Apple 2004 Annual Report Download - page 37

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were down 4% and 6%, respectively, compared to the same period in 2002. The Company believes this decline was caused by increased
competition in the education market and by a reduction in spending by U.S. educational institutions due to federal and state funding concerns
and tax revenue shortfalls resulting from the weak economy. Additionally, some of the decline during 2003 in net sales and unit sales of
Macintosh systems in the Americas segment may be the result of the operation of the Company's Retail segment whose net sales, all of which
occurred within the U.S., increased significantly during 2003.
Europe
Net sales in Europe rebounded in fiscal 2004 increasing $490 million or 37% from 2003. Total Macintosh unit sales in Europe also experienced
growth during the current year by increasing 13% in fiscal 2004 compared to 2003. Consistent with the Americas segment, Europe experienced
strong net sales across all product lines, except for the iMac systems. Demand in Europe during fiscal 2004 was particularly strong for the
Company's Power Macintosh systems and portable Macintosh systems, which experienced year-over-year increases of 29% and 42%,
respectively. Similar to the results of the Company's other segments, net sales of iPods, peripherals and software were strong in fiscal 2004.
Net sales in Europe increased $58 million or 5% during 2003 as compared to 2002 while Macintosh unit sales declined by 5% during the same
period. Europe's operating results were consistent with the trend experienced in the Americas and by the Company as a whole. Europe
experienced weakened demand for Power Macintosh, iMac and iBook systems in 2003, partially offset by strong demand for PowerBooks whose
net sales increased by 48% or $100 million from 2002. Europe also realized increased sales of iPods, peripherals, software, and services.
Japan
The Japan segment continues to be a challenge for the Company, with four consecutive years of year-over-year declines in both net sales and
Macintosh unit sales. Japan's net sales and unit sales were down 3% and 14%, respectively during fiscal 2004 compared to 2003, continuing to
lag behind all of the Company's other operating segments. These decreases in net sales and unit sales are believed to be attributable in part to a
shift in sales from the Japan segment to the Retail segment as a result of the opening of two stores in Japan in fiscal 2004. In addition, such
decreases may have been related to delayed computer system upgrades by some professional and creative customers who were awaiting the
release of Quark XPress 6 for Mac OS X, which did not occur until September 2004. The decrease in net sales was partially offset by strong iPod
and iBook sales during fiscal 2004 compared to 2003.
Net sales in Japan decreased $12 million or 2% during 2003 as compared to the same period in 2002, the weakest year
-to-date performance of
any of the Company's operating segments. Japan's Macintosh unit sales were particularly weak in 2003, declining 12%, and were primarily
attributable to lower sales of iMac and iBook systems, partially offset by an increase in PowerBook sales as well as higher sales of iPods, and
peripherals and other hardware. Japan's Macintosh unit sales remained significantly below the segment's historic levels due to economic
conditions that remained particularly negative in Japan.
Retail
The Company opened 21 new retail stores during 2004, including its first two international stores in Tokyo and Osaka, Japan, bringing the total
number of open stores to 86 as of September 25, 2004. This compares to 65 open stores as of September 27, 2003 and 40 open stores as of
September 28, 2002. During the first quarter of 2005, the Company anticipates opening approximately 14 additional stores to end the calendar
year at approximately 100 stores. Approximately half of the stores expected to open during the first quarter of 2005 will be in the new "mini"
store design, which is the Company's smallest store format to date; allowing it to be placed in a variety of new locations to introduce the
Company's innovative products to even more customers. The Company also opened its third international store in London, England during the
first quarter of 2005.
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