AMD 2014 Annual Report Download - page 31

We may incur future impairments of goodwill.
We perform our annual goodwill impairment analysis as of the first day of the fourth quarter of each year.
Based on the annual goodwill impairment analysis that we conducted during the fourth quarter of 2014, we
concluded that the carrying amount of goodwill assigned to our Computing and Graphics reporting unit exceeded
its estimated fair value, and accordingly, we recorded a goodwill impairment charge of $233 million, which
represented the entire goodwill balance within this reporting unit. Subsequent to our annual goodwill impairment
analysis, we monitor for any events or changes in circumstances, such as significant adverse changes in business
climate or operating results, changes in management’s business strategy, an inability to successfully introduce
new products in the marketplace, an inability to successfully achieve internal forecasts or significant declines in
our stock price, which may represent an indicator of goodwill impairment. The occurrence of any of these events
may require us to record goodwill impairment charges in the future.
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 for standard products more than 30
days prior to shipment without incurring significant fees. We base our inventory levels in part 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 our products are sold indirectly through downstream channel distributors and
customers, as our forecasts for demand are then based on estimates provided by multiple parties throughout the
downstream channel.
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 or a reduction in our gross margin include:
• a sudden or significant decrease in demand for our products;
• a production or design defect in 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 products, including 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 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
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