Management Shakeup: What’s Going On at Apple?

CEO Tim Cook comes out looking like a decisive leader

   

AppleLogo Management Shakeup: What’s Going On at Apple?Although I doubt that Apple (NASDAQ:AAPL) planned it this way, news that two of the company’s senior VPs are out was buried under headlines about Hurricane Sandy and the Frankenstorm. Of course, Apple wasn’t exactly shouting from the rooftops, either. Its press release announcing that John Browett (SVP of Retail) and Scott Forstall (SVP of iOS Software) are done bore the rather misleading heading: “Apple Announces Changes to Increase Collaboration Across Hardware, Software & Services.”

Apple calls it increased collaboration; Forbes refers to it as that “Apple management bloodbath.” Browett is gone altogether, while Forstall is being kept on as an adviser to Tim Cook for the next year*.

So what really happened — and what does it mean for Apple going forward?

John Browett was the retail chief that Apple snagged only half a year ago from UK retail chain Dixons. In The Telegraph, Apple CEO Tim Cook is quoted addressing what some saw as an unusual choice to run Apple’s network of 300 retail stores: “I talked to many people and John was the best by far. I think you will be as pleased as I am. His role isn’t to bring Dixons to Apple, it’s to bring Apple to an even higher level of customer service and satisfaction.”

Yet since Browett’s arrival, there has been turmoil in Apple’s retail stores. Employees have been unhappy because of layoffs and hiring freezes, reduced hours and understaffing as Browett appeared to be pursuing a strategy of cost cutting at the expense of the Apple’s vaunted customer experience. An email apology to store managers by Browett was followed by a reversal of direction with a ramping up of hiring in time to meet expected rushes for the iPhone 5 and iPad Mini.

Scott Forstall has been with Apple since arriving with Steve Jobs from NeXT in 1997 and was a Jobs favorite. Apple describes him as one of the original OSX architects and he helped iOS — the mobile operating system powering iPhones and iPads — lead Apple to the forefront in mobile. Some people had Forstall pegged as Apple’s next CEO.

But he was reportedly abrasive and disliked by other executives. According to Business Insider, Forstall couldn’t be in the same room with others on the Apple leadership team without Tim Cook present to mediate. Forstall also had a reputation as being a kingdom builder and was rumored to be behind the exit of iPod SVP Tony Fadell in 2008. Many Apple users intensely disliked Forstall’s fondness for skeumorphism (or sticking oddly out-of-place ornamental elements into an otherwise modern OS), with elements like the iOS Calendar’s fake leather look often described as tacky.

It appears that two prominent iOS misfires finally did Forstall in — Siri (which hasn’t yet lived up to promise) and Maps. An article in The Wall Street Journal suggests that Forstall sealed his fate when he refused to sign the Maps apology letter released by Apple after the fallout over pulling Google (NASDAQ:GOOG) Maps from iOS 6, forcing Tim Cook to take the heat personally.

Cook Steps Up

I think this management shakeup answers a few questions about Tim Cook. He made a mistake in hiring Browett in the first place, and he found Forstall divisive, distracting and insubordinate. While Cook has fostered an image of being kinder and gentler than his predecessor, clearly he’s no pushover. He’s willing to admit a mistake and act decisively to fix it, and he is unwilling to tolerate dissent in the ranks.

We’ll have to wait until trading resumes today to see what the market thinks of these ousters, but I suspect it’s a good move for Apple.

For one, it redefines our opinion of Tim Cook. Apple’s CEO is showing he’s a strong leader and one willing to make tough choices. By putting Jonathan Ive –the company’s highly respected hardware design guru — in charge of Human Interface companywide, the OS-level eyesores (such as leather-stitched calendars) and inconsistencies of recent years should disappear. Putting Craig Federighiin in charge of both OSX and iOS should keep the desktop and mobile operating systems moving in step. And placing Eddy Cue — the guy who runs the App Store and iTunes Store — in charge of Siri and Maps leaves no doubt that Cook is serious about fixing those two problems.

Look for Apple to come out of this as a stronger, more cohesive company rallying behind a CEO who finally seems to be escaping the shadow of Steve Jobs. Its operating systems should see a significant improvement too, something even more critical with the release of Windows 8 and an Android that’s hitting its stride.

*Forstall is a highly accomplished tech veteran with deep knowledge of Apple, so Cook has given him a make-work type job to keep him from jumping ship to Microsoft (NASDAQ:MSFT), Google or any number of competitors who’d be happy to have him. As Cult of Mac points out, non-compete agreements aren’t enforceable in California, so this concession keeps Forstall out of play for a while.

As of this writing, Brad Moon didn’t own any securities mentioned here.


Article printed from InvestorPlace Media, http://investorplace.com/2012/10/management-shakeup-whats-going-on-at-apple/.

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