iPhone 4 antenna fix could impact Apple's operating income by 1%

Posted:
in iPhone edited January 2014
The iPhone 4 antenna issue has reached a "boiling point," though investors in Apple should not overreact to the problem, a Wall Street analyst said Tuesday.



Gene Munster with Piper Jaffray said in a note to investors that investors should "not lose site of the forest for the trees" in the ongoing iPhone 4 antenna controversy. He projected that a potential fix from the Cupertino, Calif., company could impact its operating income by 1 percent.



"Ultimately we believe this PR black eye takes away from near-term upside potential to our iPhone estimates, but it does not change the long-term trajectory of the iPhone," Munster wrote. "While the issue has gained significant traction in the press, the reality is we estimate this problem periodically affects 25% of iPhone 4 users given the fix is easy (a case for the iPhone), and 75% of customer choose to use a case anyway."



The analyst gave a list of options that Apple could use to resolve the antenna issue. First among those would be giving away free $29 bumper cases, which the company has said will resolve the problem by covering the metal band on the exterior of the phone, which serves as its antennas.



Another option for Apple: do nothing. Munster said that because he believes only 25 percent of iPhone 4 users are periodically affected by the issue, the company could "weather the storm," and let demand for the product speak for it self.



Finally, Apple could do a recall, an option Munster said he feels is "highly unlikely," given that the problem is resolved with a simple case. He sees the first two as realistic options for the company.



How could this happen? The analyst said it's likely a result of the secrecy used by Apple when testing its products in the wild.



"We believe Apple field tests every iPhone model. However, recall that the lost iPhone 4 prototype was disguised as an older model iPhone with a case," he wrote. "Given its proclivity to secrecy, it is possible that Apple required all test units to have a case, which would render the issue undetectable. In other words, Apple may never have known the problem existed on test units in the field because they all had cases on them."



Piper Jaffray remains unfazed by the hardware issues with the iPhone 4, and continues to expect that Apple will have strong June and September quarter results, largely putting the discussion behind it. The firm has maintained an overweight rating for AAPL stock with a price target of $351.
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Comments

  • Reply 1 of 106
    paulmjohnsonpaulmjohnson Posts: 1,380member
    That's one of the first reports written by Munster that actually makes some sense.



    I think the time might be right for Apple to either give away a bumper, or at least drop the price, just to make the issue go away.



    Frankly, I'm sick of hearing about it.
  • Reply 2 of 106
    jragostajragosta Posts: 10,473member
    Why in the world is anyone paying any attention to Munster? Has he EVER been right about Apple?
  • Reply 3 of 106
    cvaldes1831cvaldes1831 Posts: 1,832member
    Posts quoting Gene Munster really belong on the Backpage Blog based on his track record.



    Same with articles quoting Shaw Wu and Katy Huberty.
  • Reply 4 of 106
    foo2foo2 Posts: 1,077member
    I'm all for Apple making a success of the iPhone 4. However, if Apple does nothing and merely let's "demand for the product speak for itself", then I will be very disappointed in the company when law suits are the only way to get the problem addressed.
  • Reply 5 of 106
    I'm glad I waited before upgrading from my iPhone 3G!
  • Reply 6 of 106
    cgrisarcgrisar Posts: 54member
    The antenna is not the issue. Not any more.

    The ATTITUDE has become the problem



    My guess? The stock will reach 151 well before it reaches 351
  • Reply 7 of 106
    Quote:
    Originally Posted by jragosta View Post


    Why in the world is anyone paying any attention to Munster? Has he EVER been right about Apple?



    That would be an interesting article for AI....an analysis of these analyst's previous positions and see just how correct their past prognostications have been.



    I've often thought it would make great reading for similar analysis of say Money Magazines 'advise' for investments to see how they panned out say a year or two later.
  • Reply 8 of 106
    bdkennedy1bdkennedy1 Posts: 1,459member
    Those bumper cases cost .40 cents to manufacture. Even charging $9.99 would be a rip off. Just give them away to the people that ask for them and everyone is happy.
  • Reply 9 of 106
    Quote:
    Originally Posted by ElmCityWeb View Post


    I'm glad I waited before upgrading from my iPhone 3G!



    Whatever you do, don't upgrade to iOS4!! You're phone will be slow as molasses. A deliberate ploy on Apple's part to force you to buy new hardware. Once you upgrade there is no going back.
  • Reply 10 of 106
    jeffdmjeffdm Posts: 12,946member
    Exactly how did he come up with his estimate? Figures that are neatly tied into exact quarters are suspicious at best There's bound to be some defective units, but 25% would be incredibly high, I think a 1% defect rate is considered to be high. With the Internet Bullhorn Effect, a defect rate of 1 in 10000 can be made to sound serious and widespread.
  • Reply 11 of 106
    bushman4bushman4 Posts: 789member
    Quote:
    Originally Posted by PaulMJohnson View Post


    That's one of the first reports written by Munster that actually makes some sense.



