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$76 billion a year from a tableful of products

During the calendar year 2010 Apple spent nearly $2 billion in R&D. That is a significant increase from $714 million in 2006. However, as a percent of sales, R&D spending has decreased. Sales have grown more rapidly than resources hired to develop the products (or to sell them).

In Q4 2005 Operational Expenses (costs which are not tied directly to units of production–sometimes called fixed costs) were 14.2% of sales. In the last quarter of 2010, the ratio was 9.2%. Sales and administrative expenses (which include advertising, promotion and overhead) were 7.1% and R&D (which includes all engineering, testing) were 2.2%. As percent of sales both reached new lows.

The efficiency with which Apple creates sales is legendary. There can be many explanations for this but the most telling evidence of causality I can find is the small number of products in the portfolio. Tim Cook stated that given the sales value, there is more concentration of product at Apple than at any other company except perhaps an oil company. All the products Apple sells can fit on one average sized kitchen table and they generated $76 billion in sales last year.

How is this possible? First, a few words about the often misunderstood process of product development.

Most observers of technology are not aware of the pace of its development. It’s natural to assume that most R&D costs are in the product creation, or early phases of development. Coming up with something new must be hard. But that’s not actually true. Most R&D work is routine polishing of products and coordination late in the development cycle. “Productization” is far more resource intensive than “concepting”.

It stands to reason that making go/no-go decisions early in the pipeline is a lot less expensive than making stop-ship decisions prior to launch.

I have no specific evidence that this is the case, but I guess Apple conceives of plenty of concepts, but chooses to move forward to develop and market very few. Most companies don’t have the ability to decide early which products to launch and instead proceed with costly R&D and marketing in order to find out whether products will “work” in the marketplace. The proliferation of flawed products is a big cause of the inefficiency of product development.

But launching flawed products is also detrimental to brand value, something which rarely hits the books and is thus invisible to operational managers.

This uncanny ability to pick winners early in a long gestation period is my guess for why Apple is so efficient with OpEx. The question of how to develop this ability is left for another day.

  • Vikram

    "…This uncanny ability to pick winners early in a long gestation period is my guess for why Apple is so efficient with OpEx. The question of how to develop this ability is left for another day…"

    See: Jobs, Steve

    • asymco

      That is the big question. It may be that this is a unique talent or it may be that this is a process. The answer depends a lot on whether product development is science or art to be viewed deterministically or not.

      All my observations and intuition tells me it can be deterministic.

      • Vikram

        It's deterministic in the sense of there can be conceptual understanding that can be learned of a process to follow in terms of making decisions when faced with choices but with Jobs he seems to instinctively understand where to look before a choice has to be made – almost a meta understanding of choices to be considered.

        I'm not sure if I'm making sense exactly but beyond being able to choose correctly from a set of choices, Jobs seems preternaturally understand which sets of choices are relevant to consider – an almost higher level of abstraction and that is his talent/genius/whatever you want to call it.

        Also, his thinking or perhaps his set of principles that he follows is very simple and direct: make products that are aesthetically attractive, simple to use, attention to small details, don't ship shoddy work etc… that can be learned as guiding principles that others can learn.

      • Sam Penrose

        My hunch is that the default corporate environment is extremely toxic to the process, and that Jobs' great contribution is his ability to change the environment so that it is hospitable to the process. See also: the account of Bezos and Jobs being introduced to the Segway when it was hush-hush, and how Jobs immediately attacked the format of the meeting he'd been invited to.

      • chano

        I don't know why more companies don't track their earnings and profits per employee. Taken in isolation, it may be meaningless. Taken on a quarterly and annual basis and compared with other results in the same sector might be very illuminating.
        GM and others got themselves into a deep hole by failing to track such metrics.
        In my consultancy days, this was a good yardstick for bonuses and annual increments. Reward most highly those who make above average contributions to growth and profit.
        That may be one answer for corporations and for nations.

