Friday, July 16, 2010

Antenna Gate

Apple CEO Steve Jobs said Friday "we are not perfect" during a presentation at the company's Cupertino, Calif. headquarters.

He announced customers that buy an iPhone 4 through Sept. 30 will get a free protective cover, or bumper. Anyone who has already purchased a bumper will get a refund. AT&T Inc. subscribers who want to return the device can get a full refund and get out of their contracts without penalties.

Apple "screwed up" with the signal algorithm of the phone, Chief Executive Steve Jobs said during a press conference on Friday, which he kicked off by saying "we're not perfect." But he stuck to the company line regarding the antenna problems being common with all smartphones, adding the issue was blown out of proportion, and that there was no "antennagate."

"To customers that are having problems, I apologize to them," Mr. Jobs said. Mr. Jobs said the company has sold more than 3 million iPhones since it went on sale in June 24, and defended it as the "perhaps the best product made by Apple."

He acknowledged that the iPhone 4 loses signal strength when touched in the lower left corner, but argued the problem is not unique to his company's device. He went on to show videos of other smartphones, including the BlackBerry Bold and HTC Droid Eris, that appeared to lose reception when gripped in certain ways.

"This is life in the smartphone world," he said. He said 1.7% of customers have returned their iPhone 4 to AT&T, a lower rate than the predecessor, the iPhone 3GS.

The iPhone 4, which has an unusual antenna design, was immediately dogged by complaints about its reception, particularly when owners held the device in a particular way. The problems cascaded into a full-blown public relations challenge for Apple, which initially told owners to hold the phone differently and then blamed the reception difficulties on software.

The company's problems worsened when influential product review publication Consumer Reports said Monday it could not recommend the phone. "We were stunned and embarassed" by the Consumer Reports conclusion, Mr. Jobs said.

Consumer Reports determined that touching the iPhone's antenna, which wraps around the sides of the device, degrades the device's signal. It later recommended sheathing the iPhone in a case that covers the sensitive lower left section remedies the situation.

The bumpers currently sell for $29 on its website. The product is sold out; the website says it will ship in five to seven business days.

Many industry observers have called the bumper giveaway as the most likely--and least costly--solution to Apple's problems. UBS analyst Maynard Um estimated that the bumpers cost $3 each, and freely distributing them would cut into its fiscal fourth-quarter earnings by 2 cents a share.

Despite the issues, Mr. Jobs called the antenna design the "most advanced" ever on a smartphone. He said the rate of dropped calls for the iPhone 4 is only slightly more than on the previous version, the iPhone 3GS.


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