Apple 2005 Annual Report Download - page 29

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calendar. The Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law.
Executive Overview
The Company designs, manufactures, and markets personal computers and related software, services, peripherals, and networking solutions.
The Company also designs, develops, and markets a line of portable digital music players along with related accessories and services including
the online distribution of third-party music, audio books, music videos, short films, and television shows. The Company’s products and
services include the Macintosh line of desktop and notebook computers, the iPod digital music player, the Xserve G5 server and Xserve RAID
storage products, a portfolio of consumer and professional software applications, the Mac OS X operating system, the 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 camcorders 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 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 content through its online iTunes Music Store.
While the Company is widely recognized as an innovator in the personal computer and consumer electronic markets as well as a leader in the
emerging market for distribution of digital content, these are all highly competitive markets that are subject to aggressive pricing and increased
competition. To remain competitive, the Company believes that increased investment in research and development (R&D) and marketing and
advertising is necessary 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 also believes investment in marketing and
advertising programs is critical to increasing product and brand awareness.
In June 2005, the Company announced its plan to begin using Intel microprocessors in its Macintosh computers. The Company plans to begin
shipping certain models with Intel microprocessors by June 2006 and to complete the transition of all of its Macintosh computers to Intel
microprocessors by the end of calendar year 2007. There are potential risks and uncertainties that may occur during this transition, which are
further discussed under the heading “Factors That May Affect Future Results and Financial Condition.”
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 compatibility of the
Macintosh with the Windows platform and networks. The Company further believes that providing a
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