AMD 2000 Annual Report Download - page 385

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
. the effects of Intel's new product introductions, marketing strategies and
pricing;
. adverse market conditions in the personal computer (PC) market and
consequent diminished demand for our microprocessors;
. market acceptance of our microprocessors, including the timely volume
availability of motherboards and chipsets designed for these processors;
. whether we can successfully fabricate higher performance microprocessors in
planned volume and speed mixes;
. whether we will have the financial and other resources necessary to
continue to invest in the microprocessor products, including leading-edge
wafer fabrication equipment and advanced process technologies;
. the possibility that our newly introduced products may be defective; and
. unexpected interruptions in our manufacturing operations.
See also the discussions below regarding Intel Dominance and Process Technology.
Intel Dominance. Intel has dominated the market for microprocessors used in PCs
for many years. Because of its dominant market position, Intel has historically
set and controlled x86 microprocessor and PC system standards and, thus,
dictated the type of product the market requires of Intel's competitors. In
addition, Intel may and does vary prices on its microprocessors and other
products at will and thereby affects the margins and profitability of its
competitors due to its financial strength and dominant position. Because Intel
has dominated the microprocessor market for many years and has brand strength,
we have in the past priced AMD microprocessors below the published price of
Intel processors offering comparable performance. Thus, Intel's processor
marketing and pricing can impact and have impacted the average selling prices of
our microprocessors, and consequently can impact and have impacted our overall
margins.
Intel also exerts substantial influence over PC manufacturers and their channels
of distribution through the "Intel Inside" brand program and other marketing
programs. Intel invests billions of dollars in, and as a result exerts influence
over, many other technology companies. We expect Intel to continue to invest
heavily in research and development, new manufacturing facilities and other
technology companies, and to remain dominant:
. through the Intel Inside and other marketing programs;
. through other contractual constraints on customers, retailers, industry
suppliers and other third parties;
. by controlling industry standards; and
. by controlling supply and demand of motherboards, chipsets and other system
components.
As an extension of its dominant microprocessor market share, Intel also
dominates the PC platform. As a result, PC manufacturers have been increasingly
unable to innovate and differentiate their product offerings. We do not have the
financial resources to compete with Intel on such a large scale. As long as
Intel remains in this dominant position, we may be materially and adversely
affected by its:
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Source: ADVANCED MICRO DEVIC, 10-K405, March 20, 2001