Some of the biggest US technology companies have put a lid on their research and development spending even as the industry enjoys its strongest period of growth this decade, according to the latest financial filings.
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 - particularly hardware makers and semiconductor companies -- 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. The biggest makers of computer systems held their spending broadly flat, while semiconductor companies cut back in the face of a downturn in the chip cycle.
However, analysts warn that figures for a single year should be treated cautiously. Richard Kaiser, a tech analyst at Sanford C Bernstein, said: "I don't view it as a radical change in the spending environment," said .
Corporate spending on R&D typically rises and falls in line with revenues, though with a time lag, says Jules Duga, senior researcher at Battelle Memorial Institute, a US non-profit re-search organisation. Revenue growth in tech tends to be more volatile than in many other sectors, exposing the industry to bigger swings in research budgets when markets turn down.
The spending growth in 2007 dropped from a heady 11.6 per cent for the same group of companies in 2006, though that figure was boosted in part by the inclusion of employee option costs in the figures for the first time.
Even those tech companies that have benefited most from the industry's recent strength held the growth in their research and development spending below their growth in revenues, in spite of adding considerably to their research efforts.
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.
Only a handful of the 20 biggest spenders recorded an increase in R&D as a proportion of revenues last year. Yet for two of those -- Motorola and Texas Instruments -- that was because revenues fell.
Google was an exception. The internet search company's R&D budget jumped 73 per cent to $2.1bn last year, putting it among the industry's top 10 spenders for the first time.
Google's R&D spending now eats up nearly 13 per cent of its revenues, more than double the proportion of five years ago. R&D spending at EMC, the world's biggest maker of data storage equipment, jumped 20 per cent last year to $1.53bn, also outpacing sales growth.
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