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0000320193
20161026
10-K
138
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
139
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
140
In addition, the Company competes for various components with other participants in the markets for mobile communication and media devices and personal computers.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
141
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
142
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
143
When a component or product uses new technologies, initial capacity constraints may exist until the suppliers’ yields have matured or manufacturing capacity has increased.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
144
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
145
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
146
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
147
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
148
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
149
While some Mac computers are manufactured in the U.S. and Ireland, substantially all of the Company’s hardware products are currently manufactured by outsourcing partners that are located primarily in Asia.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
150
A significant concentration of this manufacturing is currently performed by a small number of outsourcing partners, often in single locations.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
151
Certain of these outsourcing partners are the sole-sourced suppliers of components and manufacturers for many of the Company’s products.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
152
Although the Company works closely with its outsourcing partners on manufacturing schedules, the Company’s operating results could be adversely affected if its outsourcing partners were unable to meet their production commitments.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
153
The Company’s manufacturing purchase obligations typically cover its requirements for periods up to 150 days.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
154
Apple Inc. | 2016 Form 10-K | 5 Research and Development Because the industries in which the Company competes are characterized by rapid technological advances, the Company’s ability to compete successfully depends heavily upon its ability to ensure a continual and timely flow of competitive products, services and tech...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
155
The Company continues to develop new technologies to enhance existing products and to expand the range of its product offerings through R&D, licensing of intellectual property and acquisition of third-party businesses and technology.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
156
Total R&D expense was $10.0 billion, $8.1 billion and $6.0 billion in 2016, 2015 and 2014, respectively.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
157
Patents, Trademarks, Copyrights and Licenses The Company currently holds rights to patents and copyrights relating to certain aspects of its hardware devices, accessories, software and services.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
158
The Company has registered or has applied for trademarks and service marks in the U.S. and a number of foreign countries.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
159
Although the Company believes the ownership of such patents, copyrights, trademarks and service marks is an important factor in its business and that its success does depend in part on such ownership, the Company relies primarily on the innovative skills, technical competence and marketing abilities of its personnel.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
160
The Company regularly files patent applications to protect innovations arising from its research, development and design, and is currently pursuing thousands of patent applications around the world.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
161
Over time, the Company has accumulated a large portfolio of issued patents around the world.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
162
The Company holds copyrights relating to certain aspects of its products and services.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
163
No single patent or copyright is solely responsible for protecting the Company’s products.
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0000320193
20161026
10-K
164
The Company believes the duration of its patents is adequate relative to the expected lives of its products.
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0000320193
20161026
10-K
165
Many of the Company’s products are designed to include intellectual property obtained from third parties.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
166
It may be necessary in the future to seek or renew licenses relating to various aspects of its products, processes and services.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
167
While the Company has generally been able to obtain such licenses on commercially reasonable terms in the past, there is no guarantee that such licenses could be obtained in the future on reasonable terms or at all.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
168
Because of technological changes in the industries in which the Company competes, current extensive patent coverage and the rapid rate of issuance of new patents, it is possible that certain components of the Company’s products, processes and services may unknowingly infringe existing patents or intellectual property r...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
169
From time to time, the Company has been notified that it may be infringing certain patents or other intellectual property rights of third parties.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
170
Foreign and Domestic Operations and Geographic Data During 2016, the Company’s domestic and international net sales accounted for 35% and 65%, respectively, of total net sales.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
171
Information regarding financial data by geographic segment is set forth in Part II, Item 7 of this Form 10-K under the subheading “Segment Operating Performance,” and in Part II, Item 8 of this Form 10-K in the Notes to Consolidated Financial Statements in Note 11, “Segment Information and Geographic Data.” While some ...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
172
The supply and manufacture of a number of components is performed by sole-sourced outsourcing partners in the U.S., Asia and Europe.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
173
Margins on sales of the Company’s 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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
174
Information regarding concentration in the available sources of supply of materials and products is set forth in Part II, Item 8 of this Form 10-K in the Notes to Consolidated Financial Statements in Note 10, “Commitments and Contingencies.” Business Seasonality and Product Introductions The Company has historically ex...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
175
