Apple’s latest PC vs. Mac ads would like you to believe Microsoft is spending almost all of its money on advertising instead of improving Windows. Instead of the usual funny jab at Windows Vista, Apple is making accusations as to where Microsoft is spending its money. It’s no secret Microsoft is investing significantly in improving Windows with the upcoming Windows 7 release and Windows Vista SP2 but it’s less clear exactly how much it is spending compared to Apple. Since Apple’s ads are criticizing Microsoft on how much they spend on advertising, how much does Apple spend as well? And how much does that compare to improving their products?
The answers to both of these questions can be found in the annual financial reports both companies are required to file with the SEC.
The Facts:
Apple according to the fiscal 2007 Annual Report
- Net Sales: $24.006 Billion
- Advertising: $467 Million
- R&D: $782 Million
- Net Income (Profit): $3.9 Billion
Microsoft according to the fiscal 2007 Annual Report
- Net Sales: $51.122 Billion
- Advertising: $1.33 Billion
- R&D: $7.121 Billion
- Net Income (Profit): $14.065 Billion
If you read the financial reports you will find that both Apple and Microsoft spend a significant amount on Advertising and R&D but since Microsoft is a much larger company it is important to break down the numbers into comparable units. To do that I broke the numbers down to how much each company spends per $1 of sales revenue.
For each $1 of sales Apple spends:
- 1.9 cents on Advertising
- 3.3 cents on R&D
For each $1 of sales Microsoft spends:
- 2.6 cents on Advertising
- 13.9 cents on R&D
It is important to point out that these numbers are not broken down on how much each company spends on their desktop products alone but for comparing Microsoft to Apple they give us a good proportion of Advertising to R&D.
As the numbers show Microsoft spends more on Advertising than Apple but they also spend five times more on R&D. Exactly the opposite of what the Apple commercial suggests.
And since Apple brought it up, they spend only .7 cents less per sales $1 on Advertising than Microsoft and spend a fraction of what Microsoft spends on improving its products.
Data Sources:
Microsoft 2007 Annual Report (Net Sales page 34, R&D expense page 34, Advertising expense page 38)
Apple 2007 Annual Report (Net Sales page 57, R&D expense page 49, Advertising expense page 65)