      • chandra2

        From the ginger link posted below, we can learn some lessons and can conclude that there is a deterministic process though nothing is 100% guaranteed.

        Consider that Ginger ( segway meeting )
        Steve came prepared for the meeting. He thought about this all night.
        His questioned things on practical matters, based on his prior
        experience on product launches. His 'genius' is in connecting the dots,
        the 'dots' are something he acquired with product launches at Apple.

        If you viewed it that way, Steve is less of an enigma.

  • dchu220

    Since Apple is integrated and knows a lot about developing a product from beginning to end, does it give them insights into emerging technologies that other companies don't have? How much R&D do software companies do on hardware and vice versa?

    • Vikram

      The interesting thing is that when Jobs came back to Apple in the late 90's as a consultative role before he took over, he was telling Gil Amelio to cut R&D to save money and seemed not to care about it.

      Contrast that to almost every other major tech companies like HP or IBM or Oracle who pride themselves on their R&D spend. Mark Hurd, after he was canned by HP, was nearly universally criticized for dropping the R&D budget in HP and that was considered by many to be a reason why HP was suffering an innovation malaise. In fact the CEO of IBM recently praised Oracle for their R&D and criticized what happened at HP in terms of their R&D budget cuts.

      Basically almost every big tech company but Apple tries to allocate as much as they possibly can in R&D – Google, Microsoft, IBM etc…(and now HP again). It's almost an article of faith that heavy investing in R&D is a critical to future success.

      To go back to your question companies like HP – who does build the whole widget in certain areas like servers for example – had historically bragged about their culture of research and their investments in R&D.

      Apple is Apple – unique in how they operate.

      • asymco

        It's never about the size, but how you use it. (R&D spending, I mean).

      • http://twitter.com/_ChrisHarris @_ChrisHarris

        Reducing the R&D budget to low fixed forces Apple to pick the best horse from many. Products which are not ready are shelved for later. The key thing is that Steve only allows one product to go to market at any one time. He himself stated that having one product at a time allows the entire team (marketing included) to get behind the product.

      • Joe_Winfield_IL

        I don't know that Apple is managing R&D through budgetary measures. My guess is that the spend is low because of their small array of products, while your first sentence implies the opposite.

      • chano

        If you make a commodity product where almost all the content (hardware and software) is supplied by others, there is little you can do but use R&D to differentiate your offerings from the herd's. HP probably spends most of its R&D in the areas where it has a differential advantage like instrumentation products. Not so much in PCs and printers.
        By contrast, Apple owns an increasing amount of the IP in its products and has set it self on a course where product change is planned far ahead and carefully managed. A laser-tight focus on what works goes a long way towards reducing wasted R&D imo.

    • SubGenius

      Being both a hardware and software company allows them to think outside the box. Google is a software company and so every problem is tackled inside the "software box". HP is a hardware company and so every problem is tackled inside the "hardware box"(this may change with WebOS).

    • Steven

      Good point.

  • DaveM

    I'm not so sure that Apple picks winning products early in the R&D cycle, so much as it picks a product area, and then builds one specific product to fill the space. The fact that Apple does indeed have so few products is not because few have passed the bar (I suggest), but because of a deliberate decision to avoid proliferation. If you build less, you can build better.

    The other thing that strikes me with Apple is the homogeneity across their product range. Many of the design cues and technologies are reused — so the R&D efforts are shared across the whole set of products. Which is also good for consumers and sales — there is an established Apple aesthetic (simple clean lines, unibody, minimal interface) that promotes a feeling of both quality and familiarity. I don't think we can ignore the fact that Apple products feel significantly better than virtually all of those of its competitors.

