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0000320193
20001214
10-K
388
In addition to the net purchase of short-term investments of $936 million, net cash used by investing activities consisted primarily of $232 million for the purchase of long-term investments, including $200 million invested in EarthLink Network, Inc. (EarthLink) discussed below, and $107 million for the purchase of fix...
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
389
These uses of cash were partially offset by proceeds from sales of ARM shares of $372 million.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
390
The Company currently expects capital expenditures to increase to approximately $225 million during 2001 to accommodate information systems enhancements and strategic initiatives.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
391
In July 1999, the Company's Board of Directors authorized a plan for the Company to repurchase up to $500 million of its common stock.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
392
This repurchase plan does not obligate the Company to acquire any specific number of shares or acquire shares over any specified period of time.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
393
During 2000, the Company repurchased a total of 2.55 million shares of its common stock at a cost of $116 million.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
394
Since inception of the plan, the Company has repurchased a total of 5.05 million shares of its common stock at a cost of $191 million.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
395
The Company believes its balances of cash, cash equivalents, and short-term investments will be sufficient to meet its cash requirements over the next twelve months, including any cash utilized by its stock repurchase plan.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
396
However, given the Company's current non-investment grade debt ratings (Standard and Poor's Rating Agency of BB and Moody's Investor Services of Ba2), if the Company should need to obtain short-term borrowings, there can be no assurance such borrowings could be obtained at favorable rates.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
397
The inability to obtain such borrowings at favorable rates could materially adversely affect the Company's results of operations, financial condition, and liquidity.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
398
NON-CURRENT DEBT AND EQUITY INVESTMENTS The Company holds significant investments in ARM, Samsung Electronics Co., Ltd, Akamai Technologies, Inc., and EarthLink.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
399
These investments are reflected in the consolidated balance sheets as non-current debt and equity investments and have been categorized as available-for-sale requiring that they be carried at fair value with unrealized gains and losses, net of taxes, reported in equity as a component of accumulated other comprehensive ...
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
400
All realized gains on the sale of these investments have been included in other income.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
401
The combined fair value of these investments was $786 million and $339 million as of September 30, 2000, and September 25, 1999, respectively.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
402
The Company believes it is likely there will continue to be significant fluctuations in the fair value of these investments in the future.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
403
Further information related to the Company's non-current debt and equity investments may be found in Part II, Item 8 of this Form 10-K at Note 2 of Notes to Consolidated Financial Statements, which information is hereby incorporated by reference.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
404
FACTORS THAT MAY AFFECT FUTURE RESULTS AND FINANCIAL CONDITION Because of the following factors, as well as other factors affecting the Company's operating results and financial condition, past financial performance should not be considered to be a reliable indicator of future performance, and investors should not use ...
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
405
COMPETITION The personal computer industry is highly competitive and is characterized by aggressive pricing practices, downward pressure on gross margins, frequent introduction of new products, short product life cycles, continual improvement in product price/performance characteristics, price sensitivity on the part o...
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
406
The Company's results of operations and financial condition have been, and in the future may continue to be, adversely affected by industry wide pricing pressures and downward pressures on gross margins.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
407
The personal computer industry has also been characterized by rapid technological advances in software functionality, hardware performance, and features based on existing or emerging industry standards.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
408
Further, as the personal computer industry and its customers place more reliance on the Internet, an increasing number of Internet devices that are smaller and simpler than traditional personal computers may compete for market share with the Company's existing products.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
409
Several competitors of the Company have either targeted or announced their intention to target certain of the Company's key market segments, including consumer, education, and design and publishing.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
410
Additionally, several of the Company's competitors have introduced or announced plans to introduce products that mimic many of the unique design, technical features, and solutions of the Company's products.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
411
Many of the Company's competitors have greater financial, marketing, manufacturing, and technological resources, as well as broader product lines and larger installed customer bases than those of the Company.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
412
Additionally, the Company's future operating results and financial condition may be affected by overall demand for personal computers and general customer preferences for one platform over another or one set of product features over another.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
413
The Company is currently the only maker of hardware using the Mac OS.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
414
The Mac OS has a minority market share in the personal computer market, which is dominated by makers of computers utilizing Microsoft Windows operating systems.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
415
The Company's future operating results and financial condition are substantially dependent on its ability to continue to develop improvements to the Macintosh platform in order to maintain perceived design and functional advantages over competing platforms.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
416
PRODUCT INTRODUCTIONS AND TRANSITIONS Due to the highly volatile nature of the personal computer industry, which is characterized by dynamic customer demand patterns and rapid technological advances, the Company must continually introduce new products and technologies and enhance existing products in order to remain co...
