In fact, the last time Apple was talking about new products was on Oct. 23, 2012, when the iPad mini, new iMacs, and a refreshed iPad was announced. Given that Apple is facing increased competition in its main product lines and some slowdown in sales (Q1 2013 revenue was $43.6 billion compared to $54.5 billion in Q4 2012), it seems reasonable to assert that Apple must come out with some new products in the near future to avoid slipping further.
Fortunately, under the leadership of Apple CEO Tim Cook, I believe that we could see some very interesting new products announced during 2013. Though it has been some time since Apple Inc. (NASDAQ:AAPL) launched a new product, a look into the recent numbers shows that Apple is spending more than ever on improving its current products and developing new ones. Q1 2013 represented Apple’s highest-ever spending on research and development (R&D), totaling $1.1 billion. And a look back at the past 10 quarters of R&D spending from Apple shows a very clear trend of increased spending:
(Source: WikiInvest)
What is Apple spending its R&D budget on?
At this stage, where Apple’s most recent R&D spending is going (either to entirely new products, or updates to existing products with the iPhone, iPad, Mac and iPod) isn’t entirely clear. Cook has stated that Apple has new software and hardware in development, but it won’t be available until the fall and throughout 2014.
With that in mind, Q2 2013 revenue is highly unlikely to set any records, and the forecast revenue for the June 2013 quarter of $34.5 billion would be a substantial drop from Q4 2012 revenue and Q1 2013 revenue. But the fact that Apple is spending more than ever on R&D coupled with the fact that it will have been such a long time between launching new products for Apple rather suggests that something big is coming.
If all Apple Inc. (NASDAQ:AAPL)’s planning are simple product updates, then that could have already been announced. A revolutionary new product line is something that would take longer and require substantial increased R&D spending, and that’s exactly what’s taking place here.
The next major event in the pipeline: WWDC
The Apple Worldwide Developers Conference (WWDC) will take place from June 10 to June 14, and will be of major interest to Apple shareholders as it is at this event where developers gather to hear of Apple’s latest software releases. It’s possible (though many believe it’s still unlikely) that it is at this event where a major new Apple product will be announced. This event is still a month away, and already speculation is running rampant on what announcements Apple will be revealing during the event. Among the speculated product and software releases to come out of WWDC and future events are the following:
Upgraded MacBook models – It has been forecast by KGI securities analyst Ming-Chi Kuo that new lines of the MacBook Pro and MacBook Air will be released. These new models are expected to be based on Intel Corporation (NASDAQ:INTC)’s next generation Haswell processors.
The Apple Smartwatch (“iWatch”) – Numerous rumors have been flying around regarding smartwatches being developed by major-tech companies, including Apple. I believe the chances of an Apple Inc. (NASDAQ:AAPL) smartwatch being released at some point are very high, and I suspect an Apple amount of money has already been spent on developing Apple’s new smartwatch. It has been speculated that the Apple iWatch could launch in 2013, in which case there is a reasonable chance we might hear about it at the WWDC.
iOS upgrades – It’s expected that we will see a greatly improved version of iOS (Apple’s operating system for mobile phones) at WWDC, with a simpler design and better user interaction. According to Business Insider, an improved iOS will be the main topic of interest at WWDC.
iCloud updates – iCloud has proven to be a useful service for backing up iPhone data, but it has had a mixed reception among developers due to various syncing problems. It’s likely we’ll see a better iCloud at WWDC.
iPhone 6 and iPhone 5S – The iPhone 5S is rumored to launch in September, and it will apparently feature a new quad-core A7 processor, a new fingerprint chip and a major redesign. The iPhone 6, meanwhile, is one of the mostly exciting gadgets in the pipeline (though we don’t know too much about it at this stage), and it could prove to be extremely innovative and successful.
Redesigned iPad – At the beginning of April, there was a rumor that Apple would be revealing a new, completely designed iPad 5 by “the end of April”. The iPad 5 still remains to be seen, and it seems that chances are decent that we’ll have some more details on the device by the time WWDC takes place in June. The new iPad 5, just like the iPhone 6, ought to be something that gets Apple Inc. (NASDAQ:AAPL) fans excited when it’s released.
Apple iTV – While the Apple TV (a digital media receiver) has been out for a while, the Apple iTV is a complete TV set that is predicted to launch this year at an estimated cost of $1,500 to $2,500.
Comparisons with Apple’s major competitors
Apple Inc. (NASDAQ:AAPL) remains dominant in the smartphone and tablet markets. However, it faces serious competition from Samsung, which had year-over-year growth in the tablet market of 282.6%, compared to Apple’s 65.3% year-over-year tablet growth. Samsung also has a substantial, and growing, smartphone market share.
Compared with Apple, it must be noted that much of Samsung’s smartphone revenue is generated from low-end Android smartphones, and some of its cheapest tablets can be brought for less than $300. I believe Samsung will face increased competition from numerous cheaper, local manufacturers, and it is still completely unforeseeable for Samsung to overtake Apple in the higher-end market for smartphones or tablets in the near future.
Also, given Apple’s history of innovating and coming out with exciting new products first (and taking into account their increased R&D spending), I hold more hope for Apple Inc. (NASDAQ:AAPL) to develop something exciting in the near future than Samsung. Samsung may represent a reasonably solid investment, and the company fundamentals are healthy, but it’s highly unlikely for explosive growth to occur in 2013, and I still regard Apple as a far more exciting company.
Interestingly, Microsoft Corporation (NASDAQ:MSFT) has also ventured into Apple’s space in the smartphone and tablet markets, but has (so far) failed to gain any meaningful market share. Its new operating system (Windows 8) has also not been particularly well received.
However, its recent earnings were still strong, and given that Microsoft’s move into the tablet market has been very recent, I believe there is plenty of room for growth. Microsoft Corporation (NASDAQ:MSFT)’s stock is also currently trading around an attractive 52-week high and I believe the potential is there for a further move up closer to $40 within 2013.
Final thoughts
I believe it’s far too early to claim that Apple Inc. (NASDAQ:AAPL) has “stopped innovating” based on the fact that revenue declined last quarter and it’s been some time since its latest product launch. The real answer to the question of whether Apple is still innovating heavily remains to be seen.
Apple’s management surely realizes that new product lines and upgrades are essential for growth, and the fact that R&D spending is higher than ever leads me to believe that we will see some exciting new products from Apple announced in future. Investors just need to remain patient to see what is announced during WWDC and beyond.
The article Is Apple Still Innovating? originally appeared on Fool.com and is written by John Smith.
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