    I think the time might be right for Apple to either give away a bumper, or at least drop the price, just to make the issue go away.



    Frankly, I'm sick of hearing about it.



    Gene Muster just quoting what already has been said by press, blogs and customers.



    Apple will probably find away to resolve this issue and like all black eyes they go away.



    Lets give APPLE the chance to correct this, then we'll have a better idea of APPLES loyalty to its customers.
  • Reply 12 of 106
    g3prog3pro Posts: 669member
    Apple should just admit its mistake, give away free bumpers, and be done with it.



    Unfortunately, Steve Jobs is an arrogant despicable man who would never want to admit he was wrong.
  • Reply 13 of 106
    daharderdaharder Posts: 1,580member
    ... and it should be considerably more.
  • Reply 14 of 106
    Quote:
    Originally Posted by bdkennedy1 View Post


    Those bumper cases cost .40 cents to manufacture. Even charging $9.99 would be a rip off. Just give them away to the people that ask for them and everyone is happy.



    No they don't. they're not just pieces of molded silicon, but instead a combination of silicon, hard plastic and metal buttons
  • Reply 15 of 106
    scafe2scafe2 Posts: 58member
    Quote:
    Originally Posted by bdkennedy1 View Post


    Those bumper cases cost .40 cents to manufacture. Even charging $9.99 would be a rip off. Just give them away to the people that ask for them and everyone is happy.



    Please please everyone stop talking about the bumper being the holy grail as the solution, have you seen the bumpers,. they look pants,..
  • Reply 16 of 106
    charlitunacharlituna Posts: 7,159member
    Quote:
    Originally Posted by bdkennedy1 View Post


    Those bumper cases cost .40 cents to manufacture. Even charging $9.99 would be a rip off. Just give them away to the people that ask for them and everyone is happy.



    You base that on what? Insider info cause you work for Apple. Or some blog claiming that is the cost.



    for that matter I'd love to ask Mr Munster and the rest of them for their data that shows that this is actually a problem with the iphone and not with the problem phones being in areas with crap reception. Even Consumer Reports only comments on 'areas with weak reception'. No one has shown this 'major design flaw' to be evident in an area with perfect reception.



    I would also like to see Mr Munster's data about this 25% etc. I doubt he has any.



    Real numbers would probably show that only perhaps 1-2% of the units sold have any kind of antenna problem and the rest is all due to being in bad reception and other factors.



    All these folks are making a huge mountain out of a molehill. It's annoying to be one of the affected but that doesn't make this a 'design flaw' unless you can show the issue present with all other factors removed. And more than a small fraction of units.



    No cell phone service is perfect and that's why they do things like 30 days before the ETF kicks in. Those with problems need to use it. Put your number on another phone, sync your data to your computer and go return your iphone.
  • Reply 17 of 106
    jeffdmjeffdm Posts: 12,946member
    Quote:
    Originally Posted by bdkennedy1 View Post


    Those bumper cases cost .40 cents to manufacture. Even charging $9.99 would be a rip off. Just give them away to the people that ask for them and everyone is happy.



    That's interesting, what is your level of manufacturing experience? Have you seen one of the "bumber" cases in person? They aren't just silicone, there are three different materials in it and put integrated pretty well. They're actually quite nice, they're at least as good in quality as other $30 iPhone cases I've seen.
  • Reply 18 of 106
    nagrommenagromme Posts: 2,834member
    Apple could test their phones in the field using tear gas instead of a case. They?d maintain secrecy, and still have real-world conditions.
  • Reply 19 of 106
    Giving away bumpers is not a FIX, it is a PATCH to the real problem. Steve Jobs made a big deal over how thin and beautiful the iPhone 4 is, forcing one to use a bumper if they want there iPhone to function properly as a PHONE is ridiculous. If a car company made a vehicle with defective interior would it be acceptable if they gave you a set of seat covers that changed the feel and appearance of the seats? I love my iPhone 4, except for the dropped calls if I hold it in my left hand. Apple needs to stop selling these phones and come up with a true FIX for the problem that does not alter the iPhone experience.
  • Reply 20 of 106
    dr millmossdr millmoss Posts: 5,403member
    Quote:
    Originally Posted by nagromme View Post


    Apple could test their phones in the field using tear gas instead of a case. They?d maintain secrecy, and still have real-world conditions.



    Haha. Best comment yet.
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