An iPhone 4 recall less costly than Apple’s share drop

Jul 14, 2010
Finance

A recall of the iPhone 4 would cost $1.5 billion, one analyst estimates, which is less than Apple’s (AAPL) $5 billion market share loss on Tuesday. Also in today’s App Industry Roundup, Consumer Reports says Apple should fix its antenna problem for free. Recall talk grows The talk of an iPhone 4 recall has heated […]

A recall of the iPhone 4 would cost $1.5 billion, one analyst estimates, which is less than Apple’s (AAPL) $5 billion market share loss on Tuesday. Also in today’s App Industry Roundup, Consumer Reports says Apple should fix its antenna problem for free.

Recall talk grows

The talk of an iPhone 4 recall has heated up, and one analyst estimates doing so would cost Apple $1.5 billion. The recall furor stems from the flawed antenna design in the iPhone 4, which can be fixed by a piece of tape. Still, because Apple has largely sidestepped the issue, and organizations like Consumer Reports have said it cannot recommend people buy the iPhone 4, recall talk is starting to be taken seriously.

According to a CNET report, “Bernstein Research analyst Toni Sacconaghi estimated that while ‘a full product recall of the iPhone 4 (is) highly unlikely,’ it would cost Apple $1.5 billion, or 3.5 percent of its total cash on hand.” And while a full recall really does seem unlikely, a less-costly fix — but one sure to enrage Steve Jobs’ design aesthetic — is to ship a free rubber bumper to customers who bought the phone.

Of course, Apple currently sells such a $29 case for the iPhone 4 — available in 6 colors! — but Sacconaghi “estimates that giving them away to iPhone 4 customers would cost the company $1 per unit.”

And while that seems like a wise move, it won’t soothe every customer dismayed by the iPhone 4 antenna woes. Scott Kleinberg, a popular iPhone blogger and occasional cheerleader for Apple, is so upset that he wants a public apology from Jobs and a free bumper (green for him and his wife). “Steve (Jobs) is wrong,” Kleinberg writes. “Not admitting the problem and making customers – the same customers responsible for your record sales – feel like idiots is not the way to ensure satisfaction and guarantee repeat purchases.”

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This growing anger is starting to cost Apple more than a $1.5 billion recall. On Tuesday, its stock shed $5 a share on a day the market traded higher. The sharp drop cost Apple $5 billion in valuation, writes Robert Cyran for Reuters Breakingviews, who echoed the PR dismay we reported in this space yesterday. The big glitch isn’t the antenna, he writes, but “Apple’s tendency toward secrecy and denial — which has turned a potentially routine product glitch into a full-blown investor concern wiping out $5 billion of value.”

A suggestion from Consumer Reports

Consumer Reports, which put gasoline on this already smoldering fire earlier this week, is not done with it’s critique of the iPhone 4 and Apple’s behavior.

In a new blog post, the magazine wrote that Apple should “step forward soon with a remedy that fixes the confirmed antenna issue, and not one that requires additional consumer expense.” It noted that tape wasn’t a permanent solution and the software fix Apple offered doesn’t address the problem at all.

Now, is all this iPhone 4 antenna uproar getting out of hand? Probably.

The discussion has gone mainstream, as MC Siegler points out for TechCrunch. He is a bit perplexed that this “news” appears on Keith Olbermann’s show as well as overheard at coffee shops. He then offers a reasoned look at the growing controversy.

But really, Apple’s current woes should be mainstream news. Customers and media have put Apple on such a high pedestal that when the company stumbles — hey folks, it shed $5 billion in market valuation on Tuesday — we pay attention.

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Eric Benderoff

Eric Benderoff is the principal of BendableMedia.com, an editorial services firm, and a founding member of the Appolicious content strategy team. His personal technology column for the Chicago Tribune has appeared in newspapers and websites nationwide. He is a regular guest on Chicago's WGN Radio and is a frequent commentator about consumer technology on national TV news programs.

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