Is Steve Jobs Losing His Midas Touch?

Apple (Nasdaq: AAPL  ) is walking a mighty fine line right now. The "Antennagate" of the iPhone 4 has ballooned into something much bigger and badder than it ever needed to. It may soon be too late to do anything about the damage to Apple's old "always perfect" halo -- and it seems like the entire issue came from Apple's design department running roughshod over the engineers, product testers, and usability experts.

What's the big deal?
When tech blogs and desperate Twitter denizens started reporting reception problems on the brand-new iPhone, it was easy to dismiss it as isolated cases, a vocal minority that happened to get lemons on their hands. But the reception issues were repeatable in many cases by simply placing a finger in the wrong spot of your phone's antenna-infused case. Consumer Reports came to the same conclusion, noting that iPhone 4 is the best smartphone available today if it wasn't for that pesky reception issue.

From Apple and AT&T (NYSE: T  ) , we got nothing but weak excuses and what looks like an attempted cover-up of the entire episode. Posts mentioning the CR article on Apple-run support forums ran into their own private Bermuda Triangle and started disappearing. It's a self-defense mode in which Apple has operated before, sweeping problems with monitor flicker and email security under a thick, dark shag rug rather than dealing with them in the open.

The root of the problem
Apple's secrecy is part of the company's ineffable charm, of course, but Steve Jobs should limit that attitude to information about upcoming products and whatnot. When it comes to tech support for an issue that might require a wholesale recall and fix, well, people need to know. Apple's customers deserve to know if there's something wrong with their beautiful phones.

It's not enough to suggest that you're holding your phone the wrong way. Slapping electrical tape on that hyper-designed phone is tantamount to blasphemy. Free bumper cases for everyone might be a relatively cheap fix, estimated at about $45 million -- but not everyone will want that rubber edge on their phones, and if that was a requirement for making reliable calls, why wasn't the rubber edging just engineered onto the phone in the first place?

That's what I mean when I say that designers rule the roost at Apple more than ever before. Earlier iPhone models, iPods, the iPad, and every flavor of Mac have always looked amazing, but never before have design choices had such a huge negative impact on an Apple product.

OK, so the metal edging looks nice, and the little gaps between the antenna segments are placed in perfect symmetry around the phone. Congratulations. But how hard would it have been to move those problematic gaps to, say, the top half of the phone where you're less likely to make hand contact? Or, cover the metal in a clear varnish, or something. I'm no engineer, but it can't be hard to overcome this issue unless the designers hold a permanent veto vote.

What could have been
If the iPhone was a Toyota (NYSE: TM  ) model, it would have been recalled for repairs right away. Happens all the time, and cars are quite a bit more expensive to build, fix, or replace. As Toyota saw with its recent gas-pedal problems, dogged questions over whether a company swept design flaws under the rug can lead to months of unfavorable PR.

Maybe there's even a software fix, beyond modifying how the phone reports signal bars. Fine, ask Microsoft (Nasdaq: MSFT  ) how often it issues updates and fixes for its operating systems. You take some flak in public, you push out the correction, and then you move on.

That's not how Apple operates, and that mysterious halo of perfection is slipping down Steve's black turtleneck. So Adobe Systems (Nasdaq: ADBE  ) can't publish Flash on your pretty little playthings because the software isn't flawless enough. The Broadcom (Nasdaq: BRCM  ) radio chip that handles Bluetooth and WiFi communications also features FM radio reception, and has done so since the simple iPhone 3G, yet the phones won't play 101.5 for you. That's presumably because Apple hasn't figured out how to nail the user experience with radio listening yet.

You see where I'm going with this? Apple's high-end reputation is built on a mountain of these perfection-seeking little decisions, yet a rather large and annoying bug slipped through the cracks just because the end result looks so damn good. Steve can't let this become a pattern, because the crucial Apple mystique depends on keeping a clean house.

Going down the wrong path
Fellow Fool Jim Mueller compares Apple's handling of this spectacle with how Johnson & Johnson (NYSE: JNJ  ) dealt with Tylenol tampering twenty years ago, and finds Apple to come out lacking: "Remember, a reputation is so easy to lose, and so hard to get back."

That's exactly right, Jim. And Apple is closer to losing that golden reputation than the company seems willing to admit. Apple almost died in the 1990s when boneheaded design decisions ruined a perfectly good brand. Don't let that happen again, because Steve Jobs can't ride in on a white horse to save the day again -- he's already running the show like a risky high-wire act. A special iPhone-related press conference has been called for Friday. This is Steve's chance to set things right or mess it up beyond control.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. Microsoft is a Motley Fool Inside Value pick. Apple and Adobe Systems are Motley Fool Stock Advisor choices. Johnson & Johnson is a Motley Fool Income Investor recommendation. Motley Fool Options has recommended buying calls on Johnson & Johnson. Motley Fool Options has recommended a diagonal call position on Microsoft. Try any of our Foolish newsletters today, free for 30 days. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.


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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 15, 2010, at 2:30 PM, shanghaid wrote:

    LOL - running roughshod over the engineer?! I think potential design flaws are always discussed an dealt with on every product. There will never a product problem where someone will stand up and say "I warned you about that".

    More to the point is how Apple handles this. A story not fully played out. My guess is there was a realization of the issue, and despite that, they believed it was okay because it is still the best reception iPhone yet.

  • Report this Comment On July 15, 2010, at 2:47 PM, TMFZahrim wrote:
  • Report this Comment On July 15, 2010, at 5:12 PM, mythshakr wrote:

    Antennae are ugly. And virtually every Apple RF device has been less than best in breed because designers try and veto physics. And it hasn't stopped the rest of the smartphone crowd from following suit.

    I would imagine the placement of the cameras dictated the placement of the antenna at the bottom.

  • Report this Comment On July 15, 2010, at 5:18 PM, Turfscape wrote:

    With all the "backlash" over the antenna issue...how has it impacted sales?

    So far, I've seen a lot of hyperbole, but no data. Is this iPhone losing customers for Apple?

  • Report this Comment On July 15, 2010, at 9:48 PM, xetn wrote:
  • Report this Comment On July 17, 2010, at 2:00 PM, timjones17 wrote:

    Antennagate can't be a good for Apple, especially now, as Android is set to pass the iPhone in popularity in the US, very soon. Apple's stock mania was predicated on the iPhone's eventual dominance of the smartphone market. Now, the iPhone at best will be a niche in the mobile space, just as Macs are in desktop. Adding to that, Steve Jobs' uncertain health, Apple's stock position is precarious.

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