Cube systems offset by increases in unit sales of lower priced iMac systems. Additional comments regarding net sales for 2000 may be found above under the heading "Fiscal 2000 Overview."

Net sales increased $193 million or 3% to $6.134 billion in 1999 compared to 1998. The primary source of this growth was an overall 25% increase in Macintosh unit sales, which was reflective of strong unit growth in all of the Company's geographic operating segments. Offsetting the rise in unit shipments during 1999 was a decline in the average revenue per Macintosh system which fell 17% to $1,739 from $2,095 in 1998. The decline during 1999 in the average revenue per Macintosh system was attributable to lower pricing for both iMac and Power Mac products, which reflects the continuing overall industry trend towards lower pricing. The decline was also attributable to the shift in the Company's unit mix toward lower-priced consumer products such that iMac units and comparable products comprised 52% of total Macintosh unit sales in 1999 versus 39% in 1998.

Net sales declined sequentially during the fourth quarter of 1999 compared to the third quarter by $222 million or 14%, and declined $220 million or 14% compared to the same period in 1998. Similarly, Macintosh unit sales declined 15% and 7% during the fourth quarter of 1999 compared to the third quarter of 1999 and the same period in 1998, respectively. The primary causes for these declines in both net sales and unit sales were lower than planned deliveries of PowerPC G4 processors from Motorola and production interruptions at vendors supplying PowerBooks and iBooks experienced during the last week of the fourth quarter of 1999 as a result of the earthquake in Taiwan on September 20, 1999. The shortage of G4 processors reduced Power Macintosh net sales by approximately $200 million during the fourth quarter of 1999.

SEGMENT OPERATING PERFORMANCE

The Company manages its business primarily on a geographic basis. The Company's geographic segments include the Americas, Europe, Japan, and Asia Pacific. The Americas segment includes both North and South America. The European segment includes European countries as well as the Middle East and Africa. The Japan segment includes only Japan, while the Asia Pacific segment includes Australia and Asia except for Japan. Each geographic operating segment provides similar hardware and software products and similar services. Further information regarding the Company's operating segments may be found in Part II, Item 8 on this Form 10-K in the Notes to Consolidated Financial Statements at Note 10, "Segment Information and Geographic Data," which information is hereby incorporated by reference.

AMERICAS

Net sales and unit sales in the Americas segment increased 22% and 24%, respectively, during 2000 as compared to 1999. During 2000, the Americas segment represented approximately 54% and 55% of the Company's total net sales and total Macintosh unit sales, respectively. The growth of the Americas' net sales in 2000 was indicative of strong growth in unit sales of iMac and iBook and relatively flat unit sales of professionally oriented Macintosh systems.

Net sales in the