Apple-Meta talent war breeds bad feelings in the spaceship

From Gurman’s “Apple Aims to Prevent Defections to Meta With Rare $180,000 Bonuses for Top Talent” posted Tuesday on Bloomberg:

Apple has issued unusual and significant stock bonuses to some engineers in an effort to retain talent, looking to stave off defections to tech rivals such as Facebook owner Meta Platforms Inc.

Last week, the company informed some engineers in silicon design, hardware, and select software and operations groups of the out-of-cycle bonuses, which are being issued as restricted stock units, according to people with knowledge of the matter. The shares vest over four years, providing an incentive to stay at the iPhone maker.

The bonuses, which came as a surprise to those who received them, have ranged from about $50,000 to as much as $180,000 in some cases. Many of the engineers received amounts of roughly $80,000, $100,000 or $120,000 in shares, said the people, who asked not to be identified because the program isn’t public…

Apple is waging a talent war with companies in Silicon Valley and beyond, with Meta emerging as a particular threat. Meta has hired about 100 engineers from Apple in the last few months, but it hasn’t been a one-way street: Apple also has lured away key Meta employees.

The two companies are likely to become fierce rivals in augmented- and virtual-reality headsets and smartwatches, with both planning major hardware releases over the next two years…

The bonus program has irked some engineers who didn’t receive the shares and believe the selection process is arbitrary. The value of some of the bonuses equaled the annual stock grant given to some engineering managers.

 My take: Free publicity. Just what a bonus program doesn’t need.

11 Comments

  1. Fred Stein said:
    Interesting that silicon design is now in the mix. GOOGL, META, and MSFT have followed Apple’s lead in designing their own silicon.

    Apple is way ahead. Again, this will be “open” vs “closed”. There’s an open source silicon movement, mainly lead by Google. Meta is leading the OCP movement. Plus there’s RISC-V which has evolved from the original RISC movement which spawned, ironically ARM whose IP forms the basis of Apple’s and Qualcomm compute cores. ARM’s earliest roots date back to 1983, Acorn RISC Machines.

    I’m betting on Apple’s closed, tightly coupled, highly optimized approach. Apple’s 2022 rolling thunder product launches will each show off a new advantage of Apple’s silicon.

    Like services, that has been hiding in plain sight.

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    December 28, 2021
  2. John Butt said:
    Such a lead and such a program will require designer stability and design IP retention. A stock bonus with a Four year vesting is just the right tool. Hopefully it works otherwise all the work to get a lead in the market will walk out the door.

    1
    December 28, 2021
  3. Jerry Doyle said:
    I have an ancillary question but one tangential with the stated topic of awarding employees RSUs.

    We hear much about the merits of company stock buybacks. To what degree are company stock buybacks canceled or annulled by the awarding of RSUs to employees? What are the mechanics of awarding stock options? Are these RSUs “new” company shares created for that purpose, or does the company buy existing shares on the Open Market and award these bought shares as options to employees with the understanding that they are accessible on a specified maturity date? In other words, do the awarding of stock options increase the outstanding float; or, are these options “purchased” shares from the existing float?

    We often hear the amount of company buybacks, but we never (at least to my knowledge) read the amount of money the company spends giving out stock options annually.

    I welcome someone knowledgeable of this “stock options award” process to answer the above questions. Thanks in advance; and please understand that my inquiry is not to infer that I do not support Apple’s efforts to use stock options to retain employee talent. I just would like to know how the awarding of RSUs to employees affect the company’s buyback program; and does the awarding of RSUs increase the stock “float.”

    2
    December 28, 2021
    • Bart Yee said:
      From Apple Inc. | 2021 Form 10-K | page 46: (note: all emphasis mine)

      2014 Employee Stock Plan
      “The 2014 Employee Stock Plan (the “2014 Plan”) is a shareholder-approved plan that provides for broad-based equity grants to employees, including executive officers, and permits the granting of restricted stock units (“RSUs”), stock grants, performance- based awards, stock options and stock appreciation rights, as well as cash bonus awards. RSUs granted under the 2014 Plan generally vest over four years, based on continued employment, and are settled upon vesting in shares of the Company’s common stock on a one-for-one basis. RSUs granted under the 2014 Plan reduce the number of shares available for grant under the plan by a factor of two times the number of RSUs granted. RSUs canceled and shares withheld to satisfy tax withholding obligations increase the number of shares available for grant under the 2014 Plan utilizing a factor of two times the number of RSUs canceled or shares withheld. All RSUs granted under the 2014 Plan have dividend equivalent rights (“DERs”), which entitle holders of RSUs to the same dividend value per share as holders of common stock. DERs are subject to the same vesting and other terms and conditions as the underlying RSUs. As of September 25, 2021, approximately 760 million shares were reserved for future issuance under the 2014 Plan. Shares subject to outstanding awards under the 2003 Employee Stock Plan that expire, are canceled or otherwise terminate, or are withheld to satisfy tax withholding obligations for RSUs, will also be available for awards under the 2014 Plan.”

