AMD 2007 Annual Report Download - page 25

Table of Contents
Also, Intel has stated that it intends to reenter the discrete GPU market. Intel’s actions could shrink the total available market for certain of our graphics products.
Intel could also take other actions that place our discrete GPUs and integrated chipsets at a competitive disadvantage such as giving one or more of our
competitors in the graphics market, such as Nvidia Corporation, preferential access to its proprietary graphics interface or other useful information. If our
graphics products do not successfully address the discrete GPU and integrated chipset markets, our business could be materially adversely affected.
As long as Intel remains in this dominant position, we may be materially adversely affected by Intel’s:
• business practices, including rebating and allocation strategies and pricing actions, designed to limit our market share;
• product mix and introduction schedules;
• product bundling, marketing and merchandising strategies;
• exclusivity payments to its current and potential customers;
• control over industry standards, PC manufacturers and other PC industry participants, including motherboard, memory, chipset and basic input/output
system, or BIOS, suppliers and software companies as well as the graphics interface for Intel platforms; and
• marketing and advertising expenditures in support of positioning the Intel brand over the brand of its OEM customers.
Intel exerts substantial influence over computer manufacturers and their channels of distribution through various brand and other marketing programs.
Because of its dominant position in the microprocessor market, Intel has been able to control x86 microprocessor and computer system standards and to dictate
the type of products the microprocessor market requires of Intel’s competitors. Intel also dominates the computer system platform, which includes core logic
chipsets, graphics chips, motherboards and other components necessary to assemble a computer system. As a result, OEMs that purchase microprocessors for
computer systems are highly dependent on Intel, less innovative on their own and, to a large extent, are distributors of Intel technology. Additionally, Intel is able
to drive de facto standards for x86 microprocessors that could cause us and other companies to have delayed access to such standards.
We expect Intel to maintain its dominant position and to continue to invest heavily in marketing, research and development, new manufacturing facilities
and other technology companies. Intel has substantially greater financial resources than we do and accordingly spends substantially greater amounts on research
and development and production capacity than we do. Moreover, Intel launched its quad-core multi-chip module processors during the fourth quarter of 2006.
We commenced initial shipments of our first quad-core products for servers in August 2007 and for desktop PCs in November 2007. However, we did not ship
significant volumes of these products in 2007, but we expect to ship in more significant volumes in the first half of 2008. To the extent Intel manufactures a
significantly larger portion of its microprocessor products using more advanced process technologies, or introduces competitive new products into the market
before we do, we may be more vulnerable to Intel’s aggressive marketing and pricing strategies for microprocessor products.
Intel’s dominant position in the microprocessor market and integrated graphics chipset market, its existing relationships with top-tier OEMs and its
aggressive marketing and pricing strategies could result in lower unit sales and average selling prices for our products, which could have a material adverse effect
on us.
If we cannot generate sufficient revenues and operating cash flow or obtain external financing, we may face a cash shortfall and be unable to make all
of our planned capital expenditures.
In 2008, we plan to make approximately $1.1 billion of capital expenditures. Our ability to fund capital expenditures in accordance with our business plan
depends on generating sufficient cash flow from operations and the availability of external financing, if necessary.
20
Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008