Apple 1999 Annual Report Download - page 23

end of the fourth quarter of fiscal 1999. Although numerous third parties have advised the Company they are addressing their Y2K issues, the
readiness of third parties overall varies widely. Because the Company's Y2K compliance is dependent on the timely Y2K compliance of third
parties, there can be no assurances the Company's efforts alone will resolve all Y2K issues. The Company continues to communicate with and
monitor the compliance efforts of key third parties. The Company will continue these efforts with key third parties through the date rollover
and into January 2000.
IT SYSTEMS AND NON-IT BUSINESS SYSTEMS
Phase I--Inventory and Risk Assessment:
This Phase requires an inventory and assessment of the Non-IT Business Systems used by the Company, including systems with embedded
technology, building access systems, and health and safety systems. This Phase also includes inventory and assessment of IT Systems used by
the Company, including large IS&T systems, desktop hardware and software, and network hardware and software. Each system is evaluated
and the business risk is quantified as being High, Medium or Low Risk to the Company's business. Systems that are High Risk are those, which
if uncorrected, would cause an interruption of or complete failure to conduct the Company's business. Medium Risks are those that would
negatively impact the business but complete cessation could be avoided with some inconvenience. Low Risks are those where the risk to
business interruption or cessation are remote. The Company intends that High and Medium Risk items will be remediated or replaced, and Low
Risk items will likely not be addressed prior to the Year 2000. The status of the Company's remediation efforts is discussed below. The
Company had substantially completed the Inventory and Risk Assessment Phase for both IT Systems and Non-IT Systems by the end of the
third quarter of fiscal 1999. However, the Company has and will continue to review information developed as the result of its Y2K Plan, which
could result in additional items being added to its Y2K inventory.
Phase II--Remediation Cost Estimation:
This Phase involves the analysis of each High and Medium Risk to determine how such risks may be remediated and the cost of such
remediation. The Company has substantially completed this Phase for both IT and Non-IT Business Systems.
Phase III--Remediation:
This Phase includes the replacement or correction of the High and Medium Risk Non-IT Business Systems and IT Systems. The Company
substantially completed this Phase for both IT and Non-IT Business Systems during the fourth quarter of fiscal 1999.
Phase IV--Remediation Testing:
This Phase includes the future date testing of the remediation efforts made in Phase III to confirm that the changes made bring the affected
systems into compliance, no new problems have arisen as a result of the remediation, and new systems that replaced noncompliant systems are
Y2K compliant. The Company substantially completed this Phase for both IT and Non-IT Business Systems during the first quarter of fiscal
2000.
COSTS TO ADDRESS Y2K
The costs of the Y2K program are primarily costs associated with the utilization of existing internal resources and incremental external
spending. The Company's current estimate of total incremental external spending over the life of its Y2K plan to address those risks identified
as High or Medium is approximately $10 million of which approximately $9 million had been spent as of September 25, 1999. As the
Company's Y2K Plan continues, the actual future incremental spending may prove to be higher. Also, this estimate does not include the costs
that could be incurred by the Company if one or more of its significant third party vendors fails to achieve Y2K compliance. The Company is
not separately identifying
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