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(i) Derived by dividing total iPod net sales by total iPod unit sales.
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NM = Not Meaningful Fiscal Year 2009 versus 2008 Net sales during 2009 increased $5.4 billion or 14% compared to 2008.
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Several factors contributed positively to these increases, including the following: • iPhone revenue and net sales of related products and services amounted to $13.0 billion in 2009, an increase of $6.3 billion or 93% compared to 2008.
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The year-over-year iPhone revenue growth is largely attributable to the year-over-year increase in iPhone handset unit sales.
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iPhone handset unit sales totaled 20.7 million during 2009, which represents an increase of 9.1 million or 78% during 2009 compared to 2008.
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This growth is attributed primarily to expanded distribution and strong overall demand for iPhones.
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iPhone 3GS was released in the U.S. on June 19, 2009 and in many other countries over the remainder of 2009. iPhone revenue includes handset revenue recognized and revenue from sales of iPhone accessories and carrier agreements.
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• Net sales of other music-related products and services increased $696 million or 21% during 2009 compared to 2008.
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The increase was due predominantly to increased net sales of third-party digital content and applications from the iTunes Store, which experienced double-digit growth in each of the Company’s geographic segments during 2009 compared to the same period in 2008.
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The Company believes this continued growth is the result of heightened consumer interest in downloading third-party digital content and applications, continued growth in its customer base of iPod and iPhone customers, the expansion of third-party audio and video content available for sale and rent via the iTunes Store,...
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The Company continues to expand its iTunes content and applications offerings around the world.
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Partially offsetting the favorable factors discussed above, net sales during 2009 were negatively impacted by certain factors, including the following: • Net sales of iPods decreased $1.1 billion or 12% during 2009 compared to 2008. iPod unit sales decreased slightly by 1% during 2009 compared to 2008.
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Net sales per iPod unit sold decreased 11% to $149 in 2009 compared to 2008, resulting from lower average selling prices across all of the iPod product lines, which were due primarily to price reductions taken with the introduction of new iPods in September 2009 and September 2008 and a stronger U.S. dollar, offset par...
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• Mac net sales declined 3% during 2009 compared to 2008, although Mac unit sales increased by 7% over the same period.
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Net sales per Mac unit sold decreased by 10% during 2009 compared to 2008, due primarily to lower average selling prices across all Mac portable and desktop systems and a stronger U.S. dollar.
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Net sales of Macs accounted for 32% of the Company’s total net sales for 2009.
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During 2009, Mac portable systems net sales and unit sales increased by 9% and 20%, respectively, compared to 2008.
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This growth was driven by strong demand for MacBook Pro, which was updated in June 2009 and October 2008, and experienced double digit net sales and unit growth in each of the Company’s reportable operating segments compared to the same period in 2008.
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The Company also had a higher product mix of portable systems, which is consistent with the overall market trends.
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However, net sales and unit sales of the Company’s Mac desktop systems decreased by 23% and 14%, respectively, during 2009 compared to 2008.
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The decrease in net sales of Mac desktop systems was due mainly to a shift in product mix towards lower-priced desktops, lower average selling prices across all Mac desktop systems and a stronger U.S. dollar.
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Fiscal Year 2008 versus 2007 Net sales during 2008 increased $12.9 billion or 53% from 2007.
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Several factors contributed to these increases including the following: • Net sales of iPhone and related products and services were $6.7 billion for 2008, with iPhone handset unit sales totaling 11.6 million.
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Net sales of iPhone and related products and services were $630 million in 2007, which represented sales for slightly more than one fiscal quarter.
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iPhone revenue includes handset revenue recognized and revenue from sales of iPhone accessories and carrier agreements.
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• Mac net sales increased $4.0 billion or 39% during 2008 compared to 2007, while Mac unit sales increased by 2.7 million units or 38%.
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Net sales related to the Company’s Mac shipments accounted for 38% of the Company’s total net revenue in 2008.
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Higher Mac unit sales, which contributed to the increases in net sales, were driven by higher sales of all of the Company’s Mac portable products as well as the popularity of the iMac, which experienced strong growth in net sales and unit sales in all of the Company’s reportable segments.
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Unit sales of the Company’s Mac portable products accounted for 62% of the Company’s personal computer shipments in both 2008 and 2007.
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Net sales and unit sales of the Company’s Mac portable products both increased by 38% during 2008 compared to 2007.
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This growth was attributable to strong demand for all the Mac portable products, particularly the MacBook, which had double-digit growth in all of the Company’s operating segments, and the addition of the MacBook Air, which was introduced to the Company’s Mac portable product line in January 2008.
