Apple 2011 Annual Report Download - page 10

Download and view the complete annual report

Please find page 10 of the 2011 Apple annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 107

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107

The Company regularly files patent applications to protect inventions arising from its research and development, and is currently pursuing
thousands of patent applications around the world. Over time, the Company has accumulated a large portfolio of issued patents in the U.S. and
worldwide. The Company holds copyrights relating to certain aspects of its products and services. No single patent or copyright is solely
responsible for protecting the Company’
s products. The Company believes the duration of its patents is adequate relative to the expected lives of
its products. Due to the fast pace of innovation and product development, the Company’
s products are often obsolete before the patents related to
them expire, and sometimes are obsolete before the patents related to them are even granted.
Many of the Company’
s products are designed to include intellectual property obtained from third parties. While it may be necessary in the
future to seek or renew licenses relating to various aspects of its products and business methods, based upon past experience and industry
practice, the Company believes such licenses generally could be obtained on commercially reasonable terms; however, there is no guarantee that
such licenses could be obtained at all. Because of technological changes in the industries in which the Company competes, current extensive
patent coverage, and the rapid rate of issuance of new patents, it is possible that certain components of the Company’
s products and business
methods may unknowingly infringe existing patents or intellectual property rights of others. From time to time, the Company has been notified
that it may be infringing certain patents or other intellectual property rights of third parties.
Foreign and Domestic Operations and Geographic Data
The U.S. represents the Company’s largest geographic market. Approximately 39% of the Company’
s net sales in 2011 came from sales to
customers inside the U.S. Final assembly of the Company’s products is currently performed in the Company’
s manufacturing facility in Ireland,
and by outsourcing partners, primarily located in Asia. The supply and manufacture of a number of components is performed by sole-
sourced
outsourcing partners in the U.S., Asia and Europe. Single-
sourced outsourcing partners in Asia perform final assembly of substantially all of the
Company’s hardware products. Margins on sales of the Company’
s products in foreign countries, and on sales of products that include
components obtained from foreign suppliers, can be adversely affected by foreign currency exchange rate fluctuations and by international trade
regulations, including tariffs and antidumping penalties. Information regarding financial data by geographic segment is set forth in Part II, Item 7
and Item 8 of this Form 10-K and in Notes to Consolidated Financial Statements in Note 8, “Segment Information and Geographic Data.”
Seasonal Business
The Company has historically experienced increased net sales in its first fiscal quarter compared to other quarters in its fiscal year due to
increased holiday seasonal demand. This historical pattern should not be considered a reliable indicator of the Company’
s future net sales or
financial performance.
Warranty
The Company offers a limited parts and labor warranty on most of its hardware products. The basic warranty period is typically one year from
the date of purchase by the original end-user. The Company also offers a 90-day basic warranty for its service parts used to repair the Company’
s
hardware products. In addition, consumers may purchase the APP, which extends service coverage on many of the Company’
s hardware
products in most of its major markets.
Backlog
In the Company’
s experience, the actual amount of product backlog at any particular time is not a meaningful indication of its future business
prospects. In particular, backlog often increases in anticipation of or immediately following new product introductions as customers anticipate
shortages. Backlog is often reduced once customers
8