A day after Consumer Reports' scorching report -- in which it tested three iPhone 4 handsets to confirm the device's flawed antenna -- the ratings and review publication is calling on Apple (Nasdaq: AAPL) to give away a solution.
"Apple suggested owners mitigate the problem by holding the phone differently or purchasing a case," reads a blog entry following up on the magazine's inability to recommend the iPhone 4. "We think it's the company's responsibility to provide the fix -- at no extra cost to consumers."
Since Apple isn't about to send people an extra right hand, Consumer Reports appears to be suggesting that Apple either fix the problem, or provide a free case to everyone who's already bought an iPhone 4. Will Apple blink?
The high price of success
Some may argue that the Cupertino tastemaker doesn't need to cave in here. It sold a whopping 1.7 million iPhone 4 units during its first three days on the market last month. Apple's website claims that new orders placed won't be shipped for another three weeks.
I'm skeptical, though. Apple's been keeping new orders placed through its site on a three-week leash since last month. Are orders really coming in at the maximum pace that Apple's supply can sustain? It's been a while since folks were camping out in front of Apple stores for hours to get their handsets. Apple has gone on to admit that it hasn't been truthful about reception bars, and the antenna reception woes have to be keeping demand in check. Burning early adopters should give any potential buyer pause.
The "Ships: 3 weeks" tag and the unavailability of the white model have been constants on the Apple ordering page since late June. The last time I saw a clock stuck that badly was at Amazon.com (Nasdaq: AMZN) during the 2008 holidays, when the e-tailer hesitated to admit that it would phase out the first generation of its Kindle e-reader.
I don't think that Apple is phasing out the iPhone 4. However, it appears to be buying time, just in case a recall or a supplier-based fix is in the cards.
Total recall
A Bernstein Research analyst pegs the cost of the highly unlikely recall at a whopping $1.5 billion. Sending out cases would be a cheaper near-term solution, but would even that be enough?
Perhaps not. Giving away cases won't satisfy everyone, particularly the daring iPhone 4 owners who prefer their phones without a covering. It also would set an ugly precedent, indicating that a single magazine's complaint can force Apple to open its wallet.
Apple can't just ignore the backlash. When the antenna problems surfaced, many Apple fans blamed exclusive carrier AT&T (NYSE: T). Consumer Reports proved that wasn't the case, testing the iPhone 4 against earlier iPhone models and even Hewlett-Packard's (NYSE: HPQ) Palm Pre. Furthermore, a tactical application of duct tape to the iPhone 4 resolved the issue. The handset, not the carrier, is to blame.
Research In Motion (Nasdaq: RIMM) may have a gargantuan base of installed BlackBerry owners, and Google's (Nasdaq: GOOG) Android may be growing more quickly, but few could deny that the iPhone is the hottest smartphone right now. That ubiquity has been great for Apple, but it comes at a price.
When Apple was the stylistic underdog, its occasional stumbles were easier to forgive. Now that it's less than $50 billion in market cap away from passing ExxonMobil (NYSE: XOM) to become the country's most valuable company, it's under a more intense magnifying glass.
Free cases would be a start -- or at least a classier solution than handing out strips of iDuct tape.
Will Apple have to issue a recall? Will it provide free cases? Will AT&T step in and provide some kind of subsidized solution? Share your thoughts in the comment box below.
