Analyst: Management Shakeup Good for Apple

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.