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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WHO DOESN’T LOVE A POSITIVE STORY—OR TWO?

“Great journalism really does make a difference in this world: it can even save kids.”

That’s what a civil rights lawyer wrote to Julia Lurie, the day after her major investigation into a psychiatric hospital chain that uses foster children as “cash cows” published, letting her know he was using her findings that same day in a hearing to keep a child out of one of the facilities we investigated.

That’s awesome. As is the fact that Julia, who spent a full year reporting this challenging story, promptly heard from a Senate committee that will use her work in their own investigation of Universal Health Services. There’s no doubt her revelations will continue to have a big impact in the months and years to come.

Like another story about Mother Jones’ real-world impact.

This one, a multiyear investigation, published in 2021, exposed conditions in sugar work camps in the Dominican Republic owned by Central Romana—the conglomerate behind brands like C&H and Domino, whose product ends up in our Hershey bars and other sweets. A year ago, the Biden administration banned sugar imports from Central Romana. And just recently, we learned of a previously undisclosed investigation from the Department of Homeland Security, looking into working conditions at Central Romana. How big of a deal is this?

“This could be the first time a corporation would be held criminally liable for forced labor in their own supply chains,” according to a retired special agent we talked to.

Wow.

And it is only because Mother Jones is funded primarily by donations from readers that we can mount ambitious, yearlong—or more—investigations like these two stories that are making waves.

About that: It’s unfathomably hard in the news business right now, and we came up about $28,000 short during our recent fall fundraising campaign. We simply have to make that up soon to avoid falling further behind than can be made up for, or needing to somehow trim $1 million from our budget, like happened last year.

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