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0000320193
20131030
10-K
319
The Company’s online services may from time to time experience outages, service slowdowns, or errors.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
320
Defects may also occur in components and products the Company purchases from third parties.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
321
There can be no assurance the Company will be able to detect and fix all defects in the hardware, software and services it sells.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
322
Failure to do so could result in lost revenue, significant warranty and other expenses, and harm to the Company’s reputation.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
323
The Company relies on access to third-party digital content, which may not be available to the Company on commercially reasonable terms or at all.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
324
The Company contracts with numerous third parties to offer their digital content through the iTunes Store.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
325
This includes the right to make available music, movies, TV shows and books currently available through the iTunes Store.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
326
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.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
327
Some third-party content providers and distributors 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.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
328
Other content owners, providers or distributors may seek to limit the Company’s access to, or increase the cost of, such content.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
329
The Company may be unable to continue to offer a wide variety of content at reasonable prices with acceptable usage rules, or continue to expand its geographic reach.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
330
Failure to obtain the right to make available third-party digital content, or to make available such content on commercially reasonable terms, could have a material adverse impact on the Company’s financial condition and operating results.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
331
Some third-party digital content providers require the Company to provide digital rights management and other security solutions.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
332
If requirements change, the Company may have to develop or license new technology to provide these solutions.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
333
There is no assurance the Company will be able to develop or license such solutions at a reasonable cost and in a timely manner.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
334
In addition, certain countries have passed or may propose and adopt legislation that would force the Company to license its digital rights management, which could lessen the protection of content and subject it to piracy and also could negatively affect arrangements with the Company’s content providers.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
335
The Company’s future performance depends in part on support from third-party software developers.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
336
The Company believes decisions by customers to purchase its hardware products depend in part on the availability of third-party software applications and services.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
337
There is no assurance that third-party developers will continue to develop and maintain software applications and services for the Company’s products.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
338
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.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
339
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...
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
340
This analysis may be based on factors such as the market position of the Company and its products, the anticipated revenue that may be generated, continued growth of Mac sales, and the costs of developing such applications and services.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
341
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...
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
342
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.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
343
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.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
344
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.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
345
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’ platforms, such as Android.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
346
If developers focus their efforts on these competing platforms, the availability and quality of applications for the Company’s iOS devices may suffer.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
347
The Company relies on access to third-party intellectual property, which may not be available to the Company on commercially reasonable terms or at all.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
348
Many of the Company’s products include third-party intellectual property, which requires licenses from those third parties.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
349
Based on past experience and industry practice, the Company believes such licenses generally can be obtained on reasonable terms.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
350
There is, however, no assurance that the necessary licenses can be obtained on acceptable terms or at all.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
351
Failure to obtain the right to use third-party intellectual property, or to use such intellectual property on commercially reasonable terms, could preclude the Company from selling certain products or otherwise have a material adverse impact on the Company’s financial condition and operating results.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
352
The Company could be impacted by unfavorable results of legal proceedings, such as being found to have infringed on intellectual property rights.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
353
The Company is subject to various legal proceedings and claims that have not yet been fully resolved and that have arisen in the ordinary course of business, and additional claims may arise in the future.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
354
For example, 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.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
355
In addition, patent holding companies seek to monetize patents they have purchased or otherwise obtained.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
356
As the Company has grown, the intellectual property rights claims against it have increased and may continue to increase.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
357
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.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
358
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.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
359
The plaintiffs in these actions frequently seek injunctions and substantial damages.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
360
Regardless of the scope or validity of such patents or other intellectual property rights, or the merits of any claims by potential or actual litigants, the Company may have to engage in protracted litigation.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
361
If the Company is found to infringe one or more patents or other intellectual property rights, regardless of whether it can develop non-infringing technology, it may be required to pay substantial damages or royalties to a third-party, or it may be subject to a temporary or permanent injunction prohibiting the Company ...
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
362
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.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
363
These licenses may also significantly increase the Company’s operating expenses.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
364
Regardless of the merit of particular claims, litigation may be expensive, time-consuming, disruptive to the Company’s operations, and distracting to management.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
365
In recognition of these considerations, the Company may enter into arrangements to settle litigation.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
366
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.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
367
However, the outcome of litigation is inherently uncertain.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
368
Although management considers the likelihood of such an outcome to be remote, if one or more legal matters were resolved against the Company in a reporting period for amounts in excess of management’s expectations, the Company’s consolidated financial statements for that reporting period could be materially adversely a...
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
369
Further, such an outcome could result in significant compensatory, punitive or trebled monetary damages, disgorgement of revenue or profits, remedial corporate measures or injunctive relief against the Company that could materially adversely affect its financial condition and operating results.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
370
The Company is subject to laws and regulations worldwide, changes to which could increase the Company’s costs and individually or in the aggregate adversely affect the Company’s business.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
371
The Company is subject to laws and regulations affecting its domestic and international operations in a number of areas.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
372
These U.S. and foreign laws and regulations affect the Company’s activities including, but not limited to, areas of labor, advertising, digital content, consumer protection, real estate, billing, e-commerce, promotions, quality of services, telecommunications, mobile communications and media, television, intellectual p...
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
373
By way of example, laws and regulations related to mobile communications and media devices in the many jurisdictions in which the Company operates are extensive and subject to change.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
374
Such changes could include, among others, restrictions on the production, manufacture, distribution, and use of devices, locking devices to a carrier’s network, or mandating the use of devices on more than one carrier’s network.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
375
These devices are also subject to certification and regulation by governmental and standardization bodies, as well as by cellular network carriers for use on their networks.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
376
These certification processes are extensive and time consuming, and could result in additional testing requirements, product modifications, delays in product shipment dates, or preclude the Company from selling certain products.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
377
Compliance with these laws, regulations and similar requirements may be onerous and expensive, and they may be inconsistent from jurisdiction to jurisdiction, further increasing the cost of compliance and doing business.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
378
Any such costs, which may rise in the future as a result of changes in these laws and regulations or in their interpretation could individually or in the aggregate make the Company’s products and services less attractive to the Company’s customers, delay the introduction of new products in one or more regions, or cause...
