Autodesk 2005 Annual Report Download - page 49

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 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 compatible 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.
Net revenues or earnings shortfalls or the volatility of the market generally may cause the market price of our stock
to decline.
The market price for our common stock has experienced significant fluctuations and may continue to
fluctuate significantly. The market price for our common stock may be affected by a number of factors, including
the following: net revenues or earnings shortfalls, unexpected deviations in results of key performance metrics,
and changes in estimates or recommendations 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, divestitures 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 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 lifecycle
management initiatives, 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 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 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 the need for 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.
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