Ramifications of Apple’s Apology

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Many of the new iPhone buyers are growing impatient as they have to wait before they can get their hands on the new device. Some have even started cracking jokes on how the Apple (NASDAQ: AAPL) salesperson must have lost his way while trying to follow the recently introduced Apple Maps. The software turned out to be a flop and everyone knows that by now. Hundreds of jokes have started circulating regarding how major national landmarks have moved and found new places in the Maps and all this is creating frustration among the iPhone 5 users. At this point of time, Tim Cook stepped in to pacify the negative feeling among these agitated users.

The Unusual Apology
Last week Tim Cook apologized to customers for the frustration caused by the messy map problem. Users complained that the Maps service contained geographical errors and lacked several features that made Google (NASDAQ: GOOG) Maps so popular and handy. The home-grown Maps by Apple brought together data from companies such as Waze, Intermap, DigitalGlobe and Urban Mapping and this was billed as one of the key highlights of the iOS 6 software. But, omissions and errors in the maps quickly emerged and ranged from misplaced buildings to duplicated and deformed geographical features.

<img src="/media/images/user_13114/apple-maps_errors_large.jpg" />

Image: Errors in the Apple iOS 6 Maps Software

With an aim to fix the issues, Mr. Cook assured the agitated users that the Apple Maps team will work non-stop until the app lives up to the user's expectations. This rare apology followed Apple’s launch of its own mapping service earlier this month as the phone maker started selling the iPhone 5 and rolled out the highly anticipated iOS 6.

The striking part of the apology was where Mr. Cook suggested the users to try out the mapping services from rival companies such as Microsoft’s Bing, MapQuest, Waze, Google and Nokia. This move comes as a surprise as Apple is typically against promoting rival services and the remorseful apology by Mr. Cook is suggesting how the management style is changing under the leadership of a new chief executive, who took over last year from co-founder Steve Jobs just before his death.

Ramifications of the apology
In the last 10 years Apple has seen remarkable growth as it turned into an almost $650 billion giant. Presently, the company accounts for more than 4% of the total capitalization of the S&P500 and is considered to be a “buy” from a huge majority of analysts following the company. All this has been possible for the iPhone maker thanks to its innovative products which created new markets. But, now these markets are maturing and this leaves less room for errors in product development.

Through the apology Apple wanted to carry out crisis management before it rolls out the improved Maps. However, the initial reaction of the apology caused shares of Apple to plunge almost 2% and closed at $667.10. But, Apple accepted the fault and suggested the use of other mapping services has good implications for its rivals. Till now all iPhones had Google Maps and the recent disagreements between Apple and Google caused the exclusion of the software in the iOS 6. With Apple Maps malfunctioning and the iPhone 5 users turning to Google, the company’s hold on the online mapping space will be further strengthened.

Again, there are doubts if the announcement will cast a shadow of a dark cloud on the prospects of the new iPhone. According to many this is a strong opportunity for Microsoft (NASDAQ: MSFT). If the fault with the Maps wards off potential buyers, the Windows maker stands to benefit hugely. The new Windows Phone 8 powered Nokia Lumia handsets will soon hit the streets and the absence of error-free iPhones will create a demand for the Lumia 820 and Lumia 920 devices. These devices from Nokia will be offering features at par with the iPhone and will also include Nokia Maps. However, the fault in the Maps will not remain forever as Apple has already started working on a fix. So, Microsoft should aim at selling as much as possible before Apple recovers.

Even Nokia (NYSE: NOK) will enjoy similar opportunities, directly by selling more Lumia devices and indirectly because now even the iPhone users may start using Nokia Maps. According to the agreement with Microsoft, all WP8 powered handsets coming from any manufacturer will automatically have certain applications from Nokia which includes Nokia Maps. Over the years, the strengthening of data services from the telecom players has helped mapping softwares to gain huge acceptance and now it forms an important part of any smartphone. It’s very clear that maps matter and Nokia has maps that work better. The Lumia handsets come with excellent mapping functions designed by Naviteq, a Chicago based firm which the Finnish phone maker acquired 5 years ago.

While, for Microsoft, the malfunction of the Maps provides a limited period of opportunity, for Nokia the opportunity is a long term one. This may very well act as the foundation for Nokia Maps’ success. As the entire WP8 user base and the iPhone 5 users start using the Maps from Nokia, the popularity of the software will surely skyrocket. Needless to say, with time even the Android users may join these users. So, if Nokia can pull off what Google could with its Maps, even Nokia will earn some loyal users. Apple may consider the broken Maps to be a small bump in the road. But this surely has the potential to damage the prospects of the software for a considerable amount of time. One player’s loss has always been another player’s gain and here Nokia stands to benefit hugely from Apple’s mistake.

The Foolish Bottom Line
I admit Apple’s mistake can prove to be a costly one. But, will the demand for the iPhone 5 fall just because of this faulty app? I think not. Though maps are very important component in a smartphone, a broken maps app does not make the iPhone 5 any less good. It’s a brilliant phone and users can continue to enjoy the device by accessing alternate mapping services from other players until Apple rolls out the improved Maps. Developing maps is a complicated time-consuming process and requires tonnes of data and years of knowledge. Here, Apple goofed up a little. So what? Even Google was not this good and started out inferior to MapQuest and Yahoo! Maps. But, today Google is the most common name in the space.

While the apology from the CEO may discourage many from buying the new iPhone as they fear losing Google Maps to upgrade to the iPhone 5, I feel the Maps app is definitely not a deal-breaker for most consumers looking to buy the new iPhone. Rather, the deciding factors for buying the phone are the larger screen size and faster processing capabilities.

Again, Mr. Cook’s apology suggests that the phone maker is serious about providing best user experience and best in the world products. Cook said that already more than 100 million iOS devices are using the new Apple Maps and the more people start using the service, the better it will get. Surely the company will fix the Maps and will roll out something which will live up to user’s expectations, if not surpass them.

analyse360degree has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Google, and Microsoft. Motley Fool newsletter services recommend Apple and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

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