Apple has more fuel to grow than the other ‘big tech’

0
17
Apple has more fuel to grow than the other 'big tech'
1635433000 660247 1635433186 rrss normal.jpg

Spends a much smaller proportion of its income on R&D, and also less on mergers

Tim Cook keeps things tight. Apple spends much less of its revenue on R&D than others big tech, and also less in mergers. This maintains the efficiency of its organic growth. Investment is on the rise, but the ability to do more is one of the reasons that Apple, despite its huge market value, seems relatively cheap.

It allocated almost $ 19 billion to R&D in the fiscal year ending September 2020, 7% of its sales. Microsoft budgeted the same dollar amount for the year ended June 2021, but it accounted for a larger share of revenue, 12%. Amazon and Alphabet allocated 11% and 15%.

Cook has also avoided splurging on mergers. In the last five years, he only spent 1.3 billion on it. Microsoft used 33,000 million, and Amazon, 24,000 million. In the FAANG group, only Netflix, which tends to avoid mergers, spent less than Apple.

A company that has sold about $ 140 billion of a single product, the iPhone, in each of the last two fiscal years can take what seems like little product development a long way. And Cook is increasingly leveraging what tech folks call the ecosystem. One of its most lucrative and fastest-growing businesses is services, where analysts see revenue rose 21% year-on-year to nearly $ 18 billion in the latest quarter.

On the other hand, the services business is also under scrutiny from regulators and a legal attack from its competitor Epic Games. Apple’s R&D spending has increased in recent years, and it may have to invest even more to overcome these headwinds. But compared to its biggest competitors, who consistently spend more for every dollar of sales, it has scope to do so.

SEE ALSO  Orange adds Max to its television offer

Meanwhile, Apple shares are trading at about 26 times the estimated earnings for next year. Microsoft is worth 33 times the profits, and Amazon, more than 50 times. Investors expect less from Apple, but it is the one with the most fuel for growth.