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0000320193
20111026
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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 Asia-Pacific segment includes Australia and Asian countries, other than Japan.
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The Retail segment operates Apple retail stores worldwide.
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Each reportable operating segment provides similar hardware and software products and similar services.
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Further information regarding the Company’s operating segments may be found 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 Notes to Consolidated Financial Statements in Note 8, “Segment Information and Geographic Data.” Products The...
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In addition, the Company offers its own software products, including iOS, the Company’s proprietary mobile operating system; Mac OS X, the Company’s proprietary operating system software for the Mac; server software and application software for consumer, SMB, and education, enterprise and government customers.
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The Company’s primary products are discussed below.
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iPhone iPhone combines a mobile phone, an iPod, and an Internet communications device in a single handheld product.
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Based on the Company’s Multi-Touch™ user interface, iPhone features desktop-class email, web browsing, searching, and maps and is compatible with both Macs and Windows-based computers.
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iPhone automatically syncs content from users’ iTunes libraries, as well as contacts, bookmarks, and email accounts.
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iPhone allows customers to access the iTunes Store to download audio and video files, as well as a variety of other digital content and applications.
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In October 2011, the Company launched iPhone 4S, its latest version of iPhone, which includes Siri™, a voice activated intelligent assistant.
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In addition to the Company’s own iPhone accessories, third-party iPhone compatible accessories are available through the Company’s online and retail stores and from third parties.
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iPad iPad is a multi-purpose mobile device for browsing the web, reading and sending email, viewing photos, watching videos, listening to music, playing games, reading e-books and more.
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iPad is based on the Company’s Multi-Touch technology and allows customers to connect with their applications and content in a more interactive way.
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iPad allows customers to access the iTunes Store to download audio and video files, as well as a variety of other digital content and applications.
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In March 2011, the Company introduced iPad 2, its second-generation iPad.
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In addition to the Company’s own iPad accessories, third-party iPad compatible accessories are available through the Company’s online and retail stores and from third parties.
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Mac Hardware Products The Company offers a range of personal computing products including desktop and portable computers, related devices and peripherals, and third-party hardware products.
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The Company’s Mac desktop and portable systems feature Intel microprocessors, the Mac OS X Lion operating system and the iLife® suite of software for creation and management of digital photography, music, movies, DVDs and websites.
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The Company’s desktop computers include iMac®, Mac Pro and Mac mini.
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The iMac desktop computer has an all-in-one design that incorporates a display, processor, graphics card, storage, memory and other components inside a single enclosure.
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The Mac Pro desktop computer is targeted at business and professional customers and is designed to meet the performance, expansion, and networking needs of the most demanding Mac user.
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The Mac mini is a desktop computer in a compact enclosure.
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The Company’s portable computers include MacBook® Pro and MacBook Air®.
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MacBook Pro is a portable computer designed for professionals and consumers.
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MacBook Air is an ultra-slim portable computer designed for professionals and consumers.
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iPod The Company’s iPod line of portable digital music and media players includes iPod touch, iPod nano®, iPod shuffle® and iPod classic®.
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All iPods work with iTunes.
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In addition to the Company’s own iPod accessories, third-party iPod compatible accessories are available, through the Company’s online and retail stores or from third parties.
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The iPod touch, based on iOS, is a flash-memory-based iPod with a widescreen display and a Multi-Touch user interface.
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iPod touch allows customers to access the iTunes Store to download audio and video content, as well as a variety of digital applications.
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The iPod nano is a flash-memory-based iPod that features the Company’s Multi-Touch interface allowing customers to navigate their music collection by tapping or swiping the display.
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The iPod nano features a polished aluminum and glass enclosure with a built-in clip.
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The iPod shuffle is a flash-memory-based iPod that features a clickable control pad to control music playback and VoiceOver technology enabling customers to hear song titles, artists and playlist names.
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The iPod classic is a hard-drive based portable digital music and video player.
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iTunes® iTunes is an application that supports the purchase, download, organization and playback of digital audio and video files and is available for both Mac and Windows-based computers.
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iTunes 10 is the latest version of iTunes and features AirPlay® wireless music playback, Genius Mixes, Home Sharing, and improved syncing functionality with iOS devices.
