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.
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.