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0000320193
20151028
10-K
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iPad iPad is the Company’s line of multi-purpose tablets based on its iOS operating system, which includes iPad Air® and iPad mini™.
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iPad includes Siri and also includes Touch ID on qualifying devices.
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In September 2015, the Company announced the new iPad Pro™, featuring a 12.9-inch Retina® display, which is expected to be available in November 2015. iPad works with the iTunes Store, App Store and iBooks Store for purchasing, organizing and playing digital content and apps.
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iPad is compatible with both Mac and Windows personal computers and Apple’s iCloud services.
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Mac Mac is the Company’s line of desktop and portable personal computers based on its OS X operating system.
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The Company’s desktop computers include iMac®, 21.5” iMac with Retina 4K Display, 27” iMac with Retina 5K Display, Mac Pro® and Mac mini.
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The Company’s portable computers include MacBook®, MacBook Air®, MacBook Pro® and MacBook Pro with Retina display.
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Operating System Software iOS iOS is the Company’s Multi-Touch™ operating system that serves as the foundation for iOS devices.
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Devices running iOS are compatible with both Mac and Windows personal computers and Apple’s iCloud services.
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In September 2015, the Company released iOS 9, which provides more search abilities and improved Siri features.
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iOS 9 also introduced new multitasking features designed specifically for iPad, including Slide Over and Split View, which allow users to work with two apps simultaneously, and Picture-in-Picture that allows users to watch a video while using another application.
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OS X OS X is the Company’s Mac operating system and is built on an open-source UNIX-based foundation and provides an intuitive and integrated computer experience.
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Support for iCloud is built into OS X so users can access content and information from Mac, iOS devices and other supported devices and access downloaded content and apps from the iTunes Store.
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OS X El Capitan, released in September 2015, is the 12th major release of OS X and incorporates additional window management features, including Split View and the new Spaces Bar in Mission Control®, which provides users an intuitive way to group applications.
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Apple Inc. | 2015 Form 10-K | 2 watchOS watchOS is the Company’s operating system for Apple Watch.
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Released in September 2015, watchOS 2 is the first major software update for Apple Watch, providing users with new features, including new watch faces, the ability to add third-party app information on watch faces, Time Travel, and additional communication capabilities in Mail, Friends and Digital Touch.
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watchOS 2 also gives developers the ability to build native apps for Apple Watch.
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tvOS In September 2015, the Company announced tvOS, its operating system for the new Apple TV, which is expected to be available at the end of October 2015.
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The tvOS operating system is based on the Company’s iOS platform and will enable developers to create new apps and games specifically for Apple TV and deliver them to customers through the new Apple TV App Store.
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Application Software The Company’s application software includes iLife®, iWork® and various other software, including Final Cut Pro®, Logic® Pro X and FileMaker® Pro.
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iLife is the Company’s consumer-oriented digital lifestyle software application suite included with all Mac computers and features iMovie®, a digital video editing application, and GarageBand®, a music creation application that allows users to play, record and create music.
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iWork is the Company’s integrated productivity suite included with all Mac computers and is designed to help users create, present and publish documents through Pages®, presentations through Keynote® and spreadsheets through Numbers®.
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The Company also has Multi-Touch versions of iLife and iWork applications designed specifically for use on iOS devices, which are available as free downloads for all new iPhones and iPads.
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Services Internet Services The iTunes Store, available for iOS devices, Mac and Windows personal computers and Apple TV, allows customers to purchase and download music and TV shows, rent or purchase movies and download free podcasts.
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The App Store, available for iOS devices, allows customers to discover and download apps and purchase in-app content.
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The Mac App Store, available for Mac computers, allows customers to discover, download and install Mac applications.
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The iBooks Store, available for iOS devices and Mac computers, features e-books from major and independent publishers.
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Apple Music offers users a curated listening experience with on-demand radio stations that evolve based on a user’s play or download activity and a subscription-based internet streaming service that also provides unlimited access to the Apple Music library.
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In September 2015, the Company announced the Apple TV App Store, which provides customers access to apps and games specifically for the new Apple TV.
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iCloud iCloud is the Company’s cloud service which stores music, photos, contacts, calendars, mail, documents and more, keeping them up-to-date and available across multiple iOS devices, Mac and Windows personal computers and Apple TV.
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iCloud services include iCloud DriveSM, iCloud Photo Library, Family Sharing, Find My iPhone, Find My Friends, Notes, iCloud Keychain® and iCloud Backup for iOS devices.
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AppleCare AppleCare® offers a range of support options for the Company’s customers.
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These include assistance that is built into software products, printed and electronic product manuals, online support including comprehensive product information as well as technical assistance, the AppleCare Protection Plan (“APP”) and the AppleCare+ Protection Plan (“AC+”).
