How Apple has avoided layoffs so far: Lean hiring, no free lunches

How Apple has avoided layoffs so far: Lean hiring, no free lunches

No company is sure of avoiding significant cuts in today’s volatile economic environment, and Apple is not immune to the business challenges that have plagued other tech giants. Next month it is expected to report its first quarterly sales decline in more than three years. Apple has also slowed down hiring in some areas.

But the iPhone maker has been better positioned than many rivals to date, in part because it added employees at a much slower rate than those companies during the pandemic. It also tends to be thin, with limited employee benefits and businesses focused on hardware products and sales that have so far largely dodged the economic downturn, investors say.

An Apple spokesperson declined to comment.

From the end of its fiscal year in September 2019 to September 2022, Apple’s workforce grew by about 20% to approximately 164,000 full-time employees. Meanwhile, over roughly the same period, the number of employees at Amazon doubled, that of Microsoft increased 53%, Google’s parent company Alphabet. inc.

rose 57% and Facebook owner Meta soared 94%.

Apple has about 65,000 retail employees who work in more than 500 stores and make up about 40% of the company’s total workforce.

On Friday, Alphabet became the latest technology company to announce widespread layoffs, with a plan to eliminate approximately 12,000 jobs, the largest round of job cuts in the company’s history.

Alphabet’s cut follows a wave of big layoffs at Amazon, Microsoft and Meta. The technology industry has seen more than 200,000 layoffs since the start of 2022, according to Layoffs.fyi, a website that tracks cuts in the sector as they emerge in media reports and company releases.

The last major round of layoffs at Apple occurred in 1997, when co-founder Steve Jobs returned to the company, which then cut costs by laying off 4,100 employees.

So far, Apple’s core business has proven resilient in the face of broader market downturns. The other four tech giants have suffered amid slowdowns in digital advertising, e-commerce and computers. In its September quarter, Apple reported that sales of its most important business, the iPhone, rose 9.7% from a year earlier to $42.6 billion, beating analyst estimates.

After a period of aggressive hiring to meet increased demand for online services during the pandemic, tech companies are now laying off many of those workers. And tech chiefs are saying “mea culpa” for the miscalculation. WSJ reporter Dana Mattioli joins host Zoe Thomas to discuss the change and what it means for the tech industry moving forward.

Apple may face a tougher December quarter, which is scheduled to report on February 2, as the company faced manufacturing challenges in China, where strict zero-Covid policies curbed much of economic activity. Many analysts expect demand for its iPhones to have not abated, and as the company continues to ramp up production, demand is anticipated to carry over into the March quarter.

The company’s business model has not been entirely immune to broader downturns. Revenue from its services business continued to slow, growing 5% annually to $19.2 billion in the September quarter, below earnings posted in recent quarters.

Tom Forte, a senior research analyst at investment bank DA Davidson & Co., said he expects Apple to reduce the number of employees, but it could do so quietly through employee attrition, by not replacing workers who leave. The company could move in the direction of making other benefit cuts or adjustments that are common in Silicon Valley. Apple doesn’t offer free lunches to employees on its corporate campus, unlike other big tech companies like Google and Meta.

Some of the tech giants that cut jobs have spent heavily on projects that are unlikely to become strong businesses anytime soon, said Daniel Morgan, a senior portfolio manager at Synovus Trust Co., which counts Apple among its partners. higher shares. “Both Meta and Google are terribly guilty of that,” he said.

Meta has been pouring billions of dollars into its Reality Labs for its new ambitions in the so-called metaverse. Meta CEO Mark Zuckerberg has defended the company’s spending on Reality Labs, suggesting that virtual reality will become a major technology platform.

After announcing the layoffs, Alphabet Chief Executive Sundar Pichai said the company had experienced dramatic growth spurts over the past two years. “To match and fuel that growth, we are hiring for a different economic reality than the one we face today,” he wrote in a message to employees Friday.

Apple is also working on long-shot future bets, such as an augmented reality headset due out later this year and a car project whose release date is uncertain, but at a more measured pace.

Email Aaron Tilley at aaron.tilley@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8

Leave a Comment

Your email address will not be published. Required fields are marked *