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0000320193
20111026
10-K
157
The Company and other participants in the mobile communication and media device, and personal computer industries compete for various components with other industries that have experienced increased demand for their products.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
158
The Company also uses some custom components that are not common to the rest of these industries, and new products introduced by the Company often utilize custom components available from only one source.
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0000320193
20111026
10-K
159
When a component or product uses new technologies, initial capacity constraints may exist until the suppliers’ yields have matured or manufacturing capacity has increased.
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0000320193
20111026
10-K
160
If the Company’s supply of components for a new or existing product were delayed or constrained, or if a key manufacturing vendor delayed shipments of completed products to the Company, the Company’s financial condition and operating results could be materially adversely affected.
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0000320193
20111026
10-K
161
The Company’s business and financial performance could also be materially adversely affected depending on the time required to obtain sufficient quantities from the original source, or to identify and obtain sufficient quantities from an alternative source.
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0000320193
20111026
10-K
162
Continued availability of these components at acceptable prices, or at all, may be affected if those suppliers concentrated on the production of common components instead of components customized to meet the Company’s requirements.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
163
Substantially all of the Company’s hardware products are manufactured by outsourcing partners primarily located in Asia.
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0000320193
20111026
10-K
164
A significant concentration of this manufacturing is currently performed by a small number of outsourcing partners, often in single locations.
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0000320193
20111026
10-K
165
Certain of these outsourcing partners are the sole-sourced suppliers of components and manufacturer for many of the Company’s products.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
166
Although the Company works closely with its outsourcing partners on manufacturing schedules, the Company’s operating results could be adversely affected if its outsourcing partners were unable to meet their production commitments.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
167
The Company’s purchase commitments typically cover the Company’s requirements for periods up to 150 days.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
168
Research and Development Because the industries in which the Company competes are characterized by rapid technological advances, the Company’s ability to compete successfully depends heavily upon its ability to ensure a continual and timely flow of competitive products, services and technologies to the marketplace.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
169
The Company continues to develop new technologies to enhance existing products and to expand the range of its product offerings through research and development, licensing of intellectual property and acquisition of third-party businesses and technology.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
170
Total research and development expense was $2.4 billion, $1.8 billion and $1.3 billion in 2011, 2010 and 2009, respectively.
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0000320193
20111026
10-K
171
Patents, Trademarks, Copyrights and Licenses The Company currently holds rights to patents and copyrights relating to certain aspects of its iPhone, iPad, Mac and iPod devices, peripherals, software and services.
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0000320193
20111026
10-K
172
The Company has registered or has applied for trademarks and service marks in the U.S. and a number of foreign countries.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
173
Although the Company believes the ownership of such patents, copyrights, trademarks and service marks is an important factor in its business and that its success does depend in part on the ownership thereof, the Company relies primarily on the innovative skills, technical competence and marketing abilities of its perso...
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
174
The Company regularly files patent applications to protect inventions arising from its research and development, and is currently pursuing thousands of patent applications around the world.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
175
Over time, the Company has accumulated a large portfolio of issued patents in the U.S. and worldwide.
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0000320193
20111026
10-K
176
The Company holds copyrights relating to certain aspects of its products and services.
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0000320193
20111026
10-K
177
No single patent or copyright is solely responsible for protecting the Company’s products.
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20111026
10-K
178
The Company believes the duration of its patents is adequate relative to the expected lives of its products.
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0000320193
20111026
10-K
179
Due to the fast pace of innovation and product development, the Company’s products are often obsolete before the patents related to them expire, and sometimes are obsolete before the patents related to them are even granted.
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0000320193
20111026
10-K
180
Many of the Company’s products are designed to include intellectual property obtained from third parties.
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0000320193
20111026
10-K
181
While it may be necessary in the future to seek or renew licenses relating to various aspects of its products and business methods, based upon past experience and industry practice, the Company believes such licenses generally could be obtained on commercially reasonable terms; however, there is no guarantee that such ...
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
182
Because of technological changes in the industries in which the Company competes, current extensive patent coverage, and the rapid rate of issuance of new patents, it is possible that certain components of the Company’s products and business methods may unknowingly infringe existing patents or intellectual property rig...
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
183
From time to time, the Company has been notified that it may be infringing certain patents or other intellectual property rights of third parties.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
184
Foreign and Domestic Operations and Geographic Data The U.S. represents the Company’s largest geographic market.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
185
Approximately 39% of the Company’s net sales in 2011 came from sales to customers inside the U.S.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
186
Final assembly of the Company’s products is currently performed in the Company’s manufacturing facility in Ireland, and by outsourcing partners, primarily located in Asia.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
187
The supply and manufacture of a number of components is performed by sole-sourced outsourcing partners in the U.S., Asia and Europe.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
188
Single-sourced outsourcing partners in Asia perform final assembly of substantially all of the Company’s hardware products.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
189
Margins on sales of the Company’s products in foreign countries, and on sales of products that include components obtained from foreign suppliers, can be adversely affected by foreign currency exchange rate fluctuations and by international trade regulations, including tariffs and antidumping penalties.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
190
Information regarding financial data by geographic segment is set forth in Part II, Item 7 and Item 8 of this Form 10-K and in Notes to Consolidated Financial Statements in Note 8, “Segment Information and Geographic Data.” Seasonal Business The Company has historically experienced increased net sales in its first fisc...
