Apple (AAPL)

Music Products and Services

The Company offers its iPod line of portable digital music and video players and related accessories to Mac and Windows users. All iPods work with the Company’s iTunes digital music management software (“iTunes”) available for both Mac and Windows-based computers. The Company also provides an online service to distribute third-party music, audio books, music videos, short films, television shows, movies, podcasts, and applications through its iTunes Store. In addition to the Company’s own iPod accessories, third-party iPod compatible products are available, either through the Company’s online and retail stores or from third parties, including portable and desktop speaker systems, headphones, car radio solutions, voice recorders, cables and docks, power supplies and chargers, and carrying cases and armbands.

iPod^® shuffle

In September 2009, the Company updated the third-generation iPod shuffle, a flash-memory-based iPod which is nearly half the size of the second generation model and is the first music player with the VoiceOver feature enabling it to speak song titles, artists and playlist names. iPod shuffle holds up to 1,000 songs and is the first iPod shuffle to accommodate playlists. iPod shuffles include a shuffle switch feature that allows users to listen to their music in random order or in the order of their playlists synced through iTunes. iPod shuffle works with iTunes’ patent-pending AutoFill option that automatically selects songs to fill the iPod shuffle from a user’s iTunes library. The new iPod shuffle is available in 2GB and 4GB configurations in an aluminum design in a variety of colors, or a special edition 4GB configuration in a stainless steel design.

iPod^® nano

In September 2009, the Company introduced the new iPod nano, a flash-memory-based iPod. The new iPod nano includes a video camera, microphone and speaker, a built-in FM radio with live pause functionality, iTunes Tagging, and a built-in pedometer. The new iPod nano incorporates a larger 2.2-inch display with 204 pixels per inch, a built-in accelerometer, and an updated user interface featuring Cover Flow^® and Shake to Shuffle mode. The new iPod nano also features Genius Mixes, allowing users to automatically create song mixes from their music libraries. The new iPod nano provides up to 24 hours of audio playback or up to five hours of video playback and is available in 8GB and 16GB configurations in a variety of colors.

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iPod^® classic

The iPod classic is an upgraded version of the original iPod, the Company’s hard-drive based portable digital music and video player. In September 2009, the Company introduced an updated version of the iPod classic, which has 160 GB of storage and is capable of holding up to 40,000 songs, 200 hours of video, or 25,000 photos. The iPod classic provides up to 36 hours of audio playback or up to six hours of video playback, features “Genius” technology, and includes a 2.5-inch color screen that can display album artwork, photos, and video content including music videos, video and audio podcasts, short films, television shows, movies, and games.

iPod^® touch

In September 2009, the Company introduced the third-generation iPod touch, a flash-memory-based iPod that is 0.33-inches thin and features a 3.5-inch widescreen display, Genius technology, a built-in speaker, and an accelerometer. The new iPod touch features peer-to-peer connections, which gives users the ability to play multi-player games with other users, Genius Mixes, and iPhone 3.1 software. The iPod touch’s user interface is based on the Company’s Multi-Touch user interface. It also includes Wi-Fi wireless networking, which allows users to access the iTunes Wi-Fi Music Store and the App Store to purchase and/or download audio and video files, as well as a variety of other applications. The iPod touch is available in 8GB, 32GB and 64GB configurations and features up to 30 hours of audio playback and up to six hours of video playback.

iTunes^® 9

iTunes is an application for playing, downloading, and organizing digital audio and video files and is available for both Mac and Windows-based computers. iTunes is integrated with the iTunes Store, a service that allows customers to find, purchase, rent, and download third-party digital music, audio books, music videos, short films, television shows, movies, games, and other applications. Originally introduced in the U.S. in April 2003, the iTunes Store now serves customers in 23 countries. In September 2009, the Company announced iTunes 9, which includes Genius Mixes, a new feature in Genius technology, Home Sharing, which allows users to transfer music, movies and TV shows among up to five authorized computers, and improved syncing functionality that allows users to organize their iPhone applications in iTunes, to sync music by artist and genre, and to sync photos by Events and Faces. In January 2009, the Company announced it would offer all songs in the iTunes catalog without digital rights management software and that iTunes songs would be available at three standard price points, beginning in April 2009 in most countries.

