Autodesk 2005 Annual Report Download - page 21

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enables customers and third parties to customize our products for a wide variety of highly specific uses. We offer
several programs that provide marketing, sales, technical support and programming tools to developers who
develop add-on applications for our products.
BACKLOG
We typically ship products shortly after receipt of an order, which is common in the software industry. Our
backlog is primarily comprised of deferred revenue. Deferred revenue is derived from our subscription program,
services and deferred license sales. Backlog also includes current software license product orders which have
not yet shipped. The category of current software license product orders which we have not yet shipped consists
of orders from customers with approved credit status for currently available license software products and may
include both orders with current ship dates and orders with ship dates beyond the current fiscal period. We
typically experience temporarily higher levels of this component of backlog for quarters in which we retire a
release of AutoCAD, as we did in the fourth quarter offiscal 2005 and fiscal 2004. Aggregate backlog at January 31,
2005 and January 31, 2004was approximately $226.2 million and $159.2 million, respectively, ofwhich $32.0 million
and $31.9 million related to current software license product orders which had not yet shipped at the end of each
respective fiscal year. In accordance with usual trends, we anticipate a reduction of backlog, related to software
license product orders which had not yet shipped, during the first quarter of fiscal 2006. We do not believe that
backlog as of any particular date is indicative of future results.
COMPETITION
We compete with a variety of companies in different aspects of our business.
In our Design Solutions Segment, our primary global competitors include Dassault Systemes and its
subsidiary SolidWorks Corporation, Parametric Technology Corporation, UGS Corp., Bentley Systems Inc. and
Environmental Systems Research Institute, Inc. (ESRI). In our Discreet Segment, our primary competitors include
Avid Technology, Alias Systems and Apple Computer.
In addition, in each of our markets, there are numerous regional and specialized software and services
companies, with which we compete.
The software industry has limited barriers to entry, and the availability of desktop computers with
continually expanding performance capacity at progressively lower prices contributes to the ease ofmarket entry.
The design software market is characterized by vigorous competition in each of the vertical markets in which
we compete, both by entry of competitors with innovative technologies and by consolidation of companies with
complementary products and technologies. In addition, the availability of third-party application software is a
competitive factor within all of our markets.
Because of these and other factors, competitive conditions in these industries are likely to continue to
intensify in the future. Increased competition could result in price reductions, reduced net revenues and profit
margins and loss of market share, any of which could harm our business. Furthermore, some of our competitors
have greater financial, technical, sales and marketing and other resources.
We believe that our future results depend largely upon our ability to offer new products and to continue
to provide existing product offerings that compete favorably with respect to ease of use, reliability, performance,
range of useful features, continuing product enhancements, reputation, price and training.
INTELLECTUAL PROPERTY AND LICENSES
We protect our intellectual property through a combination of patents, copyright and trademark laws, trade
secrets, confidentiality procedures and contractual provisions. Nonetheless, our intellectual property rights may
not be successfully asserted in the future or may be invalidated, circumvented or challenged. In addition, the
laws ofvarious foreign countries where our products are distributed do not protect our intellectual property rights
to the same extent as U.S. laws. Enforcement of copyrights against alleged infringers can sometimes lead to costly
litigation and counterclaims. Our inability to protect our proprietary information could harm our business.
From time to time, we receive claims alleging infringement of a third party’s intellectual property rights,
including patents. Disputes involving our intellectual property rights or those of another party have in the past
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