Autodesk 2006 Annual Report Download - page 65

Download and view the complete annual report

Please find page 65 of the 2006 Autodesk annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 144

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144

them, if their financial condition were to deteriorate, they might not be able to make repeat purchases. We rely
significantly upon major distributors and resellers in both the U.S. and international regions, including Tech Data
Corporation and their affiliates, who accounted for 11% of fiscal 2006 net revenues. The loss of or a significant
reduction in business with those distributors or resellers or the failure to achieve anticipated levels of sell-through
with any one of our major international distributors or large resellers could harm our business. In particular, if
one or more of such resellers were unable to meet their obligations with respect to accounts payable to us, we
could be forced to write-off such accounts and may be required to delay the recognition of revenues on future
sales to these customers, which could have a material adverse effect on our results of operations in a given period.
Product returns could exceed our estimates and harm our net revenues.
With the exception of contracts with some distributors, our sales contracts do not contain specific product-
return privileges. However, we permit our distributors and resellers to return products in certain instances. For
example, we generally allow our distributors and resellers to return older versions of products which have been
superceded by new product releases. We anticipate that product returns will continue to be affected by product
update cycles, new product releases and software quality.
We establish reserves for stock balancing and product rotation. These reserves are based on historical
experience, estimated channel inventory levels and the timing of new product introductions and other factors.
While we maintain strict measures to monitor these reserves, actual product returns may exceed our reserve
estimates, and such differences could harm our business.
If we are not able to adequately protect our proprietary rights, our business could be harmed.
We rely on a combination of patents, copyright and trademark laws, trade secrets, confidentiality procedures
and contractual provisions to protect our proprietary rights. Despite such efforts to protect our proprietary rights,
unauthorized parties from time to time have copied aspects of our software products or have obtained and used
information that we regard as proprietary. Policing unauthorized use of our software products is time-consuming
and costly. While we have recovered some revenues resulting from the unauthorized use of our software products,
we are unable to measure the extent to which piracy of our software products exists, and software piracy can
be expected to be a persistent problem. Furthermore, our means of protecting our proprietary rights may not
be adequate, and our competitors may independently develop similar technology.
We may face intellectual property infringement claims that could be costly to defend and result in our loss of
significant rights.
As more and more software patents are granted worldwide, as the number of products and competitors
in our industry segments grows and as the functionality of products in different industry segments overlap, we
expect that software product developers will be increasingly subject to infringement claims. Infringement or
misappropriation claims have in the past been, and may in the future be, asserted against us, and any such
assertions could harm our business. Additionally, certain patent holders have become more aggressive in
threatening litigation in attempts to obtain fees for licensing the right to use patents. Any such claims or threats,
whether with or without merit, have in the past and could in the future be time-consuming to defend, result
in costly litigation and diversion of resources, or could cause product shipment delays or require us to enter into
royalty or licensing agreements. In addition, such royalty or license agreements, if required, may not be available
on acceptable terms, if at all, which would likely harm our business.
ITEM 1B. UNRESOLVED STAFF COMMENTS
We have received no written comments regarding our periodic or current reports from the staff of the SEC
that were issued 180 days or more preceding the end of our 2005 fiscal year that remained unresolved.
2006 Annual Report
19