By Tripp Mickle
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (February 19, 2019).
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.
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 $14.24 billion 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 has 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
$50 billion 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 500 million paid subscriptions
across its platform by 2020, up from 360 million now.
To help reach the goal, Apple is spending more than $1 billion
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 in 2017, 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 Tripp.Mickle@wsj.com
Corrections & Amplifications Eddy Cue poached two top
executives from Sony Pictures Television in 2017. An earlier
version of this article incorrectly said the poaching took place
last year. (Feb. 18, 2019)
(END) Dow Jones Newswires
February 19, 2019 02:47 ET (07:47 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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