A radically different Apple looms; R&D reveals the company’s largest pivot yet is coming

“People are focusing on the wrong thing when analyzing Apple’s path forward in the face of slowing iPhone sales,” Neil Cybart writes for Above Avalon. “Instead of debating how much Apple will try to monetize the iPhone user base with services (not as much as consensus thinks), the company is instead planning its largest pivot yet. There are only a handful of logical explanations for Apple’s current R&D expense trajectory, and all of them result in a radically different Apple. In a few years, we are no longer going to refer to Apple as the iPhone company.”

“As I pointed out last May, Apple’s R&D expense saw a significant bump up beginning in mid-2014. It was clear Apple was up to something big. However, after looking at Apple’s 2Q16 results, it appears I underestimated the situation,” Cybart writes. “Apple is now on track to spend more than $10 billion on R&D in 2016, up nearly 30% from 2015 and ahead of even my aggressive estimate. This is a remarkable feat considering that Apple was spending a little over $3 billion per year on R&D just four years ago.”

“The most shocking aspect about the amount of money Apple is spending on R&D is how little attention it has garnered in Silicon Valley and on Wall Street,” Cybart writes. “Apple is telling us that they are working on something very big, and yet no one seems to notice or care. I find that intriguing.”

Much more in the full article – recommended – here.

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37 Comments

  1. Boom!!

    Going to be great to watch the myopic analysts on Wallstreet eat their predictions for Apple inc.

    None of these idiots seem to process what they were told many times by Steve Jobs that “Apple inc. skates to where the Puck is going, not to where it has been!”

    Also, none of these so called analysts seem to understand the Apple inc. process, whereby they plant future direction indicators such as the Apple Watch, Research kit, care kit, home kit, Swift programming language etc etc, which are all deliberate directional moves towards where they are going; instead, they proclaim each quarter that “such and such” was a failure because Apple inc. did not sell millions of units out of the gate!

    1. The more I think about it the more it seems clear to me that the main focus of the Apple car will be Uber on steroids. You use your iDevices to order the ride – it will drive to your location by itself (auto driving might come later) and it will be personalized to your preferred settings. The “one more thing” part will be the price. Audience will be expecting $70k, 90k, 125k and Apple will announce “Price starting at $2/mile” and jaws will hit the floor.
      Think about it. Apple’s narrative is changing to services. They have learnt their lesson. unit sales have f’d up the stock. Investors want steady streams not the cyclical nature of unit sales. Plus the market to sell $70k+ cars is too little to justify the investment that apple is making.

      Just my 2 cents. pure speculation….

      1. And guess who is the only entity in the world with enough money to deploy fleets across all the major cities?
        The samscums and xiaomis won’t be able to compete. The mercs and BMWs wont be able to compete. Nor will Uber whose whole business model is based on not having to own the vehicles.

  2. Hello John Sculley!

    Sculley had Apple spend massive amounts on R&D with very little commercial success out of it.

    “Innovation has nothing to do with how many R&D dollars you have. When Apple came up with the Mac, IBM was spending at least 100 times more on R&D. It’s not about money. It’s about the people you have, how you’re led, and how much you get it.”

    As quoted by Steve Jobs in Fortune (9 November 1998).

  3. Making a car work will/would be a breathtaking feat. The sheer complexity of what they are undertaking staggers the imagination. Every part, every piece, every aspect rethought and freshly designed from the bottom up, and each needing to perfectly align-with and complement the others.

    This is moonshot territory. On the order of the pyramids in their time.

    That’s why people are silent and many skeptical. Because it’s mind-boggling to think a company could start a car from scratch and actually come up with anything inside of three years. Much less something unique and extraordinary, which is obviously what I am expecting Apple would insist upon, given their MO.

    So everyone is waiting with eyes half squinted and smiles half smirked. We shall see. We shall see.

    1. An electric car is not an amazing feat.

      An electric car that is affordable, practical, and more desirable than the existing competition (Volt, Leaf, Tesla, and many more) while making money would be a miracle.

      I suspect that Apple will find that anything to do with automobiles will be a money pit with low, perhaps zero returns. Just asTesla has discovered since it has to not only beat legacy ICE car designs, it also has to help develop the infrastructure necessary to replace a world full of gasoline stations.

      1. If Apple can do a great electric car, I am sure Apple can too.

        But a more logical and necessary product from Apple would be VR and AR gear with completely new user interfaces and capabilities driven around that entirely new mode of computing.

        We hear very few rumors about VR but surely Apple is aggressively designing something.

        I would love to dispense with the need for screens, their limited space, and their borders, for at-desk work, surfing and play.

