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0000320193
20131030
10-K
219
Approximately 42,800 of the total full-time equivalent employees worked in the Company’s Retail segment.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
220
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 (the “Exchange Act”), are filed with the Securities Exchange Commission (th...
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
221
The Company is subject to the informational requirements of the Exchange Act and files or furnishes reports, proxy statements, and other information with the SEC.
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0000320193
20131030
10-K
222
Such reports and other information filed by the Company with the SEC are available free of charge on the Company’s website at investor.apple.com/sec.cfm when such reports are available on the SEC’s website.
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0000320193
20131030
10-K
223
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.
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0000320193
20131030
10-K
224
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
20131030
10-K
225
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.
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0000320193
20131030
10-K
226
The contents of these websites are not incorporated into this filing.
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0000320193
20131030
10-K
227
Further, the Company’s references to the URLs for these websites are intended to be inactive textual references only.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
228
Item 1A.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
229
Risk Factors The following discussion of risk factors contains forward-looking statements.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
230
These risk factors may be important to understanding any statement in this Form 10-K or elsewhere.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
231
The following information should be read in conjunction with Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes in Part II, Item 8, “Financial Statements and Supplementary Data” of this Form 10-K. Because o...
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
232
Global and regional economic conditions could materially adversely affect the Company.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
233
The Company’s operations and performance depend significantly on global and regional economic conditions.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
234
Uncertainty about global and regional economic conditions poses a risk as consumers and businesses postpone spending in response to tighter credit, higher unemployment, financial market volatility, government austerity programs, negative financial news, declines in income or asset values and/or other factors.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
235
These worldwide and regional economic conditions could have a material adverse effect on demand for the Company’s products and services.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
236
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 correspond with the effect of a strengthening of the U.S. dollar.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
237
Other factors that could influence worldwide or regional 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.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
238
These and other economic factors could materially adversely affect demand for the Company’s products and services.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
239
In the event of further 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...
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
240
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...
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
241
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; volatility in foreign exchange ...
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
242
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.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
243
Global markets for the Company’s products and services are highly competitive and subject to rapid technological change, and the Company may be unable to compete effectively in these markets.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
244
The Company’s products and services compete in highly competitive global markets characterized by aggressive price cutting and resulting downward pressure on gross margins, frequent introduction of new products, short product life cycles, evolving industry standards, continual improvement in product price/performance c...
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
245
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.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
246
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.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
247
As a result, the Company must make significant investments in research and development.
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0000320193
20131030
10-K
248
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.
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0000320193
20131030
10-K
249
In contrast, many of the Company’s competitors seek to compete primarily through aggressive pricing and very low cost structures, and emulating the Company’s products and infringing on its intellectual property.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
250
If the Company is unable to continue to develop and sell innovative new products with attractive margins or if competitors infringe on the Company’s intellectual property, the Company’s ability to maintain a competitive advantage could be adversely affected.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
251
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.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
252
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; and the Company has a minority market share in the smartphone market.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
253
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 ...
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
254
The Company also competes with illegitimate ways to obtain third-party digital content and applications.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
255
Some of the Company’s competitors have greater experience, product breadth and distribution channels than the Company.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
256
Because some current and potential competitors have substantial resources and/or experience and a lower cost structure, they may be able to provide products and services at little or no profit or even at a loss.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
257
The Company also expects competition to intensify as competitors attempt to imitate the Company’s approach to providing components seamlessly within their individual offerings or work collaboratively to offer integrated solutions.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
258
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.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
259
The Company is the only authorized maker of hardware using OS X, which has a minority market share in the personal computer market.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
260
This market is dominated by computer makers using competing operating systems, most notably Windows.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
261
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.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
262
Historically, consolidation in this market has resulted in larger competitors.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
263
Price competition has been particularly intense as competitors selling Windows-based personal computers have aggressively cut prices and lowered product margins.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
264
An increasing number of Internet-enabled devices that include software applications and are smaller and simpler than traditional personal computers compete for market share with the Company’s existing products.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
265
The Company’s financial condition and operating results also depend on its ability to continually improve the Mac platform to maintain its functional and design advantages.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
266
There can be no assurance the Company will be able to continue to provide products and services that compete effectively.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
267
To remain competitive and stimulate customer demand, the Company must successfully manage frequent product introductions and transitions.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
268
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.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
269
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 product production ramp-up issues, the availability of application software for new products,...