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
191
This historical pattern should not be considered a reliable indicator of the Company’s future net sales or financial performance.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
192
Warranty The Company offers a limited parts and labor warranty on most of its hardware products.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
193
The basic warranty period is typically one year from the date of purchase by the original end-user.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
194
The Company also offers a 90-day basic warranty for its service parts used to repair the Company’s hardware products.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
195
In addition, consumers may purchase the APP, which extends service coverage on many of the Company’s hardware products in most of its major markets.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
196
Backlog In the Company’s experience, the actual amount of product backlog at any particular time is not a meaningful indication of its future business prospects.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
197
In particular, backlog often increases in anticipation of or immediately following new product introductions as customers anticipate shortages.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
198
Backlog is often reduced once customers believe they can obtain sufficient supply.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
199
Because of the foregoing, backlog should not be considered a reliable indicator of the Company’s ability to achieve any particular level of revenue or financial performance.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
200
Employees As of September 24, 2011, the Company had approximately 60,400 full-time equivalent employees and an additional 2,900 full-time equivalent temporary employees and contractors.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
201
Available Information The Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), are filed with the U.S. Securities and Exchange Commissio...
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
202
Such reports and other information filed by the Company with the SEC are available free of charge on the Company’s website at www.apple.com/investor when such reports are available on the SEC website.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
203
The public may read and copy any materials filed by the Company with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington, DC 20549.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
204
The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
205
The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at www.sec.gov.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
206
The contents of these websites are not incorporated into this filing.
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0000320193
20111026
10-K
207
Further, the Company’s references to the URLs for these websites are intended to be inactive textual references only.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
208
Item 1A.
0001193125-11-282113/full-submission.txt
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20111026
10-K
209
Risk Factors Because of the following factors, as well as other factors affecting the Company’s financial condition and operating results, past financial performance should not be considered to be a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends ...
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
210
Global economic conditions could materially adversely affect the Company.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
211
The Company’s operations and performance depend significantly on worldwide economic conditions.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
212
Uncertainty about global economic conditions poses a risk as consumers and businesses postpone spending in response to tighter credit, unemployment, negative financial news and/or declines in income or asset values, which could have a material negative effect on demand for the Company’s products and services.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
213
Demand also could differ materially from the Company’s expectations because the Company generally raises prices on goods and services sold outside the U.S. to offset the effect of a strengthening of the U.S. dollar.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
214
Other factors that could influence demand include increases in fuel and other energy costs, conditions in the real estate and mortgage markets, unemployment, labor and healthcare costs, access to credit, consumer confidence, and other macroeconomic factors affecting consumer spending behavior.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
215
These and other economic factors could materially adversely affect demand for the Company’s products and services and the Company’s financial condition and operating results.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
216
In the event of financial turmoil affecting the banking system and financial markets, additional consolidation of the financial services industry, or significant financial service institution failures, there could be a new or incremental tightening in the credit markets, low liquidity, and extreme volatility in fixed i...
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
217
This could have a number of effects on the Company’s business, including the insolvency or financial instability of outsourcing partners or suppliers or their inability to obtain credit to finance development and/or manufacture products resulting in product delays; inability of customers, including channel partners, to...
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
218
Other income and expense also could vary materially from expectations depending on gains or losses realized on the sale or exchange of financial instruments; impairment charges resulting from revaluations of debt and equity securities and other investments; interest rates; cash balances; and changes in fair value of de...
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
219
Increased volatility in the financial markets and overall economic uncertainty would increase the risk of the actual amounts realized in the future on the Company’s financial instruments differing significantly from the fair values currently assigned to them.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
220
Global markets for the Company’s products and services are highly competitive and subject to rapid technological change.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
221
If the Company is unable to compete effectively in these markets, its financial condition and operating results could be materially adversely affected.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
222
The Company’s products and services compete in highly competitive global markets characterized by aggressive price cutting, with resulting downward pressure on gross margins, frequent introduction of new products, short product life cycles, evolving industry standards, continual improvement in product price/performance...
