Apple 2004 Annual Report Download - page 27

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players along with related accessories and services including the online distribution of third-party music and audio books. The Company's
products and services include the Macintosh line of desktop and notebook computers, the iPod digital music player, the Xserve server and
Xserve RAID storage products, a portfolio of consumer and professional software applications, the Mac OS X operating system, the online
iTunes Music Store, a portfolio of peripherals that support and enhance the Macintosh and iPod product lines, and a variety of other service and
support offerings. The Company sells its products worldwide through its online stores, its own retail stores, its direct sales force, and third-party
wholesalers, resellers and value added resellers. In addition, the Company sells a variety of third-
party Macintosh compatible products, including
computer printers and printing supplies, storage devices, computer memory, digital video and still cameras, personal digital assistants, and
various other computing products and supplies through its online and retail stores. The Company sells to education, consumer, creative
professional, business and government customers. A further description of the Company's products may be found in Part I, Item 1 of this
document under the heading "Business."
The Company's business strategy leverages its unique ability, through the design and development of its own operating system, hardware and
many software applications and technologies, to bring to its customers around the world compelling new products and solutions with superior
ease-of-use, seamless integration and innovative industrial design.
The Company participates in several highly competitive markets, including personal computers with its Macintosh line of computers, consumer
electronics with its iPod line of digital music players and distribution of third-party digital music through its online iTunes Music Store. While
the Company is widely recognized as an innovator in the personal computer market as well as a leader in the emerging market for distribution of
digital music, these are highly competitive markets that are subject to aggressive pricing and increased competition. In order to remain
competitive, the Company believes that increased investment in research and development (R&D) is necessary in order to maintain and extend
its position in the markets where it competes. The Company's R&D spending is focused on delivering timely updates and enhancements to its
existing line of personal computers, displays, operating systems, software applications and portable music players; developing new digital
lifestyle consumer and professional software applications; and investing in new product areas such as rack-mount servers, RAID storage
systems, and wireless technologies.
The Company utilizes a variety of direct and indirect distribution channels. The Company believes that sales of its innovative and differentiated
products are enhanced by knowledgeable salespersons who can convey the value of the hardware, software and peripheral integration,
demonstrate the unique digital lifestyle solutions that are available only on Macintosh computers, and demonstrate the seamless compatibility of
the Macintosh with the Windows platform and networks. The Company further believes that providing a high-quality sales and after-sales
support experience is critical to attracting and retaining customers. To ensure a high-quality buying experience for its products in which service
and education are emphasized, the Company has expanded and improved its distribution capabilities by opening its own retail stores in the U.S.
and internationally. The Company had 86 stores open as of September 25, 2004.
The Company has also staffed selected third-party stores with the Company's own employees to improve the buying experience through reseller
channels. The Company has deployed Apple employees in reseller locations around the world including the U.S., Europe, Japan and Australia.
The Company also sells to customers direct through one of its online stores around the world.
To improve the accessibility of its iPod product line, the Company has significantly expanded the number of distribution points where iPods are
sold. The iPod product line can now be purchased in department stores, discount stores and specialty music and audio-visual stores.
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