Apple CEO ‘Extremely Sorry’ for IPhone Maps Frustration

By Adam Satariano - Sep 28, 2012 10:42 PM GMT+0400
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Apple Inc. (AAPL) Chief Executive Officer Tim Cook apologized for the iPhone mapping software released last week that has been criticized for flaws such as misrouted directions and inaccurately located landmarks.

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The new Apple Inc. Maps app icon is seen on an Apple Inc. iPhone 5 in this arranged photograph in London. Photographer: Simon Dawson/Bloomberg

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Sept. 28 (Bloomberg) -- Bloomberg's Rich Jaroslovsky talks about Apple Inc.'s mapping application, released last week on the new version of iOS, the software that runs Apple Inc.'s iPhones and iPads. Apple Chief Executive Officer Tim Cook apologized for the mapping software that has been criticized for flaws such as misrouted directions and inaccurately located landmarks. (Rich Jaroslovsky is a Bloomberg News columnist. The opinions expressed are his own. Source: Bloomberg)

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Tim Cook, chief executive officer of Apple Inc. Photographer: David Paul Morris/Bloomberg

“We are extremely sorry for the frustration this has caused our customers and we are doing everything we can to make Maps better,” Cook said in a letter to customers posted today on the Cupertino, California-based company’s website.

Apple’s decision to build its navigation application reflects a widening rift with Google Inc. (GOOG), which had provided its Google Maps program since the iPhone debuted in 2007. While the new software adds features such as turn-by-turn navigation, it is widely faulted for unreliable landmark searches, routes that get users lost and a lack of public transit directions.

“An apology is never bad,” Carl Howe, an analyst at Yankee Group in Boston, said in an interview. “But notice they didn’t say that they are going to reinstate Google Maps. There is no impact, there is no change in philosophy or direction.”

Apple’s mapping application was released as part of the new iOS 6 software, which runs the iPhone, iPad and iPod Touch. Cook said that the feature will improve as the company collects more data. In the meantime, he said people who are frustrated with the experience could download mapping applications such as Microsoft Corp.’s Bing, Waze and MapQuest from the company’s App Store. He said customers also could use the iPhone’s Internet browser to use Google’s mapping application.

‘Their Call’

Google Chairman Eric Schmidt said on Sept. 25 that Apple should have stuck with Google Maps. “It would have been better if they had kept ours,” Schmidt said at a press event in Tokyo. “What were we going to do, force them not to change their mind? It’s their call.”

Nate Tyler, a spokesman for Google, declined to comment beyond an online post explaining how to access its maps through the iPhone Web browser. The company hasn’t submitted a mapping app to Apple for the approval needed for it to appear in the App Store, a person familiar with the matter said on Sept. 25.

Google has been building out its online mapping software since 2005, using cars and satellites to accumulate data that helps improve its accuracy and reliability. To catch up, Apple can use location data collected from customers using its maps to improve the service. Apple’s map software includes a feedback feature for users to report inaccurate directions and other bugs.

‘Fell Short’

“At Apple, we strive to make world-class products that deliver the best experience possible to our customers,” Cook said. “With the launch of our new Maps last week, we fell short on this commitment.”

In the past few years, Apple has acquired small mapping companies including C3 Technologies, Poly9 and Placebase. The location information that Apple licenses from TomTom NV (TOM2)and OpenStreetMap isn’t as good as Google, said Noam Bardin, the CEO of Waze Inc., which makes an iPhone mapping app.

“The big problem is they’re 100 percent hostage to the quality of their data -- Apple is stuck,” Bardin said. While the quality will improve, it will be very expensive to match the billions Google has already spent on maps, he said. “The tactical challenge is they bit off what Google does really well and tried to do it themselves.”

Record Sales

Apple had to have known the application had problems during the testing period and decided to move ahead nonetheless, Bardin said.

