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0000320193
20041203
10-K
311
Phillips Co., Ltd., Matsushita, Mitsubishi Electric Corporation, NVIDIA Corp., Portal Player, Inc., Quanta Computer, Inc., Samsung Electronics, Synaptics, Inc., and Toshiba Corporation.
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0000320193
20041203
10-K
312
Research and Development Because the personal computer industry is characterized by rapid technological advances, the Company's ability to compete successfully is heavily dependent upon its ability to ensure a continuing and timely flow of competitive products and technology to the marketplace.
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0000320193
20041203
10-K
313
The Company continues to develop new products and technologies and to enhance existing products in the areas of hardware and peripherals, consumer electronic products, system software, applications software, networking and communications software and solutions, and the Internet.
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0000320193
20041203
10-K
314
The Company may expand the range of its product offerings and intellectual property through licensing and/or acquisition of third-party business and technology.
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0000320193
20041203
10-K
315
The Company's research and development expenditures totaled $489 million, $471 million, and $446 million in 2004, 2003, and 2002, respectively.
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0000320193
20041203
10-K
316
Patents, Trademarks, Copyrights and Licenses The Company currently holds rights to patents and copyrights relating to certain aspects of its computer systems, iPods, peripherals and software.
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0000320193
20041203
10-K
317
In addition, the Company has registered, and/or has applied to register, trademarks and service marks in the U.S. and a number of foreign countries for "Apple," the Apple logo, "Macintosh," and numerous other trademarks and service marks.
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0000320193
20041203
10-K
318
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 pers...
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
319
Many of the Company's products are designed to include intellectual property obtained from third-parties.
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0000320193
20041203
10-K
320
While it may be necessary in the future to seek or renew licenses relating to various aspects of its products and business methods, the Company believes that, based upon past experience and industry practice, such licenses generally could be obtained on commercially reasonable terms; however, there is no guarantee that...
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
321
Because of technological changes in the computer industry, current extensive patent coverage, and the rapid rate of issuance of new patents, it is possible certain components of the Company's products and business methods may unknowingly infringe existing patents of others.
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0000320193
20041203
10-K
322
The Company has from time to time been notified that it may be infringing certain patents or other intellectual property rights of others.
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0000320193
20041203
10-K
323
Foreign and Domestic Operations and Geographic Data The U.S. represents the Company's largest geographic marketplace.
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0000320193
20041203
10-K
324
Approximately 59% of the Company's net sales in fiscal 2004 came from sales to customers inside the U.S.
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0000320193
20041203
10-K
325
Final assembly of products sold by the Company is conducted in the Company's manufacturing facility in Cork, Ireland, and by external vendors in Fremont, California, Fullerton, California, Taiwan, Korea, the Netherlands, the People's Republic of China, and the Czech Republic.
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0000320193
20041203
10-K
326
Currently, manufacture of many of the components used in the Company's products and final assembly of substantially all of the Company's portable products including PowerBooks, iBooks, and the iPod are performed by third-party vendors in Taiwan and China.
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0000320193
20041203
10-K
327
Margins on sales of Apple 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.
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0000320193
20041203
10-K
328
Information regarding financial data by geographic segment is set forth in Part II, Item 8 of this Form 10-K in the Notes to Consolidated Financial Statements at Note 11, "Segment Information and Geographic Data."
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0000320193
20041203
10-K
329
Seasonal Business The Company has historically experienced increased net sales in its first and fourth fiscal quarters, compared to other quarters in its fiscal year, due to seasonal demand related to the holiday season and the school year, respectively.
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0000320193
20041203
10-K
330
Past performance should not be considered a reliable indicator of the Company's future net sales or financial performance.
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20041203
10-K
331
Warranty The Company offers a basic limited parts and labor warranty on its hardware products.
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20041203
10-K
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The basic warranty period for hardware products is typically one year from the date of purchase by the end-user.
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0000320193
20041203
10-K
333
The Company also offers a 90-day basic warranty for Apple service parts used to repair Apple hardware products.
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0000320193
20041203
10-K
334
In addition, consumers may purchase extended service coverage on most Apple hardware products in all of the Company's major markets.
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0000320193
20041203
10-K
335
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.
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20041203
10-K
336
In particular, backlog often increases in anticipation of or immediately following new product introductions because of over-ordering by dealers anticipating shortages.
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0000320193
20041203
10-K
337
Backlog often is reduced once dealers and customers believe they can obtain sufficient supply.
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20041203
10-K
338
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.
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0000320193
20041203
10-K
339
Environmental Laws Compliance with federal, state, local, and foreign laws enacted for the protection of the environment has to date had no material effect on the Company's capital expenditures, earnings, or competitive position.
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0000320193
20041203
10-K
340
In the future, these laws could have a material adverse affect on the Company.
