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aapl_contexts4.txt

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+The Company designs, manufactures and markets smartphones, personal computers, tablets, wearables and accessories, and sells a variety of related services.
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+The Company’s fiscal year is the 52- or 53-week period that ends on the last Saturday of September.
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+iPhone® is the Company’s line of smartphones based on its iOS operating system.
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+ The iPhone line includes iPhone 15 Pro, iPhone 15, iPhone 14, iPhone 13 and iPhone SE®.
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+Mac® is the Company’s line of personal computers based on its macOS® operating system.
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+ The Mac line includes laptops MacBook Air® and MacBook Pro®, as well as desktops iMac®, Mac mini®, Mac Studio® and Mac Pro®.
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+Wearables includes smartwatches and wireless headphones.
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+ The Company’s line of smartwatches, based on its watchOS® operating system, includes Apple Watch Ultra™ 2, Apple Watch® Series 9 and Apple Watch SE®.
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+Home includes Apple TV®, the Company’s media streaming and gaming device based on its tvOS® operating system, and HomePod® and HomePod mini®, high-fidelity wireless smart speakers.
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+The Company offers a portfolio of fee-based service and support products under the AppleCare® brand.
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+ The offerings provide priority access to Apple technical support, access to the global Apple authorized service network for repair and replacement services, and in many cases additional coverage for instances of accidental damage or theft and loss, depending on the country and type of product.
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+Segments The Company manages its business primarily on a geographic basis.
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+ The Company’s reportable segments consist of the Americas, Europe, Greater China, Japan and Rest of Asia Pacific.
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+During 2023, the Company’s net sales through its direct and indirect distribution channels accounted for 37% and 63%, respectively, of total net sales.
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+The markets for the Company’s products and services are highly competitive, and are characterized by aggressive price competition and resulting downward pressure on gross margins, frequent introduction of new products and services, short product life cycles, evolving industry standards, continual improvement in product price and performance characteristics, rapid adoption of technological advancements by competitors, and price sensitivity on the part of consumers and businesses.
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+The Company’s ability to compete successfully depends heavily on ensuring the continuing and timely introduction of innovative new products, services and technologies to the marketplace.
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+ The Company designs and develops nearly the entire solution for its products, including the hardware, operating system, numerous software applications and related services.
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+ Principal competitive factors important to the Company include price, product and service features (including security features), relative price and performance, product and service quality and reliability, design innovation, a strong third-party software and accessories ecosystem, marketing and distribution capability, service and support, and corporate reputation.
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+Supply of Components Although most components essential to the Company’s business are generally available from multiple sources, certain components are currently obtained from single or limited sources.
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+Many of the Company’s competitors seek to compete primarily through aggressive pricing and very low cost structures, and by imitating the Company’s products and infringing on its intellectual property.
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+The Company is focused on expanding its market opportunities related to smartphones, personal computers, tablets, wearables and accessories, and services.
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+Research and Development Because the industries in which the Company competes are characterized by rapid technological advances, the Company’s ability to compete successfully depends heavily upon its ability to ensure a continual and timely flow of competitive products, services and technologies to the marketplace.
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+The Company currently holds a broad collection of intellectual property rights relating to certain aspects of its hardware devices, accessories, software and services.
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+ This includes patents, designs, copyrights, trademarks and other forms of intellectual property rights in the U.S. and various foreign countries.
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+ Although the Company believes the ownership of such intellectual property rights is an important factor in differentiating its business and that its success does depend in part on such ownership, the Company relies primarily on the innovative skills, technical competence and marketing abilities of its personnel.
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+Supply of Components Although most components essential to the Company’s business are generally available from multiple sources, certain components are currently obtained from single or limited sources.
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+ The Company also competes for various components with other participants in the markets for smartphones, personal computers, tablets, wearables and accessories.
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+ 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 commodity pricing fluctuations.
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+ The Company uses some custom components that are not commonly used by its competitors, and new products introduced by the Company often utilize custom components available from only one source.
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+ When a component or product uses new technologies, initial capacity constraints may exist until the suppliers’ yields have matured or their manufacturing capacities have increased.
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+Competition has been particularly intense as competitors have aggressively cut prices and lowered product margins.
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+ Certain competitors have the resources, experience or cost structures to provide products at little or no profit or even at a loss.
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+The Company regularly files patent, design, copyright and trademark applications to protect innovations arising from its research, development, design and marketing, and is currently pursuing thousands of applications around the world.
