The Company designs, manufactures and markets personal computers and related software,
peripherals and personal computing and communicating solutions. The Company's
products include the Macintosh® line of desktop and notebook computers, the Mac
OS® X operating system, the iPod™ digital music player, and a portfolio of software
and peripheral products for education, creative, consumer and business customers.
The Company sells its products through its online stores, direct sales force,
third-party wholesalers and resellers, and its own retail stores.
Business Organization
The Company manages its business primarily on a geographic basis. The Company's
reportable operating segments are the Americas, Europe, Japan, and Retail. The
Americas segment includes both North and South America, except for the activities
of the Company's Retail segment. The Europe segment includes European countries
as well as the Middle East and Africa. The Japan segment includes only Japan,
except for the activities of the Company's Retail segment. The Retail segment
currently operates Apple-owned retail stores in the United States and in the
first quarter of fiscal 2004, opened its first international store in Tokyo,
Japan. Other operating segments include Asia-Pacific, which includes Australia
and Asia except for Japan, and the Company's subsidiary, FileMaker, Inc. Each
reportable operating segment provides similar hardware and software products
and similar services.
Markets and Distribution
The Company's customers are primarily in the education, creative, consumer,
and business markets. Certain customers are attracted to Macintosh computers
for a variety of reasons, including the reduced amount of training resulting
from the Macintosh computer's intuitive ease of use, advanced graphics capabilities,
industrial design features of the Company's hardware products, and ability of
Macintosh computers to network and communicate with other computer systems and
environments. Apple personal computers were first introduced to education customers
in the late 1970s.
Competition
The Company is confronted by aggressive competition in all areas of its business.
The market for the design, manufacture, and sale of personal computers and related
software and peripheral products is highly competitive. This market continues
to be characterized by rapid technological advances in both hardware and software
development, which have substantially increased the capabilities and applications
of these products, and have resulted in the frequent introduction of new products
and significant price, feature, and performance competition. Over the past several
years, price competition in the market for personal computers has been particularly
intense. The Company's competitors who sell 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 results of operations and financial
condition have been, and in the future may continue to be, adversely affected
by these and other industry-wide downward pressures on gross margins.
The principal competitive factors in the market for personal computers include
relative price/performance, product quality and reliability, design innovation,
availability of software, product features, marketing and distribution capability,
service and support, availability of hardware peripherals, and corporate reputation.
Further, as the personal computer industry and its customers place more reliance
on the Internet, an increasing number of Internet devices that are smaller,
simpler, and less expensive than traditional personal computers may compete
for market share with the Company's existing products.
The Company is currently taking and will continue to take steps to respond
to the competitive pressures being placed on its personal computer sales as
a result of innovations in competing platforms. The Company's future operating
results and financial condition are substantially dependent on its ability to
continue to develop improvements to the Macintosh platform in order to maintain
perceived functional and design advantages over competing platforms.
The Company's initial success with the development of an end-to-end music offering,
which includes the iTunes digital music management software, iTunes Music Store
and iPod digital music player, has already encouraged significant competition
in this area from other companies, many of whom have greater financial, marketing,
and manufacturing resources than those of the Company. The Company believes
it maintains a competitive advantage by more effectively integrating the entire
end-to-end music solution, including the hardware (iPod), software (iTunes)
and music content (iTunes Music Store).
1.96% 
40.74 %