Is Apple Inc. (AAPL) Still Innovating?

Apple Inc. (NASDAQ:AAPL)Apple Inc. (NASDAQ:AAPL) has been under some fire lately by critics who claim it has no longer been innovating, and that Apple’s stock is destined to fall further as the company continues to face the challenge of declining margins and the saturation of the smartphone market. Much of the anxiety surrounding Apple has been generated by the fact that a significant amount of time has elapsed since Apple Inc. (NASDAQ:AAPL) last came out with an entirely new product.

In fact, the last time Apple was talking about new products was on Oct. 23, 2012, when the iPad mini, new iMacs, and a refreshed iPad was announced. Given that Apple is facing increased competition in its main product lines and some slowdown in sales (Q1 2013 revenue was $43.6 billion compared to $54.5 billion in Q4 2012), it seems reasonable to assert that Apple must come out with some new products in the near future to avoid slipping further.

Fortunately, under the leadership of Apple CEO Tim Cook, I believe that we could see some very interesting new products announced during 2013. Though it has been some time since Apple Inc. (NASDAQ:AAPL) launched a new product, a look into the recent numbers shows that Apple is spending more than ever on improving its current products and developing new ones. Q1 2013 represented Apple’s highest-ever spending on research and development (R&D), totaling $1.1 billion. And a look back at the past 10 quarters of R&D spending from Apple shows a very clear trend of increased spending:

(Source: WikiInvest)

What is Apple spending its R&D budget on?

At this stage, where Apple’s most recent R&D spending is going (either to entirely new products, or updates to existing products with the iPhone, iPad, Mac and iPod) isn’t entirely clear. Cook has stated that Apple has new software and hardware in development, but it won’t be available until the fall and throughout 2014.

With that in mind, Q2 2013 revenue is highly unlikely to set any records, and the forecast revenue for the June 2013 quarter of $34.5 billion would be a substantial drop from Q4 2012 revenue and Q1 2013 revenue. But the fact that Apple is spending more than ever on R&D coupled with the fact that it will have been such a long time between launching new products for Apple rather suggests that something big is coming.

If all Apple Inc. (NASDAQ:AAPL)’s planning are simple product updates, then that could have already been announced. A revolutionary new product line is something that would take longer and require substantial increased R&D spending, and that’s exactly what’s taking place here.

The next major event in the pipeline: WWDC

The Apple Worldwide Developers Conference (WWDC) will take place from June 10 to June 14, and will be of major interest to Apple shareholders as it is at this event where developers gather to hear of Apple’s latest software releases. It’s possible (though many believe it’s still unlikely) that it is at this event where a major new Apple product will be announced. This event is still a month away, and already speculation is running rampant on what announcements Apple will be revealing during the event. Among the speculated product and software releases to come out of WWDC and future events are the following:

Upgraded MacBook models – It has been forecast by KGI securities analyst Ming-Chi Kuo that new lines of the MacBook Pro and MacBook Air will be released. These new models are expected to be based on Intel Corporation (NASDAQ:INTC)’s next generation Haswell processors.

The Apple Smartwatch (“iWatch”) – Numerous rumors have been flying around regarding smartwatches being developed by major-tech companies, including Apple. I believe the chances of an Apple Inc. (NASDAQ:AAPL) smartwatch being released at some point are very high, and I suspect an Apple amount of money has already been spent on developing Apple’s new smartwatch. It has been speculated that the Apple iWatch could launch in 2013, in which case there is a reasonable chance we might hear about it at the WWDC.

iOS upgrades – It’s expected that we will see a greatly improved version of iOS (Apple’s operating system for mobile phones) at WWDC, with a simpler design and better user interaction. According to Business Insider, an improved iOS will be the main topic of interest at WWDC.

iCloud updates – iCloud has proven to be a useful service for backing up iPhone data, but it has had a mixed reception among developers due to various syncing problems. It’s likely we’ll see a better iCloud at WWDC.

iPhone 6 and iPhone 5S – The iPhone 5S is rumored to launch in September, and it will apparently feature a new quad-core A7 processor, a new fingerprint chip and a major redesign. The iPhone 6, meanwhile, is one of the mostly exciting gadgets in the pipeline (though we don’t know too much about it at this stage), and it could prove to be extremely innovative and successful.

Redesigned iPad – At the beginning of April, there was a rumor that Apple would be revealing a new, completely designed iPad 5 by “the end of April”.  The iPad 5 still remains to be seen, and it seems that chances are decent that we’ll have some more details on the device by the time WWDC takes place in June. The new iPad 5, just like the iPhone 6, ought to be something that gets Apple Inc. (NASDAQ:AAPL) fans excited when it’s released.

Apple iTV – While the Apple TV (a digital media receiver) has been out for a while, the Apple iTV is a complete TV set that is predicted to launch this year at an estimated cost of $1,500 to $2,500.