Apple's 36% Boost in Research and Development Spending Points to Strong Product Pipeline

[lazyrighteye]

anyone who thinks home kit is a better thing for apple than health kit has many screws loose. first, i care more about monitoring my health, even if it's just how much activity during the day, my heart rate and blood pressure. but from what rumors i've read thus far it will do more. so do i want that to spend my money on or would i rather be able to turn out my lights and lock my doors remotely or while i'm sitting on my sofa?? for me it is a pretty easy choice.

cost wise it is too. even if the watch is $600 to $1000 dollars, which t won't be. it's still the cheaper thing too. $50 bucks for a wifi light switch. because it would be tough to retrofit a house any other way. if i add up my switches that would putty over $1000 very fast!! plus installation. a cheap electrician will charge you $10 bucks a switch. 4 exterior doors at $200 per lock. that's bluetooth so you may need something more to use it remotely, but thats another $800, a garage door opener that can be used with home wifi is another $350+.

When force-ranking the two, I'm also more interested in health benefits than James Bond home automation. I'm also a 40 year old male (aka: not Apple's bread and butter target audience). The VAST majority of society (and Apple's true target audience, under 40) cares more about how cool it is to turn their porch light on from Starbucks. While I have the capacity to also find that cool, I happen to find monitoring (say) my caloric intake, cooler. Again, I'm 40. My "cool" priority list is evolving.

That said, I think iWatch will prove so much bigger than most anyone is considering/discussing. Should be fun.

 

[Bare]

I'm not a financial person, so if someone could explain this to me, I'd appreciate it...

So, what does Apple spend 96% of its sales on if only 4% is spent on developing new products?

Here are some tables that help to explain it:

From this table, you can see that, in 2013, while net sales were $170 billion, when operating expenses and taxes are considered, net PROFIT was only $37 billion. So it's a little misleading to compare Apple's spending on R&D to total sales. When compared to net profit, Apple spent 12% on R&D in 2013. Again, this article is pointing out that Apple is on track to spend more than that this year.

This table shows what else Apple spends cash on -- investments, dividends, etc.

 

[dannyhex]

that concept watch is ugly as **** and looks more like a live-strong bracelet.

 

[Lord Hamsa]

While I agree, your thinking may be more "down the road" than "coming this fall." But again, in time, I think you are correct.

But come this fall...
https://forums.macrumors.com/showthread.php?p=19385140#post19385140

That's why I specifically said "long term". In the short term, the push will be HealthKit because a) it's a priority for Cook, b) it's trendy, and c) a theorized "iWatch" would have all of the necessary hardware self-contained.

I'm looking off further into the future - what are the non-obvious benefits of having such a platform? Having something like HomeKit available may very well increase the demand for such devices, which in turn could create the economy of scale to make them much more affordable, possibly to the point of being "standard" in any new construction, especially if there's an accepted communications standard that people will know won't leave them high and dry.

 

[afsnyder]

I dunno about the rest of you, but I'm starting to get some anticipation fatigue. My gut reactions when facing iWatch news these days is, "sure, whatever." I've gotten so I don't really care when or IF they release the silly thing. Maybe that's the problem with frequenting too many rumor sites.

Isn't that a good marketing tactic? Build up the hype so much that the stock price raises at a bad time. Then release it when the hype has died and the stock price was at a low.

 

[lazyrighteye]

That's why I specifically said "long term". In the short term, the push will be HealthKit because a) it's a priority for Cook, b) it's trendy, and c) a theorized "iWatch" would have all of the necessary hardware self-contained.

I'm looking off further into the future - what are the non-obvious benefits of having such a platform? Having something like HomeKit available may very well increase the demand for such devices, which in turn could create the economy of scale to make them much more affordable, possibly to the point of being "standard" in any new construction, especially if there's an accepted communications standard that people will know won't leave them high and dry.

Ha. Oops. Missed that.
Again, agree. Completely.

 

[chrisbru]

Big bet on IWatch. I won't own one.

Yes you will, you just don't realize it yet.

 

[Crosscreek]

Yes you will, you just don't realize it yet.

Yeh, maybe, no. I'm waiting for the implant addition.

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Many people don't want smartphones, the world goes on.

I don't own one either. I guess I'm not to smart.

 

[TWSS37]

Can we PLEASE remove the javascript loading from MacRumors? This website used to be fast to load, now it even froze Safari for a good 15 seconds before I could do anything.

I haven't read beyond this, but I'll be really upset if no one has responded with a Safari not being snappier comment yet.

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Turns out they take their time to get it right, and make it useful. Galaxy gear and android wear are abysmally awful, and don't change anything. Yay I can order a pizza on my watch, or I could just take out my phone and order it ten times faster, more accurately, and not look like a complete moron. The real kicker is that in order to order a pizza with your watch, your phone absolutely has to be in range, feeding you connectivity. It was one of the most embarrassing and stupid things I've ever seen, and it was shown by google.

