Expansion, culture fit key

Apple is an engineering and design-heavy company where executives such as design head Jony Ive exert enormous influence over strategy and products. Successful executives from other companies have found it tough in the past to fit in a secretive culture that encourages competition between internal groups.

Unlike at Burberry, Ahrendts will have to work with a smaller and more rigid gadget portfolio, where every incremental change is agonized over. It is unclear if she will have any say over the product landscape.

Ahrendts, who rebuilt the aging Burberry brand, will also have to counter threats from rivals like Samsung Electronics, a firm that has often used tactics from Apple's own branding playbook to compete.

Cook, in an email to employees on Tuesday announcing the appointment, described Ahrendts as "wicked smart." He said he knew he wanted to hire the 53-year-old executive from Indiana after first meeting with her in January.

"We've gotten to know each other over the past several months and I've left each conversation even more impressed," he wrote in the email seen by Reuters. "She led Burberry through a period of phenomenal growth with a focus on brand, culture, core values and the power of positive energy."

Apple's profit fell 22 percent in the June quarter as gross margins slid below 37 percent from 42 percent a year earlier and its shares, down more than 30 percent since September 2012, are being pummelled by fears of slowing growth, and competition from Samsung Electronics.

Apple's retail growth in China has been slow and the demand for its products has spawned a bustling gray market. In 2010, Apple's then-retail chief Ron Johnson forecast the company would have 25 stores in China by 2012. It now has 8 stores, despite Cook's assertion that China is crucial to growth. By comparison, Apple has 37 stores in Britain.

The company introduced a cheaper plastic iPhone last month to help make up ground in emerging markets to rivals like Samsung Electronics and Huawei Technologies. Analysts said the phone - still more expensive than many of its rivals' models - was not cheap enough.

"The trick is to allow people to buy into the product and make it as mass market as possible, because you want the volume and the sales, but you don't want that to come at the expense of the cachet of the brand," said Neil Saunders, managing director of retail consultancy Conlumino.

Ahrendts is no stranger to Silicon Valley. She is a frequent guest at Salesforce.com Inc's annual "Dreamforce" conference, and has in the past turned to Salesforce CEO Marc Benioff to consult on Burberry's digital strategy.