AMD 2013 Annual Report Download - page 40

Unfavorable currency exchange rate fluctuations could adversely affect us.
We have costs, assets and liabilities that are denominated in foreign currencies, primarily the Canadian
dollar. 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. 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. 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 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 channels
compete with these heavily discounted gray market products, which adversely affects demand for our products
and negatively impact our margins. 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
channels there is a risk that our customers are buying counterfeit or substandard products, including products that
may have been altered, mishandled or damaged, or are used products represented as new.
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
granted there under may not provide a competitive advantage to us. Furthermore, patent applications that we file
may not result in issuance of a patent or, if a patent is issued, the patent may not be issued in a form that is
advantageous to us. Despite our efforts to protect our intellectual property rights, others may independently
develop similar products, duplicate our products or design around our patents and other rights. In addition, it is
difficult to monitor compliance with, and enforce, our intellectual property on a worldwide basis in a cost-
effective manner. In jurisdictions where foreign laws provide less intellectual property protection than afforded
in the United States and abroad, our technology or other intellectual property may be compromised, and our
business would be materially adversely affected.
We are party to litigation and may become a party to other claims or litigation that could cause us to incur
substantial costs or pay substantial damages or prohibit us from selling our products.
From time to time, we are a defendant or plaintiff in various legal actions. For example, on January 15,
2014, a complaint was filed against us seeking damages for alleged securities law violations, which is described
in “Part 1, Item 3: Legal Proceedings” below. We also sell products to consumers, which could increase our
exposure to consumer actions such as product liability claims. On occasion, we receive claims that individuals
were allegedly exposed to substances used in our former semiconductor wafer manufacturing facilities and that
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