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iTunes is integrated with the iTunes Store®, a service that allows customers to discover, purchase, rent, and download digital content and applications.
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The iTunes Store includes the App Store™ and iBookstore.
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The App Store allows customers to discover and download applications, and the iBookstore features electronic books from major and independent publishers and allows customers to preview and buy books for their iOS devices.
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Customers can access the App Store through either a Mac or Windows-based computer or through an iOS device.
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The iBookstore is accessed through the iBooks® application on an iOS device.
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Mac App Store In January 2011, the Company opened the Mac App Store allowing customers to discover, download and install applications for their Macs.
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The Mac App Store offers applications in education, games, graphics and design, lifestyle, productivity, utilities and other categories.
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The Company’s Mac OS X operating system software and iLife and iWork® application software are also available on the Mac App Store.
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iCloud In October 2011, the Company launched iCloud, its new cloud service, which stores music, photos, applications, contacts, calendars, and documents and wirelessly pushes them to multiple iOS devices, Macs and Windows-based computers.
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iCloud’s features include iTunes in the Cloud, Photo Stream, Documents in the Cloud, Contacts, Calendar, Mail, automatic downloads and purchase history for applications and iBooks, and iCloud Backup.
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Users can sign up for free access to iCloud using a device running iOS 5 or a Mac running Mac OS X Lion.
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Software Products and Computer Technologies The Company offers a range of software products for consumer, SMB, education, enterprise and government customers, including the Company’s proprietary iOS and Mac OS X operating system software; server software; professional application software; and consumer, education, and ...
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Operating System Software iOS iOS is the Company’s mobile operating system that serves as the foundation for iOS devices.
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In October 2011, the Company released iOS 5, which supports iCloud and includes new features such as Notification Center, a way to view and manage notifications in one place; iMessage™, a messaging service that allows users to send text messages, photos and videos between iOS devices; and Newsstand, a way to purchase a...
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Mac OS X Mac OS X, the operating system for Macs, is built on an open-source UNIX-based foundation.
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Mac OS X Lion is the eighth major release of Mac OS X and became available in July 2011.
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Mac OS X Lion includes support for new Multi-Touch gestures; iCloud integration; system-wide support for full screen applications; Mission Control™, a way to view everything running on a user’s Mac; the Mac App Store; Launchpad™, a new home for a user’s applications; and a redesigned Mail application.
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Application Software iLife iLife ’11 is the latest version of the Company’s consumer-oriented digital lifestyle application suite included with all Mac computers.
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iLife features iPhoto®, iMovie®, iDVD®, GarageBand®, and iWeb™.
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iPhoto is the Company’s consumer-oriented digital photo application and iMovie is the Company’s consumer-oriented digital video editing software application.
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iDVD is the Company’s consumer-oriented software application that enables customers to turn iMovie files, QuickTime files, and digital pictures into interactive DVDs.
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GarageBand is the Company’s consumer-oriented music creation application that allows customers to play, record and create music.
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iWeb allows customers to create online photo albums, blogs and podcasts, and to customize websites using editing tools.
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iWork iWork ’09 is the latest version of the Company’s integrated productivity suite designed to help users create, present, and publish documents, presentations, and spreadsheets.
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iWork ’09 includes Pages® ’09 for word processing and page layout, Keynote® ’09 for presentations, and Numbers® ’09 for spreadsheets.
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The Company also has a Multi-Touch version of each iWork application designed specifically for use on iOS devices.
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Other Application Software The Company also sells various other application software, including Final Cut Pro®, Logic Studio®, Logic® Express 9, Logic Studio® Pro, and its FileMaker® Pro database software.
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Displays & Peripheral Products The Company manufactures the Apple LED Cinema Display™ and Thunderbolt Display.
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The Company also sells a variety of Apple-branded and third-party Mac-compatible and iOS-compatible peripheral products, including printers, storage devices, computer memory, digital video and still cameras, and various other computing products and supplies.
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Apple TV Apple TV allows customers to watch movies and television shows on their high definition television.
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Content from iTunes, Netflix, YouTube, and Flickr as well as music, photos, videos, and podcasts from a Mac or Windows-based computer can also be wirelessly streamed to a television through Apple TV.
