Apple 2004 Annual Report Download - page 100

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Concentrations in the Available Sources of Supply of Materials and Product
Although most components essential to the Company's business are generally available from multiple sources, other key components (including
microprocessors and application-specific integrated circuits, or ("ASICs")) are currently obtained by the Company from single or limited
sources. Some other key components, while currently available to the Company from multiple sources, are at times subject to industry-wide
availability and pricing pressures. In addition, the Company uses some components that are not common to the rest of the personal computer
industry, and new products introduced by the Company often initially utilize custom components obtained from only one source until the
Company has evaluated whether there is a need for and subsequently qualifies additional suppliers. If the supply of a key single-sourced
component to the Company were to be delayed or curtailed or in the event a key manufacturing vendor delays shipments of completed products
to the Company, the Company's ability to ship related products in desired quantities and in a timely manner could be adversely affected. The
Company's business and financial performance could also be adversely affected depending on the time required to obtain sufficient quantities
from the original source, or to identify and obtain sufficient quantities from an alternative source. Continued availability of these components
may be affected if producers were to decide to concentrate on the production of common components instead of components customized to meet
the Company's requirements. Finally, significant portions of the Company's CPUs, logic boards, and assembled products are now manufactured
by outsourcing partners, the majority of which occurs in various parts of Asia. Although the Company works closely with its outsourcing
partners on manufacturing schedules, the Company's operating results could be adversely affected if its outsourcing partners were unable to meet
their production obligations.
Contingencies
Beginning on September 27, 2001, three shareholder class action lawsuits were filed in the U.S. District Court for the Northern District of
California against the Company and its Chief Executive Officer. These lawsuits are substantially identical, and purport to bring suit on behalf of
persons who purchased the Company's publicly traded common stock between July 19, 2000, and September 28, 2000. The complaints allege
violations of the 1934 Securities Exchange Act and seek unspecified compensatory damages and other relief. The Company believes these
claims are without merit and intends to defend them vigorously. The Company filed a motion to dismiss on June 4, 2002, which was heard by
the Court on September 13, 2002. On December 11, 2002, the Court granted the Company's motion to dismiss for failure to state a cause of
action, with leave to Plaintiffs to amend their complaint within thirty days. Plaintiffs filed their amended complaint on January 31, 2003, and on
March 17, 2003, the Company filed a motion to dismiss the amended complaint. The Court heard the Company's motion on July 11, 2003 and
dismissed Plaintiffs' claims with prejudice on August 12, 2003. Plaintiffs have appealed the ruling.
The Company is subject to certain other legal proceedings and claims that have arisen in the ordinary course of business and have not been fully
adjudicated. In the opinion of management, the Company does not have a potential liability related to any current legal proceedings and claims
that would individually or in the aggregate have a material adverse effect on its financial condition, liquidity or results of operations. However,
the results of legal proceedings cannot be predicted with certainty. Should the Company fail to prevail in any of these legal matters or should
several of these legal matters be resolved against the Company in the same reporting period, the operating results of a particular reporting period
could be materially adversely affected.
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 to provide customers
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