at Note 11, “Segment Information and Geographic Data.” 

Americas 

During 2005, net sales in the Americas segment grew 64% or $2.6 billion compared to 2004. The increase in net sales during 2005 was primarily attributable to the significant year-over-year increase in iPod sales, sales of other music related products and services, and strong sales of desktop and portable Macintosh systems. This increase was partially offset by a shift in sales to the Retail segment, which had 117 stores in the U.S. and Canada as of the end of 2005. Macintosh unit sales also increased by 30% in 2005 compared to 2004, driven primarily by strong sales of desktop systems largely attributable to strong sales from the new iMac, which began shipping in September 2004, and the Mac mini, which was introduced in January 2005. During 2005 and 2004, the Americas segment represented approximately 47% and 49%, respectively, of the Company’s total net sales and represented approximately 48% and 51%, respectively, of total Macintosh unit sales. As noted above, the Company experienced an increase in both U.S. education channel net sales and unit sales of 21% for 2005 compared to 2004. Strength in higher education sales related primarily to strong iMac shipments, portable system shipments, and online sales. This strength drove year-over-year growth in net sales of 32% for the higher education channel during 2005. Despite challenges in the K-12 market from continued budget constraints and competitive pressures, the Company’s K-12 net sales grew year-over-year by 11% during 2005 due to increased iBook sales and 1:1 education sales. 

During 2004, net sales in the Americas segment grew 26% or $838 million compared to 2003. The increase in net sales during 2004 was primarily attributable to the significant year-over-year increase in iPod sales as well as strong sales of peripherals, software, and services. This increase was partially offset by a shift in sales to the Retail segment, which had 84 stores in the U.S. as of the end of 2004. Macintosh unit sales also increased by 4% in 2004 compared to 2003, driven primarily by strong sales of portable and Power Macintosh systems, partially offset by weakness in iMac sales. During 2004 and 2003, the Americas segment represented approximately 49% and 51%, respectively, of the Company’s total net sales and represented approximately 51% and 54%, respectively, of total Macintosh unit sales. The Company experienced an increase in U.S. education channel net sales of 19% for 2004 compared to 2003. Strong U.S. education net sales for 2004 related primarily to strength in higher education net sales that resulted from a successful back-to-school selling season with strong demand for the Company’s portables. This strength drove year-over-year growth in net sales of 40% for the higher education channel during 2004. The Company’s K-12 net sales grew year-over-year by 3% during 2004, despite the challenges in the K-12 market from continued budget constraints and increased competition. 

Europe 

During 2005, net sales in the Europe segment grew $1.3 billion or 71% from 2004. Total Macintosh unit sales in Europe also experienced growth during the