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APP is a fee-based service that typically extends the service coverage of phone support, hardware repairs and dedicated web-based support resources for Mac, Apple TV and display products.
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AC+ is a fee-based service offering additional coverage under some circumstances for instances of accidental damage in addition to the services offered by APP and is available in certain countries for iPhone, iPad, Apple Watch and iPod.
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Apple Pay Apple Pay is the Company’s mobile payment service available in the U.S. and U.K. that offers an easy, secure and private way to pay.
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Apple Pay allows users to pay for purchases in stores accepting contactless payments and to pay for purchases within participating apps on qualifying devices.
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Apple Pay accepts credit and debit cards across major card networks and also supports reward programs and store-issued credit and debit cards.
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Apple Inc. | 2015 Form 10-K | 3 Other Products Accessories The Company sells a variety of Apple-branded and third-party Mac-compatible and iOS-compatible accessories, including Apple TV, Apple Watch, headphones, displays, storage devices, Beats products, and various other connectivity and computing products and supplie...
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Apple TV Apple TV connects to consumers’ TVs and enables them to access digital content directly for streaming high definition video, playing music and games, and viewing photos.
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Content from Apple Music and other media services are also available on Apple TV.
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Apple TV allows streaming digital content from Mac and Windows personal computers through Home Share and through AirPlay® from compatible Mac and iOS devices.
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In September 2015, the Company announced the new Apple TV running on the Company’s tvOS operating system and based on apps built for the television.
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Additionally, the new Apple TV remote features Siri, allowing users to search and access content with their voice.
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The new Apple TV is expected to be available at the end of October 2015.
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Apple Watch Apple Watch is a personal electronic device that combines the watchOS user interface and technologies created specifically for a smaller device, including the Digital Crown, a unique navigation tool that allows users to seamlessly scroll, zoom and navigate, and Force Touch, a technology that senses the diff...
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Apple Watch enables users to communicate in new ways from their wrist, track their health and fitness through activity and workout apps, and includes Siri and Apple Pay.
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iPod iPod is the Company’s line of portable digital music and media players, which includes iPod touch, iPod nano® and iPod shuffle®.
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All iPods work with iTunes to purchase and synchronize content.
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iPod touch, based on the Company’s iOS operating system, is a flash-memory-based iPod that works with the iTunes Store, App Store and iBooks Store for purchasing and playing digital content and apps.
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Developer Programs The Company’s developer programs support app developers with building, testing and distributing apps for iOS, Mac, Apple Watch and the new Apple TV.
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Developer program membership provides access to beta software, the ability to integrate advanced app capabilities (e.g., iCloud, Game Center and Apple Pay), distribution on the App Store, access to App Analytics, and code-level technical support.
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Developer programs also exist for businesses creating apps for internal use (the Apple Developer Enterprise Program) and developers creating accessories for Apple devices (the MFi Program).
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All developers, even those who are not developer program members, can sign in with their Apple ID to post on the Apple Developer Forums and use Xcode®, the Company’s integrated development environment for creating apps for Apple platforms.
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Xcode includes project management tools; analysis tools to collect, display and compare app performance data; simulation tools to locally run, test and debug apps; and tools to simplify the design and development of user interfaces.
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All developers also have access to extensive technical documentation and sample code.
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Markets and Distribution The Company’s customers are primarily in the consumer, small and mid-sized business, education, enterprise and government markets.
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The Company sells its products and resells third-party products in most of its major markets directly to consumers and small and mid-sized businesses through its retail and online stores and its direct sales force.
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The Company also employs a variety of indirect distribution channels, such as third-party cellular network carriers, wholesalers, retailers and value-added resellers.
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During 2015, the Company’s net sales through its direct and indirect distribution channels accounted for 26% and 74%, respectively, of total net sales.
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The Company believes that sales of its innovative and differentiated products are enhanced by knowledgeable salespersons who can convey the value of the hardware and software integration and demonstrate the unique solutions that are available on its products.
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The Company further believes providing direct contact with its targeted customers is an effective way to demonstrate the advantages of its products over those of its competitors and providing a high-quality sales and after-sales support experience is critical to attracting new and retaining existing customers.
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To ensure a high-quality buying experience for its products in which service and education are emphasized, the Company continues to build and improve its distribution capabilities by expanding the number of its own retail stores worldwide.
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The Company’s retail stores are typically located at high-traffic locations in quality shopping malls and urban shopping districts.
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By operating its own stores and locating them in desirable high-traffic locations the Company is better positioned to ensure a high quality customer buying experience and attract new customers.
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The stores are designed to simplify and enhance the presentation and marketing of the Company’s products and related solutions.
