IPhone 4 recall would cost Apple an estimated $1.5 billion
The possibility that Apple Inc.’s new iPhone could have a faulty antenna has fueled speculation that the popular new smart phone could be recalled, and one analyst has even pegged the potential cost at $1.5 billion.
Recall rumors were prompted by Consumer Reports’ announcement Monday that it couldn’t recommend the handset because its tests confirmed weakening or loss of reception when the phone is held in a certain way.
When Apple’s shares slid nearly 5% on Tuesday, Bernstein Research analyst Toni Sacconaghi issued a report saying that although a “full product recall of the iPhone 4 would be highly unlikely,” such a move could end up costing Apple $1.5 billion.
“Apple’s image — and potentially iPhone sales — could be compromised if Apple does not explicitly — and constructively — address the issue of what it believes is wrong with the phone and how it will address it,” Sacconaghi said in the report.
Apple sold a record-breaking 1.7 million iPhone 4s in the first three days of the product’s launch last month, but it received immediate complaints from users who said the device dropped four or five signal-strength bars when held in a certain way.
The new iPhone has a redesigned antenna. Cupertino, Calif.-based Apple initially said a drop in signal was normal when holding any mobile handset but later issued a statement saying it uncovered a longstanding software problem that displayed inaccurate signal-strength bars in all four of its iPhone models.
It suggested users could avoid the issue by either not holding the phone so that reception is compromised or by purchasing a case, or “bumper,” that costs about $30.
Sacconaghi said Apple should issue free bumpers to all iPhone 4 users and future purchasers, which he estimated would cost the company $1 or less per unit.
“While it would force Apple to ‘acknowledge’ a design issue with the iPhone, we believe that consumers are increasingly aware of the antenna issue, and remedying it rather than dismissing or ignoring it appears most appropriate,” he said.
Apple did not return phone calls or e-mails seeking comment.
