Friday, May 18, 2007

An apology??? I want something better from Engadget who set blogging back years for credibility and cost shareholders 4 billion!

Here is an email response to the letter I sent to Ryan Block, Senior Editor at Engadget yesterday:

Subject: Re: Engadget comments: Apple Story apology
Date: May 17, 2007 7:14:56 PM EDT

Expect to see a post regarding this in the immediate future.

Best, Ryan

Here is the post about which he is referring to in full:

Regarding yesterday's Apple news

Posted May 17th 2007 7:21PM by Ryan Block

Yesterday Engadget posted an incorrect story about an iPhone delay, and I wanted to go into greater detail about how this happened.

At 9:09am CDT yesterday a number of Apple employees received an email that appeared to be from Apple corporate reporting that the iPhone and the next version of OS X had been delayed. An Apple employee who we trust then forwarded this email to us. Let's be clear that this is someone who we know without any doubt is an employee of Apple, not someone we merely believe to be an employee of Apple. We contacted our source after receiving their email, and they confirmed for us that they had indeed received this email, an email which by all appearances was a legitimate email from Apple corporate. In fact, this Apple employee certainly believed this, especially since the email had also been received by other Apple employees. They gave us absolutely no indication that its origin might be in doubt.

For a reporter, this kind of thing -- an internal memo to a company's employees -- is solid gold. You don't often get inside information more sound than a memo stating plans -- and it is not uncommon to see these sorts of internal emails quoted in mainstream newspapers and magazines -- but we are still aware of precisely how dangerous it would be to leave any story at that. So after verifying that the email was indeed sent to internal Apple email lists -- but before publishing anything -- we immediately contacted Apple PR, trying to reach our contacts on their PR team that handles iPod / iPhone matters. It was before business hours on the West coast, though, so we even called an Apple PR manager via their private cellphone in search of a statement. When no one was immediately available, we left voicemail and email.

The question we faced at that moment was: Do we run with the story without Apple's comment or not? The answer seemed fairly clear there, too, at the time. We possessed what confirmed Apple employees believed was an internal Apple memo that with absolutely no doubt had also been received by any number of other Apple employees. This memo was passed to us in good faith -- our source believed that what they were sending was real because it was exactly like every other email of this type they had received from Apple corporate. And it stood to reason that Apple, which normally holds its cards very close to the chest with this kind of news, would more than likely not comment on these matters. (How many times have you read a news story with "Apple was not available for / declined to comment"?) Even when Leopard was facing multiple accusations of delay from across the media, Apple denied it up and down for weeks right up until the very day it announced the delay.

So we were sitting on news of obvious importance -- the email was circulating, and it was enough to set off the alarms of other sources at Apple who also started forwarding it outbound. (As it happened, we were not the only site that acquired and published that memo, perhaps just the first.) Given the nature of that news, we felt we had an obligation to inform people that Apple had sent out an internal memo in preparation of a delay in the iPhone and Leopard. And so I ran the story; I believe most people in my place would have done the same.

About an hour and 40 minutes after the initial memo went out, a second memo was sent to the same internal Apple lists, dismissing the first. Soon after, our source -- who we'd been in contact with through the morning -- let us know that Apple was dismissing this earlier email; the second memo passed off the first as "fake" and "not from Apple". Fake indeed, but it still came from someone familiar with Apple's internal mail systems, lists, memo composition structure, etc., who found a way to plant a phony memo in the inboxes of who knows how many Apple employees. (Both emails are published in the original post.) Why Apple took nearly two hours to respond to the situation we do not know.

The person or persons behind the phony email had apparently put one over on Apple employees to the extent that those employees who received that memo and passed it along to us and others took it as truth -- as did we. Although we made sure to confirm and reconfirm with our source that this email was legit at the time it was sent out, unfortunately no amount of vetting and confirming sources can account for what happens when a corporate memo turns out to be fraudulently produced and distributed in this way.

So who sent the memo, and why? We don't know, and we're not sure we ever will. Again, it was not a public memo, and it was not distributed outside Apple's internal Bullet News list to employees. Ultimately we did the only thing we felt right in doing after the initial post: leave it up unedited (but struck through), making sure the developing situation was made as lucid as possible for anyone involved in order to minimize the damages the leaked email caused.