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Growth of the Company’s Mac desktop systems was also strong, with increased net sales and unit sales of 40% and 37%, respectively, during 2008 due primarily to strong sales of the iMac in all of the Company’s operating segments.
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• Net sales of iPods increased $848 million or 10% during 2008 compared to 2007 and unit sales of iPods increased 6% compared to 2007.
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The iPod unit growth was due to strong demand for the iPod touch, and to a lesser extent, higher unit sales of the iPod shuffle due to a price reduction in February 2008. iPod net sales grew faster than iPod unit sales due to higher average selling prices caused by a shift in overall iPod product mix to the higher pric...
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• Net sales of other music related products and services increased $844 million or 34% during 2008 compared to 2007, due primarily to significantly increased net sales from the iTunes Store in each of the Company’s geographic segments.
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The Company believes this success is the result of heightened consumer interest in downloading third-party digital content, the expansion of third-party audio and video content available for sale and rent via the iTunes Store, and the launch of the iTunes App Store.
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The Company continues to expand its iTunes content offerings around the world.
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Segment Operating Performance The Company manages its business primarily on a geographic basis.
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The Company’s reportable operating segments consist of the Americas, Europe, Japan and Retail.
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The Americas, Europe and Japan reportable segments do not include activities related to the Retail segment.
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The Americas segment includes both North and South America.
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The Europe segment includes European countries as well as the Middle East and Africa.
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The Retail segment operates Apple-owned retail stores in the U.S. and in international markets.
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Each reportable geographic operating segment and the Retail operating segment provide similar hardware and software products and similar services.
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Further information regarding the Company’s operating segments may be found in Note 10, “Segment Information and Geographic Data” in Notes to Consolidated Financial Statements of this Form 10-K.
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Under the historical subscription accounting methodology no single customer accounted for more than 10% of net sales in 2009; under the new accounting principles that were retrospectively adopted in the first quarter of 2010, however, one of the Company’s customers represented 11% of net sales in 2009.
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There was no single customer that accounted for more than 10% of net sales in 2008 or 2007 under the historical subscription accounting methodology or the new accounting principles.
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Americas During 2009, net sales in the Americas segment increased $2.4 billion or 15% compared to 2008.
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The increase in net sales during 2009 was attributable to the significant year-over-year increase in iPhone revenue, higher sales of third-party digital content and applications from the iTunes Store, and increased sales of Mac portable systems, which were partially offset by a decrease in sales of Mac desktop systems ...
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Americas Mac net sales decreased 6% due primarily to lower average selling prices, while Mac unit sales increased by 4% on a year-over-year basis.
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The increase in Mac unit sales was due primarily to strong demand for the MacBook Pro, which was updated in June 2009 and October 2008.
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The Americas segment represented approximately 44% of the Company’s total net sales in both 2009 and 2008.
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During 2008, net sales in the Americas segment increased $4.5 billion or 38% compared to 2007.
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The primary drivers of this growth were the significant year-over-year increase in sales of iPhone, iPod touch, Mac portable systems, and content from the iTunes Store.
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The Company began shipping iPhone in June 2007 and the growth in iPhone sales in 2008 resulted from a full year of iPhone shipments as well as stronger demand for iPhones in the fourth quarter of 2008.
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The increase in Mac net sales of $1.4 billion or 31% and Mac unit sales of 961 million or 32% is attributable to growth in sales of all of the Mac portable systems, particularly the MacBook, and higher sales of the iMac.
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Net sales of iPods increased due to a shift in product mix toward higher priced iPods, particularly the iPod touch, which was upgraded in June 2008.
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In 2008, the Americas segment represented 44% of the Company’s total net sales as compared to 48% in 2007.
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Europe During 2009, net sales in Europe increased $2.6 billion or 28% compared to 2008.
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The increase in net sales was due mainly to increased iPhone revenue and strong sales of Mac portable systems, offset partially by lower net sales of Mac desktop systems, iPods, and a stronger U.S. dollar.
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Mac unit sales increased 13% in 2009 compared to 2008, which was driven primarily by increased sales of Mac portable systems, particularly MacBook Pro, while total Mac net sales declined as a result of lower average selling prices across all Mac products.
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Although iPod net sales decreased in Europe year-over-year as a result of lower average selling prices, iPod unit sales increased due to iPod touch and market share increases.
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The Europe segment represented 28% and 25% of total net sales in 2009 and 2008, respectively.
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Europe’s net sales increased $3.8 billion or 69% during 2008 compared to 2007.
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The main drivers of this growth were strong sales of iPhone, Mac portable systems and iMac, and increased sales from the iTunes Store.
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Also contributing to the increase in net sales were higher iPod net sales due primarily to the iPod touch, which was upgraded in June 2008.
