Business / Apple Case Analysis

Apple Case Analysis

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Autor:  anton  18 October 2010
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Apple

History

Steve Jobs and Steve Wozniak founded Apple on April 1, 1976 in Santa Clara Valley, California. The two built the Apple I out of a garage and sold it. The first Apple I computer did not include a monitor, keyboard, or casing. Due to the high demand for the Apple I, Jobs realized that there was a market for small computers. He also realized that he could market the company's name and the computer's user-friendly look.

In 1977 Wozniak added a keyboard, color monitor, and eight peripheral device slots. Apple sales increased from $7.8 million in 1978 to $117 million by 1980, which was the year that Apple went public. Wozniak left the Apple in 1983 and Jobs hired PepsiCo's John Sculley as president. In 1984 Apple introduced the Macintosh and bounced back from failed product introductions. Jobs left Apple in 1985 and founded NeXT Software, which is a designer of applications for software development. Microsoft founder Bill Gates' appealed for Apple to license its products and make the Microsoft platform an industry standard, but Sculley ignored his offer.

In 1986 Apple introduced its Mac Plus and LaserWriter printers. Shortly after, Apple formed the software company that later became Claris. By the 1980s Microsoft brought new competition with the Windows operating system (OS) which was similar to Apple’s graphical interface. Apple sued Microsoft but lost its claim due to the 1992 copyright protection.

In 1993 Apple introduced the Newton handheld computer, but sale did not show much promise. Since earnings were decreasing, Apple had to downsize its workforce. Sculley was among the employees who left the company. By 1994 Apple started licensing clones of its OS, hoping to attract software developers. In 1996 Apple realized Mac clones were stealing sales and hired Gilbert Amelio as CEO, formerly from National Semiconductor.

In 1997 Apple purchased NeXT, but sales continued to decline. The company was forced again to downsize, cutting about 30% of its workforce. Many projects were canceled and research costs were cut, due to the downsizing of the company. Jobs and Amelio returned to Apple to work on a temporary basis. An alliance with Microsoft was formed, which was a Mac version of the Microsoft office software. Apple discontinued the cloning license from Power Computing to protect the company’s market share.

In 1998 Apple introduced the Mac OS X, which is the company’s first server software. The company also enhanced the iMacs with a colorful product line. Additional changes were made in its Claris unit by downsizing, shifting operations, and renaming it to FileMaker. That year there was a discontinued use of its Newton handheld device and printer products.

In 1999 the company followed the footsteps of Dell and began to sell built-to-order systems online, specifically in the portable computing area with its iBook laptop. By 2000, Jobs became a permanent executive for Apple. He turned the company’s website around by focusing on consumer Internet services. He also revamped the desktop lines, by adding the G4 cube. Unfortunately, due to the poor response to the G4, by the end of the 2000 quarter profits started to decline.

In 2001 Apple upgraded product lines to include CD and DVD burners along with faster processors. The company also introduced the Titanium, which was an ultraslim version of the Powerbook. Apple purchased PowerSchool, which was a software maker designed for schools. This was to regain the loss of market share in its education market. The company then opened a small chain of retail stores in the United States. That same year, Apple purchased Spruce Technologies, a DVD authoring software maker. By October, the iPod was introduced as a digital music player.

In 2002 Apple redesigned the iMac look, the new look was a half-dome base and flat panel display with a pivoting arm. This new look was drastic compared to the original look since iMac’s first introduction. That same year, Apple introduced the eMac, which was a computer similar to the iMac. The eMac was designed to regain market share from the education sector, it was only sold to students and educators. (Later the company designed a retail version) Apple continued to push new products by announcing the Xserve, which was a rack-mount server.

In 2004, Apple launched another iMac design which streamlined and included the G5 processor. The company also introduced the Xserve G5, iPod mini and the iPod photo. The iPod photo was an updated iPod that included the ability to store and display digital photos.

In 2005, the Mac mini was introduced into the low-end market. Apple also updated the Xserve G5 and introduced the iPod shuffle. The iPod shuffle was Apple's first launch into the market of low-end flash-based digital music players. Apple finally turned its attention to the low-end market, the only digital music market it had yet to dominate. The iPod shuffle was no larger than a keychain flash drive, and could be used as such in addition to playing mp3 and mp4 music files.

