AMD 2007 Annual Report Download - page 41

Table of Contents
Recently, there has been widespread concern over the instability of the credit markets and the current credit market conditions on the economy. If the
economy weakens or slips into recession, our business, financial condition and results of operations could be materially adversely affected.
More generally, any of these events could cause consumer confidence and spending to decrease or result in increased volatility in the United States
economy and worldwide financial markets. Any of these occurrences could have a material adverse effect on us and also may result in volatility of the market
price for our securities.
Unfavorable currency exchange rate fluctuations could adversely affect us.
We have costs, assets and liabilities that are denominated in foreign currencies, primarily the euro and the Canadian dollar. For example, some fixed asset
purchases and certain expenses of our German subsidiaries, AMD Saxony and AMD Fab 36 KG, are denominated in euros while sales of products are
denominated in U.S. dollars. Additionally, as a result of our acquisition of ATI in October 2006, some of our expenses and debt are denominated in Canadian
dollars. As a consequence, movements in exchange rates could cause our foreign currency denominated expenses to increase as a percentage of revenue,
affecting our profitability and cash flows. The value of the U.S. dollar has fallen significantly, leading to increasingly unfavorable currency exchange rates on
foreign denominated expenses. Whenever we believe appropriate, we hedge a portion of our short-term foreign currency exposure to protect against fluctuations
in currency exchange rates. We determine our total foreign currency exposure using projections of long-term expenditures for items such as payroll and
equipment and materials used in manufacturing. We cannot assure you that these activities will be effective in reducing foreign exchange rate exposure. Failure
to do so could have an adverse effect on our business, financial condition, results of operations and cash flow.
In addition, the majority of our product sales are denominated in U.S. dollars. Fluctuations in the exchange rate between the U.S. dollar and the local
currency can cause increases or decreases in the cost of our products in the local currency of such customers. An appreciation of the U.S. dollar relative to the
local currency could reduce sales of our products.
Our inability to effectively control the sales of our products on the gray market could have a material adverse effect on us.
We market and sell our products directly to OEMs and through authorized third-party distributors. From time to time, our products are diverted from our
authorized distribution channels and are sold on the “gray market.” Gray market products entering the market result in shadow inventory that is not visible to us,
thus making it difficult to forecast demand accurately. Also, when gray market products enter the market, we and our distribution channel compete with heavily
discounted gray market products, which adversely affect demand for our products. In addition, our inability to control gray market activities could result in
customer satisfaction issues, because any time products are purchased outside our authorized distribution channel, there is a risk that our customers are buying
counterfeit or substandard products, including products that may have been altered, mishandled or damaged, or used products represented as new. Our inability to
control sales of our products on the gray market could have a material adverse effect on us.
If we cannot adequately protect our technology or other intellectual property in the United States and abroad, through patents, copyrights, trade
secrets, trademarks and other measures, we may lose a competitive advantage and incur significant expenses.
We rely on a combination of protections provided by contracts, including confidentiality and nondisclosure agreements, copyrights, patents, trademarks
and common law rights, such as trade secrets, to protect our intellectual property. However, we cannot assure you that we will be able to adequately protect our
technology or other intellectual property from third party infringement or from misappropriation in the United States and abroad. Any patent licensed by us or
issued to us could be challenged, invalidated or circumvented or rights
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Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008