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Apple’s Obsession With Secrecy Grows Stronger

Posted on 23 June 2009 by admin

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 [AAPL], 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 (MSFT) 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.
…While Fake Steve Jobs Returns to Blogging
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.

This story originally appeared in the The New York Times

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