    • CndnRschr

      Good points. The overhead of supporting development of several significant variants of phones, for example, is huge – and all of the iphone competitors deal with this (aside from the loss of economy of scale of parts production). Each of those models needs separate development (sometimes in different teams) and the result is a lack of continuity and cross competition from a single vendor. Apple has managed to substantially differentiate all of its products from the competition (aside from KIRFs) and this is unlike any other CE/ computer company. The growing continuity among the software platforms (convergence of OS X and iOS, AppStores, iTunes across all models, etc) also builds a sense of consistency among buyers. When was the last time anyone had to learn how to use an Apple product? The closest would be the new gestures and behaviors on the iPad. That took 3 minutes…. The same simply isn't true on other platforms. Sony is trying – it will be interesting to see how well they can build their games platform for Android based on PlayStation Suite.

      • simon

        I suspect for others the one product strategy just isn't feasible for the simple reason of limited shelf space. Apple is pretty much the only one among the competition who can completely dictate retailers so that their products will have an exclusive display area with guaranteed exposure to the consumers. If others tried that, their phone will get lost among 10s of similar looking Android from other brands and the sales will drop.

    • chano

      Jobs and Cook have both indicated that Apple abandons many more ideas during their early gestation period than make it through and ship.

  • vroddrew

    Product R£D spending ( and product engineers) is most likely subject to the 80/20 rule. Twenty percent of your engineers end up creating eighty percent of your value.

    Apple's magic is that they have, through dint of leadership, corporate culture, human resources,, and process gotten the right twenty percent.

    Microsoft has spent billions working on surface computing without ever noticing the technological limits such devices would have when translated into shrink wrapped products. Which is why you'll see Microsoft Surfaces in the homes of billionaires and super luxury hotels. And millions of iPads in the hands of consumers.

  • Luis Masanti

    Two thoughtS:

    1) Steve said at AllThingsD that "they are so proud of what they did as they are of what they did not do." Also, he said that "they must find what makes a product different." This, I think, is the karma of Apple's products.

    2) As correctly pointed, R&D has increase buy sales has increased even more. So the percentage is lower, but the efficiency is far greater.

    • SubGenius

      I believe what he said that Apple only wants to compete in areas where they feel they can innovate and add value beyond the rest of the industry. This is why Apple started making the iPod HiFi. It is also why they got out of the market once it became overrun with similar products.

  • David W.

    One of the first things Steve Jobs did when he returned to Apple was to cut down on the product line. No more printers. No more Newton. No more Claris. The 14 plus models of the Mac was reduced to just four. Suddenly, Apple was once again profitable.

    It's no coincidence that Apple produces very few products. This allows Apple to focus its attention on what works.

    • r00tabega

      That reduction in choice is also good for the consumer.

      I remember in 1999, when trying to buy a new computer for my little sister who was starting college, how difficult it was to research computer choices (I was overseas at the time, so it had to be all online). In the PC world, there was way too many factors to compare. The Apple web store at that point made it really simple for me (3 choices of desktop), so I bought her an iMac+AppleCare, knowing that, if Apple only sold a few items, they would know to support them.

      Despite the limitations of OS9, my sister loved that iMac and still has fond memories of it to this day.

      Elegance is a characteristic that is hard to measure, and thus manage. Consequently we don't see enough of it these days.

      • Joe_Winfield_IL

        I agree, clarity for consumers is a big deal. Here is an excellent in-depth article about an American grocer, Trader Joe's. One of the key reasons for Trader Joe's success is the deliberate lack of selection. The company's stores have many of the same positive attributes as Apple stores, and with tremendous success.
        http://money.cnn.com/2010/08/20/news/companies/in

      • dchu220

        A West Coast example I love is In-And-Out Burger. By slimming their product line, they are able to give better quality at a lower price.

    • Joe_Winfield_IL

      It also simplifies EVERYTHING. To name a few:

      *With very few SKUs, Apple can shuffle production needs to meet demand much more easily than their competitors.
      *Their retail staff can be trained with deep knowledge of all products, rather than clerks with a cursory understanding and supervisors who specialize in niches.
      *Maintenance and repair requires a smaller parts catalog.
      *A full product lineup can be kept in stock simultaneously in a small space (such as a kiosk at Best Buy).

