“With its sleek iPod nano and all-in-one iMac computer, Apple is often perceived by its fans as a pre-eminent innovator,” Troy Wolverton writes for TheStreet.com. “It may come as a surprise, then, that much of the company’s recent financial — and stock — success has resulted from merely holding the line on one of the sources of that innovation: its spending on research and development.”
“Even while Apple’s revenue has skyrocketed in recent years — and even as expectations for future products and success have exploded — what the company has spent on R&D has risen only modestly. As a portion of overall sales, such expenses have actually fallen by more than half,” Wolverton writes. “Though analysts generally praise Apple for its frugality, some warn there’s a limit to how much longer the company can squeeze juicier near-term profits out of its R&D line.”
“Although there’s no hard-and-fast rule for what portion of its budget a company should devote to R&D, some analysts say Apple is approaching minimal levels. As a portion of sales, the amount Apple has spent on R&D has fallen steadily every year since fiscal 2001, when the company devoted 8%,” Wolverton writes. “Last year, Apple spent 3.8% of sales on development, and it spent just 3.2% in its most recent fiscal quarter. Apple hasn’t cut R&D spending. The company spent $534 million on development in fiscal 2005, which was 24% more than it spent in fiscal 2001. But the company has clearly been constraining the growth of development spending… Part of the reason that Apple can’t let its research spending decline much further is that the company has to bear costs that many of its PC industry competitors don’t. If it wants a new operating system for its Macintosh computers, for instance, Apple itself has to develop it; it can’t rely on Microsoft.”
Full article here.
MacDailyNews Take: It’s not how much you spend, but how well you spend. Clearly, Apple gets a lot more innovation for its R&D dollar than, say, Microsoft, for one bloated, wasteful example. Windows XP SP3, er, Vista is taking how long and costing how much to try to look like 2000’s Mac OS X beta on acid? Surely Apple will increase R&D expenditures if and when CEO Steve Jobs decides it’s necessary to accomplish certain goals.
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I have to say, I have been dissappointed with the Apple designers recently.
Other than the Mac Mini, the last major redesign was the iMac. The iBook and Powerbook/Macbook ranges havent had a redesign for 4 or 5 years now.
What has Jonny Ive been doin?
everything is rectangle, EVERYTHING, thats doesnt take millions to design haha
Apple is not skimping on R&D, but on a coherent advertising campaign.
Well, I’d say Apple has hit the sweet spots for their machines, and there is no need to make any radical changes.
More people does not = better design development
I’d like to ask the designers and engineers if they are wanting for anything. They may be able to do all they want already with what they have.
From a more psychological perspective, though– when people have to do with less, they are forced to be creative. Doubt that’s what’s really going on here exactly. Apple R&D is hardly starved.
I love how the articles here lately are spins on Microsoft “news”. Truth is, other than speakers and a $10.00 320×240 movie download, MS has been getting headlines with Windows Live services, Origami, Office 2007, Vista, and XBox360. The iPod hype is over. Now what, Apple?
Every time it appears that Apple is slacking, they come out with something new and innovative. I think that will be the case in the coming months. With the transition to Intel, Apple has devoted all their energies into that, new, cooler looking products will be arriving there after.
The other thing here is that Apple still spends considerably more than most of their competition on R&D.
I must also admit Apple is severly lacking on their R&D spending.
For instance there is a serious perfromance glitch on G5 processors and hard drives. G4’s actually test faster on I/O speeds than G5’s.
Second Apple hasn’t used the latest hard drive SATA interface on their PowerMac G5 line, except in the Quad. So people can’t use the newest fastest drives in their PowerMac’s.
Third, Apple is not innovating, it’s other people coming to Apple with innovative ideas. The iPod and the iTunes visuals are two glaring examples.
Sure Johnathan Ives is getting a cool $1M a year to design better looking hardware, but Apple is copying, improving and marketing, not truly innovating.
Look at the iPod HiFi, it’s not innovative, it’s a copy of thousands of existing products with a slap of a Apple logo and cheap plastic.
It’s really sorry what Apple has become, in the grand scheme of Steve Jobs life lately, Mac hardware quality is really taking a back seat.
It’s not getting better, it’s getting junkier.
My 5G iPod video hardly works, I get better use out of my 3G.
It’s like Apple is turning into a cheap, volume PC maker or something.
Ok, but when they create the perfect design, both in form and function, it’s kind of hard to top it. I think what they present their customers is somewhat lightyears ahead of competition anyway.
