Apple 2011 Annual Report Download - page 37

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Gross Margin
Gross margin for the three years ended September 24, 2011, are as follows (in millions, except gross margin percentages):
The gross margin percentage in 2011 was 40.5%, compared to 39.4% in 2010. This year-over-
year increase in gross margin was largely driven
by lower commodity and other product costs.
The gross margin percentage in 2010 was 39.4% compared to 40.1% in 2009. This year-over-
year decline in gross margin was primarily
attributable to new products that had higher cost structures, including iPad, partially offset by a more favorable sales mix of iPhone, which had a
higher gross margin than the Company average.
The Company expects to experience decreases in its gross margin percentage in future periods, as compared to levels achieved during 2011,
largely due to a higher mix of new and innovative products with flat or reduced pricing that have higher cost structures and deliver greater value
to customers, and potential future component cost and other cost increases.
The foregoing statements regarding the Company’s expected gross margin percentage are forward-
looking and could differ from anticipated
levels because of several factors including, but not limited to certain of those set forth below in Part I, Item 1A, “Risk Factors”
under the
subheading “ Future operating results depend upon the Company’s ability to obtain components in sufficient quantities ,”
which is incorporated
herein by reference. In general, gross margins and margins on individual products will remain under downward pressure due to a variety of
factors, including continued industry wide global product pricing pressures, increased competition, compressed product life cycles, product
transitions and potential increases in the cost of components, as well as potential increases in the costs of outside manufacturing services and a
potential shift in the Company’
s sales mix towards products with lower gross margins. In response to these competitive pressures, the Company
expects it will continue to take product pricing actions, which would adversely affect gross margins. Gross margins could also be affected by the
Company’
s ability to manage product quality and warranty costs effectively and to stimulate demand for certain of its products. Due to the
Company’s significant international operations, financial results can be significantly affected in the short-term by fluctuations in exchange rates.
Operating Expenses
Operating expenses for the three years ended September 24, 2011, are as follows (in millions, except for percentages):
Research and Development Expense (
“R&D”)
R&D expense increased $647 million or 36% to $2.4 billion in 2011 compared to 2010. This increase was due primarily to an increase in
headcount and related expenses to support expanded R&D activities. Although total
35
2011
2010
2009
Net sales
$
108,249
$
65,225
$
42,905
Cost of sales
64,431
39,541
25,683
Gross margin
$
43,818
$
25,684
$
17,222
Gross margin percentage
40.5%
39.4%
40.1%
2011
2010
2009
Research and development
$
2,429
$
1,782
$
1,333
Percentage of net sales
2%
3%
3%
Selling, general and administrative
$
7,599
$
5,517
$
4,149
Percentage of net sales
7%
8%
10%