Credibility and trust is the currency of our realm, and it's clear we lost some of that. (And to be 100% clear, no one at Engadget is allowed to own stock in any of the companies we write about.) We take what we do very seriously and would never knowingly pass along information that we believed could be false or inaccurate; in this case, as stated above, we had confirmation from within Apple that this was in fact information that been distributed via Apple's internal corporate email system. If we had had any inkling that ANYONE could have exploited that system that would have greatly affected how we proceeded.

Could things have be done differently? Definitely. We might have waited until the press release the memo mentioned hit the wires. That could have been any time, though, an hour, three hours; we were obviously sitting on a pretty major story, and we believed that would have been a disservice to our readers. We might also have presented it as rumor or whim, although given the information we had at the time, there was truly no reason to believe it was anything but totally legit, and would have been a misrepresentation of the situation.

We also might have waited to hear what Apple had to say, however long it would take for them to get back to us. While we did indeed do our best to get in touch, but we were unable to immediately produce a result, so I chose to run the without comment, as is standard practice for a reporter working on a big, urgent story. (As it happened, we only heard back from Apple after we got the second internal memo.) Of course, had I waited long enough, that second memo would have made its way to me through the pipeline, and the story would have died on the vine, never to be published. (Well, maybe we would have done a story about a planted internal memo at Apple.)

We have learned a very serious lesson yesterday. We will work very hard to earn back the trust we have lost and to do our best to be what we have always strived to be: a trustworthy source for the latest on gadgets, consumer electronics, and personal technology.

I still want an apology to shareholders - 4 billion was exchanged (read as lost) due to this "lesson learned".

I also take issue with this statement:

And so I ran the story; I believe most people in my place would have done the same.

No ... I didn't run the story even though I saw it within minutes of the post. I DID however call my source and they said it wasn't true and was unsubstantiated. I refuse to believe that MY sources are better than Engadget's. I waited it out and I'm glad that I did.

I plan to send the SEC a letter to look into the possibility of Engadget manipulating stock prices.

John Gruber added Engadget as a "Jackass of the Week" on his Daring Fireball website:

Jackasses of the Week: Engadget

The stock sell-off after Engadget’s report on the bogus announcement of iPhone and Leopard delays knocked $4 billion off Apple’s market cap.

There is some intrigue, though: the bogus email was sent through Apple’s internal email-to-every-employee system. Just a prank, or part of a scheme to profit from the false news?

*MyiPhone.COM proposes that this was a conspiracy on two different levels

* although I am positive that Apple used the FCC approval as damage control not as a tool of malfeasance.

* eWeek: Apple Denies Internal Source For Fake Email

* See yesterday's story: Should Engadget be fined for posting false information about an Apple iPhone delay?"

* Another interesting take: Engadget should have been able to TELL the eMail was fake

* The last thing Apple needs right now is a stock market scandal due to the options "backdating" issue.

Question: Does any reader know how I could get a list of who traded (sold) Apple stock on Wednesday of this past week. There should be some reference somewhere to see who bought and sold the biggest blocks of Apple's stock. I also hold accountable any large stock trading company/mutual fund that sold based on this news. I feel they too should be investigated by the SEC and fined.


Anonymous said...

You too should get your facts straight. Four billion was not lost. A brief shift in share value does not constitute a realised loss. For many of the shareholders who did sell, the transaction would effectively be locking in profits, or are you defining a smaller than ideal profit for a trader as a loss?
And exactly what better than an apology can Engadget offer for their blunder? What would make you happy? Ritual disembowelment would verge on the excessive, and besides it's so messy.

FYT said...

You call that letter an apology? Where are the words, "I apologize"?

It was a bunch of excuses.

Yes 4 Billion WAS LOST - and possibly illegally manipulated to do so.

Just because traders bought back shares doesn't mean that they didn't start selling them off to the tune of 60% of AAPL's daily volume.

A loss is a loss - whether it be in the red or a lower black figure.

Anonymous said...

I agree with Philip.

