Apple 2009 Annual Report Download - page 23

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Table of Contents
these new ventures are inherently risky, no assurance can be given that such strategies and initiatives will be successful and will not materially
adversely affect the Company’s financial condition and operating results.
The Company’s products and services experience quality problems from time to time that can result in decreased sales and operating margin.
The Company sells highly complex hardware and software products and services that can contain defects in design and manufacture.
Sophisticated operating system software and applications, such as those sold by the Company, often contain “bugs”
that can unexpectedly
interfere with the software’
s intended operation. Defects may also occur in components and products the Company purchases from third parties.
There can be no assurance the Company will be able to detect and fix all defects in the hardware, software and services it sells. Failure to do so
could result in lost revenue, harm to reputation, and significant warranty and other expenses, and could have a material adverse impact on the
Company’s financial condition and operating results.
In certain countries, including the U.S., the Company relies on a single cellular network carrier to provide service for iPhone.
In the U.S., Germany, Spain, Ireland and certain other countries, the Company has contracted with a single carrier to provide cellular network
services for iPhone on an exclusive basis. If these exclusive carriers cannot successfully compete with other carriers in their markets on any
basis, including but not limited to the quality and coverage of wireless voice and data services, performance and timely build-
out of advanced
wireless networks, and pricing and other terms of conditions of end-
user contracts, or if these exclusive carriers fail to promote iPhone
aggressively or favor other handsets in their promotion and sales activities or service plans, sales may be materially adversely affected.
The Company is subject to risks associated with laws, regulations and industry-imposed standards related to mobile communications devices.
Laws and regulations related to mobile communications devices in the many jurisdictions in which the Company operates are extensive and
subject to change. Such changes, which could include but are not limited to restrictions on production, manufacture, distribution, and use of the
device, locking the device to a carrier’s network, or mandating the use of the device on more than one carrier’
s network, could materially
adversely affect the Company’s financial condition and operating results.
Mobile communication devices, such as iPhone, are subject to certification and regulation by governmental and standardization bodies, as well
as by cellular network carriers for use on their networks. These certification processes are extensive and time consuming, and could result in
additional testing requirements, product modifications or delays in product shipment dates, which could materially adversely affect the
Company’s financial condition and operating results.
The Company’s success depends largely on the continued service and availability of key personnel.
Much of the Company’
s future success depends on the continued availability and service of key personnel, including its CEO, its executive team
and highly skilled employees in technical, marketing and staff positions. Experienced personnel in the technology industry are in high demand
and competition for their talents is intense, especially in the Silicon Valley, where most of the Company’
s key personnel are located. There can
be no assurance that the Company will continue to attract and retain key personnel.
In addition, the Company has relied on equity awards in the form of stock options and restricted stock units as one means for recruiting and
retaining highly skilled talent. Significant adverse volatility in the Company’s stock price could result in a stock option’
s exercise price
exceeding the underlying stock’
s market value or a significant deterioration in the value of restricted stock units granted, thus lessening the
effectiveness of stock-based awards for retaining employees.
20