Apple 2010 Annual Report Download - page 20

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Table of Contents
Investment in new business strategies and initiatives could disrupt the Company
’
s ongoing business and present risks not originally
contemplated.
The Company has invested, and in the future may invest, in new business strategies or acquisitions. Such endeavors may involve significant risks
and uncertainties, including distraction of management from current operations, insufficient revenue to offset liabilities assumed and expenses
associated with the strategy, inadequate return of capital, and unidentified issues not discovered in the Company’
s due diligence. Because 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 the U.S. the Company relies on a single cellular network carrier to provide service for iPhone.
In the U.S. the Company has contracted with a single carrier to provide cellular network services for iPhone on an exclusive basis. If this
exclusive carrier cannot successfully compete with other carriers in the U.S. market 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 or
conditions of customer contracts, or if this exclusive carrier fails 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 and media
devices.
Laws and regulations related to mobile communications and media 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 and media devices, such as iPhones and 3G enabled iPads, 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.
17