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With the release of iCloud in October 2011, content purchased on Apple TV can be re-downloaded on iOS devices.
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Product Support and Services AppleCare® offers a range of support options for the Company’s customers.
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These options include assistance that is built into software products, printed and electronic product manuals, online support including comprehensive product information as well as technical assistance, and the AppleCare Protection Plan (“APP”).
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APP is a fee-based service that typically includes two to three years of phone support and hardware repairs and dedicated web-based support resources.
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Markets and Distribution The Company’s customers are primarily in the consumer, SMB, and education, enterprise and government markets.
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The Company uses a variety of direct and indirect distribution channels, such as its retail stores, online stores, and direct sales force, and third-party cellular network carriers, wholesalers, retailers, and value-added resellers.
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The Company believes that sales of its innovative and differentiated products are enhanced by knowledgeable salespersons who can convey the value of the hardware and software integration, and demonstrate the unique solutions that are available on its products.
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The Company further believes providing direct contact with its targeted customers is an effective way to demonstrate the advantages of its products over those of its competitors and providing a high-quality sales and after-sales support experience is critical to attracting new and retaining existing customers.
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To ensure a high-quality buying experience for its products in which service and education are emphasized, the Company continues to expand and improve its distribution capabilities by expanding the number of its own retail stores worldwide.
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Additionally, the Company has invested in programs to enhance reseller sales by placing high quality Apple fixtures, merchandising materials and other resources within selected third-party reseller locations.
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Through the Apple Premium Reseller Program, certain third-party resellers focus on the Apple platform by providing a high level of integration and support services, and product expertise.
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No single customer accounted for more than 10% of net sales in 2011 or 2010.
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One of the Company’s customers accounted for 11% of net sales in 2009.
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Competition The markets for the Company’s products and services are highly competitive and the Company is confronted by aggressive competition in all areas of its business.
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These markets are characterized by frequent product introductions and rapid technological advances that have substantially increased the capabilities and use of mobile communication and media devices, personal computers, and other digital electronic devices.
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The Company’s competitors who sell mobile devices and personal computers based on other operating systems have aggressively cut prices and lowered their product margins to gain or maintain market share.
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The Company’s financial condition and operating results can be adversely affected by these and other industry-wide downward pressures on gross margins.
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Principal competitive factors important to the Company include price, product features, relative price/performance, product quality and reliability, design innovation, a strong third-party software and peripherals ecosystem, marketing and distribution capability, service and support, and corporate reputation.
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The Company is focused on expanding its market opportunities related to mobile communication and media devices.
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These industries are highly competitive and include several large, well-funded and experienced participants.
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The Company expects competition in these industries to intensify significantly as competitors attempt to imitate some of the features of the Company’s products and applications within their own products or, alternatively, collaborate with each other to offer solutions that are more competitive than those they currently...
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These industries are characterized by aggressive pricing practices, frequent product introductions, evolving design approaches and technologies, rapid adoption of technological and product advancements by competitors, and price sensitivity on the part of consumers and businesses.
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The Company’s digital content services have faced significant competition from other companies promoting their own digital music and content products and services, including those offering free peer-to-peer music and video services.
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The Company believes it offers superior innovation and integration of the entire solution including the hardware (iPhone, iPad, Mac, and iPod), software (iTunes), and distribution of digital content and applications (iTunes Store, App Store, iBookstore and Mac App Store).
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Some of the Company’s current and potential competitors have substantial resources and may be able to provide such products and services at little or no profit or even at a loss to compete with the Company’s offerings.
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The Company’s future financial condition and operating results depend on the Company’s ability to continue to develop and offer new innovative products and services in each of the markets it competes in.
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Supply of Components Although most components essential to the Company’s business are generally available from multiple sources, a number of components are currently obtained from single or limited sources, which subjects the Company to significant supply and pricing risks.
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Many components are at times subject to industry-wide shortages and significant commodity pricing fluctuations.
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In addition, the Company has entered into various agreements for the supply of components; however there can be no guarantee that the Company will be able to extend or renew these agreements on similar terms, or at all.
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Therefore, the Company remains subject to significant risks of supply shortages and price increases that can materially adversely affect its financial condition and operating results.
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