Music Products and Services

The Company offers its iPod line of portable digital music players and related accessories to Mac and Windows users. All iPods work with the Company’s iTunes digital music management software (“iTunes software”) available for both Mac and Windows-based computers. The Company also provides an online service to distribute third-party music, audio books, music videos, short films, television shows, movies, podcasts, and applications through its iTunes Store. In July 2008, the Company launched the iTunes App Store that allows a user to browse, search for, or purchase third-party applications through either a Mac or Windows-based computer or wirelessly download them directly onto an iPhone or iPod touch. In addition to the Company’s own iPod accessories, thousands of third-party iPod compatible products are available, either through the Company’s online and retail stores or from third parties, including portable and desktop speaker systems, headphones, car radio solutions, voice recorders, cables and docks, power supplies and chargers, and carrying cases and armbands.

iPod® shuffle

The iPod shuffle weighs half an ounce and features an aluminum design and a built-in clip. The iPod shuffle is available in 1GB or 2GB flash memory configurations and is capable of holding up to 240 or 500 songs, respectively. The iPod shuffle is available in a variety of colors and provides up to 12 hours of battery life. The iPod shuffle includes a shuffle switch feature that allows users to listen to their music in random order or in the order of their playlists synced through iTunes. iPod shuffle works with iTunes’ patent-pending AutoFill option that automatically selects songs to fill the iPod shuffle from a user’s iTunes library.

iPod® nano

In September 2008, the Company introduced the new iPod nano, a flash-memory-based iPod featuring the thinnest iPod design ever. The iPod nano incorporates a two-inch display with 204 pixels per inch, a built-in

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accelerometer, and an updated user interface featuring Cover Flow® and Shake to Shuffle mode. The new iPod nano also features “Genius” technology allowing users to automatically create playlists from songs in their music libraries. The new iPod nano provides up to 24 hours of audio playback or up to four hours of video playback and is available in 8GB and 16GB configurations in a variety of colors.

iPod® classic

The iPod classic is an upgraded version of the original iPod, the Company’s hard-drive based portable digital music player. In September 2008, the Company introduced the new iPod classic, which has 120GB of storage and is capable of holding up to 30,000 songs, 150 hours of video, or 25,000 photos. The iPod classic provides up to 36 hours of audio playback or up to six hours of video playback, features “Genius” technology, and includes a 2.5-inch color screen that can display album artwork, photos, and video content including music videos, video and audio podcasts, short films, television shows, movies, and games.

iPod® touch

In September 2008, the Company introduced the new iPod touch, a flash-memory-based iPod that is 8.5 mm thin and features a 3.5-inch widescreen display, “Genius” technology, a built-in speaker, and an accelerometer. The iPod touch’s user interface is based on the Company’s Multi-Touch display allowing users to control the device with a touchscreen. It also includes Wi-Fi wireless networking, which allows users to access the iTunes Wi-Fi Music Store and iTunes App Store to purchase and/or download audio and video files, as well as a variety of other applications. The iPod touch is available in 8GB, 16GB and 32GB configurations and features up to 36 hours of audio playback and up to six hours of video playback.

iTunes® 8

iTunes is an application for playing, downloading, and organizing digital audio and video files and is available for both Mac and Windows-based computers. iTunes is integrated with the iTunes Store, a service that allows customers to find, purchase, rent, and download third-party digital music, audio books, music videos, short films, television shows, movies, games, and other applications. Originally introduced in the U.S. in April 2003, the iTunes Store now serves customers in 22 countries. In September 2008, the Company announced iTunes 8, which includes the new “Genius” technology and features new ways of viewing music and video libraries and allows the purchase of high definition television programs from the iTunes Store. In July 2008, the Company launched the iTunes App Store that allows users to browse, search, purchase, and wirelessly download third-party applications directly onto their iPhone or iPod touch. In January 2008, the Company announced iTunes Movie Rentals, a service allowing customers to rent movies from the iTunes Store that can be watched on Macs, Windows-based computers, current generation video-enabled iPods, iPhones, and digitally enabled televisions using Apple TV.

Music Products and Services

The Company offers its iPod line of portable digital music players and related accessories to Mac and Windows users. All iPods work with the Company’s iTunes
digital music management software (“iTunes software”) available for both Mac and Windows-based computers. The Company also provides an online service to distribute third-party music, audio books, music videos, short films, television
shows, movies, podcasts, and applications through its iTunes Store. In July 2008, the Company launched the iTunes App Store that allows a user to browse, search for, or purchase third-party applications through either a Mac or Windows-based computer
or wirelessly download them directly onto an iPhone or iPod touch. In addition to the Company’s own iPod accessories, thousands of third-party iPod compatible products are available, either through the Company’s online and retail stores or
from third parties, including portable and desktop speaker systems, headphones, car radio solutions, voice recorders, cables and docks, power supplies and chargers, and carrying cases and armbands.

