Apple 2015 Annual Report Download - page 10

Item 1A. Risk Factors
The following discussion of risk factors contains forward-looking statements. These risk factors may be important to understanding other
statements in this Form 10-K. The following information should be read in conjunction with Part II, Item 7, “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes in Part II, Item 8,
“Financial Statements and Supplementary Data” of this Form 10-K.
The business, financial condition and operating results of the Company can be affected by a number of factors, whether currently known
or unknown, including but not limited to those described below, any one or more of which could, directly or indirectly, cause the
Company’s actual financial condition and operating results to vary materially from past, or from anticipated future, financial condition and
operating results. Any of these factors, in whole or in part, could materially and adversely affect the Company’s business, financial
condition, operating results and stock price.
Because of the following factors, as well as other factors affecting the Company’s financial condition and operating results, past financial
performance should not be considered to be a reliable indicator of future performance, and investors should not use historical trends to
anticipate results or trends in future periods.
Global and regional economic conditions could materially adversely affect the Company.
The Company’s operations and performance depend significantly on global and regional economic conditions. Uncertainty about global
and regional economic conditions poses a risk as consumers and businesses may postpone spending in response to tighter credit, higher
unemployment, financial market volatility, government austerity programs, negative financial news, declines in income or asset values and/
or other factors. These worldwide and regional economic conditions could have a material adverse effect on demand for the Company’s
products and services. Demand also could differ materially from the Company’s expectations as a result of currency fluctuations because
the Company generally raises prices on goods and services sold outside the U.S. to correspond with the effect of a strengthening of the
U.S. dollar. Other factors that could influence worldwide or regional demand include changes in fuel and other energy costs, conditions in
the real estate and mortgage markets, unemployment, labor and healthcare costs, access to credit, consumer confidence and other
macroeconomic factors affecting consumer spending behavior. These and other economic factors could materially adversely affect
demand for the Company’s products and services.
In the event of financial turmoil affecting the banking system and financial markets, additional consolidation of the financial services
industry, or significant financial service institution failures, there could be tightening in the credit markets, low liquidity and extreme volatility
in fixed income, credit, currency and equity markets. This could have a number of effects on the Company’s business, including the
insolvency or financial instability of outsourcing partners or suppliers or their inability to obtain credit to finance development and/or
manufacture products resulting in product delays; inability of customers, including channel partners, to obtain credit to finance purchases
of the Company’s products; failure of derivative counterparties and other financial institutions; and restrictions on the Company’s ability to
issue new debt. Other income and expense also could vary materially from expectations depending on gains or losses realized on the sale
or exchange of financial instruments; impairment charges resulting from revaluations of debt and equity securities and other investments;
changes in interest rates; increases or decreases in cash balances; volatility in foreign exchange rates; and changes in fair value of
derivative instruments. Increased volatility in the financial markets and overall economic uncertainty would increase the risk of the actual
amounts realized in the future on the Company’s financial instruments differing significantly from the fair values currently assigned to them.
Global markets for the Company’s products and services are highly competitive and subject to rapid technological change, and the
Company may be unable to compete effectively in these markets.
The Company’s products and services compete in highly competitive global markets characterized by aggressive price cutting and
resulting downward pressure on gross margins, frequent introduction of new products, short product life cycles, evolving industry
standards, continual improvement in product price/performance characteristics, rapid adoption of technological and product
advancements by competitors and price sensitivity on the part of consumers.
The Company’s ability to compete successfully depends heavily on its ability to ensure a continuing and timely introduction of innovative
new products, services and technologies to the marketplace. The Company believes it is unique in that it designs and develops nearly the
entire solution for its products, including the hardware, operating system, numerous software applications and related services. As a
result, the Company must make significant investments in R&D. The Company currently holds a significant number of patents and
copyrights and has registered and/or has applied to register numerous patents, trademarks and service marks. In contrast, many of the
Company’s competitors seek to compete primarily through aggressive pricing and very low cost structures, and emulating the
Company’s products and infringing on its intellectual property. If the Company is unable to continue to develop and sell innovative new
products with attractive margins or if competitors infringe on the Company’s intellectual property, the Company’s ability to maintain a
competitive advantage could be adversely affected.
Apple Inc. | 2015 Form 10-K | 8