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PART I
The Business section and other parts of this Annual Report on Form 10-K (“Form 10-K”) contain forward-looking statements that involve
risks and uncertainties. Many of the forward-looking statements are located in “Management’s Discussion and Analysis of Financial
Condition and Results of Operations.” Forward-looking statements can also be identified by words such as “anticipates,” “expects,”
“believes,” “plans,” “predicts,” and similar terms. Forward-looking statements are not guarantees of future performance and the Company’s
actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences
include, but are not limited to, those discussed in the subsection entitled “Factors That May Affect Future Results and Financial Condition”
under Part II, Item 7 of this Form 10-K. The Company assumes no obligation to revise or update any forward-looking statements for any
reason, except as required by law.
Item 1. Business
Company Background
Apple Computer, Inc. (“Apple” or the “Company”) was incorporated under the laws of the State of California on January 3, 1977. 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. The Company also sells a variety of third-party products that are compatible with the Company’s Macintosh and
iPod product lines, including computer printers and printing supplies, storage devices, computer memory, digital camcorders and still cameras,
personal digital assistants, iPod accessories, and various other computing products and supplies through its online and retail stores. The
Company’s fiscal year ends on the last Saturday of September. Unless otherwise stated, all information presented in this Form 10-
K is based on
the Company’s fiscal calendar.
Business Strategy
The Company is committed to bringing the best personal computing and music experience to students, educators, creative professionals,
businesses, government agencies, and consumers through its innovative hardware, software, peripherals, services, and Internet offerings. 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 new products and solutions with superior ease-of-use, seamless
integration, and innovative industrial design. The Company believes continual investment in research and development is critical to facilitate
innovation of new and improved products and technologies. Besides updates to its existing line of personal computers and related software,
services, peripherals, and networking solutions, the Company continues to capitalize on the convergence of digital consumer electronics and
the computer by creating innovations like the iPod and iTunes Music Store. The Company’s strategy also includes expanding its distribution
network to effectively reach more of its targeted customers and provide them a high-quality sales and after-sales support experience.
Digital Hub
The Company believes personal computing is in an era in which the personal computer functions for both professionals and consumers as the
digital hub for advanced new digital devices such as the Company’s
1