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Apple (NASDAQ: AAPL ) has been in the news recently because several key personnel and staffing changes were announced that may provide insight into the company's plans to overcome recent struggles.
Apple can certainly afford a little good news. The stock hit an all-time high in September 2012, but the price has since dropped 25% due to dwindling confidence that the company can rejuvenate its innovative ways.
How will Apple investors be affected by the recent announcements? Will competitors like Microsoft (NASDAQ: MSFT ) match the moves, or is Apple actually behind the curve?
Retail goes plaid
Last fall, Apple announced that Angela Ahrendts, current CEO of Burberry, will take over the company's retail operations some time this spring.
CEO Tim Cook is banking that Ahrendts will duplicate the success she had in leading Burberry. In the last five years of her tenure, revenue increased 66% and EPS more than doubled, in part because of a more aggressive advertising campaign and expansion into more countries.
Cash is king
For the first time in ten years, Apple will have a new CFO. Company veteran Peter Oppenheimer will retire in September 2014 and will be replaced by Luca Maestri, current controller and former CFO of Xerox.
One of his tasks will be to manage Apple's huge cash horde of over $150 billion and growing. Will he preside over more stock buybacks and dividend increases, or will he invest the excess in acquisitions, something Apple has only done on a limited basis over the recent past?
Apple has tried to attract shareholders by spending more than $35 billion on buybacks and dividends over the past five quarters. The effects of those efforts resulted in increased EPS and stabilization of the stock price.
Apple wants to go on a hiring binge and increase its presence overseas, especially in Asia, where anticipated growth in the smartphone and tablet markets exceed that of the domestic markets. The company has, so far, performed well on this side of the Pacific, but growth will probably level out, according to many analysts.
The strategy of poaching engineers, supply chain specialists, and others from competitors appears to be a good one (on paper). The talent there knows the local market better than anyone residing here. If Apple is to grow in emerging markets, hiring in Asia is key.
Elephant in the room
All of the planned personnel moves will probably be a net plus for Apple, but what is also needed is another game-changing product, on par with the iPhone and iPad, which together comprise 70% of current revenue. Retail operations make up only 12% of revenue, and there is probably a limited upside left from buybacks and dividend increases.
Rumors exist that an Internet-enabled TV, smartwatch, and mobile payments platform are in the works. Couple one or more of those products with staff changes, and it's probable that Apple can take off again.
Changes are also under way at Microsoft. New CEO Satya Nadella made some moves in the executive suite in an effort to improve things in Redmond. Several high-level executives were shown the door, and others farther down the food chain are moving up.
While successful in some aspects of its business (Office and Xbox are bright spots), Microsoft hasn't performed well in other areas. The company's Surface tablet made an underwhelming debut. Estimates are that only about 1.4 million-1.7 million devices were sold last quarter, and the company actually lost money on the venture. By contrast, Apple sold 26 million iPads in the last three months of the year, up 14% from the previous year.
Additionally, adoption of it's latest PC operating system, Windows 8, is probably lagging behind that of the previous version, Windows 7. Microsoft is also trying to take a page from Apple's retail playbook by opening more stores.
If the company can get its act together, it might be possible to grow revenue and EPS faster than the single-digit rates it has averaged recently, returning even more value to shareholders.
Apple seems to be making a lot of staff and personnel moves. That, and share buybacks, probably won't be enough to get the iconic company back into the high-growth mode that many investors seem to be looking for. What's needed is another innovative product that people didn't know they needed until Apple gave it to them.
Microsoft seems to be stumbling a bit with a few recent product misses, including one designed to compete directly with Apple. The new CEO appears to be cleaning house to get the ship turned around again.
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