Apple 1999 Annual Report Download - page 22

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The PMO developed and manages the Company's worldwide Y2K strategic plan (Y2K Plan) to address the potential impact of Y2K on the
Company's operations and business processes. In particular, the Y2K Plan addresses four principal areas that may be impacted by the Y2K
issue: Apple Branded Products; Third Party Relationships; Non-IT Business Systems; and IT Systems. With respect to the IT Systems and
Non
-IT Business Systems, the Y2K Plan consists of four separate but overlapping phases: Phase I--Inventory and Risk Assessment; Phase II--
Remediation Cost Estimation; Phase III--Remediation; and Phase IV--Remediation Testing. In addition, the Company has an ongoing Y2K
Awareness Program designed to keep employees informed about Y2K issues. The discussion below reflects management's estimate of the
current status of the four principal areas of the Company's Y2K Plan. Regardless of the current status, all areas of the Y2K Plan remain under
review and subject to modification as deemed necessary throughout the remainder of calendar 1999 through the date rollover and into January
2000.
APPLE BRANDED PRODUCTS
The Company designs and manufactures personal computers, related peripherals, operating system software and application software, including
Macintosh personal computers and the Mac OS, which are marketed under the "Apple" brand (collectively "Apple Branded Products"). The
Company tested certain Apple Branded Products to determine Y2K compliance, although such testing did not include third party products
bundled with Apple Branded Products and certain Apple Branded Products no longer distributed and/or supported by the Company. For
purposes of this discussion, Y2K compliant means a product will not produce errors processing date data in connection with the year change
from December 31, 1999, to January 1, 2000, when used with accurate date data in accordance with its documentation, provided all other
products (including other software, firmware and hardware) used with it properly exchange date data with it. A Y2K compliant product will
recognize the Year 2000 as a leap year. Information about testing and Y2K compliance of Apple Branded Products is available on the Apple
corporate web site under the heading "Year 2000 Readiness Disclosure", at www.apple.com/about/year/. Such information, which is updated
on an ongoing basis, is not to be considered part of this annual report. Because the Company does not control the design of non-Apple Branded
Products or third party products that are bundled with Apple Branded Products, it cannot assure such products are Y2K compliant.
Some Apple Branded Products installed at customer sites may require upgrades or other remediation. While the Company believes its
customers are responsible for the Y2K readiness of their IT and business environments, the Company has taken steps to assist customers in
achieving their readiness goals. Apple is issuing software updates (at no additional charge) for most, but not all, known issues in certain Apple
Branded Products.
THIRD PARTY RELATIONSHIPS
The Company's business operations are heavily dependent on third party corporate service vendors, materials suppliers, outsourced operations
partners, distributors and others. The Company is working with key external parties to identify and attempt to mitigate the potential risks to it
of Y2K. The failure of external parties to resolve their own Y2K issues in a timely manner could result in a material financial risk to the
Company. As part of its Y2K Plan and to establish the state of readiness of certain third parties, the Company is actively communicating on an
ongoing basis with certain third parties whose lack of Y2K compliance would present a high degree of risk to the Company. Based on
information obtained from various sources, the Company believes it is reasonably possible there will be interruptions around the world in
critical services such as air traffic control, airfreight transportation, customs clearance, telecommunications, and power utilities early in
calendar year 2000 that could result in shipping delays of raw material and finished goods. The Company also believes it is reasonably possible
that worldwide financial markets could exhibit unusual short-term volatility and liquidity disturbances at the end of calendar 1999 and at the
beginning of calendar 2000. Such events could result in material adverse effects on the Company's results of operations and financial position.
See further discussion regarding this issue below under the heading "Contingency Plans." The Company has substantially completed its review
of certain third parties as of the
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