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+The Company continues to develop new technologies to enhance existing products and services, and to expand the range of its offerings through research and development (“R&D”), licensing of intellectual property and acquisition of third-party businesses and technology.
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+The Company has historically experienced higher net sales in its first quarter compared to other quarters in its fiscal year due in part to seasonal holiday demand.
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+Additionally, new product and service introductions can significantly impact net sales, cost of sales and operating expenses.
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+ The timing of product introductions can also impact the Company’s net sales to its indirect distribution channels as these channels are filled with new inventory following a product launch, and channel inventory of an older product often declines as the launch of a newer product approaches.
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+It may be necessary in the future to seek or renew licenses relating to various aspects of the Company’s products, processes and services.
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+While the Company has generally been able to obtain such licenses on commercially reasonable terms in the past, there is no guarantee that such licenses could be obtained in the future on reasonable terms or at all.
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+As of September 30, 2023, the Company had approximately 161,000 full-time equivalent employees.
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+The Company is an equal opportunity employer committed to inclusion and diversity and to providing a workplace free of harassment or discrimination.
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+The Company believes that compensation should be competitive and equitable, and should enable employees to share in the Company’s success.
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+ The Company recognizes its people are most likely to thrive when they have the resources to meet their needs and the time and support to succeed in their professional and personal lives.
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+ In support of this, the Company offers a wide variety of benefits for employees around the world and invests in tools and resources that are designed to support employees’ individual growth and development.
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+The Company is committed to its vision to build and sustain a more inclusive workforce that is representative of the communities it serves.
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+ The Company continues to work to increase diverse representation at every level, foster an inclusive culture, and support equitable pay and access to opportunity for all employees.
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+The Company believes that open and honest communication among team members, managers and leaders helps create an open, collaborative work environment where everyone can contribute, grow and succeed.
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+ Team members are encouraged to come to their managers with questions, feedback or concerns, and the Company conducts surveys that gauge employee sentiment in areas like career development, manager performance and inclusivity.
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+The Company is committed to protecting its team members everywhere it operates.
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+ The Company identifies potential workplace risks in order to develop measures to mitigate possible hazards.
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+ The Company supports employees with general safety, security and crisis management training, and by putting specific programs in place for those working in potentially high-hazard environments.
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+The Company periodically provides certain information for investors on its corporate website, www.apple.com, and its investor relations website, investor.apple.com.
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+ This includes press releases and other information about financial performance, information on environmental, social and governance matters, and details related to the Company’s annual meeting of shareholders.
+
+Epic Games Epic Games, Inc.
+ (“Epic”) filed a lawsuit in the U.S. District Court for the Northern District of California (the “District Court”) against the Company alleging violations of federal and state antitrust laws and California’s unfair competition law based upon the Company’s operation of its App Store.
+
+Epic Games Epic Games, Inc.
+ (“Epic”) filed a lawsuit in the U.S. District Court for the Northern District of California (the “District Court”) against the Company alleging violations of federal and state antitrust laws and California’s unfair competition law based upon the Company’s operation of its App Store.
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+ On September 10, 2021, the District Court ruled in favor of the Company with respect to nine out of the ten counts included in Epic’s claim.
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+The District Court found that certain provisions of the Company’s App Store Review Guidelines violate California’s unfair competition law and issued an injunction enjoining the Company from prohibiting developers from including in their apps external links that direct customers to purchasing mechanisms other than Apple in-app purchasing.
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+On April 24, 2023, the U.S. Court of Appeals for the Ninth Circuit (the “Circuit Court”) affirmed the District Court’s ruling.
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+On June 7, 2023, the Company and Epic filed petitions with the Circuit Court requesting further review of the decision.
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+ On June 30, 2023, the Circuit Court denied both petitions.
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+On July 17, 2023, the Circuit Court granted Apple’s motion to stay enforcement of the injunction pending appeal to the U.S. Supreme Court.
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+Masimo Masimo Corporation and Cercacor Laboratories, Inc.
+
+ (together, “Masimo”) filed a complaint before the U.S. International Trade Commission (the “ITC”) alleging infringement by the Company of five patents relating to the functionality of the blood oxygen feature in Apple Watch Series 6 and 7.
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+In its complaint, Masimo sought a permanent exclusion order prohibiting importation to the United States of certain Apple Watch models that include blood oxygen sensing functionality.
