Apple's priorities are shifting as

iPhone sales continue to sink

• Apple has made several moves in recent months to position itself to find new areas of growth as
iPhone sales fall.
• The company poached a new executive from Google to lead its artificial intelligence efforts,
removed 200 employees from its self-driving car project and hired a new boss for its smart home
division.
• Apple is also preparing to launch several subscription services this year, starting in the spring
with streaming video and a paid version of its News app.
Steve Kovach | @stevekovach
Published 14 Hours Ago Updated 10 Hours AgoCNBC.com

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Apple CEO Tim Cook

As iPhone sales continue to sink, Apple has made several key moves over the
last year as it prepares new offerings to juice growth elsewhere in the
business.

If you've been listening to CEO Tim Cook's comments on earnings calls and in
interviews recently, none of this should come as a surprise. The company has
stopped reporting iPhone unit sales figures, and instead talks more about its
growing base of active devices, which the company says can be used to
squeeze out more revenue through its digital services like Apple Music, App
Store sales and extra iCloud storage.
But it's not just about those subscription services. Apple has made several
shifts in recent months that signal its preparing to move beyond the iPhone in
other ways, such as artificial intelligence, the growing smart home market and
digital health monitoring.

Here's an overview of the biggest recent shifts within Apple as it prepares to

grow beyond the iPhone:

Subscription services
The most immediate change to Apple's growth strategy will come from a host
of new subscription services launching as early as this spring.

As CNBC reported earlier this month, Apple plans to offer subscriptions to

streaming services from networks like Starz, CBS and Showtime through its
built-in TV app on iPhones, iPads and the Apple TV. Apple will take a cut of
each subscription, but a few top streaming services like Netflix and Hulu will
not be involved. Apple also plans to release a handful of original shows that
will be free to stream for device owners. The company has already signed on a
slew of big-name television and film talent like Reese Witherspoon, Steven
Spielberg and Oprah Winfrey for its original programming.

On top of video, Apple's plans for news will start to take shape this spring with
a subscription news service that will offer unlimited access to top publications
for a monthly fee. The service will be built into the Apple News app for
iPhones, iPads and Macs. The Wall Street Journal reported last week that some
publishers are hesitant to join the news service because Apple is asking for
too large of a cut of the total subscription revenues.

Apple is expected to formally announce its plans for its news and video
services at an event at its Cupertino, California, headquarters on March
25, BuzzFeed News reported.

But there's likely more to come. The Wall Street Journal reportedMonday that
Apple is considering bundling subscriptions for other services it offers, like
iCloud storage. Cheddar reported that Apple could be planning another
subscription service for gaming.
Artificial intelligence
Apple may have been the first big tech company to launch a digital assistant,
Siri, back in 2011, but compared with competitors like Google and Amazon,
the company's artificial intelligence efforts have fallen behind. Siri has often
been criticized for failing to answer questions that Google and Amazon's
assistant, Alexa, can answer. (Although a recent study by Loup Ventures has
shown that Siri has improved quite a bit in recent months.)

Apple gave its biggest signal that it's going to heavily invest in improving AI
when it poached Google's head of AI John Giannandrea away from the
company last year. Within a few months, Apple reorganized its AI and
machine learning divisions under Giannandrea, and it most recently promoted
him to its executive team. In addition to the reorganization around
Giannandrea, Apple's longtime head of Siri, Bill Stasior, has left the
company, The Information reported.

Smart home

Tying into Apple's AI plans is the smart home, where household appliances
are controlled via voice or a smartphone app. Apple is largely viewed as falling
behind Amazon and Google in the smart home space. However, it recently
hired Sam Jadallah, former CEO of smart lock company Otto, to run the
division, CNBC reported Saturday.

The gateway to the smart home, voice-controlled smart speakers, is

dominated by Amazon and Google. Amazon's Echo has 70 percent of the
smart-speaker market in the U.S., and Google has 24 percent, according to
research firm Consumer Intelligence Research Partners. Apple's HomePod
speaker, which launched early last year, only as 6 percent of the market,
according to the study.

Apple's smart-home ambitions largely live within iOS, which ships with a
Home app that lets you control hundreds of third-party connected gadgets like
light switches, cameras and door locks. But the ubiquity of Google and
Amazon's speakers has given those two companies a huge head start in the
smart home.
Self-driving cars
Apple's self-driving car project, Project Titan, is one of the biggest open
secrets in the tech industry. Although the company has yet to release a
product related to self-driving cars, Cook said in a Bloomberg interview in
2017 that it's the "mother of all AI projects."

However, plenty of other rivals are far ahead of Apple in self-driving

technology, most notably Waymo, the Alphabet company that spun out of
Google's self-driving car project. Waymo has been working on self-driving
cars for the better part of a decade and is already testing an automated ride-
hailing service in Phoenix.

Last week, new data from the California Department of Motor Vehicles
showed Apple's self-driving cars ranked the worst in disengagements, or
instances when a human driver needs to take over from the automated
system.

And last month, Apple removed 200 employees from its self-driving car
division, CNBC reported. Some of those employees were reassigned to Apple's
AI division. The Wall Street Journal reportedMonday that former Tesla
engineering boss Doug Field, who manages Project Titan, decided to make the
cuts. The move signaled that Apple could be looking to focus more broadly on
AI, not just through projects like self-driving cars.

Retail

Earlier this month, Apple head of retail Angela Ahrendts announced plans to
leave the company in April after five years in the role. Ahrendts was one of
Cook's biggest hires, and she has spent her time at the company transforming
Apple's retail locations into hubs for hanging out and taking classes related to
Apple products, not just selling and repairing stuff for customers.

Cook appointed Deirdre O'Brien, a 30-year Apple veteran and head of the
company's human resources, to run the company's retail operations on top of
her HR role. It's the biggest shakeup at the top of Apple's executive ranks in
years. Meanwhile, The Wall Street Journal reported that Apple's retail
locations could also act as a showcase for Apple's video subscription offerings
by placing TVs in stores that will display clips from its original programming.

Health
The Apple Watch, with its heart and activity monitoring, is at the center of the
company's digital health strategy, but its ambitions go beyond that. In a recent
interview with CNBC's Jim Cramer, Cook signaled that health will be a key
driver of the company's growth in the years to come.

"We are taking what has been with the institution and empowering the
individual to manage their health. And we're just at the front end of this," he
said. "But I do think, looking back, in the future, you will answer that question:
Apple's most important contribution to mankind has been in health."

The latest Apple Watch can perform an EKG reading that can identify potential
heart problems. It can also identify if the wearer falls and give them the option
to call emergency services if they're in trouble. Beyond that, Apple has started
to partner with health insurers like Aetna to offer free or discounted Apple
Watches if the customer keeps up with certain fitness goals. The company has
also had discussions with private medicare plans about similar offers, CNBC
reported in January.

WATCH: Apple to launch TV service in April

Apple to launch TV service in April: Sources 2:33 PM
ET Wed, 13 Feb 2019 | 01:08

Steve KovachTechnology Editor