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Apple's Research And Development Deficit

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Apple made major headlines this week by announcing that it will start paying its investors dividends. But with $100 billion in cash, BusinessWeek reporter Robin Farzad says that's "no biggie," because the $2.65-per-share payment only amounts to a 1.8% dividend yield, leaving plenty of money in Apple's bank.

Nicholas Thompson at the New Yorker argues today that the tech company should start pumping that cash into research and development, a sector where it falls far behind its competitors: 

Apple spends remarkably little on research and development, less, in fact, than any of its peers. Last year, according to its annual report, it spent only two and a half billion dollars. Over the past five years, it has spent, on average, less than three per cent of its revenue on R.&D. Microsoft has spent fourteen per cent, Google thirteen, and Amazon five and a half.

Apple does a few things very well, and they tend to put all their R.&D. money into these few things (phones, tablets, laptops, operating systems, maybe televisions) and stuff that makes those products work better (faster processors, better batteries, and, as of recently, cooler fans). It also gets a lot out of its users. Many of the best uses of the iPhone were designed by outside app makers. It’s a company that does lots of development and not so much basic research.

Spending more money on research wouldn't only help Apple expand its reach into other markets, he writes, but would also help sustain its public image: "Whether true or not, the public eventually comes to believe that behind every great fortune lies a crime. Having a sweeping research lab, which continues to invent things that help both the company and the public, can soften a harsh reputation."

Thompson's inadvertently bringing up a timeless question: is all charitable or philanthropic work inherently selfish?

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Comments

  1. Apple has managed to do pretty well for investors in recent months. I don't even care about the dividend. The stock price has gone insane.

    Apple has also managed to create a lot of products in high demand by consumers for about 7 years. So I'd say that R&D spending has been adequate.

    I think that his question is pointless. This is a corporation that treats its employees well. Apple never claimed to be a nonprofit. Yes, some abuses in China manufacturing factories are troublesome. But there's a lot of troublesome things happening in China.

    Posted by: Paul R | Mar 22, 2012 9:33:51 AM


  2. Not to be cynical, but why is this story worth reporting? It seems only valuable to people who have a financial interest in Apple.

    Posted by: Jack M | Mar 22, 2012 9:36:15 AM


  3. the answer to the question is yes.

    eliminate tax deductions for charitable contributions.

    Posted by: Bobeau | Mar 22, 2012 9:47:27 AM


  4. The answer is moot. Donating money to an organization that helps people is a little selfish, so what? Lots of things are.

    Posted by: Fenrox | Mar 22, 2012 10:15:14 AM


  5. "Not to be cynical, but why is this story worth reporting? It seems only valuable to people who have a financial interest in Apple."

    I agree. Subject to statutory requirements, Apple is only beholden to its shareholders. It has no moral responsibility to pump cash into anything. And the reputation it has built up over the past decade has little to do with technical superiority; most of its products in that sense are inferior to its competitors.

    There are a lot of ways that Apple could use its cash hoard to make the world a better place; I have yet to hear a convincing reason to coerce them to do so.

    ""Whether true or not, the public eventually comes to believe that behind every great fortune lies a crime."

    Hence the inherent stupidity of the general public.

    "Having a sweeping research lab, which continues to invent things that help both the company and the public, can soften a harsh reputation."

    As long as it is the preeminent tech company in the public's eye, it will inevitably inspire hatred. Every empire has its fanatics and nemeses.

    Posted by: Nat | Mar 22, 2012 10:29:25 AM


  6. "Thompson's inadvertently bringing up a timeless question: is all charitable or philanthropic work inherently selfish?"

    I think people obsess over selfishness/selflessness far too much. I don't think the characterization of the act matters as much as the overall utilitarian improvement. Now, if a company does a charitable act for a tax break, then you're in a new paradigm, because we also have to consider the utility of the tax break itself.

    Posted by: Nat | Mar 22, 2012 10:32:11 AM


  7. Apple spend so little because all its technology is someone elses. Its a design company, not a hardware company. Even its software isnt based on anything they created.

    None of the hardware is theirs. LG, Samsung, Sony and the rest actually design and make the hardware. Apple just asks for it, passes the buck on the design costs and reaps the profits. Even the 'A' range of CPUs isnt designed by them, its PowerVR and Samsung technology made by Samsung.

    More fool the other companies that make the stuff, while being sued by Apple over idiotic invalid patents. Thats Apples real genius.

    Posted by: rovex | Mar 22, 2012 11:15:12 AM


  8. Apple's crime has never been anything other than patently obvious. They exploit the idiocy of silly people who prefer their tech be pretty first, functional second.

    Posted by: FFS | Mar 22, 2012 7:25:59 PM


  9. The Nicholas Thompson article in the New Yorker is surprisingly idiotic. So are many of the comments above. Maybe merely uniformed but probably motivated by jealousy.

    Apple's cash position in the USA might be 100 billion but world-wide it is probably closer to 500 billion dollars. How do you like them apples?

    Posted by: No kidding | Mar 22, 2012 8:55:51 PM


  10. "Apple's crime has never been anything other than patently obvious. They exploit the idiocy of silly people who prefer their tech be pretty first, functional second."

    I don't think people even think in terms of 'pretty'; for many, buying Apple products allows them to tap into the zeitgeist of our current era.

    In any event: claiming that Apple products are somehow inferior in function is patently absurd, because there is no universal function that is beneficial to everyone. Apple might not employ top of the line technology, but they make a highly functional product for most people, because they aggressively filter the consumer's interactions into the simplest format. And it's genius, because a) most people need not be tech experts, b) the easy operation has opened doorways in associated fields for users who can act as intermediaries.

    Posted by: Nat | Mar 22, 2012 9:27:35 PM


  11. ROVEX seems to be smoking something that comes from Redmond, WA. And it smells like sour grapes.

    Posted by: David R. | Mar 23, 2012 5:03:20 PM


  12. @Nat: Held an iPhone 4 in your left hand, recently?

    Posted by: FFS | Mar 24, 2012 6:34:50 AM


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