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0000320193
20111026
10-K
257
Because the Company’s markets are volatile, competitive and subject to rapid technology and price changes, there is a risk the Company will forecast incorrectly and order or produce excess or insufficient amounts of components or products, or not fully utilize firm purchase commitments.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
258
The Company’s financial condition and operating results have been in the past and could be in the future materially adversely affected by the Company’s ability to manage its inventory levels and respond to short-term shifts in customer demand patterns.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
259
Future operating results depend upon the Company’s ability to obtain components in sufficient quantities.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
260
Because the Company currently obtains components from single or limited sources, the Company is subject to significant supply and pricing risks.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
261
Many components that are available from multiple sources are at times subject to industry-wide shortages and significant commodity pricing fluctuations.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
262
The Company has entered into various agreements for the supply of components; there can be no guarantee that the Company will be able to extend or renew these agreements on similar terms, or at all.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
263
The follow-on effects from the credit crisis on the Company’s suppliers, referred to in “Economic conditions could materially adversely affect the Company” above, also could affect the Company’s ability to obtain components.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
264
Therefore, the Company remains subject to significant risks of supply shortages and price increases that could materially adversely affect the Company’s financial condition and operating results.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
265
The Company expects to experience decreases in its gross margin percentage in future periods, as compared to levels achieved during 2011, largely due to a higher mix of new and innovative products with flat or reduced pricing that have higher cost structures and deliver greater value to customers, and potential future ...
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
266
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
267
The Company uses some custom components that are not common to the rest of these industries.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
268
The Company’s new products often utilize custom components available from only one source.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
269
When a component or product uses new technologies, initial capacity constraints may exist until the suppliers’ yields have matured or manufacturing capacity has increased.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
270
Continued availability of these components at acceptable prices, or at all, may be affected if those suppliers decided to concentrate 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
271
If the 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.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
272
The Company depends on component and product manufacturing and logistical services provided by outsourcing partners, many of whom are located outside of the U.S.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
273
Substantially all of the Company’s manufacturing is performed in whole or in part by a few outsourcing partners primarily located in Asia.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
274
The Company has also outsourced much of its transportation and logistics management.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
275
While these arrangements may lower operating costs, they also reduce the Company’s direct control over production and distribution.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
276
It is uncertain what effect such diminished control will have on the quality or quantity of products or services, or the Company’s flexibility to respond to changing conditions.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
277
Although arrangements with these partners may contain provisions for warranty expense reimbursement, the Company may remain responsible to the consumer for warranty service in the event of product defects.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
278
The Company also relies on its partners to adhere to the Company’s supplier code of conduct.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
279
Any unanticipated product defect or warranty liability, whether pursuant to arrangements with outsourcing partners or otherwise, or material violations of the supplier code of conduct, could materially adversely affect the Company’s reputation, financial condition and operating results.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
280
The supply and manufacture of many critical 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
281
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
282
If manufacturing or logistics in these locations is disrupted for any reason including, but not limited to, natural and man-made disasters, information technology system failures, military actions or economic, business, labor, environmental, public health, or political issues, the Company’s financial condition and oper...
