CFO Luca Maestri discusses Apple R&D, potential of 'Spaceship' HQ as tourism draw

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In an interview this week, Apple's Chief Financial Luca Maestri addressed questions regarding Apple's research spending, a possible import tax as part of a larger reform package, and the new Apple Headquarters as tourist attraction.




Maestri spoke at the Goldman Sachs Technology and Internet Conference on Tuesday, where he commented at some length about Apple research and development, saying that with a wider product portfolio, comes a larger R&D obligation to support those products. However, a good portion of the budget comes from developing solutions that other companies might have to buy elsewhere.

"Today, we do much more in-house development of some fundamental technologies than we used to do a few years ago, when we did more of that in the supplier base -- the work we do around processors or sensors," Maestri said, regarding Apple's research and development budget. "It's very important for us because we can push the envelope on innovation, we can better control timing, cost, quality. We look at that as a great strategic investment."

Cash repatriation, and tax reform

Apple is also possibly facing a big decision, regarding if it wants to manufacture future products in the U.S., and if so, how many. As part of a cohesive tax reform package including cash hoard repatriation regulations, President Donald Trump is proposing new tariffs, attempting to encourage businesses to migrate manufacturing back to the U.S.

"Very hard for us to imagine that a border tax would be good for the US economy, because it would burden the consumer and the dollar would appreciate versus where it is today, which is already too strong," Maestri said about a potential import tax suggested by the Trump administration. "It doesn't yield a positive outcome."

As proposed by the Trump administration, the effective taxation on a $700 iPhone manufactured in China rises from a current $98 to $140. Minus an expected dramatic increase in manufacturing cost if production shifts to the U.S., the same phone's taxes built in the U.S. would drop to $56.

Apple Music as part of the whole

A big driver of Apple's profits is the new Services category, spanning not only the App Stores, but Apple Music as well.

"When you combine our download model with our streaming service, which comes from Beats acquisition, [Apple Music] is clearly gaining traction. With the?combination of these two businesses, we are clearly the number one in music," Maestri said. "We've got a long association with music and it's one?of the most important?use cases for customers on our devices. We really want to provide the best popular offering and we think we're actually doing that."

Wearables as the future

Maestri spoke bullishly on Apple's wearables segment, and grouped in the AirPods, Beats, and Apple Watch in amongst them. The CFO feels that wearable technology will see a lot of interest from Apple in the future.

"We feel very good, it was the best quarter we ever had," Maestri said, reiterating previous remarks made during the most recent quarterly investor's report conference call. "We could have sold more, to be honest. We think it's a great platform to innovate on. It's early stages, but we feel very very good about the momentum."

Apple HQ as tourist attraction

Concluding the interview, Maestri was asked about the new Apple Headquarters, and when the company was expected to move to the new buildings.

"The new campus I really think is going to be come a national landmark. I think there's going to be a lot of interest from tourists, and we need to figure out how to manage that," Maestri said. "This is really Steve's vision for the employees. We think it's going to be a great place for our employees to innovate for many, many years to come."

Maestri declined to give a date for the shift, but noted that the recent rains in California were responsible for a delay of a few weeks.

Apple is hosting a replay of the entire interview.

Comments

  • Reply 1 of 13
    macxpressmacxpress Posts: 4,607member
    Probably not in everyone's best interest to bring up and start discussing Trump's trade plans...unless you want to have this thread closed immediately.

    While yes I think Apple's Campus 2 is primarily for its employees and I think it will greatly benefit Apple to have a large majority of its team in one building, I think it would also be really nice if they could find a way to somehow have the public visit. I fully realize people may not be able to visit the entire building and certain parts of the campus should be off-grounds to the general public, but I just think it would be really cool to see.
    edited February 2017 watto_cobra
  • Reply 2 of 13
    Rayz2016Rayz2016 Posts: 4,340member
    I wonder if gawpers will create traffic problems. 
    watto_cobra
  • Reply 3 of 13
    macxpressmacxpress Posts: 4,607member
    Rayz2016 said:
    I wonder if gawpers will create traffic problems. 
    If its built like the plans I don't think there's really anything you can see from the road. The entire campus would be surrounded by basically a man made forest. Not that this would stop people from trying to see something. 
    edited February 2017 Rayz2016
  • Reply 4 of 13
    Didn't I read some where that they would have the or a cafe open to the public at the new headquarters?
  • Reply 5 of 13
    I believe a visitors center is planned along the eastern side of the campus on Tantau Ave.
  • Reply 6 of 13
    macxpressmacxpress Posts: 4,607member
    I wonder how many disappointed Apple employees there will be when they get told, no you're staying in the old campus, or well were moving you from San Francisco....to Apple's old campus. Not every employee (or team) is moving to Campus 2.  Some are staying in Campus 1 and I would think others would be moving from Apple's many San Francisco offices to either Campus 1 or Campus 2. 
    edited February 2017
  • Reply 7 of 13
    Attract tourists? It should be sell to attract talent, a place you'd want to work.
    edited February 2017 cali
  • Reply 8 of 13
    zoetmbzoetmb Posts: 2,341member
    Regardless of what Maestri said, I doubt very much that Apple is going to accommodate tourists.   Even aside from the disturbance it could cause to the work process, Apple is so paranoid about security - how can they let anyone inside any building?  They don't even let their own employees wander into any building.    And with the possible exception of Ive's milling machines, what is there to see?   Aside from the architecture and landscaping, it's still going to be just a bunch of desks and computers.   

    If they cared about tourists, they could have built an "Apple Museum" in some corner of the campus and included some state-of-the-art VR experience about Apple's history or design/manufacturing process, but even Jobs used to put down the idea of an Apple Museum because he said he never wanted to look back - he only wanted to look forward.   

    ---
    While I have no insight into who is moving to the new campus and who isn't, my understanding is that the intention is for Apple to give up all the external leased space around Cupertino and consolidate everyone into either Campus 1 or Campus 2.    And my experience has been is that sometimes it's better to be "living" far away from senior management, so some people may prefer to stay in Campus 1.  Also, since Campus 1 is smaller, I bet it's more accessible and easier to do things like go out for lunch.   I bet that's near impossible on the new campus - by the time you get to your car, it would be time to come back.    I still predict big traffic jams in and out of Campus 2, but I guess we'll see the reality soon enough.    It will be interesting to see how employees feel about the new campus once they arrive and begin working there.  Sometimes, it's the subtle things that can make or break a workplace experience.  
  • Reply 9 of 13
    irelandireland Posts: 17,454member
    The vision for this circle came from Forster & Partners, likely Norman himself. Steve wanted several separate buildings. Can't recall where I learned this, but there you go. Steve was bright, but wasn't always right.
    edited February 2017
  • Reply 10 of 13
    calicali Posts: 3,495member
    Everything about Luca Maestri screams vampire! His name, looks and accent. Everything.
  • Reply 11 of 13
    Hmm, let's see they spend 18 months eliminating the underfoot bump as you go through the door, so as not to disturb the concentrated flow of thought of the engineers as they go through the door, yet he is thinking it would be a good idea to run public tours into the building?  Sure.
  • Reply 12 of 13
    cali said:
    Everything about Luca Maestri screams vampire! His name, looks and accent. Everything.
    What about the whole immortality and blood chugging thing?
  • Reply 13 of 13
    cali said:
    Everything about Luca Maestri screams vampire! His name, looks and accent. Everything.
    What about the whole immortality and blood chugging thing?

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