AMD 2003 Annual Report Download - page 49

Table of Contents
introduced our AMD Athlon 64 processors in September 2003. We designed these processors to provide users with the ability to take advantage of 64-bit
applications while preserving their ability to run existing 32-bit applications on servers and workstations and on desktop and mobile PCs. The success of these
processors is subject to risks and uncertainties including:
• market acceptance of our new 64-bit technology, AMD64, including the willingness of users to purchase products with 64-bit capability prior to having
transitioned to 64-bit computing;
• our ability to produce these processors in a timely manner on new process technologies, including 90-nanometer silicon-on-insulator technology, in the
volume and with the performance and feature set required by customers;
• our ability to successfully transition to 90-nanometer manufacturing process technology on a timely basis;
• the availability, performance and feature set of motherboards and chipsets designed for these processors; and
• the support of operating system and application program providers for our 64-bit instruction set, including timely development of 64-bit applications.
We cannot be certain that our substantial investments for research and development of process technologies will lead to timely improvements in
technology and equipment used to fabricate our products or that we will have sufficient resources to invest in the level of research and development that is
required to remain competitive. We make substantial investments in research and development for process technologies in an effort to improve the technologies
and equipment used to fabricate our products. In December 2002 we executed an agreement with IBM to jointly develop new logic process technologies,
particularly 65- and 45-nanometer technologies to be implemented on 300-millimeter silicon wafers, for use in producing future high-performance
microprocessor products. The successful and timely development and implementation of silicon-on-insulator technology and the achievement of other milestones
set forth in this agreement are critical to our AMD Opteron and AMD Athlon 64 microprocessors and to our ability to commence operations at Fab 36 in
accordance with our planned schedule. During 2002 and 2003, we paid approximately $190 million to IBM in connection with agreements and services related to
research and development activities. We cannot be certain that we will be able to develop, or obtain or successfully implement leading-edge process technologies
needed to fabricate future generations of our products profitably or on a timely basis. Furthermore, we cannot assure you that we will have sufficient resources to
maintain the level of investment in research and development that is required for us to remain competitive or that our partnerships will be successful.
We have experienced substantial fluctuations in revenues since 2001, and we may experience declines in revenues and increases in operating losses in the
future. Our historical financial results have been, and our future financial results are anticipated to be, subject to substantial fluctuations. Our total revenues
were $3,519 million for 2003 and $2,697 million for 2002 compared to $3,892 million for 2001. The decline from 2001 to 2002 was due primarily to a decrease
in unit sales and in average selling prices for our Computation Products, resulting from the industry-wide weakness in PC sales, and a decrease in average selling
prices for our Memory Products, reflecting continued weakness in the telecommunications and networking equipment industries, and the execution of our plan to
align our microprocessor inventory in the supply chain with forecasted demand, which included our decision, primarily in the third and fourth quarters of 2002,
to limit shipments and to accept receipt of product returns from certain customers. We incurred a net loss of $274 million for the fiscal year ended December 28,
2003, and $1.3 billion for 2002, compared to a net loss of $61 million for 2001. If conditions do not continue to improve in the microprocessor or Flash memory
markets in accordance with our expectations we may experience declines in revenue and operating losses. We cannot assure you that we will be able to return to
profitability or that, if we do, we will be able to sustain it.
The semiconductor industry is highly cyclical and has until recently been in a severe downturn that adversely affected, and may in the future adversely
affect, our business. The highly cyclical semiconductor industry has experienced significant downturns, often in connection with maturing product cycles,
manufacturing overcapacity and declines in general economic conditions. The most recent downturn, which began in the fourth
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Source: ADVANCED MICRO DEVIC, 10-K, March 09, 2004