AMD 2006 Annual Report Download - page 45

Table of Contents
If Spansion fails to successfully develop products based on its new MirrorBit NOR, or MirrorBit ORNAND or MirrorBit Quad architectures, or if there
is a lack of market acceptance of products based on these products, Spansion’s future operating results would be materially adversely affected.
Spansion is positioning itself to address the increasing demand for higher density data optimized Flash memory by offering products based on its new
MirrorBit ORNAND and MirrorBit Quad architectures. The success of these architectures requires that Spansion timely and cost effectively develop,
manufacture and market products based on these architectures that are competitive with floating gate NAND-based Flash memory products. Spansion began
commercial shipments of MirrorBit ORNAND-based products in the second quarter of fiscal 2006 and announced the MirrorBit Quad-based family of products
in January 2007. However, if Spansion fails to develop and commercialize these products and additional products based on these architectures on a timely basis,
Spansion’s future operating results would be materially adversely affected. Furthermore, if market acceptance of products based on Spansion’s MirrorBit
technology occurs at a slower rate than Spansion anticipates, its ability to compete will be reduced, and Spansion would be materially adversely affected. If
Spansion does not achieve market acceptance of these products or subsequent MirrorBit products, Spansion’s future operating results would be materially
adversely affected.
The loss of a significant customer or a reduction in demand for Spansion’s Flash memory products from a significant customer in the mobile
phone market could have a material adverse effect on Spansion.
Sales of Spansion’s products are dependent to a large extent on demand for mobile phones. Historically, a small number of wireless Flash memory
customers have driven a substantial portion of Spansion’s net sales. If one of these customers decided to stop buying Spansion’s Flash memory products, or if
one of these customers were materially to reduce its operations or its demand for Spansion’s products, Spansion could be materially adversely affected. For
example, in the fourth quarter of fiscal 2006 Spansion was materially adversely affected by the reduced demand for mid-range wireless handsets that incorporate
custom high density NOR-based Flash memory solutions.
Spansion has a substantial amount of indebtedness which could adversely affect its financial condition.
Spansion currently has and will continue to have for the foreseeable future, a substantial amount of indebtedness. This substantial indebtedness may:
• require Spansion to use a substantial portion of its cash flows from operations to make debt service payments;
• make it difficult for Spansion to satisfy its financial obligations;
• limit Spansion’s ability to use its cash flows or obtain additional financing for future working capital, capital expenditures, acquisitions or other general
corporate purposes;
• limit Spansion’s flexibility to plan for, or react to, changes in its business and industry;
• place Spansion at a competitive disadvantage compared to its less leveraged competitors; and
• increase Spansion’s vulnerability to the impact of adverse economic and industry conditions.
If Spansion cannot generate sufficient operating cash flows and obtain external financing, it may be unable to make all of its planned capital
expenditures.
Spansion’s ability to fund anticipated capital expenditures depends on generating sufficient cash flows from operations and the availability of external
financing. Spansion’s capital expenditures, together with ongoing operating expenses, will be a substantial drain on its cash flows and may decrease its cash
balances. The timing and amount of Spansion’s capital requirements cannot be precisely determined at this time and will depend on a number of factors,
including demand for its products, product mix, changes in industry conditions and market competition.
Spansion may need to assess markets for external financing, including debt and equity. Such financing may not be available when needed or, if available,
may not be available on satisfactory terms. Any equity financing
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Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007