đź”’ Major management shakeup at a changing Apple – The Wall Street Journal

DUBLIN — As Apple’s iPhone sales slow, the company has been thinking hard about how to rebuild itself for a strong future. It’s making big bets on a range of possible growth drivers, from music and video services to artificial intelligence to wearable technology. It has enormous piles of cash, enough cachet to attract top talent, and one of the world’s strongest and most respected brands. But it also faces some tough challenges. For over a decade, Apple has been the iPhone. The iPhone created contemporary Apple and has generated such easy, reliable, and gigantic cash flows that the slowdown in sales has set the company buzzing like a stirred beehive. The last time Apple faced a tough test, it had its visionary founder Steve Jobs to fall back on. Today, it has a professional and experienced management team under the leadership of Tim Cook. The next two to five years will tell if Cook has what it takes to steer Apple to the next port. Apple has been a cornerstone of our Biznews Global Portfolio, delivering growth and stability. Let’s hope for many more years of the same. – Felicity Duncan

Apple Executive Shake-Up Readies It for Life After iPhone

By Tripp Mickle

Apple Inc. is shaking up leadership and reordering priorities across its services, artificial intelligence, hardware and retail divisions as it works to reduce the company’s reliance on iPhone sales.
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The changes, which can be traced back to last year, have included high-profile hires, noteworthy departures, meaningful promotions and consequential restructurings. They have rattled rank-and-file employees unaccustomed to frequent leadership changes and led Apple to put several projects on hold while new managers are given a chance to reassess priorities, according to people familiar with the matter.

The primary reasons for the shifts vary by division. But collectively, they reflect Apple’s efforts to transition from an iPhone-driven company into one where growth flows from services and potentially transformative technologies.

Leadership moves of the past few months include promoting artificial intelligence chief John Giannandrea to the executive team; replacing departing retail chief Angela Ahrendts with head of human resources Deirdre O’Brien; and pushing out top Siri voice-assistant executive Bill Stasior.

Apple has also trimmed 200 staffers from its autonomous-vehicle project, and is redirecting much of the engineering resources in its services business, led by Eddy Cue, into efforts around Hollywood programming.

“This is a sign the company is trying to get the formula right for the next decade,” said Gene Munster, a longtime Apple analyst and managing partner at venture-capital firm Loup Ventures. “Technology is evolving, and they need to continue to tweak their structure to be sure they’re on the right curve.”

The changes, along with Apple’s recent sales woes, have become conversation fodder for current and ex-Apple employees, partly because they are among the most pronounced since Tim Cook’s early years as chief executive. Retail chief Ron Johnson left shortly before Mr. Cook took over in 2011, and mobile software executive Scott Forstall was dismissed a year later. Their departures led to the hiring of Ms. Ahrendts, the elevation of Craig Federighi to the top software job and Mr. Cue’s assumption of responsibility for several services, creating an 11-person executive team that remained largely unchanged for five years.

The competitive landscape could complicate Apple’s efforts to diversify beyond the iPhone. Media services like Netflix Inc. and Spotify Technology SA have a head start and more subscribers; Google’s autonomous-vehicle initiative has logged more miles on the road; and Amazon.com Inc.’s Echo speakers have put Alexa into millions of homes.

Apple spent $14.24bn on research and development last year, a 23% increase from the year prior. Though it continues to work on projects in the augmented reality, autonomous vehicle and health sectors, it hasn’t yet released a major new product in those areas. Sales of its latest gadgets – Apple Watch, AirPods and HomePod – have been mixed, and none have offered the pricing power or volumes of the iPhone, one of the best-selling products in history.

Mr. Cook, who prides himself on his long-term management focus, has been anticipating the maturation of the smartphone industry since as early as 2010 and planning for how to grow as phone sales slow, former employees say. Apple this year stopped reporting the number of iPhones it sells, a move many observers interpreted as an end of the smartphone salad days.

Though the iPhone still contributes about two-thirds of Apple sales, the company has encouraged investors to focus on a growing services business, which includes streaming-music subscriptions, app-store sales and mobile payments. Services are expected to top $50bn in sales by fiscal 2020 and contribute more than about 60% of Apple’s total revenue growth over five years, according to Morgan Stanley, which estimates the iPhone fueled 85% of growth during the prior five years.

The services business also is key to preserving iPhone loyalty. Just as Amazon has used media and music offerings to increase the value of Prime membership, Apple executives view its mobile payments, music service and coming video offering as ways to encourage current iPhone owners to buy future Apple handsets.

Apple has said it aims to pass 500m paid subscriptions across its platform by 2020, up from 360m now.

To help reach the goal, Apple is spending more than $1bn to create original shows this year starring Hollywood A-listers such as Reese Witherspoon. It has considered bundling video into a monthly subscription offering that would also include cloud storage, according to people familiar with the plans. The company also is in talks with major newspapers about offering a news service that would cost $10 a month. It has discussed bundling those services together into a single subscription along with iCloud storage for photos and files, a person familiar with the plan said.

Mr. Cue, who poached two top executives from Sony Pictures Television last year, has focused most of his engineers on the coming video offering, two of these people said. The company is pushing to announce the new offering at a media event scheduled for March 25 on its Apple Park campus, people familiar with the event said.

Apple is also expected to lean on its artificial-intelligence team to personalize the services on people’s devices. The company last year hired Mr. Giannandrea away from Alphabet Inc.’s Google, where he held a similar role incorporating AI into products like Gmail’s inbox app.

In December, shortly after presenting to Apple’s board, Mr. Giannandrea was promoted to the company’s executive team and quickly took over the AI division. He relieved Mr. Stasior from his responsibility overseeing Siri, Apple’s flagship AI product, according to people familiar with the change. Mr. Giannandrea has assumed that responsibility and is looking to improve Siri’s accuracy and performance, the people said. The Information earlier reported on Mr. Stasior’s status.

In August, Apple hired Tesla Inc.’s engineering chief Doug Field and gave him day-to-day responsibility for the company’s roughly 1,400-person autonomous-vehicle project, known as Project Titan. Last month, he cut the team by about 200 people, according to people familiar with the change, which was previously reported by CNBC.

Apple announced in early February that Ms. Ahrendts would leave the company in April, ending a five-year stint overseeing its 500-plus stores world-wide. Mr. Cook promoted Ms. O’Brien, a longtime operations executive, into a role of completing Ms. Ahrendts’s store remodelings and determining how Apple promotes services in stores. One planned initiative: Apple has promised production partners in Hollywood that it will install TVs in stores to showcase its slate of forthcoming shows, people familiar with those plans said.

Write to Tripp Mickle at [email protected]

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