New products are said to be unveiled this fall by Apple and some of them could represent a totally new category, such as the iWatch. Apple has spent $1.6 billion in the third quarter, up 36 percent from the same period last year. According to a Morgan Stanley report, if it continues at this rate, Apple's spending will be up 60 percent year-over-year by the fourth quarter,
John Jackson, a research vice president at IDC, said the following:
"This shows that they intend to make good on their implicit promise of life after iPhones and iPads. There are big bets in the wings."
Morgan Stanley analyst Katy Huberty predicted that Apple will soon enter a new product category, saying that Apple increased its R&D spending before launching the iPod, iPhone and iPad. As it turns out, Apple is allocating 4 percent of its revenue to R&D, a level it has not reached since shortly before the original iPhone release.
However, Roger Kay of Endpoint Technologies Associates says that an increased R&D right before a purported product launch doesn't necessarily mean that we're going to witness a new category, as it's hard to know or guess what happens deep inside Apple's secret labs. He added the following:
"Apple CEO Tim Cook has the luxury of a little bit of time and a whole lot of money to incubate what's next. They are masters of incremental innovation"
However, even with the sudden increase Apple's R&D spending is said to be modest, as computer and electronics companies usually devote much more of their revenue to R&D. For example, Microsoft has allocated 13 percent of its revenue for R&D each of the past three years.
Tom Mainelli, a program vice president at IDC also said that Apple's slim lineup of products also helps keep costs down:
"They don't have a thousand irons in the fire. It's a reflection of Tim Cook making this his company and basically pulling all the levers"
Source: SanJose Mercury News