Analyst: Don’t Expect an iPhone 4 Recall

| Apple Stock Watch

Apple will be holding a special iPhone 4-related press conference Friday morning, and UBS analyst Maynard Um thinks the idea that the company will be issuing a device recall over antenna and signal strength issues is wrong.

“We believe a recall is unlikely as any recall would presumably be more immediate and sales halted by Apple and its operator partners,” Mr. Um said. “However, if the solution were straight forward, investors are likely to wonder why it wouldn’t be issued by press release. We believe an event is necessary as a press release to address what has become a ‘loud’ issue would likely have drawn more ire.”

Apple has been facing negative press over signal strength issues some customers have been reporting. In some cases, holding the iPhone 4 so the lower left corner of the device is covered causes the signal strength bars to drop.

According to Apple, the issue is software-related, and a patch is on the way. Consumer Reports, however, claimed their testing showed the issue is a hardware problem.

“When your finger or hand touches a spot on the phone’s lower left side — an easy thing, especially for lefties — the signal can significantly degrade enough to cause you to lose your connection altogether if you’re in an area with a weak signal,” the group said. “Due to this problem, we can’t recommend the iPhone 4.”

Since Apple isn’t saying exactly what it plans to discuss at the press conference, speculation has risen suggesting the iPhone’s antenna and signal strength issues will be the topics of the day.

“Given recent concern driven by Consumer Reports’ non-recommendation due to the antenna issue and early feedback that OS 4.1 [beta] does not fix the issue, the event may be to nip it all in the bud,” Mr. Um said.

He added that if Apple were to announce that it will be giving away its Bumper cases to customers to address the antenna issues, the overall impact would be about US$0.02 next quarter, assuming Apple’s cost is $3 per case.

Mr. Um is maintaining his “Buy” rating and $320 target price for Apple’s stock. Apple is currently trading in the pre-market at $251.51, down 1.22 (-0.48%).

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Comments

Tiger

$3 per case? More likely the cost is about $.10.

It will be interesting to see what is the focus of the event. Although it is a minor issue, it’s gotten majorly overblown in the press, especially the Consumer Reports “can’t recommend” rating, even though their previous testing shows the iP4 far exceeds every other smartphone on the market.

My hope is they instruct all iP4 users, like myself, to take their phone into an Apple Store so a Genius Bar employee can take a bottle of clear fingernail polish and coat the metal antenna and be done with the whole matter. I won’t bother. I have a case to protect the glass. That breaking would be a MUCH bigger issue.

cb50dc

I agree, from everything I’ve read, that it is pretty easily remedied. Granted, this isn’t on the level of Ford deciding that it’s cheaper and easier to pay $x-millions in lawsuits rather than pay the few bucks per car it would have been to make the Pinto safer.

I don’t know if it’s overblown, though, considering it’s such a significant “duh” glitch from a company on Apple’s scale. I have trouble imagining how all the engineering and field tests could have missed this, and how marketing would have allowed it to go out like this.

So this is probably not a sign of the apocalypse, but Apple does need to address it candidly and explicitly, and make good on it quickly. And maybe the next round of iPhone ads needs to show people making real calls on it with their hands basically covering the whole unit grin

jfbiii

If the bumpers were just injection molded polyurethane, than 10? would probably be right. Those metal buttons are adding at least another 10?.

jfbiii

But absent lines of people trying to return their poorly functioning iPhones, I would look for some kind of bone to people that really were having an issue rather than an unnecessary recall. This whole crisis is the media latching onto a perceived problem and trying to make it real while iPhone users for the most part are recognizing that they get better reception than they got with their previous phones and are happy with the product.

Tiger

Is everybody else noticing what I am? A 10x speed difference? My iP4 is 10x faster than my 3G. The 3G seems like a Flintstone dinosaur now compared to the 4.

Glad I sold my 3G!

Bosco (Brad Hutchings)

Where is the white iPhone 4? This could prove to be a real timing problem for Apple. If they went back and redesigned the antenna or changed the location of the gap, there will be hundreds of thousands of returns, whether people were having trouble or not. That’s the unspoken looming disaster.

@jfbiii… You are mostly right. The antenna issue with the current iteration of the iPhone 4 is an overblown problem (but still a problem). But that’s kinda how Karma works. Steve Jobs has created many overblown problems over the past couple of years. Flash, skin apps, the raid on Jason Chen’s home, etc… Go back to him saying at the original iPhone unveiling that rogue apps could kill a network, so 3rd party developers couldn’t be trusted to write apps. Obviously unfounded (as millions of data cards for PCs were already deployed) but a necessary lie for Steve’s purposes. The reason the media (especially blog and print) is piling on right now mostly has to do with the iPad. These media outlets could have been on that device very inexpensively with Flash. Jobs made them redo their publishing process for the iPad. That costs lots of money, and the return for most hasn’t been great. There are a few stellar exceptions (SI, Popular Mechanics, Wired), but it hasn’t been worth the effort for most.

Anyway, Jobs is getting brushed back from the plate. I think the media should do us all a favor and throw at his head (that’s a metaphor, people) but a 97mph fastball into the kidneys is fine for now. Jobs is far too arrogant to tolerate even the light criticism he’s getting. This time next year, he won’t be working for Apple.

Lee Dronick

I have trouble imagining how all the engineering and field tests could have missed this,

Maybe if there wasn’t paparazzi types trying to get a prototype then Apple would have taken them out and about more. However, point taken, it should have been addressed during testing if not before.

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