John Paczkowski

Recent Posts by John Paczkowski

IPhone 4 Recall? Get a Grip!

The growing morass of negative publicity over the iPhone 4’s antenna performance issue has some crisis communication experts arguing that Apple will be forced to recall the device to minimize damage to its brand. But analysts say that’s unlikely.

Though the clamor over a design issue that can diminish the iPhone 4’s signal strength might drag on the company’s shares, as it is today, Apple (AAPL) probably isn’t going to issue a product recall.

Said Piper Jaffray analyst Gene Munster, “We see [a recall] as a highly unlikely scenario given the issue is completely resolved with a case, which is a significantly less expensive solution for the company.”

Citigroup analyst Richard Gardner agreed.

“We consider the probability of a recall to be very low given our view that the issue in question is not serious enough to warrant a recall,” he said in a note to clients today. “While bridging two portions of the antenna with one’s hand on the lower-left corner of the phone does cause signal degradation, it does not typically result in dropped calls unless the signal from the cell tower is already weak. Excluding this issue, overall signal reception on iPhone 4 seems at least as good, if not slightly better, than reception on the iPhone 3GS.”

Over at Barclays Capital, Ben Reitzes offered a similar take. “As users, we have experienced some issues w/call drops; however, we have found drops go away after attaching a bumper accessory, which is quite useful anyway,” he wrote. “To date, we have not seen any overwhelming evidence of iPhone 4 units being returned.” And if the current spate of negative headlines should change that, well, it’s probably not going to have much of an effect on the company’s bottom line anyway.

Said Reitzes, “Worst case is some near-term sales are impacted and/or Apple revises its policy on ‘not giving away’ free bumpers, but usually demand just gets pushed to a slightly later date. Therefore, we do not believe these issues will impact Apple’s product momentum or the story materially at this time.”

To Reitzes, the iPhone 4 antenna issue is “overblown,” a sentiment shared by Munster as well.

“Ultimately we believe this PR black eye takes away some near-term upside potential to our iPhone estimates, but it does not change the long-term trajectory of the iPhone. While the issue has gained significant traction in the press, the reality is that we estimate this problem periodically affects 25 percent of iPhone 4 users given the fix is easy (a case for the iPhone), and 75 percent of customers choose to use a case anyway. While it has reached a boiling point, we believe the magnitude of this issue is being overblown.”

And seriously, an iPhone 4 recall? Steve Jobs would rather recall hiring John Sculley.

[Image credit: Rick Smolan]


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