Apple 1998 Annual Report Download - page 22

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CONTINGENCY PLANS
The Company has not completed its assessment of the reasonably likely worst case scenario of Non-IT Business System and/or IT Systems
failures and related consequences. However, the Company is in the process of preparing specific Y2K contingency plans to mitigate the
potential impact of such failures. This effort includes both internal and external resources under the guidance and management of the PMO.
The Company's contingency plans, which will be based in part on the assessment of the magnitude and probability of potential risks, will
primarily focus on steps to prevent Y2K failures from occurring, or if they should occur, to detect them quickly, minimize their impact and
expedite their repair. The Y2K contingency plans are expected to include measures such as selecting alternative suppliers and channels of
distribution. Development of the Y2K contingency plans is expected to be substantially complete by the end of September 1999.
FACTORS THAT MAY AFFECT FUTURE RESULTS AND FINANCIAL CONDITION
RESTRUCTURING OF OPERATIONS
During 1996, the Company began to implement certain restructuring actions aimed at reducing its cost structure, improving its competitiveness,
and restoring sustainable profitability. During 1997, the Company announced and began to implement supplemental restructuring actions,
including significant headcount reductions, to meet the foregoing objectives. All material restructuring actions contemplated under the plan are
essentially complete as of September 25, 1998. Implementation of this restructuring involved several risks, including the risk that by
simplifying and modifying its product line the Company has increased its dependence on fewer products, reduced overall sales, and increased
its reliance on unproven products and technology. Another risk of the restructuring is that by increasing the proportion of the Company's
products to be manufactured under outsourcing arrangements, the Company has less control over the quality and quantity of the products
manufactured and distributed, and has less flexibility to make timely changes in production schedules in order to respond to changing market
conditions. As part of its restructuring plan, the Company also significantly reduced the number of its wholesale and retail channel partners,
particularly in the Americas, which places a greater volume of sales through fewer partners. There can be no assurance that this will not
adversely impact the Company. In addition, the restructuring included the winding down of the Company's Mac OS licensing program. There
can be no assurance that the winding down of this program will result in any greater sales, market share, or increased gross margins to the
Company. Although the Company believes that the actions it has taken in connection with the restructuring, including the winding down of its
Mac OS licensing program, have contributed to reductions in the company's cost structure and increased gross margins experienced in fiscal
1998, there can be no assurance that such actions have restored the Company to sustainable profitability. The Company's future consolidated
operating results and financial condition could be adversely affected should it encounter difficulty in effectively maintaining its new cost
structure.
Additional information relating to the restructuring of operations may be found in Part II, Item 8 of this Form 10-K in the Notes to
Consolidated Financial Statements at Note 4 under the subheading "Restructuring of Operations," which information is hereby incorporated by
reference.
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 competitive. Recent introductions include iMac, an innovatively designed lower priced desktop computer aimed at the education and
consumer markets, certain PowerBook and G3 Power Macintosh products, and the introduction of Mac OS 8.5 in October 1998. The success of
new product introductions is dependent on a number of factors,
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