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+On October 26, 2023, the ITC entered a limited exclusion order (the “Order”) prohibiting importation and sales in the United States of Apple Watch models with blood oxygen sensing functionality, which includes Apple Watch Series 9 and Ultra 2.
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+The Order will not go into effect until the end of the administrative review period, which is currently expected to end on December 25, 2023.
+ The Company intends to appeal the Order and seek a stay pending the appeal.
+
+Item 7.
+ Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with the consolidated financial statements and accompanying notes included in Part II, Item 8 of this Form 10-K.
+
+ This Item generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
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+ Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 are not included, and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended September 24, 2022.
+
+Fiscal Period The Company’s fiscal year is the 52- or 53-week period that ends on the last Saturday of September.
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+ An additional week is included in the first fiscal quarter every five or six years to realign the Company’s fiscal quarters with calendar quarters, which occurred in the first quarter of 2023.
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+ The Company’s fiscal year 2023 spanned 53 weeks, whereas fiscal years 2022 and 2021 spanned 52 weeks each.
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+Fiscal Year Highlights The Company’s total net sales were $383.3 billion and net income was $97.0 billion during 2023.
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+ The Company’s total net sales decreased 3% or $11.0 billion during 2023 compared to 2022.
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+ The weakness in foreign currencies relative to the U.S. dollar accounted for more than the entire year-over-year decrease in total net sales, which consisted primarily of lower net sales of Mac and iPhone, partially offset by higher net sales of Services.
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+The Company announces new product, service and software offerings at various times during the year.
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+ Significant announcements during fiscal year 2023 included the following: First Quarter 2023: •iPad and iPad Pro; •Next-generation Apple TV 4K; and •MLS Season Pass, a Major League Soccer subscription streaming service.
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+The Company announces new product, service and software offerings at various times during the year.
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+ Significant announcements during fiscal year 2023 included the following: Third Quarter 2023: •MacBook Air 15”, Mac Studio and Mac Pro; •Apple Vision Pro™, the Company’s first spatial computer featuring its new visionOS™, expected to be available in early calendar year 2024; and •iOS 17, macOS Sonoma, iPadOS 17, tvOS 17 and watchOS 10, updates to the Company’s operating systems.
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+In May 2023, the Company announced a new share repurchase program of up to $90 billion and raised its quarterly dividend from $0.23 to $0.24 per share beginning in May 2023.
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+ During 2023, the Company repurchased $76.6 billion of its common stock and paid dividends and dividend equivalents of $15.0 billion.
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+Macroeconomic Conditions Macroeconomic conditions, including inflation, changes in interest rates, and currency fluctuations, have directly and indirectly impacted, and could in the future materially impact, the Company’s results of operations and financial condition.
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+Americas Americas net sales decreased 4% or $7.1 billion during 2023 compared to 2022 due to lower net sales of iPhone and Mac, partially offset by higher net sales of Services.
+
+Segment Operating Performance The following table shows net sales by reportable segment for 2023, 2022 and 2021 (dollars in millions):  Rest of Asia Pacific | 29,615 | | | 1 | % | | 29,375 | | | 11 | % | | 26,356 Total net sales | $ | 383,285 | | | (3) | % | | $ | 394,328 | | | 8 | % | $ | 365,817
+
+In May 2023, the Company announced a new share repurchase program of up to $90 billion and raised its quarterly dividend from $0.23 to $0.24 per share beginning in May 2023.
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+ During 2023, the Company repurchased $76.6 billion of its common stock and paid dividends and dividend equivalents of $15.0 billion.
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+Americas net sales decreased 4% or $7.1 billion during 2023 compared to 2022 due to lower net sales of iPhone and Mac, partially offset by higher net sales of Services.
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+Europe net sales decreased 1% or $824 million during 2023 compared to 2022.
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+ The weakness in foreign currencies relative to the U.S. dollar accounted for more than the entire year-over-year decrease in Europe net sales, which consisted primarily of lower net sales of Mac and Wearables, Home and Accessories, partially offset by higher net sales of iPhone and Services.
+
+Greater China net sales decreased 2% or $1.6 billion during 2023 compared to 2022.
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+ The weakness in the renminbi relative to the U.S. dollar accounted for more than the entire year-over-year decrease in Greater China net sales, which consisted primarily of lower net sales of Mac and iPhone.