Business Strategies

Apple computer has engaged this new millennia with a sleek and eye catching iMac and iBook for consumers today. Thinking digital is the new idea behind the success of Apple. The operating systems include the OS X operating systems designed for high-end consumers and professionals involved in designing and publishing. Once the worlds top PC developer, Apple has fallen into the niche markets in an industry dominated by "Wintel" machines (computers using Microsoft Windows software and Intel processors), compared to the Apple, UNIX-based operating system. Steve Jobs, CEO and Co-founder of Apple Computer has long championed the importance of having a visually attractive, user friendly design for all the computers they manufacture. These features distinguish Macs from any other PC computer in the industry.

Apples new corporate strategy developed in the massive slowdown of technology which was to take advantage and add value to personal electronic devices. Jobs emphasize Macs as the centerpiece for digital devices such as cameras, video recorders, and music players. The idea behind this strategy was to develop MAC only applications in hope of making the MAC the “digital Hub”, of the “Digital Lifestyle”, to revitalize sales and guarantee long-term security of the company. In 2003 Apple created the itunes music stores that allow consumers to visit their website and purchase music from millions of titles for just 99 cents. Later the following year Apple and Hewlett-Packard announced a partnership that lets the PC giant resell HP-branded iPods; the deal calls for HP to preinstall iTunes on its consumer PCs. Apple launched iPods photo, which allows colorful photos and stores digital photos and music files.

In an effort to appeal to a broad array of consumers, Apple has opened over 80 retail stores generating about 15% of the company’s revenues. The company’s current successes have depended highly upon software development and unique hardware devices to maintain the interest and buying loyalty of the consumer. Job realizes that competition is looming around every corner, each seeking to outperform each others innovations and strategies. In response to this pressure, Apple has introduced the emac designed specifically for the education sector, and it’s G5 which addresses the high performance needs of today’s professionals. The current marketing campaign urges Window users to switch over to the Mac’s, in a battle between Windows and Apple in which Apple has seen its share of losses. In response Apple has unleashed Tiger which has some 200 enhancements over the already existing MAC platform.

Global Markets

Apple manages its business internationally, which is composed of the America’s both North and South. The European segment includes all European countries except Africa and the Middle East. Each geographic segment provides similar hardware and software so that consumers in various locations are all treated equally.

Americas

During the fiscal year 2004, net sales in the Americas increased by 26% or 838 million compared to 2003. This increase was largely contributed to the annual iPods sales as well as peripherals, software, and service revenues. Macintosh sales also increased by 4% from the previous year, driven primarily by portable and power Macintosh systems. During 2004 the Americas represented approximately 51% of total Macintosh unit sales. Apple also experienced an increase in the U.S. education channel net sales of 19% for fiscal year 2004 compared to its previous fiscal year.

The increase for U.S. education sales were attributed to higher education initiatives that resulted in a successful back to school campaign. This growth in net sales has resulted in a 40% higher education channel with strong demands for the Company’s portables. The K-12 market has grown by 3% during fiscal year 2004, despite budget restraints and increased competition.

Europe

The fiscal years 2000, 2001, 2002, have all lagged in revenue performance because of wide competition and weak advertising initiatives. In 2004 Europe sales rebounded by 37% or 490 million along with its previous year increases of 13%. Europe experienced strong net sales across all product lines, except for the IMac systems. With advertisement fiscal year 2004 increased revenues with the Company’s Power Macintosh systems and portable Macintosh, this resulted in a year-over-year increase of 29% and 42% respectively. Net sales in Europe increased by 58 million or 5% during 2003 as compared to a sales decline of 5% for Macintosh units in 2002. In whole Europe’s results are consistent with those experienced in the Americas.

Japan

This segment continues to be the most challenging to Apple, with four consecutive year-over-year decline in both net sales and Macintosh unit sales. Japan’s net and unit sales were down 3% and 14% respectively. These declines are attributable to a shift in sales from the Japan segment into the Retail segments. In addition delays from computer system upgrades like the Quark XPress 6 or Mac OS X, which did not arrive into Japan until September 2004. Net sales in Japan have decreased by 12 million or 2% during 2003 as compared to 2002, which was the weakest year-to-date performance of any Apple computer operating systems.

