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0000320193
20130424
10-Q
586
The licensing arrangements with these third parties are short-term and do not guarantee the continuation or renewal of these arrangements on reasonable terms, if at all.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
587
Some third-party content providers and distributors currently or in the future may offer competing products and services, and could take action to make it more difficult or impossible for the Company to license their content in the future.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
588
Other content owners, providers or distributors may seek to limit the Company’s access to, or increase the cost of, such content.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
589
The Company may be unable to continue to offer a wide variety of content at reasonable prices with acceptable usage rules, or continue to expand its geographic reach.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
590
Many third-party content providers require the Company to provide digital rights management and other security solutions.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
591
If requirements change, the Company may have to develop or license new technology to provide these solutions.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
592
There is no assurance the Company will be able to develop or license such solutions at a reasonable cost and in a timely manner.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
593
In addition, certain countries have passed or may propose and adopt legislation that would force the Company to license its digital rights management, which could lessen the protection of content and subject it to piracy and also could negatively affect arrangements with the Company’s content providers.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
594
The Company is frequently involved in intellectual property litigation, and could be found to have infringed on intellectual property rights.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
595
Technology companies, including many of the Company’s competitors, frequently enter into litigation based on allegations of patent infringement or other violations of intellectual property rights.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
596
In addition, patent holding companies seek to monetize patents they have purchased or otherwise obtained.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
597
As the Company has grown, the intellectual property rights claims against it have increased and may continue to increase.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
598
In particular, the Company’s cellular enabled products compete with mobile communication and media device companies that hold significant patent portfolios, and the number of patent claims against the Company has significantly increased.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
599
The Company is vigorously defending infringement actions in courts in a number of U.S. jurisdictions and before the U.S. International Trade Commission, as well as internationally in Europe and Asia.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
600
The plaintiffs in these actions frequently seek injunctions and substantial damages.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
601
Regardless of the scope or validity of such patents or other intellectual property rights, or the merits of any claims by potential or actual litigants, the Company may have to engage in protracted litigation.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
602
Such litigation is often expensive, time-consuming, disruptive to the Company’s operations, and distracting to management.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
603
If the Company is found to infringe one or more patents or other intellectual property rights, regardless of whether it can develop non-infringing technology, it may be required to pay substantial damages or royalties to a third-party, or it may be subject to a temporary or permanent injunction prohibiting the Company ...
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
604
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.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
605
These licenses may also significantly increase the Company’s operating expenses.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
606
In management’s opinion, there is not at least a reasonable possibility the Company may have incurred a material loss, or a material loss in excess of a recorded accrual, with respect to loss contingencies, including matters related to infringement of intellectual property rights.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
607
However, the outcome of litigation is inherently uncertain.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
608
Therefore, although management considers the likelihood of such an outcome to be remote, if one or more of these legal matters were resolved against the Company in a reporting period for amounts in excess of management’s expectations, the Company’s consolidated financial statements for that reporting period could be ma...
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
609
The Company’s future performance depends in part on support from third-party software developers.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
610
The Company believes decisions by customers to purchase its hardware products depend in part on the availability of third-party software applications and services.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
611
There is no assurance that third-party developers will continue to develop and maintain software applications and services for the Company’s products.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
612
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.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
613
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...
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
614
This analysis may be based on factors such as the market position of the Company and its products, the anticipated revenue that may be generated, continued growth of Mac sales, and the costs of developing such applications and services.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
615
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...
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
616
With respect to iOS devices, the Company relies on the continued availability and development of compelling and innovative software applications, which are distributed through a single distribution channel, the App Store.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
617
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 reduce or curtail development for the iOS platform.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
618
In addition, iOS devices are subject to rapid technological change, and, if third-party developers are unable to or choose not to keep up with this pace of change, third-party applications might not successfully operate and may result in dissatisfied customers.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
619
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’ platforms, such as Android.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
620
If developers focus their efforts on these competing platforms, the availability and quality of applications for the Company’s iOS devices may suffer.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
621
The Company depends on the performance of distributors, carriers and other resellers.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
622
The Company distributes its products through cellular network carriers, wholesalers, national and regional retailers, and value-added resellers, many of whom distribute products from competing manufacturers.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
623
The Company also sells its products and third-party products in most of its major markets directly to education, enterprise and government customers, and consumers and small and mid-sized businesses through its online and retail stores.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
624
Carriers providing cellular network service for iPhone typically subsidize users’ purchases of the device.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
625
There is no assurance that such subsidies will be continued at all or in the same amounts upon renewal of the Company’s agreements with these carriers or in agreements the Company enters into with new carriers.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
626
Many resellers have narrow operating margins and have been adversely affected in the past by weak economic conditions.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
627
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.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
628
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.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
629
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.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
630
These programs could require a substantial investment while providing no assurance of return or incremental revenue.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
631
The financial condition of these resellers could weaken, these resellers could stop distributing the Company’s products, or uncertainty regarding demand for the Company’s products could cause resellers to reduce their ordering and marketing of the Company’s products.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
632
The Company’s Retail segment has required and will continue to require a substantial investment and commitment of resources and is subject to numerous risks and uncertainties.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
633
The Company’s retail stores have required substantial fixed investment in equipment and leasehold improvements, information systems, inventory and personnel.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
634
The Company also has entered into substantial operating lease commitments for retail space.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
635
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.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
636
Because of their unique design elements, locations and size, these stores require substantially more investment than the Company’s more typical retail stores.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
637
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.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
638
Many factors unique to retail operations, some of which are beyond the Company’s control, pose risks and uncertainties.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
639
These risks and uncertainties include, but are not limited to, macro-economic factors that could have an adverse effect on general retail activity, as well as the Company’s inability to manage costs associated with store construction and operation, the Company’s failure to manage relationships with its existing retail ...
