AMD 1993 Annual Report Download - page 10

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MARKETING AND SALES
Advanced Micro Devices markets and sells its products primarily to
original equipment manufacturers of computation and communication equipment.
AMD's products are sold under the AMD(Registered Trademark) trademark. The
Corporation recently entered into an agreement with Compaq Computer Corporation
(Compaq) under which the Corporation will supply Compaq with microprocessor
products; however, the agreement does not require Compaq to purchase
microprocessor products from the Corporation. The Corporation sells to a broad
base of customers; no single customer accounted for more than ten percent (10%)
of sales during the fiscal year ended December 26, 1993. Through its principal
facilities in Santa Clara County, California, and field offices throughout the
United States and abroad (primarily Europe and the Asia-Pacific Basin) the
Corporation employs a direct sales force. The Corporation also sells its
products through third-party distributors and independent representatives in
both domestic and international markets pursuant to nonexclusive agreements.
The distributors also sell products manufactured by AMD's competitors,
including those products for which the Corporation is an alternate source.
Distributors typically maintain an inventory of AMD's products. The
Corporation, pursuant to its agreements with the distributors, employs
procedures which provide protection to the distributors for their inventory of
Advanced Micro Devices' products against price reductions as well as products
that are slow moving or have been discontinued by the Corporation. These
agreements, which may be cancelled by either party on a specified notice,
generally contain a provision for the return of AMD's products to the
Corporation in the event the agreement with the distributor is terminated. (See
Note 1 of Notes to Consolidated Financial Statements contained in the 1993
Annual Report to Stockholders.)
Advanced Micro Devices has established sales subsidiaries that have offices
in Belgium, Canada, China, France, Germany, Hong Kong, Italy, Japan, Korea,
Singapore, Sweden, Switzerland, Taiwan, and the United Kingdom. (See Note 9 of
Notes to Consolidated Financial Statements contained in the 1993 Annual Report
to Stockholders.) The international sales force also works with independent
sales representatives and distributors in approximately 30 countries, including,
those where Advanced Micro Devices has sales subsidiaries. The Corporation's
international sales operations entail political and economic risks including
expropriation, currency controls, exchange fluctuations, changes in freight
rates, and changes in rates and exemptions for taxes and tariffs. The
Corporation has not experienced any material adverse effects associated with
such risks.
BACKLOG
Since Advanced Micro Devices manufactures and markets a standard line of
products, a significant portion of its sales are made from inventory on a
current basis. Sales are made primarily pursuant to (1) purchase orders for
current delivery of standard items, or (2) agreements covering purchases over a
period of time, which are frequently subject to revision and cancellation.
Generally, in light of current industry practice and experience, the Corporation
does not believe that such agreements provide reliable backlog figures.
COMPETITION
Numerous firms are engaged in the manufacture and sale of integrated
circuits competitive with those of the Corporation. Some of these firms have
resources greater than those of the Corporation and do not depend upon
integrated circuits as their principal source of revenue. There is also
significant captive production by certain large users of circuits such as
manufacturers of computers, telecommunications equipment and consumer
electronics products.
The industry typically experiences rapid technological advances together
with substantial price reductions in maturing products. After a product is
introduced, prices normally decrease over time as production efficiency and
competition increase, and a successive generation of products is developed and
introduced for sale.
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Source: ADVANCED MICRO DEVIC, 10-K, March 07, 1994