Is the iPad and iPhone maker lacking direction in research and innovation?
Apple's latest 10-K filing with the U.S. Securities and Exchange Commission (SEC), documenting its expenditure for the 2012 fiscal year, said the tech giant had increased R&D spending by almost $1 billion. Bringing the firm's total research and development spending to $3.4 billion compared to $2.4 billion in 2011, Apple still lags behind rival technology firms in research. As an example, Microsoft and Google invested $9.8 billion and $5.2 billion in 2012 respectively.
Although Apple accounts for 118,500 employees worldwide, most of these employees are accounted for in the retail sector, of which the company had a total of 250 U.S. retail stores and 140 international retail stores -- with another 30 - 35 openings in the works for next year.
Within retail and consumer technology, there is no denying that Apple is currently a very popular technology firm. However, Global Equities Research analyst Trip Chowdhry is not so certain that the trend can continue, as Apple has stopped innovating.
According to the Wall Street Cheat Sheet, the industry analyst wrote in a note to clients:
"Apple's innovation is sputtering. Why is that Apple, the company that brought touch to phones and tablets, stopped just there and did not bring touch to notebooks and iMacs? Why is it that Apple brought high-resolution screens to... some MacBooks and not to all devices? High-resolution screens are a commodity today."
High-resolution screens may be a commodity, but they are also a more expensive option for consumers. The analyst may believe that developing touch technology or retina displays means that these features should be spread across the board, but from a business perspective, immediately upgrading every product to a more expensive counterpart could result in alienating customers with less to spend.
In addition, the analyst has suggested that Apple may be rushing products -- and due to this, is lacking a viable product roadmap. Going further, Chowdry hinted this may have contributed to Scott Forstall leaving the firm. The analyst wrote:
"Our contacts speculate that Apple executive leadership may have rushed Scott Forstall to deliver products prematurely. This may also indicate that Apple may be lacking a three- to four-year product road map, because if a roadmap existed, engineers would not be pushed to ship products prematurely -- especially when they are not fully tested."
Apple's attempt at a Google rival iOS Maps, issues with the iPhone 4's antenna and the iPhone 4S's battery problems come to mind -- but the iPad and iPhone maker is hardly the only firm that sometimes releases products with unforeseen hardware issues. It doesn't make business sense to release sub-par products to an adoring public, as the problems do nothing more than anger customers or turn future business away -- so the speed-bumps in product development are unlikely to be premeditated.
However, if the firm is only spending a marginal amount on research and development, it may be within the tech giant's best interests to boost this investment in the following years. This would not only result in staying on top of consumer trends and maintaining the company's innovative reputation and competitive edge, but could prevent "rushed" product offerings and keep hardware issues to a minimum.