Good morning,
When Apple CEO Tim Cook talks, everyone else listens.
“We believe the lion’s share of tech layoffs are now in the rearview mirror with Cook’s words echoing throughout the Valley,” Wedbush Securities analyst Dan Ives, who covers tech, tells me. Ives is referring to Cook’s comments on May 4 about mass layoffs: “I view that as a last resort and, so, mass layoffs is not something that we’re talking about at this moment,” he told CNBC. But he didn’t rule out the possibility of job cuts.
Apple has a “unique perch and perspective around consumer demand globally, and what this means for the path looking forward,” Wedbush analysts wrote in a May 1 note. So the company’s performance and practices, including Cook's current stance on mass layoffs, hold weight. In addition, Apple has more flexibility because the company has been more prudent in hiring than its peers like Meta, Google, and Amazon which have laid off thousands of employees.
“Apple did not hire at the 1980s rock-star-like pace of hiring we saw from Google, Amazon, Meta, and others during the last few years,” Ives explains. “Now, Apple and Cook are in a position to gain market share and hire talent, which is a shot across the bow at the rest of the tech space."
Apple (AAPL) announced on May 4, earnings for its quarter ending April 1. The company reported revenue of $94.8 billion, down 3%, but beating analysts’ expectations. iPhone revenue of $51.33 billion beat analysts' estimate of $48.84 billion. Apple set an all-time record for Services (including App Store, Apple Pay, Apple TV+, Apple Music, and iCloud) reaching $20.91 billion. In the Mac unit, sales fell 31% to $7.2 billion, and iPad saw revenue fall 13% to $6.7 billion. Wedbush maintained an outperform rating for AAPL. On May 5, the stock price jumped 4.7% closing at $173.57. With Apple’s better-than-expected performance and favorable U.S. jobs data, the Dow had its best day since Jan. 6.
The mega-cap tech giant has, so far, been able to avoid mass layoffs and still remain profitable. That brings to mind a question my colleague Geoff Colvin brings up in a recent report—are layoffs a confession of bad management?
“Layoffs are definitely a confession of poor management,” Jeffrey Pfeffer, a professor of organizational behavior at Stanford Business School, told Colvin. Pfeffer’s reasoning is that “research shows that generally, layoffs don’t improve a company’s fortunes,” Colvin writes. “Quite the opposite: They don’t reliably raise a company’s profits or stock price, but they do reliably reduce remaining employees’ morale, commitment, productivity, and trust.”
Are there difficult moments when layoffs are the best of bad options? “The evidence seems pretty clear that except for really unusual situations—the company is about to go under, it’s the start of the Great Recession—large layoffs actually seem to hamper the ability to restart when things improve,” Peter Cappelli, a management professor at the University of Pennsylvania’s Wharton School, told Colvin.
Looks like Cook, at least, has done his homework on that front.
Sheryl Estrada
sheryl.estrada@fortune.com
