Autodesk 2006 Annual Report Download - page 63

Net revenues or earnings shortfalls or the volatility of the market generally may cause the market price of our stock
to decline.
During fiscal 2006, the market price for our common stock experienced significant fluctuations and may
continue to fluctuate significantly. The market price for our commonstockmay be affected by anumber 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 ofnew products
or product enhancements by our competitors; quarterly variations in our or our competitors’ results of
operations; developments in our industry; unusual events such as significant 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.
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 introducing 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. 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.
Product development may also be outsourced to third-parties or developed externally and transferred to
us through business or technology acquisitions. Such externally developed technologies have certain additional
risks, including potential difficulties with effective integration into existing products, adequate transfer of
technology know-how and ownership and protection of transferred intellectual property.
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.
We rely on third party technologies and if we are unable to use or integrate these technologies, our product and
service development may be delayed.
We rely on certain software that we license from third parties, including software that is integrated with
internally developed software and used in our products to perform key functions. These third-party software
licenses may not continue to be available on commercially reasonable terms, and the software may not be
appropriately supported, maintained or enhanced by the licensors. The loss of licenses to, or inability to support,
maintain and enhance any such software could result in increased costs, or in delays or reductions in product
shipments until equivalent software could be developed, identified, licensed and integrated, which would likely
harm our business.
In addition, in the Media and Entertainment Segment we have historically relied on third-party vendors for
the supply of hardware components used in our systems. Many of the systems sold to our Media and
Entertainment customers include software products that currently run on workstations manufactured by SGI.
2006 Annual Report
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