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0000320193 | 20030513 | 10-Q | 591 | Continued availability of these components may be affected if producers were to decide to concentrate on the production of components other than those customized to meet the Company’s requirements. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 592 | If the supply of a key component were to be delayed or constrained on a new or existing product, including rights to music titles sold on the iTunes Music Store, the Company’s results of operations and financial condition could be adversely affected. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 593 | The Company’s ability to produce and market competitive products is also dependent on the ability and desire of IBM and Motorola, the sole suppliers of the PowerPC RISC-based microprocessor for the Company’s Macintosh computers, to provide the Company with a sufficient supply of microprocessors with price/performance f... | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 594 | Further, despite its efforts to educate the marketplace to the contrary, the Company believes that many of its current and potential customers believe that the relatively slower MHz rating or clock speed of the microprocessors it utilizes in its Macintosh systems compares unfavorably to those utilized by Windows-based ... | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 595 | There have been instances in recent years where the inability of the Company’s suppliers to provide advanced PowerPC G4 and G3 microprocessors with higher clock speeds in sufficient quantity has had significant adverse effects on the Company’s results of operations. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 596 | The inability in the future of the Company to obtain microprocessors in sufficient quantities with competitive price/performance features could have an adverse impact on the Company’s results of operations and financial condition. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 597 | The Company is dependent on manufacturing and logistics services provided by third parties, many of whom are located outside of the United States. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 598 | Many of the Company’s products are manufactured in whole or in part by third-party manufacturers. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 599 | In addition, the Company has outsourced much of its transportation and logistics management. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 600 | While outsourcing arrangements may lower the fixed cost of operations, they also reduce the Company’s direct control over production and distribution. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 601 | It is uncertain what effect such diminished control will have on the quality or quantity of the products manufactured, or the flexibility of the Company to respond to changing market conditions. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 602 | Moreover, although arrangements with such manufacturers may contain provisions for warranty expense reimbursement, the Company may remain at least initially responsible to the consumer for warranty service or in the event of product defects. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 603 | Any unanticipated product defect or warranty liability, whether pursuant to arrangements with contract manufacturers or otherwise, could adversely affect the Company’s future operating results and financial condition. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 604 | Final assembly of products sold by the Company is conducted in the Company’s manufacturing facilities in Sacramento, California, and Cork, Ireland, and by external vendors in Fremont, California, Fullerton, California, Taiwan, Korea, the People’s Republic of China, and the Czech Republic. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 605 | Currently, manufacture of many of the components used in the Company’s products and final assembly of all of the Company’s portable products including PowerBooks, iBooks, and the iPod is performed by third-party vendors in Taiwan. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 606 | If for any reason manufacturing or logistics in any of these locations is disrupted by regional economic, business, environmental, medical, political, or military conditions or events, the Company’s results of operations and financial condition could be adversely affected. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 607 | The Company’s products could experience quality problems that result in decreased net sales and operating profits. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 608 | The Company sells highly complex hardware and software products that may contain defects in design and manufacture. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 609 | Sophisticated operating system software and applications such as the Company sells often contains “bugs” that can unexpectedly interfere with the operation of the software. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 610 | Defects may also occur in components and products the Company purchases from third parties that may be beyond its control. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 611 | There can be no assurance that the Company will be able to detect and fix all defects in the hardware and software it sells. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 612 | Failure to do so could result in lost revenues, loss of reputation, and significant expense to remedy. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 613 | The Company’s retail initiative requires a substantial investment and commitment of resources and is subject to numerous risks and uncertainties. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 614 | Since May of 2001, the Company has opened 55 retail stores in the United States and anticipates opening more stores during the remainder of calendar 2003. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 615 | The Company’s retail initiative has required substantial investment in equipment and leasehold improvements, information systems, inventory, and personnel. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 616 | The Company has also entered into substantial operating leases commitments for retail space with lease terms ranging from 5 to 12 years. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 617 | The Company would incur substantial costs should it choose to terminate this initiative or close individual stores. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 618 | Such costs could adversely affect the Company’s results of operations and financial condition. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 619 | Additionally, a
relatively high proportion of the Retail segment’s costs are fixed because of depreciation on store construction costs and lease expense. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 620 | As a result, should the Retail segment experience a decline in sales for any reason, significant losses would result. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 621 | Certain of the Company’s stores have been designed and built to serve as high profile venues that function as vehicles for general corporate marketing, corporate events, and brand awareness. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 622 | Because of their unique design elements, locations and size, these stores require substantially more investment in equipment and leasehold improvements than the Company’s more typical retail stores. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 623 | The Company has opened two such stores and has several others under development. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 624 | Because of their location and size, these high profile stores also require the Company to enter into substantially larger operating lease commitments compared to those required for its more typical stores. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 625 | Current leases on such locations have terms ranging from 5 to 10 years with total commitments per location over the lease terms ranging from $25 million to $50 million. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 626 | Closure or poor performance of one of these high profile stores could have a particularly significant negative impact on the Company’s results of operations and financial condition. