AMD 2009 Annual Report Download - page 36

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Our receipt of royalty revenues is dependent upon being designed into third-party products and the
success of those products.
Our graphics technology for game consoles is used in the Nintendo Wii and Microsoft Xbox 360 game
consoles. The revenues that we receive from these products are in the form of non-recurring engineering fees
charged for design and development services, as well as royalties paid to us by Nintendo and Microsoft. Our
royalty revenues are directly related to the sales of these products and reflective of their success in the market. If
Nintendo or Microsoft does not include our graphics technology in future generations of their game consoles, our
revenues from royalties would decline significantly. Moreover, we have no control over the marketing efforts of
Nintendo and Microsoft and we cannot make any assurances that sales of those products will achieve expected
levels in the current or future fiscal years. Consequently, the revenues from royalties expected by us from these
products may not be fully realized, and our operating results may be adversely affected.
Our inability to continue to attract and retain qualified personnel may hinder our product development
programs.
Our future success depends upon the continued service of numerous qualified 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 materially adversely affected.
If we fail to maintain the efficiency of our supply chain as we respond to increases or changes in customer
demand for our products, our business could be materially adversely affected.
Our ability to meet customer demand for our products depends, in part, on our ability to deliver the products
our customers want on a timely basis. Accordingly, we rely on our supply chain for the manufacturing,
distribution and fulfillment of our products. As we continue to grow our business, acquire new OEM customers
and strengthen relationships with existing OEM customers, the efficiency of our supply chain will become
increasingly important because OEMs tend to have specific requirements for particular products, and
specific time-frames in which they require delivery of these products.
We outsource to third parties certain supply-chain logistics functions, including portions of our product
distribution and transportation management, and co-source some information technology services.
We rely on third-party providers to operate our regional product distribution centers and to manage the
transportation of our work-in-process and finished products among our facilities and to our customers. In
addition, we rely on third parties 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 are 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 and the distribution of our products to our customers could be materially 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 could have a material
adverse effect on us if the transition is not executed appropriately.
Uncertainties involving the ordering and shipment of our products could materially adversely affect us.
We typically sell our products pursuant to individual purchase orders. We generally do not have long-term
supply arrangements with our customers or minimum purchase requirements except that orders generally must be
for standard pack quantities. Generally, our customers may cancel orders more than 30 days prior to shipment
without incurring significant fees. We base our inventory levels on customers’ estimates of demand for their
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