Apple boosts R&D spending as revenues stabilize

Posted:
in AAPL Investors
As iPhone sales show signs of stabilizing after a first every contraction earlier this year, Apple continues to incrementally increase spending on research and development in search of the next big thing.


The location of Apple's forthcoming Cambridge R&D center in the UK.


Announced during Tuesday's investor conference call covering the third quarter, and further detailed in a Federal Trade Commission filing today, Apple spent $2.56 billion on R&D operations this past quarter, representing six percent of total net sales.

By comparison, last year's third quarter R&D spend topped out at $2.03 billion, or four percent of total net sales. The more than $500 million jump has become somewhat of a routine for the company, which in the second fiscal quarter boosted R&D activities by $600 million. Apple's focus on future products has driven a nine-month outlay of $7.48 billion, up from $5.85 billion in the year ago quarter.

That Apple is increasing spending in this area should come as no surprise. Technology companies are in the business of delivering cutting edge products and services solutions to consumers, goods that are often in development for months or years. As one of the most successful tech firms in the world, Apple's process is no different. While not a hard and fast rule, R&D spend as function of revenue is consistently higher in the tech sector than other major industries.

As usual, Apple remains tight lipped on future plans, but CEO Tim Cook did drop a few hints as to where the company is moving during yesterday's conference call. Notably, Cook discussed Apple's investment in Chinese Uber competitor Didi Chuxing, saying the partnership will offer valuable perspective on the important Asian market. The Didi mention in particular raised eyebrows as Apple is widely rumored to be working on an automotive initiative dubbed "Project Titan." As a secret product, Titan's budget is unknown, though some speculate a large engineering team and facilities account for a good chunk of Apple's R&D spend.

Cook also confirmed investments into augmented reality technology, saying that while AR might not be the "next computing platform," it has huge potential. Apple is thought to be setting aside resources for near-term consumer AR products, specifically apps and app development, not AR/VR hardware like products offered by Google and Facebook.

Comments

  • Reply 1 of 13
    SoliSoli Posts: 8,800member
    R&D is an interesting cost center for a business.

    The superficial answer to all questions about investing in R&D is, "sure, invest as much as you can into research and development," yet we've seen time-and-time again where unfocused and unfettered skunkworks projects tend to lead nowhere and create a huge amount of waste for a company.

    On a rare occasion, you get an experiment that leads nowhere, just to come to fruition many years or even decades later, like with Apple announced their Siri service built-into their iPhone which made Google say, "Hey! We can copy that and do it better [in many ways] because we of all the experiments we did with GOOG-411 years prior" to create Google Now, or how Apple asked Intel for a Small Form Factor (SFF) Ulta-Low-Voltage (ULV) chipset and processor for a new class of ultralight notebooks they were creating, which Intel had already designed but hadn't put into production and which revitalized the notebook sales with their Ultrabook branding, or how Jobs called up Corning's CEO to see if they had any glass that would work for a thin phone and be impact resistance.

    When Apple (and a plethora of startups) were out-innovating the market with only a small R&D budget, compared to ridiculously large R&D budgets from MS and other mainstays, we saw what a clear vision and a solid business plan can do for a company. What I really hate to see is the desperate maneuvers to force R&D into a unfinished products before a good idea is ready (Palm) and/or before a company has figured out a solid direction (Samsung and Blackberry).
    lolliverstanthemanlostkiwi
  • Reply 2 of 13
    flaneurflaneur Posts: 4,509member
    I'd be surprised if Apple was not working on AR hardware. I'd also be surprised if they did anything like Oculus, HTC, Samsung, etc. In other words, I can't see them making a plastic box for anyone's face.
    lolliverbaconstangnostrathomas
  • Reply 3 of 13
    altivec88altivec88 Posts: 128member
    Here apple. Let me save you some money on R&D. Get the latest processor and graphics card and put it into the Mac Pro case. There...  It took one person 10 seconds and $0 to come up with that brilliant idea.   Maybe they can spare one of their hundred thousand plus employees a few hours to do that instead of pissing off and losing more of your pro buyers every day you wait.
    clemynxcnocbui
  • Reply 4 of 13
    clemynxclemynx Posts: 1,510member
    Seriously, what the hell is this company selling? 
    lollivernolamacguy
  • Reply 5 of 13
    clemynxclemynx Posts: 1,510member

    flaneur said:
    I'd be surprised if Apple was not working on AR hardware. I'd also be surprised if they did anything like Oculus, HTC, Samsung, etc. In other words, I can't see them making a plastic box for anyone's face.
    Oculus is not AR...
  • Reply 6 of 13
    mac_dogmac_dog Posts: 678member
    altivec88 said:
    Here apple. Let me save you some money on R&D. Get the latest processor and graphics card and put it into the Mac Pro case. There...  It took one person 10 seconds and $0 to come up with that brilliant idea.   Maybe they can spare one of their hundred thousand plus employees a few hours to do that instead of pissing off and losing more of your pro buyers every day you wait.
    Brilliant! Maybe you should be running apple. You might have to move out of your parents house, though. 

