Apple 2010 Annual Report Download - page 10

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Table of Contents
One of the Company’
s customers accounted for 11% of net sales in 2009; there was no single customer that accounted for more than 10% of net
sales in 2010 or 2008.
Competition
The Company is confronted by aggressive competition in all areas of its business. The markets for the Company’
s products and services are
highly competitive. These markets are characterized by frequent product introductions and rapid technological advances that have substantially
increased the capabilities and use of personal computers, mobile communication and media devices, and other digital electronic devices. 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.
The Company is focused on expanding its market opportunities related to mobile communication and media devices, including iPhone and iPad.
The mobile communications and media device industries are highly competitive and include several large, well-
funded and experienced
participants. The Company expects competition in these industries to intensify significantly as competitors attempt to imitate some of the iPhone
and iPad features and applications within their own products or, alternatively, collaborate with each other to offer solutions that are more
competitive than those they currently offer. These industries are 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 iPod and digital content 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 offers superior
innovation and integration of the entire solution including the hardware (personal computer, iPhone, iPad and iPod), software (iTunes), and
distribution of digital content and applications (iTunes Store, App Store and iBookstore). 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.
The Company’s future financial condition and operating results are substantially dependent on the Company’
s ability to continue to develop and
offer new innovative products and services in each of the markets it competes in.
Supply of Components
Although most components essential to the Company’
s business are generally available from multiple sources, certain key components including
but not limited to microprocessors, enclosures, certain liquid crystal displays (“LCDs”), certain optical drives, and application-
specific integrated
circuits (“ASICs”)
are currently obtained by the Company from single or limited sources, which subjects the Company to significant supply and
pricing risks. Many of these and other key components that are available from multiple sources including but not limited to NAND flash
memory, dynamic random access memory (“DRAM”), and certain LCDs, are subject at times to industry-
wide shortages and significant
commodity pricing fluctuations. In addition, the Company has entered into certain agreements for the supply of key components including but
not limited to microprocessors, NAND flash memory, DRAM and LCDs at favorable pricing, but there is no guarantee the Company will be able
to extend or renew these agreements on similar favorable terms, or at all, upon expiration or otherwise obtain favorable pricing in the future.
Therefore, the Company remains subject to significant risks of supply shortages and/or price increases that can materially adversely affect its
financial condition and operating results.
7