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+Japan net sales decreased 7% or $1.7 billion during 2023 compared to 2022.
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+ The weakness in the yen relative to the U.S. dollar accounted for more than the entire year-over-year decrease in Japan net sales, which consisted primarily of lower net sales of iPhone, Wearables, Home and Accessories and Mac.
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+Rest of Asia Pacific net sales increased 1% or $240 million during 2023 compared to 2022.
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+ The weakness in foreign currencies relative to the U.S. dollar had a significantly unfavorable year-over-year impact on Rest of Asia Pacific net sales.
+ The net sales increase consisted of higher net sales of iPhone and Services, partially offset by lower net sales of Mac and iPad.
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+Mac net sales decreased 27% or $10.8 billion during 2023 compared to 2022 due primarily to lower net sales of laptops.
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+iPhone net sales decreased 2% or $4.9 billion during 2023 compared to 2022 due to lower net sales of non-Pro iPhone models, partially offset by higher net sales of Pro iPhone models.
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+Wearables, Home and Accessories net sales decreased 3% or $1.4 billion during 2023 compared to 2022 due primarily to lower net sales of Wearables and Accessories.
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+Services net sales increased 9% or $7.1 billion during 2023 compared to 2022 due to higher net sales across all lines of business.
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+Total gross margin for 2023: $169,148 million, for 2022: $170,782 million, and for 2021: $152,836 million.
+
+
+The Company’s effective tax rate for 2023 and 2022 was lower than the statutory federal income tax rate due primarily to a lower effective tax rate on foreign earnings, the impact of the U.S. federal R&D credit, and tax benefits from share-based compensation, partially offset by state income taxes.
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+ The Company’s effective tax rate for 2023 was lower compared to 2022 due primarily to a lower effective tax rate on foreign earnings and the impact of U.S. foreign tax credit regulations issued by the U.S. Department of the Treasury in 2022, partially offset by lower tax benefits from share-based compensation.
+
+The Company’s future gross margins can be impacted by a variety of factors, as discussed in Part I, Item 1A of this Form 10-K under the heading “Risk Factors.” As a result, the Company believes, in general, gross margins will be subject to volatility and downward pressure.
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+The Company believes its balances of cash, cash equivalents and unrestricted marketable securities, which totaled $148.3 billion as of September 30, 2023, along with cash generated by ongoing operations and continued access to debt markets, will be sufficient to satisfy its cash requirements and capital return program over the next 12 months and beyond.
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+Research and Development The year-over-year growth in R&D expense in 2023 was driven primarily by increases in headcount-related expenses.
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+equivalents and unrestricted marketable securities, which totaled $148.3 billion as of September 30, 2023, along with cash generated by ongoing operations and continued access to debt markets, will be sufficient to satisfy its cash requirements and capital return program over the next 12 months and beyond.
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+As of September 30, 2023, the Company had outstanding fixed-rate notes with varying maturities for an aggregate principal amount of $106.6 billion (collectively the “Notes”), with $9.9 billion payable within 12 months.
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+Future interest payments associated with the Notes total $41.1 billion, with $2.9 billion payable within 12 months.
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+The Company also issues unsecured short-term promissory notes pursuant to a commercial paper program.
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+ As of September 30, 2023, the Company had $6.0 billion of commercial paper outstanding, all of which was payable within 12 months.
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+As of September 30, 2023, the Company had fixed lease payment obligations of $15.8 billion, with $2.0 billion payable within 12 months.
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+As of September 30, 2023, the Company had manufacturing purchase obligations of $53.1 billion, with $52.9 billion payable within 12 months.
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+As of September 30, 2023, the balance of the deemed repatriation tax payable imposed by the U.S. Tax Cuts and Jobs Act of 2017 (the “Act”) was $22.0 billion, with $6.5 billion expected to be paid within 12 months.
+
+In addition to its contractual cash requirements, the Company has an authorized share repurchase program.
+ The program does not obligate the Company to acquire a minimum amount of shares.
+ As of September 30, 2023, the Company’s quarterly cash dividend was $0.24 per share.
+
+Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities.
+
+
+Item 1A.
+ Risk Factors The Company’s business, reputation, results of operations, financial condition and stock price can be affected by a number of factors, whether currently known or unknown, including those described below.
+ When any one or more of these risks materialize from time to time, the Company’s business, reputation, results of operations, financial condition and stock price can be materially and adversely affected.
