condition could be adversely affected, depending on the time required to obtain sufficient quantities from the original source, or, if possible, to identify and obtain sufficient quantities from an alternate source.

The Company's ability to produce and market competitive products is also dependent on the ability and desire of IBM and Motorola, the sole suppliers of the PowerPC RISC-based microprocessor for the Company's Macintosh computers, to provide the Company with a sufficient supply of microprocessors with price/performance features that compare favorably to those supplied to the Company's competitors by Intel Corporation, and other developers and producers of microprocessors used by personal computers using the Windows operating systems. Apple has been unable to ship Macintosh systems with PowerPC G4 microprocessors running above 500 megahertz since such systems were first announced in August of 1999 due to its G4 microprocessor supplier's inability to provide the Company with faster G4 microprocessors. Similar but less pronounced supply issues have also arisen with the Company's supply of faster PowerPC G3 microprocessors. The Company believes that this inability to obtain faster microprocessors had an adverse impact on the Company's results of operations during 2000, particularly towards the end of the fiscal year. The Company has been informed by its suppliers that faster microprocessors will be available in sufficient quantity beginning in the first half of calendar 2001. However, no assurance can be given that such faster microprocessors will actually be available or be available in sufficient quantities, and the inability of the Company to obtain faster microprocessors in sufficient quantities during 2001 may have an adverse impact on the Company's results of operations and financial condition.

Further discussion relating to availability and supply of components and product may be found in Part I, Item 1 of this Form 10-K under the heading "Raw Materials," and in Part II, Item 8 of this Form 10-K in the Notes to Consolidated Financial Statements at Note 9 under the subheading "Concentrations in the Available Sources of Supply of Materials and Product," which information is hereby incorporated by reference.

EDUCATION MARKET

Several competitors of the Company have either targeted or announced their intention to target the education market for personal computers. As a result, the Company's overall share of this market has declined. Additionally, net sales in the Company's education market fell short of expectations by approximately $60 million during the fourth quarter of 2000, primarily as a result of the Company's transition to a more direct sales model from a model heavily dependent on third party sales agents. Although the Company has initiated a plan to strengthen its position in the education market, there can be no assurance that the Company will be able to increase its share of the education market or maintain its existing share of that market. Failure to increase or maintain market share in the education market may have an adverse impact on the Company's operating results and financial condition.

MARKETING AND