Apple to cut up to 3,000 jobs

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The Independent Online
MATHEW HORSMAN

Media Editor

Apple, the beleaguered computer company, is expected to cut up to 3,000 jobs and write off up to $80m of inventory, as the full extent of its profits collapse became apparent yesterday.

The company, which slashed pre-Christmas prices by up to 25 per cent in an effort to build sales volumes, admitted on Wednesday that its final quarter losses would be $68m. The news sent the shares plunging by 6 per cent in New York, although the stock recovered ground in trading yesterday.

According to informed sources, Apple's Americas operation will be split into three divisions, covering software development, the educational market, and mass consumer/ homes sales.

The group employs 13,000 world-wide, and had revenues last year of $12bn.

The restructuring will be aimed at reversing a dramatic decline in the fortunes of one of the world's leading computer companies, with a 9 per cent market share.

Analysts said the poor performance indicated serious structural problems at the company, which had profits of $855m just four years ago. Severe cost-cutting by competitors, particularly IBM, has forced the company to abandon its premium pricing policy. Pre-Christmas prices were cut to just pounds 750 for an entry-level Apple, from pounds 1,000 previously. By contrast, IBM clone packages were just pounds 500.

The price war will cut profit margins in the Christmas quarter to just 15 per cent, compared with as much as 50 per cent in 1990, when Apple managed to maintain high prices.

Cutting prices, which Apple last tried in 1993, goes against its traditional approach, which focused on developing proprietary technology and maintaining margins through licensed distribution channels.

Despite the lower prices, Apple saw sales in the quarter climb by just 11 per cent on a like-for-like basis, compared with an industry-wide 25 per cent.

The downbeat news came as 80,000 visitors attended the Macworld conference in San Francisco, normally a time when the company unveils new products. Instead, it has maintained a low profile.

Analysts said yesterday that the future of Michael Spindler, Apple's chief executive, was now in doubt. They suggested the company might have to retreat from the low end of the market, and concentrate on niches where its user-friendly products have been popular, including publishing, which it dominates. Others suggested a takeover could be in the offing, with IBM and Sony leading the list.

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