CUPERTINO, Calif. — Anyone that had their money on Apple Inc. (AAPL) announcing an unprecedented recall of its latest iPhone today walked away empty handed.
While the odds were heavily against a recall of any sort, the constant pressure and negative press Apple has received of late over its iPhone 4 antenna system made it at least seem like a recall could be the most drastic outcome. But fear not, investors.
Even with so much fallout to answer to, Apple went barely one step above the bare minimum. Beginning one week from today, every iPhone 4 customer (including those that already bought the device) will be given one of Apple’s “bumper cases” for free. That policy will stay in place through the end of September, at which time CEO Steve Jobs said there might be a better solution or, more likely, the fervor over “antenna-gate” will have died down.
In a last-minute press conference that was scheduled to address the mounting criticism over Apple’s antenna woes, Jobs said the company was not aware of the problems until after the device was launched.
A lot could be hanging on that statement in light of reports that Apple knew about the problem well before launch. But again, just to be sure, Jobs called those reports a “crock.”
There is at least one key piece of evidence countering that claim though. Why, after three previous iPhone launches, did Apple decide to manufacture bumper cases (thin bands that only cover the exterior antenna, thereby avoiding contact with the user) for this iPhone? Until the iPhone 4, Apple left cases and essentially every other add-on product for its iPhones to third-party manufacturers. Why the change?
Nonetheless, it was refreshing to see Jobs address the issue right out of the gate this morning. The leader of Apple typically kicks off his presentations with a smattering of positive news, but not today.
“We’re not perfect,” he began today. “We know that. You know that. And phones aren’t perfect either. But we want to make all of our users happy. Now if you don’t know that about Apple, then you don’t know Apple.
“It’s not like Apple’s had its head in the sand on this guys. It’s been 22 days,” he continued. And in that time, Apple has sold “well over 3 million” iPhone 4s.
After reports started coming in about the iPhone’s “death grip” issues immediately after launch, Apple took it upon itself to gather as much data as possible and come up with a fix that will last longer than a “band aid,” Jobs said.
The company decided not to address the issue head on until today, because “we didn’t know enough,” he added. In the end, Apple determined that a full refund within 30 days and free bumpers cases is “everything we can do,” he said.
“It turns out, it’s certainly not unique to the iPhone 4,” Jobs said before showing video clips of smart phones from BlackBerry-maker Research In Motion Ltd. (RIMM), HTC Corp. and Samsung Electronics Co. Ltd. reacting similarly when gripped by a user in the same way.
“This is life in the smart phone world. Phones aren’t perfect. … Every phone has weak spots,” he said. “All smart phones do that. We haven’t found a way around the law of physics … yet.”
Later, during a question-and-answer session, Jobs said “no one’s solved this problem. Would I love Apple to be the first? Yes.”
According to Jobs, Apple has built 17 anechoic chambers and has invested $100 million so far in antenna testing facilities with a staff of 18 scientists and engineers focused exclusively on research and development in that field.
Over the past few weeks, Apple has also dispatched some of those engineers to users’ homes with testing equipment to learn more about the reception problems they’ve been experiencing. And, according to Jobs, results from those tests didn’t warrant any major concern.
“We’re pretty happy with the antenna design of the iPhone 4. We’re not feeling right now that we have a giant problem that we need to fix,” Jobs said.
Letting statistics tell the story
Throughout his nearly 90 minutes on stage, Jobs continued to steer his comments toward “hard data.” As of today, .55% of all iPhone 4 users have called Apple’s customer service to report problems related to the antenna or reception and the return rates for the iPhone 4 are less than 2%, he said.
While AT&T Mobility would not give Apple detailed information about its dropped-call rate across the board, it did provide Apple with some statistics to compare to the iPhone 3GS.
“Even though we believe the iPhone 4’s antenna is superior to the iPhone 3GS, I must report to you that the call drop rate for the iPhone 4 is higher than the 3GS,” Jobs said. Overall, the iPhone 4 drops less than one additional call per hundred than the iPhone 3GS.
Jobs shared his “pet theory” for why he thinks this is: because most third-party manufacturers weren’t ready with cases for the iPhone 4 on day one and Apple can’t keep up with demand for bumper cases, fewer iPhone 4 users are walking out of the store with a case. Around 80% of all iPhone 3GS customers bought a case and only 20% of iPhone 4 users are buying cases, he said.
Jobs takes a trip inside Apple’s head
“When we fall short, which we do sometimes, we try harder,” Jobs said. “When people are criticizing us, we take it very seriously.”
Looking back, Jobs admitted that Apple could have lowered expectations a bit when it announced the new antenna system, but really, how likely is Apple to lower expectations on anything?
“We try to have our cake and eat it too. We try to have great design and great performance,” he said.
“We didn’t understand that there would be these kinds of problems at that point. … I don’t know what there was that we could have said,” he continued. “We make mistakes sometimes. We don’t know everything.”
To reiterate his point about all smart phones suffering from similar problems, Jobs pointed out that some manufacturers go so far as to put a sticker on their device that basically says “don’t touch here.”
And let’s be real, Apple would never do that with one of its products. But at the same time, the black lines that separate different radios on the iPhone 4’s antenna have become paramount to “painting a bull’s eye on our phone,” Jobs said.
