Here’s What Apple Is Spending $5 Billion On, and It’s Not a Dividend

Apple HQ 2.b

Source: Cupertino.org

Apple’s (NASDAQ:AAPL) plans to build Apple Campus 2 — a veritable Mecca for technology and innovation in Cupertino, and a thinly-veiled attempt to build utopia on earth — are not a secret. Information regarding the project is available on Cupertino’s city website, and curious minds can explore floor plans and even see idyllic renderings of the finished site, which looks more like a nature preserve than a corporate headquarters. The campus was championed by Steve Jobs shortly before his death, and many saw the project as an extension of his personal vision for the future of the company.

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There are two primary objectives of the campus, as laid out in a proposal submitted to the Cupertino city council. The first is to consolidate “up to 14,200 of Apple’s engineers and support personnel in a single distinctive office, research and development building” shaped like a giant spaceship. All told, at 2.8 million square feet, the four-story ring would be two-thirds the size of the Pentagon, and inconspicuously located in over 100 acres of landscaped green space.

This consolidation would facilitate the unique culture that Jobs helped create, and satisfy the second primary objective of the compound. It’s no small secret that Apple likes to keep what it’s doing under wraps, and has fostered an air of mystery surrounding itself. Highlighting this, the second stated objective for the campus is to “achieve the security and privacy required for the invention of new products by eliminating any public access through the site, and protecting the perimeters against trespassers.”

Apple HQ 2

Source: Cupertino.org

Bloomberg Businessweek, tapping the knowledge of people familiar with the matter but unable to speak on the record, highlights details that make this project a lasting impression of Jobs at Apple. In particular, the building is saturated with evidence of Jobs’s absurdly high standards for fit and finish, and aesthetics.

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Jobs reportedly insisted that the standard 1/8-inch gap left between walls and other surfaces be no more than 1/32 of an inch across. Two people who have seen the plans told the publication that Jobs wanted the ceilings to be made of polished concrete, and constructed without using scaffolding that would create blemishes — a decidedly more expensive approach. Jobs infamously told the Cupertino city council that, “there isn’t a straight piece of glass on the whole building…and as you know if you build things, this isn’t the cheapest way to build them.”

Perhaps unsurprisingly, the cost of the project has increased from an initially proposed figure below $3 billion to nearly $5 billion. Apple shareholders have been calling on the company to do something with this $137 billion cash-and-investment war chest, but blowing it on an office that costs more per square foot than nearly any other building ever created may not be what they had in mind.

The financial questions that come out of the development are certainly interesting, but there’s also a series of questions about culture, or brand, that are emerging. There’s no denying that a huge part of Apple’s success was predicated on Jobs’s leadership and vision. In many ways, he was an anti-corporate crusader that championed a culture and way of business radically different than his predecessors and peers. He did things differently, and sometimes his approach didn’t make much sense to the established corporate mechanism.

Source: Cupertino.org

Source: Cupertino.org

In many ways, this building does the same thing. Shaped as it is like a ring, it would take a relatively enormous amount of time to get from one side of the building to the other. The design makes it more difficult to shuffle workspace around in the dynamic way that the living offices of Google (NASDAQ:GOOG) and Facebook (NASDAQ:FB) do. The doughnut shape harkens back to the campus’s second objective — to create the privacy necessary to innovate — and a key difference in the brand culture between companies like Apple and Google. Where Apple prioritizes secrecy, Google has opened the guts of its company up to the world for free.

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There can be no doubt about the quality and outstanding aesthetics of the building — Apple selected the internationally renowned architectural firm Foster + Partners, headed by Norman Foster, for this project — but there are concerns about practicality.

As it stands, the company hasn’t made any substantial changes to Jobs’s vision. However, Apple is looking to shave about $1 billion off the deal, which would most reasonably be pulled from those details that have Jobs’s name written all over them — namely, fit and finish. The project has put Apple in something of a Catch-22. On the one hand are the company’s fiduciary responsibilities, and on the other hand are all of those more intangible qualities that define Apple and its brand, and the desire to carry out Jobs’s legacy.

Regardless, the Apple hegemony has a choice: either invoke the spirit of Jobs and spend the money necessary to realize his vision, or admit that without him all they know how to do is the regular corporate grind.

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