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0000320193
20110421
10-Q
635
Any of these events could have a material adverse impact on the Company’s financial condition and operating results.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
636
In certain cases, the Company may consider the desirability of entering into licensing agreements, although no assurance can be given that such licenses can be obtained on acceptable terms or that litigation will not occur.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
637
These licenses may also significantly increase the Company’s operating expenses.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
638
If the Company is found to be infringing one or more patents, it may be required to pay substantial damages.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
639
If there is a temporary or permanent injunction prohibiting the Company from marketing or selling certain products or a successful claim of infringement against the Company requires it to pay royalties to a third party, the Company’s financial condition and operating results could be materially adversely affected, rega...
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
640
While in management’s opinion the Company does not have a potential liability for damages or royalties from any known current legal proceedings or claims related to the infringement of patent or other intellectual property rights that would individually or in the aggregate materially adversely affect its financial cond...
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
641
Should the Company fail to prevail in any of the matters related to infringement of patent or other intellectual property rights of others or should several of these matters be resolved against the Company in the same reporting period, the Company’s financial condition and operating results could be materially adversel...
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
642
The Company’s future performance depends on support from third-party software developers.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
643
If third-party software applications and services cease to be developed and maintained for the Company’s products, customers may choose not to buy the Company’s products.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
644
The Company believes decisions by customers to purchase its hardware products, including its iPhones, iPads, Macs and iPods, are often based to a certain extent on the availability of third-party software applications, and services, including online services.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
645
There is no assurance that third-party developers will continue to develop and maintain applications and services for the Company’s products on a timely basis or at all, and discontinuance or delay of these applications and services could materially adversely affect the Company’s financial condition and operating resul...
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
646
With respect to its Mac products, the Company believes the availability of third-party software applications and services depends in part on the developers’ perception and analysis of the relative benefits of developing, maintaining, and upgrading such software for the Company’s products compared to Windows-based produ...
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
647
This analysis may be based on factors such as the perceived strength of the Company and its products, the anticipated revenue that may be generated, continued acceptance by customers of Mac OS X, and the costs of developing such applications and services.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
648
If the Company’s minority share of the global personal computer market causes developers to question the Company’s prospects, developers could be less inclined to develop or upgrade software for the Company’s products and more inclined to devote their resources to developing and upgrading software for the larger Window...
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
649
The Company’s development of its own software applications and services may also negatively affect the decisions of third-party developers, such as Microsoft, Adobe and Google, to develop, maintain, and upgrade similar or competitive software and services for the Company’s products.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
650
With respect to iPhone, iPad and iPod touch, the Company relies on the continued availability and development of compelling and innovative software applications.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
651
Unlike third-party software applications for Mac products, the software applications for the iPhone, iPad and iPod touch platforms are distributed through a single distribution channel, the App Store.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
652
The absence of multiple distribution channels, which are available for competing platforms, may limit the availability and acceptance of third-party applications by the Company’s customers, thereby causing developers to curtail significantly, or stop, development for the Company’s platforms.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
653
In addition, iPhone, iPad and iPod touch are subject to rapid technological change, and, if third-party developers are unable to keep up with this pace of change, third-party applications might not successfully operate and may result in dissatisfied customers.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
654
Further, if the Company develops its own software applications and services, such development may negatively affect the decisions of third-party developers to develop, maintain, and upgrade similar or competitive applications for the iPhone, iPad and iPod touch platforms.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
655
As with applications for the Company’s Mac products, the availability and development of these applications also depend on developers’ perceptions and analysis of the relative benefits of developing software for the Company’s products rather than its competitors’ products, including devices that use competing platforms...
