AMD 2000 Annual Report Download - page 387

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Dependence on Microsoft and Logo License. Our ability to innovate beyond the x86
instruction set controlled by Intel depends on support from Microsoft in its
operating systems. If Microsoft does not provide support in its operating
systems for the x86 instructions that we innovate and design into our
processors, independent software providers may forego designing their software
applications to take advantage of our innovations. This would adversely affect
our ability to market our processors. For example, we cannot assure that
Microsoft will support our Hammer family of microprocessors and its x86-64 bit
instruction set. Microsoft's support is vital to the success of the Hammer
family products currently in development.
In addition, we have entered into logo license agreements with Microsoft that
allow us to label our products as "Designed for Microsoft Windows." We have also
obtained appropriate certifications from recognized testing organizations for
our microprocessors. If we fail to maintain the logo license agreements with
Microsoft, we may lose our ability to label our microprocessors with the
Microsoft Windows logo. This could impair our ability to market the products and
could have a material adverse effect on our business.
Fluctuations in the PC Market. Since most of our microprocessor products are
used in PCs and related peripherals, our future growth is closely tied to the
growth of the PC industry. Industry-wide fluctuations in the PC marketplace have
in the past and may in the future materially and adversely affect our business.
Flash Memory Products
The demand for Flash memory devices has recently increased substantially due to
the increasing use of equipment and other devices requiring non-volatile memory
such as:
. cellular telephones;
. routers which transfer data between local area networks;
. PC cards which are inserted into notebook and subnotebook computers or
personal digital assistants; and
. Consumer electronic items such as set top boxes, personal digital
assistants and digital cameras.
In order to meet forecasted demand, we must increase our production of Flash
memory devices through FASL's fabrication facilities, FASL JV1, FASL JV2 and
FASL JV3, and through foundry or similar arrangements with others. We cannot be
certain that the demand for Flash memory products will remain at current or
greater levels, or that we will have sufficient capacity to meet the demand for
Flash memory devices. Our inability to meet the demand for Flash memory devices
could have a material adverse effect on our business.
Competition in the market for Flash memory devices will increase in 2001 and
beyond as existing manufacturers introduce new products and industry-wide
production capacity increases. It is possible that we will be unable to maintain
or increase our market share in Flash memory devices as the market develops and
as existing and potential new competitors introduce competitive products. A
decline in our Flash memory device business or decline in revenue in this
product line could have a material adverse effect on our business.
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Source: ADVANCED MICRO DEVIC, 10-K405, March 20, 2001