Retail

Apple has opened 21 new retail stores in 2004, including two international stores in Tokyo and Osaka, Japan, bringing the total number of opened stores to 86 as of Sept 25, 2004. Currently Apple retains approximately 91 stores globally, hoping to reach 100 stores by the end of 2005. Half of the new stores opened in 2005 will be the “mini” store design, the Company’s smallest store format to date. Net sales in the Retail Industry grew to 1.185 billion during 2004 from 621 million in 2003. This increase in net sales reflects the impact of new store openings for each fiscal year. The Company’s Retail segment reported profit of 39 million in 2004 compared to losses of 5 million during 2003.

Competitors

Hewlett-Packard Company

Hewlett-Packard is the third largest competitor of Apple in term of market cap after Microsoft and Dell. Its main business market is computing and imaging solutions for both business and home office. Hewlett-Packard business strategies are to provide customers with superior products, services and overall experiences by providing leading technologies that work seamlessly together; to deliver to business customers the best return on IT investments in the industry; to build world class cost structures and processes across the entire portfolio of businesses; and to focus on innovations and research and development.

Hewlett-Packard has four main group business segments: the Technology Solution Group (TSG) which consist of Enterprise Storage and Servers (ESS), HP Services (HPS), and Software and Corporate Investments; the Personal Systems Group (PSG), the Imaging and Printing Group (IPG), and HP Financial Services (HPFS).

Its $79.905 billion revenue in 2004 (as of October 31) came from 37.3% Technology Solution Group, 30.8% Personal Systems Group, 30.2% Imaging and Printing Group, and 2.3% HP Financial Services. The company total revenue increased by 9% from 2003 to 2004; and by 29% from 2002 to 2003 due to acquisition of Compaq. In 2004, its international sales cover 60% of total revenue and 40% from the United States.

The company gains its market share by acquisition of Compaq in 2002. It also expands its imaging and printing group especially in printer that capable to the needs of digital printing.

Dell Inc.

Dell has a position as the second largest Apple competitor after Microsoft. Its business covers servers, storage, networking products, workstations, notebook computers, desktop computer systems, printing and imaging systems, software and peripheral products and IT services. Dell’s market area is corporate business and institutional customers. Its marketing strategy includes television and internet advertisement, publication, and special promotions. Dell maintains a field sales force throughout the world. Its worldwide operation covers the Americas (U.S., Canada and Latin America), Europe and Asia Pacific-Japan regions.

Dell has five business strategies: direct relationship is the most efficient path to the customer; availability of custom-built products and custom-tailored services; low-cost leader; provides a single point of accountability for its customers; and standards-based technologies deliver the best value to customers.

In 2004, Dell made total revenue of $41.4 billion, which came from Americas market $28.6 billion, Europe $8.5 billion, and Asia Pacific-Japan $4.3 billion. Dell’s market growth higher in international market compare to Americas market. Asia Pacific-Japan has the highest growth from 2003 to 2004 as 26%, followed by Europe 23%, and Americas 14%.

In 2004, Dell maintained the No.1 position of market share of its desktop product; and held No.2 market share position of notebooks. The market for notebooks grew higher in 2004 (35%), compared to 2003 (20%); this situation as a result of the demand for mobile computer is increasing.

Dell believes that the models will benefit the company in all environments and all product segment and regions. Dell also has bright future to continue the profitable growth by increasing its market, entering new market, and add products and services.

Microsoft Incorporation

Microsoft is the main competitor of Apple. Microsoft’s core mission statement: To enable people and businesses throughout the world to realize their full potential. The company was started by a college graduate, Bill Gates, who later on went to dominate the computer industry.

Microsoft is also owned by NBC which has 50% ownership. Major geographic sales and marketing organizations represent a majority of all the global continents. Microsoft localizes many of their products to reflect local languages and conventions. Research and development facilities are located in Redmond, Fargo, Beijing, Dublin, Vedbaek, etc.

Microsoft is able to generate revenue and other income related segments by creating a wide range of software products for computing devices. The company for the past few years laid a foundation for long-term growth, by capitalizing on vital areas such as customers, innovative new products, and improving internal processes.