    Seriously, don't quit your day job. 
    lolliveranomebaconstangmike1williamlondonbrucemcstanthemannolamacguyai46badmonk
  • Reply 7 of 13
    flaneurflaneur Posts: 4,509member
    clemynx said:

    flaneur said:
    I'd be surprised if Apple was not working on AR hardware. I'd also be surprised if they did anything like Oculus, HTC, Samsung, etc. In other words, I can't see them making a plastic box for anyone's face.
    Oculus is not AR...
    Neither is the Vive or the Samsung thing. Maybe I have to spell everything out: 

    Apple is probably working on AR hardware, but probably not on VR hardware like the plastic box makers, at least I hope not.
    baconstangration al
  • Reply 8 of 13
    anomeanome Posts: 1,269member
    clemynx said:
    Seriously, what the hell is this company selling? 
    At a rough guess, sun protection. You know, hats, parasols, UV resistant clothing. That sort of thing.
    baconstangcnocbuiai46
  • Reply 9 of 13
    irelandireland Posts: 17,584member
    Some amount of R&D centres worldwide for Apple now. Amazing how diverse an amount of R&D has to be going at this company. Just imagine.
  • Reply 10 of 13
    irelandireland Posts: 17,584member
    clemynx said:
    Seriously, what the hell is this company selling? 

    Just an annoying ad. I block most of that shit.
    lostkiwi
  • Reply 11 of 13
    shevshev Posts: 80member
    altivec88 said:
    Here apple. Let me save you some money on R&D. Get the latest processor and graphics card and put it into the Mac Pro case. There...  It took one person 10 seconds and $0 to come up with that brilliant idea.   Maybe they can spare one of their hundred thousand plus employees a few hours to do that instead of pissing off and losing more of your pro buyers every day you wait.
    Haha and even when they decide to actually update the thing, this is all they'll do and everyone will fall over themselves over this incredible update. 
    altivec88
  • Reply 12 of 13
    altivec88altivec88 Posts: 128member
    mac_dog said:
    altivec88 said:
    Here apple. Let me save you some money on R&D. Get the latest processor and graphics card and put it into the Mac Pro case. There...  It took one person 10 seconds and $0 to come up with that brilliant idea.   Maybe they can spare one of their hundred thousand plus employees a few hours to do that instead of pissing off and losing more of your pro buyers every day you wait.
    Brilliant! Maybe you should be running apple. You might have to move out of your parents house, though. 

    Seriously, don't quit your day job. 
    Unless you are Tim, I'm not sure what your problem with my post is.  Maybe your parents basement doesn't rely on Mac Pro's like mine does so you have no understanding of the frustration level us pro's are at.  We have been stuck on 12 core machines for over 6 years and the latest model is 3 years old with no price drops or any effort at all to put the price/performance ratio in line with competitor systems.  I have seen countless of my colleagues forced to switch due to this lackadaisical commitment.  All I said is, why can't apple chew gum and walk at the same time and you know maybe spend some of that R&D dollar on the MacPro.  I'm not saying a redesign but just a refresh using the latest E5v4 and modern graphic cards to keep it up to date.

    Are you claiming what I am saying is not true? or is it that you are okay with 1000 day refresh cycles?  or are you just on another level of fanboyism that exceeds even me?  Again, I'm not sure what's in there to elicit such a response.
    singularityshevgatorguy
  • Reply 13 of 13
    cnocbuicnocbui Posts: 3,613member
    shev said:
    altivec88 said:
    Here apple. Let me save you some money on R&D. Get the latest processor and graphics card and put it into the Mac Pro case. There...  It took one person 10 seconds and $0 to come up with that brilliant idea.   Maybe they can spare one of their hundred thousand plus employees a few hours to do that instead of pissing off and losing more of your pro buyers every day you wait.
    Haha and even when they decide to actually update the thing, this is all they'll do and everyone will fall over themselves over this incredible update. 
    That is not all they do.  first they have to expend a considerable effort in taking existing graphics cards and come up with a slightly modified version so that users can't just buy generic cards and have to buy the 'special' ones from Apple.  Since Apple ensure their 'special' cards are never updated, you will of course have to buy a whole new machine when Apple is good and read to provide you with one, say in 7 years time.
    singularityaltivec88
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