This "letter" was a justification; not an apology.

Ryan even said, [paraphrased] "You would have done it too!"

That's like saying you'd kill your wife if your wife had been doing the things Nicole Brown Simpson was doing.

A sin is a sin. Engadget committed a professional journalism "sin". They didn't just make a mistake.

Ambrose said...

There is a concept of temporarily manipulating stock prices downwards to gain (illegal) profits.

It's called "selling short."

It's not a complicated concept. Here's one explanation from a well-known source:

Paul Douglas said...

I complete agree with Phillip. I would not have run such a story with nothing more than an internal e-mail without confirmation from Apple.

The post is not an apology, in fact it seems to lay the blame at Apple's door.

I too would like to see the list of people who traded shares in that period.

Unknown said...

What heaping load. The fault is Apple's, not Engadget's. This should serve as a warning to Apple's directors. Putting everything behind the iPhone at the expense the entire rest of Apple's product line is very, VERY dangerous. Should the iPhone fail or only get a luke warm reception (my personal prediction, based on it's high price and limited availability), the results could be catastrophic. Never put all your eggs in one basket. Everyone knows this is a terrible idea, and the stock market knows this as well; hence the multi-billion dollar loss in market cap.

It's time for Apple to stop ignoring the Mac and the iPod. (year of exciting Mac announcements indeed, unless you count Leopard's delay and a .167GHz MacBook upgrade as "exciting announcements.")

Anonymous said...

I guess the hoax was from some scumbag Apple manager to get Apple stocks for less. No surprise from a company with scumbag CEO.

FYT said...

I decided to post 2 of the 8 troll comments I received on this article.

Scumbag CEO?

iPhone going to have lukewarm sales?

Yeah ... I'm laughing too.

Anonymous said...

Wow. You know when an "apology" is twelve paragraphs long that it's not going to be an apology at all. Only a laundry list of excuses can take that long.

Suck it up, Engadget. Take responsibility and be done with it.

Anonymous said...

Oh good lord, the fanboi contingent needs to get some perspective.

A rumor on a web site isn't something that requires such drama queenery. Engadget reported a rumor, the rumor turned out to be false. Whether investors freak out slightly or not doesn't matter in the grand scheme of things.

Besides, if the iPhone is a flop (and at $599 for an obsolete EDGE-based radio, there's every possibility it will be), will you be writing Steve Jobs demanding an apology for $20 billion in stock market value that disappears not in a slight dip and recovery inside of a couple of hours, but rather a steady downward slide over a several months?

Anonymous said...

To "Anonymous troll":

I am a financial advisor. Apple will have to pay out 4 Billion in stock - even if it gained 4 Billion right back. It is several thousand dollars worth of paper work and will have to be reconciled in accounting.

FYT said...

FixYourThinking edited anonymous comment for language:

Give me a break.

So you and your greed, thought you could sell straight off, screwing everyone who DIDNT read the story, and then buy back when the stock tanked for a tidy profit when it inevitably bounced back. And your little plan backfired.

Cry me a river.

You only "lost" money if you were stupid/greedy enough to sell based on a rumor.

Anonymous said...

Apple should be concerned that an employee is feeding 'sensitive information' to a website like Engadget.

As far as I am concerend Engadget jumped on this story in an attempt to be one up on everyone else. If they had waited they might have discovered from their 'source' it was a fake email. But no, they ran it without considering the consequences.


Anonymous said...

An Apple employee who we trust then forwarded this email to us.

Could Apple force Engadget to reveal the identity of the employee?
If I was that employee I might be a little bit worried right now....

FYT said...

Roget ...

I'm pretty sure this is just what Apple will do and will most likely HAVE to fire the Apple employee that forwarded the information to avoid a MAJOR SEC investigation.

This is much more serious than many people think.

I spoke today with a Morgan Stanley Financial Consultant here in my home town. He said this has implications of stock manipulation and even insider trading in conjunction with Engadget. He said at the VERY least Engadget will have to turn over details to the SEC as they don't look at 4 billion changing hands lightly. He also said that Engadget will be lucky that they don't get red flagged by Homeland Security. (That sounds extreme, but he gave me a satisfactory detailed explanation.) I'll report on this at a later date about my interview.

