Apple’s 1st priority — cut costs BUT gently does it

Times are tough for the tech giants — but Apple has plans on how to sail the choppy waters

Are the good times over?

I’ve written recently about Apple’s continued fiscal prudence, and how it all stems back to the days when they all but called in the bankruptcy accountants to wrap things up.

Tech companies, in general, are not oblivious to the economic difficulties that we find ourselves in, but, the differences are, in how they are choosing to combat them.

CEO, Tim Cook, addressed the problems head on at last week’s shareholders meeting.

Carefully does it

In his statement at that meeting, Cook said the company continues to be especially careful with money, going on to say;

“We’re being very prudent and thoughtful on spending, and we continue to be very deliberate when it comes to hiring. Operating expenses during the holiday quarter came in below guidance and grew more slowly than in the past, but we must still invest in innovation.”

In an effort to avoid layoffs, the board at Apple has decided one way that cashflow can be bettered, is by is delaying bonuses for some corporate divisions and expanding a wide-ranging cost-cutting effort.

Silicon Valley in general is trying to figure out a way forward, as it’s feared these uncertain times may be around a while.

Although not a perfect answer, Apple’s plans are better than the alternatives — layoffs. The plan, to pay bonuses less frequently to some, will be launched alongside restricting hiring for new jobs and leaving positions open when employees decide to leave.

A new normal

Historically, Apple had handed out bonuses (and promotions) twice-yearly. The bonus payments normally landed for the eligible employees in April and October. But, with immediate effect, it is understood that no bonuses will be paid next month — with everyone now having to wait until October.

This shift is not company-wide, though. Those, in the software engineering and services departments, had already been shifted over to the once-a-year schedule. The new plans will affect staff in operations, corporate retail and a few smaller other sections.

The first signs of caution were sounded last summer, as soaring inflation, the looming credit crisis, energy costs, and the very real possibility of a recession started to be an imminent fear. It was in July 2022, that we first heard of Apple pausing hiring, company-wide.

These new warnings to shareholders came in the same week that Meta’s CEO, Mark Zuckerberg, announced his company would be initiating its second wave of redundancies. Having already laid off 11,000 staff last November, 10,000 more are now to be chopped, with be further 5000 vacancies left unfilled.

Payment in full please

The bonus payments themselves are not impacted, just the regularity. The full bonuses they were expecting will eventually drop in to their bank accounts, but now just annually.

Apparently, there is some disquiet within Apple, as not much warning had been given. Many, clearly, would have made personal budget plans at home, based on the April/October payments, and this short notice could be tough to swallow. From the company’s standpoint though, they’re hoping they can now retain some staff members who had intended to leave after the April bonus, as they’ll now have to wait until October to cash in.

The majority of those affected will be engineers, and mid-level managers. Those higher up the food chain — more senior employees at director level and above, have their bonuses handed out quarterly. The lack of equality must be hard to stomach…

The cashflow situation, that has driven these changes, is real, though. Revenue declined five percent during the holiday quarter, which was a steeper drop than Wall Street projected. Apple had been hurt by iPhone production issues and slow demand for Macs and wearables. The worrying news is that sales are expected to fall by a similar amount in the current period.

To that point, Zuckerberg said, “I think we should prepare ourselves for the possibility that this new economic reality will continue for many years.”

Flying the nest

The prudence is being felt widespread throughout Apple.

Contract workers are being laid off, and not replaced, and travel budgets will now have to be approved at SVP level — a first for the company. That’s a pretty serious move, as SVP is only one level below the CEO, Tim Cook.

The small blessing for those that were feeling a little peeved at these changes to the bonus payouts, is that at least they still have jobs. The ingrained cautious, economic approach from Apple during the past twelve months, has meant mass layoffs have been avoided. Those at Meta & Google have not faired so fortunate.

In January, even Cook took a 40% pay cut, in an attempt to lead from the top. His compensation for this year will now be around $49 million — so I won’t worry about him too much! The pay package suggestions were approved by Apple’s board at last week’s AGM.

Wrapping up

No stone, it seems, is being left unturned in an attempt to steer the company through these economically tough times.

You’ll recall late last year, the return to working from the office was a point of dispute. The current expectation from Apple is to work at least three days per week from the office. Some fear, that failing to readily abide by those demands could be seen as another way to look to lay staff off.

Don’t think that retail staff are unaffected, either. With Apple still trying to keep unionisation to a minimum in their stores, they too are feeling the pinch. Increasingly, the number of hours worked, and attendance, is being scrutinised. Part-timers are feeling as if unfair demands are being asked of them — and if they can’t step up to the hours being asked, they fear they could be let go.

I don’t even know if it’s possible to tread through this tricky quagmire perfectly, but overall, Apple still seems to be prioritising job security. There will inevitably be some wounded in the process, but a lot fewer than at other tech companies.

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Originally published at https://talkingtechandaudio.com on March 15, 2023.