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0000320193
20041203
10-K
341
Production and marketing of products in certain states and countries may subject the Company to environmental and other regulations including, in some instances, the requirement that the Company provide consumers with the ability to return to the Company product at the end of its useful life, and place responsibility f...
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
342
Such laws and regulations have recently been passed in several jurisdictions in which the Company operates, including various European Union member states, Japan and California.
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0000320193
20041203
10-K
343
In the future, these laws could have a material adverse affect on the Company.
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0000320193
20041203
10-K
344
Employees As of September 25, 2004, Apple and its subsidiaries worldwide had 11,695 employees and an additional 1,731 temporary employees and contractors.
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0000320193
20041203
10-K
345
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, are available on its website at http://www.apple.com/investor when such re...
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
346
The public may read and copy any materials filed by the Company with the SEC at the SEC's Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549.
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0000320193
20041203
10-K
347
The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
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0000320193
20041203
10-K
348
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 http://www.sec.gov.
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0000320193
20041203
10-K
349
The contents of these websites are not incorporated into this filing.
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0000320193
20041203
10-K
350
Further, the Company's references to the URLs for these websites are intended to be inactive textual references only.
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0000320193
20041203
10-K
351
Item 2.
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0000320193
20041203
10-K
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Properties The Company's headquarters are located in Cupertino, California.
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0000320193
20041203
10-K
353
The Company has manufacturing facilities in Cork, Ireland.
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0000320193
20041203
10-K
354
As of September 25, 2004, the Company leased approximately 3.3 million square feet of space, primarily in the U.S., and to a lesser extent, in Europe, Japan, and the Asia Pacific region.
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0000320193
20041203
10-K
355
The major facility leases are for terms of 5 to 10 years and generally provide renewal options for terms of 2 to 5 additional years.
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0000320193
20041203
10-K
356
Leased space includes 660,000 square feet of retail space, a majority of which is in the U.S.
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0000320193
20041203
10-K
357
Lease terms for retail space range from 5 to 16 years, the majority of which are for 10 years, and often contain multi-year renewal options.
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0000320193
20041203
10-K
358
The Company owns its manufacturing facility in Cork, Ireland, which has approximately 352,000 square feet.
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0000320193
20041203
10-K
359
The Cork facility also houses a customer support call center.
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0000320193
20041203
10-K
360
The Company also owns a 752,000 square-foot facility in Sacramento, California, which has a customer support call center and is used for warehousing and distribution.
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0000320193
20041203
10-K
361
In addition, the Company owns approximately 942,000 square feet of facilities located in Cupertino, California, used for research and development and corporate functions.
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0000320193
20041203
10-K
362
Outside the U.S., the Company owns additional facilities totaling approximately 169,000 square feet.
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0000320193
20041203
10-K
363
The Company believes its existing facilities and equipment are well maintained and in good operating condition.
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0000320193
20041203
10-K
364
The Company has invested in internal capacity and strategic relationships with outside manufacturing vendors, and therefore believes it has adequate manufacturing capacity for the foreseeable future.
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0000320193
20041203
10-K
365
The Company continues to make investments in capital equipment as needed to meet anticipated demand for its products.
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0000320193
20041203
10-K
366
Item 3.
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20041203
10-K
367
Legal Proceedings The Company is subject to various legal proceedings and claims that are discussed below.
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20041203
10-K
368
The Company is also subject to certain other legal proceedings and claims that have arisen in the ordinary course of business and which have not been fully adjudicated.
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0000320193
20041203
10-K
369
In the opinion of management, the Company does not have a potential liability related to any current legal proceedings and claims that would individually or in the aggregate have a material adverse effect on its financial condition, liquidity or results of operations.
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0000320193
20041203
10-K
370
However, the results of legal proceedings cannot be predicted with certainty.
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0000320193
20041203
10-K
371
Should the Company fail to prevail in any of these legal matters or should several of these legal matters be resolved against the Company in the same reporting period, the operating results of a particular reporting period could be materially adversely affected.
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0000320193
20041203
10-K
372
The Company settled certain matters in 2004, which did not individually or in the aggregate have a material impact on the Company's results of operations.
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0000320193
20041203
10-K
373
Antor Media Corporation v. Apple Computer, Inc., et al.
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0000320193
20041203
10-K
374
Plaintiff Antor Media filed this action on September 5, 2003 in the United States District Court in the Eastern District of Texas alleging infringement by the Company and other defendants of U.S. patent 5,754,961 relating to a "Method and Apparatus for Transmitting Information Recorded on Information Storage Means from...
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0000320193
20041203
10-K
375
The complaint seeks unspecified damages and other relief.
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0000320193
20041203
10-K
376
The Company has answered the complaint, denying all allegations and asserting numerous affirmative defenses.
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0000320193
20041203
10-K
377
The Company also asserted counterclaims requesting declaratory judgment for non-infringement and invalidity.
