The contrast couldn’t be greater. Apple’s revenues in the quarter ending June 26th were 15.7 billion dollars, yet it spent only 464 million dollars on research and development. Nokia’s revenues in the quarter ending June 30th were 10 billion euros (12.83 billion dollars) and it spent 1.48 billion euros (1.9 billion dollars) on R&D – more than four times as much as Apple.
With Apple’s sales growing 61% year-on-year and Nokia’s sales just 1%, it is tempting to conclude that the Finland-based company has it all wrong. Yet, dare I say it. Apple could probably learn something from Nokia. “Antennagate”, the reception problems suffered by the iPhone 4, suggest that Apple should be spending more on R&D and should be spending more time testing its products.
Probably feeling some competitive heat from the so-called superphones, with 1GHz processors and razor-sharp screens, from the likes of HTC, Apple appears to have rushed out the iPhone 4. Moreover, its obsession with keeping forthcoming products completely secret probably limited the scope for testing the handset in real-world conditions.
Nokia, of course, could also learn from Apple. The world’s largest handset maker is clearly taking too long to bring new handsets to market. Although it was unveiled in April, the N8 smartphone, Nokia’s most credible answer to the superphones and the iPhone 4, isn’t expected to go on sale until early October. Moreover, Nokia clearly isn’t seeing enough bang for its R&D buck – Apple’s focus on getting the computing elements, rather than the telecoms elements, of a handset exactly right has paid major dividends in the marketplace. Nokia’s enormous telecoms expertise, acquired at considerable expense, is no longer a clear differentiator in an age where updating Facebook matters as much as making phone calls. Still, Nokia does, at least, know how to get good reception from an embedded antenna.
$46 billion and the Freedom of Wall Street
But Nokia must be increasingly troubled by the huge array of options open to its Californian rival, which now has an extraordinary cash pile of almost $46 billion. Investors trust Steve Jobs and if he chooses to double R&D spending, acquire a company specialising in antenna technology or poach Nokia’s best telecoms engineers, Apple’s shareholders obviously won’t get in the way. Nokia doesn’t have that luxury – it will need to work hard to convince its shareholders to sanction any further spending sprees, such as its 2008 8.1 billion dollar acquisition of mapping and navigation specialist NAVTEQ.
Having generated a net income of 3.25 billion dollars in just one quarter, investors may soon forget antennagate and Apple will continue to enjoy the freedom of Wall Street. As well as taking on Google in the mobile advertising market, Jobs should obviously use that liberty to boost Apple’s telecoms expertise and invest more resources in testing new handsets on real, live mobile networks.
If and when Apple masters telecoms, it will be an even more daunting competitor for the rest of the handset industry.