The Dow Jones Industrial Average (^DJI -1.15%) was down Friday morning ahead of the Memorial Day holiday. While many U.S. states are in the process of reopening after imposing lockdowns to slow the spread of the novel coronavirus, the full scope of the economic impact is still unknown. The Dow was down about 0.45% at 11:40 a.m. EDT.
Many companies are turning to layoffs to adjust to depressed demand. International Business Machines (IBM -2.79%) has joined that club, with reports indicating that the tech company has let potentially thousands of employees go. Meanwhile, Apple (AAPL -0.66%) is taking steps to grow its services business amid a slump in iPhone demand. The company is reportedly looking to use exclusive podcasts to promote its Apple TV+ streaming service.
Layoffs hit IBM
The pandemic has wreaked havoc on the U.S. economy, leading to more than 38 million unemployment insurance filings since the crisis began. Industries that took a direct hit, like restaurants and travel, bore the brunt of the job losses early on. But as the ripple effects permeate through the broader economy, companies of all stripes may be forced to pare down their headcounts.
Bloomberg reported late Thursday that IBM has cut an unspecified number of U.S. jobs across at least five states. The tech giant did not disclose the number of job cuts, but a source that lost his job said that the cuts were far-ranging and likely in the thousands.
"IBM's work in a highly competitive marketplace requires flexibility to constantly add high-value skills to our workforce. While we always consider the current environment, IBM's workforce decisions are in the interest of the long-term health of our business," said IBM spokesman Ed Barbini.
The pandemic has put pressure on IBM's results, particularly in the software business. In the first-quarter earnings call, CFO James Kavanaugh noted a pause in client activity, with deals that would have typically been closed in the last two weeks of the quarter pushed back. IBM also pulled its full-year guidance due to uncertainty.
IBM has been cutting jobs in some areas for years as it's shifted toward high-growth and high-value areas like cloud computing, artificial intelligence, and data analytics. It's unclear how many of the most recent job cuts were part of that process, and how many were the direct result of the pandemic's impact on the business.
Shares of IBM were down about 0.7% Friday morning. Before the pandemic, 2020 was shaping up to be a solid year for the century-old tech giant, driven by a recently launched mainframe system and the acquisition of Red Hat. But with the U.S. likely already in a deep recession, a return to growth will have to wait.
Apple aims for podcast exclusives
With the iPhone no longer much of a growth business for Apple, the company is relying on services to drive sales higher in the coming years. Services generated $26 billion of revenue for Apple in the six months ended March 28, bigger than all other product categories except for the iPhone.
Part of Apple's services push is content. The company launched its Apple TV+ streaming service late last year, giving away a free year of the $4.99 monthly service to anyone buying a new iPhone, iPad, iPod touch, Apple TV, or Mac. While that offer brought millions of users onto the service, Bernstein analyst Toni Sacconaghi noted earlier this year that no more than 10% of those eligible for the free trial had bothered to activate it.
Compared to services like Netflix or Disney's Disney+, Apple TV+ is light on content. Disney+ has been the streaming success story of the past year, with its vast catalog of TV shows and movies driving the subscriber count beyond 50 million. Apple TV+ has tens of millions of subscribers as well, but only because of the free trial.
On Friday, Bloomberg reported that Apple has plans to use exclusive podcasts to promote its Apple TV+ service. The company is reportedly looking for an executive to lead the initiative, and it's started buying original podcasts that are spinoffs of current Apple TV+ content, as well as podcasts that could be adapted into future Apple TV+ content.
Podcasts may never produce much of a profit for Apple, but the company can use podcasts to drive adoption of Apple TV+, which could eventually become a big moneymaker. However, Apple remains at a disadvantage to other streaming services that already have vast troves of content. Competing effectively will likely require many billions in content spending annually.
Shares of Apple were roughly flat Friday morning. The stock is less than 4% below its 52-week high.