AMD 2001 Annual Report Download - page 217

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Our ability to increase microprocessor product revenues and benefit fully from
the substantial investments we have made and continue to make related to
microprocessors depends on the continuing success of the AMD Athlon and AMD
Duron microprocessors, our seventh-generation processors, and future generations
of microprocessors, beginning with the eighth-generation "Hammer" family of
processors that we currently plan to introduce at the end of 2002.
If we fail to achieve continued and expanded market acceptance of our
seventh-generation microprocessors or if we fail to introduce in a timely
manner, or achieve market acceptance for, the Hammer microprocessors, we may be
materially adversely affected.
We Face Significant Competition from Intel Corporation. Intel has dominated the
market for microprocessors used in PCs for many years. As a result, Intel has
been able to control x86 microprocessor and PC system standards and dictate the
type of products the market requires of Intel's competitors. In addition, the
financial strength of Intel allows it to market its product aggressively, target
our customers and our channel partners with special incentives and discipline
customers who do business with us. These aggressive activities can result in
lower average selling prices for us and adversely affect our margins and
profitability. Intel also exerts substantial influence over PC manufacturers and
their channels of distribution through the "Intel Inside" brand program and
other marketing programs. As long as Intel remains in this dominant position, we
may be materially adversely affected by its:
o pricing and allocation strategies;
o product mix and introduction schedules;
o product bundling, marketing and merchandising strategies;
o control over industry standards, PC manufacturers and other PC industry
participants, including motherboard, chipset and basic input/output system
(BIOS) suppliers; and
o user brand loyalty.
We expect Intel to maintain its dominant position in the marketplace as well as
to continue to invest heavily in research and development, new manufacturing
facilities and other technology companies.
Intel also dominates the PC system platform. As a result, PC OEMs are highly
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 or exited the business. In addition, these companies
produce chipsets, motherboards, BIOS software and other components to support
each new generation of Intel's microprocessors, and Intel has significant
leverage over their business opportunities.
Our microprocessors are not designed to function with motherboards and chipsets
designed to work with Intel micro-
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Source: ADVANCED MICRO DEVIC, 10-K, March 07, 2002