AMD 2008 Annual Report Download - page 31

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 our proposed joint venture with ATIC is not consummated, our business could be adversely impacted.
On October 6, 2008, we entered into a Master Transaction Agreement with ATIC and WCH pursuant to
which we agreed to form a manufacturing joint venture with ATIC, referred to as The Foundry Company.
If the transactions contemplated by the Master Transaction Agreement are not consummated, it could have a
number of adverse consequences for our business, including the following:
• we would not improve our cash balance, on a consolidated basis, by approximately $2.2 billion, of
which approximately $800 million will be available for current working capital purposes and $1.4
billion will go to The Foundry Company to fund its operations;
• we would not be able to transfer approximately $1.1 billion (as of December 27, 2008) of our
indebtedness to The Foundry Company upon contribution of our ownership interests in the German
subsidiaries that own AMD Fab 36 Limited Liability Company & Co. KG;
• The Foundry Company would not assume responsibility for funding future wafer manufacturing capital
expenditures;
• we would not be able to take advantage, as a shareholder of The Foundry Company, of the shift by
integrated device manufacturers, or IDMs, to a fabless business model;
• our stock price may decline;
• we would be required to pay WCH a termination fee or reimburse ATIC and WCH for certain expenses
pursuant to the Master Transaction Agreement; and
• our business and operations may be harmed to the extent that customers, suppliers and others believe
that we cannot effectively compete in the marketplace without the joint venture or there is customer or
employee uncertainty surrounding the future direction of our company in the absence of the joint
venture.
The recent instability of the financial markets may adversely impact our business and operating results.
Recently, there has been widespread concern over the instability of the financial markets and their influence
on the global economy. As a result of the credit market crisis and other macro-economic challenges currently
affecting the global economy, our current or potential future customers may experience serious cash flow
problems and as a result may modify, delay or cancel plans to purchase our products. For example, in the fourth
quarter of 2008, typically, the strongest quarter of our fiscal year, end user demand for PCs and servers decreased
significantly. In turn, our customers sharply reduced orders for our products in order to balance their inventory
levels to address end-customer demand. We believe this inventory correction will continue across the supply
chain into at least the first half of 2009, particularly in connection with notebook PCs. Additionally, if our
customers are not successful in generating sufficient revenue or are unable to secure financing, they may not be
able to pay, or may delay payment of, accounts receivable that they owe us. Any inability of our current or
potential future customers to pay us for our products may adversely affect our earnings and cash flow. Moreover,
our key suppliers may reduce their output or become insolvent, thereby adversely impacting our ability to
manufacture our products. For example, in January 2009, Qimonda AG, a supplier of memory for our graphics
products filed an application with the local court in Munich to commence insolvency proceedings. In addition,
the current economic conditions may make it more difficult for us to raise funding through borrowings or private
or public sales of debt or equity securities. If global economic conditions deteriorate further or do not show
improvement, we may experience material adverse impacts on our business and operating results.
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