KREMLINOLOGISTS looking for a new job might want to start studying the goings-on at Apple’s headquarters in Cupertino. A rejig of the firm’s top management team and the surprising departure of Scott Forstall, a highly regarded executive who ran the firm’s mobile software operations, has sparked speculation in Silicon Valley about tensions behind the scenes at the secretive electronics giant.
The defenestrations, which also involved the ousting of John Browett, the boss of Apple’s chain of retail stores, come at a sensitive time for the firm, whose share price has fallen sharply since hitting a high of just over $700 earlier this year. Apple said it had made the changes to boost collaboration between its hardware, software and services teams, but the fact that there clearly has been tension between them spooked shareholders: on October 31st, the first day of trading after the news emerged, Apple’s share price dipped to just over $595.
The news of the reshuffle comes at a sensitive time for the company. Although Apple has developed an incredibly powerful “ecosystem” of devices, software and other services, it now faces stiffer competition from the likes of Google, Amazon and Samsung. The company recently unveiled a smaller version of its popular iPad to compete with rival devices from Google and others that already have modest screens. Yet the firm’s share price started falling during the unveiling of the new gizmo when it became clear that Apple intended to price it at a premium to rival offerings. Clearly the market thinks that even the Colossus of Cupertino's pricing power has its limits. The company's latest quarterly results added to concerns about its prospects when they failed to live up to analysts' expectations.
The goings-on at Apple headquarters are also being scrutinised closely because the shake-up marks the first big reshuffle instigated by Tim Cook, the firm’s chief executive, who took over the helm from the late Steve Jobs. There has been plenty of speculation about the reasons for the high-level departures. Mr Forstall reportedly clashed with other executives at Apple, notably Jonathan Ive, the firm’s hardware design chief. He was also responsible for the flawed Apple maps offering in the latest release of Apple’s mobile operating system and is said to have refused to sign a public apology acknowledging its failings. Mr Browett, who arrived at Apple earlier this year after running Dixons, a British electronics retailer that does not enjoy anywhere near the same kind of prestige, raised eyebrows by seeking to cut costs with a new work rostering system for Apple's stores that triggered rumours of layoffs.
Mr Cook’s reshuffle has been portrayed as proof that he is ready to take decisive action when needed. He has also given additional responsibilities to well-regarded executives such as Eddy Cue, who oversees Apple’s online services and will now look after maps and Siri, the firm’s voice-activated personal assistant, as well. Mr Ive is also being given an expanded role and Craig Federighi, an executive whose profile has risen under Mr Cook’s reign, will lead the teams responsible for both its mobile and desktop operating systems.
Yet some important questions still need to be answered. Why was Mr Forstall, a protégé of Mr Cook's predecessor as chief executive, seemingly frustrated with the way things were going at Apple? And how is the company going to replace the valuable knowledge he brought to the firm? A talented product leader, Mr Forstall was one of the few people in Apple’s senior ranks with a deep understanding of the software world.
Mr Browett’s departure is also noteworthy. Why, for instance, did Mr Cook agree to hire someone to oversee Apple’s stores from a retail chain with significantly less cachet than Apple enjoys? And why has Apple been unable to find a leader for its retail business from within its own ranks when it boasts in the press release announcing the recent management changes that it has “an incredibly strong network of leaders at the store and regional level”. Investors betting that the firm’s share price can rebound will be hoping Mr Cook has good answers to these and other puzzles.
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