Apple is famous for being nuts about secrecy—and for not having a sense of humor. So it was all the more entertaining when Gizmodo, a scrappy Silicon Valley tech blog, recently landed what its publisher called "the biggest tech scoop ever." It got hold of a top-secret, fourth-generation iPhone, ripped it apart, and published photos and descriptions of the device. (Guess what? It has a camera that faces you for video chatting!) Apple fumed and demanded Gizmodo return the phone, which an Apple engineer had left behind in a beer garden where he was celebrating his birthday.
Gizmodo gave back the phone, and that might have been the end of the story, but Apple just wouldn't let it drop. Four days later, police raided the Fremont, Calif., home of the reporter who had written the piece—and that sent the story spiraling out of control, with everyone from Rush Limbaugh to Keith Olbermann commenting on it. Jon Stewart of The Daily Show lashed into Apple, saying Steve Jobs and his team were behaving like "appholes."
It's the kind of attention that Apple, long a media darling, isn't used to. Apple's control-freak nature didn't matter as much when it was a plucky underdog. Yes, Jobs was a demanding boss and a finicky perfectionist—but he created great products. We rooted for Apple, and wanted it to survive. Apple seemed like the anti-Microsoft, a company that was on our side. But this year Apple will do nearly $60 billion in sales, and its market value stands at $240 billion—the third-largest in the United States, bigger than Coca-Cola and Pepsi combined. Any company that big can seem a little scary. So when police start breaking down doors over a lost phone, it's a PR disaster, especially for Apple. The company works hard to cultivate a counterculture image, with ads that have featured Gandhi and John Lennon, not to mention the "I'm a Mac" hipster. Yet lately Apple has started to look like the big bully of the tech industry, the kid who doesn't play well others. Over the long haul, that can put customers off.
The Gizmodo affair is only the latest in a string of skirmishes. Apple has fallen out with Google, a former ally, because Google moved into the mobile-phone market and has blocked Google Voice, a telephony app, from running on the iPhone. Apple is suing HTC, a Taiwanese phone maker and big Google partner, claiming that HTC's handsets infringe on Apple patents. Apple cracks down on its own engineers, and recently fired one for giving a glimpse of an early 3G iPad to Apple cofounder Steve Wozniak, who complained that Apple had been too harsh. Apple bullies developers, telling them which software tools they can use and rejecting apps that ridicule public figures or that, in the case of journalist Michael Wolff, are created by people who have criticized Jobs himself.
Finally there's an ugly war with software maker Adobe, in which Apple refuses to support Adobe's Flash program on its iPhone and iPad, even though most of the Web's videos require Flash. Apple claims its rejection of Flash is based on technical arguments, but it still comes off looking like the heavy, the big company desperate to crush a smaller opponent.
Same goes for the Gizmodo affair. The tale, as told by Gizmodo, goes like this: On March 18, an Apple engineer named Gray Powell was celebrating his 27th birthday at Gourmet Haus Staudt, a beer garden in Redwood City, Calif., about 20 miles from Apple's headquarters in Cupertino. Powell carried with him a prototype next-generation iPhone, and somehow left it at the bar.
Another patron, Brian Hogan, 21 years old, found the phone, which looked like a regular iPhone but had some unusual bar codes stuck on the back. He took it home and realized that the case was a fake, and that inside the plastic shell was an entirely different phone. According to Gizmodo, Hogan contacted the blog, a negotiation took place, and Gizmodo ended up buying the device for $5,000.
Gizmodo wasn't sure the phone was a genuine Apple prototype; it could have been a fake. But when the editors took the phone apart they discovered it contained parts stamped with Apple's logo. On Monday, April 19, Gizmodo ran its story, by reporter Jason Chen. Nobody at Gizmodo will talk on the record because of the ongoing legal proceedings. Apple, for its part, also declines to comment.
But on the day the story ran, Jobs himself called Gizmodo editor Brian Lam and demanded Gizmodo return the phone. Lam said Gizmodo would comply but wanted Apple to make a formal request in writing, which would establish that the phone was from Apple. After some back-and-forth, Apple sent Gizmodo a letter, which Gizmodo gleefully published. That evening, the same day Gizmodo's article ran, an Apple lawyer retrieved the phone from Chen.
After this, instead of letting the whole thing drop, an Apple lawyer, plus Gray Powell, the engineer who lost the phone, called the San Mateo County district attorney to report that a phone had been stolen. Why do that after the device had been returned? Apple won't say. But the purpose of reporting a crime is to encourage law enforcement to investigate, says D.A. Stephen Wagstaffe.
On Friday, April 23, a few days after Apple filed its report about the stolen phone, Chen and his wife came home from a dinner date and found police had broken in their door and were going through their house. The police, armed with a search warrant, took six computers. Gawker Media, which owns Gizmodo, complained to Wagstaffe that Chen, as a journalist, should be protected against such searches by a California shield law. Gawker demanded police return the computers. So far that hasn't happened.
Police have not brought charges Hogan, who says he regrets his mistake, or against anyone at Gizmodo. But the whole thing has sparked a debate about journalistic ethics. Some tech bloggers, including John Gruber and Jason Calacanis, argue that both the seller and Gizmodo broke the law. Others, like the Electronic Frontier Foundation, a legal-advocacy group, have sided with Gizmodo, saying police had no right to break into the home of a journalist.
Apple, for its part, seems to have realized that no matter who is right or wrong, having its brand associated with aggressive police action is probably not a great idea. So last week the company scrambled to draw attention away from the Gizmodo story by having Jobs publish an essay on the Apple Web site explaining Apple's reasons for shunning Adobe's Flash software. It worked, sort of. The tech blogs all ran with the news that Steve Jobs had come down from the mountain and published an essay. But the Gizmodo mess is not going away. Will it hurt Apple's business? Not immediately. If anything, the buzz could boost sales when the new phone ships, probably in June. Long term, however, Apple's brand could suffer. "I think there's going to be a backlash. It's all just dark and creepy," says Rob Frankel, a brand consultant in Los Angeles. Call it the price of success.