Autodesk 2007 Annual Report Download - page 82

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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.
Net revenues or earnings shortfalls or the volatility of the market generally may cause the market price of
our stock to decline.
The market price for our common stock has experienced significant fluctuations and may continue
to fluctuate significantly. The market price for our common stock may be affected by a number 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 of new products or product enhancements by us or 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 changes, 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.