Autodesk 2010 Annual Report Download - page 129

We believe that the recent economic contraction, as well as the financial pressure on our customers, have
decreased demand for our products as customers have reduced their work forces; this has resulted in fewer seats
of our design software sold and fewer maintenance contracts being renewed. Consequently, we experienced
revenue contraction in most products, all geographies and all reportable segments during fiscal 2010 as compared
to fiscal 2009. However, our business appears to show some signs of stabilizing as evidenced by modest
increases in revenue from commercial new seat licenses, revenue from every geographic region, revenue from
each of our product types and revenue from most of our operating segments in the fourth quarter of fiscal 2010 as
compared to the third quarter of fiscal 2010. In addition, we continued to make progress in reducing our
operating costs, which led to an increase in operating margin in the fourth quarter of fiscal 2010 compared to
each of the other quarters in fiscal 2010. Despite the small growth in these areas, it is not clear to us whether
these increases represent sustainable trends.
During fiscal 2010, as compared to fiscal 2009, net revenue decreased 26%, gross profit decreased 27%,
operating expenses decreased 21% and income from operations decreased 73%. The 73% decrease in income
from operations in fiscal 2010, as compared to fiscal 2009, was primarily due to the reduction in our net revenue
without an equivalent reduction of our costs. The majority of our costs are relatively fixed in the short term as
they relate primarily to our workforce. Marketing and sales, research and development and general and
administrative expenses declined in total by 18% in fiscal 2010 compared to the prior fiscal year due to our cost
containment efforts. Additionally, we recorded goodwill and intangible asset impairment charges of $21.0
million in fiscal 2010 compared to $128.9 million in the prior fiscal year. The unfavorable impacts of our
revenue decline during fiscal 2010 were partially offset by lower operating costs resulting from our fiscal 2009
and fiscal 2010 restructuring plans and other cost containment efforts. Our spending decisions are based in part
on our expectations for future revenue and are not directly variable with fluctuations in revenue. Accordingly,
our inability to immediately adjust our operating costs for any revenue shortfall below expectations could have
an immediate and significant adverse impact on our profitability.
In the second quarter of fiscal 2010 we initiated the fiscal 2010 restructuring plan, which reduced headcount
by approximately 430 positions globally and consolidated approximately 32 leased facilities around the world in
order to reduce our operating expenses. We took these and other actions in an attempt to better align our cost
structure with our recent and anticipated financial results. Other important actions include reductions in
discretionary spending and contingent labor costs.
We generate a significant amount of our revenue in the U.S., Japan, Germany, the United Kingdom, France,
Canada, Italy, South Korea, Australia and China. The stronger value of the U.S. dollar relative to most of the
other currencies, except for the Japanese yen, against which the dollar weakened, had a negative effect on
operating income during fiscal 2010 as compared to fiscal 2009. Had exchange rates from fiscal 2009 been in
effect during fiscal 2010 (“on a constant currency basis”), net revenue would have decreased 23% compared to a
26% decrease as recorded, operating expenses would have decreased 20% compared to 21% as recorded, and
income from operations would have decreased 59% compared to a 73% decrease as recorded during fiscal 2010
as compared to fiscal 2009. Changes in the value of the U.S. dollar may have a significant effect on net revenue,
operating expenses and income from operations in future periods. We use foreign currency contracts to reduce
the exchange rate effect on a portion of the net revenue of certain anticipated transactions, but cannot completely
mitigate the impact of fluctuation of such foreign currency against the U.S. dollar.
Net revenue for the fiscal year ended January 31, 2010 decreased 26% as compared to the same period in
the prior fiscal year due to a 39% decrease in license and other revenue, which was partially offset by a 3%
increase in maintenance revenue. We experienced decreases in net revenue in EMEA, APAC and the Americas
during fiscal 2010 as compared to fiscal 2009.
We rely significantly upon major distributors and resellers in both the U.S. and international regions,
including Tech Data Corporation and its global affiliates (collectively, “Tech Data”). Tech Data accounted for
14% of our consolidated net revenue during both fiscal year 2010 and 2009.
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