including pricing actions by the Company; the availability of key components on terms acceptable to the Company; the Company's ability to supply products in certain categories; the Company's ability to supply products free of latent defects or other faults; the Company's ability to make timely delivery to the marketplace of technological innovations, including its ability to continue to make timely delivery of planned enhancements to the current Mac OS and to make timely delivery of a new and substantially backward-compatible operating system; the Company's ability to successfully integrate technologies obtained from NeXT with those at Apple; the Company's ability to maintain the benefits derived from its restructuring actions, including maintaining the reduced level of expenditures; the Company's ability to attract, motivate and retain employees; and the availability of third- party software for particular applications. Potential risks and uncertainties that could affect the Company's future operating results and financial condition are discussed throughout this Item 7, including the discussion under the heading "Factors That May Affect Results and Financial Condition." 

NET SALES 

Net sales decreased $1.1 billion, or 16%, to $5,941 million in 1998, compared to a 28% decline in 1997. The decline during 1998 in net sales is attributable to several factors. The Company experienced a $454 million decrease in net sales of peripheral products during 1998 compared to 1997 principally due to the discontinuance by the Company of certain imaging and display products. The average revenue per Macintosh system, a function of total net sales generated by hardware shipments and total Macintosh CPU unit sales, fell 11% to $2,095 during 1998 as compared to 1997, reflecting the effect of aggressive pricing of the Company's Power Macintosh G3 systems introduced in the first quarter of fiscal 1998, the decline in net sales from the phase out of certain peripheral products, the overall industry trend towards lower-priced products, and the Company's reentry during the fourth quarter of 1998 into the lower-priced consumer market. Lastly, overall Macintosh CPU units sales for 1998 declined approximately 4% from 1997. As discussed below, international net sales were particularly affected by these factors and by the economic conditions in Asia. The 28% decline in net sales in 1997 as compared to 1996 was due to declines in Macintosh CPU and peripheral unit sales of 27% and 33%, respectively, primarily as a result of a decline in worldwide demand for most of the Company's product families. 

Net sales increased sequentially during the fourth quarter of 1998 compared with the third quarter of 1998 by $154 million or 11%. Macintosh unit sales also increased sequentially during the fourth quarter, rising 190,000 units or 30% to a total of 834,000 units. The sequential increases in both net sales and unit sales experienced during the fourth quarter of 1998 are primarily attributable to introduction by the Company of the iMac, a moderately priced Macintosh system designed for the education and consumer markets. Sales of iMac accounted for 33% or 278,000 of the total