AMD 2014 Annual Report Download - page 37

In addition, our worldwide operations (or those of our business partners) could be subject to natural
disasters such as earthquakes, tsunamis, flooding, typhoons and volcanic eruptions that disrupt manufacturing or
other operations. For example, our Sunnyvale operations are located near major earthquake fault lines in
California. Any conflict or uncertainty in the countries in which we operate, including public health issues (for
example, an outbreak of a contagious disease such as Avian Influenza, measles or Ebola), safety issues, natural
disasters, fire, disruptions of service from utilities, nuclear power plant accidents or general economic or political
factors, could have a material adverse effect on our business. Any of the above risks, should they occur, could
result in an increase in the cost of components, production delays, general business interruptions, delays from
difficulties in obtaining export licenses for certain technology, tariffs and other barriers and restrictions, longer
payment cycles, increased taxes, restrictions on the repatriation of funds and the burdens of complying with a
variety of foreign laws, any of which could ultimately have a material adverse effect on our business.
Worldwide political conditions may adversely affect demand for our products.
Worldwide political conditions may create uncertainties that could adversely affect our business. The United
States has been and may continue to be involved in armed conflicts that could have a further impact on our sales
and our supply chain. The consequences of armed conflict, political instability or civil or military unrest are
unpredictable, and we may not be able to foresee events that could have a material adverse effect on us. Terrorist
attacks or other hostile acts may negatively affect our operations, or adversely affect demand for our products,
and such attacks or related armed conflicts may impact our physical facilities or those of our suppliers or
customers. Furthermore, these attacks or hostile acts may make travel and the transportation of our products more
difficult and more expensive, which could materially adversely affect us. Any of these events could cause
consumer spending to decrease or result in increased volatility in the United States economy and worldwide
financial markets.
Unfavorable currency exchange rate fluctuations could adversely affect us.
We have costs, assets and liabilities that are denominated in foreign currencies. 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.
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