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
270
Accordingly, the Company cannot determine in advance the ultimate effect of new product introductions and transitions.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
271
The Company depends on the performance of distributors, carriers and other resellers.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
272
The Company distributes its products through cellular network carriers, wholesalers, national and regional retailers, and value-added resellers, many of whom distribute products from competing manufacturers.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
273
The Company also sells its products and third-party products in most of its major markets directly to education, enterprise and government customers, and consumers and small and mid-sized businesses through its online and retail stores.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
274
Carriers providing cellular network service for iPhone typically subsidize users’ purchases of the device.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
275
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.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
276
Many resellers have narrow operating margins and have been adversely affected in the past by weak economic conditions.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
277
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.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
278
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.
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0000320193
20131030
10-K
279
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.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
280
These programs could require a substantial investment while providing no assurance of return or incremental revenue.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
281
The financial condition of these resellers could weaken, these resellers could stop distributing the Company’s products, or uncertainty regarding demand for the Company’s products could cause resellers to reduce their ordering and marketing of the Company’s products.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
282
The Company faces substantial inventory and other asset risk in addition to purchase commitment cancellation risk.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
283
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.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
284
The Company also reviews its long-lived assets, including capital assets held at its suppliers’ facilities and inventory prepayments, for impairment whenever events or circumstances indicate the carrying amount of an asset may not be recoverable.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
285
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 value.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
286
Although the Company believes its provisions related to inventory, capital assets, inventory prepayments and 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 i...
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
287
The Company must order components for its products and build inventory in advance of product announcements and shipments.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
288
Consistent with industry practice, components are normally acquired through a combination of purchase orders, supplier contracts, and open orders, in each case based on projected demand.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
289
Where appropriate, the purchases are applied to inventory component prepayments that are outstanding with the respective supplier.
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0000320193
20131030
10-K
290
Purchase commitments typically cover forecasted component and manufacturing requirements for periods up to 150 days.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
291
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.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
292
Future operating results depend upon the Company’s ability to obtain components in sufficient quantities.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
293
Because the Company currently obtains components from single or limited sources, the Company is subject to significant supply and pricing risks.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
294
Many components, including those that are available from multiple sources, are at times subject to industry-wide shortages and significant commodity pricing fluctuations.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
295
While the Company has entered into various agreements for the supply of components, there can be no assurance that the Company will be able to extend or renew these agreements on similar terms, or at all.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
296
The follow-on effects from global economic conditions on the Company’s suppliers, described in “Global economic conditions could materially adversely affect the Company” above, also could affect the Company’s ability to obtain components.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
297
Therefore, the Company remains subject to significant risks of supply shortages and price increases.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
298
The Company and other participants in the markets for mobile communication and media devices and personal computers also compete for various components with other industries that have experienced increased demand for their products.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
299
The Company uses some custom components that are not common to the rest of these industries.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
300
The Company’s new products often utilize custom components available from only one source.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
301
When a component or product uses new technologies, initial capacity constraints may exist until the suppliers’ yields have matured or manufacturing capacity has increased.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
302
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.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
303
The supply of components for a new or existing product could be delayed or constrained, or a key manufacturing vendor could delay shipments of completed products to the Company.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
304
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.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
305
Substantially all of the Company’s manufacturing is performed in whole or in part by a few outsourcing partners located primarily in Asia.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
306
The Company has also outsourced much of its transportation and logistics management.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
307
While these arrangements may lower operating costs, they also reduce the Company’s direct control over production and distribution.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
308
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.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
309
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 and could experience an unanticipated product defect or warranty liability.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
310
While the Company relies on its partners to adhere to its supplier code of conduct, material violations of the supplier code of conduct could occur.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
311
The Company relies on sole-sourced outsourcing partners in the U.S., Asia and Europe to supply and manufacture many critical components, and on outsourcing partners in Asia for final assembly of substantially all of the Company’s hardware products.
0001193125-13-416534/full-submission.txt
0000320193
20131030
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Any failure of these partners to perform may have a negative impact on the Company’s cost or supply of components or finished goods.
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0000320193
20131030
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In addition, manufacturing or logistics in these locations or transit to final destinations may be disrupted for a variety of reasons including, but not limited to, natural and man-made disasters, information technology system failures, commercial disputes, military actions or economic, business, labor, environmental, ...
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
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The Company has invested in manufacturing process equipment, much of which is held at certain of its outsourcing partners, and has made prepayments to certain of its suppliers associated with long-term supply agreements.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
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While these arrangements help ensure the supply of components and finished goods, if these outsourcing partners or suppliers experience severe financial problems or other disruptions in their business, the net realizable value of these assets could be negatively impacted.
0001193125-13-416534/full-submission.txt
0000320193
20131030
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The Company’s products and services may experience quality problems from time to time that can result in decreased sales and operating margin and harm to the Company’s reputation.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
317
The Company sells complex hardware and software products and services that can contain design and manufacturing defects.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
318
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.
0001193125-13-416534/full-submission.txt