Apple 2011 Annual Report Download - page 20

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area, and other jurisdictions are considering imposing additional restrictions. These laws continue to develop and may be inconsistent from
jurisdiction to jurisdiction. Complying with emerging and changing international requirements may cause the Company to incur substantial costs
or require the Company to change its business practices. Noncompliance could result in penalties or significant legal liability.
The Company’
s privacy policies and practices concerning the use and disclosure of data are posted on its website. Any failure by the Company,
its suppliers or other parties with whom the Company does business to comply with its posted privacy policies or with other federal, state or
international privacy-
related or data protection laws and regulations could result in proceedings against the Company by governmental entities or
others, which could have a material adverse effect on the Company’s business, results of operations and financial condition.
The Company is also subject to payment card association rules and obligations under its contracts with payment card processors. Under these
rules and obligations, if information is compromised, the Company could be liable to payment card issuers for the cost of associated expenses
and penalties. In addition, if the Company fails to follow payment card industry security standards, even if no customer information is
compromised, the Company could incur significant fines or experience a significant increase in payment card transaction costs.
The Company expects its quarterly revenue and operating results to fluctuate.
The Company’s profit margins vary among its products and its distribution channels. The Company’
s software, accessories, and service and
support contracts generally have higher gross margins than certain of the Company’s other products. Gross margins on the Company’
s hardware
products vary across product lines and can change over time as a result of product transitions, pricing and configuration changes, and
component, warranty, and other cost fluctuations. The Company’
s direct sales generally have higher associated gross margins than its indirect
sales through its channel partners. In addition, the Company’
s gross margin and operating margin percentages, as well as overall profitability,
may be materially adversely impacted as a result of a shift in product, geographic or channel mix, new products, component cost increases,
strengthening U.S. dollar, or price competition. The Company has typically experienced greater net sales in the first fiscal quarter compared to
other fiscal quarters due to increased holiday seasonal demand. Furthermore, the Company sells more products from time-to-
time during the
third month of a quarter than it does during either of the first two months. Developments late in a quarter, such as lower-than-
anticipated demand
for the Company’s products, issues with new product introductions, an internal systems failure, or failure of one of the Company’
s logistics,
components supply, or manufacturing partners, could have a material adverse impact on the Company’
s financial condition and operating results.
The Company’s stock price is subject to volatility.
The Company’
s stock continues to experience substantial price volatility. Additionally, the stock market as a whole has experienced extreme
price and volume fluctuations that have affected the stock price of many technology companies in ways that may have been unrelated to these
companies’
operating performance. The Company believes its stock price reflects high future growth and profitability expectations. If the
Company fails to meet these expectations its stock price may significantly decline, which could have a material adverse impact on investor
confidence and employee retention.
The Company’s business is subject to the risks of international operations.
The Company derives a significant portion of its revenue and earnings from its international operations. Compliance with applicable U.S. and
foreign laws and regulations, such as import and export requirements, anti-
corruption laws, tax laws, foreign exchange controls and cash
repatriation restrictions, data privacy requirements, environmental laws, labor laws, and anti-
competition regulations, increases the costs of doing
business in foreign jurisdictions. Although the Company has implemented policies and procedures to comply with these laws and
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