So says you. But on an Apple forum, I wouldn't expect less. Is this based on your use case or just subjectivity developed from watching YouTube videos?

 

[ChrisCW11]

Another interpretation

A boost in the R&D budget could also be interpreted as "We don't know what to do next so throw more money at the problem".

It's good in general to grow R&D, but it also speaks further to the idea that Apple is internally struggling to innovate in the post-Jobs era.

Innovation (or at least perceived innovation depending on who you talk to) was easy to come by for Steve Jobs and I am sure a small team of sycophants at Apple, but now Cook has to rely on the entire company to start pulling up the slack hence an increase in the budget.

I am sure Apple is full of bright people with great ideas, but this pipeline has to start growing with new ideas as Apple is starting to wane in the consumer mindset as a company still capable of wowing us and more of a company that is following other trends like larger screen sizes and smart watches.

 

[AppleInLVX]

Isn't that a good marketing tactic? Build up the hype so much that the stock price raises at a bad time. Then release it when the hype has died and the stock price was at a low.

Maybe so, maybe so...

// grabs tinfoil hat.

 

[yellowtruck]

iwatch

I just can’t get giddy over a computerized watch, another device that collects the most personal data ever, your biometrics and broadcasts your frequency, movements to potentially intercepted via wi-fi and Bluetooth by the covert technology and agencies hiding in the shadows feasting on the public’s trust and ignorance. More future drone bate.


Lol, I know that sounds extreme but had I told you earlier last year everything online is collected by the government and they were Secret court orders allow NSA to sweep up Americans' phone records, NSA spies on foreign countries and world leaders, NSA collects text messages under a program called Dishfire, The NSA intercepts deliveries, a tactic called "method interdiction," which intercepts packages that are en route to the recipient. Malware or backdoor-enabling hardware is installed in workshops by agents and the item then continues on its way to the customer.

The NSA can spy on PCs not connected to the Internet
Der Spiegel also published a document from an NSA division called ANT, which revealed technology the NSA uses to carry out operations, including a radio-frequency device that can monitor and even change data on computers that are not online.

The NSA hacked Yahoo and Google data centers
In October, The Washington Post accused the NSA of secretly monitoring transmissions between the data centers of Internet giants Yahoo and Google. Both companies denied giving the NSA permission to intercept such traffic. Google's Eric Schmidt called the move "outrageous," if true, while Yahoo moved to encrypt its data after the revelation.







 

[cube]

New most annoying use of a word after "innovation": pipeline.

 

[obamacare]

The new product will be called icrap.

 

[IJ Reilly]

Haven't we already been told that it will be called iTime, not iWatch?

We have even less idea what it will be called than we know about what it will do.

Personally, I think the folks who've been riding the iWatch bandwagon are going to be embarrassed, or at least they should be. Not only is it a terrible name, it promotes tunnel vision thinking about what the product will do. I believe that Apple has a much better imagination than the vast majority of people who are trying to guess at what they will do. Year in, year out, this proves to be true.

For the record, I think iTime is an even worse name than iWatch.

 

[commodorepet]

i'm guessing payroll is not included in the R&D budget. it's in the payroll budget which is probably the biggest piece of the pie.

R&D payroll is most certainly in the R&D budget.

Silicon valley paychecks rose 10% in the last 12-18 months according to CNBC, and companies such as Google (and by inference, Apple) are having to present their better employees with "offer-they-can't-refuse" to stop them quitting and going to start-ups, etc.

Housing cost in Silicon valley is rising faster than that, so the conclusion is pretty secure that a significant part of this R&D budget increase is just in payroll.

http://www.cnbc.com/id/101677461

"Housing costs doubled in the last 5 years"
http://www.cnbc.com/id/101471208
"Those earning $50,000 a year in Dallas would need to make $77,000 a year in the Silicon Valley to maintain the same quality of life"

 

[IJ Reilly]

But 4% sounds like a small number for what, I believe, is the most important part of their business.

Don't focus on the R&D percentage relative to Apple's massive revenue stream. Focus on the $1.6B they spent on R&D in the last quarter alone. This makes Apple possibly the largest investor in R&D on the planet.

 

[rmsanger]

A few things... 4% of R&D spend of sales is a healthy percent and nothing to sneeze at.

An increase in R&D spend does not equate to more or better products (see MSFT).

The ideas bounced around on here are way too small for this type of investment (iWatch, iTV, iETC are all marginal products). They will be investing in a tech pipeline that changes that way we live our lives.


I'm thinking it's integration of existing iPhone capabilities, with Mercedes/Lexus drive assist to revolutionize global commuting. Envision a world where all human error is taken out of the driving/commute process and you can work/rest while you ride. The productivity gains and costs savings from accidents alone would change our world.

