AMD 2001 Annual Report Download - page 222

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
market during the winter holiday season.
The Market for Our Products Is Subject to Rapid Technological Change. The market
for our products is generally characterized by rapid technological developments,
evolving industry standards, changes in customer requirements, frequent new
product introductions and enhancements, short product life cycles and severe
price competition. Our success depends substantially on our ability, on a
cost-effective and timely basis, to continue to enhance our existing products,
develop and introduce new products that take advantage of technological advances
and meet the demands of our customers.
We Face Intense Competition in the Integrated Circuit Industry. The integrated
circuit industry is intensely competitive. Products compete on performance,
quality, reliability, price, adherence to industry standards, software and
hardware compatibility, marketing and distribution capability, brand recognition
and availability. After a product is introduced, costs and average selling
prices normally decrease over time as production efficiency improves,
competitors enter the market and successive generations of products are
developed and introduced for sale. Failure to reduce our costs on existing
products or to develop and introduce, on a cost-effective and timely basis, new
products or enhanced versions of existing products with higher margins, would
have a material adverse effect on us.
Our Customers Can Cancel or Revise Purchase Orders Without Penalty. As a Result,
We Must Commit Resources to the Manufacture of Products Without Any Advance
Purchase Commitments from Customers. Sales of our products are made primarily
pursuant to purchase orders for current delivery or agreements covering
purchases over a period of time, which may be revised or canceled without
penalty. As a result, we must commit resources to the manufacture of products
without any advance purchase commitments from customers. Therefore, the failure
of demand for our products to match the supply of our products could result in
the expenditure of excess costs, which could have a material adverse effect on
us.
Our Obligations Under Specific Provisions in our Agreements with Distributors
Expose Us to Material Adverse Effects When We Experience an Unexpected
Significant Decline in the Price of Our Products. Distributors typically
maintain an inventory of our products. In most instances, our agreements with
distributors protect their inventory of our products against price reductions,
as well as products that are slow moving or have been discontinued. These
agreements, which may be canceled by either party on a specified notice,
generally allow for the return of our products. The price protection and return
rights we offer to our distributors could materially adversely affect us if
there is an unexpected significant decline in the price of our products.
We May Not Be Able to Adequately Protect Our Technology or Other Intellectual
Property, in the United States and Abroad, Through Patents, Copyrights, Trade
Secrets, Trademarks and Other Measures. We may not be able to adequately protect
our technology or other intellectual property, in the United States and abroad,
through patents, copyrights, trade secrets, trademarks and other measures. Any
patent licensed by us or issued to us could be challenged, invalidated or
circumvented or rights granted thereunder may not provide a competitive
advantage to us. Further, patent applications that we file may not be issued.
Despite our efforts to protect our rights, others may independently develop
similar products, duplicate our products or design around our patents and other
rights. In addition, it is difficult to cost-effectively monitor compliance
with, and enforce, our intellectual property on a worldwide basis.
From time to time, we have been notified that we may be infringing intellectual
property rights of others. If any such claims are asserted against us, we may
seek to obtain a license under the
Source: ADVANCED MICRO DEVIC, 10-K, March 07, 2002