Apple appears to have confirmed what we already knew: Times are tough, and while the company will continue to invest in product development, it will freeze investment in some of its departments, according to Bloomberg.
Confrontation for the slowdown
We don’t know which parts of Apple’s business will be affected. Bloomberg simply says that the company will no longer increase headcount in certain departments next year. Amazon, Google, Microsoft and other tech companies are also slowing recruitment in response to unyielding economic headwinds.
It’s not the same as cutting jobs, of course, and, at least in Apple’s case, the freeze isn’t company-wide, only affecting parts of the vast enterprise. Tesla, meanwhile, has laid off hundreds of workers and closed at least one research facility.
What parts of the business can be affected?
It is reasonable to think that in the context of the recession, Apple could slow down the rate at which it opens new stores. That said, it’s worth remembering that Apple opened its first two retail stores in May 2001, just a year after the dot-com bubble burst in early 2000. In other words, Apple has been successful in the past with longer term bets. in the face of headwinds in the market.
We’ll find out what impact these headwinds have had on Apple’s business in the current quarter on July 28, when the company will release its next financial results.
We know that sales are expected to slow as consumer demand softens. In its latest tax call, Apple warned of a bumpy quarter with sales down $8 billion, quarter over quarter.
Under the hype
Despite these potential pain points, there have been positive thoughts over the past 13 weeks. Macs are gaining market share in the declining PC market. iPhones remain popular in China – Apple’s market share continues to grow. Some supply chain issues appear to be improving. But what is not improving is consumer confidence as we face the real four horsemen of insecurity: disease, rising food and energy prices, the plague of nature environment and war.
The actions reported by Apple simply confirm that when the jumpers come out, things get tough. Credit Suisse Chairman Axel Lehmann said CNBC that while some tech companies may not move on to the next chapter, “fundamental trends will remain, that technology and digitalization will matter, new business models.”
[Also read: Apple (almost) says, ‘If you want to collaborate, stay apart’]
While analysts have cut current targets on Apple shares in response to headwinds, the company looks well positioned to continue growing atop these new emerging business models.
Where is the puck going
Not only has its move to Apple Silicon given a big boost to the company’s Mac sales in enterprise markets, but its focus on making technology that’s both personalized and private (like its healthcare products) continues. to give the company a strong case as its products become essential components of the connected future that Lehmann envisions.
This digital transformation is driving – and will likely continue to drive – strong growth for Apple in the business and for the companies providing services to support such use.
In other words, even in a potentially recessionary market, Apple still has strong growth opportunities. The Bloomberg report clearly indicates that Apple intends to continue this growth. It even specifically notes that the company has no plans to slow down its product announcement cycle, and we expect it to launch an all-new family of AR glasses in 2023. Apple has innovated its way through the bust dot-com and will continue to use the same strategy this time around.
Meanwhile, Apple’s installed base is driving additional service revenue opportunities. Apple’s services business has now grown into a bigger business than IBM, showing how shrewd Apple management has been in diversifying its business mix to make it less reliant on hardware sales. pure than before.
Evercore analysts recently predicted that Apple’s services will generate $100 billion in revenue by 2024.
“While the jittery market backdrop creates a chilling environment for tech stocks, we believe Apple’s growth story remains well intact despite the fragile macro. Apple remains our favorite tech name,” wrote Daniel Ives, analyst at Wedbush.
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