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
283
The Company relies on third-party intellectual property and digital content, which may not be available to the Company on commercially reasonable terms or at all.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
284
Many of the Company’s products include third-party intellectual property, which requires licenses from those third parties.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
285
Based on past experience and industry practice, the Company believes such licenses generally could be obtained on reasonable terms.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
286
There is however no assurance that the necessary licenses could be obtained on acceptable terms or at all.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
287
If the Company is unable to obtain or renew critical licenses on reasonable terms, its financial condition and operating results may be materially adversely affected.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
288
The Company also contracts with third parties to offer their digital content through the iTunes Store.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
289
The licensing arrangements with these third parties are short-term and do not guarantee the continuation or renewal of these arrangements on reasonable terms, if at all.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
290
Some third-party content providers currently or in the future may offer competing products and services, and could take action to make it more difficult or impossible for the Company to license their content in the future.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
291
Other content owners, providers or distributors may seek to limit the Company’s access to, or increase the cost of, such content.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
292
If the Company is unable to continue to offer a wide variety of content at reasonable prices with acceptable usage rules, or continue to expand its geographic reach, the Company’s financial condition and operating results may be materially adversely affected.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
293
Many third-party content providers require the Company to provide digital rights management (“DRM”) and other security solutions.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
294
If these requirements change, the Company may have to develop or license new technology to provide these solutions.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
295
There is no assurance the Company will be able to develop or license such solutions at a reasonable cost and in a timely manner.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
296
In addition, certain countries have passed or may propose legislation that would force the Company to license its DRM, which could lessen the protection of content and subject it to piracy and also could affect arrangements with the Company’s content providers.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
297
The Company’s future results could be materially adversely affected if it is found to have infringed on intellectual property rights.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
298
Technology companies, including many of the Company’s competitors, frequently enter into litigation based on allegations of patent infringement or other violations of intellectual property rights.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
299
In addition, patent holding companies seek to monetize patents they have purchased or otherwise obtained.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
300
As the Company has grown, the intellectual property rights claims against it have increased and may continue to increase.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
301
In particular, the Company’s cellular enabled products compete with mobile communication and media device companies that hold significant patent portfolios, and the number of patent claims against the Company has significantly increased.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
302
The Company is vigorously defending infringement actions in courts in a number of U.S. jurisdictions and before the U.S. International Trade Commission, as well as internationally in Europe and Asia.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
303
The plaintiffs in these actions frequently seek injunctions and substantial damages.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
304
Regardless of the scope or validity of such patents or the merits of any patent claims by potential or actual litigants, the Company may have to engage in protracted litigation.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
305
If the Company is found to infringe one or more patents, it may be required to pay substantial damages.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
306
If there is a temporary or permanent injunction prohibiting the Company from marketing or selling certain products or a successful claim of infringement against the Company requiring it to pay royalties to a third-party, its financial condition and operating results could be materially adversely affected, regardless of...
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
307
In certain cases, the Company may consider the desirability of entering into licensing agreements, although no assurance can be given that such licenses can be obtained on acceptable terms or that litigation will not occur.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
308
These licenses may also significantly increase the Company’s operating expenses.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
309
In management’s opinion there is not at least a reasonable possibility the Company may have incurred a material loss, or a material loss in excess of a recorded accrual, with respect to loss contingencies, including matters related to infringement of intellectual property rights.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
310
However, the outcome of litigation is inherently uncertain.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
311
Therefore, although management considers the likelihood of such an outcome to be remote, if one or more of these legal matters were resolved against the Company in the same reporting period for amounts in excess of management’s expectations, the Company’s consolidated financial statements of a particular reporting peri...
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
312
The Company’s future performance depends in part on support from third-party software developers.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
313
The Company believes decisions by customers to purchase its hardware products depend in part on the availability of third-party software applications and services.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
314
There is no assurance that third-party developers will continue to develop and maintain software applications and services for the Company’s products.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
315
If third-party software applications and services cease to be developed and maintained for the Company’s products, customers may choose not to buy the Company’s products, which could materially adversely affect the Company’s financial condition and operating results.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
316
With respect to its Mac products, the Company believes the availability of third-party software applications and services depends in part on the developers’ perception and analysis of the relative benefits of developing, maintaining, and upgrading such software for the Company’s products compared to Windows-based produ...
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
317
This analysis may be based on factors such as the perceived strength of the Company and its products, the anticipated revenue that may be generated, continued acceptance by customers of Mac OS X, and the costs of developing such applications and services.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
318
If the Company’s minority share of the global personal computer market causes developers to question the Company’s prospects, developers could be less inclined to develop or upgrade software for the Company’s products and more inclined to devote their resources to developing and upgrading software for the larger Window...
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
319
With respect to iOS devices, the Company relies on the continued availability and development of compelling and innovative software applications, which are distributed through a single distribution channel, the App Store.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
320
The absence of multiple distribution channels, which are available for competing platforms, may limit the availability and acceptance of third-party applications by the Company’s customers, thereby causing developers to reduce or curtail development for the iOS platform.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
321
In addition, iOS devices are subject to rapid technological change, and, if third-party developers are unable to or choose not to keep up with this pace of change, third-party applications might not successfully operate and may result in dissatisfied customers.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
322
As with applications for the Company’s Mac products, the availability and development of these applications also depend on developers’ perceptions and analysis of the relative benefits of developing software for the Company’s products rather than its competitors’ products, including devices that use competing platforms...
