Autodesk 2006 Annual Report Download - page 64

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There are significant risks associated with this dependence on SGI, given SGI’s financial stability and potential
changes to its future product development plans, which SGI has announced will include curtailing development
of next generation workstations targeted at our markets. SGI has also recently announced its intentions to cease
development of new products for the media and entertainment industry. To mitigate against this risk, among
other things, we offer a range of Media and Entertainment Segment products for use on standard, open, PC-based
Linux platforms. Our customers may now choose to adopt our products using these alternative platforms, or
may delay purchases while evaluating the new platforms, which could have a material adverse effect on our results
of operations in a given period.
Disruptions with licensing relationships and third party developers could adversely impact our business.
We license certain key technologies from third parties. Licenses may be restricted in the term or the use
of such technology in ways that negatively affect our business. Similarly, we may not be able to obtain or renew
license agreements for key technology on favorable terms, if at all, and any failure to do so could harm
our business.
Our business strategy has historically depended in part on our relationships with third-party developers,
who provide products that expand the functionality of our design software. Some developers may elect to support
other products or may experience disruption in product development and delivery cycles or financial pressure
during periods of economic downturn. In particular markets, this disruption would likely negatively impact these
third-party developers and end users, which could harm our business.
As a result of our strategy of partnering with other companies for product development our product delivery schedules
could be adversely affected if we experience difficulties with our product development partners.
We partner with certain independent firms and contractors to perform some of our product development
activities. We believe our partnering strategy allows us to, among other things, achieve efficiencies in developing
new products and maintaining and enhancing existing product offerings.
However, our partnering strategy creates a dependency on such independent developers. Independent
developers, including those who currently develop products for us in the United States and throughout the world,
may not be able or willing to provide development support to us in the future. In addition, use of development
resources through consulting relationships, particularly in non-US jurisdictions with developing legal systems,
may be adversely impacted by, and expose us to risks relating to, evolving employment, export and intellectual
property laws. These risks could, among other things, expose our intellectual property to misappropriation and
result in disruptions to product delivery schedules.
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 and cause delays in our recognition of revenues on future sales to these customers. Any of these
events would likely harm our business, results of operations and financial condition.
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 anetwork 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
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