Apple’s Higher R&D Expense May Not Be Good News

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Apple announced lower gross margins and slower growth this week, leading to a selloff of their stock. But Chris O’Brien reports some good news:

[If] investors are looking for some reasons for optimism, they might do well to check Apple’s numbers related to its research and development spending. Tucked way down deep in its 10-Q filed on Thursday, the company noted that spending on R&D increased 33% in the quarter ending in December. That amounts to an increase of $252 million to a cool $1 billion.

….So, what’s cooking in Apple’s labs? Ha. You didn’t think they’d actually tell us that, did you? In the filing, the company said, “This increase was due primarily to an increase in headcount and related expenses to support expanded R&D activities.”

This might indeed be good news. But then again, it might not. Part of Apple’s success over the past decade has been its uncanny ability to invent a very small number of blockbuster products. Its R&D expense has been low—less than 2 percent of sales—largely because there was so little wasted motion: first the iPod, then the iPhone, then the iPad. That’s three products, along with a smattering of other stuff, generating $200 billion per year. That’s remarkable.

But as product lines age, they have to be maintained, and maintenance engineering is as costly as the original invention itself. Compatibility problems crop up, both between product lines and with prior versions of software. Old products have to be supported. Bureaucracies swell. Not every new product is a winner. All of that causes R&D expense to go up.

Maybe Apple still has the R&D magic. Maybe they’re spending more because their next product introduction will be even bigger and more amazing than anything they’ve done before. But then again, maybe it’s because they’re turning into an ordinary company. Maybe their improbable run of good luck is over. We’ll have to wait and see.

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SIX TRUTHS

Reclaiming power from those who abuse it often starts with telling the truth. And in "This Is How Authoritarians Get Defeated," MoJo's Monika Bauerlein unpacks six truths to remember during the homestretch of an election where democracy, truth, and decency are on the line.

Truth #1: The chaos is the point.

Truth #2: Team Reality is bigger than it seems.

Truth #3: Facebook owns this.

Truth #4: When we go to work, we're in the fight.

Truth #5: It's about minority rule.

Truth #6: The only thing that can save us is…us.

Please take a moment to see how all these truths add up, because what happens in the weeks and months ahead will reverberate for at least a generation and we better be prepared.

And if you think journalism like Mother Jones'—that calls it like it is, that will never acquiesce to power, that looks where others don't—can help guide us through this historic, high-stakes moment, and you're able to right now, please help us reach our $350,000 goal by October 31 with a donation today. It's all hands on deck for democracy.

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