Apple 2005 Annual Report Download - page 36

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computer accessories include AirPort cards and base stations, iSight digital video cameras, and third-party hardware products. The
increase in total net sales of peripherals and other hardware was related to the overall increase in Macintosh unit sales and the
introduction of new and updated peripheral products and was experienced predominantly by the Company’s Americas, Europe, and
Retail segments.
•
Net sales of other music related products and services increased $242 million or 672% during 2004 compared to 2003. The Company
experienced strong growth in sales of iPod services and accessories consistent with the increase in overall iPod unit sales for 2004. The
increased sales from the iTunes Music Store, which was originally introduced in April 2003, was primarily due to making the service
available for Windows in October 2003 and the introduction of the service in the U.K., France, and Germany in June 2004.
•
Net sales of software rose $140 million or 39% during 2004 compared to 2003 due primarily to higher net sales of the Company’s
Apple-branded software and in particular, higher net sales of the Company’s operating system software, including Mac OS X version
10.3 “Panther,” which was released in October 2003. Net sales of Panther accounted for approximately $74 million or over 50% of the
increase in software net sales for 2004 compared to 2003.
•
The Company’s U.S. education channel experienced year-over-year growth in net sales of approximately 19% for 2004 compared to
2003. Unit sales also increased by 10% during 2004 compared to 2003. The increase in U.S. education net sales for 2004 related
primarily to a 40% year-over-year increase in higher education net sales and to a lesser extent the Company’s 3% growth in K-12 net
sales.
•
Service and other sales increased $37 million or 13% during 2004 compared to 2003. These increases were the result of significant
year-over-year increases in net sales associated with APP extended maintenance and support services, as well as increased net sales
associated with the Company’s .Mac Internet service. Increased net sales associated with APP were primarily the result of higher
Macintosh unit sales and higher attach rates on APP over the last several years.
Offsetting the favorable factors discussed above, the Company’s net sales during 2004 were negatively impacted by the following:
•
Net sales and unit sales of iMac systems were down 23% and 16%, respectively, during 2004 versus 2003. The decrease in iMac net
sales and unit sales was largely due to the delay in the introduction of the new iMac, based on the PowerPC G5 processor, primarily as a
result of manufacturing problems experienced by IBM. The delays in the new iMac resulted in the depletion of inventory of the old
iMac flat panel prior to availability of the new iMac G5. The old flat panel iMac form factor, which was available during most of 2004,
was nearly 3 years old by the time the new iMac G5 began shipping in September 2004 and had experienced declines in sales as a result
of the age of this product. The Company believes that sales of iMac systems have also declined due to a shift in consumer preference to
portable systems and desktop models from competitors with price points below $1,000.
•
Net sales and unit sales in the Company’
s Japan segment decreased 3% and 14%, respectively, during 2004 versus 2003. The Company
believes these declines related to a shift in sales from the Japan segment to the Retail segment as a result of the Tokyo and Osaka store
openings in 2004. Declines in net sales in Japan may have also related to delays in computer upgrades by certain professional and
creative customers pending release in Japan of certain Mac OS X native applications, such as Quark Xpress 6, which did not become
available until September 2004. When sales from the Japan retail stores are included in the results for the Japan segment, the combined
revenue in Japan resulted in a 3% year-over-year increase in 2004 as compared to 2003. See
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