17 January 2019

Apple's plan to reduce hiring due to iPhone sales difficulties

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17 January 2019
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According to people familiar with the matter, Apple will reduce hiring for some divisions after selling fewer iPhones than expected and missing its holiday revenue forecast.

Tim Cook, Chief Executive Officer of Apple, announced to employees earlier this month at a meeting the day after he sent a letter to investors about the recent struggles of the company, especially in China. Cook was asked during the meeting whether a hiring freeze would be imposed by the company. He said he didn't think that was the answer. Instead, Cook said that according to the people who asked not to be identified discussing private matters, some divisions would reduce hiring.

Cook said that he still needs to fully identify which divisions would reduce hiring, but said that key groups such as the artificial intelligence team of Apple would continue to add new employees at a strong pace. He also stressed that the importance of a division for Apple's future is not measured by hiring rates.

An Apple spokesperson did not reply to a comment request. Apple has been on a hiring spree in the last decade, but in recent years the rate of headcount growth has slowed. In its most recent fiscal year, the company added about 9,000 workers for a total of 132,000. A year earlier, Apple has employed approximately 7,000 people.
In extended trading on Wednesday, Apple's shares fell below 1%. The recruitment pullback will not affect plans to open new offices in Austin, Texas, or expand in the area of Los Angeles, where Apple is building its original video content team, said the CEO.

Following Cook's talks with employees, some Apple senior vice presidents held separate meetings with vice presidents, senior managers and other managers in their groups to emphasize that the slowdown in iPhone sales is, according to one of the people, an opportunity for new innovation.

On January 2, Apple cut the holiday quarter's revenue guidance to $ 84 billion( approximately Rs. 5.90,000 crores) from 89 to 93 billion dollars. This was the first time Apple's sales forecast was reduced in nearly two decades. The company blamed the lower outlook for weaker iPhone sales, mainly in China, due to economic and industrial headwinds.

The Cupertino technology giant, based in California, also said that iPhone upgrades in some developed markets were not as strong as expected due to fewer carriers subsidizing phone purchases, higher prices and consumers holding older iPhones longer due to cheaper battery replacement.

Cook told employees in a memo after the announcement that he would not use' external forces' as an excuse. " This moment gives us an opportunity to learn and to take action," he added.

While lower sales of iPhone dragged down revenue, Cook noted earlier this month that the company's services business would grow to approximately $ 10.8 billion. 77,000 crores) in holiday quarter sales. During his meeting with employees, Cook emphasized the importance of service for the future of the company.

Apple's service strategy has shifted in recent months, opening Apple Music to Amazon devices, adding the ability to stream media directly from iPhones and iPads to TV sets, and releasing an iTunes video streaming app for Samsung TVs. According to a person familiar with the strategy, the company continues to work on new partnerships and plans to extend services such as Apple Music to more third party platforms.

The missed iPhone sales and hiring reductions occur only months after the iPhone manufacturer became the first publicly traded US company to spend $ 1 trillion( about Rs). Market capitalization threshold at 70,00,000 crores. Since then Apple has lost a value of nearly $ 300 billion.

© 2019 Bloomberg LP
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