Apple joins fellow tech giants in slowing hiring and spending

LOS ANGELES (BLOOMBERG) – Apple is the latest tech giant to rein in hiring and spending plans, adding to evidence that even Silicon Valley stalwarts are worried about a recession in the coming months.

The iPhone maker is looking to limit expenditures and job growth at some of its divisions, Bloomberg reported on Monday (July 18), though Apple has not adopted a companywide policy. The more cautious stance mimics the approach of its technology peers, including Amazon.com, Microsoft and Alphabet’s Google, which have all taken steps to decelerate spending. 

The news sent stocks sliding and increased trepidation surrounding tech earnings season, which goes into full swing this week. It may be difficult for companies to reassure jittery investors. IBM posted better-than-expected sales growth on Monday, only to see its shares slip in late trading.

For now, most of the biggest tech companies are not talking about eliminating jobs, just reducing the rate of hiring. The overall US job growth has not stalled. Payrolls increased 372,000 in June, beating the 265,000 estimate, with manufacturing jobs helping to bolster the numbers.

The United States added 25,000 information jobs in June, putting that category 105,000 higher than just before the pandemic.

But some tech companies are going as far as cutting jobs. They include Microsoft, which said last week that it was eliminating some positions as part of a reorganisation.

The reduction affects less than 1 per cent of Microsoft’s 180,000-strong workforce, and the company still expects to end the year with increased headcount. But it follows a move in May to slow hiring at the Windows, Office and Teams divisions “as Microsoft gets ready for the new fiscal year”.

Last month, Tesla laid off hundreds of workers and shuttered a California facility devoted to its Autopilot self-driving technology, according to people familiar with the matter.

Chief executive officer Elon Musk said earlier that layoffs would be necessary in an increasingly shaky economic environment. He clarified in a subsequent interview with Bloomberg that about 10 per cent of salaried employees would lose their jobs over the next three months, though the overall headcount could be higher in a year.

Former pandemic high-fliers like Netflix and Peloton Interactive have also been laying off workers in recent months. Netflix trimmed a few hundred jobs in June, and Peloton just announced plans to shutter its in-house manufacturing.

Facebook parent Meta Platforms has cut spending and slowed hiring for some senior-level positions. In April, the company announced plans to slash expenses by US$3 billion (S$4.2 billion) this year. The idea is to refocus Meta’s product teams on core priorities, like the metaverse and its TikTok clone, Reels.

Meta also halted development on one of its early smartwatch prototypes and repositioned its in-home video device, Portal, to focus more on business customers instead of regular consumers.

Last week, Google CEO Sundar Pichai told staff that the company planned to slow hiring for the remainder of 2022 – a rare move for the Internet giant, which typically adds tens of thousands of employees every year. Google will be focusing its hiring on technical and “other critical roles” in this year and the next.

“We need to be more entrepreneurial, working with greater urgency, sharper focus and more hunger than we’ve shown on sunnier days,” Mr Pichai said.

Other companies are looking to wind down ambitious growth plans without the need for major layoffs.

Amazon staffed up during the pandemic so it could handle a surge in e-commerce spending. That has now left it overstaffed at its warehouses, but the company has said it is working through that problem with attrition.

In some cases, Amazon is subleasing warehouse space and has paused development of facilities meant for office workers, saying it needs more time to determine how much space employees will require for hybrid work.

Amazon CEO Andy Jassy said the company made the decision early in the pandemic to err on the side of having too many workers and too much warehouse space – rather than too little.

A key question during the latest earnings season is whether demand from consumers has softened. Apple warned in April that the latest quarter would be bumpy, but mostly because of supply chain challenges. 

Those problems are expected to erase as much as US$8 billion from Apple’s sales in the quarter. Investors should get a clearer picture of the damage – and Apple’s outlook for the coming months – when it reports results on July 28.