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US cuts R&D

March 18, 2008

Some of the biggest US technology companies have capped research and development spending even as the industry enjoys a strong period of growth. With a US economic downturn looming, the pressure to hold down spending is expected to intensify further this year.

The data, analysed by the Financial Times, point to the pressure that companies in some parts of the tech industry have been under to raise profit margins even in good times. Leaving aside Google, which increased spending strongly, the 10 biggest tech spenders capped the growth in their R&D budgets last year at 4.1 per cent, at a time when their revenues jumped by more than 9 per cent.

For Microsoft and Cisco, R&D fell as a proportion of revenues by at least a percentage point each last year, a reflection of the operating leverage they gain as they generate higher revenues from the same base of fixed costs.

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