Buried in its Form 10-K, the annual financial report required of all publicly traded firms, is a lengthy list of risk factors to the company. Some are ridiculous, some are obvious, but they’re all factors that could negatively impact Apple going forward.

As an Apple-watcher and analyst, I believe it’s a worthwhile exercise to take a look at these every year and consider the strength of the technology market as a whole, as well as Apple’s place in it.

Here are Apple’s top 10 most significant market risks:

1. Global markets for the Company’s products and services are highly competitive and subject to rapid technological change, and the Company may be unable to compete effectively in these markets.

This is pretty obvious. Personal computers, smartphones, and tablets are all massively competitive markets and, though Apple has significant market share now, it’s always possible that an upstart competitor could come along and knock Apple off its perch. After all, in 2004, Nokia looked unstoppable.

“There can be no assurance the Company will be able to continue to provide products and services that compete effectively.”

2. To remain competitive and stimulate customer demand, the Company must successfully manage frequent product introductions and transitions.

Apple has gotten into a yearly cycle of iPhone and iPad launches, with Mac updates coming slightly more infrequently. Each time Apple updates its flagship products, it must wind down production of the older generation and ramp up production of the new one. Managing global supply/demand balance is a massively tricky job and, for the most part, Apple has done this successfully for the past few years. One of these years, it might not be so skilled.

“The Company cannot determine in advance the ultimate effect of new product introductions and transitions.”

3. The Company depends on the performance of distributors, carriers, and other resellers.

Apple might have close to 500 of its own retail stores, but it has hundreds of thousands of retail outlets selling and supporting iPhones, iPads, and Macs around the world. Apple also relies on cellular carrier partners to sell and subsidize its phones. A wholesale shift in worldwide carrier policies (like, say, data plans) could have a huge impact on Apple’s business. Apple also notes that the growth of its own retail store efforts could discourage third-parties from growing their sales channels.

“The financial condition of these resellers could weaken, these resellers could stop distributing the Company’s products, or uncertainty regarding demand for the Company’s products could cause resellers to reduce their ordering and marketing of the Company’s products.”

4. The Company faces substantial inventory and other asset risk in addition to purchase commitment cancellation risk.

Apple sells a lot of stuff! The company has said it wants to grow its channel inventory — the amount of product in between the manufacturing facility and the customer at retailers, wholesalers, and in transit — at 5-7 weeks. That’s a huge amount of money locked up in inventory. Apple could find itself on the hook for millions or even billions of dollars in useless inventory if products or even individual components become obsolete or if too much is ordered. This is similar to the product transition issue noted above, where Apple needs to be very diligent when handling product changeovers.

“No assurance can be given that the Company will not incur additional related charges given the rapid and unpredictable pace of product obsolescence in the industries in which the Company competes.”

5. Future operating results depend upon the Company’s ability to obtain components in sufficient quantities.

Apple buys lots of components to assemble its products — screens, storage, aluminum, cellular antennas, rare earth metals, and many, many more — and it uses a ton of individual materials. It’s possible that these will run out, or some other shortage (widespread flooding in Bangladesh a few years ago caused a shortage of hard drives, for example) might impact Apple’s ability to make its products.

“The supply of components for a new or existing product could be delayed or constrained, or a key manufacturing vendor could delay shipments of completed products to the Company.”

6. The Company depends on component and product manufacturing and logistical services provided by outsourcing partners, many of whom are located outside of the U.S.

Almost all of Apple’s stuff is made overseas in China. Apple has saved a ton of money outsourcing production and distribution, but this comes at a cost: it experiences product leaks, more limited control on quality, and difficulty responding to changing conditions. To be sure, Apple’s partners will bend over backwards to accommodate it, but this may not always be the case.

There’s also the risk of operating in China, which has significant long-term unresolved political and military issues.

“While these arrangements help ensure the supply of components and finished goods, if these outsourcing partners or suppliers experience severe financial problems or other disruptions in their business, the net realizable value of these assets could be negatively impacted.”

7. The Company’s products and services may experience quality problems from time to time that can result in decreased sales and operating margin and harm to the Company’s reputation.

This one is pretty straightforward. Scandals like Antennagate with the iPhone 4 and Bendgate with the iPhone 6 Plus could damage customer perception and hurt sales. Apple seems to have weathered these pretty well thus far, though.

