Apple 2009 Annual Report Download - page 17

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Table of Contents
Uncertainty about current global economic conditions could also continue to increase the volatility of the Company’s stock price.
Global markets for personal computers, mobile communication devices, digital music and video devices, and related peripherals and services
are highly competitive and subject to rapid technological change. If the Company is unable to compete effectively in these markets, its financial
condition and operating results could be materially adversely affected.
The Company competes in highly competitive global markets characterized by aggressive price cutting, with resulting 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, and price sensitivity on the part of
consumers.
The Company’
s ability to compete successfully depends heavily on its ability to ensure a continuing and timely introduction of innovative new
products and technologies to the marketplace. The Company believes it is unique in that it designs and develops nearly the entire solution for its
personal computers, mobile communication devices, and consumer electronics, including the hardware, operating system, numerous software
applications, and related services. As a result, the Company must make significant investments in research and development and as such, the
Company currently holds a significant number of patents and copyrights and has registered and/or has applied to register numerous patents,
trademarks and service marks. By contrast, many of the Company’
s competitors seek to compete primarily through aggressive pricing and very
low cost structures. If the Company is unable to continue to develop and sell innovative new products with attractive margins or if other
companies infringe on the Company’s intellectual property, the Company’
s ability to maintain a competitive advantage could be negatively
affected and its financial condition and operating results could be materially adversely affected.
In the market for personal computers and peripherals, the Company faces a significant number of competitors, many of which have broader
product lines, lower priced products, and larger installed customer bases. Consolidation in this market has resulted in larger and potentially
stronger competitors. Price competition has been particularly intense as competitors selling Windows-
based personal computers have
aggressively cut prices and lowered product margins. The Company also faces increased competition in key market segments, including
consumer, SMB, education, enterprise, government and creative markets. An increasing number of Internet devices that include software
applications and are smaller and simpler than traditional personal computers compete for market share with the Company’s existing products.
The Company is currently the only authorized maker of hardware using the Mac OS. The Mac OS has a minority market share in the personal
computer market, which is dominated by computer makers using competing operating systems, most notably Windows. The Company’
s
financial condition and operating results depend substantially on the Company’
s ability to continually improve the Mac platform to maintain
functional and design advantages. Use of unauthorized copies of the Mac OS on other companies’
hardware products may result in decreased
demand for the Company’s hardware products, and could materially adversely affect the Company’s financial condition and operating results.
The Company is currently focused on certain mobile communication devices, such as iPhone, consumer electronic devices, including the iPod
family of digital music and video players and third-
party digital content and applications distribution. The Company faces substantial
competition from companies that have significant technical, marketing, distribution and other resources, as well as established hardware,
software and digital content supplier relationships. The Company also competes with illegitimate ways to obtain third-
party digital content and
applications. The Company has only recently entered the mobile communications market, and many of its competitors in the mobile
communications market have significantly greater experience, product breadth and distribution channels than the Company. Because some
current and potential competitors have substantial resources and experience and a lower cost structure, they may be able to provide such products
and services at little or no profit or even at a loss. The Company also expects competition to intensify as competitors attempt to
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