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
417
The success of new product introductions is dependent on a number of factors, including market acceptance, the Company's ability to manage the risks associated with product transitions, the availability of application software for new products, the effective management of inventory levels in line with anticipated produ...
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
418
Accordingly, the Company cannot determine in advance the ultimate effect that new products will have on its sales or results of operations.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
419
During 2001, the Company plans to introduce a new client operating system, Mac OS X, which will offer advanced functionality based on Apple and NeXT software technologies.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
420
Inability to successfully introduce Mac OS X on a timely basis, gain customer acceptance, obtain the commitment of developers to transition existing applications to run on Mac OS X, or ensure adequate backward-compatibility of Mac OS X with applications authored for previous version of the Mac OS, may have an adverse i...
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
421
INVENTORY AND SUPPLY The Company records a write-down for inventories of components and products that have become obsolete or are in excess of anticipated demand or net realizable value and accrues necessary reserves for cancellation fees of orders for inventories that have been canceled.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
422
Although the Company believes its inventory and related provisions are adequate, given the rapid and unpredictable pace of product obsolescence in the computer industry, no assurance can be given the Company will not incur additional inventory and related charges.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
423
In addition, such charges have had, and may again have, a material effect on the Company's financial position and results of operations.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
424
The Company must order components for its products and build inventory in advance of product shipments.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
425
Because the Company's markets are volatile and subject to rapid technology and price changes, there is a risk the Company will forecast incorrectly and produce or order from third parties excess or insufficient inventories of particular products.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
426
Consistent with industry practice, components are normally acquired through purchase orders typically covering the Company's requirements for periods from 30 to 130 days.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
427
The Company's operating results and financial condition have been in the past and may in the future be materially adversely affected by the Company's ability to manage its inventory levels and respond to short-term shifts in customer demand patterns.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
428
The Company ended 2000 with substantially more inventory in its distribution channels than planned due to the lower than expected sell-through of the Company's products during the fourth quarter.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
429
The Company currently anticipates a significant sequential decline in quarterly net sales during the first quarter of fiscal 2001, in part due to the Company's plan to reduce substantially the level of inventory in its distribution channels from the amounts at the end of fiscal 2000 to more normal levels by the end of ...
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
430
Many of the Company's products are manufactured in whole or in part by third-party manufacturers.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
431
In addition, the Company has outsourced much of its transportation and logistics management.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
432
While outsourcing arrangements may lower the fixed cost of operations, they also reduce the Company's direct control over production and distribution.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
433
It is uncertain what effect such diminished control will have on the quality or quantity of the products manufactured, or the flexibility of the Company to respond to changing market conditions.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
434
Moreover, although arrangements with such manufacturers may contain provisions for warranty expense reimbursement, the Company may remain at least initially responsible to the ultimate consumer for warranty service or in the event of product defects.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
435
Any unanticipated product defect or warranty liability, whether pursuant to arrangements with contract manufacturers or otherwise, could adversely affect the Company's future operating results and financial condition.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
436
Although certain components essential to the Company's business are generally available from multiple sources, other key components (including microprocessors and application specific integrated circuits ("ASICs")) are currently obtained by the Company from single or limited sources.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
437
Some other key components (including without limitation DRAM, TFT-LCD flat-panel displays, and optical and magnetic disk drives), while currently available to the Company from multiple sources, are at times subject to industry wide availability and pricing pressures.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
438
In addition, new products introduced by the Company often initially utilize custom components obtained from only one source until the Company has evaluated whether there is a need for and subsequently qualifies additional suppliers.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
439
In situations where a component or product utilizes new technologies, initial capacity constraints may exist until such time as the suppliers' yields have matured.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
440
The Company and other producers in the personal computer industry also compete for various components with other industries (such as the cellular phone and automotive industries) that have experienced increased demand for their products.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
441
The Company uses some components that are not common to the rest of the personal computer industry (including certain microprocessors and ASICs).
