I have no intention of buying the iPhone 5, but I have been watching the map-app drama unfold. Aside from some unexpected humility from Apple Inc. (Nasdaq: AAPL), does Tim Cook's apology matter?
On the PR side, it matters a lot. Apple's reputation has taken a beating lately. Apple continues to be linked to worker-abuse reports at its leading manufacturing partner, Foxconn Electronics Inc. It is suing one of its biggest suppliers, Samsung Corp. And now, it has failed to invent a better map-app for the iPhone 5.
On the business side, the apology matters less than the iPhone release itself. Apple Maps was designed to shut Apple competitors out of the iPhone-mapping-software market. Apple's strategy and its success have been based on improving the user's technology experience. Apple Maps fails on both counts.
Cook deserves credit for acknowledging that the iPhone 5 may be less than perfect. When the iPhone was first released, cellular service was dropped when users held the iPhone like -- well -- a phone. Apple's now-legendary CEO Steve Jobs said something along the lines of "Well, don't hold it that way." In other words, the problem wasn't the phone, it was the user.
Apple drew criticism again two months after the iPhone's release when it cut prices by $200.
Let's take a look at how Apple has fared so far:
Labor-abuse at Foxconn: Apple conducted its own audits and invited a third party to audit the plants. Although the report from the Fair Labor Association cites progress, unrest continues at Foxconn. This is not directly tied to Apple -- Foxconn workers have apparently discovered there is a world outside their dormitories that pays workers better. I'd call this one a draw.
Apple sues Samsung: A US jury found that Samsung infringed on Apple patents. Several foreign courts, including the UK and Korea, found in favor of Samsung. Based on sales of the iPhone 5 in the US, Apple won this round. And so far, no suppliers to Apple have defected as a result of the Samsung suit.
Apple Maps has some problems: If you rely on your phone as a GPS system, this is a biggie. As good as the iPhone is, it doesn't enable users to walk (or drive) on water. Apple loses this one.
Apple discounts iPhone: The company relented -- a little. Customers got a $100 credit at the Apple Store. Another draw.
Is the map-app SNAFU a deal breaker for Apple?
On the PR side, no. Cook not only apologized, but recommended users go to Bing or MapQuest until the bug is fixed. That goes above and beyond a typical CEO apology and Cook deserves credit for that. So far, the error hasn't hurt sales. Apple's stock dropped a bit on Friday, but even then,
investors remain bullish:
[Cook's] mea culpa won praise from some analysts, who were in general agreement that it wasn't necessary and would probably have little impact on the company's momentum.
Strategically, though, Apple miscalculated. A pre-emptive strike at its competitors didn't work. Consumers have come to expect perfection from Apple and this time, they didn't get it. Will it hurt iPhone sales? No. Any consumer willing to sleep in the street for first crack at a new product won't be dissuaded easily.
Does it tarnish Apple's reputation? I think it does. On their own, labor issues, software glitches, and CEO apologies don't make or break a corporation. Products do. But there have been a lot of chinks in Apple's armor of late that are beginning to add up, and competitors -- like Google and Samsung -- will just keep hammering away. At some point, something will give.
Or do you disagree? Will Apple be able to maintain its dominance indefinitely? Let us know.