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The retail stores employ experienced and knowledgeable personnel who provide product advice, service and training and offer a wide selection of third-party hardware, software and other accessories that complement the Company’s products.
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Apple Inc. | 2015 Form 10-K | 4 The Company has also invested in programs to enhance reseller sales by placing high-quality Apple fixtures, merchandising materials and other resources within selected third-party reseller locations.
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Through the Apple Premium Reseller Program, certain third-party resellers focus on the Apple platform by providing a high level of product expertise, integration and support services.
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The Company is committed to delivering solutions to help educators teach and students learn.
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The Company believes effective integration of technology into classroom instruction can result in higher levels of student achievement and has designed a range of products, services and programs to address the needs of education customers.
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The Company also supports mobile learning and real-time distribution of, and access to, education related materials through iTunes U, a platform that allows students and teachers to share and distribute educational media online.
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The Company sells its products to the education market through its direct sales force, select third-party resellers and its online and retail stores.
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The Company also sells its hardware and software products to enterprise and government customers in each of its reportable operating segments.
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The Company’s products are deployed in these markets because of their performance, productivity, ease of use and seamless integration into information technology environments.
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The Company’s products are compatible with thousands of third-party business applications and services, and its tools enable the development and secure deployment of custom applications as well as remote device administration.
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No single customer accounted for more than 10% of net sales in 2015, 2014 or 2013.
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Competition The markets for the Company’s products and services are highly competitive and the Company is confronted by aggressive competition in all areas of its business.
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These markets are characterized by frequent product introductions and rapid technological advances that have substantially increased the capabilities and use of mobile communication and media devices, personal computers and other digital electronic devices.
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The Company’s competitors that sell mobile devices and personal computers based on other operating systems have aggressively cut prices and lowered their product margins to gain or maintain market share.
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The Company’s financial condition and operating results can be adversely affected by these and other industry-wide downward pressures on gross margins.
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Principal competitive factors important to the Company include price, product features (including security features), relative price and performance, product quality and reliability, design innovation, a strong third-party software and accessories ecosystem, marketing and distribution capability, service and support an...
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The Company is focused on expanding its market opportunities related to personal computers and mobile communication and media devices.
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These markets are highly competitive and include many large, well-funded and experienced participants.
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The Company expects competition in these markets to intensify significantly as competitors attempt to imitate some of the features of the Company’s products and applications within their own products or, alternatively, collaborate with each other to offer solutions that are more competitive than those they currently of...
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These markets are characterized by aggressive pricing practices, frequent product introductions, evolving design approaches and technologies, rapid adoption of technological and product advancements by competitors and price sensitivity on the part of consumers and businesses.
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The Company’s digital content services have faced significant competition from other companies promoting their own digital music and content products and services, including those offering free peer-to-peer music and video services.
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The Company’s future financial condition and operating results depend on the Company’s ability to continue to develop and offer new innovative products and services in each of the markets in which it competes.
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The Company believes it offers superior innovation and integration of the entire solution including the hardware (iOS devices, Mac, Apple Watch and Apple TV), software (iOS, OS X, watchOS and tvOS), online services and distribution of digital content and applications (Internet Services).
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Some of the Company’s current and potential competitors have substantial resources and may be able to provide such products and services at little or no profit or even at a loss to compete with the Company’s offerings.
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Supply of Components Although most components essential to the Company’s business are generally available from multiple sources, a number of components are currently obtained from single or limited sources.
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In addition, the Company competes for various components with other participants in the markets for mobile communication and media devices and personal computers.
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Therefore, many components used by the Company, including those that are available from multiple sources, are at times subject to industry-wide shortage and significant pricing fluctuations that could materially adversely affect the Company’s financial condition and operating results.
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Apple Inc. | 2015 Form 10-K | 5 The Company uses some custom components that are not commonly used by its competitors, and the Company often utilizes custom components available from only one source.
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When a component or product uses new technologies, initial capacity constraints may exist until the suppliers’ yields have matured or manufacturing capacity has increased.
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If the Company’s supply of components were delayed or constrained, or if an outsourcing partner delayed shipments of completed products to the Company, the Company’s financial condition and operating results could be materially adversely affected.
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The Company’s business and financial performance could also be materially adversely affected depending on the time required to obtain sufficient quantities from the original source, or to identify and obtain sufficient quantities from an alternative source.
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Continued availability of these components at acceptable prices, or at all, may be affected if those suppliers concentrated on the production of common components instead of components customized to meet the Company’s requirements.
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The Company has entered into agreements for the supply of many components; however, there can be no guarantee that the Company will be able to extend or renew these agreements on similar terms, or at all.
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Therefore, the Company remains subject to significant risks of supply shortages and price increases that could materially adversely affect its financial condition and operating results.
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