Why Apple Has Trouble Keeping Its Secrets

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By Ian Sherr

In one of his first interviews after becoming Apple’s chief executive, Tim Cook vowed to double down on secrecy. It seems to be a hard promise to keep.

The company’s product launch Tuesday had the typical Apple flair and flashes of excitement, but there were few surprises associated with the two new iPhones unveiled by Cook and his lieutenants. Keeping product details quiet has always been a challenge for the company and its competitors, but a predictable trickle of leaks turned into a torrent of details about its latest offerings just before the event.

Rumor blogs and websites devoted to writing about every step Apple takes published a stream of photos, videos and detailed descriptions of the two gadgets for months leading up to the event — including features like the addition of fingerprint-scanning technology, the new iPhone 5S color and the new chip that can process 64 bits of data at a time.

Websites even posted photos of the packaging for Apple’s low-cost iPhone 5C, as well as video tours of its design.

An Apple spokesman declined to comment for this article. But company executives tried to play up the positive attributes of pre-event publicity Tuesday.

“Some of you may have seen some shots on the Web, and that’s cool, because people are excited,” said Phil Schiller, Apple’s senior vice president for worldwide marketing.

Of course, companies have been known to try to orchestrate such excitement by planning leaks, not that any evidence has emerged to suggest Apple tried that tactic this time. In any case, the stock market reacted negatively, driving Apple shares down nearly 6% in recent trading.

Analysts attributed the drop largely to higher pricing than they expected on the new iPhone 5C, which could limit Apple’s ability to expand its market share in emerging countries.

One major reason controlling product secrets has become harder is the vast and growing number of people now involved in designing and making consumer devices, experts in managing company supply chains say. In Apple’s case, participants range from engineers at its Silicon Valley headquarters to the young, relatively low-paid workers on the assembly lines at contractors in China, which pump out millions of devices each quarter.

“When they’re paying employees dollars a day, they’re not going to pay the kind of security it would take to make it air-tight,” said Pierre Mercier, a partner and head of supply-chain efforts at Boston Consulting Group.

 

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(Published September 11, 2013 @ WSJ.com.)