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Apple's annual report highlights retail stores and the competition

October 31, 2012|By Andrea Chang
  • Apple released its 2012 annual report Wednesday, providing an inside look at the company's business and future plans.
Apple released its 2012 annual report Wednesday, providing an inside look… (Kimihiro Hoshino / AFP/Getty…)

Apple released its annual report Wednesday, an 82-page filing that gives insights into its future plans and views on the competition.

Here are some highlights:

-- Apple said it is confronted by "aggressive competition" in all areas of its business and expects it to "intensify significantly" as rivals 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."

-- Apple's rivals who sell mobile devices and PCs have "aggressively cut prices" and lowered 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."

-- Although the Cupertino, Calif., tech company believes it offers "superior innovation" in hardware, online services and the distribution of digital content, its "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."

-- A number of product components are currently obtained from single or limited sources, which subjects the company to "significant supply and pricing risks." Many components, including those that are available from multiple suppliers, are at times subject to industry-wide shortages and significant commodity pricing fluctuations.

-- R&D costs are going up: Total research and development expense was $3.4 billion in 2012, $2.4 billion in 2011 and $1.8 billion in 2010.

-- Product backlogs are not a meaningful indication of future business prospects, and "should not be considered a reliable indicator of the company's ability to achieve any particular level of revenue or financial performance."

-- As of Sept. 29, the end of the company's fiscal year, Apple had approximately 72,800 full-time  employees and an additional 3,300 full-time temporary employees and contractors. About 42,400 of the total full-time employees worked in the company’s retail segment.

-- Apple reiterated that it intends to "vigorously contest" the civil antitrust action brought by the U.S. Department of Justice alleging that Apple and five major book publishers attempted to fix retail e-book prices. The lawsuit is now in discovery, with an initial trial date set for June.

-- Average revenue per store increased 19% to $51.5 million in 2012 compared with $43.3 million in 2011. Apple has 326 stores in 2011 and 365 in 2012.

-- During 2013, the company expects to open about 30 to 35 new retail stores, about three-quarters of them outside of the U.S.

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