Look at Bang & Olufsen etc., they don’t need to change their looks every three months. Simply because their design “just works”…
(and is farely timeless)
As far as revs to their hardware’s appearance, I don’t expect much change there until the switch to Intel is over. They want their machines to look the same as the previous hardware as part of the mindset that the computer has not changed just because it has a different processor inside.
Once the change is complete I’m sure Jonathan Ives will be set loose to bring us amazing looking new hardware. Personally, I’m expecting a rev to black shiny cases for the MacBooks.
hehe good take mdn!
Hey, “Paul” . . . nice try!
I can tell that you’re really MacDude from a mile away.
The author said that they haven’t cut funding for R&D, they just haven’t added the same percentage that they’ve seen in their profits. I remember reading awhile back, when they devoted 8% of their profits to R&D, that the actual dollar amount was much higher than other tech companies. It that amount has risen modestly, then the same is true today.
If these guys are going to base these types of questions on percentages, they need to acknowledge that they are also subjective.
WizeGuy –
I agree. I too am a little disappointed with the rate of design change at Apple. And with the rate of ‘new’ product announcements in general. Fair play, the iMac was slightly revamped last year, and of course there’s the nano and iPod 5g – but these are really just variations on a theme. I was most disappointed at the lack of new look for the MacBook… (which, while still beautiful is, as you say, almost 5 years old now). However, I can appreciate the argument that Apple wants to signal that despite having Intel chips inside, “it’s still a Mac.”
My 5G iPod is just fantastic, I’m buying the iPod speakers at the end of the month because I’ve just listened to them in my local Currys and they blew away the next £250 iPod speaker set up.
To all the catch up companies, the birthday is seriously going to piss you off . . . Apple R&D will move the cool bar well above eye level.
Paul, buy an sandisk or a sony bean or something else, they work for sure.
If R&D has declined in real times then that should be a concern. However there’s another way of looking at these set of figures. During this period there has been a huge increase in sales and the company doesn’t have to increase spending on research and development as a proportion of sales but they do have to increase this figure.
My overall concern is that spending on this area has to increase in relation to the inflation rate. That means increasing R&D spending in relation to worldwide inflation.
As for MDN’s take, at best it’s smacks of voodoo economics and worst it reads like a snippet from some old style Soviet government spokesperson.
Andy,
Really everything is cuboid with rounded corners or edges.
“If it wants a new operating system for its Macintosh computers, for instance, Apple itself has to develop it; it can’t rely on Microsoft.”
This has got to be the best line. Even Microsoft can’t rely on Microsoft!
FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD FUD
Security issue with Flash, remote takeover of Mac’s
http://www.macnn.com/articles/06/03/15/flash.security.update/
Darn will it never end?
We have been living in a pipe dream.
Wolverton shows the banal idiocy of using meaningless numbers to try to infer something.
The fact of the matter is, R&D as a precentage of revenue is becoming smaller because Apple’s revenues are growing 2-3x the industry average!
Revenues are growing much faster because Apple is selling more product for the same effort, and brainlessly pumping up R&D dollars does not result in proportionally more or better products!
DUH!!
Look at it this way. If Apple spent an extra $200 million a year on R&D, what would it do with it that it isn’t already doing?
A new Newton or Palm-type device is probably out of the question.
They are already working on all kinds of next-generation iPods. They are already working on iLife 2007, and new versions of all the Pro apps. They are working on a whole line of Core-powered Macs. iTMS continues to rock the industry.
I mean, Apple is already doing everything it needs to in terms of product development, and Wolverton’s call for increased R&D is what you get when bean counter analyst types with no ability to create hit products try their hand at creating any damn product on the theory that you will get at least 1 winner from a pile of something.
His call to spend more on R&D is like asking Pixar to pump out 2 films a year instead of 1 every 18 months, on the theory that twice as much is twice as nice. Hey, if you spent $200 million instead of $100 million, you can get two “Finding Nemos,” right?
But it’s clear the main reason Pixar films have been so successful and satisfying is that they refuse to treat filmmaking and storytelling like a factory assembly line, because no amount of money can produce a good story or a great movie before it’s time.
As Steve Jobs has said often in the past, Apple succeeds because he is even proud of what they choose not to do as much as doing great products like the iPod.
Look at it this way – Microsoft spent $5 billion developing Windows XP. Apple spent a fraction of that developing OS X. Does Wolverton want to pen an article on the topic of “bang for the buck?”