+
+ Because of the following factors, as well as other factors affecting the Company’s results of operations and financial condition, 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.
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+ This discussion of risk factors contains forward-looking statements.
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+ This section 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 accompanying notes in Part II, Item 8, “Financial Statements and Supplementary Data” of this Form 10-K.
+
+ Macroeconomic and Industry Risks The Company’s operations and performance depend significantly on global and regional economic conditions and adverse economic conditions can materially adversely affect the Company’s business, results of operations and financial condition.
+
+ The Company has international operations with sales outside the U.S. representing a majority of the Company’s total net sales.
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+ In addition, the Company’s global supply chain is large and complex and a majority of the Company’s supplier facilities, including manufacturing and assembly sites, are located outside the U.S. As a result, the Company’s operations and performance depend significantly on global and regional economic conditions.
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+ Adverse macroeconomic conditions, including slow growth or recession, high unemployment, inflation, tighter credit, higher interest rates, and currency fluctuations, can adversely impact consumer confidence and spending and materially adversely affect demand for the Company’s products and services.
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+ In addition, consumer confidence and spending can be materially adversely affected in response to changes in fiscal and monetary policy, financial market volatility, declines in income or asset values, and other economic factors.
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+ In addition to an adverse impact on demand for the Company’s products and services, uncertainty about, or a decline in, global or regional economic conditions can have a significant impact on the Company’s suppliers, contract manufacturers, logistics providers, distributors, cellular network carriers and other channel partners, and developers.
+
+ Potential outcomes include financial instability; inability to obtain credit to finance business operations; and insolvency.
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+ Adverse economic conditions can also lead to increased credit and collectibility risk on the Company’s trade receivables; the failure of derivative counterparties and other financial institutions; limitations on the Company’s ability to issue new debt; reduced liquidity; and declines in the fair values of the Company’s financial instruments.
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+ These and other impacts can materially adversely affect the Company’s business, results of operations, financial condition and stock price.
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+ The Company’s business can be impacted by political events, trade and other international disputes, war, terrorism, natural disasters, public health issues, industrial accidents and other business interruptions.
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+ Political events, trade and other international disputes, war, terrorism, natural disasters, public health issues, industrial accidents and other business interruptions can harm or disrupt international commerce and the global economy, and could have a material adverse effect on the Company and its customers, suppliers, contract manufacturers, logistics providers, distributors, cellular network carriers and other channel partners.
+
+ Apple Inc.
+ | 2023 Form 10-K | 5 The Company has a large, global business with sales outside the U.S. representing a majority of the Company’s total net sales, and the Company believes that it generally benefits from growth in international trade.
+
+ Substantially all of the Company’s manufacturing is performed in whole or in part by outsourcing partners located primarily in China mainland, India, Japan, South Korea, Taiwan and Vietnam.
+
+ Restrictions on international trade, such as tariffs and other controls on imports or exports of goods, technology or data, can materially adversely affect the Company’s operations and supply chain and limit the Company’s ability to offer and distribute its products and services to customers.
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+ The impact can be particularly significant if these restrictive measures apply to countries and regions where the Company derives a significant portion of its revenues and/or has significant supply chain operations.
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+ Restrictive measures can require the Company to take various actions, including changing suppliers, restructuring business relationships, and ceasing to offer third-party applications on its platforms.
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+ Changing the Company’s operations in accordance with new or changed restrictions on international trade can be expensive, time-consuming and disruptive to the Company’s operations.
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+ Such restrictions can be announced with little or no advance notice and the Company may not be able to effectively mitigate all adverse impacts from such measures.
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+ For example, tensions between governments, including the U.S. and China, have in the past led to tariffs and other
+
+Political events, trade and other international disputes, war, terrorism, natural disasters, public health issues, industrial accidents and other business interruptions can harm or disrupt international commerce and the global economy, and could have a material adverse effect on the Company and its customers, suppliers, contract manufacturers, logistics providers, distributors, cellular network carriers and other channel partners.
+
+
+ | 2023 Form 10-K | 5 The Company has a large, global business with sales outside the U.S. representing a majority of the Company’s total net sales, and the Company believes that it generally benefits from growth in international trade.
+
+ Substantially all of the Company’s manufacturing is performed in whole or in part by outsourcing partners located primarily in China mainland, India, Japan, South Korea, Taiwan and Vietnam.
