Recalling iphone 4, to cost Apple $1.5 Billion
When Apple Inc.'s shares slid more than 4 percent early Tuesday, Bernstein Research analyst Toni Sacconaghi issued a report saying that although a "full product recall of the iPhone 4 would be highly unlikely," the occurrence would end up costing Apple $1.5 billion or 3.5 percent of its total cash balance.
"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 statement.
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 consumers that the device dropped four or five signal bars when holding it near the bottom left corner.
The new iPhone's antenna was designed for the first time to have a steel band that wraps around the device. The Cupertino, Calif.-based company initially said a drop in signal was normal when holding any mobile handset but later issued a statement saying the problem was due to an error in displaying the signal-strength bars in all four of its phone's models.
It suggested users could avoid the issue by either not holding it in that particular way or purchase a case, or "bumper," which runs around $30 each.
Sacconaghi said Apple should issue free bumpers to all of its current 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.