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Friday, April 25, 2014, 06:39 am PT (09:39 am ET)

Apple's R&D spending grew $303M in March quarter as company invests heavily in future products

Apple continues to invest a considerable amount of money into research and development for future products, as costs ballooned to $1.42 billion in the just-concluded March quarter, with signs from the company that those expenses may continue to grow even further.

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The $1.42 billion Apple spent on research and development in its second fiscal quarter of 2014 represented a $303 million increase from the same period a year ago. As a percentage of net sales, it was 3.1 percent in 2014, up from 2.6 percent of sales in March of 2013.
Apple spent more on R&D in the first six months of fiscal 2014 than it did in the five full years prior to the launch of the iPhone.
R&D costs are also up about $90 million sequentially. To date, Apple has spent some $2.75 billion on R&D in fiscal 2014, up from $2.13 billion in the same six-month span of 2013.

To further put the numbers in perspective, Apple spent $2.68 billion on its entire R&D budget in the five years before the first iPhone was released. The company exceeded that amount in just the first six months of fiscal 2014.

In its 10-Q filing with the U.S. Securities and Exchange Commission, Apple said the increased spending was "driven primarily by an increase in headcount and related expenses to support expanded R&D activities." The investments are said to be "directly related to timely development of new and enhanced products."




Apple's executive team also touched on R&D costs during the company's quarterly earnings conference call, when Corporate Comptroller Luca Maestri said Apple expects operating expenses to be between $4.4 billion and $4.5 billion in the current June quarter. For comparison, total operating expenses in the March quarter, including R&D, were $4.35 billion.

"We are continuing to invest heavily in R&D for current revenue generating categories as well as future products and services," Maestri said on Wednesday.

Apple Chief Executive Tim Cook also cited escalating R&D investments as a key reason why his company needs to have ample cash on hand. Apple ended the quarter with a whopping $150.6 billion in cash plus marketable securities, 88 percent of it held overseas.

"We'll continue to innovate by investing in research and development and capitalizing on our strengths in hardware, software and services," Cook said.

If Apple's R&D spending continues to grow at the same rate, it would increase by about $100 million sequentially in the June quarter, topping $1.5 billion.