Apple 2013 Annual Report Download - page 8

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The Company also sells its hardware and software products to enterprise and government customers in each of its
geographic segments. The Company’s products are deployed in these markets because of their performance,
productivity, ease of use and seamless integration into information technology environments. The Company’s
products are compatible with thousands of third-party business applications and services, and its tools enable the
development and secure deployment of custom applications as well as remote device administration.
No single customer accounted for more than 10% of net sales in 2013, 2012 or 2011.
Competition
The markets for the Company’s products and services are highly competitive and the Company is confronted by
aggressive competition in all areas of its business. These markets are characterized by frequent product
introductions and rapid technological advances that have substantially increased the capabilities and use of
mobile communication and media devices, personal computers, and other digital electronic devices. The
Company’s competitors who sell mobile devices and personal computers based on other operating systems have
aggressively cut prices and lowered their product margins to gain or maintain market share. The Company’s
financial condition and operating results can be adversely affected by these and other industry-wide downward
pressures on gross margins. Principal competitive factors important to the Company include price, product
features, relative price/performance, product quality and reliability, design innovation, a strong third-party
software and peripherals ecosystem, marketing and distribution capability, service and support, and corporate
reputation.
The Company is focused on expanding its market opportunities related to personal computers and mobile
communication and media devices. These markets are highly competitive and include many large, well-funded
and experienced participants. The Company expects competition in these markets to intensify significantly as
competitors attempt to imitate some of the features of the Company’s products and applications within their own
products or, alternatively, collaborate with each other to offer solutions that are more competitive than those they
currently offer. These markets are characterized by aggressive pricing practices, frequent product introductions,
evolving design approaches and technologies, rapid adoption of technological and product advancements by
competitors, and price sensitivity on the part of consumers and businesses.
The Company’s digital content services have faced significant competition from other companies promoting their
own digital music and content products and services, including those offering free peer-to-peer music and video
services.
The Company’s future financial condition and operating results depend on the Company’s ability to continue to
develop and offer new innovative products and services in each of the markets in which it competes. The
Company believes it offers superior innovation and integration of the entire solution including the hardware
(iPhone, iPad, Mac, and iPod), software (iOS, OS X and iTunes), online services, and distribution of digital
content and applications (iTunes Store, App Store, iBooks Store and Mac App Store). Some of the Company’s
current and potential competitors have substantial resources and may be able to provide such products and
services at little or no profit or even at a loss to compete with the Company’s offerings.
Supply of Components
Although most components essential to the Company’s business are generally available from multiple sources, a
number of components are currently obtained from single or limited sources. In addition, the Company competes
for various components with other participants in the markets for mobile communication and media devices and
personal computers. Therefore, many components used by the Company, including those that are available from
multiple sources, are at times subject to industry-wide shortage and significant pricing fluctuations that can
materially adversely affect the Company’s financial condition and operating results.
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