Apple in 2014: iPhone 6, iCloud hack, Beats and more (pictures)

Leading off a year of many big events for the company, Apple in May unveiled its largest acquisition ever, agreeing to purchase Beats for $3 billion and giving it a popular headphones business and subscription streaming-music service.

The deal, which closed in August, included hiring Beats co-founders, record producer Jimmy Iovine and rapper Dr. Dre. Apple is expected to use both of them to build up its links to the music world.

Beats controls about 60 percent of the $1 billion premium-headphones market, according to NPD Group, and it’s proved popular with everyone from celebrities to tweens. The Beats Music subscription streaming service costs about $10 a month, or $100 a year, but is far less established than the headphone side of the business.

The acquisition showed a new direction that Tim Cook -- who became Apple’s CEO in 2011 -- may be taking the company. Apple in the past has largely shunned these kinds of big acquisitions of well-known startups, instead opting to buy smaller players with talent or technology that helps Apple build on its products. Apple also makes its own name as ubiquitous as possible in its stores and on its website -- though in this case will make room for another brand by maintaining the Beats name.

Pictured from left: Beats co-founder Iovine, Apple CEO Cook, Beats co-founder Dr. Dre and Apple iTunes head Eddy Cue.

Apple faced heavy criticism in September after nude photos of actress Jennifer Lawrence (pictured), model Kate Upton and several other celebrities were stolen from their iCloud cloud-storage accounts and shared across the Web.

The company said the attack wasn't a widespread breach on the iCloud or Find My iPhone services but the result of a targeted attack on celebrities. Apple said hackers accessed the accounts by figuring out user names, passwords and security questions. In response,  Cook said Apple would bolster its security measures on iCloud, including adding more alerts to users when someone tries to make changes to their accounts.

Apple has advised customers to always use a strong password and enable two-step verification, which adds an extra step to logging in to make hacking attacks much harder.

It took Apple three years to respond to the trend of larger smartphones, but once it did, the iPhone 6 and 6 Plus became huge hits.

With sales starting in September, Apple reported its biggest iPhone launch ever, with buyers snapping up the 4.7-inch-display iPhone 6 and 5.5-inch iPhone 6 Plus as fast as Apple could make them. In the latest quarter, Apple sold a record 39.3 million iPhones, up 16 percent from the year earlier and easily topping analysts’ predictions, thanks to 10 million iPhone purchases in the first weekend of sales.

"Demand for the new iPhones has been staggering,"  Cook said during an October conference call with analysts.

The iPhone is the linchpin of Apple’s lineup, accounting for more than half of sales and about 70 percent of profit, according to analysts. Apple hopes to use the new phones to steal customers from rivals Samsung Electronics and HTC, which have been coming out with big-screen phones for years.

The new iPhones are a big jump over the 4-inch screen found in last year's iPhone 5S and 5C. In addition to being slimmer and lighter, both models also include a 64-bit A8 processor with improved graphics, an improved 8-megapixel rear camera, better battery life and an NFC chip that allows you to use the phone to make payments.

While the new iPhones have garnered positive reviews, Apple faced a hiccup from reports that the devices could actually bend in a person's pocket. Amid the mini-controversy, Apple disclosed that only nine customers contacted the company about bent phones, saying the problem was “extremely rare.”

During its flashy iPhone 6 debut event in September, Apple unveiled its new mobile payment system, called Apple Pay.

Mobile wallets offered by Google, PayPal, Apple and others have the potential of letting consumers get rid of their credit cards, loyalty cards and coupons, instead using just their phones. But, so far consumers have balked at adopting the new technology, seeing plastic cards as easy to use.

Apple Pay, which went live in October, could get more people to use mobile payment systems, but it’s still too early to say if the new service will bring about big change.

Despite the challenges, it's not surprising Apple would show interest in the new technology. Researcher Gartner predicts the global market for mobile payments will reach about $720 billion in transactions by 2017. This is up from about $235 billion last year.

One more big reveal of September’s iPhone 6 event was the Apple Watch, the company’s first new product category since the iPad went on sale in 2010.

The smartwatch is set to hit the market early next year starting at $349. It will bring Apple into the already competitive wearables market, where Fitbit, LG, Samsung, Motorola and others are already selling smartwatches and fitness bands.

The new device comes in three designs -- the stainless-steel-cased Apple Watch, the aluminum-cased Apple Watch Sport, and the 18-karat-gold-cased Apple Watch Edition.

At September’s event, Cook described Apple Watch as a "comprehensive" health and fitness device, walkie-talkie, and remote control for the Apple TV streaming-box. Those factors alone set the device apart from current smartwatches, which tend to simply track steps, provide notifications and run basic apps. However, the Apple Watch may end up being a niche, high-end product, since there are already many cheaper smartwatches out there.

Just because something is free doesn’t mean people will want it.

