AMD 2004 Annual Report Download - page 14

Table of Contents
have a right to return our products other than pursuant to the standard limited warranty. However, from time to time we may agree to repurchase a portion of
these products pursuant to negotiated terms.
No OEM customer accounted for ten percent or more of our consolidated gross sales in 2002. In 2003 and 2004, one of our customers, Fujitsu, accounted
for approximately 13 percent and 22 percent of our consolidated gross sales. Fujitsu primarily distributes Spansion Flash memory products. However, Fujitsu
also is an OEM customer with respect to our microprocessor products.
Third-Party Distributors
Our authorized distributors resell to sub-distributors and mid-sized and smaller OEMs and to electronic manufacturing service providers and other
companies. Distributors typically maintain an inventory of our products. In most instances, our agreements with distributors protect their inventory of our
products against price reductions and provide return rights with respect to any product that we have removed from our price book or that is not more than twelve
months older than the manufacturing code date. In addition, some agreements with our distributors may contain standard stock rotation provisions permitting
limited levels of product returns.
No distributor accounted for ten percent or more of our consolidated gross sales in 2002. In each of 2003 and 2004, one of our distributors, Avnet, Inc.,
accounted for approximately 13 percent of our consolidated gross sales. Avnet primarily distributes our microprocessor products. In addition, in 2003 and 2004,
Fujitsu accounted for approximately 13 percent and 22 percent of our consolidated gross sales. Fujitsu primarily distributes Spansion Flash memory products.
However, Fujitsu is also an OEM customer with respect to our microprocessor products.
Competition
The IC 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. Technological advances in the industry result in frequent
product introductions, regular price reductions, short product life cycles and increased product capabilities that may result in significant performance
improvements.
Competition in the Microprocessor Market
Intel Corporation has dominated the market for microprocessors used in desktop and mobile PCs for many years. Intel is also a dominant competitor in the
server segment of the microprocessor market. Because of its dominant position in the microprocessor market, Intel has been able to control x86 microprocessor
and PC system standards and dictate the type of products the microprocessor market requires of Intel’s competitors. In addition, Intel’s significant financial
resources enable it to market its products 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 our products, 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 Intel’s:
• pricing and allocation strategies and actions, including aggressive pricing for microprocessors to increase market share;
• product mix and introduction schedules;
• product bundling, marketing and merchandising strategies;
• exclusivity payments to its current and potential customers;
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Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2005