Apple CEO Tim Cook said on the company’s recent earnings call that Apple is hard at work on new hardware and software that will begin rolling out “this fall and throughout 2014.” Numerous reports over the past few months likely paint a good broad picture of what we can expect — an iPhone 5S, a redesigned iPad, a Retina iPad mini, maybe a smartwatch and possibly even a TV — but as the saying goes, the devil is in the details.
Beyond simply launching new products, investors want to see that Apple can still innovate. We read the headlines every day; Apple’s margins are getting squeezed and the high-end smartphone market is nearing saturation, so it’s time for the company to debut innovative products in new categories. CEO Tim Cook said on Apple’s recent earnings call that Apple is indeed exploring new categories, and we should see “exciting” products start to roll out beginning this fall.
Rumors have ranged from boring to borderline ridiculous, but we won’t really know anything specific about Apple’s upcoming new devices until the company unveils them. What we do know right now, however, is that Apple is exploring new technologies more aggressively than ever before. That obviously bodes well for the future.
In a recent 10-Q filing with the Securities and Exchange Commission, Apple detailed its various operating costs. Among them, as it always has been, was Apple’s research and development spending for the March quarter: $1.12 billion. That healthy figure represents an increase of 33% over the year-ago quarter, when Apple spent $841 million on R&D.
At its current pace, Apple will spend more than $4 billion on R&D in fiscal 2013, a 17.6% increase over the previous fiscal year when Apple spent $3.4 billion.
Unique new features that Apple is developing along with the new software and services that will accompany upcoming launches will play a big role in determining how appealing these products are. As Siri on the iPhone 4S showed us, exciting new technology and services within a product can absolutely be a driving force behind huge sales.
Beyond software, Apple is also getting ready to break into new categories so R&D spending will be very important here. Smartwatches, for example, have for the most part been boring and useless thus far and sales have reflected their lack of appeal. If Apple is indeed planning an “iWatch,” it will certainly see a fair amount of success among Apple fans. But pulling in consumers who aren’t inherently loyal to the Apple brand might take some intriguing features, and increased R&D spending is a good indication we might see some surprises.
Apple is now spending more money than ever on developing new technologies that could help attract new customers and put the company back on track in investors’ eyes. As growth in Apple’s key iPhone business slows and margins are crunched, these efforts are more important than ever.
