Autodesk 2013 Annual Report Download - page 89

affected by a slower summer period, and our Asia Pacific operations typically experience seasonal slowing in our third and
fourth quarters.
Our operating expenses are based in part on our expectations for future revenue and are relatively fixed in the short term.
Accordingly, any revenue shortfall below expectations have had, and in the future could have, an immediate and significant
adverse effect on our profitability. Greater than anticipated expenses or a failure to maintain rigorous cost controls would also
negatively affect profitability.
If we do not maintain good relationships with the members of our distribution channel, or achieve anticipated levels of sell-
through, our ability to generate revenue will be adversely affected. If our distribution channel suffers financial losses, becomes
financially unstable or insolvent, is negatively impacted by the 2011 consolidation between two important distributors, or is not
provided the right mix of incentives to sell our products, our ability to generate revenue will be adversely affected.
We sell our software products both directly to end-users and through a network of distributors and resellers. For the fiscal
year ended January 31, 2013, approximately 83% of our revenue was derived from indirect channel sales through distributors
and resellers, and we expect that the majority of our revenue will continue to be derived from indirect channel sales in the
future. Our ability to effectively distribute our products depends in part upon the financial and business condition of our
distributor and reseller network. Computer software distributors and resellers typically are not highly capitalized, have
previously experienced difficulties during times of economic contraction and experienced difficulties during the past several
years. We have processes to ensure that we assess the creditworthiness of distributors and resellers prior to our sales to them. In
the past we have taken steps to support them, and may take additional steps in the future, such as extending credit terms and
providing temporary discounts. These steps, if taken, could harm our financial results. If our distributors and resellers were to
become insolvent, they would not be able to maintain their business and sales, or provide customer support services, which
would negatively impact our business and revenue.
We rely significantly upon major distributors and resellers in both the U.S. and international regions, including the
distributor Tech Data Corporation and its global affiliates (“Tech Data”). Tech Data accounted for 23%, 17% and 16% of our
total net revenue for the fiscal years ended January 31, 2013, 2012 and 2011, respectively.
On October 27, 2011, Tech Data purchased certain assets of Mensch und Maschine Software (“MuM”) in Europe. MuM
had been a European distributor of our products in that region. The acquisition concentrates additional sales through Tech Data.
On a consolidated basis, combined sales of the two entities would have accounted for 21% and 22% of our net revenue for
fiscal 2012 and 2011, respectively, if the acquisition had taken place at the beginning of fiscal 2011. Although we believe that
we are not substantially dependent on Tech Data, including following the acquisition of certain assets of MuM, if Tech Data
were to experience a significant disruption with its business or if our relationship with Tech Data were to significantly
deteriorate, it is possible that our ability to sell to end users would be, at least temporarily, negatively impacted. This could in
turn negatively impact our financial results.
Over time, we have modified and will continue to modify aspects of our relationship with our distributors and resellers,
such as their incentive programs, pricing to them and our distribution model to motivate and reward them for aligning their
businesses with our strategy and business objectives. Changes in these relationships and underlying programs could negatively
impact their business and harm our business. In addition, 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 distributors or 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 revenue on future sales to these customers. These events could have a material adverse
effect on our financial results.
A significant portion of our revenue is generated through maintenance revenue; decreases in maintenance attach or renewal
rates or a decrease in the number of new licenses we sell would negatively impact our future revenue and financial results.
Our maintenance customers have no obligation to attach maintenance to their initial license or renew their maintenance
contract after the expiration of their initial maintenance period, which is typically one year. Our customers' attach and renewal
rates may decline or fluctuate as a result of a number of factors, including the overall global economy, the health of their
businesses, and the perceived value of the maintenance program. If our customers do not attach maintenance to their initial
license or renew their maintenance contract for our products, our maintenance revenue will decline and our financial results
will suffer.
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2013 Annual Report