Apple's 'spaceship' campus budget balloons from $3 billion to $5 billion

Posted:
in General Discussion edited January 2014
Portraying Apple's new corporate campus as an "investor relations nightmare," a new report reveals that the project's budget has increased by $2 billion, causing it to become a year behind schedule as the architect looks to cut costs.

Apple headquarters 2.0 rendering


Citing five people close to the project, Bloomberg reported on Thursday that the cost of Apple's so-called "spaceship" circular campus could now exceed the $3.9 billion cost of New York City's new World Trade Center complex. The increase in costs has reportedly led to a delay in the project, as architect Foster + Partners seeks to cut $1 billion from the budget.

Apple Chief Executive Tim Cook already revealed in February that his company plans to move to its new "Campus 2" by 2016. That's a year later than the company had originally projected.

Late Apple co-founder Steve Jobs had a hands-on role in designing the facility. He personally revealed the project at a Cupertino City Council meeting in June 2011, just months before his death, where he noted that the project would be costly due in part to its use of curved glass.

"There's not a straight piece of glass in this building," Jobs said. "We've used our experience in building retail buildings all over the world. We know how to make the biggest pieces of glass for architectural use."

With the project now apparently over budget, Bloomberg questioned how investors would react to the cost of the project. At the end of its last quarter, Apple had $137 billion in cash reserves.

"Investors didn't squawk much when Apple was dominating the smartphone and tablet market, but shares have fallen 38 percent since September amid rising competition from Samsung Electronics and concerns about Apple's product pipeline," author Peter Burrows wrote, adding that critics would ask whether "curved glass is the best use of funds."

Most of the cost of the project lies in materials and "fit and finish." Under the plans overseen by Jobs, there will be "no seam, gap, or paintbrush stroke showing; every wall, floor and ceiling is to be polished to a supernatural smoothness," the report said. Even the interior wood must "heartwood" from the center of trees from a a specific series of maple.

Apple campus rendering


The report speculated that some of the $1 billion in cuts that have been made to the project will come from some of those "fit and finish" aspects pushed for by Jobs. For example, the former CEO originally wanted polished concrete ceilings that will be cast in molds on the floor and lifted into place.

Apple's new corporate headquarters will be located about a mile east of its current location in Cupertino, Calif. The company plans to migrate about 12,000 workers to the site, but also plans to retain its existing office space at 1 Infinite Loop.

The circular four-story main facility will be one of the largest buildings in the world at 2.8 million square feet. The project earned its "spaceship" moniker from Jobs himself, who said at the Cupertino City Council meeting that the project would look like one had landed in the city.
«134

Comments

  • Reply 1 of 76
    igrivigriv Posts: 1,177member


    Aha! Now we know what apple is hoarding $150BN for!

  • Reply 2 of 76
    pedromartinspedromartins Posts: 1,333member


    I hope it ends up costing 150 billion. That way, apple kills the "problem" and the stock can skyrocket again.


     


    /s

  • Reply 3 of 76
    rot'napplerot'napple Posts: 1,839member
    Who the heck budgeted this thing? If I gave an estimate of three bucks and it turned out to be five, no sweat. But if one was looking to spend 3 billion and it turned out to be $5 billion??? That's some serious scratch!
  • Reply 4 of 76
    starbird73starbird73 Posts: 538member


    Regarding this:


     


    Quote:


    "Investors didn't squawk much when Apple was dominating the smartphone and tablet market, but shares have fallen 38 percent since September amid rising competition from Samsung Electronics and concerns about Apple's product pipeline," author Peter Burrows wrote, adding that critics would ask whether "curved glass is the best use of funds."



     


    Well, the time for that question would have been long ago. Not going to save any money by scrapping it and changing it now.

  • Reply 5 of 76
    hattighattig Posts: 812member
    It seems that even Apple's own infrastructure projects must follow the path most other infrastructures projects take - bloating costs and reductions in the end fit-and-finish.

    But $2b is rather a lot to go over, in my opinion. But I guess that comes after a full in-depth expensing of what was desired, rather than pie-in-the-sky estimates.
  • Reply 6 of 76
    jragostajragosta Posts: 10,473member
    hattig wrote: »
    It seems that even Apple's own infrastructure projects must follow the path most other infrastructures projects take - bloating costs and reductions in the end fit-and-finish.

    But $2b is rather a lot to go over, in my opinion. But I guess that comes after a full in-depth expensing of what was desired, rather than pie-in-the-sky estimates.

    Or maybe the cost overrun is simply based on wild-a$$ed guesses.
  • Reply 7 of 76
    rogifanrogifan Posts: 10,669member


    Leave it to Bloomberg to find a way to get Samsung and D&G about Apple's product roadmap into this story.  Oh and Google too.  And what a surprise, Bloomberg prefers Google's campus to Apple's.

