AMD 2002 Annual Report Download - page 44

Table of Contents
and Asia. We also depend on foreign foundry suppliers and joint ventures for the manufacture of a portion of our finished silicon wafers and have international
sales operations.
The political and economic risks associated with our operations in foreign countries include:
• expropriation;
• changes in a specific country’s or region’s political or economic conditions;
• trade protection measures and import or export licensing requirements;
• difficulty in protecting our intellectual property;
• changes in foreign currency exchange rates and currency controls;
• changes in freight and interest rates;
• disruption in air transportation between the United States and our overseas facilities; and
• loss or modification of exemptions for taxes and tariffs;
any of which could have a material adverse effect on us.
As part of our business strategy, we are continuing to seek expansion of product sales in emerging overseas markets. Expansion into emerging overseas
markets presents similar political and economic risks as described above, and we may be unsuccessful in our strategy to penetrate these emerging overseas
markets.
Our inability to continue to attract and retain key personnel may hinder our product development programs. Our future success depends upon the
continued service of numerous key engineering, manufacturing, marketing, sales and executive personnel. If we are not able to continue to attract, retain and
motivate qualified personnel necessary for our business, the progress of our product development programs could be hindered, and we could be otherwise
adversely affected.
Our operating results are subject to substantial seasonal fluctuations. Our operating results tend to vary seasonally. For example, our revenues are
generally higher in the fourth quarter than the third quarter of each year. This seasonal pattern is largely a result of decreased demand in Europe during the
summer months and higher demand in the retail sector of the PC market during the winter holiday season. In recent quarters, a substantial portion of our quarterly
sales have been made in the last month of the quarter.
Uncertainties involving the ordering and shipment of, and payment for, our products could materially adversely affect us. Our sales are typically made
pursuant to individual purchase orders, and we generally do not have long-term supply arrangements with our customers. Generally, our customers may cancel
orders 30 days prior to shipment without incurring a significant penalty. We base our inventory levels on customers’ estimates of demand for their products,
which is difficult to predict. This difficulty may be compounded when we sell to original equipment manufacturers indirectly through distributors, as our
forecasts for demand are then based on estimates provided by multiple parties. In addition, our customers may change their inventory practices on short notice for
any reason. The cancellation or deferral of product orders, the return of previously sold products or overproduction due to failure of anticipated orders to
materialize could result in excess or obsolete inventory, which could result in write-downs of inventory.
During 2002, the markets in which our customers operate were characterized by a decline in end-user demand which reduced visibility of future demand
for our products and resulted in high levels of inventories in the PC industry supply chain. In some cases, this led to delays in payments for our products. We
believe that these and other factors could continue to materially adversely affect our revenues in the near term.
Our price protection obligations and return rights under specific provisions in our agreements with distributors may adversely affect us. Distributors
typically maintain an inventory of our products. In most
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Source: ADVANCED MICRO DEVIC, 10-K, March 14, 2003