Tim Cook, Apple’s chief executive officer, has a longstanding philosophy that Apple should continue to invest for the future amid an economic downturn. It more than doubled its staff during the Great Depression and nearly tripled its sales. It recently increased bonuses for some hardware engineers to $200,000, according to Bloomberg.
John Chambers, who has steered Cisco Systems through multiple recessions as its former chief executive, said the company’s strong businesses and deep pockets could give it a chance to embrace new challenges. unrealistic risk for smaller competitors. During the 2008 recession, he said, Cisco allowed troubled automakers to pay for technology services with credit at a time when competitors demanded cash. The company was at risk of having to write down $1 billion in inventory, he said, but has emerged from the recession as the dominant supplier to a healthy auto industry.
“Companies fall apart during recessions,” Mr. Chambers said.
David Yoffie, a professor at Harvard Business School, said: “Standing out will require ignoring the broader market gloom. He said previous recessions have shown that even the strongest businesses are vulnerable to pressure on profits and prone to falling behind. “Companies are just as pessimistic as everyone else,” he said.
The first test for the biggest companies in the tech sector will be contagion from their peers. Shares of Amazon in electric vehicle maker Rivian Automotive fell more than 65%, losing $7.6 billion. Analysts say Apple’s services sales could be constrained by a slowdown in advertising by app developers, which rely on venture capital to fund marketing. theirs, the analysts said. And startups are scrutinizing their spending on cloud services, which will likely slow the growth of Microsoft Azure and Google Cloud, cloud analysts and executives say. Cloud said.
“People are trying to figure out how to spend smart,” said Sam Ramji, chief strategy officer at DataStax, a data management company.
The immediate regulatory challenges could also cloud the prospects for big tech companies. Europe’s Digital Markets Act, expected to become law soon, designed to increase the openness of technology platforms. Among other things, it could drain the estimated $19 billion Apple earned from Alphabet to make Google the default search engine on iPhones, a change Bernstein estimates could erase 3%. Apple’s pre-tax profit.
But the companies are expected to challenge the law in court, potentially binding the law for years. The possibility of it getting bogged down leads analysts to continue the consensus: “Big tech will get stronger. And what is being done about it? Nothing at all,” said Arete Research’s Kramer.
Jason Karaian contributed reporting.
