Apple 2010 Annual Report Download - page 18

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Table of Contents
assurance can be given that such licenses can be obtained on acceptable terms or that litigation will not occur. If the Company is found to be
infringing such rights, it may be required to pay substantial damages. If there is a temporary or permanent injunction prohibiting the Company
from marketing or selling certain products or a successful claim of infringement against the Company requires it to pay royalties to a third party,
the Company’s financial condition and operating results could be materially adversely affected, regardless of whether it can develop non-
infringing technology. While in management’
s opinion the Company does not have a potential liability for damages or royalties from any known
current legal proceedings or claims related to the infringement of patent or other intellectual property rights that would individually or in the
aggregate materially adversely affect its financial condition and operating results, the results of such legal proceedings cannot be predicted with
certainty. Should the Company fail to prevail in any of the matters related to infringement of patent or other intellectual property rights of others
or should several of these matters be resolved against the Company in the same reporting period, the Company’
s financial condition and
operating results could be materially adversely affected.
With the introduction of iPhones and 3G enabled iPads, the Company has begun to compete with mobile communication and media devices
companies that hold significant patent portfolios. Regardless of the scope or validity of such patents or the merits of any potential patent claims
by competitors, the Company may have to engage in protracted litigation, enter into expensive agreements or settlements and/or modify its
products. Any of these events could have a material adverse impact on the Company’s financial condition and operating results.
The Company’s future performance depends on support from third-party software developers. If third-
party software applications and services
cease to be developed and maintained for the Company’s products, customers may choose not to buy the Company’s products.
The Company believes decisions by customers to purchase its hardware products, including its Macs, iPhones, iPads and iPods, are often based
to a certain extent on the availability of third-party software applications and services. There is no assurance that third-
party developers will
continue to develop and maintain applications and services for the Company’
s products on a timely basis or at all, and discontinuance or delay of
these applications and services could materially adversely affect the Company’s financial condition and operating results.
With respect to its Mac products, the Company believes the availability of third-
party software applications and services depends in part on the
developers’ perception and analysis of the relative benefits of developing, maintaining, and upgrading such software for the Company’
s products
compared to Windows-
based products. This analysis may be based on factors such as the perceived strength of the Company and its products,
the anticipated revenue that may be generated, continued acceptance by customers of Mac OS X, and the costs of developing such applications
and services. If the Company’s minority share of the global personal computer market causes developers to question the Company’
s prospects,
developers could be less inclined to develop or upgrade software for the Company’
s products and more inclined to devote their resources to
developing and upgrading software for the larger Windows market. The Company’
s development of its own software applications and services
may also negatively affect the decisions of third-
party developers, such as Microsoft, Adobe and Google, to develop, maintain, and upgrade
similar or competitive software and services for the Company’s products.
With respect to iPhone, iPad and iPod touch, the Company relies on the continued availability and development of compelling and innovative
software applications. Unlike third-
party software applications for Mac products, the software applications for the iPhone, iPad and iPod touch
platforms are distributed through a single distribution channel, the App Store. The absence of multiple distribution channels, which are available
for competing platforms, may limit the availability and acceptance of third-party applications by the Company’
s customers, thereby causing
developers to curtail significantly, or stop, development for the Company’
s platforms. In addition, iPhone, iPad and iPod touch are subject to
rapid technological change, and, if third-party developers are unable to keep up with this pace of change, third-
party applications might not
successfully operate and may result in dissatisfied customers. Further, if the Company develops its own software applications and services, such
development may negatively affect the decisions of third-party developers to develop, maintain,
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