In 2004, PC unit growth was strong which increased 13% from 2003. Forecast for 2005 does not look good, with forecast of 7% to 9% growth. Revenue growth for 2004 was driven by licensing of Windows Client operating systems through OEMs and other server applications. Growth in PC shipments was 13% in 2004. The company also estimates that total server hardware shipments grew 16%.

Operating income declined in 2004, a decline of $11 million which was from court settlements with Sun Microsystems. Operating income was improved by revenue growth by operational improvements in MSN business.

PC and server unit shipment growth rates are expected to decline in 2005. The company is expecting to lose market share to Linux because Linux share of server units grew at a faster rate. Microsoft is anticipating a decline in future sales.

Apple Financial Position

Net sales increased 33% or $2.1 billion during 2004 from 2003. Several factors have contributed to net sales during 2004:

Macintosh system’s net sales increased $432 million or 10% from 2004 compared to 2003, while net sales per Macintosh unit sold remained stable each year. Macintosh systems unit sales increased per unit 278,000 units or 9% during 2004 in comparison to 2003. There was a prevalent demand for Macintosh systems which was from increases in net sales and unit sales, iMacs were the exception. The Powerbook and iBook has the strongest revenue and unit growth during 2004 compared to 2003 of approximately 26% and 33%. Portable systems unit sales accounted for 51% during 2004 compared to only 42% during 2003. All these results are from a trend in the industry preference for portable systems. Power Macintosh systems performance had positive results in 2004 with a 15% and 6% increase in net sales and unit sales. During second half of 2004, sales of Power Macintosh were slowed down as a result of manufacturing problems at IBM, a company who was the main supplier of the PowerPC G5 processor. Even though, there problems at IBM, Power Macintosh sales still increased from the prior year.

2004 compared with 2003, iPods net sales increased from $961 million. iPods unit sales totaled 4.4 million in 2004, which is a representation of an increase of 370% from the 939,000 iPod units sold in 2003. iPods continued to have strong demand during 2004 which was obvious in Apple’s operating segment and improvements to the iPod, release of mini iPod, increased distribution network for iPods, and success of iTunes Music Store was resulted from making it available to both Macintosh and Windows users around the world. Since the release of the iPod, Apple has sold approximately 5.7 million iPods.

Although Apple has been behind the competition, it is clearly apparent that this company is making a slow comeback. Each year, Apple is slowly stealing their competitor’s market share; this is due in part to Apple’s competitive advantage in operating systems.

Apple Financial Data

Apple’s Products

Hardware Products The Company offers a range of personal computing products including desktop and notebook personal computers, related devices and peripherals, and various third-party hardware products. All of the Company’s Macintosh products utilize PowerPC RISC-based microprocessors. The Company’s entire line of Macintosh systems, excluding servers and storage systems, features the Company’s Mac OS X Version 10.3 ‘‘Panther’’ and iLife suite of software for digital photography, music, movies, and music creation.