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0000320193
20041203
10-K
378
Trial is set for March 2005.
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20041203
10-K
379
The Court held a Markman hearing on September 16, 2004 but has not yet issued a ruling.
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0000320193
20041203
10-K
380
Apple Corps Ltd. v. Apple Computer, Inc.; Apple Computer, Inc. v. Apple Corps Ltd.
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0000320193
20041203
10-K
381
Plaintiff Apple Corps filed this action on July 4, 2003 in the High Court of Justice, Chancery Division, in London alleging that the Company has breached a 1991 agreement that resolved earlier trademark litigation between the parties regarding use of Apple marks.
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0000320193
20041203
10-K
382
Plaintiff seeks an injunction, unspecified damages and other relief.
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20041203
10-K
383
The Company filed a motion on October 13, 2003, challenging jurisdiction in the UK, but the Court denied the motion on April 7, 2004.
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0000320193
20041203
10-K
384
The Company filed an appeal of the Court's decision but subsequently withdrew the appeal and is preparing its defense in this matter.
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0000320193
20041203
10-K
385
On October 8, 2003, the Company filed a lawsuit in the United States District Court for the Northern District of California requesting a declaratory judgment that the Company has not breached the 1991 agreement.
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0000320193
20041203
10-K
386
Apple Corps challenged jurisdiction in the California case but the Court denied that challenge on March 25, 2004.
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0000320193
20041203
10-K
387
Apple Corps subsequently prevailed on a motion to stay the California case during the pendency of the UK action.
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0000320193
20041203
10-K
388
The Company has dismissed the California lawsuit without prejudice.
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0000320193
20041203
10-K
389
Cagney v. Apple Computer, Inc.
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0000320193
20041203
10-K
390
Plaintiff filed this purported class action on January 9, 2004 in Los Angeles County Superior Court, alleging improper collection of sales tax in transactions involving mail-in rebates.
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0000320193
20041203
10-K
391
The complaint alleges violations of California Civil Code Section 17200 (unfair competition) and seeks unspecified damages and other relief.
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0000320193
20041203
10-K
392
The Company was served on January 21, 2004, and filed an answer on February 20, 2004, denying all allegations and asserting numerous affirmative defenses.
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0000320193
20041203
10-K
393
The Company is investigating these allegations.
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0000320193
20041203
10-K
394
The Company filed a motion to disqualify Plaintiff's counsel, which the Court denied.
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0000320193
20041203
10-K
395
The Company filed a petition for a writ of mandate with respect to this ruling and the Court of Appeal has issued an order to show cause as to why the writ should not issue.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
396
Plaintiffs lead counsel subsequently withdrew.
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0000320193
20041203
10-K
397
The hearing on the show cause order is scheduled for January 29, 2005.
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0000320193
20041203
10-K
398
The Company also has obtained an opinion on the tax issue from the State Board of Equalization.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
399
Compression Labs, Inc. v. Apple Computer, Inc., et al.
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0000320193
20041203
10-K
400
; Apple v. Compression Labs, Inc., et al.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
401
Plaintiff Compression Labs, Inc. filed this patent infringement action on April 22, 2004 against the Company and twenty-seven other defendants in the United States District Court for the Eastern District of Texas, Marshall Division, alleging infringement of U.S. patent 4,698,672.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
402
Plaintiff alleges that the Company infringes the patent by complying with the JPEG standard as defined by CCITT Recommendation T.81 entitled "Information Technology-Digital Compression and Coding of Continuous Tone Still Images-Requirements and Guidelines."
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
403
Plaintiff seeks unspecified damages and other relief.
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0000320193
20041203
10-K
404
The Company is investigating this claim.
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20041203
10-K
405
Defendants have filed a motion to dismiss or, in the alternative, to transfer the case to Delaware.
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20041203
10-K
406
The case is in discovery and trial is expected in October 2005.
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20041203
10-K
407
On July 2, 2004, the Company and several other defendants in the Texas action filed a lawsuit in the United States District Court in Delaware requesting declaratory judgment of noninfringement, invalidity, implied license and unenforceability with respect to the '672 patent.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
408
Additional actions regarding this patent have been filed in other jurisdictions.
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0000320193
20041203
10-K
409
A petition has been filed with the Panel on Multi-District Litigation (MDL), seeking coordination and transfer of all of these cases to one court for pre-trial proceedings.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
410
Craft v. Apple Computer, Inc. (filed December 23, 2003, Santa Clara County Superior Court); Chin v. Apple Computer, Inc. (filed December 23, 2003, San Mateo County Superior Court); Hughes v. Apple Computer, Inc. (filed December 23, 2003, Santa Clara County Superior Court); Westley v. Apple Computer, Inc. (filed Decembe...
0001047469-04-035975/full-submission.txt