AMD 2003 Annual Report Download - page 59

Table of Contents
Uncertainties involving the ordering, and shipment of, and payment for our products could materially adversely affect us. Our sales are typically made
pursuant to individual purchase orders, and we generally do not have long-term supply arrangements with our customers. Generally, our customers may cancel
orders 30 days prior to shipment without incurring a significant penalty. We base our inventory levels on customers’ estimates of demand for their products,
which is difficult to predict. This difficulty may be compounded when we sell to OEMs indirectly through distributors, as our forecasts for demand are then
based on estimates provided by multiple parties. In addition, our customers may change their inventory practices on short notice for any reason. The cancellation
or deferral of product orders, the return of previously sold products or overproduction due to failure of anticipated orders to materialize could result in excess or
obsolete inventory, which could result in write-downs of inventory. While we believe inventories in the supply chain are currently at reasonable levels, market
conditions are uncertain and these and other factors could materially adversely affect our revenues.
Our price-protection obligations and return rights under specific provisions in our agreements with distributors may adversely affect us. Distributors
typically maintain an inventory of our products. In most instances, our agreements with distributors protect their inventory of our products against price
reductions, as well as products that are slow moving or have been discontinued. These agreements, which may be canceled by either party on a specified notice,
generally allow for the return of our products. We defer the gross margins on our sales to distributors, resulting from both our deferral of revenue and related
product costs, until the applicable products are re-sold by the distributors. The price protection and return rights we offer to our distributors could materially
adversely affect us if distributors exercise these rights as a result of an unexpected significant decline in the price of our products or otherwise.
If we cannot adequately protect our technology or other intellectual property, in the United States and abroad, through patents, copyrights, trade secrets,
trademarks and other measures, we may lose a competitive advantage and incur significant expenses. We may not be able to adequately protect our technology
or other intellectual property, in the United States and abroad, through patents, copyrights, trade secrets, trademarks and other measures. Any patent licensed by
us or issued to us could be challenged, invalidated or circumvented or rights granted thereunder may not provide a competitive advantage to us. Furthermore,
patent applications that we file may not result in issuance of a patent. Despite our efforts to protect our rights, others may independently develop similar products,
duplicate our products or design around our patents and other rights. In addition, it is difficult to cost-effectively monitor compliance with, and enforce, our
intellectual property on a worldwide basis.
From time to time, we have been notified that we may be infringing intellectual property rights of others. If any such claims are asserted against us, we
may seek to obtain a license under the third party’s intellectual property rights. We cannot assure you that all necessary licenses can be obtained on satisfactory
terms, if at all. We could decide, in the alternative, to resort to litigation to challenge such claims. Such challenges could be extremely expensive and
time-consuming and could have a material adverse effect on us. We cannot assure you that litigation related to the intellectual property rights of us and others
will always be avoided or successfully concluded.
Failure to comply with any applicable environmental regulations could result in a range of consequences including fines, suspension of production,
alteration of manufacturing process, sales limitations, and criminal and civil liabilities. Existing or future regulations could require us or FASL LLC to procure
expensive pollution abatement or remediation equipment, to modify product designs or to incur other expenses associated with compliance with environmental
regulations. Any failure to control the use of, disposal or storage of, or adequately restrict the discharge of, hazardous substances could subject us to future
liabilities and could have a material adverse effect on our business.
Future litigation proceedings may materially affect us. From time to time we are a defendant or plaintiff in various legal actions. Litigation can involve
complex factual and legal questions and its outcome is uncertain.
54
Source: ADVANCED MICRO DEVIC, 10-K, March 09, 2004