Apple's major problems

Apple's iPhone launch was kind of rocky, but it pales in comparison to the MobileMe fiasco. In case you don't know, MobileMe was Apple's newly named cloud computing effort. The idea being that you could subscribe to the $99/year service and have all your address, calendar and other key information sync across all your computers and iPhones.

Previously, the service was called .Mac and it worked pretty well. MobileMe was an effort to make .Mac more of a Web 2.0 system in the vein of Google Mail or Google Calendar. One thing that compounded the technical glitches is that Apple advertised the service as "Outlook Exchange for the rest of us." Meaning that it would work like Exchange does. But it not only doesn't work like Exchange, for about 1% of the users of MobileMe (i.e. about 20,000 people) it doesn't work at all. These people have no access to email, and in some cases their emails are being completely deleted. These are people who (like most folks these days) rely heavily on their emails.

Apple acknowledged that there were problems with MobileMe and offered a 30 day extension to all customers, which is nice for everyone who didn't have major problems. But, beyond two brief announcements Apple has not said anything. Two of Apple's key journalist supporters, Walt Mossberg and David Pogue, have penned strong criticisms. Mossberg says to stay away from MobileMe until it is clear that the problems have been worked out (which may be several months at least). Pogue can't understand why Apple hasn't seen fit to acknowledge the problem more forthrightly. He understands that it's not in Apple's marketing DNA to do so, but he says it's like a pilot keeping passengers on a plane for hours and not saying anything more than 'we're experiencing some problems, bear with us.'

This will all blow over as Apple restores MobileMe service, but that doesn't eliminate an underlying problem. Apple's approach to PR is a two-edged sword. When it held less market share (and far less popular attention), it could freely operate like the Church of Scientology. But, now it has become a much-hyped company (largely due to its own successful marketing campaigns). The demand for the new iPhone appears to be much greater than expected, at least by customers. If Apple wants to enjoy the benefits of stirring up passions in customers then it needs to be prepared to manage those passions better, lest those passions turn negative (which can happen very quickly out there in the brutish world of commerce).

Apple has good leadership, even beyond Steve Jobs. You can't create the kind of success they have enjoyed recently without good management across-the-board. But passions are being stirred up in extreme ways, and Apple's approach of complete silence in the face of obvious problems seems odd. Perhaps this is a wise move, albeit one that is hard to understand for us who aren't part of the Apple inner sanctum. Then again maybe it's the first sign of Apple's Achilles' heel.

I sold all my Apple stock a few weeks ago, not because I think that the company doesn't have amazing growth prospects. I sold it because there is too much mania about Apple. If Steve Jobs decides to retire, or becomes ill again, I can easily see the stock dropping 30% in a few days. When that happens (and eventually he will retire or die), then I'll consider buying the stock again. Another factor that will affect my decision to buy Apple is how it decides to communicate with its customers.

Apple has always been an arrogant company, but not admitting your obvious mistakes and not explaining why they occur is strange. Either way, in a couple of years this situation will be studied by people who specialize in corporate crisis management. Right now the textbook approach is to 'fess up to maintain trust. What makes Apple think the textbook approach doesn't apply here? Sometimes 'think different' is good, and sometimes it's not.

Comments

[kimmi]

Hi, Ernie,
I found your three-item choice interesting, and quite on the norm side given the hyper-mobile cyber-senstive world we all live in. I've been thinking about an Ihone for just the reason you mention: less to carry around etc. But, I for one, hope Kindle never replaces books as there is something about the feel and scent of a new book in hand... : )

[mike b]

Here Real Dan graphs Apple's stock showing a decline for the same reasons you cited but 4 days later. Apparently when Ernie talks people listen.