Cannot complete applications logon

Recently after a clone none of the services would start up and gave error like this one:

Cannot complete applications logon. You may have entered an invalid applications password, or there may have been a database connect error.
Apache Web Server Listener :httpd ( pid 21496 ) is running.

We checked for GUEST password and it was ORACLE in system profile option and encrypted passwords. However the services wouldn't start. If we changed the GUEST password to GUEST the Apache services started but Jserv wouldn't start:

JVM logs had this error:

Exception in static block of jtf.cache.CacheManager. Stack trace is: oracle.apps
.jtf.base.resources.FrameworkException: oracle.apps.fnd.common.PoolException: No
t able to create new database connection: FNDSECURITY_APPL_LOGIN_FAILED

It was clear that GUEST password was out of sync. Since we could not pinpoint where the issue was we followed this strategy to solve this issue:

1. Change the s_guest_passwd to GUEST/GUEST in context file and run autoconfig.
2. Checked everything was working fine, including Apache, Jserv, Forms
3. Changed back s_guest_passwd to GUEST/ORACLE in context file and run autoconfig.

It worked fine after this.

Sandhya reported another instance with the same symptoms, however the above 3 points were correct.  Something had gone wrong with the encryption of passwords.  The encryption had the old production password, but the database had the new apps password.  Changing back the APPS and APPLSYS passwords back to its production value, through alter user command solved it.