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
656
If developers focus their efforts on these competing platforms, the availability and quality of applications for the Company’s devices may suffer.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
657
The Company’s future operating performance depends on the performance of distributors, carriers and other resellers.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
658
The Company distributes its products through wholesalers, resellers, national and regional retailers, value-added resellers, and cataloguers, many of whom distribute products from competing manufacturers.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
659
The Company also sells many of its products and resells third-party products in most of its major markets directly to customers, certain education customers, cellular network carriers’ distribution channels and certain resellers through its online and retail stores.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
660
Many resellers operate on narrow operating margins and have been negatively affected in the past by weak economic conditions.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
661
Some resellers have perceived the expansion of the Company’s direct sales as conflicting with their business interests as distributors and resellers of the Company’s products.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
662
Such a perception could discourage resellers from investing resources in the distribution and sale of the Company’s products or lead them to limit or cease distribution of those products.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
663
The Company’s financial condition and operating results could be materially adversely affected if the financial condition of these resellers weakens, if resellers stopped distributing the Company’s products, or if uncertainty regarding demand for the Company’s products caused resellers to reduce their ordering and mark...
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
664
The Company has invested and will continue to invest in programs to enhance reseller sales, including staffing selected resellers’ stores with Company employees and contractors and improving product placement displays.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
665
These programs could require a substantial investment while providing no assurance of return or incremental revenue.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
666
The Company’s Retail business has required and will continue to require a substantial investment and commitment of resources and is subject to numerous risks and uncertainties.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
667
The Company’s retail stores have required substantial fixed investment in equipment and leasehold improvements, information systems, inventory and personnel.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
668
The Company also has entered into substantial operating lease commitments for retail space, with terms ranging from five to 20 years, the majority of which are for 10 years.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
669
Certain stores have been designed and built to serve as high-profile venues to promote brand awareness and serve as vehicles for corporate sales and marketing activities.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
670
Because of their unique design elements, locations and size, these stores require substantially more investment than the Company’s more typical retail stores.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
671
Due to the high fixed cost structure associated with the Retail segment, a decline in sales or the closure or poor performance of individual or multiple stores could result in significant lease termination costs, write-offs of equipment and leasehold improvements, and severance costs that could materially adversely aff...
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
672
Many factors unique to retail operations, some of which are beyond the Company’s control, pose risks and uncertainties that could materially adversely affect the Company’s financial condition and operating results.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
673
These risks and uncertainties include, but are not limited to, macro-economic factors that could have a negative effect on general retail activity, as well as the Company’s inability to manage costs associated with store construction and operation, inability to sell third-party products at adequate margins, failure to ...
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
674
Investment in new business strategies and initiatives could disrupt the Company’s ongoing business and present risks not originally contemplated.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
675
The Company has invested, and in the future may invest, in new business strategies or acquisitions.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
676
Such endeavors may involve significant risks and uncertainties, including distraction of management from current operations, insufficient revenue to offset liabilities assumed and expenses associated with the strategy, inadequate return of capital, and unidentified issues not discovered in the Company’s due diligence.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
677
Because these new ventures are inherently risky, no assurance can be given that such strategies and initiatives will be successful and will not materially adversely affect the Company’s financial condition and operating results.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
678
The Company’s products and services experience quality problems from time to time that can result in decreased sales and operating margin.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
679
The Company sells highly complex hardware and software products and services that can contain defects in design and manufacture.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
680
Sophisticated operating system software and applications, such as those sold by the Company, often contain “bugs” that can unexpectedly interfere with the software’s intended operation.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
681
Defects may also occur in components and products the Company purchases from third parties.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
682
There can be no assurance the Company will be able to detect and fix all defects in the hardware, software and services it sells.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
683
Failure to do so could result in lost revenue, harm to reputation, and significant warranty and other expenses, and could have a material adverse impact on the Company’s financial condition and operating results.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
684
The Company is subject to risks associated with laws, regulations and industry-imposed standards related to mobile communications and media devices.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
685
Laws and regulations related to mobile communications and media devices in the many jurisdictions in which the Company operates are extensive and subject to change.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
686
Such changes, which could include but are not limited to restrictions on production, manufacture, distribution, and use of the device, locking the device to a carrier’s network, or mandating the use of the device on more than one carrier’s network, could materially adversely affect the Company’s financial condition and...
