[Infowarrior] - Apple’s Secrecy on Products and Top Executives

[Richard Forno]

June 23, 2009
Apple’s Secrecy on Products and Top Executives
By BRAD STONE and ASHLEE VANCE

http://www.nytimes.com/2009/06/23/technology/23apple.html?_r=1&hp=&pagewanted=print

SAN FRANCISCO — Apple is one of the world’s coolest companies. But  
there is one cool-company trend it has rejected: chatting with the  
world through blogs and dropping tidbits of information about its  
inner workings.

Few companies, indeed, are more secretive than Apple, or as punitive  
to those who dare violate the company’s rules on keeping tight control  
over information. Employees have been fired for leaking news tidbits  
to outsiders, and the company has been known to spread disinformation  
about product plans to its own workers.

“They make everyone super, super paranoid about security,” said Mark  
Hamblin, who worked on the touch-screen technology for the iPhone and  
left Apple last year. “I have never seen anything else like it at  
another company.”

But even by Apple’s standards, its handling of news about the health  
of its chief executive and co-founder, Steven P. Jobs, who has battled  
pancreatic cancer and recently had a liver transplant while on a leave  
of absence, is unparalleled.

Mr. Jobs received the liver transplant about two months ago, according  
to people briefed on the matter by current and former board members.  
Despite intense interest in Mr. Jobs’s condition among the news media  
and investors, Apple representatives have declined to address the  
matter, reciting with maddening discipline only that Mr. Jobs is due  
back at the company by the end of June.

Mr. Jobs was actually at work on Apple’s sprawling corporate campus on  
Monday, according to a person who saw him there. Company  
representatives would not say whether he had returned permanently.

Even senior officials at Apple fear crossing Mr. Jobs. One official,  
who is normally more open, when asked for a deep-background briefing  
about Mr. Jobs’s health after the news of the transplant had become  
public, replied: “Just can’t do it. Too sensitive.”

Secrecy at Apple is not just the prevailing communications strategy;  
it is baked into the corporate culture. Employees working on top- 
secret projects must pass through a maze of security doors, swiping  
their badges again and again and finally entering a numeric code to  
reach their offices, according to one former employee who worked in  
such areas.

Work spaces are typically monitored by security cameras, this employee  
said. Some Apple workers in the most critical product-testing rooms  
must cover up devices with black cloaks when they are working on them,  
and turn on a red warning light when devices are unmasked so that  
everyone knows to be extra-careful, he said.

Apple employees are often just as surprised about new products as  
everyone else.

“I was at the iPod launch,” said Edward Eigerman, who spent four years  
as a systems engineer at Apple and now runs his own technology  
consulting firm. “No one that I worked with saw that coming.”

Mr. Eigerman was fired from Apple in 2005 when he was implicated in an  
incident in which a co-worker leaked a preview of some new software to  
a business customer as a favor. He said Apple routinely tries to find  
and fire leakers.

Philip Schiller, Apple’s senior vice president for marketing, has held  
internal meetings about new products and provided incorrect  
information about a product’s price or features, according to a former  
employee who signed an agreement not to discuss internal matters.  
Apple then tries to track down the source of news reports that include  
the incorrect details.

Five years ago, Apple took its obsession with secrecy to the courts.  
It sued several bloggers who had covered the company, arguing that  
they had violated trade-secret laws and were not entitled to First  
Amendment protections. A California appeals court ruled for the  
bloggers, and the company had to pay $700,000 in legal fees.

Apple also sued a blog called Think Secret and settled the case for an  
undisclosed amount, but as part of the settlement that blog shut down.

Regis McKenna, a well-known Silicon Valley marketing veteran who  
advised Apple on its media strategy in its early days, said the  
culture of secrecy had its origin in the release of the first  
Macintosh, which competitors like Microsoft and Sony knew about before  
it was unveiled.

“It really started around trying to keep the surprise aspect to  
product launches, which can have a lot of power,” Mr. McKenna said.

He added: “But what most people don’t understand is that Steve has  
always been very personal about his life. He has always kept things  
close to the vest since I’ve known him, and only confided in  
relatively few people.”

Apple’s decision to severely limit communication with the news media,  
shareholders and the public is at odds with the approach taken by many  
other companies, which are embracing online outlets like blogs and  
Twitter and generally trying to be more open with shareholders and  
more responsive to customers.

“They don’t communicate. It’s a total black box,” said Gene Munster,  
an analyst at Piper Jaffray who has covered Apple for the last five  
years.

Mr. Munster said he jokes with other colleagues covering the company  
about how Apple routinely “jams the frequencies,” or gives them  
misinformation to throw them off the scent of a new product or other  
news it hopes to keep confidential. Four years ago, he said, a senior  
Apple executive directly told him the company had no interest in  
developing a cheap iPod with no screen. Soon after, the company  
released just that: the iPod Shuffle.

For corporate governance experts, and perhaps federal regulators, the  
biggest question is whether Mr. Jobs’s approach has led to violating  
laws that cover what companies must disclose to the public about the  
well-being of their chief executive.

On that key issue, the experts are divided. Some believe Apple did not  
need to disclose Mr. Jobs’s liver transplant because Mr. Jobs was on a  
leave of absence and had passed responsibility for the day-to-day  
operations of the company to the chief operating officer, Timothy Cook.

Other governance experts argue that the liver transplant now makes one  
of Apple’s assertions from January — that Mr. Jobs was suffering only  
from a hormonal imbalance — seem like a deliberate mistruth, unless  
Mr. Jobs’s health condition suddenly deteriorated. Of course, no one  
knows enough to say definitively.

Most governance experts do seem to agree on one point: that the  
secrecy that adds surprise and excitement to Apple product  
announcements is not serving the company well in other areas.

“In this environment, where transparency is critical, the more  
information you give the marketplace the better,” said Charles Elson,  
director of the John L. Weinberg Center for Corporate Governance at  
the University of Delaware. “For a technology company that views  
itself as innovative, it’s a little odd that they are getting a  
reputation for lack of transparency.”

Apple’s stock dropped $2.11 to $137.37 on Monday amid a larger market  
sell-off. And the company did, in fact, have something to reveal: it  
said it had sold a million units of its new iPhone 3G S over the  
weekend, well above analysts’ forecasts.