A company devotes an amount of money to R & D. Their income rises enormously and suddenly – say by 50%. Their R & D budget goes up by 10%. Suddenly their spending has gone up, but their % of revenue spent on R & D goes down. If the person that wrote this article believes he has hit on something he is right. He has bounded up against the limits of his own intelligence. It is enormously unwise to use statistics to support an argument you don’t understand, particularly when using statistics you don’t understand, especially when underscoring it with mathematics you don’t understand. The article implies that they have cut R & D spending – in truth they have become more profitable. If they have cut their dollar spend then the article would have a point, but they haven’t and it doesn’t. The MDN take is mistaken – it accepts that they have cut R & D. They haven’t. It’s just that revenues are spiralling.
Look at Bang & Olufsen etc., they don’t need to change their looks every three months. Simply because their design “just works”…
Actually walking into their store I’ve found their products lacking and overpriced beyond belief.
$16,000 for a pair of stereo speakers?
Their products are like Hummers, you buy one to show off and alienate yourself from humanity.
“Apple hasn’t cut R&D spending. The company spent $534 million on development in fiscal 2005, which was 24% more than it spent in fiscal 2001.”
So R&D spending is UP!
“Part of the reason that Apple can’t let its research spending decline much further…”
No! It’s down!…or whatever. Get a brain transplant, dude.
People actually want Apple to INCREASE their R&D pace? Good grief, if Apple runs any faster, that SNL (Saturday Night Live) spoof of near-immediate obsolescence just might become reality!
Anyway, from the article:
“Part of the reason that Apple can’t let its research spending decline much further is that the company has to bear costs that many of its PC industry competitors don’t.”
So Apple bears a huge cost that PC clone makers don’t, and Apple is supposed to RAISE that expense?! I like MDN’s take, it’s not what you spend it’s how well you spend. Better to run smart and demand results, than to throw money in the hole hoping a product emerges someday.
“If it wants a new operating system for its Macintosh computers, for instance, Apple itself has to develop it”
Um, Apple has a new, modern operating system with 10.4.5. We don’t need Mac OS 11 quite yet. And when we do, Apple will make it happen, without any Vista-like “place bets on the release date” fiascos.
Hey y’all MDN is dead on. I used to be a design engineer and it basically doesn’t have much to do with $$ spent in proportion to profits. The idea is to recoup all your R&D dollars once the new product goes on the market. Once it’s been there a while, you simply tweak the designs as needed, while lowering the cost to customers. This is how the game is played. You don’t keep redoing your designs from scratch every rev. That would be very bad business and the customers will hate paying the high cost of R&D with each rev of the item.
To me, Apple has already done the unbelievable with their designs. Take the iMac. They went from the old G3 (colorful) iMac to the COMPLETELY new design of the G4 flat panel iMac and not even a good year or two later, redid the ENTIRE design with the G5 (where’s the computer?) iMacs.
Same with the iPods. They even have the price falling while producing very different new designs. The “basic” iPod design, the iPod mini, the shuffle, the nano… c’mon! We’re spoiled!!
Apple is popping out new designs faster than anyone else out there. Sure their R&D dollars are less when compared to their profits because THEIR PROFITS ARE RISING VERY QUICKLY. Just because they make more profit doesn’t mean they should spend it where they don’t need to.
Consider that Dell, HP et al, all spend about the same as Apple on R&D (per some news story I read here some weeks back), and then tell me what do those companies have to show for their money spent? They have NOTHING like what Apple has to show. They can’t even “copy” what Apple has delivered and still turn a profit.
It’s a mistake to completely change the design on a product every six months. People are already confused about “which iPod should I get?” because each model is very different. That was one thing Steve Jobs did when he first returned to Apple… He cut down on the 10-15 some odd different computer models Apple had and scaled it down to much simpler consumer desktop, pro desktop, and laptop lines.
Please don’t let this author’s artical screw with your heads. He’s wrong. It’s like MDN said. It has more to do with what you get for your $$. Not how much you spend.
Also consider what we have that the PC’ers don’t. We have great hardware AND a great os that keeps getting better with each rev. We have Apple Retail stores. No other computer computer manufacturer has a world wide retail store chain. We have Xsans and Xserve, educational software packages, iLife and iWork, all the pro apps, .mac and the ITMS.
This is where the “profits” are being spent!! If you add up MS and any two of the best PC box makers, they don’t have anything like what Apple has been able to produce. All of this innovation comes out of Apple’s engineering department which is funded with these so called “inadequate” R&D dollars.
To think Apple is somehow sluffing in this area is just stupid. The proof is in the puddin.
Now, if you were to talk about advertising the mac/osX, I’d be the VERY first to say Apple is making a huge mistake in what’s (not) being spent.