The mapping fiasco is a product of Apple’s growing rivalry with Google, the maker of the world’s most popular smartphone software. Google’s Android operating system runs on devices from manufacturers including Samsung Electronics Co. and HTC Corp. (2498) that compete with the iPhone.

Apple built the replacement app because it wanted to scale back its relationship with Google, not because of any glaring product flaws, two people familiar with Apple’s development of the mapping features said last week.

The feud also extends beyond maps. For the first time since 2007, Google’s YouTube video service isn’t preinstalled on the new iPhone. Schmidt exited Apple’s board of directors in 2009 as tensions escalated between the competitors.

Apple took a strategic risk releasing its own maps app before it was ready, said Barbara Kahn, a marketing professor at the Wharton School at the University of Pennsylvania.

‘Competitor’s Brand’

“Maps is a very critical Google brand,” Kahn said in an interview. “Apple doesn’t want their competitor’s brand all over their phone.”

That said, defects with the maps isn’t likely to crimp sales of the iPhone 5, said Gene Munster, an analyst at Piper Jaffray Cos. Apple sold a record 5 million iPhone 5s during the handset’s debut weekend. The device, which has a bigger screen and is lighter than previous models, went on sale in another 22 countries today and will be in 100 by the end of the year.

“Consumer sentiment on the iPhone remains high,” Munster wrote in a research note today. “The maps product is not causing a user backlash.”

The maps software joins a list of other faulty services Apple has introduced in recent years. It recently discontinued the Ping music social network after it failed to attract users. MobileMe, a product for e-mail, calender and other online services, was also plagued by defects and recently transitioned into Apple’s iCloud service.

Prior Apologies

This is also the third time Apple has had to apologize or reverse course during the introduction of a new iPhone.

Following the first iPhone release in 2007, Apple co- founder Steve Jobs offered users rebates and an apology because early customers complained about a price cut two months after it went on sale.

In 2010, Jobs apologized and gave out free cases to customers because of antenna defects for the iPhone 4. After Consumer Reports and other publications showed the device would lose its signal if held a certain way, Jobs called a rare press conference to explain the issue.

The mapping application has made the company a target of ridicule. A website was created to chronicle various snafus, including one where a huge swath of Portland, Oregon, is shown as a park and others where bridges are labeled as being on land. In one New York example, Lexington Ave. is listed as being in Brooklyn, not Manhattan.

“Maps is an appalling first release,” David Pogue, the technology critic for the New York Times, said in a review this week. “It may be the most embarrassing, least usable piece of software Apple has ever unleashed.”

Apple fell 2.1 percent to $667.11 at the close in New York, paring the gain for the year to 65 percent.

To contact the reporter on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

RIM Defies Critics by Finding BlackBerry Sales Overseas

By Hugo Miller and Sean B. Pasternak - Sep 28, 2012 5:22 PM GMT+0400
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Research In Motion Ltd. (RIMM)’s sales of the BlackBerry smartphone trounced estimates last quarter as it gained ground in emerging markets, signaling that the company may still have a future in the age of the iPhone.

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The results show that RIM can gain customers in lower-income markets such as Asia and Africa, even as it struggles to compete in the U.S. with Apple Inc.’s iPhone and devices running Google Inc.’s Android software. Photographer: Adeel Halim/Bloomberg

RIM shares rose the most in almost a year in intraday trading after the company sold 7.4 million smartphones, about 500,000 more than analysts had projected. RIM also posted a narrower loss for the period than estimated and increased its cash holdings. That impressed some of RIM’s biggest critics -- including shareholder Vic Alboini, who has previously demanded a shakeup in management and strategy.

“Those numbers are very, very positive,” Alboini, chairman of Toronto-based investment firm Jaguar Financial Corp. (JFC), said in an interview yesterday. “RIM has taken a step up the ladder, and they can see where they’re going.”

