Apple 2005 Annual Report Download - page 17

ownership thereof, the Company relies primarily on the innovative skills, technical competence, and marketing abilities of its personnel.
Many of the Company’s products are designed to include intellectual property obtained from third-parties. While it may be necessary in the
future to seek or renew licenses relating to various aspects of its products and business methods, the Company believes that, based upon past
experience and industry practice, such licenses generally could be obtained on commercially reasonable terms; however, there is no guarantee
that such licenses could be obtained at all. Because of technological changes in the computer industry, current extensive patent coverage, and
the rapid rate of issuance of new patents, it is possible certain components of the Company’s products and business methods may unknowingly
infringe existing patents of others. From time to time, the Company has been notified that it may be infringing certain patents or other
intellectual property rights of third-parties.
Foreign and Domestic Operations and Geographic Data
The U.S. represents the Company’s largest geographic marketplace. Approximately 60% of the Company’s net sales in 2005 came from sales
to customers inside the U.S. Final assembly of products sold by the Company is conducted in the Company’s manufacturing facility in Cork,
Ireland, and by external vendors in Fremont, California, Fullerton, California, Taiwan, Korea, the People’s Republic of China, and the Czech
Republic. Currently, manufacture of many of the components used in the Company’s products and final assembly of substantially all of the
Company’s portable products including PowerBooks, iBooks, and iPods are performed by third-
party vendors in China. Margins on sales of the
Company’s products in foreign countries, and on sales of products that include components obtained from foreign suppliers, can be adversely
affected by foreign currency exchange rate fluctuations and by international trade regulations, including tariffs and antidumping penalties.
Information regarding financial data by geographic segment is set forth in Part II, Item 8 of this Form 10-K in the Notes to Consolidated
Financial Statements at Note 11, “Segment Information and Geographic Data.”
Seasonal Business
The Company has historically experienced increased net sales in its first and fourth fiscal quarters compared to other quarters in its fiscal year
due to seasonal demand related to the holiday season and the beginning of the school year. This historical pattern should not be considered a
reliable indicator of the Company’s future net sales or financial performance.
Warranty
The Company offers a basic limited parts and labor warranty on its hardware products. The basic warranty period for hardware products is
typically one year from the date of purchase by the end-user. The Company also offers a 90-day basic warranty for its service parts used to
repair the Company’s hardware products. In addition, consumers may purchase extended service coverage on most of the Company’
s hardware
products in all of its major markets.
Backlog
In the Company’s experience, the actual amount of product backlog at any particular time is not a meaningful indication of its future business
prospects. In particular, backlog often increases in anticipation of or immediately following new product introductions because of over-
ordering by dealers anticipating shortages. Backlog often is reduced once dealers and customers believe they can obtain sufficient supply.
Because of the foregoing, backlog should not be considered a reliable indicator of the Company’s ability to achieve any particular level of
revenue or financial performance.
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