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
323
If developers focus their efforts on these competing platforms, the availability and quality of applications for the Company’s devices may suffer.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
324
The Company’s future operating performance depends on the performance of distributors, carriers and other resellers.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
325
The Company distributes its products through wholesalers, resellers, national and regional retailers, and value-added resellers, many of whom distribute products from competing manufacturers.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
326
The Company also sells many of its products and third-party products in most of its major markets directly to education customers, cellular network carriers’ distribution channels, resellers and consumers through its online and retail stores.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
327
Carriers providing cellular network service for iPhone typically subsidize users’ purchase of the device.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
328
There is no assurance that such subsidies will be continued at all or in the same amounts upon renewal of the Company’s agreements with these carriers or in agreements the Company enters into with new carriers.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
329
Many resellers have narrow operating margins and have been negatively affected in the past by weak economic conditions.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
330
Some resellers have perceived the expansion of the Company’s direct sales as conflicting with their business interests as distributors and resellers of the Company’s products.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
331
Such a perception could discourage resellers from investing resources in the distribution and sale of the Company’s products or lead them to limit or cease distribution of those products.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
332
The Company has invested and will continue to invest in programs to enhance reseller sales, including staffing selected resellers’ stores with Company employees and contractors and improving product placement displays.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
333
These programs could require a substantial investment while providing no assurance of return or incremental revenue.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
334
The Company’s financial condition and operating results could be materially adversely affected if the financial condition of these resellers weakens, if resellers stopped distributing the Company’s products, or if uncertainty regarding demand for the Company’s products caused resellers to reduce their ordering and mark...
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
335
The Company’s Retail business has required and will continue to require a substantial investment and commitment of resources and is subject to numerous risks and uncertainties.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
336
The Company’s retail stores have required substantial fixed investment in equipment and leasehold improvements, information systems, inventory and personnel.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
337
The Company also has entered into substantial operating lease commitments for retail space.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
338
Certain stores have been designed and built to serve as high-profile venues to promote brand awareness and serve as vehicles for corporate sales and marketing activities.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
339
Because of their unique design elements, locations and size, these stores require substantially more investment than the Company’s more typical retail stores.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
340
Due to the high fixed cost structure associated with the Retail segment, a decline in sales or the closure or poor performance of individual or multiple stores could result in significant lease termination costs, write-offs of equipment and leasehold improvements, and severance costs that could materially adversely aff...
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
341
Many factors unique to retail operations, some of which are beyond the Company’s control, pose risks and uncertainties that could materially adversely affect the Company’s financial condition and operating results.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
342
These risks and uncertainties include, but are not limited to, macro-economic factors that could have a negative effect on general retail activity, as well as the Company’s inability to manage costs associated with store construction and operation, inability to sell third-party products at adequate margins, failure to ...
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
343
Investment in new business strategies and initiatives could disrupt the Company’s ongoing business and present risks not originally contemplated.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
344
The Company has invested, and in the future may invest, in new business strategies or acquisitions.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
345
Such endeavors may involve significant risks and uncertainties, including distraction of management from current operations, insufficient revenue to offset liabilities assumed and expenses associated with the strategy, inadequate return of capital, and unidentified issues not discovered in the Company’s due diligence.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
346
These new ventures are inherently risky and may not be successful.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
347
They may materially adversely affect the Company’s financial condition and operating results.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
348
The Company’s products and services experience quality problems from time to time that can result in decreased sales and operating margin.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
349
The Company sells complex hardware and software products and services that can contain design and manufacturing defects.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
350
Sophisticated operating system software and applications, such as those sold by the Company, often contain “bugs” that can unexpectedly interfere with the software’s intended operation.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
351
The Company’s online services may from time to time experience outages, service slowdowns, or errors.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
352
Defects may also occur in components and products the Company purchases from third parties.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
353
There can be no assurance the Company will be able to detect and fix all defects in the hardware, software and services it sells.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
354
Failure to do so could result in lost revenue, harm to reputation, and significant warranty and other expenses, and could have a material adverse impact on the Company’s financial condition and operating results.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
355
The Company is subject to laws and regulations worldwide, changes to which could increase the Company’s costs and individually or in the aggregate materially adversely affect the Company’s financial condition or operating results.
0001193125-11-282113/full-submission.txt
0000320193
20111026
10-K
356
The Company is subject to laws and regulations affecting its domestic and international operations in a number of areas.
0001193125-11-282113/full-submission.txt