The Power Mac line of desktop personal computers is targeted at business and professional users and is designed to meet the speed, expansion and networking needs of the most demanding Macintosh user. Powered by the PowerPC G5 processor, the Power Mac G5 utilizes 64-bit processing technology for memory expansion up to 8GB, and advanced 64-bit computation while also running existing 32-bit applications natively. The Power Mac G5 product line comes in four processor configurations—single 1.8GHz, dual 1.8GHz, dual 2.0GHz and dual 2.5GHz. All Power Mac G5 desktops feature a SuperDrive and either the NVIDIA GeForceFX 5200 Ultra or the ATI Radeon 9600 XT graphics card. In addition, all Power Mac G5 desktops deliver connectivity and high-performance input/output (I/O), including Gigabit Ethernet, FireWire 800 and FireWire 400 ports, USB 2.0 ports, optical digital audio input and output, built-in support for 54 Mbps AirPort Extreme wireless networking, and optional Bluetooth connectivity. Xserve and Xserve RAID Storage System Xserve, the Company’s first rack-mount server product, was designed for simple setup and remote management of intensive I/O applications such as digital video, high-resolution digital imagery, and large databases. In January 2004, the Company announced Xserve G5, which is available with either a single or dual 2.0 GHz PowerPC G5 processor. Xserve G5 includes a system controller with up to 8GB of PC3200 error correcting code memory; three hot-plug Serial ATA drive modules that deliver up to 750GB of storage; and dual on-board Gigabit Ethernet for high-performance networking. In January 2004, the Company also introduced its Xserve RAID storage system, a 3U high-availability rack storage system, along with support for Windows and Linux-based computing environments. In October 2004, the Company updated its Xserve RAID storage system to deliver 5.6 terabytes of storage capacity and also expanded support for heterogeneous environments. The dual independent RAID controllers with 512MB cache per controller offer sustained throughput of over 380MBps—high enough to support two streams of uncompressed 10-bit HD video editing using protected RAID level 5. PowerBook The PowerBook family of portable computers is designed to meet the mobile computing needs of professionals and advanced consumer users. In April 2004, the Company updated its PowerBook G4 notebooks with faster PowerPC G4 processors. Both the 15-inch and 17-inch PowerBook G4 offer up to a 1.5 GHz PowerPC G4 processor, an available SuperDrive and the ATI Mobility Radeon 9700 graphics processor. The 12-inch PowerBook G4 features a 1.33 GHz PowerPC processor, an available SuperDrive, and NVIDIA GeForce FX Go5200 graphics. Every PowerBook G4 notebook comes with built-in AirPort Extreme wireless networking, an internal Bluetooth module for wireless connectivity, as well as a full complement of I/O ports including Firewire 400, USB 2.0., a built-in 56K v.92 modem and Ethernet (10/100BASE-T), for connectivity to a wide range of peripherals. The 15-inch and 17-inch PowerBook G4 models also include built-in Gigabit Ethernet and Firewire 800.

The iMac line of desktop computers is targeted to consumer and education markets. In August 2004, the Company introduced the iMac G5, featuring the PowerPC G5 processor and a design that integrates the entire computer into the flat panel display. The line offers 17- or 20-inch active matrix widescreen LCDs and PowerPC G5 processors running up to 1.8 GHz. The 17-inch models come with either a 1.8 GHz PowerPC G5 processor and a SuperDrive, or a 1.6 GHz PowerPC G5 processor and a Combo drive. The 20-inch model has a 1.8 GHz PowerPC G5 processor and a SuperDrive. The iMac G5 offers up to a 600 MHz front-side bus, 400 MHz DDR memory expandable to 2GB, AGP 8X graphics and 7200 rpm Serial ATA drives holding up to 250GB. The iMac G5 comes standard with NVIDIA graphics with dedicated video memory. The iMac G5 desktops offer a total of five USB ports (three USB 2.0) and two FireWire 400 ports, an optional internal Bluetooth module, a built-in antenna and card slot to support an optional AirPort Extreme Card for 54 Mbps 802.11g wireless networking, and also includes built-in Ethernet (10/100BASE-T) and a 56K V.92 modem.

The eMac, which is targeted primarily at the Company’s education and consumer customers, features a PowerPC G4 processor, a high resolution 17-inch flat cathode ray tube display, and preserves the all-in-one compact design of the original iMac favored by many of the Company’s education and consumer customers. In April 2004, the Company updated its eMac, which now has a suggested retail price starting at $799 and is available with a SuperDrive for a suggested retail price starting at $999. The eMac offers PowerPC G4 processors running at up to 1.25 GHz, 333 MHz DDR memory, ATI Radeon graphics and USB 2.0 connectivity to peripherals.

The iBook is designed to meet the portable computing needs of education and consumer users. In October 2004, the Company upgraded its iBook G4 line to include faster PowerPC G4 processors running up to 1.33 GHz, built-in AirPort Extreme 54 Mpbs 802.11g wireless networking and an available slot-load SuperDrive. The 12-inch model features a 1.2 GHz PowerPC G4 processor and a slot-load Combo drive, while the 14-inch models include a 1.33GHz G4 processor and either a Combo or SuperDrive optical drive. All iBook G4 models offer a full complement of I/O ports including FireWire 400, USB 2.0, a built-in 56K v.92 modem and Ethernet (10/100BASE-T), as well as an optional internal wireless Bluetooth module, for connectivity to a wide range of peripherals.