Why should Apple spend to much on R&D? M$ will just steal their ideas.
RE: ” you buy one to show off and alienate yourself from humanity.”
Sounds like a Macintosh.
everything is rectangle, EVERYTHING, thats doesnt take millions to design haha
—
dear god, don’t tell me they have to design the INSIDE too?!!
“dear god, don’t tell me they have to design the INSIDE too?!!”
In fact, Apple does spent a lot of time on the design of the internals. Ever peek inside a PowerMac G5? From the air flow channels to the “G5” stamped on the side of the processor boxes, it smacks of careful attention to every detail.
Heck, the circuit board of the “sunflower” iMac G4 was CIRCULAR – totally non-standard in the industry. Not only was it circular, but it was colored BLUE instead of the usual green.
Yep, Apple designs the inside, too, but all truly great designs are more than just beautiful on the outside.
Apple has definatly increased its bandwidth.
The download speed has been increased for sure. I dunno if this was today. But it downloaded a song in about 10 secs
are they really spending less on R&D?
it seems that if you spend lets say
100 million on R&D and make a profit of 1 billion
and the next year you make a profit of 2 billion
and still spend 100 million on R&D
is that really skimping?
do you need to spend more?
if profits go up and you still spend the same amount
that sounds like good business to me
ash , did you actually listen to those speakers ?
make a comment when you’re informed
dummy
the beolab 5’s are recognised as the finest speakers in the world and a lot cheaper than some of the so called esoterica flying about
The comments here that say “MDN takes are dead on,” are MDN staff themselves.
Apple is making more money now than they did in 2001. If the percentage of their profits is lower today it does not mean that they are spending less. I am sure that someone with a background in economics and business can explain this in more detail.
Another point: Apple is no longer as hands-on in their Mac’s motherboard designs as they were with PPC hardware. Intel does most of the work now and the lack of FireWire 800 in the MacBook is proof of that.
Last but not least: most of Apple’s software has matured, including the OS. Apple can now focus on fine-tuning performance and adding new features. I do not think that would cost them as much as writing this software from scratch.
Apparently they have been spending enough since the late 1990’s to develop best-of-kind products in several areas. They produced multiple releases of MacOS X since 2001 as well as many other great products – iTMS, iTunes, iLife, Airport and Airport Express, new iMacs, Mac mini, etc.
If they are spending 24% more now than in 2001 (less than that after inflation, but still growth), then there is no reason to believe that they cannot continue to produce great new products. The logic that R&D spending has to be a certain percentage of sales is faulty, as is the assumption that R&D has to growth commensurate with sales.
Funny thing is, if they did throw another few humdred million at R&D, people would scream at the reduction in profits… Besides, unless Apple can hire more people with the right stuff, the extra R&D would be wasted. Efficient, targeted R&D will beat random heavy spending any day.
It’s small, highly-talented teams of designers and engineers. I think that other companies would hire too many people and really get nowhere with the extra money spent of those wages. Apple’s computers were nearly perfectly designed, and the Intel processors, faster ram, better graphics, SATA, and standard front row are just making them better.
And another thing, SHUT UP PAUL!
How many articles can MDN post today that have been in circulation for weeks?
Christ…
Rome wasn’t built in a day, folks. Can ya jus’ wait till 10.5 and Macs with the new 64-bit dual core processors are released. Some of ya’ll actin’ like a buncha nervous nellies. Tighten up, fellas.
1) Industrial design is not the same as R&D.
2) If you exclude iPods – sales of which have been climbing exponentially and for which the R&D requirement is less onerous – R&D spend was 9.93% of CPU sales in FY2004, and 8.51% in FY2005.
3) If Apple continued to spend 8% of total sales on R&D, it would have a reserve of $232 million from the last quarter based on iPod sales alone. And it could probably reserve another $128 million in this quarter from the same source.
But the nice thing about not declaring a dividend or a share buyback is that – if the market ever gets tough again – Apple will still have the money to either a) innovate its way out of trouble or b) bear a couple of years of truly apocalyptic quarters. That’s as opposed to blowing all the money now just cause Troy “I’ve never run a real company” Wolverton says so.
3rdKidney, except for your last line, dead on. (See my comments on the advertisement article)
Luc
We have a new R&D department they are not taking into consideration.
Intel.
Bozos.
S.
(Magic word is, ironically, power.)
