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0000320193
20021219
10-K
921
In August 1997, the Company and Microsoft Corporation entered into patent cross license and technology agreements.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
922
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.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
923
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.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
924
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.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
925
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.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
926
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.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
927
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.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
928
Many of the Company's products are designed to include intellectual property obtained from third parties.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
929
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.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
930
However, there can be no assurance that the necessary licenses would be available or available on acceptable terms.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
931
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.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
932
The Company has from time to time been notified that it may be infringing certain patents or other intellectual property rights of others.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
933
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.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
934
Several pending claims are in various stages of evaluation.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
935
The Company may consider the desirability of entering into licensing agreements in certain of these cases.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
936
However, no assurance can be given that such licenses can be obtained on acceptable terms or that litigation will not occur.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
937
In the event there is a temporary or permanent injunction entered prohibiting the Company from marketing or selling certain of its products or a successful claim of infringement against the Company requiring it to pay royalties to a third-party, the Company's future operating results and financial condition could be ad...
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
938
Information regarding claims and potential litigation involving the Company related to alleged patent infringement and other matters is set forth in Part I, Item 3 of this Form 10-K.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
939
In the opinion of management, the Company does not have a potential liability for damages or royalties from any current legal proceedings or claims related to the infringement of patent or other intellectual property rights of others that would have a material adverse effect on its results of operations, or financial c...
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
940
However, the results of such legal proceedings cannot be predicted with certainty.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
941
Should the Company fail to prevail in any of the matters related to infringement of patent or other intellectual property rights of others described in Part I, Item 3 of this Form 10-K or should several of these matters be resolved against the Company in the same reporting period, the operating results of a particular ...
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
942
The Company expects its quarterly revenues and operating results to fluctuate for a variety of reasons.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
943
The Company's profit margins vary among its products, its geographic markets, and its distribution channels.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
944
As a result, the overall profitability of the Company in any given period will depend, in part, on the product, geographic, and channel mix reflected in that period's net sales.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
945
The typical concentration of net sales in the third month of the Company's fiscal quarters can adversely affect the Company's business and operating results.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
946
The Company generally sells more products during the third month of each quarter than it does during either of the first two months, a pattern typical in the personal computer industry.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
947
This sales pattern can produce pressure on the Company's internal infrastructure during the third month of a quarter and may adversely impact the Company's ability to predict its financial results accurately.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
948
Developments late in a quarter, such as lower-than-anticipated demand for the Company's products, an internal systems failure, or failure of one of the Company's key logistics or components suppliers, can have significant adverse impacts on the Company and its results of operations and financial condition.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
949
The Company's success depends largely on its ability to attract and retain key personnel.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
950
Much of the future success of the Company depends on the continued service and availability of skilled personnel, including those in technical, marketing and staff positions.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
951
Experienced personnel in the information technology industry are in high demand and competition for their talents is intense, especially in the Silicon Valley, where the majority of the Company's employees are located.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
952
There can be no assurance that the Company will be able to successfully attract and retain the key personnel it needs.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
953
Additionally, volatility or a lack of positive performance in the Company's stock price may adversely affect its ability to retain key employees.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
954
As of September 28, 2002, a substantial majority of the Company's outstanding employee stock options were out-of-the-money.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
955
The Company is subject to risks associated with the availability and cost of insurance.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
956
The Company has observed rapidly changing conditions in the insurance markets relating to nearly all areas of traditional corporate insurance.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
957
Such conditions have resulted in higher premium costs, higher policy deductibles, and lower coverage limits.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
958
For some risks, because of cost and/or availability, the Company does not have insurance coverage.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
959
For these reasons, the Company is retaining a greater portion of its insurable risks than it has in the past at relatively greater cost.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
960
The Company is exposed to credit risk on its accounts receivables.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
961
This risk is heightened as economic conditions worsen.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
962
The Company distributes its products through third-party computer resellers and retailers and directly to certain educational institutions and commercial customers.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
963
A substantial majority of the Company's outstanding trade receivables are not covered by collateral or credit insurance.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
964
The Company also has non-trade receivables from certain of its manufacturing vendors resulting from the sale by the Company of raw material components to these manufacturing vendors who manufacture sub-assemblies or assemble final products for the Company.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
965
While the Company has procedures in place to monitor and limit exposure to credit risk on its trade and non-trade receivables, there can be assurance that such procedures will be effective in limiting its credit risk and avoiding losses.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
966
Additionally, if the global economy and regional economies fail to improve or continue to deteriorate, it becomes more likely that the Company will incur a material loss or losses as a result of the weakening financial condition of one or more of its customers or manufacturing vendors.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
967
The market value of the Company's non-current debt and equity investments is subject to significant volatility.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
968
The Company holds minority investments in several public companies with a combined fair market value of approximately $39 million as of September 28, 2002.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
969
These investments are in publicly traded companies whose share prices are subject to significant volatility.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
970
The Company has categorized its investments in these companies as available-for-sale requiring the investments be carried at fair value, with unrealized gains and losses, net of taxes, reported as a component of accumulated other comprehensive income.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
971
The Company recognizes an impairment charge to earnings when it is judged an investment has experienced a decline in value that is other-than-temporary.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
972
The Company has recognized material impairment charges related to its non-current debt and equity investments twice in the last two fiscal years.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
973
The Company is subject to risks associated with environmental regulations.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
974
Production and marketing of products in certain states and countries may subject the Company to environmental and other regulations including, in some instances, the requirement that the Company provide consumers with the ability to return to the Company product at the end of its useful life, and place responsibility f...
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
975
Although the Company does not anticipate any material adverse effects in the future based on the nature of its operations and the thrust of such laws, there is no assurance that such existing laws or future laws will not have a material adverse effect on the Company.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
976
The parliament of the European Union is working on finalizing the Waste Electrical and Electronic Equipment Directive (the Directive).