  • http://machoopla.com Joseph

    "I have no specific evidence that this is the case, but I guess Apple conceives of plenty of concepts, but chooses to move forward to develop and market very few."

    Horace, not sure if Tim Cook's words meet your standard of evidence, but Cook says exactly this in the same oil quote you refer to. That was his main point, to say that Apple is continually rejecting not just good ideas, but great ones.

    • asymco

      I should say I have no specific data. Cook and Jobs have mentioned the focus several times.

  • http://twitter.com/techNewsDay @techNewsDay

    Question: "This uncanny ability to pick winners early in a long gestation period is my guess for why Apple is so efficient with OpEx. The question of how to develop this ability is left for another day."

    Answer: "The Vision Thing"

  • newtonrj

    Been involved with several R/D shops. Most focus on the ability to turn a marketing idea into a manufactured product. My sense is that Apple has found a way to have several different groups approach a marketing idea, thus competing internally.

    • SubGenius

      You are assuming that the marketing dept is directing the R&D.
      Apple is primarily an engineering culture but the key is having the visionaries at the top who see where tech is going.

      For example, the computer is disappearing!
      Apple gets that in 20 years you won't "see" computers as we normally think of them.
      The iPad is a great example. 90% of it is the software/display and 10% is the the frame, the home button and a thin aluminum border.
      In a few years all you will see is 99% software/ screen and 1% hardware.
      No more frame, no buttons, no ports.

      The iMac has gone from a 15" CRT to a 27" LCD but it is actually disappearing.
      With each successive revision you "see" less hardware, less computer.

      Apple's leadership has spent considerable time thinking about where the future of computing is going and how to get there.
      Apple's competition spends it's time thinking about next quarter's sales figures.

  • CndnRschr

    Horace, care to comment on the Nokia results? Sounds as though they are seriously contemplating moving to WP7 or Android. What a disaster for a quite remarkable company.

    • asymco

      I will do an industry round-up after all the quarterly data is in. Still waiting for Samsung.

      As far as seriously contemplating WP or Android, the contemplation was always there. The fact that Elop chose to communicate this is new. I don't know if there is some real change coming.

  • poke

    Apple is notable for being neither future oriented (no concept products, Jobs cut Apple's labs on his return) or past oriented (they frequently obsolete their own successful products). I think the main difference in the way they develop products is that Apple looks at emerging technologies and says, 'What can we build out of this?' – Jobs said the iPhone/iPad came about when he gave a capacitive touchscreen to an engineer and asked him to see what kind of UI he could build – whereas other companies try to fold emerging technologies into existing product lines (or reject them because they don't fit existing product lines, which was apparently RIM's problem). Apple sees new technology as an opportunity to do something new rather than something they have to keep up with.

    I don't think Jobs is a visionary in the classic sense of being somebody who has a particular vision of the future and knows where he wants technology to go. It doesn't seem as if Apple does any serious 'concepting' without having samples of the necessary technologies on hand. Jobs' unique ability is to stay focused on the near term and realise new products from emerging yet very concrete technologies like flash, capacitive touch, mobile processors, etc. His other ability is a near total lack of nostalgia. This is coming dangerously close to saying Jobs' uniqueness comes from being a Californian Buddhist. Living in the now, and so forth.

    I don't see why this kind of thing isn't teachable. By now it's probably fully ingrained in Apple's culture. Tim Cook frequently surprises me with his ability to capture what makes Apple successful with even more eloquence than Jobs himself. As long as Cook and Ive are there I think they'll be fine.

    • R Kendall

      I think you have nailed Job's unique talent: Knowing a great idea as soon as he sees it and understanding its future. In that sense, he is a visionary. Legend has it that it took him less than 15 minutes at PARC to see the significance of icons and the mouse when Xerox and MicroSoft couldn't. Henry Ford didn't invent the automobile — he had a vision for it.

