AMD 2001 Annual Report Download - page 218

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
processors. Our ability to compete with Intel in the market for seventh-
generation and eighth-generation microprocessors will depend on our ability to
ensure that the microprocessors can be used in PC platforms designed to support
our microprocessors or that platforms are available that support both Intel
processors and our microprocessors. A failure 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 us.
The Cyclical Nature of the Semiconductor Industry May Limit Our Ability to
Maintain or Increase Revenue and Profit Levels During Industry Downturns. The
semiconductor industry is highly cyclical, to a greater extent than other less
dynamic or less technology-driven industries. In the past, including during 2001
and currently, our financial performance has been negatively affected by
significant downturns in the semiconductor industry as a result of:
o the cyclical nature of the demand for the products of semiconductor
customers;
o excess inventory levels by customers;
o excess production capacity; and
o accelerated declines in average selling prices.
If current conditions do not improve in the near term or if these or other
conditions in the semiconductor industry occur in the future, we will be
adversely affected.
Our Business Is Subject to Fluctuations in the Personal Computer Market. Our
business is closely tied to the personal computer industry. Industry-wide
fluctuations in the PC marketplace have materially adversely affected us,
including the industry downturn experienced during 2001 and currently, and may
materially adversely affect us in the future.
Worldwide Economic and Political Conditions May Affect Demand for Our Products.
The economic slowdown in the United States and worldwide, exacerbated by the
occurrence and threat of terrorist attacks and consequences of sustained
military action, has adversely affected demand for our microprocessors, Flash
memory devices and other integrated circuits. Similarly, a continued decline of
the worldwide semiconductor market or a significant decline in economic
conditions in any significant geographic area would likely decrease the overall
demand for our products, which could have a material adverse effect on us.
We Depend on Microsoft Corporation's Support for Our Products and Its 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 our x86 instruction sets,
independent software providers may forego designing their software applications
to take advantage of our innovations. In addition, we have entered into logo
license agreements with Microsoft that allow us to label our products as
"Designed for Microsoft Windows." If we fail to retain the support and
certification of Microsoft, our ability to market our processors could be
materially adversely affected.
We Will Have Significant Capital Requirements in 2002. We plan to continue to
make significant capital expenditures to support our microprocessor and Flash
memory products both in the near and long term, including $850 million in 2002.
These capital expenditures will be a substantial drain on our cash flow and may
also decrease our cash balances. To the extent that we
Source: ADVANCED MICRO DEVIC, 10-K, March 07, 2002