The results show that RIM can gain customers in lower- income markets such as Asia and Africa, even as it struggles to compete in the U.S. with Apple Inc. (AAPL)’s iPhone and devices running Google Inc. (GOOG)’s Android software. The challenge now is a successful release of the BlackBerry 10 phone, the linchpin of the Waterloo, Ontario-based company’s comeback strategy.

“If they can have another quarter of not burning cash and can get the device out in a few months, then investors are thinking, ‘Perhaps they have a chance to come back,’” said Neeraj Monga, an analyst at Veritas Investment Research in Toronto who rates RIM a sell.

Shares Gain

The stock jumped 5 percent to $7.50 at the close in New York after climbing as much as 15 percent earlier in the day. That pared the shares’ decline this year to 48 percent.

RIM’s free BlackBerry Messenger program, known as BBM, has emerged as a selling point indeveloping countries, where data plans often cost more.

“It’s amazing when you go into those countries and you see how BBM is just kicking it,” Chief Executive Officer Thorsten Heins said on a conference call, fresh from a tour through Asia, theMiddle East and Africa. “I mean, it’s everywhere.”

RIM also did a better job conserving cash than some analysts predicted, curtailing operating expenses 7.9 percent. Cash and investments grew to $2.3 billion by the end of last quarter, up from $2.2 billion three months earlier.

“The fact cash is not going to burn out in a quarter or two gives us an opportunity to see what BB10 is going to do,” Alboini said.

BlackBerry Sales

Revenue fell 31 percent to $2.87 billion in the period, which ended Sept. 1, topping a projection of $2.47 billion.

While sales of the BlackBerry’s phone beat the 6.9 million predicted by analysts, they remain a fraction of Apple’s volume. The latest iPhone, released earlier this month, sold 5 million units in a single weekend.

RIM’s subscriber base climbed to 80 million at the end of last quarter, up from 78 million. Still, the new BlackBerry 10 lineup has been delayed at least a year, making it harder for the company to compete with the latest Apple and Android devices. At RIM’s software developer conference this week in San Jose, California, Heins said the debut of BB10 is “a few short months away,” without being more specific.

The delays mean the BlackBerry 10 will miss the holiday season, when new Android devices and phones built on Microsoft Corp. (MSFT)’s Windows 8 software will hit the market.

RIM’s share of the global smartphone market dropped to 4.8 percent in the second calendar quarter, from 12 percent a year earlier, according to research firm IDC. Still, Heins said this week that BB10 will have a “clear shot” at being the world’s third-largest mobile operating system. That would put it behind Android and Apple’s iOS, and ahead of Microsoft.

‘Continued Pressure’

RIM posted a second-quarter net loss of $235 million, or 45 cents a share, compared with net income of $329 million, or 63 cents, a year earlier. The company expects to have an operating loss this quarter and face “continued pressure” on its operating results for the remainder of the fiscal year, Chief Financial Officer Brian Bidulka told analysts on the call. He said RIM is using “aggressive pricing initiatives” to sustain the growth of its subscriber base.

“While we applaud the cost and balance sheet improvements, we’d note that selling devices below cost to boost its subscriber base is likely not a viable business solution long term,” saidWilliam Power, an analyst at Robert W. Baird & Co. He left his rating unchanged at the equivalent of a sell.

Scotia Capital Inc.’s Gus Papageorgiou raised his rating to sector perform, and Kris Thompson, an analyst at National Bank Financial, boosted his rating to outperform. Cormark Securities Inc.’s Richard Tse lifted his rating to buy.

Cost Cutting

Heins, who became CEO in January, has embarked on a cost- cutting plan to stem losses at the company. He’s eliminating almost a third of its workforce and shutting down manufacturing sites to boost efficiency.

RIM also has hired JPMorgan Chase & Co. (JPM) and RBC Capital Markets to help explore its strategic options. Heins told analysts yesterday that he’s met with CEOs at various organizations over the past several months to discuss BB10 licensing and partnerships. He plans to continue meeting potential partners and hasn’t set a specific timeframe for the end of the review. Heins has said in the past that he hasn’t ruled out a sale of the company, though that’s not his focus.