“There can be no assurance the Company will be able to detect and fix all defects in the hardware, software, and services it sells.”

8. The Company relies on access to third-party digital content, which may not be available to the Company on commercially reasonable terms or at all.

Apple sells a ton of content through the iTunes Store, including music, movies, TV shows, and books. Over the years, Apple has had difficulty signing musical acts (like The Beatles, for example) and movie and television studios when it first launched the video sections on the iTunes Store.

These days, Apple has almost everything on the iTunes Store with few exceptions, but that doesn’t mean it’ll be there forever. However, Apple is making lots of new deals to bring video content to the Apple TV set-top box and potentially a new television in the future. Getting those deals made will be key.

“Failure to obtain the right to make available third-party digital content, or to make available such content on commercially reasonable terms, could have a material adverse impact on the Company’s financial condition and operating results.”

9. The Company’s future performance depends in part on support from third-party software developers.

Steve Ballmer was right — it is all about the developers, developers, developers. Apple’s million app-strong developer ecosystem on iOS is massively important to the success of both the iPhone and the iPad, as well as the Macintosh.

Apple’s customers have downloaded 1.3 million different apps and a total of more than 85 billion apps, according to recent numbers released by the company. It’s the quality and variety of those apps that keep many customers locked in to the Apple ecosystem, and many customers who have already purchased iOS apps are then even less likely to switch to a competing platform.

“If developers focus their efforts on these competing platforms, the availability and quality of applications for the Company’s iOS devices may suffer.”

10. The Company relies on access to third-party intellectual property, which may not be available to the Company on commercially reasonable terms or at all.

Though it’s in extended patent litigation with a number of companies including Samsung, Apple has a number of cross-licensing agreements with other companies, including Microsoft, Google, HTC, and Motorola Mobility.

These agreements are important both for reducing Apple’s potential litigation and its ability to include technical features in its products. In 2012, Apple was hit with a $368 million judgement over a patent related to VPN connectivity, though that award was thrown out by an appeals court last month.

“Failure to obtain the right to use third-party intellectual property, or to use such intellectual property on commercially reasonable terms, could preclude the Company from selling certain products or otherwise have a material adverse impact on the Company’s financial condition and operating results.”

Aside from those 10, Apple lists a number of other risks as well. See Apple’s 10-K for more details:

  • The Company could be impacted by unfavorable results of legal proceedings, such as being found to have infringed on intellectual property rights.
  • The Company is subject to laws and regulations worldwide, changes to which could increase the Company’s costs and individually or in the aggregate adversely affect the Company’s business.
  • The Company’s business is subject to the risks of international operations.
  • The Company’s Retail segment has required and will continue to require a substantial investment and commitment of resources and is subject to numerous risks and uncertainties.
  • Investment in new business strategies and acquisitions could disrupt the Company’s ongoing business and present risks not originally contemplated.
  • The Company’s business and reputation may be impacted by information technology system failures or network disruptions.
  • There may be breaches of the Company’s information technology systems that materially damage business partner and customer relationships, curtail or otherwise adversely impact access to online stores and services, or subject the Company to significant reputational, financial, legal, and operational consequences.
  • The Company’s business is subject to a variety of U.S. and international laws, rules, policies, and other obligations regarding data protection.
  • The Company’s success depends largely on the continued service and availability of key personnel.
  • The Company’s business may be impacted by political events, war, terrorism, public health issues, natural disasters, and other business interruptions.
  • The Company expects its quarterly revenue and operating results to fluctuate.
  • The Company’s stock price is subject to volatility.
  • The Company’s financial performance is subject to risks associated with changes in the value of the U.S. dollar vs. local currencies.
  • The Company is exposed to credit risk and fluctuations in the market values of its investment portfolio.
  • The Company is exposed to credit risk on its trade accounts receivable, vendor non-trade receivables, and prepayments related to long-term supply agreements, and this risk is heightened during periods when economic conditions worsen.
  • The Company could be subject to changes in its tax rates, the adoption of new U.S. or international tax legislation, or exposure to additional tax liabilities.

What do you think about Apple’s analysis of its risks? Let us know in the comments below.

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