AMD 2002 Annual Report Download - page 39

Table of Contents
• limit our flexibility to plan for, or react to, changes in our business and industry;
• place us at a competitive disadvantage compared to our less leveraged competitors; and
• increase our vulnerability to the impact of adverse economic and industry conditions and, to the extent of our outstanding debt under our September
2002 Loan Agreement, the impact of increases in interest rates.
Our ability to make payments on and to refinance our debt or our guarantees of other parties’ debts will depend on our financial and operating
performance, which may fluctuate significantly from quarter to quarter and is subject to prevailing economic conditions and to financial, business and other
factors beyond our control.
We cannot assure you that we will continue to generate sufficient cash flow or that we will be able to borrow funds under our credit facilities in amounts
sufficient to enable us to service our debt, or meet our working capital and capital expenditure requirements or that we will be able to extend the July 1999 Loan
Agreement. If we are not able to generate sufficient cash flow from operations or to borrow sufficient funds to service our debt, due to borrowing base
restrictions or otherwise, we may be required to sell assets, reduce capital expenditures, refinance all or a portion of our existing debt or obtain additional
financing. We cannot assure you that we will be able to refinance our debt, sell assets or borrow more funds on terms acceptable to us, if at all.
Intense competition in the integrated circuit industry may materially adversely affect us. 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.
Intel Corporation’s dominance of the PC processor market may limit our ability to compete effectively in that market. 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, to target our customers
and our channel partners with special incentives and to discipline customers who do business with us. These aggressive activities can result in lower unit sales
and 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:
• pricing and allocation strategies and actions;
• product mix and introduction schedules;
• product bundling, marketing and merchandising strategies;
• control over industry standards, PC manufacturers and other PC industry participants, including motherboard, chipset and basic input/output system
(BIOS) suppliers; and
• 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 has substantially greater financial resources than we do and accordingly expends substantially
greater amounts on research and development than we do.
In marketing our microprocessors to OEMs and dealers, we depend on third-party companies other than Intel for the design and manufacture of core-logic
chipsets, graphics chips, motherboards, BIOS software and
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Source: ADVANCED MICRO DEVIC, 10-K, March 14, 2003