AMD 2008 Annual Report Download - page 37

dismiss foreign conduct claims. The effect of that decision was clarified by the Court’s January 12, 2007
adoption of the Special Master’s decision on our motion to compel foreign conduct discovery. As a result of
these two decisions, we will be permitted to develop evidence of Intel’s exclusionary practices wherever they
occur, including practices foreclosing us from foreign customers or in foreign market segments. However, the
court’s ruling limits our damages to lost sales in the United States and lost sales abroad that would have
originated from the United States. Trial is set for February 2010. If our antitrust lawsuit against Intel is ultimately
unsuccessful, our business, including our ability to increase market share in the microprocessor market, could be
materially adversely affected.
Our operating results are subject to quarterly and seasonal sales patterns.
A substantial portion of our quarterly sales have historically been made in the last month of the quarter. This
uneven sales pattern makes prediction of revenues for each financial period difficult and increases the risk of
unanticipated variations in quarterly results and financial condition. In addition, our operating results tend to vary
seasonally. For example, demand in the retail sector of the PC market is often stronger during the fourth quarter
as a result of the winter holiday season. European sales are often weaker during the summer months. Many of the
factors that create and affect seasonal trends are beyond our control.
Industry overcapacity and current macro-economic conditions could cause us to under-utilize our
microprocessor manufacturing facilities and have a material adverse effect on us.
It is difficult to predict future growth or decline in the demand for our products, making it very difficult to
estimate requirements for production capacity. Both we and our competitor, Intel, have added significant
capacity in recent years, both by expanding capacity at wafer fabrication facilities and by transitioning to more
advanced manufacturing technologies. In the past, capacity additions sometimes exceeded demand requirements
leading to oversupply situations and downturns in the industry. Fluctuations in the growth rate of industry
capacity relative to the growth rate in demand for our products contribute to cyclicality in the semiconductor
market, which is currently and may in the future put pressure on our average selling prices and materially
adversely affect us.
During periods of industry overcapacity, customers do not generally order products as far in advance of the
scheduled shipment date as they do during periods when our industry is operating closer to capacity, which can
exacerbate the difficulty in forecasting capacity requirements. If the demand from our target markets is below our
expectations, we may under-utilize our manufacturing facilities, which may result in write-downs or write-offs of
inventories and losses on products for which demand is lower than we anticipate. In addition, due to the current
macro-economic conditions, in general, and the decrease in orders from our OEM customers which we believe
will continue in 2009, in particular, we also plan to reduce our manufacturing output in order to control our
inventory levels. Many of our costs are fixed. Accordingly, during periods in which we under-utilize our
manufacturing facilities as a result of reduced demand for certain of our products, our costs cannot be reduced in
proportion to the reduced revenues for such a period. When this occurs, our operating results are materially
adversely affected. If the demand for our microprocessor products is not consistent with our expectations, we
may under-utilize our manufacturing facilities. This may have a material adverse effect on us.
Manufacturing capacity constraints and manufacturing capacity utilization rates may have a material
adverse effect on us.
There may be situations in which our microprocessor manufacturing facilities, including our foundries, are
inadequate to meet the demand for certain of our microprocessor products. Capacity addition is dependent on
many factors such as tool delivery, lead-times, installation and qualification. Our inability to provide sufficient
manufacturing capacity to meet demand, either in our own facilities or through foundry or similar arrangements
with third parties, could result in an adverse effect on our relationships with customers, which could have a
material adverse effect on us.
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