  • http://twitter.com/aegisdesign @aegisdesign

    I wish Apple would spend MORE on R&D though. The Mac has been suffering because of diverting core development onto iOS and other primarily Mac software products have devs pulled to work on the new hotness.

    Leopard was late and buggy because of the iPhone. Snow Leopard was buggy and junked features we'd had for years.

    iWork updates are late so they could do the iPad versions first.

    I think at times Apple run a little too lean on the R&D side. It's been said that Jobs likes to run Apple like a startup with tight software teams but that only works so far.

    • dchu220

      I have to agree with you on this. I do get the feeling that Apple is starting to stretch themselves thin, not just on development but on production as well. Some of it just can't be helped. The demand for the company and it's products is greater than the speed that they can grow.

      Btw. I used 'aegis' in scrabble the other day thanks to you.

    • Dick Applebaum

      I think you miss the point — every R&D dollar invested in iDevices and iOS is being folded back into the Mac hardware, Mac OS X, Pro Apps, Prosumer apps, etc., and vice versa.

      They are all part of the whole — we just don't see them yet!

    • Sergio

      Think of it a bit like in Star Trek when they had to divert energy from other systems to shields or weapons to fight or maintain structural integrity; it's a temporary nuisance for those systems but ultimately good for the whole ship. OK, enough cheap geek philosophy…

    • FalKirk

      "I wish Apple would spend MORE on R&D though."

      I can definitely see some merit to this. When the iPad came out, it didn't have some of the features that the iPhone 4 had when it came out only two months later and it took until November for Apple to "unite" the two operating systems. And when AirPlay and AirPrint came out, some of the features were removed at the last moment. It's appeared to me for quite some time that Apple has had their engineers running just as fast as they possibly can.

      We've all read that Apple is run like a start up. There are huge advantages to that, but there's a price to pay too. I read somewhere that Apple is just like any other company except for the parts where Steve Jobs is paying attention. Then everything moves at hyper-speed. Borrowing from Sergio's geeky Star Trek analogy, it's like Steve Jobs is the Captain of the Enterprise (ironic, no?) and during the battle, he and all of his officers keep rushing together from station to station – weapons to shields to life support to thrusters to the science station back to weapons down to sick bay back to engineering over to transporters over to ten forward to consult with Guinen – wait, that's the wrong series! – over to communications back to shields….all the while people are shouting and wailing that "it can't be done", "we don't have enough power" or "Damn it Jobs, I'm a doctor not an Engineer!"

      It's sounds exhausting. You would think it would inefficient. But hey, maybe it works for them. After all, it totally worked for Kirk.

      • KenC

        I think Gruber's theory on this topic was correct. He posited that there were two teams that took the existing base iOS, whatever that was, 3.1?, and each worked on it, one would become iOS4, and the other would become iOS 3.2 for iPad, or whatever the intro version of the OS was. Then, once the iPad was released, the teams would work on homologating the two iOSes into the next version 4.1.

        I'm sorry if I got the version numbers wrong, but I think Gruber's notion that the software engineering teams were compartmentalized to protect the iPad launch makes sense. Also, Steve is known for that interview where he said teams couldn't be more than 100 people, because he could not remember more than 100 names, etc.

  • tkr

    As further color, I would add it isn't necessarily about killing products early. It may equally be about minimizing investment until you are closer to the point where you can pick a winner.

    The model is similar to what we see in pharma. Like tech, pharma companies must evaluate thousands of potential projects with long duration and high rate of failure. The trick is to maintain pipeline breadth to accomodate high failure rates without consuming too many resources to drag the company down as a whole. The balancing act means you evaluate lots of projects at a skunk works level, winnow out the losers, but don't fret about over-spending in late stage because by that time your are highly confident you are going to be successful.

    So what I am saying is: Apple isn't necessarily "uncanny" in their ability to pick winners and losers. They may just do a better job of managing the R&D pipeline by pushing investment to the late stage and choking investment in the early stage.

