Don't let it get away!
Keep track of the stocks that matter to you.
Help yourself with the Fool's FREE and easy new watchlist service today.
First, let me apologize. I really didn't think I'd be writing another story about the iPhone 4 antenna issue. But it's being dredged up again, and people actually seem to like reading about it.
It's also sort of weird for me to be slamming Consumer Reports over an issue with Apple (Nasdaq: AAPL ) . I'm a huge CR fan and have been a subscriber for more than 20 years.
That out of the way, I believe CR is misleading its readers when it comes to the iPhone 4 -- and at this point it seems almost personal.
The anatomy of nothing
Just in case you were too engrossed with real life to notice, here's the quick background. Not long after the iPhone 4's smashing debut, reports surfaced that its signal strength might be dropping for some users when the phone was held in a certain way. There was no signal loss when the phones were wrapped in a case, which indicated it was a problem with the phone's outer antenna band and not an AT&T (NYSE: T ) issue. As this fanned into a full-blown firestorm of media attention, CR tested the issue in a controlled laboratory setting. It found there was indeed a drop in signal strength with the three phones it tested. Noting that the iPhone was excellent in most other respects -- and that it would top its smartphone ratings otherwise -- it said it could not recommend the phone because of the antenna problem.
That was pretty much the straw that forced Apple to address the controversy, and it did so in full force. In a July 16 press conference, Steve Jobs said the company would give free cases to all iPhone 4 owners until Sept. 30, and offered full refunds to any who still weren't satisfied. But he also put on what was a quite remarkable demonstration, showing the same signal degradation issue in Research In Motion's (Nasdaq: RIMM ) BlackBerry Bold 9700, Samsung's Omnia 2, and Google's (Nasdaq: GOOG ) Android-based HTC Droid Eris from Verizon (NYSE: VZ ) . Virtually all smartphones, Jobs said, suffer from some sort of signal degradation when held in certain ways. "You can see pictures of a Nokia (NYSE: NOK ) phone with a sticker on it that says, 'Don't touch here.' No one has solved this problem," he said.
It was an eye-opening demonstration, and it couldn't have made rival manufacturers happy -- but there it was. (Intrigued, I ran my own unscientific experiment with readers, which agreed with Jobs' contention.)
After Apple offered a free remedy or full refund to anyone still dissatisfied, and also implicated all other smartphones in this issue -- antennagate died down and pretty much disappeared. It has since been exposed for the minor issue it really is. Today, nearly three months after launch, the iPhone 4 is so wildly popular that it's still hard to find in stores -- especially the $199 16GB model. There's still a three-week wait when ordering on Apple's website. Do you really think if there were a problem of any significance there would be this kind of backlog?
Apple announced a few days ago that because "the iPhone 4 antenna attenuation issue is even smaller than we originally thought," it would end the free case program on schedule. Anyone purchasing the device after Sept. 30 and still wanting a free case will have to call customer service. In other words, it's ending the "free cases for all" program, but anyone still wanting one needs only clear the lowest of hurdles to get it.
When "not acceptable" is not acceptable
It all sounds very sensible, but Consumer Reports doesn't think so. "[P]utting the onus on any owners of a product to obtain a remedy to a design flaw is not acceptable to us," it says. Thus, it still won't recommend the iPhone 4 and calls on Apple to "provide a permanent fix for the phone's reception issues."
Oh boy. Unlike last time when it made a reasonable decision based on the information it had, CR just looks silly and out of touch now. Here are the problems:
- It's taking Apple to task for putting an "onus" on users to obtain satisfaction, when the marketplace is clearly and loudly telling us that users are satisfied. Beyond satisfied, actually. More like giddily exuberant.
- CR is ignoring the same issue with other smartphones. It's quite apparent signal degradation exists when almost every other smartphone is held in a certain way. To what extent, and how much better or worse they are than iPhone 4 is unknown at this point. Why isn't CR testing and issuing non-recommendations for other phones?
- Most of CR's other product ratings -- from gas grills to washing machines -- are extremely relevant to "real-life" use. But this "not acceptable" stance with iPhone 4 is not at all practical and in no way mirrors the vast majority of users' experiences, where this "issue" is no issue at all and makes no difference in their day-to-day use.
- This is not a safety feature, like an SUV's tendency to roll over or a baby crib that can trap and harm children. It's a couple of bars on a phone for some people, and in a very few others a couple of dropped calls.
This extreme (and highly publicized) stance on a minor issue seems petty and personal and harms CR's reputation.
There's a different issue for Apple shareholders, however, and it's the classic "good news, bad news" situation. The good news: The market has voted loud and clear that CR and any other antenna detractors are having virtually no effect on sales. The bad news: Why isn't Apple able to even come close to satisfying demand three months after launch? How many sales is it losing to Android phones among the less rabid who don't want to wait three weeks or more for a new device?
At first it seemed highly unlikely there would be any inventory problems when the holiday season rolled around, but now things are getting a tad uncomfortable. It's late September -- when the kids are back at school and retailers should be gearing up for their most profitable time of the year. If we don't see the backlog easing soon, Apple's holiday quarter may not be quite as big as Mr. Market is expecting.