Autodesk 2010 Annual Report Download - page 124

We believe our competitive advantages will help us manage through the current challenging economic
environment, and position us well as economies begin to recover.
Our strategy to grow over the long term derives from these core strengths. Our growth strategy includes
continually increasing the business value of our design tools in a number of ways, and improving the
performance and functionality of our existing products with each new release. Our most recent release began in
March 2010. Beyond our non-industry or discipline specific horizontal design products, AutoCAD and AutoCAD
LT, we develop products addressing industry or discipline-specific needs through our vertical design and model-
based design product offerings. We continually strive to improve our product functionality and specialization by
industry while increasing product interoperability and usability. We also strive to create innovative ways of
delivering better user experiences to our customers. We believe this ultimately increases our customers’
satisfaction, the usefulness of our products to our customers and drives customer loyalty.
We believe that expanding our horizontal design product customers’ portfolios to include our vertical design
products and model-based design products presents a meaningful growth opportunity and is an important part of
our overall strategy. For fiscal 2010, revenue from model-based design products decreased 19%, as compared to
the prior fiscal year, but as a percentage of total revenue increased to 29% in fiscal 2010 compared to 27% in
fiscal 2009. We believe that the adoption of vertical design products and model-based design products by our
customers in all industries will increase their productivity, as well as result in richer design data. This migration
also poses various risks to us. In particular, if we do not successfully expand our horizontal design customer base
to our vertical design products and model-based design products as expected, then we would not realize the
growth we expect and our business would be adversely affected.
Expanding our geographic coverage is another key element of our growth strategy. We believe that
emerging economies continue to present long-term growth opportunities for us, although revenue from emerging
economies declined 37% during fiscal 2010 as compared to fiscal 2009. Revenue from emerging economies
represented 15% of fiscal 2010 net revenue as compared to 18% of fiscal 2009 net revenue. While we believe
there are long-term growth opportunities in emerging economies, conducting business in these countries presents
significant challenges, including economic volatility, geopolitical risk, intellectual property protection and
software piracy.
Our strategy includes improving our product functionality and expanding our product offerings through
internal development as well as through the acquisition of products, technology and businesses. Acquisitions
often increase the speed at which we can deliver product functionality to our customers; however, they entail
integration challenges and may, in certain instances, negatively impact our operating margins. We continually
review these trade-offs in making our decisions of whether to make acquisitions. The size and frequency of
transactions to acquire products, technology and businesses decreased significantly during fiscal 2010 as
compared to earlier periods. We currently anticipate that we will selectively acquire products, technology and
businesses as compelling opportunities that promote our strategy become available, but the pace at which we
make such investments will vary depending upon our business needs, the availability of suitable sellers and
technology, and our own financial condition.
Global economic conditions deteriorated significantly in fiscal 2010 as compared to the conditions that
existed during most of fiscal 2009. Economic contraction in most countries and markets, and global financial
market instability, including tighter credit, has impacted our business. We have seen demand for our products
and services decline in each of our major geographies and all the industries we serve during fiscal 2010 as
compared to fiscal 2009. This has negatively impacted our financial results. Our operating margins are very
sensitive to changes in revenue, given the relatively fixed nature of most of our expenses, which consist primarily
of employee-related expenditures, facilities costs, and depreciation and amortization expense. We have taken
actions in response to these global economic changes that we believe will improve our financial condition in
fiscal 2011 and beyond. We believe that by continuing to execute our strategy we can achieve our goal of being
the world’s leading design and engineering software and services company for the architecture, engineering, and
construction, manufacturing, geospatial mapping, and digital media and entertainment markets.
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