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As the economy stalls, big tech companies prepare for tougher times

ASMA KHALID, HOST:

For another indication of what the slowing economy means for businesses, let's look to Silicon Valley. The pandemic fueled a tech boom. But this week, many of those same companies said they're hunkering down for tougher times ahead. I asked NPR tech correspondent Shannon Bond to tell us about the mood in Silicon Valley right now.

SHANNON BOND, BYLINE: Well, rather than me tell you, why don't we hear from the CEOs of Facebook, Apple and Google?

(SOUNDBITE OF MONTAGE)

MARK ZUCKERBERG: I'd say that the situation seems worse than it did a quarter ago.

TIM COOK: I know that this is a time of significant challenge around the world.

SUNDAR PICHAI: What we are talking about is uncertainty.

BOND: And uncertainty, what you heard Google's Sundar Pichai say at the end there - that's the word that really captures this mood. You know, Google executives said uncertainty or uncertain 13 times on their earnings call this week. And that is something that just makes executives and investors really uncomfortable. They don't like it. But right now, it's what many companies are bracing for.

KHALID: So what is creating that uncertainty?

BOND: Well, there's a few things going on here. So first, the global economy, right? These companies are dealing with the effects of inflation, higher interest rates, supply chain disruptions and the war in Ukraine. So, you know, Apple can't get enough parts to build enough Mac computers because of supply shortages, so some of their sales are down. Meanwhile, inflation is driving up costs, and so Apple's profit dropped in the last three months. Secondly, because of these economic worries, advertisers are pulling back, and that's hurting tech companies like Google and Facebook and Twitter and Snapchat that depend on advertising. Facebook's sales dropped for the first time ever last quarter. And it and other ad-dependent companies are also still trying to cope with changes Apple made to its privacy policies last year that have made it harder to target ads on iPhones. And then on top of all of that, these tech companies are also coming off this wild run during the pandemic, and people's habits have changed and the companies now have to adapt.

KHALID: So what's changing there with people's habits?

BOND: Well, we're in a different stage - right? - than in 2020, 2021. Lots of people then were largely staying home, doing much more online.

KHALID: Right.

BOND: But these days, you know, Netflix is bleeding subscribers. Amazon is - says it's seeing a comedown from the frenzied internet shopping of the past few years. So now there's just more doubt creeping in that this tech boom that drove so much demand is really sustainable.

KHALID: So how are you seeing companies in Silicon Valley cope with all of this?

BOND: Well, they're cutting expenses, slowing hiring. In some cases, there's even companies doing layoffs. And Facebook CEO Mark Zuckerberg had a clear message for investors and his own employees this week.

(SOUNDBITE OF ARCHIVED RECORDING)

ZUCKERBERG: I expect us to get more done with fewer resources.

BOND: But, of course, you know, that is easier for some of these companies to do than others, right? So, you know, we heard pretty upbeat note from Apple, right? It said it thinks sales are going to pick up towards the end of the year. You know, some of these other companies are seeing sales slow. But overall, these gigantic companies - you know, they were able to get through the pandemic. That also looked like a very tough time. And in the end, they didn't just weather that storm. It turned out to be a huge opportunity as so much demand was driven. People were turning online for school, for work, to connect. Now, in the face of a possible recession, you know, those big companies may be more insulated. It's harder for smaller companies with fewer resources - the Twitters and the Snapchats and so many others - to do the same.

KHALID: NPR tech correspondent Shannon Bond, thank you.

BOND: Thank you.

KHALID: And we should note, Apple, Amazon and Microsoft are among NPR's financial supporters, and Facebook parent company Meta pays NPR to license NPR content. Transcript provided by NPR, Copyright NPR.

Shannon Bond is a business correspondent at NPR, covering technology and how Silicon Valley's biggest companies are transforming how we live, work and communicate.