Analyst: Don’t Expect an iPhone 4 Recall

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%).