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
379
The Company has implemented policies and procedures designed to ensure compliance with applicable laws and regulations, but there can be no assurance that the Company’s employees, contractors, or agents will not violate such laws and regulations or the Company’s policies and procedures.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
380
The Company’s business is subject to the risks of international operations.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
381
The Company derives a significant portion of its revenue and earnings from its international operations.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
382
Compliance with applicable U.S. and foreign laws and regulations, such as import and export requirements, anti-corruption laws, tax laws, foreign exchange controls and cash repatriation restrictions, data privacy requirements, environmental laws, labor laws, and anti-competition regulations, increases the costs of doin...
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
383
Although the Company has implemented policies and procedures to comply with these laws and regulations, a violation by the Company’s employees, contractors, or agents could nevertheless occur.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
384
The Company also could be significantly affected by other risks associated with international activities including, but not limited to, economic and labor conditions, increased duties, taxes and other costs, and political instability.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
385
Margins on sales of the Company’s products in foreign countries, and on sales of products that include components obtained from foreign suppliers, could be materially adversely affected by international trade regulations, including duties, tariffs and antidumping penalties.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
386
The Company is also exposed to credit and collectability risk on its trade receivables with customers in certain international markets.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
387
There can be no assurance the Company can effectively limit its credit risk and avoid losses.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
388
The Company’s Retail segment has required and will continue to require a substantial investment and commitment of resources and is subject to numerous risks and uncertainties.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
389
The Company’s retail stores have required substantial investment in equipment and leasehold improvements, information systems, inventory and personnel.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
390
The Company also has entered into substantial operating lease commitments for retail space.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
391
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.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
392
Because of their unique design elements, locations and size, these stores require substantially more investment than the Company’s more typical retail stores.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
393
Due to the high 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.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
394
Many factors unique to retail operations, some of which are beyond the Company’s control, pose risks and uncertainties.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
395
These risks and uncertainties include, but are not limited to, macro-economic factors that could have an adverse effect on general retail activity, as well as the Company’s inability to manage costs associated with store construction and operation, the Company’s failure to manage relationships with its existing retail ...
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
396
Investment in new business strategies and acquisitions could disrupt the Company’s ongoing business and present risks not originally contemplated.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
397
The Company has invested, and in the future may invest, in new business strategies or acquisitions.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
398
Such endeavors may involve significant risks and uncertainties, including distraction of management from current operations, greater than expected liabilities and expenses, inadequate return of capital, and unidentified issues not discovered in the Company’s due diligence.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
399
These new ventures are inherently risky and may not be successful.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
400
The Company’s business and reputation may be impacted by information technology system failures or network disruptions.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
401
The Company may be subject to information technology system failures and network disruptions.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
402
These may be caused by natural disasters, accidents, power disruptions, telecommunications failures, acts of terrorism or war, computer viruses, physical or electronic break-ins, or other events or disruptions.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
403
System redundancy may be ineffective or inadequate, and the Company’s disaster recovery planning may not be sufficient for all eventualities.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
404
Such failures or disruptions could prevent access to the Company’s online stores and services, preclude retail store transactions, compromise Company or customer data, and result in delayed or cancelled orders.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
405
System failures and disruptions could also impede the manufacturing and shipping of products, delivery of online services, transactions processing and financial reporting.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
406
There may be breaches of the Company’s information technology systems that materially damage business partner and customer relationships, curtail or otherwise adversely impact access to online stores and services, or subject the Company to significant reputational, financial, legal, and operational consequences.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
407
The Company’s business requires it to use and store customer, employee, and business partner personally identifiable information (“PII”).
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
408
This may include, among other information, names, addresses, phone numbers, email addresses, contact preferences, tax identification numbers, and payment account information.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
409
Although malicious attacks to gain access to PII affect many companies across various industries, the Company is at a relatively greater risk of being targeted because of its high profile and the amount of PII it manages.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
410
The Company requires user names and passwords in order to access its information technology systems.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
411
The Company also uses encryption and authentication technologies to secure the transmission and storage of data and prevent access to Company data or accounts.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
412
As with all companies, these security measures are subject to third-party security breaches, employee error, malfeasance, faulty password management, or other irregularities.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
413
For example, third parties may attempt to fraudulently induce employees or customers into disclosing user names, passwords or other sensitive information, which may in turn be used to access the Company’s information technology systems.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
414
To help protect customers and the Company, the Company monitors accounts and systems for unusual activity and may freeze accounts under suspicious circumstances, which may result in the delay or loss of customer orders.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
415
The Company devotes significant resources to network security, data encryption, and other security measures to protect its systems and data, but these security measures cannot provide absolute security.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
416
To the extent the Company was to experience a breach of its systems and was unable to protect sensitive data, such a breach could materially damage business partner and customer relationships, and curtail or otherwise adversely impact access to online stores and services.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
417
Moreover, if a computer security breach affects the Company’s systems or results in the unauthorized release of PII, the Company’s reputation and brand could be materially damaged, use of the Company’s products and services could decrease, and the Company could be exposed to a risk of loss or litigation and possible li...
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
418
The Company’s business is subject to a variety of U.S. and international laws, rules, policies and other obligations regarding data protection.
0001193125-13-416534/full-submission.txt