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
640
Investment in new business strategies and acquisitions could disrupt the Company’s ongoing business and present risks not originally contemplated.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
641
The Company has invested, and in the future may invest, in new business strategies or acquisitions.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
642
Such endeavors may involve significant risks and uncertainties, including distraction of management from current operations, greater than expected liabilities and expenses, inadequate return of capital, and unidentified issues not discovered in the Company’s due diligence.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
643
These new ventures are inherently risky and may not be successful.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
644
The Company’s products and services may experience quality problems from time to time that can result in decreased sales and operating margin and harm to the Company’s reputation.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
645
The Company sells complex hardware and software products and services that can contain design and manufacturing defects.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
646
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.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
647
The Company’s online services may from time to time experience outages, service slowdowns, or errors.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
648
Defects may also occur in components and products the Company purchases from third parties.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
649
There can be no assurance the Company will be able to detect and fix all defects in the hardware, software and services it sells.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
650
Failure to do so could result in lost revenue, significant warranty and other expenses, and harm to the Company’s reputation.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
651
The Company is subject to laws and regulations worldwide, changes to which could increase the Company’s costs and individually or in the aggregate adversely affect the Company’s business.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
652
The Company is subject to laws and regulations affecting its domestic and international operations in a number of areas.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
653
These U.S. and foreign laws and regulations affect the Company’s activities including, but not limited to, areas of labor, advertising, digital content, consumer protection, real estate, billing, e-commerce, promotions, quality of services, telecommunications, mobile communications and media, television, intellectual p...
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
654
By way of example, 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.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
655
Such changes could include, among others, restrictions on the production, manufacture, distribution, and use of devices, locking devices to a carrier’s network, or mandating the use of devices on more than one carrier’s network.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
656
These devices are also subject to certification and regulation by governmental and standardization bodies, as well as by cellular network carriers for use on their networks.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
657
These certification processes are extensive and time consuming, and could result in additional testing requirements, product modifications, delays in product shipment dates, or preclude the Company from selling certain products.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
658
Compliance with these laws, regulations and similar requirements may be onerous and expensive, and they may be inconsistent from jurisdiction to jurisdiction, further increasing the cost of compliance and doing business.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
659
Any such costs, which may rise in the future as a result of changes in these laws and regulations or in their interpretation could individually or in the aggregate make the Company’s products and services less attractive to the Company’s customers, delay the introduction of new products in one or more regions, or cause...
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
660
The Company has implemented policies and procedures designed to ensure compliance with applicable 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 and procedures.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
661
The Company’s success depends largely on the continued service and availability of key personnel.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
662
Much of the Company’s future success depends on the continued availability and service of key personnel, including its Chief Executive Officer, executive team and other highly skilled employees.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
663
Experienced personnel in the technology industry are in high demand and competition for their talents is intense, especially in Silicon Valley, where most of the Company’s key personnel are located.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
664
The Company’s business may be impacted by political events, war, terrorism, public health issues, natural disasters and other circumstances.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
665
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 material adverse effect on the Company, its suppliers, logistics providers, manufacturing vendors an...
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
666
The Company’s business operations are subject to interruption by, among others, 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.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
667
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.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
668
Should major public health issues, including pandemics, arise, the Company could be adversely 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 disru...
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
669
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.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
670
In the event of a natural disaster, the Company could incur significant losses, require substantial recovery time and experience significant expenditures in order to resume operations.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
671
The Company’s business and reputation may be impacted by information technology system failures or network disruptions.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
672
The Company may be subject to information technology system failures and network disruptions.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
673
These may be caused by natural disasters, accidents, power disruptions, telecommunications failures, acts of terrorism or war, computer viruses, physical or electronic break-ins, or similar events or disruptions.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
674
System redundancy may be ineffective or inadequate, and the Company’s disaster recovery planning may not be sufficient for all eventualities.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
675
Such failures or disruptions could prevent access to the Company’s online stores and services, preclude retail store transactions, compromise Company or customer data, and result in delayed or cancelled orders.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
676
System failures and disruptions could also impede the manufacturing and shipping of products, delivery of online services, transactions processing and financial reporting.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
677
The Company may be subject to breaches of its information technology systems, which could damage business partner and customer relationships, could curtail or otherwise adversely impact access to online stores and services, and could subject the Company to significant reputational, financial, legal, and operational con...
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
678
The Company’s business requires it to use and store customer, employee, and business partner personally identifiable information (“PII”).
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
679
This may include, among other information, names, addresses, phone numbers, email addresses, contact preferences, tax identification numbers, and payment account information.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
680
Although malicious attacks to gain access to PII affect many companies across various industries, the Company may be at a relatively greater risk of being targeted because of its high profile and the amount of PII managed.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
681
The Company requires user names and passwords in order to access its information technology systems.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
682
The Company also uses encryption and authentication technologies to secure the transmission and storage of data.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
683
These security measures may be compromised as a result of third-party security breaches, employee error, malfeasance, faulty password management, or other irregularity, and result in persons obtaining unauthorized access to Company data or accounts.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
684
Third parties may attempt to fraudulently induce employees or customers into disclosing user names, passwords or other sensitive information, which may in turn be used to access the Company’s information technology systems.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
685
To help protect customers and the Company, the Company monitors accounts and systems for unusual activity and may freeze accounts under suspicious circumstances, which may result in the delay or loss of customer orders.
0001193125-13-168288/full-submission.txt