+
+ Restrictions on international trade, such as tariffs and other controls on imports or exports of goods, technology or data, can materially adversely affect the Company’s operations and supply chain and limit the Company’s ability to offer and distribute its products and services to customers.
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+ The impact can be particularly significant if these restrictive measures apply to countries and regions where the Company derives a significant portion of its revenues and/or has significant supply chain operations.
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+ Restrictive measures can require the Company to take various actions, including changing suppliers, restructuring business relationships, and ceasing to offer third-party applications on its platforms.
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+ Changing the Company’s operations in accordance with new or changed restrictions on international trade can be expensive, time-consuming and disruptive to the Company’s operations.
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+ Such restrictions can be announced with little or no advance notice and the Company may not be able to effectively mitigate all adverse impacts from such measures.
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+ For example, tensions between governments, including the U.S. and China, have in the past led to tariffs and other
+
+Changing the Company’s operations in accordance with new or changed restrictions on international trade can be expensive, time-consuming and disruptive to the Company’s operations.
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+ Such restrictions can be announced with little or no advance notice and the Company may not be able to effectively mitigate all adverse impacts from such measures.
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+For example, tensions between governments, including the U.S. and China, have in the past led to tariffs and other restrictions being imposed on the Company’s business.
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+ If disputes and conflicts further escalate in the future, actions by governments in response could be significantly more severe and restrictive and could materially adversely affect the Company’s business.
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+The Company has a minority market share in the global smartphone, personal computer and tablet markets.
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+ The Company faces substantial competition in these markets from companies that have significant technical, marketing, distribution and other resources, as well as established hardware, software and digital content supplier relationships.
+ In addition, some of the Company’s competitors have broader product lines, lower-priced products and a larger installed base of active devices.
+
+ Competition has been particularly intense as competitors have aggressively cut prices and lowered product margins.
+
+Many of the Company’s competitors seek to compete primarily through aggressive pricing and very low cost structures, and by imitating the Company’s products and infringing on its intellectual property.
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+ Effective intellectual property protection is not consistently available in every country in which the Company operates.
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+ 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 materially adversely affected.
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+Defects can also exist in components and products the Company purchases from third parties.
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+ Component defects could make the Company’s products unsafe and create a risk of environmental or property damage and personal injury.
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+ These risks may increase as the Company’s products are introduced into specialized applications, including health.
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+ In addition, the Company’s service offerings can have quality issues and from time to time experience outages, service slowdowns or errors.
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+ As a result, from time to time the Company’s services have not performed as anticipated and may not meet customer expectations.
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+ There can be no assurance the Company will be able to detect and fix all issues and defects in the hardware, software and services it offers.
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+ Failure to do so can result in widespread technical and performance issues affecting the Company’s products and services.
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+ In addition, the Company can be exposed to product liability claims, recalls, product replacements or modifications, write-offs of inventory, property, plant and equipment or intangible assets, and significant warranty and other expenses, including litigation costs and regulatory fines.
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+ Quality problems can also adversely affect the experience for users of the Company’s products and services, and result in harm to the Company’s reputation, loss of competitive advantage, poor market acceptance, reduced demand for products and services, delay in new product and service introductions and lost sales.
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+The Company is exposed to the risk of write-downs on the value of its inventory and other assets, in addition to purchase commitment cancellation risk.
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+ The Company records a write-down for product and component inventories that have become obsolete or exceed anticipated demand, or for which cost exceeds net realizable value.
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+ The Company also accrues necessary cancellation fee reserves for orders of excess products and components.
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+ The Company reviews long-lived assets, including capital assets held at its suppliers’ facilities and inventory prepayments, for impairment whenever events or circumstances indicate the assets may not be recoverable.
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+ If the Company determines that an impairment has occurred, it records a write-down equal to the amount by which the carrying value of the asset exceeds its fair value.
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+ Although the Company believes its inventory, capital assets, inventory prepayments and other assets and purchase commitments are currently recoverable, there can be no assurance the Company will not incur write-downs, fees, impairments and other charges given the rapid and unpredictable pace of product obsolescence in the industries in which the Company competes.
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+The Company’s minority market share in the global smartphone, personal computer and tablet markets can make developers less inclined to develop or upgrade software for the Company’s products and more inclined to devote their resources to developing and upgrading software for competitors’ products with larger market share.
+
+ When developers focus their efforts on these competing platforms, the availability and quality of applications for the Company’s devices can suffer.
+