    –tkr

  • dchu220

    There has to be processes that they have that help them evaluate these emerging technologies. It cant all be attributed to having a visionary. For example, i have heard that Apple has designers mock up 10 different ways of doing a task. The exercise is designed to force the designer to think deeper than the first three ideas that come to mind. Of those ten, three get chosen to be thought out even further before a final design is accepted. Big companies need lots of processes to stay organized.

  • chano

    Even a limited succession of flawed products will damage brand value. This tarnishing of the brand will inevitably affect sales and become highly visible to Ops managers In fact it will often see them escorted off the premises.
    The modern consumer with access to the web can easily become well-informed. Impressions of poor performance in a product, subsequently reinforced by similar views expressed by others on the web, leads to big time buyer's remorse and often anger. It can lead to a class action for compensation.
    Toyota……recalls…..reputation.

  • jbelkin

    The answer is what's killing other companies? BUREAUCRACY. That is the baseline reason why most company's cannot innovate, why there are dozens of pointless versions of the same product and of course, leading to that is company politics. People are a) intersted in just protecting their turf-budget so if they are senior enough, they kill off or water down their "competition," and since there are no strong other products, no one can stand out in their arena – ie: no hotshot product manager to eat their lunch or be a promotions competitor in 2 or 5 years … and since the product is neutered in the beginning, who's to say it's any good … and even if the prospect looks good, you keep it held in check by testing and re-testing and adding features and bringing in other departents and product features so no one product manager can claim its thers or by releasing 45 versions with varying features, you spread out the acolades to just YOU since no one product manager can claim it all … The difference is Apple is not going to add complexity and features just to satisfy the .02% who checked it off in testing. Only bureucrats need to fall back upon a number to justify or not justify something … I was working at a tech company that 15 years ago got back results like 43% of people said they would never buy a cell phone … it's pointless asking AVERAGE PEOPLE to guess the future because they have no imagination. They only saw a mobile phone as intrusive – I have to get up from my couch to get the phone, who is calling me? Why would they want that walking down the street? Or 6 years ago, ask the average person about mobile apps or games and they might think BREAKOUT – how much would I pay for a 1" low res screen game – nothing. Don't need it. So, a company has to decide – do you want real growth or do you just want to provide employment? Do you really trust your employees – and if not, maybe you hired the wrong people or you have the wrong environment … but look, it's tricky … just look at Google. People confuse their brilliance at ONE thing (search & monetizing it) and free lunch PR as they are geniuses at everything … they are not. After all this time, 97% of their revenue comes from search ads. Android, nice free mobile Os but it's just that, an OS they bought and GIVES away to ensure Google search is on the next generation of phones but they have lost the revenue battle to FaceBook & Apple in social & mobile OS. So, again, engineers are smart and brilliant at coding but Google has yet to come up a second revenue stream – so just throwing a lot of resources at something means nothing is you either don't have the right resources or the right company culture.

    • KenC

      Speaking about that 1" screen of breakout, didn't Apple sell that for $5 with the iPod about 6 years ago? I think Daniel Eran Dilger was prescient in noting that this was a toe-in-the-water for Apple towards selling "signed" apps.

      • http://twitter.com/ivanhoe1982 @ivanhoe1982

        Agreed. Daniel is sometimes a bit too optimistic but I also remember vividly when he envisioned the app store as the first iPod games where published. I'm really curious to see whether we see the app model extended to apple tv. The I'd buy one.

    • Steven

      Bureaucracy – good point. I recall reading a story about how the Microsoft "Pink" project was sabotaged internally by VP's from other departments who did not want to provide the needed cooperation or resources. Could you imagine something like that happening at Apple?

  • FalKirk

    Reading the summary of that meeting and listening to Jobs' slice and dice "Ginger" was electric. I could almost feel his genius sparking across the pages.

