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... each balance sheet date for assets and liabilities and a weighted-average exchange rate for each period for income statement items. Translation adjustments are recorded as a separate component of stockholders' equity in the U. S. dollar financial statements. AMD uses foreign exchange forward and option contracts to reduce their exposure to currency fluctuations on net monetary assets position in their foreign subsidiaries, liabilities for products purchased from FASL, fixed asset purchase commitments and obligations for future investments in AMD Saxony.
They had $ 13 million (notional amount) of short-term foreign currency forward contracts denominated in the Japanese yen, German mark and British pound outstanding as of December 27, 1998. They also had entered into various foreign currency option arrangements. In 1997, AMD purchased $ 150 million of call option contracts to hedge their obligations to provide loans to, or invest equity in, AMD Saxony, of which $ 75 million were outstanding as of December 27, 1998. In 1998, AMD entered into a no-cost collar arrangement to hedge Dresden Fab 30 project costs through which they purchased $ 300 million of put option contracts and sold $ 300 million of call option contracts.
AMD had $ 220 million of no-cost collar option contracts outstanding as of December 27, 1998. The reason that AMD uses these contracts is to minimize the impact of foreign currency exchange rate movements on their operating results and on the cost of capital asset acquisition. Problematic Issues & Their Solutions AMD is up against a tough competitor in Intel as described earlier in the Market Conditions & Competition section, however, they have taken measures to try to gain market share. AMD must try to gain market share and at the same time strive to reach and sustain profitability. With the introduction of the Athlon, AMD has broadened their product line in the microprocessor arena. This will help them make gains in market share and brand recognition.
By introducing the fastest chip available in a personal computer, AMD has turned more then a few heads in the industry, garnering more respect and recognition. These Athlon chips, being high-end, will have a higher profit margin and, if widely accepted, should lead AMD closer to profitability. For quite some time AMD had been plagued by lawsuits filed against them by numerous companies claiming patent and copyright infringement. The largest of these claims could have put AMD right out of business had the plaintiff, Intel, won. Intel and AMD were locked in a tough five-year arbitration battle, over the rights to make and sell the Am 386 family of microprocessors. The judgment on this case came in February 1992, with AMD awarded full rights to make and sell the Am 386.
Three years later, in 1995, AMD reached an agreement with Intel to settle all previously outstanding legal disputes between the two companies and not in court. In December 1995, AMD signed a cross-licensing agreement with Intel that will expire on New Years Eve 2000. The agreement gives AMD and Intel the right to use each others patents and some specific copyrights. If AMD uses Intel technologies in their products, through the cross licensing agreement, they are required to pay royalties. Taiwan is currently recovering from a major earthquake that occurred on September 21, 1999. The earthquake resulted in an interruption of power to their suppliers' manufacturing facilities that contributed to a severe shortage of motherboards in the last week of the third quarter of 1999 which adversely affected their sales of AMD Athlon microprocessors.
Overall sales growth in the fourth quarter of 1999 and in the first quarter of 2000 is dependent upon a successful production ramp on 0. 25 -micron and 0. 18 -micron technology, market acceptance of their AMD Athlon microprocessor and availability of chipsets and motherboards from Taiwanese and other suppliers, as to which they cannot give any assurance. The effects of the earthquake in Taiwan may continue to have an adverse impact on their business. AMD is currently trying to make up for lost production time and hence sales due to this earthquake. AMD is currently devoting their attention to producing a wider array of processors to help defend against possible strategies that Intel might wish to pursue to try and hurt AMD.
