Apple 2000 Annual Report Download - page 24

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continual improvement in product price/performance characteristics, price sensitivity on the part of consumers, and a large number of
competitors. The Company's 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 personal computer industry has also been characterized by
rapid technological advances in software functionality, hardware performance, and features based on existing or emerging industry standards.
Further, as the personal computer industry and its customers place more reliance on the Internet, an increasing number of Internet devices that
are smaller and simpler than traditional personal computers may compete for market share with the Company's existing products. Several
competitors of the Company have either targeted or announced their intention to target certain of the Company's key market segments,
including consumer, education, and design and publishing. Additionally, several of the Company's competitors have introduced or announced
plans to introduce products that mimic many of the unique design, technical features, and solutions of the Company's products. Many of the
Company's competitors have greater financial, marketing, manufacturing, and technological resources, as well as broader product lines and
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 only maker of hardware using the Mac OS. The Mac OS has a minority market share in the personal computer
market, which is dominated by makers of computers utilizing Microsoft Windows operating systems. The Company's future operating results
and financial condition are substantially dependent on its ability to continue to develop improvements to the Macintosh platform in order to
maintain perceived design and functional advantages over competing platforms.
PRODUCT INTRODUCTIONS AND TRANSITIONS
Due to the highly volatile nature of the personal computer industry, which is characterized by dynamic customer demand patterns and rapid
technological advances, the Company must continually introduce new products and technologies and enhance existing products in order to
remain competitive. The success of new product introductions is dependent on a number of factors, 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 in advance the ultimate effect that new products will have on its sales or results of operations.
During 2001, the Company plans to introduce a new client operating system, Mac OS X, which will offer advanced functionality based on
Apple and NeXT software technologies. Inability to successfully introduce Mac OS X on a timely basis, gain customer acceptance, obtain the
commitment of developers to transition existing applications to run on Mac OS X, or ensure adequate backward-compatibility of Mac OS X
with applications authored for previous version of the Mac OS, may have an adverse impact on the Company's operating results and financial
condition.
INVENTORY AND SUPPLY
The Company records a write-down for inventories of components and products that have become obsolete or are in excess of anticipated
demand or net realizable value and accrues necessary reserves for cancellation fees of orders for inventories that have been canceled. Although
the Company believes its inventory and related provisions are adequate, given the rapid and unpredictable pace of product obsolescence in the
computer industry, no assurance can be given the Company will not incur additional inventory and related charges. In addition, such charges
have had, and may again have, a material effect on the Company's financial position and results of operations.
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