While most of the eastern seaboard was preparing for Sandy, Apple (Nasdaq:AAPL) was busy firing two of its most prominent executives in a move heard around the world. On Oct. 29, CEO Tim Cook dropped the hammer on Scott Forstall, the head of mobile software, and John Browett, head of its retail stores. Any time there's a shakeup of this magnitude, investors go to work assessing the damage of such moves. Is this good or bad for Apple? I'll have a look.

Discount Brokers Comparison: Your one-stop shop for finding the perfect broker for your investments.

Retail Operations
While its retail stores accounted for just 11.7% of overall revenue in the third quarter, they are a major advertising vehicle for the iPad, iPhone and all the other electronics Apple sells around the world. Any kind of bad press isn't a good thing for Apple and the firestorm Browett created in the past year with his caveman-like view of retail operations simply wasn't right for a firm so fixated on the customer experience. Browett initiated a widespread reduction in employee hours in August intended to boost the retail profitability of its stores. Employees were furious and customer service suffered. He was forced to rescind the moves almost immediately but the damage had already been done. Browett, whose reputation at Dixon's, an electronics retailer in the United Kingdom where he worked before Apple, wasn't flattering, making his hiring by Cook a curious one. Board member Mickey Drexler, CEO of J. Crew and Gap (NYSE:GPS) before that, never even met the man. A retail legend and you don't even bother to vet the candidate with Drexler? It was a rookie mistake by Cook that couldn't continue given its second consecutive soft quarter, at least by Apple's standards. The sign of a good CEO is someone who's able to quickly correct his or her mistakes. Cook has done so with Browett. You can be sure Drexler will be a part of the replacement's hiring. I'd call this a win for investors.

SEE: The Industry Handbook: The Retailing Industry

Speculation as to why software chief Scott Forstall was fired include faulty products such as Siri and Apple Maps, slow development of Apple's iOS mobile operating system and an unbearable ego making it impossible for other senior executives to work with the man. Each of those issues on its own probably wasn't enough to get Forstall fired; however, the combination of all of them likely didn't help. The straw that broke the camel's back was Forstall refusing to sign the public apology letter to Apple customers for the flaws in Apple Maps. Cook signed the letter instead and Forstall's fate was sealed. Forstall knew the mapping software wasn't ready for public consumption and yet he sang its praises at a developer conference in June and then let his boss look really bad at the iPhone 5 launch in September. The fastest way to get demoted or better yet - fired - is making your boss look bad. Getting rid of Forstall is another move in the company's evolution from Steve Jobs to Tim Cook. Cook's vision for the future is a company where everyone works towards its goal of making the best products in the world. Forstall appears to have been operating under his own vision of the future and the new Apple couldn't survive with this kind of political infighting. Although Forstall had become a thorn in the side of other senior managers, the fact that he's not leaving immediately indicates this dismissal was harder to make for Cook.

SEE: A Primer On Investing In The Tech Industry

The Bottom Line
Tim Cook has taken Apple in a more corporate direction at a time when it needs to be more structured. With Microsoft (Nasdaq:MSFT), Google (Nasdaq:GOOG) and Samsung nipping at its heels, it can't afford to have any loose cannons running around. My brother asked me the other day if he should sell his Apple stock and I told him no, he shouldn't. Tim Cook's vision for the company is just like the Three Musketeers - "One for all and all for one!" Both dismissals support this idea. Long-term, Cook will be happy it was he, and not Forstall, who signed the apology letter. It sends a message to employees and investors alike that accountability matters.

At the time of writing, Will Ashworth did not own any shares in any company mentioned in this article.

Related Articles
  1. Stock Analysis

    Analyzing Altria's Return on Equity (ROE) (MO)

    Learn about Altria Group's return on equity (ROE) and analyze net profit margin, asset turnover and financial leverage to determine what is causing its high ROE.
  2. Investing News

    Icahn's Bet on Cheniere Energy: Should You Follow?

    Investing legend Carl Icahn continues to lose money on Cheniere Energy, but he's increasing his stake. Should you follow his lead?
  3. Stock Analysis

    Analyzing Google's Return on Equity (ROE) (GOOGL)

    Learn about Alphabet's return on equity. How has its ROE changed over time, how does it compare to its peers and what factors are driving ROE for the company?
  4. Investing News

    Is Buffett's Bet on Oil Right for You? (XOM, PSX)

    Oil stocks are getting trounced, but Warren Buffett still likes one of them. Should you follow the leader?
  5. Investing News

    Chipotle Served with Criminal Probe

    Chipotle's beat muted expectations and got a clear bill from the CDC, but it now appears that an investigation into its E.coli breakout has expanded.
  6. Stock Analysis

    Analyzing Sprint Corp's Return on Equity (ROE) (S)

    Learn about Sprint's return on equity. Find out why its ROE is negative and how asset turnover and financial leverage impact ROE relative to Sprint's peers.
  7. Stock Analysis

    Why Alphabet is the Best of the 'FANGs' for 2016

    Alphabet just impressed the street, but is it the best FANG stock?
  8. Investing News

    A 2016 Outlook: What January 2009 Can Teach Us

    January 2009 and January 2016 were similar from an investment standpoint, but from a forward-looking perspective, they were very different.
  9. Mutual Funds & ETFs

    3 Vanguard Equity Fund Underperformers

    Discover three funds from Vanguard Group that consistently underperform their indexes. Learn how consistent most Vanguard low-fee funds are at matching their indexes.
  10. Investing News

    Alphabet Earnings Beat Expectations (GOOGL, AAPL)

    Alphabet's earnings crush analysts' expectations; now bigger than Apple?
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
Trading Center