Apple 2006 Annual Report Download - page 23

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business operations. Should the Company fail to prevail in certain legal matters, the Company’s financial condition, liquidity, or results of
operations could be adversely affected.
Economic conditions and political events could adversely affect the demand for the Company
’s products and the financial health of its
suppliers, distributors, and resellers.
The Company’s operating performance depends significantly on economic conditions in the U.S. and abroad. At times in the past, demand for
the Company’s products has been negatively impacted by difficult global economic conditions. Uncertainty about future economic conditions
makes it difficult to forecast future demand for the Company’s products and related operating results. Should global and/or regional economic
conditions deteriorate, demand for the Company’s products could be adversely affected, as could the financial health of its suppliers,
distributors, and resellers.
War, terrorism, public health issues, and other circumstances could disrupt supply, delivery, or demand of products, which could negatively
affect the Company’s operations and performance.
War, terrorism, public health issues, and other business interruptions, whether in the U.S. or abroad, have caused and could cause damage or
disruption to international commerce and global economy, and thus may have a strong negative impact on the global economy, the Company,
and the Company’s suppliers or customers. The Company’s major business operations are subject to interruption by earthquake, other natural
disasters, fire, power shortages, terrorist attacks and other hostile acts, labor disputes, public health issues, and other events beyond its control.
The majority of the Company’s research and development activities, its corporate headquarters, information technology systems, and other
critical business operations, including certain component suppliers and manufacturing vendors, are located near major seismic faults. Because
the Company does not carry earthquake insurance for direct quake-related losses, the Company’s operating results and financial condition
could be materially adversely affected in the event of a major earthquake or other natural or man-made disaster.
Although it is impossible to predict the occurrences or consequences of any such events, such events could result in a decrease in demand for
the Company’
s products, make it difficult or impossible for the Company to deliver products to its customers or to receive components from its
suppliers, and create delays and inefficiencies in the Company’s supply chain. In addition, should major public health issues including
pandemics arise, the Company could be negatively affected by more stringent employee travel restrictions, additional limitations in the
availability of freight services, governmental actions limiting the movement of products between various regions, delays in production ramps
of new products, and disruptions in the operations of the Company’s manufacturing vendors and component suppliers. The Company’s
operating results and financial condition have been, and in the future may be, adversely affected by such events.
The market for personal computers and related peripherals and services, as well as digital music devices and related services, is highly
competitive. If the Company is unable to effectively compete in these markets, its results of operations could be adversely affected.
The personal computer industry is highly competitive and is characterized by aggressive pricing practices, downward pressure on gross
margins, frequent introduction of new products, short product life cycles, evolving industry standards, continual improvement in product
price/performance characteristics, rapid adoption of technological and product advancements by competitors, price sensitivity on the part of
consumers, and a large number of competitors. Price competition in the market for personal computers and related peripherals has been
particularly intense as competitors who sell Windows and Linux based personal computers have aggressively cut prices and lowered their
product margins for personal computing products. The Company’s results of operations and financial condition have been, and in the future
may continue to be, adversely affected by these and other industry-wide pricing pressures and downward pressures on gross margins.
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