Music Products and Services

The Company offers its iPod® line of portable digital music players and related accessories to Mac and Windows users. All iPods work with the Company's iTunes® digital music management software ("iTunes software") available for both Mac and Windows-based computers.

The Company also provides an online service to distribute third-party music, audio books, music videos, short films, television shows, movies, podcasts and iPod games through its iTunes Store. In addition to the Company's own iPod accessories, thousands of third-party iPod compatible products are available, either through the Company's online and retail stores or from third parties, including portable and desktop speaker systems, headphones, car radio solutions, voice recorders, cables and docks, power supplies and chargers, and carrying cases and armbands.

iPod® shuffle

The iPod shuffle weighs half an ounce and features an aluminum design and a built-in clip. The iPod shuffle contains 1GB of flash memory capable of holding up to 240 songs and provides up to 12 hours of battery life. The iPod shuffle includes a shuffle switch feature that allows users to listen to their music in random order or in the order of their playlist synced through iTunes. iPod shuffle works with iTunes' patent-pending AutoFill option that automatically selects songs to fill the iPod shuffle from a user's iTunes library.

iPod® nano

In September 2007, the Company introduced a new version of its flash-memory-based iPod nano featuring a larger two-inch display with 204 pixels per inch and a new user interface featuring Cover Flow®. The new iPod nano comes in an all metal design made with anodized aluminum and polished stainless steel and has up to 24 hours of battery life. The iPod nano includes the Click Wheel, a smaller and lighter design and brighter color screen than its predecessor, and new iPod games. The iPod nano is available in 4GB and 8GB configurations and in a variety of colors.

iPod® classic

In September 2007, the Company introduced the new iPod classic. The iPod classic is an upgraded version of the original iPod, the Company's hard-drive based portable digital music player. The iPod classic is available in an 80GB model capable of holding up to 20,000 songs or 100 hours of video and a 160GB model capable of holding up to 40,000 songs or 200 hours of video. The iPod classic features up to 40 hours of battery life and includes a new all-metal enclosure and a 2.5-inch color screen that can display album artwork, photos, and video content including music videos, video and audio podcasts, short films, television shows, movies, and games.

iPod® touch

In September 2007, the Company introduced the iPod touch, a new flash-memory-based iPod that is 8 mm thin and features the Company's Multi-Touch™ user interface on a 3.5-inch widescreen display. The iPod touch includes Wi-Fi wireless networking and additional applications such as Safari™, Google Search or Yahoo! oneSearch, and the new iTunes Wi-Fi Music Store. The iPod touch is available in 8GB and 16 GB configurations and features up to 22 hours of audio playback and up to five hours of video playback. The iPod touch's user interface is based on the Multi-Touch™ display allowing users to control the device with a touchscreen.

iTunes® 7

iTunes is a digital media player application for playing, downloading, and organizing digital music and video files. iTunes is available for both Mac and Windows-based computers. Within iTunes, the user can connect to the iTunes Store™, a service that allows customers to find, purchase, and download third-party digital music, audio books, music videos, short films, television shows and movies, and iPod games. In

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September 2007, the Company introduced the iTunes Wi-Fi Music Store offering users the ability to browse, search, preview, purchase, and download songs and albums from their iPod touch or iPhone over a Wi-Fi network. Customers can search the contents of the store catalog to locate works by title, artist, or album, or browse the entire contents of the store by genre. Originally introduced in the U.S. in April 2003, the iTunes Store now serves customers in 22 countries.

