Apple to Trim 1,560 Positions by End of 1991

Apple Computer said Monday that it will cut its 15,600-person work force by about 10% this year and take a restructuring charge as part of an effort to improve its sagging profitability.

Most of the cuts, which will affect all departments, will be in the form of layoffs in the current fiscal quarter, Apple said. The company will also relocate and consolidate functions as part of the cost cutting.

Apple’s earnings have been under pressure as a result of its 7-month-old strategy to boost market share with low-cost models of its flagship Macintosh computer. Although the company said that unit shipments of the Macintosh were up a whopping 85% in the first quarter, profit was down slightly as a result of dramatically lower margins.

Apple is also suffering from a general slowdown in the PC market, which has hurt sales of highly profitable high-end systems. Other PC vendors, notably International Business Machines and Compaq Computer, have also been hurt by the recession and are aggressively cutting prices to boost shipments.

Compaq said it has no plans for layoffs, despite an anticipated 80% drop in earnings in the current quarter. IBM maintains a no-layoff policy.

Stewart Alsop, publisher of PC Letter, said Apple’s problems were probably exacerbated by a factor that Compaq cited last week in announcing its profit problems: a build-up of inventory in the dealer channel resulting from consolidation among computer retailers.

“If that’s happening to Compaq, it’s happening to Apple as well. They’ve been shipping a tremendous number of low-end machines, and now some of that is sitting in the pipeline,” Alsop said. “So they have the double-whammy of lower margins and trouble keeping the shipments up.”

Alsop faulted Apple, which has had three previous rounds of layoffs in its short history, for not managing its staffing levels better. “It’s a real shame--they should have learned to be more conservative in their hiring practices,” he said.

The company is widely regarded in the financial community as having a high-cost structure, causing greater pressure in tight times. “They’ve been indicating they wanted to curtail operating expenses, and how do you do that besides layoffs?” asked analyst Steve Ossad of Montgomery Securities.