AMD 2011 Annual Report Download - page 35

adverse effect on our business. For example, flooding in Thailand is disrupting the supply of hard disk drives.
Some of our customers have been unable to obtain sufficient quantities of hard disk drives. As a result, we
believe during the fourth quarter of 2011, they postponed or canceled their orders for our GPU products. We
expect the hard disk drive shortage to continue through at least the first quarter of 2012, which could have a
material adverse impact on our business. Any of the above risks, should they occur, could result in an increase in
the cost of components, production delays, general business interruptions, delays from difficulties in obtaining
export licenses for certain technology, tariffs and other barriers and restrictions, potentially longer payment
cycles, potentially increased taxes, restrictions on the repatriation of funds and the burdens of complying with a
variety of foreign laws, any of which could ultimately have a material adverse effect on our business.
Worldwide economic and political conditions may adversely affect demand for our products.
Continued uncertainty over the worldwide economic environment may adversely impact consumer
confidence and spending, causing our customers to postpone purchases. Moreover, political conditions may
create uncertainties that could adversely affect our business. The United States has been and may continue to be
involved in armed conflicts that could have a further impact on our sales and our supply chain. The consequences
of armed conflict, political instability or civil or military unrest are unpredictable and we may not be able to
foresee events that could have a material adverse effect on us. Also, the occurrence and threat of terrorist attacks
have in the past, and may in the future, adversely affect demand for our products. Terrorist attacks or other
hostile acts may negatively affect our operations, directly or indirectly, and such attacks or related armed
conflicts may directly impact our physical facilities or those of our suppliers or customers. Furthermore, these
attacks or hostile acts may make travel and the transportation of our products more difficult and more expensive,
which could materially adversely affect us. Any of these events could cause consumer spending to decrease or
result in increased volatility in the United States economy and worldwide financial markets.
Unfavorable currency exchange rate fluctuations could continue to adversely affect us.
We have costs, assets and liabilities that are denominated in foreign currencies, primarily the Canadian
dollar. As a consequence, movements in exchange rates could cause our foreign currency denominated expenses
to increase as a percentage of revenue, affecting our profitability and cash flows. Whenever we believe
appropriate, we hedge a portion of our short-term foreign currency exposure to protect against fluctuations in
currency exchange rates. We determine our total foreign currency exposure using projections of long-term
expenditures for items such as payroll. We cannot assure you that these activities will be effective in reducing
foreign exchange rate exposure. Failure to do so could have an adverse effect on our business, financial
condition, results of operations and cash flow. In addition, the majority of our product sales are denominated in
U.S. dollars. Fluctuations in the exchange rate between the U.S. dollar and the local currency can cause increases
or decreases in the cost of our products in the local currency of such customers. An appreciation of the U.S.
dollar relative to the local currency could reduce sales of our products.
Our inability to effectively control the sales of our products on the gray market could have a material adverse
effect on us.
We market and sell our products directly to OEMs and through authorized third-party distributors. From
time to time, our products are diverted from our authorized distribution channels and are sold on the “gray
market.” Gray market products result in shadow inventory that is not visible to us, thus making it difficult to
forecast demand accurately. Also, when gray market products enter the market, we and our distribution channel
compete with these heavily discounted gray market products, which adversely affects demand for our products
and negatively impact our margins. In addition, our inability to control gray market activities could result in
customer satisfaction issues because any time products are purchased outside our authorized distribution channel
there is a risk that our customers are buying counterfeit or substandard products, including products that may
have been altered, mishandled or damaged, or are used products represented as new.
29