RIM needs to keep talking to potential partners because there’s no guarantee that BB10 will be the company’s savior, said Jaguar Financial’s Alboini.

“RIM is still losing money,” he said. “You have to have a push-the-button, ready-to-go backup plan.”

To contact the reporters on this story: Hugo Miller in Toronto at hugomiller@bloomberg.net; 

Sean B. Pasternak in Toronto at spasternak@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net

Intel-Based Motorola Smartphone to Debut in Europe in October

By Ian King - Sep 18, 2012 1:30 PM GMT+0400

 

Intel (INTC) Corp.’s effort to land chips in smartphones is getting a boost from Google Inc. (GOOG)’s Motorola Mobility, which plans to start selling devices featuring Intel processors in Europe and Latin America next month.

Motorola Mobility plans to sell the Razr i in the U.K., France, Germany, Argentina, Brazil and Mexico, the companies said today. The handset is the first to boast a 2-gigahertz version of Intel’s Atom processor, which is designed to speed up such tasks as taking pictures and toggling between applications.

Motorola Mobility becomes the second top-ten smartphone maker to introduce an Intel-based mobile phone, after China’s ZTE Corp. (000063) released one in Europe this month. While Intel is establishing a beachhead in mobile chips after a decade of failed attempts to persuade phone makers to use its products, it doesn’t expect material sales from the effort until 2013.

Intel has less than 1 percent of the market for mobile- phone processors, said Will Strauss, an analyst at Forward Concepts Co., a Mesa, Arizona-based research firm.

Intel lags in mobile chips behind Qualcomm Inc., Samsung Electronics Co. and Apple Inc. Its new device will square off against Apple’s iPhone 5, which goes on sale in parts of Europe on Sept. 21, as well as other, more established brands.

Not all of Intel’s announced partners end up bringing Intel-based phones to market. That was the case with Nokia Oyj (NOK1V) and LG Electronics Inc. (066570)

Fast Camera

The Motorola Mobility phone will be capable of loading the camera function and taking multiple pictures instantaneously, said Jim Wicks, a vice president of mobile devices at Motorola Mobility.

“It will build on the Razr brand,” Wicks said in an interview.

Intel shares fell less than one percent to $23.31 in New York trading yesterday, leaving them down 3.9 percent this year.

India’s Lava International Ltd. became the first company to offer an Intel-based phone, rolling out a model called the XOLO X900 that runs Google’s Android software in April.

Intel has also said that France Telecom SA (FTE)’s Orange and Lenovo Group Ltd. (992) are phone-chip customers.

-- Editors: Tom Giles, Reed Stevenson

To contact the reporters on this story: Ian King in San Francisco at ianking@bloomberg.net;

To contact the editors responsible for this story: Tom Giles at tgiles5@bloomberg.net;

Facebook Posts Record Gain as IPhone Aids Mobile Effort

By Brian Womack and Douglas MacMillan - Sep 13, 2012 1:09 AM GMT+0400 

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Facebook Inc. (FB) posted a record gain after Apple Inc. debuted the iPhone 5 with tighter integration for the social network, enabling voice-activated posts and photo sharing.

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Mark Zuckerberg, chief executive officer and founder of Facebook Inc. Photographer: David Paul Morris/Bloomberg

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Sept. 11 (Bloomberg) -- In today's top headlines, Facebook CEO Mark Zuckerberg breaks his silence on stock performance. Kelly Bit reports on Bloomberg Television's "Bloomberg Rewind." (Source: Bloomberg)

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Facebook increased 7.7 percent to $20.93 at the close in New York. Its prominence on the iPhone 5 debuted today bolstered efforts by Chief Executive Officer Mark Zuckerberg to allay concerns over its ability to generate sales from users who increasingly socialize over handheld devices. The stock has plunged 45 percent since an initial public offering on May 17.

