Wall Street Journal Suggests Apple May Need To Announce Lay Offs

by , 4:30 PM EDT, October 4th, 2001

The Wall Street Journal has published a piece by Gary McWilliams that suggests that Apple may need to lay off some of its work force in the wake of decreasing sales in the PC market. Most of the article focuses on the Wintel beige-meisters and the ever decreasing sales in that market, but Apple figures into it as well. From the article:

Since the start of this year, the nation's largest personal-computer makers have cut or announced plans to eliminate nearly 46,000 employees world-wide in light of declining sales. But with little hope now of a rebound, even more job reductions could be coming.

None of the major players have disclosed any additional layoffs since the Sept. 11 terrorist attacks. But many market watchers now don't expect PC shipments to rise until the second half of 2002.

The next round of industry job cuts could be just days away. Indications are corporate computer budgets are being pulled back once again, and home-PC sales, which first slumped late last year, continue to fall. NPD Intelect, which tracks retail outlets, reported PC sales fell 50% during the first three weeks of September compared with a year earlier.

[...]

So, too, Apple Computer Inc., which has ridden out the year with scant cutbacks. Now Apple may have to decide on deeper cost reductions or hold out for an early 2002 consumer upturn. "They might have to burn cash for a quarter or two," says Richard Gardner, PC analyst at Salomon Smith Barney. In part, Apple has recently followed Gateway into setting up its own retail stores, adding the overhead of its own stores as PC retailing has fallen sharply. A spokeswoman for Apple, Cupertino, Calif., declined to comment. The company is due to report its results on Oct. 17.

Apple is in the midst of its (mostly self-imposed) quiet period in advance of an announcement later this month for the September quarter and its fiscal 2001 year, but the last statement from the company came just before the terrorist attacks on September 11th. At that time, Apple CFO Fred Anderson said "If you don't hear from us, that's obviously good news." In that same meeting, Mr. Anderson said that Apple's retail operations would break even in the 4th quarter (the current quarter), and turn a small profit next quarter. At that time, Morningstar.com had some good things to say about Apple's retail strategy. This is contrast to the Wall Street Journal's above article that suggests the company's retail operations are a liability.

There is more information in the full Wall Street Journal article.

The Mac Observer Spin:

We do not count ourselves among the ranks of Apple apologists, and it is certainly possible that Apple could lower guidance for the rest of the year (the company's fiscal year started this quarter). It's also possible that the company could find sales lowered so much that it will "mortgage its future" by laying off employees (something it may well have to do if sales do fall) directly contrary to comments made earlier this year that it would not do so.

Or, it's possible that Apple is once again being underestimated and misunderstood by Wintel lemmings that don't grok Apple, the Mac, or the Mac industry.

Wall Street Journal Article