AMD 2013 Annual Report Download - page 38

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• a higher incidence of inventory obsolescence because of rapidly changing technology and customer
requirements;
• a failure to accurately estimate customer demand for our products, including for our older products as
our new products are introduced; or
• our competitors taking aggressive pricing actions.
Because market conditions are uncertain and because we believe that consumer PC market conditions will
remain challenging, these and other factors could materially adversely affect our business.
Our reliance on third-party distributors and add-in-board (AIB) partners subjects us to certain risks.
We market and sell our products directly and through third-party distributors and AIB partners pursuant to
agreements that can generally be terminated for convenience by either party upon prior notice to the other party.
These agreements are non-exclusive and permit both our distributors and AIBs to offer our competitors’
products. We are dependent on our distributors and AIBs to supplement our direct marketing and sales efforts. If
any significant distributor or AIB or a substantial number of our distributors or AIBs terminated their relationship
with us, decided to market our competitors’ products over our products or decided not to market our products at
all, our ability to bring our products to market would be impacted and we would be materially adversely affected.
If we are unable to manage the risks related to the use of our third-party distributors and AIB partners or offer the
appropriate incentives to focus them on the sale of our products, our business could be materially adversely
affected.
Additionally, distributors and AIBs 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 provide
return rights for any product that we have removed from our price book and that is not more than 12 months
older than the manufacturing code date. Some agreements with our distributors also contain standard stock
rotation provisions permitting limited levels of product returns. Our agreements with AIBs protect their inventory
of our products against price reductions. We defer the gross margins on our sales to distributors and AIBs,
resulting from both our deferral of revenue and related product costs, until the applicable products are re-sold by
the distributors or the AIBs. However, in the event of a significant decline in the price of our products, the price
protection rights we offer would materially adversely affect us because our revenue and corresponding gross
margin would decline.
Acquisitions could disrupt our business, harm our financial condition and operating results or dilute, or
adversely affect the price of, our common stock.
Our success will depend, in part, on our ability to expand our product offerings and grow our business in
response to changing technologies, customer demands and competitive pressures. In some circumstances, we
may pursue growth through the acquisition of complementary businesses, solutions or technologies rather than
through internal development. The identification of suitable acquisition candidates can be difficult, time-
consuming and costly, and we may not be able to successfully complete identified acquisitions. Moreover, if
such acquisitions require us to seek additional debt or equity financing, we may not be able to obtain such
financing on terms favorable to us or at all. Even if we successfully complete an acquisition, we may not be able
to assimilate and integrate effectively or efficiently the acquired business, technologies, solutions, assets,
personnel or operations, particularly if key personnel of the acquired company decide not to work for us.
Acquisitions may also involve the entry into geographic or business markets in which we have little or no prior
experience. Consequently, we may not achieve anticipated benefits of the acquisitions which could harm our
operating results. In addition, to complete an acquisition, we may issue equity securities, which would dilute our
stockholders’ ownership and could adversely affect the price of our common stock, as well as incur debt, assume
contingent liabilities or have amortization expenses and write-downs of acquired assets, which could adversely
affect our results of operations. Acquisitions may also reduce our cash available for operations and other uses,
which could harm our business.
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