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
687
Mobile communication and media devices, such as iPhones and 3G enabled iPads, are subject to certification and regulation by governmental and standardization bodies, as well as by cellular network carriers for use on their networks.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
688
These certification processes are extensive and time consuming, and could result in additional testing requirements, product modifications or delays in product shipment dates, which could materially adversely affect the Company’s financial condition and operating results.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
689
The Company’s success depends largely on the continued service and availability of key personnel.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
690
Much of the Company’s future success depends on the continued availability and service of key personnel, including its CEO, its executive team and highly skilled employees in technical, marketing and staff positions.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
691
Experienced personnel in the technology industry are in high demand and competition for their talents is intense, especially in the Silicon Valley, where most of the Company’s key personnel are located.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
692
The Company’s CEO has taken a medical leave of absence and will continue to be involved in major strategic decisions during his leave.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
693
There can be no assurance that the Company will continue to attract and retain key personnel.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
694
Political events, war, terrorism, public health issues, natural disasters and other circumstances could materially adversely affect the Company.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
695
War, terrorism, geopolitical uncertainties, public health issues, and other business interruptions have caused and could cause damage or disruption to international commerce and the global economy, and thus could have a strong negative effect on the Company, its suppliers, logistics providers, manufacturing vendors and...
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
696
The Company’s business operations are subject to interruption by natural disasters, fire, power shortages, nuclear power plant accidents, terrorist attacks, and other hostile acts, labor disputes, public health issues, and other events beyond its control.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
697
Such events could decrease demand for the Company’s products, make it difficult or impossible for the Company to make and deliver products to its customers, including channel partners, or to receive components from its suppliers, and create delays and inefficiencies in the Company’s supply chain.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
698
Should major public health issues, including pandemics, arise, the Company could be negatively affected by more stringent employee travel restrictions, additional limitations in freight services, governmental actions limiting the movement of products between regions, delays in production ramps of new products, and disr...
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
699
The majority of the Company’s research and development activities, its corporate headquarters, information technology systems, and other critical business operations, including certain component suppliers and manufacturing vendors, are in locations that could be affected by natural disasters.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
700
In the event of a natural disaster, losses and significant recovery time could be required to resume operations and the Company’s financial condition and operating results could be materially adversely affected.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
701
Please also refer to the discussion of risks related to the March 11, 2011, Japan earthquake and tsunami in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the subheading “Japan Earthquake and Tsunami,” which is incorporated herein by reference.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
702
The Company may be subject to information technology system failures, network disruptions and breaches in data security.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
703
Information technology system failures, network disruptions and breaches of data security caused by such factors including, but not limited to, earthquakes, fire, theft, fraud, malicious attack or other causes could disrupt the Company’s operations by causing delays or cancellation of customer, including channel partne...
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
704
While management has taken steps to address these concerns by implementing sophisticated network security and internal control measures, there can be no assurance that a system failure or loss or data security breach will not materially adversely affect the Company’s financial condition and operating results.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
705
The Company expects its quarterly revenue and operating results to fluctuate for a variety of reasons.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
706
The Company’s profit margins vary among its products and its distribution channels.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
707
The Company’s software, accessories, and service and support contracts generally have higher gross margins than certain of the Company’s other products.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
708
Gross margins on the Company’s hardware products vary across product lines and can change over time as a result of product transitions, pricing and configuration changes, and component, warranty, and other cost fluctuations.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
709
The Company’s direct sales generally have higher associated gross margins than its indirect sales through its channel partners.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
710
In addition, the Company’s gross margin and operating margin percentages, as well as overall profitability, may be materially adversely impacted as a result of a shift in product, geographic or channel mix, new products, component cost increases, strengthening U.S. dollar, or price competition.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
711
The Company has typically experienced greater net sales in the first and fourth fiscal quarters compared to the second and third fiscal quarters due to seasonal demand related to the holiday season and the beginning of the school year, respectively.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
712
Furthermore, the Company sells more products from time-to-time during the third month of a quarter than it does during either of the first two months.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
713
Developments late in a quarter, such as lower-than-anticipated demand for the Company’s products, issues with new product introductions, an internal systems failure, or failure of one of the Company’s key logistics, components supply, or manufacturing partners, could have a material adverse impact on the Company’s fina...