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Don't focus on the R&D percentage relative to Apple's massive revenue stream. Focus on the $1.6B they spent on R&D in the last quarter alone. This makes Apple possibly the largest investor in R&D on the planet.

Here's prior year EUR spend per annum.

http://www.businessinsider.com/50-biggest-companies-by-rd-investment-2013-12

 

[MentalFloss]

all this spending is to make up for a lack of vision

I see. But if you have a vision, the products come out by themselves, without any spending whatsoever? That's the point you are making, isn't it?

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Someone at Apple says that every year. Usually right after earnings come out!

I would really like to see a link to prove that claim.

Yes, Apple representatives always say that they have great products coming out, and frankly, I have seen great products from Apple every year sind the release of the first iPhone... there was the iPad, iPad Mini, Macbook Air, retina versions of various products, iPad Air, etc. But I have never heard any Apple representative say that they had better stuff coming up than they did in the last 25 years.

 

[StyxMaker]

Apple's 36% Boost in Research and Development Spending Points to Strong Produ...

Like the old Tom Swift books where all of Swift's family and close friends had special watches that told the security system they were friends so the alarm didn't fire. With HomeKit, it can unlock the doors, turn on the lights, open your garage door, and start your coffee pot!

And, it will cost you $200+ in hardware purchases to do each of those things.

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They should have had the watch and the larger iphone and a new mac mini etc a freekin' year ago

Since you're such a wiz-bang genius engineer, you should stat your own company and show Apple how to do it right.

 

[IJ Reilly]

Here's prior year EUR spend per annum.

http://www.businessinsider.com/50-biggest-companies-by-rd-investment-2013-12

That's interesting, but annualizing the published R&D for the recent quarter puts Apple easily into the top ten. It is also quite interesting to see Microsoft spending nearly $8B a year on R&D. It sure raises questions about the payoff they get from this massive investment and the issue of diminishing returns.

 

[StyxMaker]

I just can’t get giddy over a computerized watch, another device that collects the most personal data ever, your biometrics and broadcasts your frequency, movements to potentially intercepted via wi-fi and Bluetooth by the covert technology and agencies hiding in the shadows feasting on the public’s trust and ignorance. More future drone bate.





Lol, I know that sounds extreme but had I told you earlier last year everything online is collected by the government and they were Secret court orders allow NSA to sweep up Americans' phone records, NSA spies on foreign countries and world leaders, NSA collects text messages under a program called Dishfire, The NSA intercepts deliveries, a tactic called "method interdiction," which intercepts packages that are en route to the recipient. Malware or backdoor-enabling hardware is installed in workshops by agents and the item then continues on its way to the customer.



The NSA can spy on PCs not connected to the Internet

Der Spiegel also published a document from an NSA division called ANT, which revealed technology the NSA uses to carry out operations, including a radio-frequency device that can monitor and even change data on computers that are not online.



The NSA hacked Yahoo and Google data centers

In October, The Washington Post accused the NSA of secretly monitoring transmissions between the data centers of Internet giants Yahoo and Google. Both companies denied giving the NSA permission to intercept such traffic. Google's Eric Schmidt called the move "outrageous," if true, while Yahoo moved to encrypt its data after the revelation.

I would have been surprised if it turned out that the NSA had not done all these things. It is, has been, and always will be a signals intelligence organization. Spies spy on people, it's what they are paid to do.

I have always assumed that anything I do on the internet, or on the phone, is public knowledge.

 

[Daalseth]

Big bet on IWatch. I won't own one.

As of right n ow I'm inclined to agree with you. I just haven't seen any feature or use compelling enough to make me want one. That may change. Their new iWatch/iTime device might have something that I just gotta have. As of now however i'm not impressed by any of the rumored things it might be able to do.

 

[yellowtruck]

I would have been surprised if it turned out that the NSA had not done all these things. It is, has been, and always will be a signals intelligence organization. Spies spy on people, it's what they are paid to do.

That sounds like complacency, a shrug off that reduces the matter down nothing more than an expected train arrival and not unlawful privacy violation, covert secrecy, perpetuating unregulated unchecked secrete courts.

I guess if it’s all no big deal, it’s no big deal. Who needs rights that guarantee freedom? Sheesh, who even needs freedom.

 

[IJ Reilly]

As of right n ow I'm inclined to agree with you. I just haven't seen any feature or use compelling enough to make me want one. That may change. Their new iWatch/iTime device might have something that I just gotta have. As of now however i'm not impressed by any of the rumored things it might be able to do.

You haven't seen a single feature or use, compelling or otherwise, so reserving judgment might be the wisest course.

In the short memories department, I remind you that we heard the exact same types comments about the iPad before it appeared. Nobody guessed it right, or even guessed the name right, and a lot of people declared it to be an instant failure when it did arrive because it lacked some pet feature that they claimed was essential. The vast majority of expressed opinions are wrong.

All worth keeping in mind, I should think.