[djf1]

They're working on services. From the Q4 earnings call,

"What should we read into the fact that R&D has more than doubled over the past three years while sales growth was sort of a fifth of that? Are R&D investments just less efficient than they were in the company's history, or should we think about that as incremental spend for products that haven't yet come to market?

Timothy Donald Cook - Apple, Inc.

There's clearly some amount of R&D that are on products that today are in the development phase that have not reached the market, and so that's a part of it. And we feel really great about the things that we've got. We've also put a lot of emphasis on our Services business as well and on making the ecosystem even better. And so we're very much, we're confidently investing in the future, and that's the reason you see the R&D spend increasing."

My super informal analysis of where Apple's priorities are:

  Term      Count
  iPhone    64
  Mac/macOS 17
  Services  16
  iPad      15
  Watch     8

(http://seekingalpha.com/article/4014922-apple-aapl-q4-2016-r...)

[joakleaf]

But surely the overlap between the people who used to work on routers and the people working on services must be minimal.

However, maybe some of the hardware guys who used to work on the router are now busy with the watch. It would make sense that they would sacrifice the routers in favor of the watch (although I would prefer the routers).

[djf1]

Generally yes, but another quote from the call: "We are making important investments in data centers because we want to support our services business." Maybe that's taken some of their hardware resources.