iPhone™

In January 2007, the Company announced iPhone™, a handheld device that combines in a single product a mobile phone, a widescreen iPod with touch controls, and an Internet communications device. iPhone's user interface is based on the Multi-Touch™ display allowing users to control the device with a touchscreen. iPhone lets users make calls by tapping on a name or number in their address book, a favorites list, or a call log as well as select and listen to voicemail messages in any order. iPhone also allows users to purchase and download songs and albums from the iTunes Wi-Fi Music Store directly onto their iPhone and play their iTunes® content, including movies, television shows, music, photos and podcasts, with the touch of a finger. iPhone features desktop-class email, web browsing, searching, and maps. iPhone is compatible with a Mac or PC and automatically syncs content from a user's iTunes library, as well as contacts, bookmarks, and email accounts. iPhone is a quad-band GSM phone featuring EDGE and Wi-Fi wireless technologies for data networking, Bluetooth 2.0, a built-in 2 megapixel camera, a 3.5-inch touch screen with 480-by-320 resolution at 160 pixels per inch, and providing up to 8 hours of talk time, 6 hours of Internet use, 7 hours of video playback or 24 hours of audio playback. AT&T Mobility LLC ("AT&T") is the exclusive U.S. cellular network carrier for iPhone. The Company began shipping iPhone in the U.S. on June 29, 2007. On November 9, 2007, the Company began shipping iPhone in the U.K. and Germany, and expects to ship the iPhone in France on November 29, 2007. O2 Limited ("O2"), T-Mobile International AG & Co. KG ("T-Mobile"), and France Telecom ("Orange") are the exclusive cellular network carriers for iPhone in the U.K., Germany, and France, respectively. The Company has entered into agreements with each exclusive cellular network carrier related to cellular network services and the purchase and sale of iPhone and iPhone related products. These agreements entitle the Company to receive certain payments from these carriers.

In addition to the Company's own iPhone accessories, third-party iPhone compatible products are available, either through the Company's online and retail stores or from third parties, including headsets, cables and docks, power supplies, and carrying cases.

Music Products and Services

The Company offers its iPod® line of portable digital music players and related accessories to Mac and Windows users. All iPods work with the Company's
iTunes® digital music management software ("iTunes software") available for both Mac and Windows-based computers.

The
Company also provides an online service to distribute third-party music, audio books, music videos, short films, television shows, movies, podcasts and iPod games through its iTunes Store. In
addition to the Company's own iPod accessories, thousands of third-party iPod compatible products are available, either through the Company's online and retail stores or from third parties, including
portable and desktop speaker systems, headphones, car radio solutions, voice recorders, cables and docks, power supplies and chargers, and carrying cases and armbands.

iPod® shuffle

The
iPod shuffle weighs half an ounce and features an aluminum design and a built-in clip. The iPod shuffle contains 1GB of flash memory capable of holding up to 240 songs and provides up
to 12 hours of battery life. The iPod shuffle includes a shuffle switch feature that allows users to listen to their music in random order or in the order of their playlist synced through
iTunes. iPod shuffle works with iTunes' patent-pending AutoFill option that automatically selects songs to fill the iPod shuffle from a user's iTunes library.

iPod® nano

In
September 2007, the Company introduced a new version of its flash-memory-based iPod nano featuring a larger two-inch display with 204 pixels per inch and a new user interface
featuring Cover Flow®. The new iPod nano comes in an all metal design made with anodized aluminum and polished stainless steel and has up to 24 hours of battery life. The iPod nano
includes the Click Wheel, a smaller and lighter design and brighter color screen than its predecessor, and new iPod games. The iPod nano is available in 4GB and 8GB configurations and in a variety of
colors.

iPod® classic

In
September 2007, the Company introduced the new iPod classic. The iPod classic is an upgraded version of the original iPod, the Company's hard-drive based portable digital music
player. The iPod classic is available in an 80GB model capable of holding up to 20,000 songs or 100 hours of video and a 160GB model capable of holding up to 40,000 songs or 200 hours of
video. The iPod classic features up to 40 hours of battery life and includes a new all-metal enclosure and a 2.5-inch color screen that can display album artwork,
photos, and video content including music videos, video and audio podcasts, short films, television shows, movies, and games.

iPod® touch

In
September 2007, the Company introduced the iPod touch, a new flash-memory-based iPod that is 8 mm thin and features the Company's Multi-Touch™ user interface on a
3.5-inch widescreen display. The iPod touch includes Wi-Fi wireless networking and additional applications such as Safari™, Google Search or Yahoo! oneSearch, and
the new iTunes Wi-Fi Music Store. The iPod touch is available in 8GB and 16 GB configurations and features up to 22 hours of audio playback and up to five hours of video
playback. The iPod touch's user interface is based on the Multi-Touch™ display allowing users to control the device with a touchscreen.

