Apple 1998 Annual Report Download - page 24

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companies have greater financial, marketing, manufacturing, and technological resources than the Company.
SUPPORT FROM THIRD-PARTY SOFTWARE DEVELOPERS
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. The Company believes that 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 Windows market. 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. To the extent the Company's financial losses in prior years and declining demand for the
Company's products, as well as the Company's decision to wind down its Mac OS licensing program, have caused software developers to
question the Company's prospects in the personal computer market, developers could be less inclined to develop new application software or
upgrade existing software for the Company's products and more inclined to devote their resources to developing and upgrading software for the
larger Windows market. Moreover, the Company's current plan to introduce Mac OS X could cause software developers to stop developing
software for the current Mac OS. In addition, there can be no assurance that software developers will decide to develop software for the new
operating system on a timely basis or at all.
In August 1997, the Company and Microsoft entered into patent cross licensing and technology agreements. In addition, for a period of five
years from August 1997 as 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, and the Company will bundle the Internet Explorer
product with Mac OS system software releases and make that product the default Internet browser for such releases. While the Company
believes that 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, including the Windows platform. Accordingly, Microsoft's interest in producing application software for the Mac OS
not covered by the relationship or upon expiration of the relationship may be influenced by Microsoft's perception of its interests as the vendor
of the Windows operating system. In addition, the Microsoft relationship may have an adverse effect on, among other things, the Company's
relationship with other partners. There can be no assurance that the benefits to the Company of the Microsoft relationship will not be offset by
the disadvantages.
GLOBAL MARKET RISKS
A large portion of the Company's revenue is derived from its international operations. As a result, the Company's consolidated 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 versus the
local currency in which the products are sold and goods and services are purchased.
Countries in the Asia Pacific region, including Japan, have recently experienced weaknesses in their currency, banking and equity markets.
These weaknesses have adversely affected and may continue to adversely affect consumer demand for the Company's products, the U.S. dollar
value of the Company's foreign currency denominated sales, the availability and cost of product components to the Company, and ultimately
the Company's consolidated results of operations.
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
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