Apple spending on research and development swells again to $1.9 billion
Apple's spending on research and development surged year over year by another $500 million last quarter, reaching $1.9 billion and growing to 3.3 percent of the company's total net sales.
The location of Apple's forthcoming Cambridge R&D center in the U.K.
The investments made by Apple into future products, revealed as part of its 10-K filing with the U.S. Securities and Exchange Commission this week, were up from $1.4 billion a year ago. That's a year over year increase in spending of nearly 36 percent.
Apple said the growth in R&D expense during the second quarter of its fiscal year 2015 stemmed from "an increase in headcount and related expenses, including share-based compensation costs, and material costs to support expanded R&D activities."
Apple Chief Financial Officer Luca Maestri was asked about his company's spending on research and development during this week's quarterly earnings conference call. Analyst Katy Huberty noted that R&D spending continues to track "well ahead" of the company's revenue growth.
In response, Maestri noted that Apple's current product portfolio has grown significantly in recent years to include two iPhone models, two iPads, and the Apple Watch.
Maestri also indicated that Apple is developing "core foundational technologies" in-house, whereas in the past the company might have outsourced such projects. And of course Apple is also investing in future products that it has in the pipeline, and that development carries considerable costs.
"Research and development is the core of the company. Innovation is the core of the company," Maestri said.
The $1.9 billion Apple spent last quarter matches the investment the company made in the preceding December quarter. Thus far in fiscal 2015, Apple has spent nearly $1.1 billion more than it did during the same six-month span in fiscal 2014.
The location of Apple's forthcoming Cambridge R&D center in the U.K.
The investments made by Apple into future products, revealed as part of its 10-K filing with the U.S. Securities and Exchange Commission this week, were up from $1.4 billion a year ago. That's a year over year increase in spending of nearly 36 percent.
Apple said the growth in R&D expense during the second quarter of its fiscal year 2015 stemmed from "an increase in headcount and related expenses, including share-based compensation costs, and material costs to support expanded R&D activities."
Apple Chief Financial Officer Luca Maestri was asked about his company's spending on research and development during this week's quarterly earnings conference call. Analyst Katy Huberty noted that R&D spending continues to track "well ahead" of the company's revenue growth.
In response, Maestri noted that Apple's current product portfolio has grown significantly in recent years to include two iPhone models, two iPads, and the Apple Watch.
Maestri also indicated that Apple is developing "core foundational technologies" in-house, whereas in the past the company might have outsourced such projects. And of course Apple is also investing in future products that it has in the pipeline, and that development carries considerable costs.
"Research and development is the core of the company. Innovation is the core of the company," Maestri said.
The $1.9 billion Apple spent last quarter matches the investment the company made in the preceding December quarter. Thus far in fiscal 2015, Apple has spent nearly $1.1 billion more than it did during the same six-month span in fiscal 2014.
Comments
Exactly. R&D costs are significant for new products.
For comparison, in the 1990's Chrysler spent 2.3 billion developing the new 1996 minivan models, and Ford spent nearly three billion on the 1996 Taurus/Sable redesign. Both of those reused some components from the prior model though; the Mondeo/Contour project cost six billion (largely due to cost overruns, bad management, etc).
A new Apple TV costs a few million at most.
AppleTV
AppleCar
iPad-Pro
AppleWatch 2.0
nice
Don't forget all those custom chips Apple is making now. I'd guess that's where the bulk of this money is going. Battery tech might be another area they're throwing money towards.
Yep. Last year at a WSJD conference Tim Cook said the iPhone would be Apple's main revenue driver for the next 5 years. The executive team has to be thinking about what comes after iPhone. Watch, ?TV, streaming music ?Pay, are all good but not the revenue drivers iPhone is. A $349 watch or $99 TV box will be difficult to meaningfully grow a $200B revenue base.
1. Support of epub as solid as that for pdf. 'New World' mobile devices display pdfs poorly. They need epub as badly as desktops needed pdf in the 'Old World' of the 1990s. Apple got that previous shift right. Why is it dragging its feet with epub?
2. Meaning or syntactically related document transfers rather than appearance-related. Again, that is a necessity with New World mobile devices. In the Old World, a document on a computer screen translated easily to a printed page. In the New World, it doesn't. What works on a 24-inch screen (font-size etc) looks awful on a mobile device. Documents should move with their meaning intact, so for instance an appropriate-appearing first-level heading in a printed office memo becomes an appropriately styled one on an iPhone 6. Implementing that will also make epub support easier.
3. A much improved spell checker and spelling suggestions. The current one is awful. Either give the Hungarian Hunspell group that created it sufficient money to improve it or spend sufficient millions (pocket cash to today's Apple) to improve it in house. And for goodness sake, buy the continually updated rights to a top-of-the-line, professional spelling vocabulary. I edit scientific documents. The current dictionary knows few words above the college sophomore level. Also make smart enough to know not just a legitimate spelling but the preferred one. Pay special attention to getting hyphenation right. OS X's spell checker is so stupid, it literally thinks any two legitimately spell words connected by a hyphen is also correct. Sorry, but "quickly-go" is not correct English spelling. Apple's current spell checker makes many Apple users look illiterate. Fix that.
4. Word had named paragraph and text styles back in the late 1980s. Apple's pitiful implementation of RTF still doesn't have that. Doing named styles right (i.e. better than Microsoft has done it since Word 5.1) would mesh quite well with items #1 and #2. Again, to work with Old World desktops and New World mobile devices the meaning of a block of text is what matters not its font size, color, etc. The latter is based on the screen-to-print technology of the late 1980s. It's woefully out of date today.
