Even as iWatch rumors fly thick and fast in investing and analytical circles, Apple Inc. (NASDAQ:AAPL) spent more money on research than it has in nearly a decade, according to some perceptive detective work by the Financial Times. Apple’s financial figures indicated a massive upward bump of 36% additional spending for R&D in Q3 2014 compared to Q3 2013. This is a massive year-over-year increase, and is generally taken as being related to the launch of the iWatch, or whatever Apple elects to call their wearable device.
The R&D spending currently underway is massive even without comparison to the previous year’s total. The $1.6 billion spent during the quarter amounts to no less than 4% of the total revenue earned by the Cupertino enterprise over the same period. This is clearly something massive underway, a spending binge similar to that which came ahead of the iPod and the iPhone.
However, there is something slightly amiss with the picture of the current R&D spending relating directly to the iWatch. If the wrist-mounted device is indeed to see the light of retail this September, or even in the early days of 2015 if the pessimists are accurate, this research is definitely belated. The original iPhone appeared in 2007, but the research spending spike that heralded it was visible in 2005 and 2006. Either the iWatch is much further from launch than is generally believed, or the R&D funding seems likely to be directed towards some other goal.
While Apple’s hypothetical mobile payments system has been suggested as an alternative, there is little evidence that this system is anywhere near the top of Apple’s priority list. Instead, the jump in R&D has followed close on the heels of the California electronics giant’s acquisition of Beats Music, which features a streaming music distribution model.
This model appears to be displacing the purchase model used by iTunes, and is proving highly lucrative to boot. However, Beats’ service is currently quite new and underdeveloped – raw clay, with a lot of potential, to be shaped by the expert hands of Apple’s programmers, engineers, and advertising teams.
Though it is possible that the R&D increase is related to the imminent iWatch release, it also seems possible that it has been earmarked to develop Beats into a world-class service capable of harvesting massive profits for Apple (AAPL). After all, Tim Cook did not spend billions to acquire the service simply to let it languish in obscurity or remain as a trivial byline such as the iPod.
