AMD 2011 Annual Report Download - page 32

procedures, errors will not be found in new products or releases after commencement of commercial shipments
in the future, which could result in loss of or delay in market acceptance of our products, material recall and
replacement costs, delay in recognition or loss of revenues, writing down the inventory of defective products, the
diversion of the attention of our engineering personnel from product development efforts, defending against
litigation related to defective products or related property damage or personal injury, and damage to our
reputation in the industry and could adversely affect our relationships with our customers. In addition, we may
have difficulty identifying the end customers of the defective products in the field. As a result, we could incur
substantial costs to implement modifications to correct defects. Any of these problems could materially adversely
affect our business.
We could be subject to potential product liability claims if one of our products causes, or merely appears to
have caused, an injury. Claims may be made by consumers or others selling our products, and we may be subject
to claims against us even if an alleged injury is due to the actions of others. A product liability claim, recall or
other claim with respect to uninsured liabilities or for amounts in excess of insured liabilities could have a
material adverse effect on our business.
Our receipt of royalty revenues is dependent upon our technology being designed into third-party products and
the success of those products.
Our graphics technology is used in game consoles, including the Nintendo Wii and Microsoft Xbox 360.
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 these third parties. Our royalty revenues are
directly related to the sales of these products and reflective of their success in the market. If these third parties do
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 these third parties 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.
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. If we are unable to consistently deliver the right
products to our customers on a timely basis in the right locations, our customers may reduce the quantities they
order from us, which could have a material adverse affect on our business.
We outsource to third parties certain supply-chain logistics functions, including portions of our product
distribution, transportation management, and information technology support 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, our manufacturing suppliers
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.
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
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