Categories

Owing how much to how few?

For the year ending October Apple’s R&D costs were $4.475 billion. These costs have been rising. Though, as the company explains, not faster than net sales:

The growth in R&D expense was driven by an increase in headcount and related expenses to support expanded R&D activities. Although total R&D expense increased 32% and 39% in 2013 and 2012, respectively, it remained fairly consistent as a percentage of net sales.

[My emphasis]

We can see this in the following graph:

Screen Shot 2013-11-01 at 11-1-4.37.48 PM

R&D has remained very nearly 3% of sales since at least 2005.

 

SG&A Expenses barely grew however:

The growth in SG&A during 2013 was primarily due to the Company’s continued expansion of its Retail segment and increased headcount and related expenses, partially offset by decreased spending on professional services.

The change in R&D and SG&A on a full-year basis is shown below.

Screen Shot 2013-11-01 at 11-1-4.42.06 PM

I emphasized the mention of increases in headcount. We cannot know with any precision what portion of last year’s $15 billion in operating expenses went toward wage expenses since there are other costs such as advertising[1] commissions and public relations in the case of SG&A and outside services, equipment leases, in the case of R&D. However, it’s more likely that wage expenses are a far larger proportion of total R&D than they are of SG&A.

My estimate, based on wage rates, is that there are approximately 15,000 R&D staff at Apple.

Screen Shot 2013-11-01 at 11-1-4.42.49 PM

If we divide sales by this number we get $11.4 million in sales per engineer.

Notes:
  1. Apple’s advertising expenditures for fiscal 2013 were $1.1 billion or 10% of SG&A or 0.64% of sales. []
  • tfd2

    sounds like those engineers deserve a bonus.

    • Nevermark

      A $1 million bonus to each engineer would just pause profit taking for one quarter.

      • http://loewald.com/ Tonio Loewald

        Read @handleym’s comment. Also note that Apple is very much a company being run with rainy days in mind (hence the $160B war chest). Apple nearly died once, and it doesn’t plan to be in that situation again if it can help it.

    • Sacto_Joe

      Any employee worth their salt is going to get stock options. And even an average employee gets 100% matching on their 401K after vesting plus discounted AAPL stock. Which is why my wife and I were able to retire after she worked for them for about seven years.

      To say that Apple takes care of their own is an understatement….

      • handleym

        (a) Apple does indeed take care of us very well. Apart from compensation, during the ten years I was an engineer there, management was extremely flexible about allowing me to work from home as much as I liked, keep my own hours, basically control my work patterns. As long as I delivered, there was no micro-management. (Of course this is a two-sided street. I imagine if I had abused this freedom I’d have been kept on a much tighter leash.)

        (b) This “sales/engineer” metric is cute but extremely pernicious. It suggests that all value is provided by the engineers and everyone else, from legal to HR to management to retail are all superfluous.

        Not only is this nonsense, thinking this way leads to the poison that has taken over America today where the richest 1% believe that they legitimately “earned” their wealth, that the other 99% are superfluous parasites, and that this 1% would be able to continue living their exact same lives if the 99% were simply to disappear tomorrow.

      • tfd2

        what years was she there?