Not only are they defending against these strategies, they are also gaining respect, recognition and building towards profitability. The earthquake in Taiwan may have disrupted their Athlon production somewhat, however, this is a one in a million event that is not foreseeable and not likely to occur often. AMD is doing the right thing by broadening their product lines through investing heavily in research and development. Having a first mover advantage in the processor market may mean hundreds of millions of dollars to the companys bottom line if they are able to continue the trend they have started with the 750 MHz Athlon chip. AMD should try their best to maintain this first mover advantage as the personal computing and hence processor market, in accordance with Moores Law, is a rapidly changing market and the benefits of being the first to offer the newest, fastest chips available are extremely great as the margins on high-end chips are immense. (Thousands except share and per share amounts) 1999 1998 -- -- ASSETS Current assets: Cash and cash equivalents $ 8 $ 11, 453 Accounts receivable from affiliates 64, 007 74, 837 Inventories: Raw materials and supplies 4, 471 4, 921 Work-in-process 57, 760 35, 693 Finished goods 2, 339 8, 471 Total inventories 64, 570 49, 085 Other current assets 299 1, 960 Total current assets 128, 884 137, 335 Property, plant and equipment: Equipment 944, 936 764, 921 Buildings 131, 016 117, 449 Construction in progress 3, 866 5, 708 Total property, plant and equipment 1, 079, 818 888, 078 Accumulated depreciation (507, 449) (288, 342) Property, plant and equipment, net 572, 369 599, 736 Other assets 11, 895 9, 955 TOTAL $ 713, 148 $ 747, 026 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Loan payable to affiliates $ 114, 036 $ 93, 868 Accounts payable 34, 998 105, 473 Payables to affiliates 29, 200 33, 331 Accrued liabilities 11, 307 8, 047 Income taxes payable 17 31, 908 Total current liabilities 189, 558 272, 627 Deferred income taxes 59, 610 62, 097 Other accrued liabilities 1, 269 772 Commitments - - Stockholders' equity: Common stock, par value $ 500; 800, 000 shares authorized; 636, 000 shares issued and outstanding in 1999 and 1998 318, 790 318, 790 Retained earnings 214, 978 203, 931 Accumulated other comprehensive loss (71, 057) (111, 191) Total stockholders' equity 462, 711 411, 530 TOTAL $ 713, 148 $ 747, 026 (Thousands except per share amounts) 1998 1997 1996 Net sales $ 2, 542, 141 $ 2, 356, 375 $ 1, 953, 019 Cost of sales 1, 718, 703 1, 578, 438 1, 440, 828 Research and development 567, 402 467, 877 400, 703 Marketing, general and administrative 419, 678 400, 713 364, 798 2, 705, 783 2, 447, 028 2, 206, 329 Operating loss (163, 642) (90, 653) (253, 310) Litigation settlement (11, 500) - - net 34, 207 35, 097 59, 391 Interest expense (66, 494) (45, 276) (14, 837) in joint venture (207, 429) (100, 832) (208, 756) Benefit for income taxes (91, 878) (55, 155) (85, 008) Loss before equity in joint venture (115, 551) (45, 677) (123, 748) Equity in net income of joint venture 11, 591 24, 587 54, 798 Net loss $ (103, 960) $ (21, 090) $ (68, 950) Basic $ (0. 72) $ (0. 15) $ (0. 51) Diluted $ (0. 72) $ (0. 15) $ (0. 51) Basic 143, 668 140, 453 135, 126 Diluted 143, 668 140, 453 135, 126 Advanced Micro Devices S. A.
N. V. Belgium AMD Trading Company Limited Bermuda AMD South America Limited (2) Brazil Advanced Micro Devices (Canada) Limited Canada Advanced Micro Devices (Suzhou) Limited (3) China Advanced Micro Devices S. A. France Vantis SAS (1) France Advanced Micro Devices GmbH Germany AMD Saxony Holding GmbH Germany AMD Saxony Manufacturing GmbH (4) Germany Vantis GmbH Germany AMD Foreign Sales Corporation Guam Advanced Micro Devices S. p.
A. Italy Vantis Japan K. K. (1) Japan Advanced Micro Devices Sdn. Bhd. Malaysia Advanced Micro Devices Export Sdn. Bhd. (5) Malaysia Advanced Micro Devices Services Sdn.
Bhd. (6) Malaysia AMD (Netherlands) B. V. (7) Netherlands Advanced Micro Devices (Singapore) Pte. Ltd. Singapore AMD Holdings (Singapore) Pte.
Ltd. (8) Singapore Advanced Micro Devices AB Sweden Advanced Micro Devices S. A. (9) Switzerland AMD (Thailand) Limited (7) Thailand Advanced Micro Devices (U. K. ) Limited United Kingdom Vantis (UK) Limited (1) United Kingdom Vantis II (UK) Limited (1) United Kingdom Bibliography:
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Research essay sample on Gain Market Share Amd Athlon
