Autodesk 2005 Annual Report Download - page 51

Our international results will also continue to be impacted by economic and political conditions in foreign
markets generally or in specific large foreign markets.These 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, during each quarter, which
exist as a part of our ongoing business operations. These instruments provide us some protection against
currency exposures for only the current quarter. Significant fluctuations in exchange rates between the U.S. dollar
and foreign currency markets may adversely impact our future net revenues.
General economic conditions may affect our net revenues and harm our business.
As our business has grown, we have become increasingly subject to the risks arising from adverse changes
in domestic and global economic and political conditions. If economic growth in the United States and other
countries’ economies is slowed, many customers may delay or reduce technology purchases. This could result
in reductions in sales of our products, longer sales cycles, slower adoption of new technologies and increased
price competition. In addition, weakness in the end-user market could negatively affect the cash flow of our
distributors and resellers who could, in turn, delay paying their obligations to us, which would increase our credit
risk exposure. Any of these events would likely harm our business, results of operations and financial condition.
Our business could suffer as a result of risks associated with strategic acquisitions, divestitures 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 April 2004 we
acquired certain assets of MechSoft.com, in May 2004 we acquired Unreal Pictures and in June 2004 we acquired
certain assets of DESC Inc. 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 divestitures, may involve significant transaction-related costs. We may not be successful in
overcoming such risks, and such investments, acquisitions and divestitures 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 transaction-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.
If we do not maintain our relationships with the members of our distribution channel, or achieve anticipated levels
of sell-through, 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 and may do so in the future. While we
have processes to ensure that we assess the creditworthiness of dealers and distributors prior to our sales to
them, iftheir financial conditionwere to deteriorate, theymight not be able tomake repeatpurchases. In addition,
the changing distribution models resulting from increased focus on direct sales to strategic accounts or from
two-tiered distribution may impact our reseller network in the future. We rely significantly upon major
distributors and resellers in both the U.S. and international regions, including Tech Data Corporation, who
accounted for 12% of fiscal 2005 consolidated net revenue. The loss of or a significant reduction in business with
those distributors or resellers or the failure to achieve anticipated levels of sell-throughwith 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.
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