Apple continues to invest in innovation in a soft market – its first three 2002 quarters saw five per cent more spending on R&D than in the same period last year, the company's quarterly report claims.

Apple said: “Total research and development spending has increased in 2002 primarily to support new product-development activities and increased R&D headcount.”

The company is investing heavily in OS X. “R&D expenses in the third quarter of 2002 reflect the capitalization of approximately $9.1 million of spending associated with development of Apple's OS X update version 10.2,” the report says.

This follow Apple's $5.4 million OS X R&D spend in 2001, following the release of OS X 10 Public Preview in 2000. Apple also spent $2 million on R&D for its PowerSchool student information product. A new version ships in Q4, the report says.

Despite the investment, Apple believes that current economic conditions “are having a pronounced negative impact on its professional and creative customers".

This means customers are waiting to upgrade their Macs, partly due to the OS X migration, and partially while they await certain key software product releases.

Apple added that it“did not experience the anticipated increase in Power Mac sales it expected following the introduction of Photoshop 7".

A company spokesperson added: “Many professional users may be delaying upgrades of their systems until the release of OS X 10.2 – and the availability of QuarkXPress for OS X.”