|
Posted on 03/16/2006 1:18:45 AM PST by Swordmaker
With its sleek iPod nano and all-in-one iMac computer, Apple is often perceived by its fans as a pre-eminent innovator.
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. 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.
"Ultimately, for them to sustain their growth and be successful in the long term, they're going to have to move in new directions and tackle some new product lines that they don't have and haven't historically done," says Van Baker, an analyst who covers the company for industry research group Gartner. "That's going to take significant investment."
Apple spokeswoman Natalie Kerris didn't know whether the company had set goals for R&D spending. But the pace at which Apple allows its investment in innovation to grow in future quarters will likely go a long way toward determining the company's future profit growth.
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%.
|
OTOH, I sold my stock in January, because I suspected a correction may be due. I started at 13+, saw it split, and then reaped a handy reward for my guessing. My suspicions were realized, but I see no reason why they can't keep up their ascent. The iPod/iTunes connection is making it into every facet of our culture, and now with video and movies, the profit picture is fabulous...
I still have a little while to re-invest, but i'm not sure whether to jump back in... but I did stay in a Holiday Inn!
We bought just before the split and are planning to stay in for the long haul. Even with the latest dip we're ahead of the game, and I'm optimistic it's going to hit pre-split levels again by summer.
It wasn't that long ago that people on 'The Street' were mocking Apple for spending so much time on R&D. Bill Gates used to do the same thing.
These folks just don't understand that, historically, Apple is not that intereseted in maintaining a high growth rate. High growth rates have perils of their own. Many a company has been destroyed by efforts to maintain growth rates.
Maintining viability and long-term profitability is more important, and serve responsible stock-holders much better.
LOL...the dinosauer business press is worrying about Apple not coming up with enough innovations. Compare the price per share of Apple and Microsoft to find out what the stock-buying public thinks.
I think to many investors have ADD nowadays. Verizon is having the same problem with getting their FIOS roll out plan sold to the Wall Street crowd. WS can't stand a company that isn't doing things to make a billion dollars profit every day. Long term plans are heresy!
Later on in the article, they note that Apple gets the best bang for the buck in R&D. The actual dollars spent on R&D is increasing, it's just not increasing as fast as the profits. They also point out that if Apple tried to increase R&D as quickly as they've increased profits, they'd have a lot of wasted money (Quick! Research SOMETHING!). Research without direction of some sort is pointless. It think Jobs learned his lesson not to let vision outrun technology. Apple stays ahead of the curve now, but not so far ahead that the hardware can't keep up with the design ideas.
Let's see. Intel is designing Apple's motherboards now, and Apple will only have to maintain two versions of OS X for another couple of years... and these guys are surprised that R&D spending is remaining the same?
Remind me never to listen to these people when I start investing.
Actually it isn't remaining the same. Apple is investing 21% more this year than last year. The author of this article is complaining that Apple has not maintained the same percentage of Sales for R&D as last year... despite having a 68% gain in sales and commensurate revenues.
This is Democrat budgeting... a whopping increase is actually a cut...
"Mr. Jobs., a guy down in maintenance has an idea for a new Apple product... the Apple iToilet."
"Great idea! Here! Take this spare $100,000,000 of shareholders money and invest it in iToilet research!"
Gotcha. I still think it's a dumb complaint--as if Apple somehow doesn't care about R&D anymore.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.
