AMD 2005 Annual Report Download - page 67

Table of Contents
subsidies from these governmental entities for Fab 30. From time to time, we also apply for and obtain subsidies from the State of Saxony, the Federal Republic
of Germany and the European Union for certain research and development projects. The subsidy grant documents typically contain covenants that must be
complied with, and noncompliance with the conditions of the grants, allowances and subsidies could result in the forfeiture of all or a portion of any future
amounts to be received, as well as the repayment of all or a portion of amounts received to date. If we are unable to comply with any of the covenants in the grant
documents, we may be materially adversely affected.
If our microprocessors are not compatible with some or all industry-standard software and hardware, we could be materially adversely affected.
Our microprocessors may not be fully compatible with some or all industry-standard software and hardware. Further, we may be unsuccessful in correcting
any such compatibility problems in a timely manner. If our customers are unable to achieve compatibility with software or hardware after our products are
shipped in volume, we could be materially adversely affected. In addition, the mere announcement of an incompatibility problem relating to our products could
have a material adverse effect on us.
Costs related to defective products could have a material adverse effect on us.
If one or more of our products were found to be defective after the product had been shipped to customers in volume, the cost of product replacements or
product returns would be substantial, and our reputation with our customers would be damaged. In addition, we could incur substantial costs to implement
modifications to fix defects. Any of these problems could materially adversely affect us.
Our inability to continue to attract and retain qualified personnel may hinder our product development programs.
Our future success depends upon the continued service of numerous qualified 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 materially adversely affected.
We outsource to third parties certain supply-chain logistics functions, including physical distribution of our products, and co-source some information
technology services.
We rely on a third-party provider to deliver our products to our customers and to distribute materials for our manufacturing facilities. In addition, we rely
on a third party in India to provide certain information technology services to us, including helpdesk support, desktop application services, business and software
support applications, server and storage administration, data center operations, database administration, and voice, video and remote access. Our relationships
with these providers are governed by fixed term contracts. We cannot guarantee that these providers will fulfill their respective responsibilities in a timely
manner in accordance with the contract terms, in which case our internal operations, the distribution of our products to our customers and the distribution of
materials for our facilities could be materially adversely affected. Also, we cannot guarantee that our contracts with these third-party providers will be renewed,
in which case we would have to transition these functions in-house or secure new providers, which could have a material adverse effect on us.
In addition, we decided to outsource or co-source these functions to third parties primarily to lower our operating expenses and to create a more variable
cost structure. However, if the costs related to administration, communication and coordination of these third-party providers are greater than we expect, then we
will not realize our anticipated cost savings.
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Source: ADVANCED MICRO DEVIC, 10-K, February 27, 2006