Behind every stock lies a business, and behind every business lies its employees, toiling every day to make sure things run smoothly. In today's world -- with artificial intelligence, the Internet of Things, and a slew of new, exciting technologies -- highly talented executives, especially in tech, have more choices than ever. So when a big company makes a high-profile hire or promotion, it's noteworthy.
Recently, Apple (NASDAQ:AAPL) made two headline-grabbing personnel decisions -- one new hire and a promotion -- that could affect its key services and product offerings.
Poaching from Google
Apple recently announced the hiring of John Giannandrea, formerly Alphabet's head of artificial intelligence. According to The Guardian, Giannandrea was a driving force behind Google's improvement in its core search products and voice-recognition technologies. He'd been with Google since 2010 when his start-up Metaweb was acquired by the search giant.
According to an email shared with The New York Times, CEO Tim Cook said, "Our technology must be infused with the values we all hold dear ... John shares our commitment to privacy and our thoughtful approach as we make computers even smarter and more personal."
Apple has been investing in artificial intelligence on a number of key fronts, including the recently unveiled HomePod and the company's self-driving car ambitions. However, as capable as Apple is, its current AI offerings lag well behind those of Google.
It's not known why Giannandrea chose to leave Google for Apple -- whether it was money, the chance to work at the brand new Apple Park campus, or more of a values-based choice, as suggested by Cook's comment quoted above.
One thing is for sure: Apple is making a bigger and bigger push to improve its AI systems. It was recently reported that its new HomePod smart speaker isn't selling very well, and the company cut its internal forecasts as the HomePod's AI capabilities reportedly lag well behind the leading home speakers from Google and Amazon.
In addition, Tim Cook has called self-driving cars "the mother of all AI projects", and Giannandrea's hire may also help Apple move toward that end. While Alphabet's Waymo unit is thought to be miles ahead (pun intended) of the competition, Apple researchers published a paper last fall outlining a breakthrough in their own lidar efforts. The company's self-driving car project, known as Titan, has seen several leadership changes. However, it's unclear whether Giannandrea will be directly involved in Project Titan.
The new face of Apple Music
Apple also made a big promotion, picking Oliver Schusser, the former head of its European content and music operations, to head Apple Music. He'll replace outgoing head Jimmy Iovine, who announced last summer that he would be stepping down, though transitioning into a consulting role.
Iovine, whose many career highlights include producing Bruce Springsteen's Born to Run album and founding Interscope Records in 1989, joined Apple via Beats Electronics, which Apple acquired in 2013.
Those will be some mighty big shoes to fill, but obviously Schusser has proven himself to CEO Tim Cook, having launched the international App Store, iTunes Movies and TV, Apple News, and Apple podcasts, among other initiatives.
Apple Music has also made significant progress against worldwide streaming leader Spotify, which began trading publicly earlier this month. For instance, Apple announced last week that it had reached 40 million subscribers. While that's still far behind the 73 million to 76 million estimated for Spotify, Apple Music appears to be growing faster, especially in the U.S. Therefore, it appears Iovine is handing off an Apple Music service that's in excellent shape and winning over customers, and it may only need continued execution from a seasoned executive like Schusser.
The promotion is important, because Apple Music plays a key role in the company's services division, which it hopes to grow to $40 billion in revenue by 2020. Growing services are a key part of diversifying the company away from slowing iPhone sales. Last quarter, Apple reported $8.47 billion in services revenue, good for 18% year-over-year growth. Apple Music's 40 million subscribers paying $9.99 per month equals about $1.2 billion quarterly, or about 15% of that total.
Apple's cash cow is undoubtedly the iPhone, which makes up 70% of revenue. However, its strength doesn't come from just one device but the way its hardware and software ecosystems all work together. AI-enabled products and services such as Apple Music are two big ways that Apple hopes to lure customers into its ecosystems and retain them in the future. These two personnel changes are important milestones as the company works toward those goals.