iTunes® 7

iTunes
is a digital media player application for playing, downloading, and organizing digital music and video files. iTunes is available for both Mac and Windows-based computers. Within iTunes, the
user can connect to the iTunes Store™, a service that allows customers to find, purchase, and download third-party digital music, audio books, music videos, short films, television shows
and movies, and iPod games. In

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September 2007,
the Company introduced the iTunes Wi-Fi Music Store offering users the ability to browse, search, preview, purchase, and download songs and albums from their iPod
touch or iPhone over a Wi-Fi network. Customers can search the contents of the store catalog to locate works by title, artist, or album, or browse the entire contents of the store by
genre. Originally introduced in the U.S. in April 2003, the iTunes Store now serves customers in 22 countries.

iPhone™

In
January 2007, the Company announced iPhone™, a handheld device that combines in a single product a mobile phone, a widescreen iPod
with touch controls, and an Internet communications device. iPhone's user interface is based on the Multi-Touch™ display allowing users to control the device with a touchscreen. iPhone
lets users make calls by tapping on a name or number in their address book, a favorites list, or a call log as well as select and listen to voicemail messages in any order. iPhone also allows users to
purchase and download songs and albums from the iTunes Wi-Fi Music Store directly onto their iPhone and play their iTunes® content, including movies, television shows, music,
photos and podcasts, with the touch of a finger. iPhone features desktop-class email, web browsing, searching, and maps. iPhone is compatible with a Mac or PC and automatically syncs content from a
user's iTunes library, as well as contacts, bookmarks, and email accounts. iPhone is a quad-band GSM phone featuring EDGE and Wi-Fi wireless technologies for data networking,
Bluetooth 2.0, a built-in 2 megapixel camera, a 3.5-inch touch screen with 480-by-320 resolution at 160 pixels per inch, and providing up
to 8 hours of talk time, 6 hours of Internet use, 7 hours of video playback or 24 hours of audio playback. AT&T Mobility LLC ("AT&T") is the exclusive
U.S. cellular network carrier for iPhone. The Company began shipping iPhone in the U.S. on June 29, 2007. On November 9, 2007, the Company began shipping iPhone in the U.K. and
Germany, and expects to ship the iPhone in France on November 29, 2007. O2 Limited ("O2"), T-Mobile International AG & Co. KG ("T-Mobile"), and France
Telecom ("Orange") are the exclusive cellular network carriers for iPhone in the U.K., Germany, and France, respectively. The Company has entered into agreements with each exclusive cellular network
carrier related to cellular network services and the purchase and sale of iPhone and iPhone related products. These agreements entitle the Company to receive certain payments from these carriers.

In
addition to the Company's own iPhone accessories, third-party iPhone compatible products are available, either through the Company's online and retail stores or from third parties, including
headsets, cables and docks, power supplies, and carrying cases.

Music Products and Services

The Company offers its iPod® line of portable digital music players and related accessories to Macintosh and Windows users. The Company also provides an online service to distribute third-party music, audio books, music videos, short films, television shows, movies, and iPod games through its iTunes Store. In addition to the Company’s own iPod accessories, thousands of third-party iPod compatible products are available, including portable and desktop speaker systems, headphones, car radio solutions, voice recorders, cables and docks, power supplies and chargers, and carrying cases and armbands.

iPod®

The iPod is the Company’s hard-drive based portable digital music player and was updated in September 2006. The iPod is available in a 30GB model capable of holding up to 7,500 songs, 25,000 photos, or 75 hours of video, and an 80GB model capable of holding up to 20,000 songs, 25,000 photos, or 100 hours of video. The iPod features up to 20 hours of battery life and includes a 2.5-inch color screen that can display album artwork, photos, and video content including music videos, video and audio podcasts, short films, television shows, movies, and games. Other key features of the iPod include a calendar, contact utility, and data storage capability. The iPod features the Company’s patent-pending Click Wheel, a touch-sensitive wheel with five push buttons for one-handed navigation. The iPod also includes the Company’s patent-pending Auto-Sync technology that automatically synchronizes and updates the iPod’s digital music and other content whenever it is connected to a Macintosh or Windows computer via USB. All iPods work with the Company’s iTunes digital music management software (“iTunes software”) available for both Macintosh and Windows-based computers.

