Apple: Lost iPhone debacle to result in 'huge' sales loss

Apple (NASDAQ:AAPL) executives believe Gizmodo's revealing of the company's next-generation iPhone could lead to a "huge" loss in sales, recently unsealed court documents show.

Apple's next-generation iPhoneThe documents, released Friday by a San Mateo, Calif., county judge at the urging of several media outlets, show Apple executives met with police investigators the day after Gizmodo posted its lost-iPhone story. According to the documents, Matthew Broad, a detective with the San Mateo County Sheriff's office, met with Bruce Sewell, Apple's senior vice president and general counsel; Rick Orloff, Apple's director of information security; and Apple's outside counsel, George Riley of O'Melveny and Myers.

At the meeting, Riley said that disclosure of the prototype could harm Apple because consumers might hold off on buying Apple products until the new iPhone is released, according to a search warrant. He was asked to estimate how large a loss Apple would suffer, and said it would be "huge." Apple is widely expected to unveil the latest version if its iPhone next month.

The phone was left at a bar by an Apple employee and discovered by 21-year-old Brian Hogan, who then sold it to Gizmodo for $5,000. Hogan's roommate tipped off Apple about the missing prototype. Apple CEO Steve Jobs contacted Brian Lam, Gizmodo's editor, after the iPhone pictures were published. According to the documents, Lam said the device would be returned if Apple acknowledged the device was its iPhone prototype. Lam gave Apple the address of Gizmodo employee Jason Chen to arrange to have the iPhone picked up. Police later seized computers and other devices from Chen's home.

A device that looks similar to the one obtained by Gizmodo has since popped up in Vietnam.

For more:
- see this Reuters article
- see this WSJ blog post (sub. req.)
- see this Computerworld article

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