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
223
The Company’s ability to compete successfully depends heavily on its ability to ensure a continuing and timely introduction of innovative new products and technologies to the marketplace.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
224
The Company believes it is unique in that it designs and develops nearly the entire solution for its products, including the hardware, operating system, numerous software applications, and related services.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
225
As a result, the Company must make significant investments in research and development and as such, the Company currently holds a significant number of patents and copyrights and has registered and/or has applied to register numerous patents, trademarks and service marks.
0001193125-11-282113/full-submission.txt
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20111026
10-K
226
By contrast, many of the Company’s competitors seek to compete primarily through aggressive pricing and very low cost structures.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
227
If the Company is unable to continue to develop and sell innovative new products with attractive margins or if other companies infringe on the Company’s intellectual property, the Company’s ability to maintain a competitive advantage could be negatively affected and its financial condition and operating results could b...
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
228
The Company markets certain mobile communication and media devices based on the iOS mobile operating system and also markets related third-party digital content and applications.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
229
The Company faces substantial competition in these markets from companies that have significant technical, marketing, distribution and other resources, as well as established hardware, software and digital content supplier relationships.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
230
Additionally, the Company faces significant price competition as competitors reduce their selling prices and attempt to imitate the Company’s product features and applications within their own products or, alternatively, collaborate with each other to offer solutions that are more competitive than those they currently ...
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
231
The Company also competes with illegitimate ways to obtain third-party digital content and applications.
0001193125-11-282113/full-submission.txt
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20111026
10-K
232
The Company has entered the mobile communications and media device markets, and some of its competitors in these markets have greater experience, product breadth and distribution channels than the Company.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
233
Because some current and potential competitors have substantial resources and/or experience and a lower cost structure, they may be able to provide such products and services at little or no profit or even at a loss.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
234
The Company also expects competition to intensify as competitors attempt to imitate the Company’s approach to providing these components seamlessly within their individual offerings or work collaboratively to offer integrated solutions.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
235
The Company’s financial condition and operating results depend substantially on the Company’s ability to continually improve iOS and iOS devices in order to maintain their functional and design advantages.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
236
The Company is the only authorized maker of hardware using Mac OS X, which has a minority market share in the personal computer market.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
237
This market is dominated by computer makers using competing operating systems, most notably Windows.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
238
In the market for personal computers and peripherals, the Company faces a significant number of competitors, many of which have broader product lines, lower priced products, and a larger installed customer base.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
239
Consolidation in this market has resulted in larger and potentially stronger competitors.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
240
Price competition has been particularly intense as competitors selling Windows-based personal computers have aggressively cut prices and lowered product margins.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
241
An increasing number of Internet devices that include software applications and are smaller and simpler than traditional personal computers compete for market share with the Company’s existing products.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
242
The Company’s financial condition and operating results depend substantially on its ability to continually improve the Mac platform to maintain its functional and design advantages.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
243
There can be no assurance the Company will be able to continue to provide products and services that compete effectively.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
244
To remain competitive and stimulate customer demand, the Company must successfully manage frequent product introductions and transitions.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
245
Due to the highly volatile and competitive nature of the industries in which the Company competes, the Company must continually introduce new products, services and technologies, enhance existing products and services, and effectively stimulate customer demand for new and upgraded products.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
246
The success of new product introductions depends on a number of factors including but not limited to timely and successful product development, market acceptance, the Company’s ability to manage the risks associated with new products and production ramp issues, the availability of application software for new products,...
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
247
Accordingly, the Company cannot determine in advance the ultimate effect of new product introductions and transitions on its financial condition and operating results.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
248
The Company faces substantial inventory and other asset risk in addition to purchase commitment cancellation risk.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
249
The Company records a write-down for product and component inventories that have become obsolete or exceed anticipated demand or net realizable value and accrues necessary cancellation fee reserves for orders of excess products and components.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
250
The Company also reviews its long-lived assets for impairment whenever events or changed circumstances indicate the carrying amount of an asset may not be recoverable.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
251
If the Company determines that impairment has occurred, it records a write-down equal to the amount by which the carrying value of the assets exceeds its fair market value.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
252
Although the Company believes its provisions related to inventory, other assets and purchase commitments are currently adequate, no assurance can be given that the Company will not incur additional related charges given the rapid and unpredictable pace of product obsolescence in the industries in which the Company comp...
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
253
Such charges could materially adversely affect the Company’s financial condition and operating results.
0001193125-11-282113/full-submission.txt
0000320193
20111026
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254
The Company must order components for its products and build inventory in advance of product announcements and shipments.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
255
Consistent with industry practice, components are normally acquired through a combination of purchase orders, supplier contracts, open orders and, where appropriate, inventory component prepayments, in each case based on projected demand.
0001193125-11-282113/full-submission.txt
0000320193
20111026
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Such purchase commitments typically cover forecasted component and manufacturing requirements for periods up to 150 days.
0001193125-11-282113/full-submission.txt