In the weeks leading up to Apple’s (AAPL) Oct. 4 announcement about the new iPhone 4S, Tim Hickman lived and breathed rumors about the device. His company, Hard Candy Cases, makes protective covers for mobile phones, and he was determined to get a jump on production. After three separate manufacturing partners in China sent him detailed 3D models of an iPhone with a widened, pill-shaped “home” button and a slightly tapered back, Hickman decided to roll the dice. He paid $50,000 to make steel moldings to mass-produce cases for the new design and, on the morning of Apple’s announcement, began taking orders on his website. The gamble backfired: Apple’s new iPhone 4S included no major changes to the exterior design. The home button remained circular. Hickman suddenly owned $50,000 worth of paperweights.
What’s more, some Apple rumor sites rely on the same information as these case manufacturers to report on future Apple designs. They, too, got burned. The report says that smartphone cases are now a $436 million a year business, so it’s no wonder some companies are taking risks like this to be the first to market.