Autodesk 2007 Annual Report Download - page 84

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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. In
addition, we have acquired an investment interest in one developer, Hanna Strategies. We have historically
and plan to continue to contract with Hanna Strategies in order to provide more efficient resources for
the development of new products and features in existing products.
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 a network 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 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 12%
of fiscal 2007 net revenues and 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.