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
442
Continued availability of these components may be affected if producers were to decide to concentrate on the production of components other than those customized to meet the Company's requirements.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
443
If the supply of a key component were to be delayed or constrained on a new or existing product, the Company's results of operations and financial condition could be adversely affected, depending on the time required to obtain sufficient quantities from the original source, or, if possible, to identify and obtain suffi...
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
444
The Company's ability to produce and market competitive products is also dependent on the ability and desire of IBM and Motorola, the sole suppliers of the PowerPC RISC-based microprocessor for the Company's Macintosh computers, to provide the Company with a sufficient supply of microprocessors with price/performance f...
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
445
Apple has been unable to ship Macintosh systems with PowerPC G4 microprocessors running above 500 megahertz since such systems were first announced in August of 1999 due to its G4 microprocessor supplier's inability to provide the Company with faster G4 microprocessors.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
446
Similar but less pronounced supply issues have also arisen with the Company's supply of faster PowerPC G3 microprocessors.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
447
The Company believes that this inability to obtain faster microprocessors had an adverse impact on the Company's results of operations during 2000, particularly towards the end of the fiscal year.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
448
The Company has been informed by its suppliers that faster microprocessors will be available in sufficient quantity beginning in the first half of calendar 2001.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
449
However, no assurance can be given that such faster microprocessors will actually be available or be available in sufficient quantities, and the inability of the Company to obtain faster microprocessors in sufficient quantities during 2001 may have an adverse impact on the Company's results of operations and financial ...
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
450
Further discussion relating to availability and supply of components and product may be found in Part I, Item 1 of this Form 10-K under the heading "Raw Materials," and in Part II, Item 8 of this Form 10-K in the Notes to Consolidated Financial Statements at Note 9 under the subheading "Concentrations in the Available ...
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
451
EDUCATION MARKET Several competitors of the Company have either targeted or announced their intention to target the education market for personal computers.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
452
As a result, the Company's overall share of this market has declined.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
453
Additionally, net sales in the Company's education market fell short of expectations by approximately $60 million during the fourth quarter of 2000, primarily as a result of the Company's transition to a more direct sales model from a model heavily dependent on third party sales agents.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
454
Although the Company has initiated a plan to strengthen its position in the education market, there can be no assurance that the Company will be able to increase its share of the education market or maintain its existing share of that market.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
455
Failure to increase or maintain market share in the education market may have an adverse impact on the Company's operating results and financial condition.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
456
MARKETING AND DISTRIBUTION The Company distributes its products through wholesalers, resellers, national and regional retailers and cataloguers.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
457
In addition, the Company also sells many of its products and resells certain third-party products in most of its major markets to consumers, certain education customers, and certain resellers either directly or through its on-line stores around the world.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
458
Many of the Company's significant resellers operate on narrow product margins, and may distribute products from competing manufacturers.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
459
The Company's business and financial results could be adversely affected if the financial condition of these resellers weakened, if resellers within consumer channels were to cease distribution of the Company's products, or if uncertainty regarding demand for the Company's products caused resellers to reduce their orde...
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
460
Further information regarding risks associated with Marketing and Distribution may be found in Part I, Item 1 of this Form 10-K under the heading "Markets and Distribution," which information is hereby incorporated by reference.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
461
GLOBAL MARKET RISKS A large portion of the Company's revenue is derived from its international operations.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
462
As a result, the Company's operating results and financial condition could be significantly affected by risks associated with international activities, including economic and labor conditions, political instability, tax laws (including U.S. taxes on foreign subsidiaries), and changes in the value of the U.S. dollar ver...