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
977
The Directive makes producers of electrical goods, including personal computers, financially responsible for the collection, recycling, and safe disposal of past and future products.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
978
The Directive must now be approved and implemented by individual European Union governments by June 2004, while the producers' financial obligations are scheduled to start June 2005.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
979
The Company's potential liability resulting from the Directive related to past sales of its products and expenses associated with future sales of its product may be substantial.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
980
However, because it is likely that specific laws, regulations, and enforcement policies will vary significantly between individual European member states, it is not currently possible to estimate the Company's existing liability or future expenses resulting from the Directive.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
981
As the European Union and its individual member states clarify specific requirements and policies with respect to the Directive, the Company will continue to assess its potential financial impact.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
982
Similar legislation may be enacted in other geographies, including federal and state legislation in the United States, the cumulative impact of which could be significant.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
983
Business interruptions could adversely affect the Company's future operating results.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
984
The Company's major business operations are subject to interruption by earthquake, fire, power shortages, terrorist attacks and other hostile acts, labor disputes, and other events beyond its control.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
985
The majority of the Company's research and development activities, its corporate headquarters, and other critical business operations, including certain major components suppliers and manufacturing vendors, are located near major seismic faults.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
986
The Company does not carry earthquake insurance for direct quake-related losses.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
987
The Company's operating results and financial condition could be materially adversely affected in the event of a major earthquake or other natural or manmade disaster.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
988
Unanticipated changes in the Company's tax rates could affect its future results.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
989
The Company's future effective tax rates could be favorably or unfavorably affected by unanticipated changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of the Company deferred tax assets and liabilities, or by changes in tax laws or their interpretation.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
990
The Company's stock price may be volatile.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
991
The Company's stock has at times experienced substantial price volatility as a result of variations between its actual and anticipated financial results and as a result of announcements by the Company and its competitors.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
992
In addition, the stock market has experienced extreme price and volume fluctuations that have affected the market price of many technology companies in ways that have been unrelated to the operating performance of these companies.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
993
These factors, as well as general economic and political conditions and investors' concerns regarding the credibility of corporate financial reporting and integrity of financial markets, may materially adversely affect the market price of the Company's common stock in the future.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
994
Item 7A.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
995
Disclosures About Market Risk Interest Rate and Foreign Currency Risk Management To ensure the adequacy and effectiveness of the Company's foreign exchange and interest rate hedge positions, as well as to monitor the risks and opportunities of the non-hedge portfolios, the Company continually monitors its foreign excha...
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
996
However, given the effective horizons of the Company's risk management activities and the anticipatory nature of the exposures intended to hedge, there can be no assurance the aforementioned programs will offset more than a portion of the adverse financial impact resulting from unfavorable movements in either foreign e...
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
997
In addition, the timing of the accounting for recognition of gains and losses related to mark-to-market instruments for any given period may not coincide with the timing of gains and losses related to the underlying economic exposures and, therefore, may adversely affect the Company's operating results and financial po...
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
998
The Company adopted Statement of Financial Accounting Standard No.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
999
133, Accounting for Derivative Instruments and Hedging Activities, as of October 1, 2000.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,000
SFAS No.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,001
133 establishes accounting and reporting standards for derivative instruments, hedging activities, and exposure definition.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,002
Management does not believe that ongoing application of SFAS No.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,003
133 will significantly alter the Company's hedging strategies.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,004
However, its application may increase the volatility of other income and expense and other comprehensive income.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,005
Interest Rate Risk While the Company is exposed to interest rate fluctuations in many of the world's leading industrialized countries, the Company's interest income and expense is most sensitive to fluctuations in the general level of U.S. interest rates.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,006
In this regard, changes in U.S. interest rates affect the interest earned on the Company's cash, cash equivalents, and short-term investments as well as costs associated with foreign currency hedges.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,007
The Company's fixed income investment policy and strategy is to ensure the preservation of capital, meet liquidity requirements, and optimize return in light of the current credit and interest rate environment.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,008
The Company benchmarks its performance by utilizing external money managers to manage a small portion of the aggregate investment portfolio.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,009
The external managers adhere to the Company's investment policies and also provide occasional research and market information that supplements internal research used to make credit decisions in the investment process.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,010
During 1994, the Company issued $300 million aggregate principal amount of 6.5% unsecured notes in a public offering registered with the SEC.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,011
The notes were sold at 99.925% of par, for an effective yield to maturity of 6.51%.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,012
The notes pay interest semiannually and mature on February 15, 2004.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,013
The Company's exposure to market risk for changes in interest rates relates primarily to the Company's investment portfolio and long-term debt obligations and related derivative financial instruments.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,014
The Company places its short-term investments in highly liquid securities issued by high credit quality issuers and, by policy, limits the amount of credit exposure to any one issuer.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,015
The Company's general policy is to limit the risk of principal loss and ensure the safety of invested funds by limiting market and credit risk.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,016
All highly liquid investments with maturities of three months or less are classified as cash equivalents; highly liquid investments with maturities greater than three months are classified as short-term investments.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,017
As of September 28, 2002, $1.087 billion of the Company's investment portfolio classified as short-term investments was invested in U.S. Agency and corporate debt securities with maturities ranging from 1 to 5 years.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,018
As of September 29, 2001, $313 million of the Company's investment portfolio classified as short-term investments was in U.S. agency securities with underlying maturities ranging from 1 to 4 years.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,019
The remainder all had underlying maturities between 3 and 12 months.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,020
Due to liquidity needs, or in anticipation of credit deterioration, or for the purpose of duration management of the Company's investment portfolio, the Company may sell investments prior to their stated maturities.
0001047469-02-007674/full-submission.txt