Apple axes 2,000 staff worldwide: Company to take charge estimated at dollars 100m against third quarter earnings
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Your support makes all the difference.APPLE COMPUTER, which has been cutting its prices aggressively for months, yesterday announced plans to axe more than 2,000 staff, confirming the doubts of some investors about its marketing strategy.
As part of what it calls a 're-engineering' of the company, Apple will make more than 15 per cent of its workforce redundant over the next year, putting about 2,500 out of work at various operations around the world. Most of the redundancies will come later this month, although the company said it could not yet disclose details of the restructuring plan.
To pay for the layoffs, Apple said it would take a charge against its third quarter earnings to be released next week. Analysts estimated the charge would be at least dollars 100m ( pounds 66m).
The cuts were not unexpected as Apple has shifted from its old premium pricing strategy - which afforded it gross profit margins of more than 50 per cent - to one based on higher volumes. Apple's margins, though still half as much again as its nearest rival Compaq, have plummeted to about 33 per cent and few analysts believe that higher sales will offset sharply lower prices.
Before the cuts Apple's expenses were running at about dollars 600m a quarter, and a number of industry experts said the firm would have to trim expenses sharply to bring costs into line with its Silicon Valley rivals.
Apple's chairman, John Sculley, warned last month that the price wars in the personal computer industry would mean lower earnings for the rest of 1993. The restructuring charge could even result in a loss for the third quarter to 25 June and see Apple's earnings for the year come in below dollars 4 a share. Last year it earned dollars 4.33, or dollars 530m total profit.
The more directly competitive environment has caused worries among some institutional investors about Apple's future, despite the appointment of a cost-conscious new chief executive, Michael Spindler.
But Apple, long insulated by its unique design from the stiff competition among IBM clones, had little choice but to join the price-cutting game. Advances in Microsoft's Windows operating system have narrowed the 'user-friendliness' gap Apple enjoyed over IBM-compatible PCs.
'Consumers just aren't willing to pay as much of a premium for Apple these days,' said David Wu, a computer analyst with S G Warburg.
But Apple continues to enjoy record sales growth for its Macintosh lines, including its best-selling Powerbook notebook computer and its Performa series of low-end consumer PCs. At these volumes Apple remains the world's second largest PC producer, well ahead of Compaq.
Wall Street, which pushed Apple's shares to a 52-week low of dollars 38 last week, welcomed the news of the restructuring. The shares rose 50 cents to dollars 39 by midday.
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