Apple 1998 Annual Report Download - page 23

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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 product demand, the availability of products in
appropriate quantities to meet anticipated demand, and the risk that new products may have quality or other defects in the early stages of
introduction. Accordingly, the Company cannot determine the ultimate effect that new products will have on its sales or results of operations.
In addition, although the number of new product introductions may decrease as a result of the Company's restructuring actions, the risks and
uncertainties associated with new product introductions may increase as the Company refocuses its product offerings on key growth segments
and to the extent new product introductions are in markets that are new to the Company.
The Company plans to continue to introduce major upgrades to the current Mac OS and later introduce a new operating system, Mac OS X,
which is expected to offer advanced functionality based on Apple and NeXT software technologies. It is uncertain whether Mac OS X will gain
developer support and market acceptance. Inability to successfully develop and make timely delivery of a substantially backward-compatible
Mac OS X or of planned enhancements to the current Mac OS, or to gain developer support and market acceptance for those operating systems,
may have an adverse impact on the Company's consolidated operating results and financial condition.
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 of consumers, and a large number of competitors. The Company's consolidated 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. The industry has also been characterized by rapid technological advances in software functionality and hardware performance
and features based on existing or emerging industry standards. 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.
The Company's future consolidated 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.
The Company is currently the primary maker of hardware that uses the Mac OS. The Mac OS has a minority market share in the personal
computer market, which is dominated by makers of computers that run Microsoft operating systems. The Company believes that the Mac OS,
with its perceived advantages over Windows, and the general reluctance of the Macintosh installed base to incur the costs of switching
platforms, have been driving forces behind sales of the Company's personal computer hardware for the past several years. Recent innovations
in the Windows platform, including those expected to be included in new versions of Windows, have added features to the Windows platform
that make the differences between the Mac OS and Microsoft's Windows operating systems less significant. The Company is currently taking
and will continue to take steps to respond to the competitive pressures being placed on its personal computer sales as a result of the recent
innovations in the Windows platform. The Company's future operating results and financial condition will be substantially dependent on its
ability to continue to develop improvements of the Macintosh platform in order to maintain perceived functional advantages over competing
platforms.
Several competitors of the Company have either targeted or announced their intention to target certain of the Company's key market segments,
including education and publishing. Many of these
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