Inside Apple: Cupertino's secrets revealed

It seems big-name app developers don't get much love either. In the run-up to the launch of the first iPad, firms including Flixster, Evernote and mobile app developer Digital Chocolate asked for dev kits and were turned down flat and offered simulator software instead; the developers Apple did say yes to had to sign a 10-page confidentiality agreement and jump through all kinds of hoops.

The "sixth person to get an iPad", a developer of a very successful iPad app, told Business Insider that in order to get a genuine, pre-release iPad to test code on, "we had to have a room with no windows. They changed the locks on the door. Three developers and I were the only people allowed to go in the room. Apple needed the names and social security numbers of the people who had access."

Apple drilled holes in the desk and chained the iPads up with bicycle cables, and each iPad was in a custom frame "so we couldn't even tell what the iPads looked like."

Apple's representatives even took photos of the wood grain of the desk: if any pictures leaked out, they could trace it back to which desk they came from. "I wasn't allowed to tell our CEO," the developer says. "I wasn't allowed to tell anybody anything about what we were doing. I couldn't even tell my wife."

Apple's wall of secrecy meant that blogs and media outlets became Apple's PR machine - but it's a machine that Apple doesn't control, and if you don't control something there's always the risk that it might turn around and bite you.

That's exactly what happened in October when Apple announced the iPhone 4S - or rather, when Apple didn't announce the iPhone 5. Don't just take our word for it: here's Apple's Chief Financial Officer, Peter Oppenheimer.

"Apple's secrecy creates a certain amount of vacuum, which, as we all know, the internet abhors, and then fills with rumours," he said during Apple's October financial earnings call, noting that "pervasive" rumours had had a negative impact on iPhone sales.

The rumours didn't just affect sales: they affected Apple's share price too, with the value of Apple shares immediately falling by 5%. That's been happening quite a lot lately: with the exception of the iPad 2, the announcement of every major iOS device from the iPhone 3GS onwards has lead to a significant drop in Apple's share price.

Digital Trends' Geoff Duncan argues that Apple could be responsible for such drops in two ways: by whipping up the hype to the point where speculators buy Apple shares early and dump them at the very peak of the hype cycle as the keynote starts, and by attracting amateur investors with "unreasonable expectations" who "may start acquiring Apple stock in an effort to make a quick buck.

Once the announcement hits, and Apple's stock price begins to decline, these same investors may panic and sell their stock in an effort to minimise their losses. That puts more Apple stock for sale, driving down the price even further."

The danger for Apple is that it could become the victim of its own success. Apple rumour-mongering has become an industry, especially online, where click-hungry sites publish the most ridiculous rumours in the hope of getting a bit more traffic. When the rumours become the story, as happened with the iPhone 4S, the actual product can't be anything other than a disappointment.

That could be disastrous not just for Apple's shareholders, but for Apple itself: imagine if Apple product announcements were greeted not with cheers, but with jeers.

Secrecy for the sake of it

Critics of Apple argue that sometimes Apple takes its obsession with secrecy too far. For much of 2009 the App Store approvals process seemed to have been designed by Kafka, with apps being rejected for opaque reasons and developers given no option to appeal. That was eventually addressed and clear guidelines published, but only after widespread bad publicity.

Many Apple watchers also believe that the firm should have been more open about Steve Jobs' failing health, and that by refusing to comment Apple turned the matter into a media circus. And according to CNN, retail industry executives "say Apple's demands for absolute secrecy in its store development process are peculiar and unjustified."

You can understand Apple wanting to keep the lid on details of the next iPhone, but its shops? Apparently so: CNN says that when it approached architect Peter Bohlin, who'd spoken to The New York Times about his work designing some of the most iconic Apple Stores, he said that "Apple has requested that we refrain from granting any additional interviews."

Furthermore, CNN claims that "nearly two dozen people involved in the development of upcoming and recently opened US Apple Stores [say] Apple sometimes employs uncommon legal tactics, refuses to name itself in public documents and hearings, and has sworn city government officials to secrecy."

Stealthy stores

Grand Central

In Santa Monica today, where Apple is widely believed to be opening a second Apple Store, Apple's secretive behaviour "has perplexed and infuriated city officials who are unclear why Apple would feel the need to hide a new store when it already has one a couple of blocks away." CNN asked Apple to comment. Apple, of course - and yes, you're ahead of us here - declined.

Secrecy has been part of Apple's retail efforts since before the first store was opened: Apple hired an enormous warehouse to test its Store ideas in absolute secrecy, and they even hid the identity of the man in charge: when Steve Jobs hired Target executive Ron Johnson to head the Apple Store project, Johnson was given a false name and a phoney job title to throw rivals off the scent. John Bruce didn't get his name back until the first Apple Store was unveiled.

Apple is secretive because of Steve Jobs. Jobs was a naturally secretive man, but he also understood the power of "big-bang" product announcements to generate enormous free publicity and to prevent pre-release bad publicity.

In Steve Kemper's book Code Name Ginger, which recounts the story of the Segway scooter, Kemper describes a meeting between Segway inventor Dean Kamen, CEO Tim Adams, Amazon CEO Jeff Bezos and Steve Jobs. Jobs made it abundantly clear that he was no fan of the Segway's design or of Jeff Bezos' idea to launch the Segway softly in one country, pointing out that "slow was no longer possible… if the machine was unavailable in the United States, the company would blow its chance for $100 million of free publicity in its biggest market."

Jobs also pointed out that with a slow launch, all it would take to create a PR disaster would be one unhappy customer. "I understand the appeal of a slow burn," he said, "but personally I'm a big-bang guy."

Will Tim Cook follow in Steve Jobs' secretive footsteps? We're betting on yes. Secrecy has served Apple well for the best part of 15 years, helping lift it from a bit player to the most important and influential technology company on Earth.

While Apple has become more open in recent years - publishing App Store approval guidelines, being up-front about environmental issues and so on - and Cook is more communicative than Jobs, the wall of secrecy surrounding Apple's products will remain as strong as ever.

If anything, it needs to become stronger: the stakes are too high for any more iPhone prototypes to be left behind in bars. For Apple, secrecy isn't an affectation: it's the company's killer app.