Autodesk 2006 Annual Report Download - page 62

Our operating results fluctuate within each quarter and from quarter to quarter making our future revenues and
operating results difficult to predict.
Our quarterly operating results have fluctuated in the past and may do so in the future. These fluctuations
could cause our stock price to change significantly or experience declines. Some of the factors that could cause
our operating results to fluctuate include the timing of the introduction of new products by us or our competitors,
slowing of momentum in upgrade or maintenance revenue, the adoption of the new accounting pronouncement,
SFAS 123R, that will require us to record compensation expense for shares issued under our stockplans beginning
in the first quarter of fiscal 2007 with a negative impact on our results of operations, continued fluctuation in
foreign currency exchange rates, failure to achieve anticipated levels of customer acceptance of key new
applications, unexpected costs or changes in marketing or other operating expenses, changes in product pricing
or product mix, platform changes, delays in product releases, timing of product releases and retirements, failure
to continue momentum of annual release cycles or to move a significant number of customers from prior product
versions in connection with our retirement programs, failure to achieve continued cost reductions and
productivity increases, failure to convert our 2D customer base to 3D products, unanticipated changes in tax
rates and tax laws, unexpected outcomes of matters relating to litigation, distribution channel management,
changes in sales compensation practices, the timing of large systems sales, failure to effectively implement our
copyright legalization programs, especially in developing countries, failure to successfully integrate Alias and
other acquired businesses and technologies, failure to achieve sufficient sell-through in our channels for new
or existing products, the financial and business condition of our reseller and distribution channels, renegotiation
or termination of royalty or intellectual property arrangements, interruptions or terminations in the business
of our consultants or third party developers, failure to grow lifecycle management or collaboration products,
unanticipated impact of accounting for technology acquisitions and general economic conditions, particularly
in countries where we derive a significant portion of our net revenues.
We have also experienced fluctuations in operating results in interim periods in certain geographic regions
due to seasonality or regional economic conditions. In particular, our operating results in Europe during the third
quarter are usually affected by a slow summer period, and the Asia/Pacific operations typically experience
seasonal slowing in the third and fourth quarters.
Our operating expenses are based in part on our expectations for future revenues and are relatively fixed in the
short term. Accordingly, any revenue shortfall below expectations could have an immediate and significant adverse
effect on our profitability. Failure to maintain rigorous cost controls would negatively affect future profitability. Further,
gross margins may be adversely affected if our sales of AutoCAD LT, upgrades and advanced systems products, which
historically have had lower margins, grow at a faster rate than sales of our higher-margin products.
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 in certain markets 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.
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