iPod® nano

In September 2006, the Company introduced the second-generation version of its flash-memory-based iPod nano featuring an aluminum body and up to 24 hours of battery life. The second-generation iPod nano includes the Click Wheel, a smaller and lighter design, a brighter color screen than its predecessor, and new Search and Quick Scroll features that make it easier to find content. The iPod nano is available in 2GB, 4GB and 8GB configurations and in a variety of colors.

iPod® shuffle

In September 2006, the Company introduced a new version of its flash-memory-based iPod shuffle. The new iPod shuffle weighs half an ounce and features an all-new aluminum design and a built-in clip. The new iPod shuffle contains one gigabyte of flash memory capable of holding up to 240 songs and provides up to 12 hours of battery life. The iPod shuffle is based on the Company’s shuffle feature that allows users to listen to their music in random order. iPod shuffle works with iTunes and its patent-pending AutoFill option that automatically selects songs to fill the iPod shuffle from a user’s iTunes library.

iTunes® Store

The Company’s iTunes Store, available for both Macintosh and Windows-based computers, is a service that allows customers to find, purchase, and download third-party digital music, audio books, music videos, short films, television shows and movies, and iPod games. The iTunes Store also features the Podcast Directory that allows customers to search for and download audio programs to their computers and automatically receive new episodes over the Internet. Customers can search the contents of the store catalog to locate works by title, artist, or album, or browse the entire contents of the store by genre and

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artist. Originally introduced in the U.S. in April 2003, the iTunes Store now serves customers in 22 countries.

The iTunes Store is fully integrated with iTunes software allowing customers to preview, purchase, download, organize, share, and transfer digital content to an iPod using a single software application. Further discussion of the iTunes software may be found below under the heading “Software Products and Computer Technologies.” The iTunes Store offers customers a broad range of personal rights to the third-party content they have purchased. Content purchased through the store may also be used in certain applications such as iPhoto®, iMovie®, and iDVD®. Additional features of the iTunes Store include gift certificates that can be sent via e-mail; prepaid music cards; an “allowance” feature that enables users to automatically deposit funds into an iTunes Store account every month; online gift options that let customers give specific content to anyone with an email address; parental controls; and album reviews.

Music Products and Services

The Company offers its
iPod® line of portable digital music players and related accessories to
Macintosh and Windows users. The Company also provides an online service to
distribute third-party music, audio books, music videos, short films,
television shows, movies, and iPod games through its iTunes Store. In addition
to the Company’s own iPod accessories, thousands of third-party iPod compatible
products are available, including portable and desktop speaker systems,
headphones, car radio solutions, voice recorders, cables and docks, power
supplies and chargers, and carrying cases and armbands.

iPod®

The iPod is the Company’s
hard-drive based portable digital music player and was updated in September 2006.
The iPod is available in a 30GB model capable of holding up to 7,500 songs,
25,000 photos, or 75 hours of video, and an 80GB model capable of holding up to
20,000 songs, 25,000 photos, or 100 hours of video. The iPod features up to 20
hours of battery life and includes a 2.5-inch color screen that can
display album artwork, photos, and video content including music videos, video
and audio podcasts, short films, television shows, movies, and games. Other key
features of the iPod include a calendar, contact
utility, and data storage capability. The iPod features the Company’s
patent-pending Click Wheel, a touch-sensitive wheel with five push buttons for
one-handed navigation. The iPod also includes the Company’s patent-pending
Auto-Sync technology that automatically synchronizes and updates the iPod’s
digital music and other content whenever it is connected to a Macintosh or
Windows computer via USB. All iPods work with the Company’s iTunes digital
music management software (“iTunes software”) available
for both Macintosh and Windows-based computers.

iPod® nano

In September 2006,
the Company introduced the second-generation version of its flash-memory-based
iPod nano featuring an aluminum body and up to 24 hours of battery life. The
second-generation iPod nano includes the Click Wheel, a smaller and lighter
design, a brighter color screen than its predecessor, and new Search and Quick
Scroll features that make it easier to find content. The iPod nano is available
in 2GB, 4GB and 8GB configurations and in a variety of colors.

iPod® shuffle

In September 2006,
the Company introduced a new version of its flash-memory-based iPod shuffle.
The new iPod shuffle weighs half an ounce and features an all-new aluminum
design and a built-in clip. The new iPod shuffle contains one gigabyte of flash
memory capable of holding up to 240 songs and provides up to 12 hours of
battery life. The iPod shuffle is based on the Company’s shuffle feature that
allows users to listen to their music in random order. iPod shuffle works with
iTunes and its patent-pending AutoFill option that automatically selects songs
to fill the iPod shuffle from a user’s iTunes library.

