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Apple software, retail chiefs out in overhaul

Scott Forstall, senior vice president of iOS Software at Apple Inc, speaks about iPhone5 apps during Apple Inc.'s iPhone media event in San
Scott Forstall, senior vice president of iOS Software at Apple Inc, speaks about iPhone5 apps during Apple Inc.'s iPhone media event in San

By Poornima Gupta

SAN FRANCISCO (Reuters) - Apple Inc CEO Tim Cook on Monday pushed out the powerful head of the company's mobile software products group, sources said, in a major management shake-up that also claimed the recently hired chief of the retail stores division.

Scott Forstall, a long-time lieutenant of late Apple co-founder Steve Jobs, was asked to leave following years of friction with other top executives and his recent refusal to take responsibility for the mishandling of the Apple's much-criticized mapping software, people familiar with the situation said.

Sources said Forstall refused to sign a public apology after Apple's mapping product, which displaced the popular Google Maps on the iPhone and the iPad in September, contained embarrassing errors and drew fierce criticism.

Instead, Cook signed the letter last month.

Forstall will leave the company next year, Apple said in a statement. He did not respond to emails seeking comment.

The executive changes are the biggest at Apple in more than a decade, and mark the first major move by Cook to shape his own management team since Jobs' death a year ago.

John Browett, who was hired as the company's retail chief just seven months ago after serving as CEO of U.K. electronics retailer Dixon's, will also leave Apple.

His efforts to improve profits at the stores had alienated employees and sources close to Apple said Cook had concluded he was simply the wrong person for the job.

"These changes show that Tim Cook is stamping his authority on the business," added Ben Wood, analyst with CCS Insight, said. "Perhaps disappointed with the Maps issues, Forstall became the scapegoat."

INCREASING COMPETITION

While Apple has enjoyed enormous success since Cook took the helm, recent stumbles including the Maps debacle and several earnings disappointments have underscored the long-term challenges the company faces in retaining its dominance in the smartphone and tablet markets.

In Google, Amazon.com Inc, Microsoft and Samsung Electronics, Apple faces an array of powerful competitors who are determined to own a piece of the exploding mobile-computing market.

"Competition is moving much faster to be more Apple-like," said Tim Bajarin, president of technology research and consulting firm Creative Strategies.

The executive changes hand substantially more responsibility to Jonathan Ive, Apple's celebrated industrial design chief, who will now oversee both hardware and software design.

Eddy Cue, a long-serving executive who runs online products, will take charge of Apple Maps and the Siri voice search software. Craig Federighi, who oversees the OSX software that powers the Macintosh computers, will take charge of the iOS software.

The retail stores will report directly to Cook while a search is conducted for a new head of the division.

Shares of Apple, the world's largest publicly traded company by market value, have declined 14 percent in the past month since reaching a 52-week high of $705.07 in September.

UPROAR OVER MAPS

People with knowledge of Apple's inner workings said Forstall's departure was years in the making, and came to a head with the Apple Maps incident.

A 15-year veteran of the company, Forstall was once considered a possible CEO candidate and is credited with playing a central role in making the iPhone and the iPad two of the most successful consumer electronics products ever.

But Forstall was also considered a hard person to work with, and he alienated other senior executives with his abrasive style, one person familiar with the situation said. This person added that once Jobs passed away, Forstall was left with few defenders at the top of the company.

The fate of the executive, who had 1,000 people directly reporting to him, was sealed by the Maps debacle. Even after a public uproar over the shortcomings and widespread calls for Apple to revert to Google Maps, Forstall would not acknowledge the gravity of the problem, a source with knowledge of the matter said.

Forstall instead likened the situation to the complaints over the antenna in an earlier iPhone and insisted it would blow over without a public mea culpa, the source said. But Cook disagreed, and issued a public apology with his own signature on it after Fortstall would not go along, the source added.

Apple described Monday's moves as a way to increase "collaboration" across its hardware, software and services business. Forstall will serve as an advisor to Cook until his departure.

Putting the mobile and personal computer software teams together under Federighi could improve operations within the company, particularly as the capabilities and features of smartphones and PCs increasingly converge, said analysts.

Ive, now responsible for design across all products, has played a key role in Apple's success by imbuing its gadgets with a distinct look and feel.

BGC Partners analyst Colin Gillis said Ives could now help reinvigorate the look of Apple's software, which has been slow to evolve.

"If you have two different heads, you have two different fiefdoms," he said.

QUESTIONS ABOUT BROWETT'S HIRING

Browett, the ousted retail chief, was simply not a good fit for the company, people familiar with the matter said -- raising questions about how well the high-profile hire was vetted in the first place.

A source familiar with Browett's hiring said Apple board member Millard Drexler, a legend in consumer retail who is now CEO of J. Crew, did not even meet Browett before he was hired.

Browett took over from Ron Johnson, who is credited with making the Apple stores as revolutionary a force in retailing as the products have been in computing. Johnson left the company last year to become CEO of J.C. Penny.

Browett angered store staff when he cut some workers' hours in effort to make staffing more efficient. He also could not improve the slow pace of Apple's retail expansion in China, a region Cook has said was key to the growth of the company.

(Editing by Jonathan Weber and John Mair)

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