003 we acquired certain assets
of VIA Development Corporation, and in March 2004 we entered into an agreement to purchase certain
assets of MechSoft.com, Inc., subject to standard closing contingencies. The risks associated with such
acquisitions or investments include, among others, the difficulty of assimilating the operations and
personnel of the companies, the failure to realize anticipated synergies and the diversion of management’s
time and attention. In addition, such investments and acquisitions, as well as business divestures, may
involve significant transaction-related costs. We may not be successful in overcoming such risks, and such
investments, acquisitions and divestures may negatively impact our business. In addition, such investments
and acquisitions have in the past and may in the future contribute to potential fluctuations in quarterly
results of operations. The fluctuations could arise from merger-related costs and charges associated with
eliminating redundant expenses or write-offs of impaired assets recorded in connection with acquisitions.
These costs or charges could negatively impact results of operations for a given period or cause quarter to
quarter variability in our operating results.
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