Additionally, new product introductions can significantly impact net sales, product costs and operating expenses.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
176
Product introductions can also impact the Company’s net sales to its indirect distribution channels as these channels are filled with new product inventory following a product introduction, and often, channel inventory of a particular product declines as the next related major product launch approaches.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
177
Net sales can also be affected when consumers and distributors anticipate a product introduction.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
178
However, neither historical seasonal patterns nor historical patterns of product introductions should be considered reliable indicators of the Company’s future pattern of product introductions, future net sales or financial performance.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
179
Warranty The Company offers a limited parts and labor warranty on most of its hardware products.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
180
The basic warranty period is typically one year from the date of purchase by the original end-user.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
181
The Company also offers a 90-day basic warranty for its service parts used to repair the Company’s hardware products.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
182
In certain jurisdictions, local law requires that manufacturers guarantee their products for a period prescribed by statute, typically at least two years.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
183
In addition, where available, consumers may purchase APP or AC+, which extends service coverage on many of the Company’s hardware products.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
184
Apple Inc. | 2016 Form 10-K | 6 Backlog In the Company’s experience, the actual amount of product backlog at any particular time is not a meaningful indication of its future business prospects.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
185
In particular, backlog often increases immediately following new product introductions as customers anticipate shortages.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
186
Backlog is often reduced once customers believe they can obtain sufficient supply.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
187
Because of the foregoing, backlog should not be considered a reliable indicator of the Company’s ability to achieve any particular level of revenue or financial performance.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
188
Employees As of September 24, 2016, the Company had approximately 116,000 full-time equivalent employees.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
189
Available Information The Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are filed with the Securities and Exchange Commission...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
190
The Company is subject to the informational requirements of the Exchange Act and files or furnishes reports, proxy statements and other information with the SEC.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
191
Such reports and other information filed by the Company with the SEC are available free of charge on the Company’s website at investor.apple.com/sec.cfm when such reports are available on the SEC’s website.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
192
The public may read and copy any materials filed by the Company with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington, DC 20549.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
193
The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
194
The SEC maintains an internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at www.sec.gov.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
195
The contents of these websites are not incorporated into this filing.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
196
Further, the Company’s references to website URLs are intended to be inactive textual references only.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
197
Apple Inc. | 2016 Form 10-K | 7 Item 1A.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
198
Risk Factors The following discussion of risk factors contains forward-looking statements.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
199
These risk factors may be important to understanding other statements in this Form 10-K.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
200
The following information should be read in conjunction with Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes in Part II, Item 8, “Financial Statements and Supplementary Data” of this Form 10-K.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
201
The business, financial condition and operating results of the Company can be affected by a number of factors, whether currently known or unknown, including but not limited to those described below, any one or more of which could, directly or indirectly, cause the Company’s actual financial condition and operating resu...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
202
Any of these factors, in whole or in part, could materially and adversely affect the Company’s business, financial condition, operating results and stock price.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
203
Because of the following factors, as well as other factors affecting the Company’s financial condition and operating results, past financial performance should not be considered to be a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends in future per...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
204
Global and regional economic conditions could materially adversely affect the Company.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
205
The Company’s operations and performance depend significantly on global and regional economic conditions.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
206
Uncertainty about global and regional economic conditions poses a risk as consumers and businesses may postpone spending in response to tighter credit, higher unemployment, financial market volatility, government austerity programs, negative financial news, declines in income or asset values and/or other factors.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
207
These worldwide and regional economic conditions could have a material adverse effect on demand for the Company’s products and services.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
208
Demand also could differ materially from the Company’s expectations as a result of currency fluctuations because the Company generally raises prices on goods and services sold outside the U.S. to correspond with the effect of a strengthening of the U.S. dollar.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
209
Other factors that could influence worldwide or regional demand include changes in fuel and other energy costs, conditions in the real estate and mortgage markets, unemployment, labor and healthcare costs, access to credit, consumer confidence and other macroeconomic factors affecting consumer spending behavior.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
