Apple 1999 Annual Report Download - page 28

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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 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. 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 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 following expiration of the agreements 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 the benefits to the Company of the Microsoft relationship will not be offset by the
disadvantages.
EURO CONVERSION
On January 1, 1999, eleven of the fifteen member countries of the European Union adopted the Euro as their common legal currency and
established fixed conversion rates between their existing sovereign currencies and the Euro. The Euro is now traded on currency exchanges and
is available for non-cash transactions. A three year transition period began during which transactions can be made in the old currencies.
The Company has taken steps to evaluate internal system capabilities, review the ability of financial institution vendors to support Euro
transactions, and examine current marketing and pricing policies and strategies in light of the Euro conversion. The cost of this effort is not
expected to have a material adverse effect on the Company's results of operations or financial condition. There can be no assurance, however,
all issues related to the Euro conversion have been identified and that any additional issues would not have a material effect on the Company's
results of operations or financial condition. The conversion to the Euro may have competitive implications on the Company's pricing and
marketing strategies, the impact of which are not known at this time. Additionally, the Company is at risk to the extent its principal European
suppliers and customers are unable to deal effectively with the impact of the Euro conversion.
OTHER FACTORS
The potential risks associated with the Company's Y2K Plan are discussed above under the heading "Year 2000 Compliance."
The majority of the Company's research and development activities, its corporate headquarters, and other critical business operations, including
certain major vendors, are located near major seismic faults. The Company's operating results and financial condition could be materially
adversely affected in the event of a major earthquake.
Production and marketing of products in certain states and countries may subject the Company to environmental and other regulations
including, in some instances, the requirement that the Company provide consumers with the ability to return to the Company product at the end
of its useful life, and leave responsibility for environmentally safe disposal or recycling with the Company. Although the Company does not
anticipate any material adverse effects in the future based on the nature of its operations and the thrust of such laws, no assurance can be given
such laws, or any future laws enacted for the protection of the environment, will not have a material adverse effect on the Company.
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