“Now we are a mobile company,” Zuckerberg said in an on- stage interview at the TechCrunch Disrupt conference in San Francisco yesterday, his first since Facebook’s IPO. “Over the next three to five years I think the biggest question that is on everyone’s minds, that will determine our performance over that period, is really how well we do with mobile.”

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Integration with the iPhone, the world’s best-selling handset, offers some evidence that Facebook’s mobile push can work, said Mark Harding, an analyst at JMP Securities LLC in San Francisco. “Investors feel more confident that Zuckerberg is now focused on mobile and focused on monetizing mobile.”

Zuckerberg “struck an upbeat tone,” said Colin Sebastian, an analyst at Robert W. Baird & Co. in San Francisco. “Clearly, from his words, they are making progress in mobile.”

Zuckerberg, who appeared at ease while trading laughs with his interviewer, for the first time elaborated on technical struggles that have impeded Menlo Park, California-based Facebook from creating a user- and advertiser-friendly mobile application. The company spent too long trying to build mobile products using a programming language known as HTML5, Zuckerberg said.

‘Biggest Mistake’

“The biggest mistake we’ve made as a company is betting too much on HTML5,” he said.

Facebook is lessening its reliance on the tools, and it has built an application better tailored forApple Inc. (AAPL)’s mobile software, Zuckerberg said. It’s also working on an application forGoogle Inc. (GOOG)’s Android system. New features will be available to the mobile service in the coming weeks and months, he said.

Based on the amount of time users spend on mobile, the company should make “a lot more money” via wireless devices than through desktops, Zuckerberg said. Mobile users also tend to be more interactive than desktop users, he said.

“It makes perfect sense to us that more people have mobile phones so there is a far larger universe of potential Facebook users and it is much easier to check Facebook mobile regularly,” said Richard Greenfield, an analyst at BTIG LLC in New York, in a research report.

‘Communications Tool’

At the same time, mobile ads may alienate users if the promotions disrupt use of the social-networking service, he said.

‘Facebook is not a media consumption service, it is first and foremost a communications tool,’’ said Greenfield. “If your phone call, IM or iChat were disrupted by ads you would never tolerate it. Facebook users did not mind advertising on desktop because it could be ignored.”

Zuckerberg said Facebook is taking steps to strengthen search capabilities. The company is fielding about a billion search queries a day.

“We have a team working on search,” said Zuckerberg, who was interviewed by Michael Arrington, a venture capitalist and the founder of the TechCrunch technology blog. “Search engines are really evolving towards giving you a set of answers.”

Zuckerberg also said Instagram, the mobile photo-sharing service recently acquired by Facebook, has more than 100 million registered users. Facebook wants to help Instagram, which cost the company about $740 million in cash and stock, to grow to hundreds of millions of users, he said.

Slower Growth

Facebook, which hasn’t closed above the $38 IPO price since its first trading day, reported in July that second-quarter sales increased 32 percent, down from 45 percent in the previous three months.

The share-price performance has been “disappointing” and it “doesn’t help” in terms of employee morale, Zuckerberg said.

Still, Zuckerberg would rather Facebook be underestimated rather than lavished with praise, he said. That gives the company flexibility to make big bets on the future.

“Sure, maybe some people will leave,” he said. “But I think it’s a great time for people to join and a great time for people to stay and double down.”

Zuckerberg’s comments helped boost shares of Millennial Media Inc., operator of a mobile-advertising network. The stock gained 12 percent to $13.68 at the close in New York.

Millennial stands to gain from Facebook’s transition to custom-built apps because it may help increase demand for mobile-ad networks, according to Jason Helfstein, an analyst at Oppenheimer & Co. in New York.

To contact the reporters on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net; 

Douglas MacMillan in San Francisco at dmacmillan3@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net