AMD 2011 Annual Report Download - page 33

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 our business if the transition is not executed
appropriately.
We may be subject to disruptions or failures in our information technology systems and network
infrastructures that could have a material adverse effect on us.
We maintain and rely extensively on information technology systems and network infrastructures for the
effective operation of our business. We also hold large amounts of data in various data center facilities around
the world which our business depends upon. A disruption, infiltration or failure of our information technology
systems or any of our data centers as a result of software or hardware malfunctions, computer viruses, cyber
attacks, employee theft or misuse, power disruptions, natural disasters or accidents could cause breaches of data
security and loss of critical data, which in turn could materially adversely affect our business. Our security
procedures, such as virus protection software and our business continuity planning, such as our disaster recovery
policies and back-up systems, may not be adequate or implemented properly to fully address the adverse effect of
such events, which could adversely impact our operations. In addition, our business could be adversely affected
to the extent we do not make the appropriate level of investment in our technology systems as our technology
systems become out-of-date or obsolete and are not able to deliver the type of data integrity and reporting we
need to run our business. Furthermore, when we implement new systems and or upgrade existing systems, we
could be faced with temporary or prolonged disruptions that could adversely affect our business.
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
products, which may not accurately predict the quantity or type of our products that our customers will want in
the future or ultimately end up purchasing. Our ability to forecast demand is even further complicated when we
sell indirectly through distributors, as our forecasts for demand are then based on estimates provided by multiple
parties. Moreover, PC and consumer markets are characterized by short product lifecycles, which can lead to
rapid obsolescence and price erosion. In addition, our customers may change their inventory practices on short
notice for any reason. We may build inventories during periods of anticipated growth, and the cancellation or
deferral of product orders 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 and an adverse effect on gross
margins. Factors that may result in excess or obsolete inventory, which could result in write-downs of the value
of our inventory, a reduction in the average selling price, and/or a reduction in our gross margin include:
• a sudden and significant decrease in demand for our products;
• a higher incidence of inventory obsolescence because of rapidly changing technology and customer
requirements;
• a failure to accurately estimate customer demand for our older products as our new products are
introduced; or
• our competitors taking aggressive pricing actions.
Because market conditions are uncertain, these and other factors could materially adversely affect our
business.
Our reliance on third-party distributors and AIBs subjects us to certain risks.
We market and sell our products directly and through third-party distributors and AIBs pursuant to
agreements that can generally be terminated for convenience by either party upon prior notice to the other party.
27