    Rude? Maybe. Brilliant, incisive, curt, direct, to the point, insightful? Definitely. I would never want to be the target of his ire, but I'd pay anything to work by his side.

    It all leaves me a bit melancholy. I think it's possible that Jobs may have crafted Apple in his own image. But can any company suffer the loss of a genius like his?

    • SubGenius

      Steve has cloned his brain.
      His left brain is inside Tim Cook.
      His right brain is inside Jonathan Ive.
      and Phil Schiller is a cyborg.

    • Sam Penrose

      My point, which may not be worth much, is that Horace's analysis suggests we pay too much attention to the "brilliant" part and not enough to the "rude." The value of the rude, under this hypothesis, is that it disrupts a default process that is hostile to product development (think: the structure of the meeting the Segway folks had planned; think: most meetings you've ever been in), and allows a process that might be worth following to replace it. That Jobs is really good at product development may be the icing on the cake; the cake may be that he *stops other people from doing a bad job at it*.

      • r00tabega

        Noone is going to put up with rude if you're not brilliant.
        Eventually, in a social environment being rude just gets you blackballed unless you're either a successful bootlicker or brilliant enough to run your own show.

  • dchu220

    Thanks for the link. That's a great story.

    That's why I've always like watching all of Steve's D8 interviews. He is clear and concise on the market, unlike most other CEOs. It's amazing how often he is spot on.

  • SubGenius

    Thanks for posting that link. It was great to read it again.
    My favorite part was the repeated use of the expression "shit his pants."

  • Hamranhansenhansen

    The key is that Apple only has one product: OS X.

    The Mac is OS X on a PC, Xserve is OS X on a server, iPhone is OS X on a phone, iPod is OS X on a music player (at first through iTunes, but then with more and more OS X moving onto the device with each generation until it was literally true), iPad is OS X on a tablet, and AppleTV is OS X on a set-top box.

    Should they do OS X on a car? Or not? Not as hard or mysterious a decision as everyone here is making it out to be. Not that hard or expensive to mock it up and see if it sucks or not. OS X on a refrigerator? OS X on a big ass table? OS X on a generic PC ("PC OS X")? Mock it up, let's see if it sucks or not. If it doesn't suck, is there a go to market strategy? Again, not that hard or mysterious a decision.

    OS X in a watch (wearable computer)? People are wearing iPod nano, let's make one small enough for a wrist strap or clip on and put some more OS X in there until the whole thing fits.

    The expensive productization phase is made a lot easier if your new device already knows UTF-8, OpenGL, PDF, TCP/IP, HTTP, HTML5, MPEG-4, and so on and so on, because it runs OS X.

  • William

    Apple makes a lot of money selling other peoples products too. Have you ever been to an Apple Store or the Apple Store online? They sell many accessories that compliment the products they make. There is a huge mark up on these items. Surely, these items are adding to Apple's bottom line. All of the items Apple sells would not fit on any kitchen table that I've seen. Maybe the items that they create, but definitely not all the items they sell.

  • charles502

    • Does Apple's relatively small product stable limit its valuation by WS?

    • Is it seen as a vulnerability?

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  • Steven

    Many have tried to suggest the value of media-generated buzz for Apple products. I would venture this is an inestimable number. But here's the thing I believe is mostly overlooked – how much Apple brand-awareness is generated inadvertently by Apple's competitors?

    For example, it's my contention that Apple was able to retire the "Get A Mac" campaign in large part because of the brand awareness generated by Microsoft's "Laptop Hunters" fiasco. What did you gain by stating the obvious – that PC's are cheaper than Macs? Absolutely nothing! Did you, however, succeed at informing millions of people that there is an alternative to the PC and giving it a name? Absolutely!

    How many times have Taiwanese and Canadian CEO’s made public statements concerning Apple? Enough times for the average person to conclude that perhaps Apple products are the ones to beat.

    What is the value of this increased brand awareness to Apple's bottom line? Incalculable.

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