Apple 2002 Annual Report Download - page 22

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The Americas segment's 2001 net sales and unit sales declined 30% and 29%, respectively, from 2000. The operating performance of the
Americas segment for 2001 reflects the Company's overall performance characterized by significant declines in year-over-year quarterly net
sales and units sales, particularly during the first quarter and particularly in consumer channels, with sequential increases in unit sales and net
sales during each of the last three quarters of 2001. Net sales in the Americas segment during 2001 were also negatively affected by the
Company's overall reduction in channel inventories during the year. Consumer sales in the Americas were particularly hard hit by current
economic conditions. Outside of the U.S. education channel, unit sales of the Company's consumer oriented iMac fell 64% in 2001. The effect
of falling consumer demand in the Americas segment was partially offset by strong U.S. education sales. The Company's unit sales in U.S.
education markets rose 7% in 2001 driven by the acceptance of the
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Company's new portable products, particularly the iBook, and reflect a general shift in demand in the U.S. education market towards portable
versus desktop systems. Portable systems accounted for 28% of total unit sales in the Company's U.S. education market in 2001 compared to
18% during 2000.
During 2002 and 2001, the Americas segment represented approximately 54% and 56%, respectively, of the Company's total net sales and
represented approximately 56% and 57%, respectively, of total Macintosh unit sales.
Europe
Economic conditions in Europe remained weak throughout 2002, and the overall demand for the Company's products in that region remained
flat during 2002 versus 2001. Unit sales in Europe for 2002 reflect relatively stronger demand for consumer-oriented products, particularly
iBook whose unit sales increased 27% in 2002, offset by declines in Power Macintosh unit sales.
Net sales in Europe fell $568 million or 31% during 2001 compared to 2000, while Europe's unit sales fell 32%. Europe's results reflect the
worsening economic climate in Europe in the latter half of 2001 and reductions in channel inventories as experienced in the Company's other
geographic operating segments. Combined unit sales of the Company's consumer oriented products in Europe were particularly impacted
during 2001, falling 40% from 2000.
Japan
Net sales in Japan remained flat during 2002 versus 2001, with a slight decline in unit sales of 2%. Consistent with the Company's other
geographic operating segments, during 2002 Japan showed growth in unit sales of consumer systems and a decline in unit sales of Power
Macintosh systems. Japan's iMac unit sales increased 85% in 2002. However, in the case of Japan the increase in iMac unit shipments in 2002
versus 2001 was primarily the result of the unusually depressed level of net sales experienced by the Company in the first quarter of 2001
discussed above. Additionally, net sales in Japan on a sequential and year-over-year comparative basis generally worsened as 2002 progressed
reflecting particularly poor economic conditions that currently exist in Japan.
Net sales and unit sales in Japan fell 47% and 46%, respectively, in 2001 versus 2000. Although unit sales and net sales in Japan have generally
trended upwards as 2001 progressed, the Japan segment has been particularly affected by current unfavorable economic conditions. Reflecting
the continuing harsh consumer climate in Japan, the Japan segment's combined unit sales of iMacs and iBooks during 2001 were down 58%
from 2000, and professionally oriented systems unit sales fell 30%.
Retail
By the end of September 2002, the Company had 40 retail stores operating in the United States, 32 of which were opened during fiscal 2002.
The Company has opened 11 additional stores during the first quarter of 2003. During 2002, approximately 39% of the Retail segment's net
sales came from the sale of Apple-branded and third-party peripherals and software. This compares to 21% for the Company as a whole. With
an average of 35 stores open, the Retail segment achieved average annualized revenue per store during the fourth quarter of approximately
$12 million and had approximately 2.25 million visitors. The Retail segment reported a loss for all of 2002 of $22 million, and a loss for the
fourth quarter of 2002 of $3 million.
Expansion of the Retail segment has required and will continue to require a substantial investment in fixed assets and related infrastructure,
operating lease commitments, personnel, and other operating expenses. Capital expenditures associated with the Retail segment totaled
$106 million in 2002 and $92 million in 2001. As of September 28, 2002, the Retail segment had 807 employees and had outstanding operating
lease commitments associated with retail store space and related facilities of $209 million. The Company would incur substantial costs should
it choose to terminate its Retail segment or close individual stores. Such costs could adversely affect the Company's results of operations and
financial condition. Investment
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