Apple 2015 Annual Report Download - page 7

The Company has also invested in programs to enhance reseller sales by placing high-quality Apple fixtures, merchandising materials and
other resources within selected third-party reseller locations. Through the Apple Premium Reseller Program, certain third-party resellers
focus on the Apple platform by providing a high level of product expertise, integration and support services.
The Company is committed to delivering solutions to help educators teach and students learn. The Company believes effective integration of
technology into classroom instruction can result in higher levels of student achievement and has designed a range of products, services and
programs to address the needs of education customers. The Company also supports mobile learning and real-time distribution of, and access
to, education related materials through iTunes U, a platform that allows students and teachers to share and distribute educational media online.
The Company sells its products to the education market through its direct sales force, select third-party resellers and its online and retail stores.
The Company also sells its hardware and software products to enterprise and government customers in each of its reportable operating
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 2015, 2014 or 2013.
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 that 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 (including security features), relative price and performance, product
quality and reliability, design innovation, a strong third-party software and accessories 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 (iOS devices, Mac, Apple Watch and Apple TV), software (iOS, OS X, watchOS
and tvOS), online services and distribution of digital content and applications (Internet Services). 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 could materially adversely affect the Company’s financial condition and operating results.
Apple Inc. | 2015 Form 10-K | 5