  • Reply 8 of 76
    rogifanrogifan Posts: 10,669member

    Quote:

    Originally Posted by Rot'nApple View Post



    Who the heck budgeted this thing? If I gave an estimate of three bucks and it turned out to be five, no sweat. But if one was looking to spend 3 billion and it turned out to be $5 billion??? That's some serious scratch!


    I say we blame Jony Ive.  image


     


    Quote:




    He also has another, very different project on the horizon -- Apple's new "spaceship" campus in Cupertino, on which he has said he is "working very closely" with Sir Norman Foster.



  • Reply 9 of 76
    zoffdinozoffdino Posts: 192member
    Significant savings can be achieved if they plant new apricot trees in the middle of spaceship rather than relocated fully grown trees. AI reported that each tree would cost $60K to relocate. If I, as an investor, were given a vote on the matter, I would kill that plan.

    Anyway, it's hard to imagine how the rents Apple saved would justify the $3B cost, plus whatever amount for the land.
  • Reply 10 of 76
    solipsismxsolipsismx Posts: 19,566member
    Having a lot of experience with construction I'd wager that it's not so much a result of poor initial estimates but [S]ideas[/S] changes by Apple that have constantly inflating costs and causing delays.
  • Reply 11 of 76
    The additional costs are less than 2 percent of Apples cash hoard. So What!
  • Reply 12 of 76
    anantksundaramanantksundaram Posts: 18,463member


    It's stuff like this that gives CEOs pause in building their US presence. Whether it's in the government or in the private sector, stuff never seems to come in on budget or on time.


     


    A 67% budget balloon, if true, is absolutely ridiculous.

  • Reply 13 of 76
    anantksundaramanantksundaram Posts: 18,463member

    Quote:

    Originally Posted by MacHarry de View Post



    The additional costs are less than 2 percent of Apples cash hoard. So What!


    This is the kind of thinking that validates my post above!

  • Reply 14 of 76
    As an investor, I don't give a damn about the cost of this campus (within reason). If this campus does not reach Wow! then it wasn't worth building for any amount.
  • Reply 15 of 76
    island hermitisland hermit Posts: 6,217member


    It sounds like my local municipal government calculated the budget for this building.

     

  • Reply 16 of 76
    jfc1138jfc1138 Posts: 3,090member

    Quote:

    Originally Posted by SolipsismX View Post



    Having a lot of experience with construction I'd wager that it's not so much a result of poor initial estimates but ideas changes by Apple that have constantly inflating costs and causing delays.


    Yes, the long lead and developement times offer lots of room for "just one more thing...".

  • Reply 17 of 76
    jungmarkjungmark Posts: 6,536member
    "Investors didn't squawk much when Apple was dominating the smartphone and tablet market, but shares have fallen 38 percent since September amid rising competition from Samsung Electronics and concerns about Apple's product pipeline," author Peter Burrows wrote, adding that critics would ask whether "curved glass is the best use of funds."
    .

    Problem is Apple never dominated the smartphone market in regards to market share. They've dominated in profit share, however.
  • Reply 18 of 76
    jragostajragosta Posts: 10,473member
    zoffdino wrote: »
    Significant savings can be achieved if they plant new apricot trees in the middle of spaceship rather than relocated fully grown trees. AI reported that each tree would cost $60K to relocate. If I, as an investor, were given a vote on the matter, I would kill that plan.

    Anyway, it's hard to imagine how the rents Apple saved would justify the $3B cost, plus whatever amount for the land.

    I don't think it's justified solely on the basis of rent savings. If that were the goal, they would simply have built a conventional high-rise tower. This project's goals were far more ambitious.

    I agree, however, that some of the objectives led to silly decisions. Relocating trees for $60 K each (if that's correct) is silly. They can buy very nice, well established trees for $100 each. Granted, it would take a few years for them to fill in enough to meet the appearance objectives, but that's a reasonable penalty to save millions of dollars.
  • Reply 19 of 76
    robogoborobogobo Posts: 378member
    Who.

    Cares.
  • Reply 20 of 76
    spacepowerspacepower Posts: 208member
    rot'napple wrote: »
    Who the heck budgeted this thing? If I gave an estimate of three bucks and it turned out to be five, no sweat. But if one was looking to spend 3 billion and it turned out to be $5 billion??? That's some serious scratch!

    The funny thing about this Bloomberg article is that Apple hasn't broken grounds and isn't even accepting bids from contractors till May.

    I find it hard to believe that anyone can accurately predict $2 billion / 66% over budget expenses before a project even starts.

    Bloomberg is just writing this stuff bc Apple made peace with the Chinese Gov this week and they can't find anything else negative to write Apple or positive to write about Samsung.


    Bloomberg source:
    You know, there's this big company, they're going build a new office, they haven't started yet, but I think its going to cost them 66% more then they predicted. Write a story about this. Oh, and they are delaying the project so they can figure out how to save $1 billion so they project only goes 25% over budget. But you should use the $2 billion figure if you want more page views.

    The world is filled with idiots, but I'm guessing the Bloomberg article won't be the stupidest thing I read today.
Sign In or Register to comment.