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Sales of Mac portable products increased due to stronger demand for the MacBook Pro and the MacBook, both updated in February 2008, as well as sales of the MacBook Air, introduced in January 2008.
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Mac desktop sales also increased due primarily to the popularity of the iMac, which was updated in April 2008.
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The Europe segment represented 25% and 22% of total net sales in 2008 and 2007, respectively.
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Japan Japan’s net sales increased $551 million or 32% in 2009 compared to 2008.
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The key contributors to this growth were increased iPhone revenue, stronger demand for certain Mac portable systems and iPods, and strength in the Japanese Yen, partially offset by decreased sales of Mac desktop systems.
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Net sales and unit sales of Mac portable systems increased during 2009 compared to 2008, driven primarily by stronger demand for MacBook Pro, which was updated in June 2009 and October 2008.
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Net sales and unit sales of iPods increased during 2009 compared to 2008, driven by strong demand for iPod touch and iPod nano.
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Japan net sales increased $644 million or 59% in 2008 compared to 2007.
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The primary contributors to the growth in net sales were increases in sales of iPhones, iPods, iMac, Mac portable systems, and strong sales from the iTunes Store.
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Net sales, unit sales and the average selling price of iPods increased during 2008 compared to 2007, driven by strong demand for iPod touch and iPod nano.
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Additionally, Mac net sales and unit sales grew 42% and 29%, respectively, in 2008 compared to 2007 due to increases in sales of iMac and Mac portable systems, particularly MacBook, as well as the introduction of MacBook Air in January 2008.
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Retail Retail net sales decreased $636 million or 9% during 2009 compared to 2008.
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The decline in net sales was driven largely by a decrease in net sales of iPhones, iPods and Mac desktop systems, offset partially by strong demand for Mac portable systems.
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The Company opened 26 new retail stores during 2009, including a total of 14 international stores, ending the year with 273 stores open.
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This compares to 247 stores open as of September 27, 2008 and 197 open stores as of September 29, 2007.
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The year-over-year decline in Retail net sales is attributable to continued third-party channel expansion, particularly in the U.S. where most of the Company’s stores are located, and also reflects the challenging consumer-spending environment.
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With an average of 254 stores and 211 stores opened during 2009 and 2008, respectively, average revenue per store decreased to $26.2 million for 2009 from $34.6 million in 2008.
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The Retail segment’s net sales grew by $2.9 billion or 67% during 2008 compared to 2007, due in large part to strong demand for the iPhone, increased sales of Mac portable and desktop systems, increased sales of iPod touch and new store openings.
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The Company opened 50 new retail stores during 2008, bringing the total number of open stores to 247 as of September 27, 2008.
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This compares to 197 open stores as of September 29, 2007.
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With an average of 211 stores and 178 stores opened during 2008 and 2007, respectively, average revenue per store increased to $34.6 million for 2008 from $24.5 million in 2007.
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As measured by the Company’s operating segment reporting, the Retail segment reported operating income of $1.7 billion during 2009 and 2008, and $876 million during 2007.
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Despite the year-over-year decline in Retail net sales, the Retail segment’s operating income was flat at $1.7 billion in 2009 and 2008 due primarily to a higher gross margin percentage consistent with that experienced by the overall company.
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The Retail segment’s operating income increased by $785 million during 2008 as compared to 2007 due primarily to the significant Retail net sales growth of 67% as compared to 2007.
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Expansion of the Retail segment has required and will continue to require a substantial investment in fixed assets and related infrastructure, operating lease commitments, personnel, and other operating expenses.
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Capital asset purchases associated with the Retail segment were $369 million in 2009, bringing the total capital asset purchases since inception of the Retail segment to $1.8 billion.
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As of September 26, 2009, the Retail segment had approximately 16,500 full-time equivalent employees and had outstanding operating lease commitments associated with retail store space and related facilities of $1.5 billion.
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The Company would incur substantial costs if it were to close multiple retail stores.
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Such costs could adversely affect the Company’s financial condition and operating results.
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Other Segments The Company’s Other Segments, which consist of its Asia Pacific and FileMaker operations, experienced an increase in net sales of $482 million, or 17%, during 2009 as compared to 2008 reflecting strong growth in sales of iPhone and Mac portable systems offset partially by a decline in sales related to iP...
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Mac net sales and unit sales grew in the Asia Pacific region by 4% and 17%, respectively, due to increased sales of the MacBook Pro.
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The Company’s Other Segments experienced an increase in net sales of $1.0 billion, or 59% during 2008 as compared to 2007.
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These increases are related primarily to strong growth in sales of iPhone, Mac portable systems, iPods and iMac in the Company’s Asia Pacific region.
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Sales from the iTunes Store in the Company’s Asia Pacific region grew 109% compared to 2007.
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