Anonymous said...

Just because you stick a white coat on does not make you a scientist or a doctor. Just because you "publish" a blog does not make you a journalist.

Ryan Blockhead's CV....
Well then.

Sorry, but I’m just not done with the CV yet. Ok, fine, so maybe I am just too lame to post it; you probably wouldn’t be impressed anyway. The long and short of it is I’m Managing Editor of Engadget, as well as being a part of the Weblogs, Inc. Management Team, and a Senior Editor at AOL.

Where are his Journalist credentials? Managing Editor at Engadget?
Senior Editor at AOL?

Oh look if I stick Editor after my name I get to sound important....

FYT said...

Actually a journalist is not a credential .. it's a function. A jourmalist is not a job title. Engadget does serve news and news commentary - two key elements that make the editors journalists.

Anonymous said...

Actually a journalist is not a credential .. it's a function. A jourmalist is not a job title. Engadget does serve news and news commentary - two key elements that make the editors journalists.

Forgive my ignorance. I thought journalism was a job, ergo it would be a job title?
Better not tell my Journo friends when I see them next....
I know you have previously written in depth about the blogger as a journalist so maybe you think I am getting indirectly at you?

OK, so Engadget does "serve news and news commentary" but if this is done in a reckless manner, which seems to be the crux of this (and the preceding) article, then the person responsible needs to be given a hard kick in the ass by someone.

And the "two key elements that make the editors journalists" need to have a few more "key elements" added in the case of Engadget - maybe they should read this?

FYT said...

Good points ... I don't claim to be credentialed here, but I am ... I have won awards throughout my life for my writing. (Two notable ones for this site)

Engadget is the same ... while they hold a lot more weight than this site, they have won numerous awards.

I consider a journalist as a function not a credential.

I wouldn't call myself journalist unless MacWorld Expo allowed me in as such (and they did in 2006). Although in previous years I was turned down. I just wrote a better bio and sent them some stats for my site the second go around.

I hate to say it ... but Bill Palmer is also recognized under this category.

And Roget ... I agree ... Engadget needs a swift kick in the rear for this.

Anonymous said...

I wouldn't call myself journalist unless MacWorld Expo allowed me in as such (and they did in 2006). Although in previous years I was turned down. I just wrote a better bio and sent them some stats for my site the second go around.

I hate to say it ... but Bill Palmer is also recognized under this category.

No, what you and Palmer are categorized as are members of the "Media".
To gain a Media badge for MW you need to provide an example of some written work.
As long as it is industry related (i.e. Apple) you'll maybe qualify for a media pass.

And if you don't even write that much you can get a "Media" badge (one person boasted on their 'blog' how they were getting around failing to qualify for a media pass by using their girlfriends, who had only written ONE short article).

Maybe your use of the word "credential" is different to the way I understand the word. A journalist was originally a term for someone who wrote a journal but it is now a profession, a career.

People who publish their views in a blog (an online journal?) or report news on an internet site might need to have a completely new title to differentiate them from those in the true jouranlist field? "Bloggers" seems to be the favoured term.
Basically any kid with a computer and something to say could call themselves a journalist. But they have not had to work to gain the title - they appoint themselves.

So the likes of Engadget and others who see themselves as the 'new media', need to be accountable in the same way that conventional journalists are.

Paul Douglas said...

Journalist is NOT a credential, it is a broad term for a particular profession. "Editor" is a title.

A credential is completely different.

"A credential is an attestation of qualification, competence, or authority issued to an individual by a third party with a relevant de jure or de facto authority or assumed competence to do so.

Examples of credentials include academic diplomas, academic degrees, and certifications, security clearances, identification documents, badges, passwords and user names, keys, powers of attorney, and so on."

FYT said...

Agreed ..

But a point needs to be made. There is no club, no rating, no clique - called "Journalists".

What is news to some is not to others. Points discussed are moot to some; philosophical masterpieces to others.

There should never be a time in history or definition when a journalist is made to "qualify" to write.

Some of the greatest reporting, greatest stories will be lost if such a day comes.