P5-50. Research and Development Expense

International Business Machines Corporation (IBM) reported the following on its 2015 income statement.

$ millions	Fiscal 2015	Fiscal 2014	Fiscal 2013
Net Sales	$81,741	$92,793	$98,367
Cost of Sales	$5,247	$5,437	$5,743
Number of new patents	7,355	7,534	6,809

a.) Compare IBM's research and development expense to other publicly traded companies and those in the same industry. Comment on the comparison (Hint: Refer to Exhibit 5.3)

b.) IBM's spending on research and development declined during 2015. Quantify this trend. Is this of potential concern to investors?

c.) What other data might analysts and investors collect to form an opinion about the level and effectiveness of IBM's R&D endeavors?

** Research and Development expenses for IMB are not given.** They must be computed and then compared.

Exhibit 5.3

Food, Beverage & Tobacco	<1.0%
Energy	1.5%
Household & Personal Products	2.0%
Materials	2.9%
Capital Goods	3.0%
Automobiles	4.0%
Consumer Durables	4.8%
Health Care Equipment	7.2%
Hardware & Equipment	9.0%
Software & Services	14.0%
Semiconductors	16.5%
Pharmaceuticals & Biotech	20.0%