iTunes® Store

The Company’s iTunes Store, available for both
Macintosh and Windows-based computers, is a service that allows customers to
find, purchase, and download third-party digital music, audio books, music
videos, short films, television shows and movies, and iPod games. The iTunes
Store also features the Podcast Directory that allows customers to search for
and download audio programs to their computers and automatically receive new
episodes over the Internet. Customers can search the contents of the store
catalog to locate works by title, artist, or album, or browse the entire
contents of the store by genre and

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artist. Originally introduced in the U.S. in April 2003,
the iTunes Store now serves customers in 22 countries.

The iTunes Store is fully
integrated with iTunes software allowing customers to preview, purchase,
download, organize, share, and transfer digital content to an iPod using a
single software application. Further discussion of the iTunes software may be
found below under the heading “Software Products and Computer Technologies.”
The iTunes Store offers customers a broad range of personal rights to the
third-party content they have purchased. Content purchased through the store
may also be used in certain applications such as iPhoto®, iMovie®, and iDVD®.
Additional features of the iTunes Store include gift certificates that can be
sent via e-mail; prepaid music cards; an “allowance” feature that enables users
to automatically deposit funds into an iTunes Store account every month; online
gift options that let customers give specific content to anyone with an email
address; parental controls; and album reviews.

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, audio books, music videos, short films, and television shows through its iTunes Music Store®.

iPod®

The iPod is the Company’s portable digital music player, featuring the Company’s patent pending Click Wheel, which combines a touch-sensitive wheel with five push buttons for one-handed navigation. In October 2005, the Company introduced the new iPod containing a 2.5-inch color screen that can display album artwork and photos and play video including music videos, video podcasts, home movies, short films, and television shows.  The iPod lineup includes a 30GB model holding up to 7,500 songs, 25,000 photos, or

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75 hours of video, and a 60GB model holding up to 15,000 songs, 25,000 photos, or 150 hours of video. The iPod features the Company’s patent pending Auto-Sync technology that automatically downloads digital music, podcasts, photos, audio books, home movies, music videos, short films, and television shows onto the iPod and keeps it up-to-date whenever it is plugged into a Macintosh or Windows computer using USB. The iPod also features Shuffle Songs, which randomly plays songs in a selected playlist or across the entire library. All iPods work with the Company’s iTunes® digital music management software on either a Macintosh or Windows computer.

The iPod’s functionality extends beyond playing music, listening to audio books, and watching music videos, short films, home movies, and television shows. 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 photo downloading directly from certain digital cameras. The Company has also entered into alliances with many automobile manufacturers to offer seamless integration of the iPod in certain automobiles. Along with the iPod, the Company has developed the iTunes software and the iTunes Music Store, a service that consumers may use to purchase third-party music, audio books, music videos, short films, and television shows over the Internet.

iPod® nano

In September 2005, the Company introduced iPod nano, a flash-memory based digital music player. The iPod nano is available in either a 2GB model holding up to 500 songs or 25,000 photos, or a 4GB model holding up to 1,000 songs or 25,000 photos. The iPod nano, which weighs as little as 1.5 ounces and is .27 inches thin, features a color screen and the Company’s patent pending Click Wheel.

iPod® shuffle

In January 2005, the Company introduced iPod shuffle, a flash-memory based digital music player, which is based on iPod’s shuffle feature that randomly selects songs from the user’s music library or playlists. iPod shuffle works with iTunes and its patent-pending AutoFill feature that automatically selects songs to fill iPod shuffle from a user’s music library on their computer. iPod shuffle can also be used as a portable USB flash drive with up to 1GB of storage space. It is available in a 512MB model holding up to 120 songs and a 1GB model holding up to 240 songs.

iTunes Music Store®

The Company’s iTunes Music Store, available for both Windows-based and Macintosh computers, is a service that allows customers to find, purchase, and download third-party digital music, audio books, music videos, short films, and television shows. The iTunes Music Store also offers Podcast Directory that allows users to search for and download audio programs to their computer and automatically receive new episodes over the Internet. Users can search the contents of the 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 content available through the store. The iTunes Music Store was originally introduced in the U.S. in April 2003 and now serves customers in 21 countries.