Planned as the cherry on top of Apple’s iPhone 6 launch event, U2 ended the show with a short concert, then revealed it was giving away the band’s newest album, “Songs of Innocence,” to iTunes’ 800 million accounts.

A vocal crowd of users griped that Apple automatically downloaded the album to their iTunes and other iOS devices without their permission and they wanted to give it back. Apple soon provided a page on its website on how to remove the album.

About a month later in a Facebook video answering fans’ questions, Bono fielded this pointed submission: “Can you please never release an album on iTunes that automatically downloads to peoples playlists ever again? It’s really rude.”

U2’s frontman sounded contrite.

“Oops, I’m sorry about that,” he said. “I had this beautiful idea. Might have gotten carried away with ourselves. Artists are prone to that kind of thing. A drop of megalomania, a touch of generosity, a dash of self-promotion, and deep fear that these songs that we poured our life into over the last few years mightn’t be heard.”

Wait, it’s not just the iPhone? Apple got around to offering up an update on most of its lineup, including a thinner and faster iPad Air 2 (pictured) and an iPad Mini 3 updated with a TouchID fingerprint reader.

The Mac lineup largely got a bump in hardware specifications, with the iMac getting the biggest addition with a pricey “5K Display” version.

In the latest quarter, Mac laptop and desktop sales actually outpaced iPad sales for the first time in more than three years, even as industrywide personal computer sales are still dropping. That brings up the question of whether Apple’s iPad growth days are in the past, or whether the iPad Air 2 can provide a new spark.

The tech giant updated its mobile and desktop operating systems this year, offering up the simply designed iOS 8 for its smartphones and tablets in September and Yosemite software for its desktops and laptops in October.

The new systems were built to more closely connect Apple devices to one other, allowing you to access and update the same project using different Apple devices, share files, and respond to iMessage texts and phone calls using your phone, tablet or laptop.

iOS 8 marks the second major release of Apple’s mobile operating system under the guidance of head designer Jony Ive and new software head Craig Federighi. Cook fired the prior iOS chief, Scott Forstall, in 2012 in part for refusing to take responsibility for a botched launch of Apple’s Maps.

While an update to iOS 8 accidentally prevented iPhone owners from connecting to cellular service, the update was quickly recalled and new software was released a few days later.

Pictured from left: Apple software executive Federighi and CEO Cook at June’s unveiling of iOS 8 during Apple Worldwide Developers Conference.

Cook says he hasn’t hid the fact that he’s gay, but -- in the interest of maintaining his privacy -- also didn’t publicly acknowledge it. Hoping to do his part to help others in the gay community, Cook wrote a column for Bloomberg Businessweek in October, saying: “I’m proud to be gay.”

“If hearing that the CEO of Apple is gay can help someone struggling to come to terms with who he or she is,” Cook wrote, “or bring comfort to anyone who feels alone, or inspire people to insist on their equality, then it’s worth the trade-off with my own privacy.”

Cook said he considers being gay as one of “the greatest gifts God has given me,” providing him with more empathy and a greater understanding of other minority groups.

“It’s been tough and uncomfortable at times, but it has given me the confidence to be myself, to follow my own path, and to rise above adversity and bigotry,” he wrote.

Synthetic sapphire, a form of the second-hardest material in the world after diamonds, was expected to become the newest display cover on Apple’s next iPhone, replacing Corning’s Gorilla Glass.

Apple invested hundreds of millions of dollars to build up a huge stock of the scratch-resistant material through supplier GT Advanced Technologies. But, GT surprised Apple, Wall Street and many others by filing for bankruptcy protection in October, saying it was burning through cash trying to prepare a new Arizona sapphire-production facility for Apple.

Last month, GT released in bankruptcy court filings a stinging condemnation against Apple, accusing the tech giant of being controlling, refusing to negotiate and constantly changing its standards for the sapphire.

Apple refuted those claims, saying GT simply failed to fulfill its side of the deal. In the end, the mess resulted in many losses: over 1,300 GT jobs, hundreds of millions of dollars in investments from both companies and nearly all of GT’s market value. What could have been a partnership to make a potentially game-changing material for smartphone displays instead became an embarrassing episode for Apple and a cautionary tale for any of its future suppliers.

Apple’s investors have plenty of reasons to celebrate in 2014.

The tech giant, already the highest-valued company in the world, saw its market value cross an eye-popping $700 billion last month, before giving some of those gains back. Shares are up about 40 percent this year, helped along by June’s seven-to-one stock split and the company’s continued share repurchases.

Apple has faced pressure from shareholders, including activist investor Carl Icahn, to give back some of its massive cash stockpiles. Amid those calls, Apple earlier this year approved a big increase to its dividend and share buyback program, along with the stock split. The company at that time boosted the amount of cash it plans to return to shareholders by about $30 billion to more than $130 billion.

If Apple can keep thrilling consumers like Andreas Gibson -- pictured here on the iPhone 6’s launch day in Manhattan -- it may be able to keep both its fans and investors happy in 2015.