Apple plans to cut back on hiring after selling fewer iPhones than expected

Apple sold fewer iPhones than expected in holiday season; CEO Tim Cook told employees company will avoid hiring freeze.

Apple Inc. will cut back on hiring for some divisions after selling fewer iPhones than expected and missing its revenue forecast for the holiday quarter, according to people familiar with the matter.

Tim Cook, Apple’s chief executive officer, made the disclosure to employees earlier this month in a meeting the day after he penned a letter to investors about the company’s recent struggles, particularly in China. During the meeting, Cook was asked if the company would impose a hiring freeze in response. He said he didn’t believe that was the solution. Instead, Cook said some divisions would reduce hiring, according to the people, who asked not to be identified discussing private matters.

Cook said he is yet to fully determine which divisions would cut back on hiring, but said that key groups such as Apple’s artificial intelligence team would continue to add new employees at a strong pace. He also emphasized that a division’s importance to Apple’s future isn’t measured by hiring rates.

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An Apple spokesman didn’t respond to a request for comment. Apple has been on a hiring spree in the past decade, but the pace of headcount growth has slowed in recent years. The company added about 9,000 workers in its most-recent fiscal year for a total of 132,000. A year earlier, Apple added roughly 7,000 employees.

Apple shares slipped less than 1 per cent in extended trading on Wednesday. The hiring pullback won’t affect plans to open new offices in Austin, Texas, nor expand in the Los Angeles area, where Apple is building out its original video content team, the CEO also said.

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

On Jan. 2, Apple cut revenue guidance for the holiday quarter to $84 billion from between $89 billion and $93 billion. That was the first time Apple reduced its sales forecast in almost two decades. The company blamed the lower outlook on weaker iPhone sales due to economic and industry headwinds, mostly in China.

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

In a memo to employees after the announcement, Cook told staff that he wouldn’t use "external forces" as an excuse. "This moment gives us an opportunity to learn and to take action," he added.

Business Standard