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 627 | Many of the general risks and uncertainties the Company faces could also have an adverse impact on its Retail segment. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 628 | Also, many factors unique to retail operations present risks and uncertainties, some of which are beyond the Company’s control, that could adversely affect the Retail segment’s future results, cause its actual results to differ from those currently expected, and/or have an adverse effect on the Company’s consolidated r... | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 629 | Potential risks and uncertainties unique to retail operations that could have an adverse impact on the Retail segment include, among other things, macro-economic factors that have a negative impact on general retail activity; inability to manage costs associated with store construction and operation; lack of consumer a... | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 630 | Unit sales of the Company’s professionally oriented desktop systems have declined sharply over past two to three years negatively impacting net sales and gross margin. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 631 | Unit sales of Power Macintosh systems fell 18% during 2002 as compared to 2001 and fell 35% in 2001 from 2000. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 632 | Power Macintosh unit sales have fallen as a percentage of total Macintosh unit sales from 38% in 1999 to 25% in 2002 and 22% during the first six months of fiscal 2003. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 633 | The Company believes that weak economic conditions over the past several years are having a pronounced negative impact on its professional and creative customers who are the primary users of such systems. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 634 | The Company also believes that many of these customers continue to delay upgrades of their Power Macintosh systems due to the Company’s ongoing transition to Mac OS X and in anticipation of certain software vendors transitioning their professionally oriented Macintosh software applications to run natively in Mac OS X. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 635 | Also, it is likely that many of the Company's current and potential customers, particularly professional and creative customers who are most likely to utilize the Company's Power Macintosh systems, believe that the relatively slower MHz rating or clock speed of the microprocessors it utilizes in its Macintosh systems c... | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 636 | In addition to the negative impact on net sales, declining sales of Power Macintosh systems also have a negative effect on the Company’s overall gross margin because Power Macintosh systems generally have higher individual gross margins than the Company’s other Macintosh systems. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 637 | Continued deterioration in Power Macintosh unit sales will adversely affect the Company’s future net sales and gross margin. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 638 | If future unit sales of Power Macintosh systems fail to partially or fully recover, it will be difficult for the Company to improve its overall profitability. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 639 | The Company faces increasing competition in the U.S. education market. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 640 | Sales in the United States to both elementary and secondary schools, as well as for college and university customers, remains a core market for Apple. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 641 | Net sales in these markets fell to 21% of the Company’s total net sales in 2002 from 26% in 2001. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 642 | The drop in 2002 reflects declines in both net sales and Macintosh unit sales in these markets of 15% and 14%, respectively, in fiscal 2002 compared to 2001. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 643 | Additionally, the Company experienced a 14% decline during the first six months of 2003 as compared to the same period in 2002. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 644 | These developments are consistent with industry data showing the Company losing market share in the U.S. education market in each of the last two full fiscal years. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 645 | Several competitors of the Company have either targeted or announced their intention to target the education market for personal computers. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 646 | Although the Company has taken certain steps to strengthen its position in the education market, there can be no assurance that the Company will be able to increase its share of the education market or maintain its existing share of that market. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 647 | Failure to increase or maintain market share in the education market may have an adverse impact on the Company’s operating results and financial condition. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 648 | The Company’s future operating performance is dependent on the performance of distributors and other resellers of the Company’s products. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 649 | The Company distributes its products through a variety of resellers including wholesalers, national and regional retailers and cataloguers, many of who distribute products from competing manufacturers. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 650 | In addition, the Company also sells many of its products and resells certain third-party products in most of its major markets directly to end users, certain education customers, and certain resellers through its online stores around the world. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 651 | The Company also sells its own products and certain third-party products through its retail stores in the United States. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 652 | Many of the Company’s significant resellers operate on narrow product margins and have been negatively affected by current economic conditions. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 653 | Considerable trade receivables that are not covered by collateral or credit insurance are outstanding with the Company’s distribution and retail channel partners. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 654 | The Company’s business and financial results could be adversely affected if the financial condition of these resellers weakened, if resellers within consumer channels were to cease distribution of the Company’s products, or if uncertainty regarding demand for the Company’s products caused resellers to reduce their orde... | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 655 | Over the past several years, an increasing proportion of the Company’s net sales have been made by the Company directly to end users through its online stores around the world and through its retail stores in the United States. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 656 | The Company’s resellers may perceive this expansion of the Company’s direct sales as conflicting with their own business and economic interests as distributors and resellers of the Company’s products. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 657 | Perception of such a conflict could discourage the Company’s resellers from investing additional resources in the distribution and sale of the Company’s products or lead them to limit or cease distribution of the Company’s products. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 658 | The Company’s business and financial results could be adversely affected if expansion of its direct sales to end users causes some or all of its resellers to cease or limit distribution of the Company’s products. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 659 | The Company’s business is subject to the risks of international operations. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 660 | A large portion of the Company’s revenue is derived from its international operations. