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0000320193
20170201
10-Q
492
The Company’s new products often utilize custom components available from only one source.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
493
When a component or product uses new technologies, initial capacity constraints may exist until the suppliers’ yields have matured or manufacturing capacity has increased.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
494
Continued availability of these components at acceptable prices, or at all, may be affected for any number of reasons, including if those suppliers decide to concentrate on the production of common components instead of components customized to meet the Company’s requirements.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
495
The supply of components for a new or existing product could be delayed or constrained, or a key manufacturing vendor could delay shipments of completed products to the Company.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
496
The Company depends on component and product manufacturing and logistical services provided by outsourcing partners, many of which are located outside of the U.S.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
497
Substantially all of the Company’s manufacturing is performed in whole or in part by a few outsourcing partners located primarily in Asia.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
498
The Company has also outsourced much of its transportation and logistics management.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
499
While these arrangements may lower operating costs, they also reduce the Company’s direct control over production and distribution.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
500
It is uncertain what effect such diminished control will have on the quality or quantity of products or services, or the Company’s flexibility to respond to changing conditions.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
501
Although arrangements with these partners may contain provisions for warranty expense reimbursement, the Company may remain responsible to the consumer for warranty service in the event of product defects and could experience an unanticipated product defect or warranty liability.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
502
While the Company relies on its partners to adhere to its supplier code of conduct, material violations of the supplier code of conduct could occur.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
503
The Company relies on sole-sourced outsourcing partners in the U.S., Asia and Europe to supply and manufacture many critical components, and on outsourcing partners primarily located in Asia, for final assembly of substantially all of the Company’s hardware products.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
504
Any failure of these partners to perform may have a negative impact on the Company’s cost or supply of components or finished goods.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
505
In addition, manufacturing or logistics in these locations or transit to final destinations may be disrupted for a variety of reasons including, but not limited to, natural and man-made disasters, information technology system failures, commercial disputes, military actions or economic, business, labor, environmental, ...
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
506
The Company has invested in manufacturing process equipment, much of which is held at certain of its outsourcing partners, and has made prepayments to certain of its suppliers associated with long-term supply agreements.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
507
While these arrangements help ensure the supply of components and finished goods, if these outsourcing partners or suppliers experience severe financial problems or other disruptions in their business, such continued supply could be reduced or terminated and the net realizable value of these assets could be negatively ...
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
508
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.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
509
The Company sells complex hardware and software products and services that can contain design and manufacturing defects.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
510
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.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
511
The Company’s online services may from time to time experience outages, service slowdowns, or errors.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
512
Defects may also occur in components and products the Company purchases from third parties.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
513
There can be no assurance the Company will be able to detect and fix all defects in the hardware, software and services it sells.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
514
Failure to do so could result in lost revenue, significant warranty and other expenses and harm to the Company’s reputation.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
515
The Company relies on access to third-party digital content, which may not be available to the Company on commercially reasonable terms or at all.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
516
The Company contracts with numerous third parties to offer their digital content to customers.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
517
This includes the right to sell currently available music, movies, TV shows and books.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
518
The licensing or other distribution arrangements with these third parties are for relatively short terms and do not guarantee the continuation or renewal of these arrangements on reasonable terms, if at all.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
519
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 or otherwise distribute their content in the future.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
520
Other content owners, providers or distributors may seek to limit the Company’s access to, or increase the cost of, such content.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
521
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.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
522
Failure to obtain the right to make available third-party digital content, or to make available such content on commercially reasonable terms, could have a material adverse impact on the Company’s financial condition and operating results.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
523
Some third-party digital content providers require the Company to provide digital rights management and other security solutions.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
524
If requirements change, the Company may have to develop or license new technology to provide these solutions.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
525
There is no assurance the Company will be able to develop or license such solutions at a reasonable cost and in a timely manner.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
526
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.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
527
The Company’s future performance depends in part on support from third-party software developers.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
528
The Company believes decisions by customers to purchase its hardware products depend in part on the availability of third-party software applications and services.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
529
There is no assurance that third-party developers will continue to develop and maintain software applications and services for the Company’s products.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
530
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.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
531
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 produc...
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
532
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, expected future growth of Mac sales and the costs of developing such applications and services.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
533
If the Company’s minority share of the global personal computer market causes developers to question the Mac’s prospects, developers could be less inclined to develop or upgrade software for the Company’s Mac products and more inclined to devote their resources to developing and upgrading software for the larger Window...
