Oracle Apps R12 “Cannot complete applications logon”

In a recently cloned R12 instance, we can successfully login as oracle apps user
but clicking on a form based function triggers this pop-up error:

“Cannot complete applications logon.
You may have entered an invalid applications password,
or there may have been a database connect error.”

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:
Not 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.