Often dismissed, often missed, we all love the Ma cDude®
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More security problems
OfficeMac, remote code execution
http://www.macnn.com/articles/06/03/15/excel.flaws.patched/
Quicktime (Mac or PC) code execution
http://www.pcpro.co.uk/news/84689/overflow-vuln-found-in-itunes-and-quicktime.html
Way to go Apple!
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What’s this ‘the Powerbook’s design is five years old’ ? The Aluminum Powerbook, as 12″ PB, was introduced in early 2003, the 15″ and 17″ PBs followed in summer hat year. That’s three years for me. And they are completely different from the previous TiBook, except for the silvery finish.
The decision to keep the form factors in the face of the processor change was a neat psychological trick, telling people, “Hey, it’s only the processor that changed, it’s still a Mac”. Besides, you cannot easily top the design of the Aluminum Books.
Paul… those vulnerabilities affect Apple… and WINDOWS… So your point is???
maczealot—-“Can ya jus’ wait till…”
Hasn´t that always been the rallying call for everyone interested in Apple products?
Everyone is waiting for the next great thing from Apple …and when it finally comes, it´s not that great and so everyone says “Can ya jus’ wait till…”.
———
And R&D is not the same the design of a product. You guys is all confused.
Does the MacDailyNews Take always support whatever Apple does and critisize anyone who would dare question Apple/Jobs actions/logic?
Is this site run by Apple?
If apple doesn’t come out with something new in say the next year then I would perhaps agree. As is their designs are the best on the market. Even if the “old” designs used in the new intel machinesweren’t still fresh and way ahead of everyone else it could be argued that by not redesigning it went a long way to perceivably easing the transition ie there is no difficult transition.
I would say that really the only thing that could really do with a redesign is the iBook and for all we know we’ll see that anyway.
The iPod is pretty much perfect and there’s not a lot you can do to it cosmetically without totally overhauling it and doing something different – which we may see when/if they move to or add a more video orientated model.
The main thing for me though is that Apple has seen such massive growth, growth perhaps disproportionate to the market as a whole that they’re getting far better value out of their R&D spending.
As I said, give it a year then get worried.
macfanboy #12:
You may submit your CV to Apple anytime you think that you can do better. It seems that people like you do nothing of consequence, but only exist in a perpetual state of disappointment and impotence only interrupted by occasional frantic episodes of unbridled expectation and confused anxiety. My pragmatic advice to you is become a hermit thus avoid the risk of cynicism that comes from living in an imperfect world. We won’t miss ya.
maczealot are u one confused monkey.
You are the one spouting the and I quote you directly:
“Rome wasn’t built in a day, folks. Can ya jus’ wait till 10.5 and Macs with the new 64-bit dual core processors are released. Some of ya’ll actin’ like a buncha nervous nellies. Tighten up, fellas.”
You are the one beating the “Can ya jus’ wait…” drum. LOL
maczealot: “You may submit your CV to Apple anytime you think that you can do better.”
At least I have one that I could submit to Apple if I wanted to work there.
Your CV summed up in a too long sentence: Spend my sparetime pontificating at a mac chat site in between shifts at McD´s.
Apple absolutely needs to put some development money into one product.
AppleWorks Pro.
They already have a great office suite here but it is so old. Update this and merge in Pages and Keynote, make it universal and work on PCs and Linux. That would shake up the world more than some new speaker box.
Skimp all you want Apple.
It works.
macfanboy #12:
I apologize. I hoped that by using monosyllabic words I could express ideas more clearly for you. I did not realize that you do not understand rudimentary English. Let me explain, “wait” is a word that expresses a sense of a serenity and patience.
So you claim that you could actually work at Apple, presumably to usher in a new decade of stunning intellectual and technological advances, but decide not to because you are (a) too lazy, (b) too incompetent, or (c) all of the above. Hmm. More impotence and inaction. On second thought, I believe that Apple does need someone to clean the lavatories at night. Are having comfortable shoes and a uniform your impressive qualifications for “working” at Apple?
Can I say at this point, and in the best possible taste: derr fred.
Aussies will understand
macz – LOL
You buy a new dictionary?
” width=”19″ height=”19″ alt=”LOL” style=”border:0;” />
We all know you are a high school student from your previous replies and you use your momma´s 5 year old iMac. LOL.
When you have a true long-term plan and have finally gotten all the ducks and elements in a row, then you can cut throught all the doo doo and cut R & D costs and still set the innovation standard at the same time. Apple is the only one who is even close to being able to do this. They have dialed in every aspect of their business the last few years. The smartest thing Steve ever did for Apple is to simply have a plan.
macfanboy #12:
How could any sane person argue with your logic?