You pre-ordered your iPhone 4 approximately 94 seconds after Steve Jobs announced the smartphone update on stage in June. You stood in line outside the Apple store for thirty-six hours straight, tweeting about your excitement on both your iPhone 3GS and your iPad, depending on which device you felt like flaunting to the other obsessives around you. You got your iPhone 4 activated at the store. You called yourself just to try it out. While you were leaving yourself a message, the call was promptly dropped. Then Steve Jobs told you that you were holding your phone wrong.
In the three weeks since the iPhone 4 launched, it’s been difficult to judge how successful it’s been. At least, that is, in a spiritual sense. In the literal sense Apple’s machine has been a juggernaut of success. The technology manufacturer has sold an absolute monumental number of the phones. AT&T (T) stopped accepting preorders for the iPhone 4 almost two weeks before the launch, having already sold out the machines they’d been allotted for June 24th. Between 1 and 2 million iPhone 4s were sold in the opening weekend alone. Apple (AAPL) shares have soared following the release, besting their all-time high more than once in June alone. The widely reported issues users have had with the iPhone 4 dropping calls have finally taken their toll, though. AAPL shares dropped a whopping 3 – 4% in the last twenty-four hours, down to $246.43. Shares quickly bounced back up to $250, but that dip was the first chink in APPL shareholders seemingly invincible armor in quite a long time.
The straw that broke the dropped-call-camel’s back was actually a Consumer Reports article about the iPhone 4. Actually, two articles. The first, published on July 2nd, was an article recommending the iPhone 4 that went as far as to dismiss the device’s antenna issues. The second, published this past Monday, saw Consumer Reports backpedalling on their previous recommendation, advising prospective iPhone users to hold off on buying until Apple fixes its significant problems. It didn’t matter that Consumer Reports’ formal score of the iPhone 4 was a 76 out of 100, two points above the iPhone 3GS. The damnation of the second article was enough to fuel the flames of a full press backlash against Apple. That backlash, in turn, was enough to drop APPL stock down that brutal 4% this morning.
Is the iPhone 4 doomed? Even before Consumer Reports ran its negative review on Monday, Apple had already shown signs of panic over the smartphone’s problems. InvestorPlace reported on Apple’s call for new antenna engineers in the week following the iPhone 4’s launch, as well as an open letter published at Apple.com claiming that the real problem was the algorithm in the phone’s software that calculated how many reception bars appeared on the display. Apple also stated that users needed to not hold the phone so tightly, suggesting that a bumper protector purchased separately would ensure the greatest call quality. Now, in the aftermath of Consumer Reports’ recommending current iPhone 4 owners actually cover their phone’s antenna with duct tape to ensure calls don’t drop, the consumer electronics world is predicting that AAPL will recall the phone.
Whether or not Apple decides to recall the launched iPhone 4, it’s doubtful that this PR fiasco will affect the company in the long run. While technophiles and savvy investors alike have been paying close attention to the intricacies of Antenna Gate (or any other adorable name the blogs have given the situation), consumer interest in the device remains high. Apple has a proven track record of peerless consumer satisfaction with their devices, mobile and otherwise, and they will undoubtedly come up with a solution for early adopters that feel burned. It’s likely that, if a recall is in the cards, AAPL is already planning the supply chain for replacements. AAPL shareholders reeling from today’s drop should also take heart. Rumors of a new iPad by year’s end and the all-but-confirmed Verizon iPhone hold the promise of AAPL shares hitting that predicted $300 high before 2010 is out.
As of this writing, Anthony Agnello did not own a position in any of the stocks named here.
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