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
534
With respect to iOS devices, the Company relies on the continued availability and development of compelling and innovative software applications, including applications distributed through the App Store.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
535
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.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
536
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, maintaining or upgrading software for the Company’s iOS devices rather than its competitors’ platforms, such as Android.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
537
If developers focus their efforts on these competing platforms, the availability and quality of applications for the Company’s iOS devices may suffer.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
538
The Company relies on access to third-party intellectual property, which may not be available to the Company on commercially reasonable terms or at all.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
539
Many of the Company’s products include third-party intellectual property, which requires licenses from those third parties.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
540
Based on past experience and industry practice, the Company believes such licenses generally can be obtained on reasonable terms.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
541
There is, however, no assurance that the necessary licenses can be obtained on acceptable terms or at all.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
542
Failure to obtain the right to use third-party intellectual property, or to use such intellectual property on commercially reasonable terms, could preclude the Company from selling certain products or otherwise have a material adverse impact on the Company’s financial condition and operating results.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
543
The Company could be impacted by unfavorable results of legal proceedings, such as being found to have infringed on intellectual property rights.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
544
The Company is subject to various legal proceedings and claims that have not yet been fully resolved and that have arisen in the ordinary course of business, and additional claims may arise in the future.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
545
For example, 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.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
546
In addition, patent holding companies seek to monetize patents they have purchased or otherwise obtained.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
547
The intellectual property rights claims against the Company have generally increased over time and may continue to increase.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
548
In particular, the Company's cellular enabled products compete with products from mobile communication and media device companies that hold significant patent portfolios, and the Company has faced a significant number of patent claims against it.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
549
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 various countries.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
550
The plaintiffs in these actions frequently seek injunctions and substantial damages.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
551
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.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
552
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 ...
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
553
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.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
554
These licenses may also significantly increase the Company’s operating expenses.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
555
Regardless of the merit of particular claims, litigation may be expensive, time-consuming, disruptive to the Company’s operations and distracting to management.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
556
In recognition of these considerations, the Company may enter into arrangements to settle litigation.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
557
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.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
558
However, the outcome of litigation is inherently uncertain.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
559
Although management considers the likelihood of such an outcome to be remote, if one or more 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 materially adversely a...
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
560
Further, such an outcome could result in significant compensatory, punitive or trebled monetary damages, disgorgement of revenue or profits, remedial corporate measures or injunctive relief against the Company that could materially adversely affect its financial condition and operating results.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
561
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.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
562
The Company is subject to laws and regulations affecting its domestic and international operations in a number of areas.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
563
These U.S. and foreign laws and regulations affect the Company’s activities including, but not limited to, in areas of labor, advertising, digital content, consumer protection, real estate, billing, e-commerce, promotions, quality of services, telecommunications, mobile communications and media, television, intellectua...
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
564
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.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
565
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.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
566
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.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
567
These certification processes are extensive and time consuming, and could result in additional testing requirements, product modifications, or delays in product shipment dates, or could preclude the Company from selling certain products.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
568
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.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
569
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 caus...
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
570
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.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
571
The Company’s business is subject to the risks of international operations.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
572
The Company derives a significant portion of its revenue and earnings from its international operations.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
573
Compliance with applicable U.S. and foreign laws and regulations, such as import and export requirements, anti-corruption laws, tax laws, foreign exchange controls and cash repatriation restrictions, data privacy requirements, environmental laws, labor laws and anti-competition regulations, increases the costs of doing...
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
574
Although the Company has implemented policies and procedures to comply with these laws and regulations, a violation by the Company’s employees, contractors, or agents could nevertheless occur.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
575
In some cases, compliance with the laws and regulations of one country could violate the laws and regulations of another country.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
576
Violations of these laws and regulations could materially adversely affect the Company’s brand, international growth efforts and business.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
577
The Company also could be significantly affected by other risks associated with international activities including, but not limited to, economic and labor conditions, increased duties, taxes and other costs and political instability.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
578
Margins on sales of the Company’s products in foreign countries, and on sales of products that include components obtained from foreign suppliers, could be materially adversely affected by international trade regulations, including duties, tariffs and antidumping penalties.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
579
The Company is also exposed to credit and collectability risk on its trade receivables with customers in certain international markets.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
580
There can be no assurance the Company can effectively limit its credit risk and avoid losses.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
581
The Company’s retail stores have required and will continue to require a substantial investment and commitment of resources and are subject to numerous risks and uncertainties.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
582
The Company’s retail stores have required substantial investment in equipment and leasehold improvements, information systems, inventory and personnel.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
583
The Company also has entered into substantial operating lease commitments for retail space.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
584
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.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
585
Because of their unique design elements, locations and size, these stores require substantially more investment than the Company’s more typical retail stores.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
586
Due to the high cost structure associated with the Company’s retail stores, 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.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
587
Many factors unique to retail operations, some of which are beyond the Company’s control, pose risks and uncertainties.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
588
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 ...
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
589
Investment in new business strategies and acquisitions could disrupt the Company’s ongoing business and present risks not originally contemplated.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
590
The Company has invested, and in the future may invest, in new business strategies or acquisitions.
0001628280-17-000717/full-submission.txt
0000320193
20170201
10-Q
591
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.
0001628280-17-000717/full-submission.txt