Apple's 10-Q notes iPod battery legal entanglements
By Peter Cohen pcohen@maccentral.com
February 10, 2004 12:05 pm ET
Apple's most recent 10-Q filing with the SEC was published on Tuesday. The quarterly report provides a glimpse into some of the company's business and financial machinations, as well as a possible look at what Apple may do in the future. Of particular interest to iPod users is Apple's acknowledgement that it's involved in five separate class action suits regarding iPod battery life.
The 10-Q outlines in broad strokes Apple's quarterly financial results -- which have been previously reported -- as well as the company's previously discussed product and business initiatives, such as iLife 04, Final Cut Express, updates to the iPod line and the new iPod mini, the G5 Xserve and more.
Apple's sales to the educational market rose year-over-year, but Apple cautioned about "continued uncertainty" in the market, thanks to increased competition and reduced spending. Apple stressed that its strategy for the educational market is "1:1 solutions," or programs like its Virginia and Maine efforts where each individual student is assigned an iBook. "Although the Company has taken steps, and will continue to take steps, to address this weakness, it remains difficult to anticipate when and if this trend will reverse," said Apple.
Could a makeover of the iMac or eMac be coming soon? Apple noted that sales of iMacs are lagging significantly; unit sales of iMacs are off 24 percent for the quarter. Apple attributes this slowness to a shift in consumer preference to portable models like its PowerBook and iBook line, as well as a general trend towards consumer computers that cost less than $1,000 (the iMac, by comparison, starts at $1,299). "Also, the current flat panel iMac and eMac form factors are approximately 2 years old, which contributed to the decline in net sales," said Apple.
Apple saw $23 million in restructuring costs during the quarter. The company terminated its manufacturing operations in Singapore and reduced headcount in its PowerSchool division, which develops student information technology used by schools.
Part of the 10-Q deals with legal proceedings involving Apple; at any given point, as with most large companies, Apple is either defending itself or prosecuting a variety of cases concerning a variety of issues -- class action lawsuits, for example, or patent cases. One entry in particular may catch the interest of iPod users: Apple noted that five separate plantiffs have filed class action suits in Northern California courts alleging "misrepresentations by the Company relative to iPod battery life."
Apple has been the subject of criticism for some months now regarding the battery pack used in the iPod. Some users have noted that the system's battery charge capacity seems to degrade dramatically over time. The iPod's battery pack is not an easily user-serviceable item, and until fairly recently Apple's sole recommendation to iPod users suffering with the problem was to replace the iPod -- some third parties offer battery replacements and service as well.
Since last fall, however, following a public outcry, Apple responded by offering an extended AppleCare warranty plan which provides iPod users with another year of warranty coverage and the promise of a battery replacement for units affected by this issue, for an additional cost.
The cases, filed in Santa Clara, San Mateo, San Francisco and Alameda County Superior Courts, allege that Apple violated California Civil Codes regarding unfair competition, false advertising, fraudulent concealment and breach of warranty.
"The Company is beginning its investigation of these claims," said Apple, which has also requested that the claims be consolidated to Santa Clara County (Silicon Valley).
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