Autodesk 2010 Annual Report Download - page 116

The fluctuations of currencies in which we conduct business can both increase and decrease our overall
revenue and expenses for any given fiscal period. Although we have expanded our foreign currency cash flow
hedge program beyond the current quarter to a longer term program in order to reduce foreign currency volatility,
we cannot completely mitigate this risk, and in any case, will incur transaction fees in adopting such hedging
programs. Such volatility, even when it increases our revenues or decreases our expenses, impacts our ability to
accurately predict our future results and earnings.
Our investment portfolio is composed of a variety of investment vehicles in a number of countries that are
subject to interest rate trends, market volatility and other economic factors. If general economic conditions
further cause interest rates to decline, credit ratings of our investments to deteriorate, or illiquidity in the
financial marketplace, we may continue to experience a decline in interest income, an inability to sell our
investments, or impairment in the value of our investments.
It is our policy to invest our cash, cash equivalents and marketable securities in highly liquid instruments
with, and in the custody of, financial institutions with high credit ratings and to limit the amounts invested with
any one institution, type of security and issuer. However, we are subject to general economic conditions, interest
rate trends and volatility in the financial marketplace that can affect the income that we receive from our
investments, the net realizable value of our investments (including our cash, cash equivalents and marketable
securities) and our ability to sell them. In the U.S., for example, the yields on our portfolio securities are very low
due to general economic conditions. Any one of these factors could reduce our interest income, or result in
material charges, which in turn could impact our overall net income and earnings per share.
For example, if we were to experience a loss on any of these investments that loss may cause us to record an
other-than-temporary impairment charge. The effect of this charge could impact our overall net income and
earnings per share. In any of these scenarios, our liquidity may be negatively impacted, which in turn may
prohibit us from making investments in our business, taking advantage of opportunities and potentially meeting
our financial obligations as they come due.
Our strategy to develop and introduce new product and service offerings, including new product features,
exposes us to risks such as limited customer acceptance, costs related to product defects and large
expenditures that may not result in additional net revenue.
Rapid technological changes, as well as changes in customer requirements and preferences, characterize the
software industry. We devote significant resources to the development of new technologies, such as our vertical
design products and our digital prototyping and collaboration products. In addition, we frequently introduce new
business models or methods that require a considerable investment of technical and financial resources. We are
making such investments through further development and enhancement of our existing products, as well as
through acquisitions of new product lines. Such investments may not result in sufficient revenue generation to
justify their costs, or competitors may introduce new products and services that achieve acceptance among our
current customers, adversely affecting our competitive position.
In particular, a critical component of our growth strategy is to have customers of our AutoCAD and
AutoCAD LT products expand their portfolios to include our related vertical design products and our model-
based design products such as our Autodesk Inventor products, our Autodesk Revit products, our AutoCAD Civil
3D products and our Autodesk Navisworks products. Should sales of our AutoCAD and AutoCAD LT products
decrease without a corresponding increase in vertical design and model-based design product revenue or without
purchases of customer seats to our vertical design products and model-based design products, our results of
operations will be adversely affected.
Additionally, the software products we offer are complex, and despite extensive testing and quality control,
may contain errors or defects. These errors or defects could result in the need for corrective releases to our
software products, damage to our reputation, loss of revenue, an increase in product returns or lack of market
acceptance of our products, any of which would likely harm our business.
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