Autodesk 2008 Annual Report Download - page 106

In addition, we believe that migration of our customers from our 2D horizontal products to our 2D vertical
products and 3D model-based design products, presents a significant growth opportunity. For fiscal 2008,
revenue from 3D model-based design products increased 26% as compared to the prior fiscal year, and Autodesk
shipped more than 159,300 commercial seats (which includes new seats and crossgrade seats) of 3D model-based
design products, including 76,400 seats of Revit, 52,500 seats of Autodesk Inventor and 30,400 seats of
AutoCAD Civil 3D. While the rate of migration to 2D vertical products and 3D model-based design products
varies from industry to industry, adoption of 2D vertical products and 3D model-based design software should
increase the productivity of our customers in all industries and result in richer design data. However, this
migration also poses various risks to us. In particular, if we do not successfully convert our 2D horizontal
customer base to our 2D vertical products and 3D model-based design products as expected, sales of our 2D
horizontal products may decrease without a corresponding increase in customer seats of our 2D vertical products
and 3D model-based design products, we would not realize the growth we expect and our business would be
adversely affected.
Expanding our geographic coverage is a key element of our growth strategy. We believe that rapidly
growing emerging economies present significant growth opportunities for us. In fiscal 2008, revenue from
emerging economies increased 40% as compared to fiscal 2007. Revenue from emerging economies represented
17% of fiscal 2008 net revenue as compared 14% of fiscal 2007 net revenue. Conducting business in these
emerging economies presents significant challenges, including intellectual property protection and software
piracy, which remain substantial problems.
Another significant part of our growth strategy is to continue to move customers to our Subscription
Program. We strive to sell subscription contracts to all new customers, migrate existing upgrade customers to
subscription contracts and renew subscription contracts with existing subscription customers. This business
model results in a more efficient sales process than our traditional upgrade process and reduces volatility in our
revenue. Moving customers to our Subscription Program ensures that we have more customers on current
versions of our products, increases customer loyalty and increases the likelihood that they will migrate to our 3D
model-based design products. All revenue from our Subscription Program is Maintenance Revenue on our
Consolidated Statements of Income. Maintenance revenue grew 31% in fiscal 2008, as compared to growth of
54% in the prior fiscal year. Our subscription base has grown substantially over the past several years and now
consists of nearly 1.5 million users. As a result, while we expect growth in maintenance revenue from our
Subscription Program in the future to continue to be strong, we expect the growth rate to be lower than in the
past.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in conformity with U.S. generally accepted accounting
principles. In preparing our consolidated financial statements, we make assumptions, judgments and estimates
that can have a significant impact on amounts reported in our consolidated financial statements. We base our
assumptions, judgments and estimates on historical experience and various other factors that we believe to be
reasonable under the circumstances. Actual results could differ materially from these estimates under different
assumptions or conditions. We regularly reevaluate our assumptions, judgments and estimates. We believe that
of our significant accounting policies, which are described in Note 1, “Business and Summary of Significant
Accounting Policies,” in the Notes to Consolidated Financial Statements, the following policies involve a higher
degree of judgment and complexity. Accordingly, these are the policies we believe are the most critical to aid in
fully understanding and evaluating our financial condition and results of operations.
Revenue Recognition. Our accounting policies and practices are in compliance with Statement of Position
97-2, “Software Revenue Recognition,” as amended, and SEC Staff Accounting Bulletin No. 104, “Revenue
Recognition.”
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