On Monday, October 29, Apple Inc. (AAPL) announced that Tim Cook, Apple's CEO, had ousted two of its most senior executives, including Scott Forstall, the head of the Apple's mobile software products group. The other executive that was pushed out of his perch was John Browett, the former CEO of Dixon's, a British electronics retailer, who was hired as the company's retail chief a mere seven months ago.
Rather than focus on the removal of these two executives, and the problems that Apple and its leadership may have had with them, Apple's release instead spun the news as an effort to increase collaboration across hardware, software and services. This appears at least partially disingenuous, especially in light of the fact that Mr. Browett's removal seems to have nothing to do with any collaborative changes being implemented. As a result, it appears these changes are in response to Apple's recent and lately out of character problems meeting consumer and investor expectations.
Mr. Forstall came to Apple in 1997 when Steve Jobs returned to the company and Next was acquired. Forestall is widely considered one of the engineers that designed the Mac OS X operating system, and was later named Senior Vice President of iPhone Software. Many may have seen him speak in some of the promotional videos for various iPhone models, introduce iOS 5 and/or demonstrate Siri when the iPhone 4S was launched.
While the precise basis for Forstall's ouster was not stated, it is believed that his recent refusal to apologize or take responsibility for the failures of Apple's recently launched Maps app that was designed to replace Google (GOOG) Maps, upon which prior incarnations of iOS were dependent. It is also believed that Forstall and other top Apple executives may not have seen eye to eye on other matters.
While Tim Cook has apologized for the buggy and seeming unfinished nature of Apple's Maps app, egos behind the curtain may have clashed and disagreed with exactly how problematic the mapping was. It is also quite possible that the apology letter that the apology letter Tim Cook posted was initially prepared for Mr. Forstall to sign, but that he refused. It is also entirely possible that Mr. Forstall is being made into a scapegoat for a problem that is not entirely his fault.
John Browett's history at Apple is far shorter, and may simply indicate that Tim Cook and others concluded he was the wrong person for the job. Mr. Browett was hired after Ronald Johnson chose to leave Apple and run J.C. Penny (JCP). It is possible that the retail division recognized some problems during the last few months on Mr. Browett's watch, or that he proposed some changes that were in conflict with beliefs of the powers that be.
It is believed that Browett made some store employees disgruntled by cutting their hours, and that he did not sufficiently address Apple's retail expansion in China. Apple has become increasingly dependent upon China for growth, and may have decided that the stores required a leader that was more capable of focusing on the Chinese market. Tim Cook will directly oversee Apple's retail stores until a new retail division head is found, at which point that selection's strengths may help delineate whatever weaknesses caused Browett's ouster.
Though Apple has continued to sell impressive numbers of iPhones, iPads, iMacs, MacBooks and its other popular devices, recent hiccups, including the Maps app debacle and a quarterly earnings disappointment, have made many question whether management is up to the long-term challenges the company will undoubtedly confront as the smartphone, tablet and cloud computing markets.
In particular, Google and Amazon (AMZN) and Samsung (SSNLF) have all had success in offering consumers small tablets running versions of Google's Android OS. Samsung has also garnered a significant share of the smartphone market with its Android-based OS, as have many other Android smartphone makers, including Google itself. Apple initially obtained a substantial lead in the race to mobile computing superiority, but continues to find Google and its many manufacturers nipping at its heels.
Recent versions of Android-based smartphones and tablets have filled much of the former gap between them and prior iPhone and iPad models, putting pressure on Apple to innovate yet another advancement. Now, Microsoft (MSFT) is reentering the mobile device market with a new version of Windows that could also become competitive and grab market share from both iOS and Android.
In some ways, the ouster of these Apple executives could also be seen as a consolidation, placing more authority in fewer hands and particularly within Tim Cook and Jonathan Ive, Apple's Senior Vice President of Industrial Design, among some other Apple higher-ups referenced in Apples announcement (Eddy Cue, Craig Federighi and Bob Mansfield). Ive will now responsible for the design of all Apple products, including its software.
These significant cracks in the upper ranks of Apple executives appear to indicate that the problems at Apple are more than just a few bugs in a new operating system, and could be a sign that the Apple empire is starting to crumble. Shares of Apple, the world's largest publicly traded company by market value, have declined by about 15 percent over the past month, since reaching an all-time high in September. This recent downturn indicates that market sentiment is also questioning the staying power of Apple's dominant position. Investors should be wary of the next shoe to drop.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.