Apple Computer cutbacks to take big bite out of work force, pare executive pay

June 07, 1991|By Ken Siegmann | Ken Siegmann,San Francisco Chronicle

CUPERTINO, Calif. -- Apple Computer Inc. is expected to lay off about 750 workers and trim executive pay by about 10 percent as part of a broad cost-cutting program to be unveiled this month.

In addition, the maker of personal computers will eliminate a few hundred more jobs but will give the people holding those jobs 30 days to 60 days to find new ones within the company.

The plan for an executive pay cut came to light through an internal newsletter obtained by the San Francisco Chronicle.

Apple had already announced that it would eliminate about 1,560 jobs, or about 10 percent of its work force, through a combination of layoffs and attrition.

Apple employs about 15,660 people -- including full-time employees, contractors and temporary workers -- and about 6,000 of those people work in the San Francisco area.

The company is eyeing a number of other cost-cutting moves:

*Vacating between 20 and 30 of the more than 70 buildings it leases on its Cupertino campus.

*Cutting back its day-care program and closing some of its fitness centers.

*Eliminating many of the off-site conferences that managers hTC formerly attended at California wineries and various resorts.

*Cutting back the use of company cars.

According to Apple's newsletter, the company is evaluating a pay cut for executives. Sources inside the company said it's likely that Apple will cut 10 percent from its executive salaries and bonuses.

Last year, Apple's five most highly paid executives earned a total of $9.9 million in salaries and bonuses. The executives also earned millions of dollars from Apple stock options, which would not be affected by the cuts.

Apple's chairman and chief executive, John Sculley, earned $2.2 million in salary and bonuses last year. A 10 percent cut would lower his pay to about $2 million. Mr. Sculley also reaped about $14 million by cashing in Apple stock options last year.

Hoping to increase its market share, Apple has shifted from a strategy of selling expensive machines with high profit margins to pushing high volumes of low-cost personal computers.

The strategy has worked, but profit margins have fallen faster than Apple expected, catching executives off guard and forcing them to cut costs faster than planned.

As recently as the first week in May, Apple Chief Financial Officer Joseph Grazziano told analysts that the company was not considering any layoffs.

Apple managers are working to complete an outline of the cost-cutting program by June 19, so they can say who will be laid off before the company's third fiscal quarter ends June 30, according to sources inside the company.

"They've already started telling some people that their jobs have been eliminated and to go find another one within the company," said one employee. He added that many people are being told that they may have to demonstrate additional qualifications to land other jobs.

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