Apple 2009 Annual Report Download - page 12

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Table of Contents
Product Support and Services
AppleCare offers a range of support options for the Company’
s customers. These options include assistance that is built into software products,
printed and electronic product manuals, online support including comprehensive product information as well as technical assistance, and the
AppleCare Protection Plan. The AppleCare Protection Plan is a fee-
based service that typically includes two to three years of phone support and
hardware repairs, dedicated web-based support resources, and user diagnostic tools.
Markets and Distribution
The Company’
s customers are primarily in the consumer, SMB, education, enterprise, government and creative markets. The Company
distributes its products through wholesalers, resellers, national and regional retailers and cataloguers. No individual customer accounted for more
than 10% of net sales in 2009, 2008 or 2007. The Company also sells many of its products and resells certain third-
party products in most of its
major markets directly to customers through its own sales force and retail and online stores.
Competition
The Company is confronted by aggressive competition in all areas of its business. The markets for personal computers, mobile communication
devices, consumer electronics, related software, services and peripheral products are highly competitive. These markets are characterized by
rapid technological advances in both hardware and software that have substantially increased the capabilities and use of personal computers,
mobile communication devices, and other digital electronic devices that have resulted in the frequent introduction of new products with
competitive price, feature, and performance characteristics. Over the past several years, price competition in these markets has been particularly
intense. The Company’
s competitors who sell personal computers based on other operating systems have aggressively cut prices and lowered
their product margins to gain or maintain market share. The Company’
s financial condition and operating results can be adversely affected by
these and other industry-
wide downward pressures on gross margins. The principal competitive factors include price, product features, relative
price/performance, product quality and reliability, design innovation, availability of software and peripherals, marketing and distribution
capability, service and support, and corporate reputation. Further, as the personal computer industry and its customers place more reliance on the
Internet, an increasing number of Internet devices that are smaller, simpler and less expensive than traditional personal computers may compete
with the Company’s products.
The Company is focused on expanding its market opportunities related to mobile communication devices including the iPhone. The mobile
communications industry is highly competitive and includes several large, well-
funded and experienced participants. The Company expects
competition in the mobile communication industry to intensify significantly as competitors attempt to imitate some of the iPhone’
s functionality
and applications within their own smart phones or, alternatively, collaborate with each other to offer solutions that are more competitive than
those they currently offer. This industry is characterized by aggressive pricing practices, frequent product introductions, evolving design
approaches and technologies, rapid adoption of technological and product advancements by competitors, and price sensitivity on the part of
consumers and businesses.
The Company’
s music products and services have faced significant competition from other companies promoting their own digital music and
content products and services, including those offering free peer-to-
peer music and video services. The Company believes it currently retains a
competitive advantage by offering superior innovation and integration of the entire solution including the hardware (personal computer, iPhone
and iPod), software (iTunes), and distribution of digital content and applications (iTunes Store, iTunes Wi-
Fi Music Store and App Store). Some
of the Company’
s current and potential competitors have substantial resources and may be able to provide such products and services at little or
no profit or even at a loss to compete with the Company’
s offerings. Alternatively, these competitors may collaborate with each other to offer
solutions that are more integrated than those they currently offer.
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