Apple could be bruised by a US$1.5bn iPhone 4 recall

14 Jul 2010

If Apple were to recall the iPhone 4 over antenna issues it would cost the company US$1.5bn, an analyst in the US has estimated.

In its first three days of release, 1.7 million iPhone 4s were sold. However, technical glitches surfaced, from streaks allegedly appearing on screens to loss of signal if users held the device a certain way.

This led Apple to retort with a “hold it this way” statement and urging consumers, if they wanted, to buy bumpers that wrap around the device and restore the signal performance.

In recent days, Consumer Reports, after testing three different iPhone 4s, caused a storm when it said it could not recommend the iPhone 4.

“Consumer Reports’ engineers have just completed testing the iPhone 4 have confirmed that there is a problem with its reception. 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. Due to this problem, we can’t recommend the iPhone 4.”

Apple’s decision in the last 24 hours to ban links from customer support forums following the report from Consumer Reports calling for Apple to fix the reception issues is the latest to have increased pressure on the company.

Apple’s stock fell 2pc yesterday to US$251.80 on what was an otherwise buoyant day on the stock markets.

Comments in a research note by Bernstein Research analyst Antonio Sacconaghi suggest that if Apple were to recall the iPhone 4 it would cost Apple US$1.5bn.

However, according to Gene Munster of Piper Jaffray, a more reasonable approach would be to give free US$29 bumpers to iPhone 4 users, a move that would cost Apple just 1pc of its operating profit.

Analysts and stock market observers agree that the easiest fix for Apple would be to issue perturbed new iPhone 4 owners the bumpers that would fix the antenna problem for free.

Sacconaghi said the growing volume of complaints suggests that Apple’s image, and potentially iPhone sales, could be compromised if Apple does not “explicitly and constructively” address the issues with the new smartphone.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years