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
463
Historically, the Company's primary exposure to movements in foreign currency exchange rates relate to non-dollar denominated sales in Europe, Japan, Australia, Canada, and certain parts of Asia and non-dollar denominated operating expenses incurred throughout the world.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
464
Weaknesses in foreign currencies, particularly the Japanese Yen and the Euro, can adversely impact consumer demand for the Company's products and the U.S. dollar value of the Company's foreign currency denominated sales.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
465
Conversely, strengthening in these and other foreign currencies can effect the cost to the Company of product components, negatively impacting the Company's results of operations.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
466
Further information related to the Company's global market risks may be found in Part II, Item 7A of this Form 10-K under the subheading "Foreign Currency Risk" and may be found in Part II, Item 8 of this Form 10-K at Notes 1 and 2 of Notes to Consolidated Financial Statements, which information is hereby incorporated ...
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
467
SUPPORT FROM THIRD-PARTY SOFTWARE DEVELOPERS The Company believes that decisions by customers to purchase the Company's personal computers, as opposed to Windows-based systems, are often based on the availability of third-party software for particular applications.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
468
The Company also believes the availability of third-party application software for the Company's hardware products depends in part on third-party developers' perception and analysis of the relative benefits of developing, maintaining, and upgrading such software for the Company's products versus software for the larger...
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
469
This analysis is based on factors such as the perceived strength of the Company and its products, the anticipated potential revenue that may be generated, and the costs of developing such software products.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
470
To the extent the Company's financial losses in prior years and the minority market share held by the Company in the personal computer market, as well as the Company's decision to end its Mac OS licensing program, have caused software developers to question the Company's prospects in the personal computer market, devel...
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
471
In addition, past and future development by the Company of its own software applications and solutions may negatively impact the decision of software developers to develop, maintain, and upgrade similar or competitive software for the Company's products.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
472
Moreover, the Company's current plan to introduce Mac OS X during 2001 could cause software developers to stop developing software for the current Mac OS, and there can be no assurance software developers will decide to develop software for Mac OS X on a timely basis or at all.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
473
In August 1997, the Company and Microsoft Corporation entered into patent cross licensing and technology agreements.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
474
In addition, for a period of five years from August 1997, and subject to certain limitations related to the number of Macintosh computers sold by the Company, Microsoft will make future versions of its Microsoft Office and Internet Explorer products for the Mac OS.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
475
Although Microsoft has announced its intention to do so, these agreements do not require Microsoft to produce future versions of its products that are optimized to run on Mac OS X.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
476
The Company will bundle the Internet Explorer product with Mac OS system software releases and make that product the default Internet browser for such Mac OS releases.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
477
While the Company believes its relationship with Microsoft has been and will continue to be beneficial to the Company and to its efforts to increase the installed base for the Mac OS, the Microsoft relationship is for a limited term and does not cover many of the areas in which the Company competes with Microsoft, incl...
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
478
Accordingly, Microsoft's interest in producing application software for the Mac OS, including Mac OS X, not covered by the relationship or following expiration of the agreements may be influenced by Microsoft's perception of its interests as the vendor of the Windows operating system.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
479
In addition, the Microsoft relationship may have an adverse effect on, among other things, the Company's relationship with other partners.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
480
There can be no assurance that the benefits to the Company of the Microsoft relationship will not be offset by the disadvantages.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
481
PATENTS AND INTELLECTUAL PROPERTY Many of the Company's products are designed to include intellectual property obtained from third parties.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
482
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.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
483
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.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
484
The Company has from time to time been notified that it may be infringing certain patents or other intellectual property rights of others.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
485
However, no litigation has arisen out of any of these claims that has had, or is expected to have, an adverse impact on the Company's operating results and financial condition.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
486
The Company believes that any necessary patent or other rights could be obtained on commercially reasonable terms.
0000912057-00-053623/full-submission.txt
0000320193
20001214
10-K
487
However, there can be no assurance that the necessary licenses would be available on acceptable terms, if at all, or that the Company would prevail in any such challenge.
0000912057-00-053623/full-submission.txt