AMD 2003 Annual Report Download - page 58

Table of Contents
Any of the above risks, should they occur, could have a material adverse effect on us.
As part of our business strategy, we are continuing to seek expansion of product sales in emerging overseas markets. Expansion into emerging overseas
markets presents similar political and economic risks as described above, and we may be unsuccessful in our strategy to penetrate these emerging overseas
markets.
Also, a significant portion of the manufacturing costs for our microprocessor products is denominated in euros while sales of those products are
denominated primarily in U.S. dollars. If the U.S. dollar continues to depreciate against the euro in the foreign exchange market, our gross margins may
deteriorate.
Our inability to continue to attract and retain key personnel may hinder our product development programs. Our future success depends upon the
continued service of numerous key engineering, manufacturing, marketing, sales and executive personnel. If we are not able to continue to attract, retain and
motivate qualified personnel necessary for our business, the progress of our product development programs could be hindered, and we could be otherwise
materially adversely affected.
Our inability to effectively implement new modules of our enterprise resource planning system could have a material adverse effect on us. In November
2003, we restarted the implementation of the sales and distribution modules of the enterprise resource planning (ERP) system that we initially began
implementing in early 2002 and postponed from September 2002 to November 2003 as part of our cost-cutting initiatives. The ERP system is intended to provide
an integrated information system to serve all of AMD. We are heavily dependent on the proper function of our internal systems to conduct our business. System
failure or malfunctioning may result in disruption of operations and the inability to process transactions. If we encounter unforeseen problems with regard to
system operations or these additional module implementations, we could be materially adversely affected. In addition, if the semiconductor industry does not
continue to improve in accordance with our expectations or undergoes another downturn or if demand for our products is lower than our expectations, we may
again postpone implementation of these modules.
We rely on third parties to provide supply-chain logistics functions, including physical distribution of our products, and some information technology
services. We rely on a third-party provider to deliver our products to our customers and to distribute materials for Fab 25 and the SDC. In addition, we rely on a
third-party provider in India to provide certain information technology services to us, including helpdesk support, desktop application services, business and
software support applications, server and storage administration, data center operations, database administration, and voice, video and remote access. Our
relationships with these providers is governed by fixed term contracts. We cannot guarantee that these providers will fulfill their respective responsibilities in a
timely manner in accordance with the contract terms, in which case our internal operations, the distribution of our products to our customers and the distribution
of materials for Fab 25 and the SDC may be adversely affected. Also, we cannot guarantee that our contracts with these third-party providers will be renewed, in
which case we would have to transition these functions in-house or secure new providers, which may have a material adverse effect on our business, results of
operations and financial condition.
In addition, we decided to co-source these functions to third parties primarily to lower our operating expenses and create a more variable cost structure for
the company. However, if the costs related to administration, communication and coordination of these third-party providers are greater than we expect, then we
will not realize our anticipated cost savings.
Our operating results are subject to substantial seasonal fluctuations. Our operating results tend to vary seasonally. For example, our revenues are
generally higher in the fourth quarter than the third quarter of each year. This seasonal pattern is largely a result of decreased demand in Europe during the
summer months and higher demand in the retail sector of the PC market during the winter holiday season. In recent quarters, a substantial portion of our quarterly
sales have been made in the last month of the quarter.
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Source: ADVANCED MICRO DEVIC, 10-K, March 09, 2004