AMD 2000 Annual Report Download - page 386

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
. product mix and introduction schedules;
. product bundling, marketing, merchandising and pricing strategies;
. control over industry standards, PC manufacturers and other PC industry
participants, including motherboard, chipset and basic input/output system
(BIOS) suppliers; and
. customer brand loyalty.
As Intel expanded its dominance over the PC system platform, many PC
manufacturers reduced their system development expenditures and now purchase
microprocessors together with chipsets or in assembled motherboards. PC OEMs are
increasingly dependent on Intel, less innovative on their own and, to a large
extent, distributors of Intel technology. In marketing our microprocessors to
these OEMs and dealers, we depend on companies other than Intel for the design
and manufacture of core-logic chipsets, graphics chips, motherboards, BIOS
software and other components. In recent years, many of these third-party
designers and manufacturers have lost significant market share to Intel. In
addition, these companies produce chipsets, motherboards, BIOS software and
other components to support each new generation of Intel's microprocessors only
if Intel makes information about its products available to them in time to
address market opportunities. Delay in the availability of such information
makes, and will continue to make, it increasingly difficult for these third
parties to retain or regain market share.
To compete with Intel in the microprocessor market in the future, we intend to
continue to form close relationships with third-party designers and
manufacturers of chipsets, motherboards, graphics chips, BIOS software and other
components. Similarly, we intend to expand our chipset and system design
capabilities, and to offer OEMs licensed system designs incorporating our
microprocessors and companion products. We cannot be certain, however, that our
efforts will be successful.
We do not currently plan to develop microprocessors that are bus interface
protocol compatible with the Pentium III, Pentium IV and Celeron processors
because our patent cross-license agreement with Intel does not extend to
microprocessors that are bus interface protocol compatible with Intel's sixth
and subsequent generation processors. Thus, the AMD Athlon and AMD Duron
microprocessors are not designed to function with motherboards and chipsets
designed to work with Intel microprocessors. The same will be true of our Hammer
family microprocessors. Our ability to compete with Intel in the market for
seventh-generation and future generation microprocessors will depend on our:
. success in designing and developing the microprocessors; and
. ability to ensure that the microprocessors can be used in PC platforms
designed to support our microprocessors, or that platforms are available
which support both Intel processors and our microprocessors.
A failure for any reason of the designers and producers of motherboards,
chipsets, processor modules and other system components to support our
microprocessor offerings would have a material adverse effect on our business.
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Source: ADVANCED MICRO DEVIC, 10-K405, March 20, 2001