210
These and other economic factors could materially adversely affect demand for the Company’s products and services.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
211
In the event of financial turmoil affecting the banking system and financial markets, additional consolidation of the financial services industry, or significant financial service institution failures, there could be tightening in the credit markets, low liquidity and extreme volatility in fixed income, credit, currenc...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
212
This could have a number of effects on the Company’s business, including the insolvency or financial instability of outsourcing partners or suppliers or their inability to obtain credit to finance development and/or manufacture products resulting in product delays; inability of customers, including channel partners, to...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
213
Other income and expense also could vary materially from expectations depending on gains or losses realized on the sale or exchange of financial instruments; impairment charges resulting from revaluations of debt and equity securities and other investments; changes in interest rates; increases or decreases in cash bala...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
214
Increased volatility in the financial markets and overall economic uncertainty would increase the risk of the actual amounts realized in the future on the Company’s financial instruments differing significantly from the fair values currently assigned to them.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
215
Global markets for the Company’s products and services are highly competitive and subject to rapid technological change, and the Company may be unable to compete effectively in these markets.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
216
The Company’s products and services compete in highly competitive global markets characterized by aggressive price cutting and resulting downward pressure on gross margins, frequent introduction of new products, short product life cycles, evolving industry standards, continual improvement in product price/performance c...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
217
The Company’s ability to compete successfully depends heavily on its ability to ensure a continuing and timely introduction of innovative new products, services and technologies to the marketplace.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
218
The Company believes it is unique in that it designs and develops nearly the entire solution for its products, including the hardware, operating system, numerous software applications and related services.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
219
As a result, the Company must make significant investments in R&D.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
220
The Company currently holds a significant number of patents and copyrights and has registered and/or has applied to register numerous patents, trademarks and service marks.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
221
In contrast, many of the Company’s competitors seek to compete primarily through aggressive pricing and very low cost structures, and emulating the Company's products and infringing on its intellectual property.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
222
If the Company is unable to continue to develop and sell innovative new products with attractive margins or if competitors infringe on the Company’s intellectual property, the Company’s ability to maintain a competitive advantage could be adversely affected.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
223
Apple Inc. | 2016 Form 10-K | 8 The Company markets certain mobile communication and media devices based on the iOS mobile operating system and also markets related services, including third-party digital content and applications.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
224
The Company faces substantial competition in these markets from companies that have significant technical, marketing, distribution and other resources, as well as established hardware, software and digital content supplier relationships; and the Company has a minority market share in the global smartphone market.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
225
Additionally, the Company faces significant price competition as competitors reduce their selling prices and attempt to imitate the Company’s product features and applications within their own products or, alternatively, collaborate with each other to offer solutions that are more competitive than those they currently ...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
226
The Company competes with business models that provide content to users for free.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
227
The Company also competes with illegitimate means to obtain third-party digital content and applications.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
228
Some of the Company’s competitors have greater experience, product breadth and distribution channels than the Company.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
229
Because some current and potential competitors have substantial resources and/or experience and a lower cost structure, they may be able to provide products and services at little or no profit or even at a loss.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
230
The Company also expects competition to intensify as competitors attempt to imitate the Company’s approach to providing components seamlessly within their individual offerings or work collaboratively to offer integrated solutions.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
231
The Company’s financial condition and operating results depend substantially on the Company’s ability to continually improve iOS and iOS devices in order to maintain their functional and design advantages.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
232
The Company is the only authorized maker of hardware using macOS, which has a minority market share in the personal computer market.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
233
This market has been contracting and is dominated by computer makers using competing operating systems, most notably Windows.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
234
In the market for personal computers and accessories, the Company faces a significant number of competitors, many of which have broader product lines, lower priced products and a larger installed customer base.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
235
Historically, consolidation in this market has resulted in larger competitors.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
236
Price competition has been particularly intense as competitors have aggressively cut prices and lowered product margins.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
237
An increasing number of internet-enabled devices that include software applications and are smaller and simpler than traditional personal computers compete for market share with the Company’s existing products.
0001628280-16-020309/full-submission.txt