5. GREP is a marvelous time-saver. Build a well-done, user-friendly version into OS X, so a host of text apps can not only use it, but share various search-and-replace routines between apps and users (getting around the messiness of knowing how to code GREP). Most of the GREP code is open source, so implementing will just involve something Apple does well, creating a clever UI.
Do that, and you'll make a lot of people happy, particular the very substantial number who work with words.
Interesting. That seems to indicate that a lot of the increase was on the 'Research' side, rather than on 'Development' (i.e. basic technologies rather than product design). I'm glad to see that. Research is riskier, but has a better chance of pulling off some really stunning new breakthroughs which can give Apple a competitive advantage.
Lots of IoT products and services that Apple can design and sell, further cementing the stickiness of the ecosystem (although as communication standards, HealthKit and HomeKit are useful for other product manufacturers too). I could see revenue from those markets supplanting iPhone in 5 years.
And as a larger market in 10 years? The green economy - renewables, energy management systems, and batteries. Right now, these Apple investments in solar and other renewables are good PR and good for business (managing risk associated with variability in energy costs). In the future, sky's the limit - especially if drivers like carbon trading enter into the mix.
Quote:
Apple Chief Financial Officer Luca Maestri was asked about his company's spending on research and development during this week's quarterly earnings conference call. Analyst Katy Huberty noted that R&D spending continues to track "well ahead" of the company's revenue growth.
For heaven's sake. The analysts are now complaining about Apple's R&D spending, which are generating new ways to make money. Is that just not the epitome of hypocrisy? They complain when it's been some quarters/years since Apple's last new product. Now they complain about how much is spent developing those new products and services. C'mon Katy, it was $1.9 billion. There was still $13.6 BILLION in profit, even after the $500 million R&D increase from the year-ago quarter! What else do you want???
Quote:
For heaven's sake. The analysts are now complaining about Apple's R&D spending, which are generating new ways to make money. Is that just not the epitome of hypocrisy? They complain when it's been some quarters/years since Apple's last new product. Now they complain about how much is spent developing those new products and services. C'mon Katy, it was $1.9 billion. There was still $13.6 BILLION in profit, even after the $500 million R&D increase from the year-ago quarter! What else do you want???
Whoa there, I don't think Katy Huberty was criticizing Apple. The quote came from the latest earnings telcon, and she was asking what the big drivers were. Huberty has been very positive on Apple's outlook and particularly the Apple Watch. All she did was note that R&D spending has been increasing quickly.
I believe that increase is for base-line tech that will filter into all their products in some way. To quote Bruce Willis, I think they have a bunch of people just "Thinking shit up!".
They are pushing the limits, and advancing battery tech, materials science, CPU/SoC solutions, etc... tech that will benefits mobile devices, watches, computers, etc... I don't think they are focusing specifically on one particular product or group per-se. What they invent and/or advance will help many areas of products they build.
I'm sure they're doing the exact same thing with OSX/iOS software as well...
Relative to what they make per year, $1.9B is chump-change to them. I'm surprised it's not more...
..and the stock continues to take a dive on the back of an insane quarter, and an incredible future outlook, for God-knows-what fucking reason. Would have thought that $130 would be a baseline going forward, but nope. Best Q2 of any company in history is not enough to even keep the needle where it is, let alone move it forward, when it comes to Apple. Maybe Apple should stop actually making money and products that sell absurdly well, but instead discontinue everything, dump their money in the ocean, then talk about some fantasy "potential" it has to make money? Seems Wallstreet loves that shit, since other tech companies get rewarded when they post zero profit, or a loss.
..and the stock continues to take a dive on the back of an insane quarter, and an incredible future outlook, for God-knows-what fucking reason. Would have thought that $130 would be a baseline going forward, but nope. Best Q2 of any company in history is not enough to even keep the needle where it is, let alone move it forward, when it comes to Apple. Maybe Apple should stop actually making money and products that sell absurdly well, but instead discontinue everything, dump their money in the ocean, then talk about some fantasy "potential" it has to make money? Seems Wallstreet loves that shit, since other tech companies get rewarded when they post zero profit, or a loss.
In addition to the usual trolling opinions of analysts and fabricated bad news from trolling news sites, there is also the effect of the bubble economy that has been blowing up thanks to Fed monetary policy. Apple does not exist or perform in a vacuum, regrettably.
When the A8X performs in the same ballpark as the Core M consuming approximately equivalent power, using an older process for less than a tenth of the cost, they have literally rendered x86 CPUs totally irrelevelant. That chip is a home run. The S1 in the watch is a home run.
The ROI at that R&D budget is simply fantastic. And AAPL stock drops in price. I can't help but to scratch my head.
..and the stock continues to take a dive on the back of an insane quarter, and an incredible future outlook, for God-knows-what fucking reason. Would have thought that $130 would be a baseline going forward, but nope. Best Q2 of any company in history is not enough to even keep the needle where it is, let alone move it forward, when it comes to Apple. Maybe Apple should stop actually making money and products that sell absurdly well, but instead discontinue everything, dump their money in the ocean, then talk about some fantasy "potential" it has to make money? Seems Wallstreet loves that shit, since other tech companies get rewarded when they post zero profit, or a loss.
The jokes on those idiots though; Apple is probably now buying their own stock with a smile. Apple kind of expects their stock to dive on good news, it has happened so often its like a punchline now.