    1. Jeff:

      You’re are exactly right. Jobs was the “no” filter. As he said, they’re as proud of the things they said no to as they are for those things they said yes.

      A testament to how incredible he was… was how little R&D spending Apple engaged in under his rule relative to revenues.

      Enough of these BS articles. Just because Apple is dumping more and more into R&D doesn’t mean anything good. It could be bad: Apple has yet to do anything innovative since Jobs passed. Nothing. It’s mediocre.

        1. yoji:

          The key is that the CEO has the vision, and a strong team to help and contribute and challenge you. Saying no to a lot of things shows strength: that you have a focus and that you know what you’re doing. Otherwise, it’s stuff like design by committee and doing things half assed because you spread yourself too thin.

          With Apple, they tried to do a smartwatch and the new Apple TV in the same year in terms of launch. Well, neither are very good. They’re not revolutionary and they don’t solve a set of key problems for users.

          Just like Jobs criticized Rubenstein about the HP Touchpad and WebOS, saying “He never went deep enough”, so too would he say that of the Apple Watch and Apple TV.

          1. Dswe…
            I agree with some of what you say… The apple music and apple tv were less than halfbacked and not well thought out. Very disapointing to me.
            There are a lot other littke things here and there i wont get into…

            Apple watch not so much.. I love my apple watch..
            Can it be improved …you bet.. A lot… But as first iteration i love the thing….and i alsoi bombard Apple with improvement suggestions.

            My point was not to say ‘saying no’ is a bad thing.. But saying no to everything may be a sign of not taking enough risk. Hence lack of excitement.
            Just another perspective.

  4. Name one really excellent software application that Apple has released in the last decade.

    Look at the misfire with the Mac Pro which only looks pretty when you don’t use it for any work – otherwise you lose a huge chunk of your desk space with a tangled mess of cables and components.

    The MacBook looks amazing but has the worst keyboard on any portable computer I have ever used.

    The iPad remains useless for real work. It will not replace a computer for those that actually do real work.

    iCloud might have good security features but no-one is using it for real work anyway. OneDrive comes with Office365 and it “just works” unlike iWork (which isn’t even called iWork any more) and iCloud (which is designed for photos and is useless for projects).

    Apple can spend as much as they like but unless they can improve their execution they will not succeed in any pivot anywhere.

    1. Where do you come from? Clearly not from Apple ecosystem.

      A solid software released is FCPX. Maybe you don’t know it.

      Losing a large chunk of desk space?!? With what? Drives? Other?

      Lots of the pro audio/video/media/printer gear use a version of thunderbolt. Having a rackmount beside your desk with only a wire hooked from your Mac pro to standard 19″ rackmount module, I don’t see your point besides ranting uselessly.

      What real work do you do that Apple can’t handle besides dedicated software for dedicated modules. For that you have bootcamp. You know?

      Even 3D now is doing fine on a Mac.

      Steve Kovach is convince about the new Apple’s ergonomic keyboard. Maybe you have finger out of this world and Apple product is just too low for you. I’ll lean on Kovach side for credibility.

      Then you talk about execution like if Apple as always been that big. Stay in school. Finance and managing class perhaps.

      Now, go rant somewhere else my friend and ext time add substance.

      1. He’s right on several points but is too harsh with respect to the Mac Pro. I did real work with the nMP, not the same work that he does but it’s real and was considered important enough to my clients that they enabled me to retire at 48. If that’s a microscopic niche, so be it. The total market will tell the final story, not compelling anecdotes like Shadowself’s or my own.

    2. Sorry to say, I agree with all your points. I do not agree with Herself characterization that you are too harsh. Brutal reality Apple. Deal with it.

      Why Apple does not correct these errors is mystifying … 🙏🏻

  5. Apple has invented several revolutionary watch bands made by Gucci and Huog Boss.

    They are hard at work inventing a TV show produced by Doctor Dre. It is a show about cutting edge apps.

    But wait… There’s on more thing! Apple is about to invent a phone that is 6 percent thinner! Patience.. Patience..

  6. Yes, Apple -bashers, you’ve been holding your breath so long throwing tantrums that you fail to notice that no one else is exactly making any dents in the universe at the moment either. Google Glass? Self- driving cars? VR? Gaming? Actually, Apple makes me, an artist and a musician, pretty damn happy usually. I don’t need a watch, and I’ll be keeping my Honda for another 7-10 years. I don’t need drones to drop off my Amazon purchases. I don’t expect Bernie Sanders to spearhead the revolution- revolutions are products of ongoing evolving. That’s how Apple is doing it. Of course it takes risks- it’s had a few good failures, hasn’t it? In a year or two, if this is where we’re still at- then I’d worry.

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