Analyst: Management Shakeup Good for Apple

| Apple Stock Watch

Apple will be fine despite Monday's executive shakeupApple announced on Monday that two of its executives, Scott Forstall and John Browett, are out and that other top managers are taking on new responsibilities. The changes are good news for the company, according to Sterne Agee analyst Shaw Wu, and he thinks Apple will move forward without any serious issues.

"We believe these moves make sense in promoting more collaboration but are still somewhat surprised with the sudden demotion of Scott Forstall," Mr. Wu said. "But at the same time, we don't think it will be a big deal as the company has arguably not missed a beat despite senior departures in the past, showing the resilience of Apple's mission and culture."

Apple said that Scott Forstall, Senior Vice President of iOS Software, is leaving the company next year and as of now is serving as a consulting advisor to CEO Tim Cook. Senior Vice President of Mac Software Engineering is adding Mr. Forstall's former responsibilities to his plate, and Eddie Cue, Senior Vice President of Internet Software and Services will add Siri and Maps to his iTunes Store, App Store, and iBookstore duties.

Apple replaced Google's Maps app and service with its own when iOS 6 launched, and was quickly hit with criticism for bad location data and missing features. That led to Mr. Cook posting an open letter apologizing for the problems -- a letter that Mr. Forstall apparently refused to sign.

Mr. Wu thinks the Maps issues may have been the catalyst to push him out of the company. Mr. Wu stated,
We believe what may have triggered this is the less than stellar roll-out of AAPL's new Maps app. It is an ambitious effort replacing Google Maps and bringing new functionality including turn-by-turn navigation and 3G photo-realistic rendering. We find it unfortunate that Scott Forstall may be taking the fall for this. As we have said before, we have high confidence that the Maps app is fixable as it is software and will get better over time as more data is collected. People forget that Google Maps started out inferior to Yahoo Maps and Mapquest.

Mr. Browett's short time with Apple saw him dealing with backlash from retail store staff cutbacks and concerns that he was tossing aside customer service in favor of focusing solely on profits. Apple is already on the hunt for a new Senior Vice President of Retail, and until one is found the retail team will report directly to Mr. Cook.

Despite the turmoil surrounding both departing executives, Mr. Wu expects Apple will be fine and that the company is strong enough to move forward without any problems.

"We would like to note that this isn't the first time that senior executives have departed the company," he said. "Some we think of include Fred Anderson, Jon Rubenstein, Tony Fadell, Avi Tevanian, and Bertrend Setlet and the company has arguably not missed a beat. We believe this is a testament to Apple's strong culture that continues to endure despite changes in personnel through the years."

Mr. Wu has a "Buy" rating and US$840 target price for Apple's stock. Apple is currently sitting at $603.36, down 0.64 (0.11%) in after hours trading because the market is closed due to Hurricane Sandy.

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9 Comments Leave Your Own

gnasher729

Surely the “maps” application is fixable. But it should have been better from the start, and if Forstall is to blame for it - well, he got paid a very good salary for taking responsibility, and if he fails, then he isn’t worth the salary.

Bosco (Brad Hutchings)

Why should Forstall take the fall for a bad strategic decision? Siri is the same deal as maps, but they marketed it better. Apple is several years behind Google on voice control and maps, and Apple doesn’t just get to catch up by declaring it has or plunking down money. Being able to support eventually becoming and remaining competitive in these two endeavors without ad revenue monetization requires the Apple maintain significant market share.

What I’m saying is that Forstall was asked to do the impossible, he failed, and was right to refuse to take the blame.

jfbiii

“becoming and remaining competitive in these two endeavors without ad revenue monetization requires the Apple maintain significant market share”

Ad revenue monetization has nothing to do with this. Market share, sure. Last I looked Google maps lost close to 200 million users in a matter of weeks. Because if you think that a “significant” portion of iOS 6 users actually downloaded Google maps to replace using Apple maps then you’re spending a little too much time sniffing your own emissions. Maps is quite a bit nicer than the existing Google maps app.

In fact, the negative publicity actually more than counterbalances it’s actual flaws because the app functions so much better than I’ve been told to expect. It’s one more non-issue for consumers that is going to have much less impact on iOS device sales than the ability for Google and Amazon to throw comparatively cheaper tablets (not just less expensive, but devices of notably less utility and value) against the wall year after year to return a comparatively tiny profit.

As a long-term strategy, maybe it’s better to ship a lot more tablets than you can sell at a loss than not be able to produce as many tablets as you can sell at a 40% margin just so you can train users to ignore everything except the one square inch of screen real-estate that is content instead of ad. Why don’t we give it six more months and see if Apple is on the ropes, eh?

Lancashire-Witch

If Forstall was told (not asked) to do something he knew was impossible, and said so at the time, then i agree - he was right not to take the blame.

Whether Apple Maps was a good or bad strategic decision is another matter. I’m far from convinced its a bad decision.  It has all the hallmarks of a good idea badly implemented (just like the Euro!). But it’s fixable (not like the Euro).

Bosco (Brad Hutchings)

@Lancashire-Witch: Remember how they rolled out Safari back in the day? It took Apple almost 10 months from release of “1.0” to include it with the OS, and another 18 months after that to remove IE from the OS install. Browsers take awhile to catch up to state-of-the-art from scratch. So do maps. They could have given themselves time and bought forgiveness from users by continuing to include Google Maps alongside Apple Maps for a year or so. That’s the strategy foul-up that lays squarely on Tim Cook.

skipaq

While I’m sure the faults reported with the new Maps are true; I really do like how responsive they are when scaling. I have had no issues with accuracy thus far and the turn by turn directions have been a pleasure to use. It is not a matter of money to invest in development for Apple has plenty. When Scott demoed the program at its’ introduction he sure sounded like he had brought a ready for market product to view. Hardly the man trumpeting a product he thought impossible for the scheduled delivery.

Siri on the other hand came out in beta and holds great promise.

Lee Dronick

As Brad says maybe Forrestal didn’t feel that he should take the fall for someone else’s screw up. We may find once the door hits him in the butt.

“While I’m sure the faults reported with the new Maps are true”

Yesterday I did a Map app search via the Address Book on an address given to me as being on “North 4th Street.” It returned an incorrect city, but to one with a “North 4th Street. I searched on just the Zip Code +4 and it returned the correct location. I took a look at the address and changed North to N and then did a search from the Address Book and it took me to the correct address.

As I mentioned earlier today I want a distance scale on the map. I can get a fairly accurate distance between two points by eyeing the scale and not have to go through the hoops of getting directions.

As to directions, I want to be able to add waypoints to a route so that I can plan side trips.

realist53

These firing are the result of Apple being run by MBAs and not people with vision. Browett was part of the old boys club. he ran dixons into the ground he never had a clue about what Apple is about. Forrestal was promoted to fail. He is the fall guy and most likely does not get along with Tim Cook. I hope Apple is not headed the way of HP. If i see they are talking to Carly Fiorina then we can start putting nails into Apples future coffin.

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