Music Products and Services The Company offers its iPod line of digital music players and related accessories to Macintosh and Windows users. The Company also provides an online service to distribute third-party music and audio books through its iTunes Music Store. Net sales of iPods and other music products and services generated year-over-year revenue growth of 316% and accounted for 19% of the Company’s total net sales in fiscal 2004. In July 2004, the Company introduced the fourth generation of the iPod, the Company’s portable digital music player, featuring Apple’s patent pending click wheel, which combines a touch-sensitive wheel with five push buttons for one handed navigation, and up to 12 hours of battery life. The iPod features Apple’s patent pending Auto-Sync technology that automatically downloads an entire digital music library onto the iPod and keeps it up-to-date whenever it is plugged into a Macintosh or Windows computer using FireWire or USB. The iPod also features Shuffle Songs, which randomly plays songs in a selected play list or across the entire library. All iPods work with Apple’s iTunes digital music management software on either a Macintosh or Windows computer. The iPod is available in 20GB and 40GB models. The iPod’s functionality extends beyond playing music and listening to audio books. Other key capabilities include data storage, calendar and contact information utility, and a selection of games. With the addition of third-party iPod peripherals, the capabilities of certain iPods can be enhanced to include voice recording and photo downloading directly from certain digital cameras. Along with the iPod, the Company has developed a seamless end-to-end music solution with the Company’s iTunes software and the iTunes Music Store, a service that consumers may use to purchase third-party music and audio books over the Internet. The Company has entered into a strategic alliance with Hewlett-Packard Company (HP), which provides for a HP-branded digital music player based on the iPod, the pre-installation of iTunes software on HP’s consumer PCs and notebooks and access to the iTunes Music Store. The Company has also entered into an alliance with BMW Group for the BMW iPod Adapter, a device that offers seamless integration of the iPod and certain BMW automobiles in North America. In addition, the Company formed an alliance with Founder Technology Group Corporation, a supplier of PCs to the Chinese market that provides for the pre-installation of iTunes on all Founder Technology Windows-based PCs. A similar alliance was formed with Synnex Technology International Corporation, a Taiwan-based wholesaler and distributor of personal computers, for the pre-installation of iTunes on its Windows-based laptop and desktop PCs. In October 2004, the Company introduced the iPod U2 Special Edition as part of a strategic alliance with the musical band, U2, and Universal Music Group. The U2 iPod holds up to 5,000 songs, features a black enclosure with a red click wheel and custom engraving of U2 band member signatures. iPod photo In October 2004, the Company introduced iPod photo. The iPod photo holds digital photos alongside the music library and displays them on its high-resolution color screen, which allows users to scroll through the photo library almost instantly using iPod’s patent pending click wheel. iPod photo can auto sync music and photos with a Macintosh or Windows-based computer. The iPod photo also allows users to simultaneously play music and view photo slideshows on the iPod, as well as on televisions and projectors. The iPod photo comes in 40GB or 60GB models and has an extended battery life that gives users up to 15 hours of music playback or up to 5 hours of slideshows. The iPod photo can hold up to 25,000 digital photos or 15,000 digital songs. iPod mini In January 2004, the Company introduced the iPod mini. Smaller and lighter than the iPod, the iPod mini has storage capacity of 4GB and holds up to 1,000 songs, utilizes the patent pending click wheel and is encased in an anodized aluminum case available in a selection of five colors: silver, gold, pink, blue or green. The iPod mini retains the same user interface as the iPod and works seamlessly with the Company’s iTunes Music Store and the iTunes software for buying, managing and listening to digital music on either a Macintosh or Windows-based computer. iTunes Music Store The Company’s iTunes Music Store, available for both Windows-based and Macintosh computers, is an online music download store that allows customers to find, purchase, and download third-party digital music and audio books. Users can easily search the contents of the music store catalog to locate works by title, artist, or album, or browse the entire contents of the store by genre and artist. Users can also listen to a free 30-second preview of any song in the store. Since April 2003, the iTunes Music Store has been available to U.S. customers. A similar store became available in the U.K., France and Germany in June 2004 and was followed by the October 2004 launch of an English language music store covering nine additional European countries. The Company has also announced its intention to open an iTunes Music Store in Canada during fiscal 2005. The iTunes Music Store is fully integrated directly into the latest version of the iTunes software, allowing customers to preview, purchase, download, organize, share, and transfer their digital music to an iPod using a single software application. Further discussion on the iTunes software may be found below under the heading ‘‘Software Products and Computer Technologies.’’ Requiring no subscription fee, the iTunes Music Store with iTunes software offers customers a broad range of personal rights to the third-party content they have purchased, including playing songs on up to five personal computers, burning a single song onto CDs an unlimited number of times, burning the same playlist up to seven times, listening to their music on an unlimited number of iPod’s, and using songs in certain media applications such as iPhoto, iMovie, and iDVD. The iTunes Music Store also features availability of audio books for purchase directly from the iTunes Music Store. Additional features currently available within the U.S. iTunes Music Store include gift certificates that can be sent via e-mail, prepaid gift cards, an ‘‘allowance’’ feature that enables users to automatically deposit funds into an iTunes Music Store account every month; and ‘‘Radio Charts,’’ a feature that allows users to search and buy the top songs played on radio stations in major U.S. markets.