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
714
The Company’s stock price continues to be volatile.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
715
The Company’s stock has at times experienced substantial price volatility due to a number of factors including, but not limited to variations between its actual and anticipated financial results, announcements by the Company and its competitors, and uncertainty about current global economic conditions.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
716
The stock market as a whole also has experienced extreme price and volume fluctuations that have affected the market price of many technology companies in ways that may have been unrelated to these companies’ operating performance.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
717
Furthermore, the Company believes its stock price reflects high future growth and profitability expectations.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
718
If the Company fails to meet these expectations its stock price may significantly decline, which could have a material adverse impact on investor confidence and employee retention.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
719
The Company’s business is subject to the risks of international operations.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
720
The Company derives a significant portion of its revenue and earnings from its international operations.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
721
Compliance with U.S. and foreign laws and regulations that apply to the Company’s international operations, including without limitation import and export requirements, anti-corruption laws, tax laws (including U.S. taxes on foreign subsidiaries), foreign exchange controls and cash repatriation restrictions, data priva...
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
722
Furthermore, the Company has implemented policies and procedures designed to ensure compliance with these laws and regulations, but there can be no assurance that the Company’s employees, contractors, or agents will not violate such laws and regulations or the Company’s policies.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
723
Any such violations could individually or in the aggregate materially adversely affect the Company’s financial condition or operating results.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
724
The Company’s financial condition and operating results also could be significantly affected by other risks associated with international activities including, but not limited to, economic and labor conditions, increased duties, taxes and other costs, political instability, and changes in the value of the U.S. dollar v...
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
725
Margins on sales of the Company’s products in foreign countries, and on sales of products that include components obtained from foreign suppliers, could be materially adversely affected by foreign currency exchange rate fluctuations and by international trade regulations, including duties, tariffs and antidumping penal...
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
726
Additionally, the Company is exposed to credit and collectability risk on its trade receivables with customers in certain international markets.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
727
There can be no assurance it can effectively limit its credit risk and avoid losses, which could materially adversely affect the Company’s financial condition and operating results.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
728
The Company’s primary exposure to movements in foreign currency exchange rates relate to non-U.S. dollar denominated sales in Europe, Japan, Australia, Canada and certain parts of Asia, as well as non-U.S. dollar denominated operating expenses incurred throughout the world.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
729
Weakening of foreign currencies relative to the U.S. dollar will adversely affect the U.S. dollar value of the Company’s foreign currency-denominated sales and earnings, and generally will lead the Company to raise international pricing, potentially reducing demand for the Company’s products.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
730
In some circumstances, due to competition or other reasons, the Company may decide not to raise local prices to the full extent of the dollar’s strengthening, or at all, which would adversely affect the U.S. dollar value of the Company’s foreign currency denominated sales and earnings.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
731
Conversely, a strengthening of foreign currencies, while generally beneficial to the Company’s foreign currency-denominated sales and earnings, could cause the Company to reduce international pricing and incur losses on its foreign currency derivative instruments, thereby limiting the benefit.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
732
Additionally, strengthening of foreign currencies may also increase the Company’s cost of product components denominated in those currencies, thus adversely affecting gross margins.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
733
The Company has used derivative instruments, such as foreign currency forward and option contracts, to hedge certain exposures to fluctuations in foreign currency exchange rates.
0001193125-11-104388/full-submission.txt
0000320193
20110421
10-Q
734
The use of such hedging activities may not offset any or more than a portion of the adverse financial effects of unfavorable movements in foreign exchange rates over the limited time the hedges are in place.
0001193125-11-104388/full-submission.txt