The iTunes Music Store is fully integrated directly into the iTunes software allowing customers to preview, purchase, download, organize, share, and transfer digital content 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.” The iTunes Music Store offers customers a broad range of personal rights to the third-party content they have purchased. Content purchased through the store may also be used in certain applications such as iPhoto®, iMovie®, and iDVD®. Additional features of the 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; online gift options that let customers give specific songs, albums, music videos, or their own playlists to anyone with an email address; parental controls; and album reviews.

6

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, audio books, music videos, short films, and television shows
through its iTunes Music Store®.

iPod®

The iPod is the Company’s portable digital music
player, featuring the Company’s patent pending Click Wheel, which combines a
touch-sensitive wheel with five push buttons for one-handed navigation. In October 2005,
the Company introduced the new iPod containing a 2.5-inch color screen that can
display album artwork and photos and play video including music videos, video
podcasts, home movies, short films, and television shows.  The iPod lineup includes a 30GB model holding
up to 7,500 songs, 25,000 photos, or

5

75 hours of video, and a 60GB model holding up to
15,000 songs, 25,000 photos, or 150 hours of video. The iPod features the
Company’s patent pending Auto-Sync technology that automatically downloads
digital music, podcasts, photos, audio books, home movies, music videos, short
films, and television shows onto the iPod and keeps it up-to-date whenever it
is plugged into a Macintosh or Windows computer using USB. The iPod also
features Shuffle Songs, which randomly plays songs in a selected playlist or
across the entire library. All iPods work with the Company’s iTunes® digital
music management software on either a Macintosh or Windows computer.

The iPod’s functionality
extends beyond playing music, listening to audio books, and watching music
videos, short films, home movies, and television shows. 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 photo downloading directly from
certain digital cameras. The Company has also entered into alliances with many
automobile manufacturers to offer seamless integration of the iPod in certain
automobiles. Along with the iPod, the Company has developed the iTunes software
and the iTunes Music Store, a service that consumers may use to purchase
third-party music, audio books, music videos, short films, and television shows
over the Internet.

iPod® nano

In September 2005,
the Company introduced iPod nano, a flash-memory based digital music player. The
iPod nano is available in either a 2GB model holding up to 500 songs or 25,000
photos, or a 4GB model holding up to 1,000 songs or 25,000 photos. The iPod
nano, which weighs as little as 1.5 ounces and is .27 inches thin,
features a color screen and the Company’s patent pending Click Wheel.

iPod® shuffle

In January 2005, the
Company introduced iPod shuffle, a flash-memory based digital music player,
which is based on iPod’s shuffle feature that randomly selects songs from the
user’s music library or playlists. iPod shuffle works with iTunes and its
patent-pending AutoFill feature that automatically selects songs to fill iPod
shuffle from a user’s music library on their computer. iPod shuffle can also be
used as a portable USB flash drive with up to 1GB of storage space. It is
available in a 512MB model holding up to 120 songs and a 1GB model holding up
to 240 songs.

iTunes Music Store®

The Company’s iTunes Music Store, available for both Windows-based
and Macintosh computers, is a service that allows customers to find, purchase,
and download third-party digital music, audio books, music videos, short films,
and television shows. The iTunes Music Store also offers Podcast Directory that
allows users to search for and download audio programs to their computer and
automatically receive new episodes over the Internet. Users can search the
contents of the 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 content available through the
store. The iTunes Music Store was originally introduced in the U.S. in April 2003
and now serves customers in 21 countries.

The iTunes Music Store is
fully integrated directly into the iTunes software allowing customers to
preview, purchase, download, organize, share, and transfer digital content 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.” The iTunes Music Store offers customers a broad range of
personal rights to the third-party content they have purchased. Content
purchased through the store may also be used in certain applications such as
iPhoto®, iMovie®, and iDVD®. Additional features of the 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; online gift options that let customers give specific
songs, albums, music videos, or their own playlists to anyone with an email
address; parental controls; and album reviews.

6

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.

iPod®

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 playlist 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 preinstallation 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

5

Founder Technology Group Corporation, a supplier of PCs to the Chinese market, that provides for the preinstallation 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 preinstallation 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 iPods, 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

6

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.

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.

iPod®

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 playlist 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 preinstallation 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

5

Founder
Technology Group Corporation, a supplier of PCs to the Chinese market, that provides for the preinstallation 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 preinstallation 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 iPods, 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

6

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.