Why do most of us think that the only three uses for Apple's
Consider iCloud. During Apple's rollout of its buy-once, download-anywhere music service, Jobs talked up the company's new data center in North Carolina. Apple spent $500 million to create a state-of-the-art facility that, according to Business Insider, includes equipment from Teradata
Bullet the blue-sky research
iFans will tell you that the Mac maker is one of the world's most innovative companies. Surveys say they're right. Apple consistently ranks high on Bloomberg BusinessWeek's list of the most innovative companies, topping the charts from 2005 to 2009. What's interesting is that Apple has earned this reputation while investing comparatively little in research and development.
Apple has spent just 2.4% of revenue on R&D over the past 12 months. By contrast, Google
I've seen blue-sky research -- the sort of R&D where Big Ideas come first and output comes second -- at work at IBM's
Thinking and spending different
Apple needn't tackle R&D in the same way. But with so much cash, isn't it time the Mac maker's intellectual aspirations matched its design aspirations? Why not use the new spaceship building as an R&D hub aimed at rethinking every element of Apple's value chain? The company could apply its resources toward:
Manufacturing innovation. We're not yet at the point where something as complex as a computer can be 3-D printed, but could you imagine the implications of such a breakthrough? Apple has more than enough cash to spend on manufacturing-by-printer. The team also wouldn't face the same pressure as Stratasys
and 3-D Systems, since these businesses need incremental product improvements to keep cash flowing. Apple researchers would be free to think in terms of order-of-magnitude improvements. (Nasdaq: SSYS)
- Data storage innovation. IBM is working on this at Almaden, but in many ways, we can credit Apple for moving the computing industry away from magnetic and optical disk drives and toward flash memory. What's next after flash? We don't yet know, but plenty of work remains to bring down the cost per byte of advanced storage technology. We'll also need new form factors, so that tiny devices become capable of storing as much as a server. That way, every node connected to the global cloud -- where a 'node' is a phone, a PC, a tablet, or some other device we've yet to conceive of -- has equal deftness for downloading, manipulating, and uploading data.
- Microprocessor innovation. Apple has already broken ground in this area with its A4 processor, created by the team led by former IBMer Mark Papermaster and acquired with P.A. Semi in 2008. Yet A4 remains an incremental improvement, bound by Moore's Law. What about working on designs unbound by the current thinking? What about 100- or even 1,000-core chips built to function inside a mobile device? Impossible, you say? We'll never know unless someone tries. As a hardware supplier whose fortunes are increasingly tied to the success of its mobile products, Apple has ample incentive to work on this breakthrough.
The Foolish bottom line
Right now, Apple mostly innovates with regard to execution. Rather than invent entirely new technologies, the iEmpire improves what exists, and packages whole products that, for the most part, meet Jobs' credo to sell gear that "just works." The Mac maker need not change this mantra in order to deliver outstanding returns to today's investors.
But there will come a day when incrementalism no longer suffices. Apple has the cash to build one of the world's great R&D laboratories, worthy of legend. Why not do it? Why not lead rather than follow, especially now when a shift to cloud computing is remaking the entire computing industry? Let me know what you think using the comments box below.
Of course, Apple isn't the only company looking to profit from the rise of web-based computing. Take a minute to watch this free video right now, and you'll walk away with a stock idea from our Motley Fool Rule Breakers scorecard, and a richer understanding of how the Web is changing everything.
The Motley Fool owns shares of Google, Microsoft, International Business Machines, 3-D Systems, and Apple. Motley Fool newsletter services have recommended buying shares of Microsoft, Google, Stratasys, Teradata, and Apple, and creating a bull call spread position in Apple and a diagonal call position in Microsoft. Try any of our Foolish newsletter services free for 30 days.
Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He owned shares of Apple, Google, and IBM at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.