Peripheral Products The Company sells certain associated Apple-branded computer hardware peripherals, including iSight digital video cameras, and a range of high quality flat panel TFT active-matrix digital color displays. The Company also sells a variety of third-party Macintosh compatible hardware products directly to end users through both its retail and online stores, including computer printers and printing supplies, storage devices, computer memory, digital video and still cameras, personal digital assistants, and various other computing products and supplies. iSight The Company’s iSight digital video camera enables video conferencing over broadband. iSight is a small, portable aluminum alloy camera with all audio, video and power provided by a single FireWire cable. iSight is designed to be center-mounted on the top of a computer screen and uses its integrated tilt and rotate mechanism to easily position the camera for natural, face-to-face video conferencing. iSight features an auto focusing auto exposure F/2.8 lens which captures high-quality pictures and full-motion video. With its on-board processor, iSight automatically adjusts color, white balance, sharpness and contrast to provide high-quality images with accurate color reproduction in most lighting conditions. iSight also includes a dual-element microphone that suppresses ambient noise for clear digital audio. Displays In June 2004, the Company announced a family of widescreen flat panel displays featuring the 30-inch Apple Cinema HD Display, a widescreen active-matrix LCD with 2560-by-1600 pixel resolution, a 23-inch widescreen Apple Cinema Display with 1920-by-1200 pixel resolution and a 20-inch widescreen Apple Cinema Display with 1680-by-1050 pixel resolution. The displays feature dual FireWire and dual USB 2.0 ports built into the display and use the industry standard DVI interface for a pure digital connection with the Company’s latest Power Mac and PowerBook systems. The Cinema Displays feature an aluminum design with a very thin bezel, suspended by an aluminum stand that allows viewing angle adjustment.

Software Products and Computer Technologies The Company offers a range of software products for education, creative, consumer and business customers, including Mac OS X, the Company’s proprietary operating system software for the Macintosh; server software and related solutions; professional application software; and consumer, education and business oriented application software. Operating System Software The Company released Mac OS X version 10.3 (code-named ‘‘Panther’’), the Company’s current version of Mac OS X, in October 2003. Panther incorporates features including a new version of Finder; Expos мe, a way to organize windows and instantly see all open windows at once; FileVault, a feature that secures the contents of a home directory with 128-bit AES encryption; iChat AV; and enhanced support for use on Windows-based networks. In June 2004, the Company previewed Mac OS X version 10.4 (code-named ‘‘Tiger’’), the fifth major version of Mac OS X that is expected to ship in the first half of calendar 2005. Tiger will contain new features including Spotlight, a new way to instantly find any file, document or information on a Macintosh created by any application on the Macintosh; Safari RSS, a new version of Apple’s web browser that incorporates instant access to Really Simple Syndication (RSS) data feeds on the web; Dashboard, a new way to instantly access ‘‘Widgets,’’ a new collection of desktop mini application accessories, including a date book, stock ticker, calculator, address book and iTunes controller; and a new version of iChat instant messaging client with multi-person audio and video conferencing in a 3D interface. (2004-10k annual report)



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