Apple 2008 Annual Report Download - page 40

Table of Contents
The Company is focused on providing innovative products and solutions to consumer, SMB, education, enterprise, government and creative
customers that greatly enhance their evolving digital lifestyles. The Company is the only participant in the personal computer and consumer
electronics industries that controls the design and development of the entire personal computer, including the hardware, operating system, and
sophisticated software applications, as well as the design and development of portable digital music players, mobile communication devices, and
a variety of products and solutions for obtaining and enjoying digital content. The Company is therefore uniquely positioned to offer superior
and well-integrated digital lifestyle products and solutions, which are further enhanced by the Company’s emphasis on ease-of-use and creative
industrial designs.
The Company participates in several highly competitive markets, including personal computers with its Mac line of personal computers,
consumer electronics with its iPod product families, mobile communications with iPhone, and distribution of third-party digital content through
its online iTunes Store. While the Company is widely recognized as a leading innovator in the personal computer and consumer electronics
markets as well as a leader in the emerging market for distribution of digital content, these markets are highly competitive and subject to
aggressive pricing. To remain competitive, the Company believes that increased investment in research and development and marketing and
advertising is necessary to maintain or expand its position in the markets where it competes. The Company’s R&D spending is focused on
further developing its existing Mac line of personal computers, its operating system, application software, iPhone and iPods; developing new
digital lifestyle consumer and professional software applications; and investing in new product areas and technologies. The Company also
believes increased investment in marketing and advertising programs is critical to increasing product and brand awareness.
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 Mac computers, and demonstrate the compatibility of the Mac with
the Windows platform and networks. The Company further believes providing a high-quality sales and after-sales support experience is critical
to attracting new and retaining existing customers. To ensure a high-quality buying experience for its products in which service and education
are emphasized, the Company continues to expand and improve its distribution capabilities by opening its own retail stores in the U.S. and
internationally. The Company had 247 stores open as of September 27, 2008.
The Company has also invested in programs to enhance reseller sales, including the Apple Sales Consultant Program, which places Apple
employees and contractors at selected third-
party reseller locations. The Company believes providing direct contact with its targeted customers is
an efficient way to demonstrate the advantages of its Mac computers and other products over those of its competitors. The Company also sells to
customers directly through its online stores around the world and through its direct sales force.
The Company’s iPods are sold through a significant number of distribution points to provide broad access. iPods can be purchased in certain
department stores, member-only warehouse stores, large retail chains, and specialty retail stores, as well as through the channels for Mac
distribution listed above.
iPhone is distributed through the Company, its cellular network carriers’ distribution channels, and certain third-party resellers. The Company
has signed multi-year agreements with various cellular network carriers authorizing them to distribute and provide cellular network services for
iPhone 3G in over 70 countries. These agreements are generally not exclusive with a specific carrier, except in the U.S., U.K., France, Germany,
Spain, Ireland, and certain other countries. The Company expects to ship iPhone 3G in over 70 countries by the end of calendar year 2008.
Critical Accounting Policies and Estimates
The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles and the
Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make judgments,
assumptions, and estimates that affect the amounts
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