      If I read this correctly, there are 760 million shares, oh about $136 Billion worth of RSU available at current share prices. Against a float of 16.41B shares, that’s less than 4.7% of shares if all were exercised and added to the float.

      On the same page is this information:
      Shares of Common Stock
      “The following table shows the changes in shares of common stock for 2021, 2020 and 2019 (in thousands):
      2021 —— 2020 —— 2019
      Common stock outstanding, beginning balances
      16,976,763 17,772,945 19,019,943
      Common stock repurchased
      (656,340) (917,270) (1,380,819)
      Common stock issued, net of shares withheld for employee taxes
      106,363 121,088 133,821
      Common stock outstanding, ending balances
      16,426,786 16,976,763 17,772,945”

      1
      December 29, 2021
      • Bart Yee said:
        Continued:

        We can see that for all of FY 2021, Apple issued 106M shares through RSU’s, most to upper management but also to select employees as above (likely identified by management) while repurchasing over 656M shares, net -550M shares. Remember that all are issued but not all become vested over the 4 year vesting period unless the employee stays on. The RSU effect on the repurchases is a dilution of about 16%, but only 0.65% on the overall outstanding float. As one may surmise, if you believe in Apple and AAPL, and stay for 4 years contributing to Apple’s successes, AAPL shares issued now could be vested and worth quite a bit more in 4 years, a LOT more.

        Now let’s say that you were given your entire $180,000 salary in 4 yr. vesting RSU’s effective Jan 1, 2022. Let’s say that AAPL is $180 so you get 1000 shares plus accumulated dividends. Let’s also say that AAPL continues to grow, conservatively, 30% each year for 4 years. On Jan 1, 2026, your shares vest at a then share price of…wait for it…$514! ($234, $304, $395, $514) at which point AAPL would have a market cap of $7.5 Trillion given net share repurchases of 3% of shares per annum, which is probably high.

        Or at a measly 25% annual growth, $440. ($225, $281, $352, $440) at which point AAPL would have a market cap of $6.4 Trillion given net share repurchases of 3% of shares per annum. Remember, these are conservative stock price growth figures for a company / stock that isn’t supposed to be able to grow when this big.

        If your shares vest at $514 or $440, your 1000 shares will be worth $514,000 or $440,000 plus dividends, in addition to the $180K x 4 yrs or $720K in gross salary and benefits, a cool $1.23M or $1.16M less taxes earned over 4 years. Of course, if the shares are up at this level, a 3:1 or 4:1 split is very probable.

        Oh, did I mention Apple just announced their Apple iCar in September 2025 just before your shares vested?

        2
        December 29, 2021
        • Jerry Doyle said:
          @Bart Yee: I thank you deeply for an outstanding commentary response, Bart. Please know that your comments alone throughout the year on this blog more than pay for my subscription costs.

          2
          December 29, 2021
  4. David Emery said:
    $180k is what, maybe 1 year salary? I’m not sure that’s a particularly large bonus for top developers in Silicon Valley.

    3
    December 28, 2021
  5. Bart Yee said:
    “The bonus program has irked some engineers who didn’t receive the shares and believe the selection process is arbitrary. The value of some of the bonuses equaled the annual stock grant given to some engineering managers.”

    Stock bonuses are not guaranteed to any employee unless it’s in your contract. But:

    “If you make yourself indispensable to your employer, he is not going to part with you in a hurry no matter what it costs him.”
    – Robert Baden-Powell

    Or as Liam Neeson said:
    “But what I do have are a very particular set of skills, skills I have acquired over a very long career, skills that make me a nightmare for people like you.”

    A nightmare to keep from jumping ship but also a nightmare for competition to keep up with. Apple would do well to keep these highly skilled people for as long as they can.

    And if you’re not chosen to get the big bonuses, are your skills, all of them, good enough to be indispensable?

    0
    December 29, 2021
  6. David Emery said:
    A bonus is a kind of business expense 🙂

    Ford, whose electrical engineers couldn’t solve some problems they were having with a gigantic generator, called Steinmetz in to the plant. Upon arriving, Steinmetz rejected all assistance and asked only for a notebook, pencil and cot. According to Scott, Steinmetz listened to the generator and scribbled computations on the notepad for two straight days and nights. On the second night, he asked for a ladder, climbed up the generator and made a chalk mark on its side. Then he told Ford’s skeptical engineers to remove a plate at the mark and replace sixteen windings from the field coil. They did, and the generator performed to perfection.
    Henry Ford was thrilled until he got an invoice from General Electric in the amount of $10,000. Ford acknowledged Steinmetz’s success but balked at the figure. He asked for an itemized bill.
    Steinmetz, Scott wrote, responded personally to Ford’s request with the following:
    Making chalk mark on generator $1.
    Knowing where to make mark $9,999.
    Ford paid the bill.

    3
    December 29, 2021

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