Apple 2006 Annual Report Download - page 50

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respectively. The impact of these adjustments was not significant to the Company’s operating results, trends, or liquidity for the annual or
quarterly periods in 2006, 2005, and 2004.
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, television shows, movies, and iPod games. The Company’s
products and services include the Macintosh line of desktop and notebook computers, the iPod line of portable digital music players, the Xserve
server and Xserve RAID storage products, a portfolio of consumer and professional software applications, the Mac OS X operating system, the
iTunes 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 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 and iPod compatible
products including application software, printers, storage devices, speakers, headphones, and various other accessories 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 Form 10-K under the heading “Business.”
The Company believes that for both professionals and consumers the personal computer has become the center of an evolving digital lifestyle
by integrating and enhancing the utility of advanced digital devices such as the Company’s iPods, digital video and still cameras, televisions,
CD and DVD players, cellular phones, personal digital assistants, and other consumer electronic devices. The attributes of the personal
computer that enable this functionality include a high-
quality user interface, easy access to relatively inexpensive data storage, the ability to run
complex applications, and the ability to connect easily to a wide variety of other digital devices and to the Internet. The Company is the only
participant in the personal computer industry that controls the design and development of the entire personal computer—
from the hardware and
operating system to sophisticated applications. This, along with its products’ innovative industrial designs, intuitive ease-of-use, built-in
graphics, multimedia and networking capabilities, uniquely positions the Company to offer innovative integrated digital lifestyle solutions.
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 portable digital music players, and distribution of third-party digital content through its online iTunes 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 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 digital 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.
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