Corporate America took a tightfisted approach to its future last year, leading to an overall decline in research and development spending at major industry titans for the first time in over a decade, according to a Booz & Co. survey cited by The Wall Street Journal. Companies pulled back from their 2008 level of R&D outlays by 3.5% to $503 billion in 2009.
R&D spending is viewed as a key driver of future revenue growth, as it provides companies with new products and services they will later sell. But in the wake of an economic downturn that cut a deep swath through revenues, it should come as no surprise that earlier spending levels would have been difficult to maintain.
Computing, electronics, auto and industrial companies were among the industries that took the greatest hits, although Microsoft (MSFT), which was listed as the second largest R&D spender, actually increased its outlays last year, according to its Securities and Exchange Commission filing.
The software giant spent $9 billion on R&D last year, up nearly 10% from 2008. And while Microsoft noted it pulled back a bit this year to $8.7 billion in R&D spending, it nonetheless continued to stress the importance of that investment.
In its SEC filing, the Redmond, Wash., giant says that its sees good long-term R&D and growth opportunities in the areas of cloud computing, software plus services, natural user interfaces, and what it describes as "new scenario innovation in key industries."
Although companies across the nation faced declining revenues and, hence, smaller budgets, in 2009, the percentage of those budgets allocated to R&D actually rose a tad, The Wall Street Journal notes. Corporate America carved out 3.8% of its budget for R&D spending last year, up from 3.5% in the previous year. Microsoft pushed its allocation to 15% of revenues from 14% a year earlier.
The specific level of R&D spending, however, doesn't always correlate with a company's overall success at innovation. Apple (AAPL), for example, spent a mere 3.1% of its revenues on R&D last year -- a percentage which pales in comparison with Microsoft's outlays and, as The Wall Street Journal article points out, is roughly half the level typically spent by other computer and electronics companies. Yet, over the years, Apple has churned out game-changing devices, from the iPod to iPhone and now the iPad, each of which has left rivals rushing to develop their own competing products.
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