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 661 | As a result, the Company’s operating results and financial condition could be significantly affected by risks associated with international activities, including economic and labor conditions, political instability, tax laws (including U.S. taxes on foreign subsidiaries), and changes in the value of the U.S. dollar ver... | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 662 | The Company’s primary exposure to movements in foreign currency exchange rates relate to non-dollar denominated sales in Europe, Japan, Australia, Canada, and certain parts of Asia and non-dollar denominated operating expenses incurred throughout the world. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 663 | Weaknesses in foreign currencies, particularly the Japanese Yen and the Euro, can adversely impact consumer demand for the Company’s products and the U.S. dollar value of the Company’s foreign currency denominated sales. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 664 | Conversely, strengthening in these and other foreign currencies can increase the cost to the Company of product components, negatively affecting the Company’s results of operations. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 665 | Margins on sales of Apple products in foreign countries, and on sales of products that include components obtained from foreign suppliers, can be adversely affected by foreign currency exchange rate fluctuations and by international trade regulations, including tariffs and antidumping penalties. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 666 | Further information related to the Company’s global market risks may be found in Part I, Item 3 of this Form 10-Q under the subheading “Foreign Currency Risk,” and also in the 2002 Form 10-K. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 667 | The Company’s future performance is dependent upon support from third-party software developers. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 668 | The Company believes that decisions by customers to purchase the Company’s personal computers, as opposed to Windows-based systems or other devices, are often based on the availability of third-party software for particular applications such as Microsoft Office. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 669 | The Company also believes the availability of third-party application software for the Company’s hardware products depends in part on third-party developers’ perception and analysis of the relative benefits of developing, maintaining, and upgrading such software for the Company’s products versus software for the larger... | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 670 | This analysis is based on factors such as the perceived strength of the Company and its products, the anticipated potential revenue that may be generated, acceptance by customers of Mac OS X, and the costs of developing such software products. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 671 | To the extent the Company’s financial losses in prior years and the minority market share held by the Company in the personal computer market, as well as the Company’s decision to end its Mac OS licensing program, have caused software developers to question the Company’s prospects in the personal computer market, devel... | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 672 | Moreover, there can be no assurance software
developers will continue to develop software for Mac OS X, the Company's new operating system, on a timely basis or at all. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 673 | In addition, past and future development by the Company of its own software applications and solutions may negatively impact the decision of software developers to develop, maintain, and upgrade similar or competitive software for the Company’s products. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 674 | The company currently markets and sells a variety of software applications for use by professionals, consumers and education customers that could influence the decision of third-party software developers to develop or upgrade Macintosh-compatible software products. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 675 | Software applications currently marketed by the Company include software for professional film and video editing, professional compositing and visual effects for large format film and video productions, professional music production and music post production, professional and consumer DVD encoding and authoring, consum... | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 676 | The Company also markets an integrated productivity application that incorporates word processing, page layout, image manipulation, spreadsheets, databases, and presentations in a single application. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 677 | In August 1997, the Company and Microsoft Corporation entered into patent cross license and technology agreements. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 678 | In addition, for a period of five years through August 2002, and subject to certain limitations related to the number of Macintosh computers sold by the Company, Microsoft was required to make versions of its Microsoft Office and Internet Explorer products for the Mac OS. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 679 | Although Microsoft has released Microsoft Office and Internet Explorer for Mac OS X, Microsoft is not obligated to produce future versions of its products subsequent to August 2002. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 680 | While the Company believes its relationship with Microsoft has been and will continue to be beneficial to the Company and to its efforts to increase the installed base for the Mac OS, the Company does compete directly with Microsoft in a number of key areas. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 681 | Accordingly, Microsoft’s interest in producing application software for the Mac OS following expiration of the agreements may be influenced by Microsoft’s perception of its interests as the vendor of the Windows operating system. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 682 | Discontinuance of Microsoft Office and other Microsoft products for the Macintosh platform would have an adverse effect on the Company’s net sales and results of operations. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 683 | The Company’s business relies on access to patents and intellectual property obtained from third parties, and the Company’s future results could be adversely affected if it is alleged or found to have infringed on the intellectual property rights of others. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 684 | Many of the Company’s products are designed to include intellectual property obtained from third parties. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 685 | While it may be necessary in the future to seek or renew licenses relating to various aspects of its products and business methods, the Company believes that based upon past experience and industry practice, such licenses generally could be obtained on commercially reasonable terms. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 686 | However, there can be no assurance that the necessary licenses would be available or available on acceptable terms. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 687 | Because of technological changes in the computer industry, current extensive patent coverage, and the rapid rate of issuance of new patents, it is possible certain components of the Company’s products and business methods may unknowingly infringe existing patents of others. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 688 | The Company has from time to time been notified that it may be infringing certain patents or other intellectual property rights of others. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 689 | Responding to such claims, regardless of their merit, can be time consuming, result in significant expenses, and cause the diversion of management and technical personnel. | 0001104659-03-009489/full-submission.txt |
0000320193 | 20030513 | 10-Q | 690 | Several pending claims are in various stages of evaluation. | 0001104659-03-009489/full-submission.txt |
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