iPhone 4 recall could cost Apple $1.5 billion

Posted:
in iPhone edited January 2014
A recall of the iPhone 4 could cost Apple as much as $1.5 billion, according to one investment research firm.



Toni Sacconaghi, an analyst for Bernstein Research, said in a note to clients on Tuesday that while a full product recall is "highly unlikely," it could theoretically cost the company up to $250 per phone. Sacconaghi estimates 6 million units sold or in transit, resulting in a recall price tag as high as $1.5 billion.



Another option is for Apple to offer an in-store hardware fix, which could cost $75 per phone. Giving away a free bumper case, which currently retail for $29, would be a much cheaper alternative for the Cupertino, Calif., company. Sacconaghi estimates this approach would cost just $1 per unit.



Examining the longer-term consequences for Apple, Sacconaghi turned to "the emerging pattern of hubris that the company has displayed, which has increasingly pitted competitors (and regulators) against the company, and risks alienating customers over time."



As some examples, the analyst noted Apple's "limited disclosure practices, its attack on Adobe's Flash, its investigation into its lost iPhone prototype (which culminated in a reporter's home being searched while he was away and computers being removed), its restrictions on app development, and its ostensibly dismissive characterizations of the iPhone's antenna issues (i.e., phone needs to be held a different way; a software issue that affects the number of bars displayed)."



Sacconaghi further speculates that "these issues may, over time, begin to impact consumers' perceptions of Apple, undermining its enormous prevailing commercial success."



The report arrives just a day after Consumer Reports -- the nation's largest and most trusted nonprofit product review organization -- warned that it could no longer recommend the iPhone 4. After conducting its own tests inside a radio frequency isolation chamber, the organization issued a statement on its blog reversing its previous recommendation of the phone.



For its part, Apple earlier this month released an open letter stating that the iPhone 4's reception issues were largely due to an inaccurate formula for calculating signal strength. The company assured that a free software fix would be available in the coming weeks. Consumer Reports' findings are in opposition to Apple's statement.



Another Wall Street analyst, Gene Munster with Piper Jaffray, estimated Tuesday that a fix from Apple could impact its operating income by 1 percent. Like Sacconaghi, Munster also suggested the possibility of issuing free bumper cases. Additionally, the analyst said that since only 25 percent of users are affected by the issue, the company could "weather the storm" by doing nothing.



Apple stock was down $5.49 (2.13%) at the market's close on Tuesday.
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Comments

  • Reply 1 of 110
    kingkueikingkuei Posts: 137member
    With $41B in its warchest, my initial reaction was... "That's it?" given operating margins, revenue, and its balance sheet, this would be a drop in the bucket.



    So there are perhaps some real reception issues while holding it a certain way. But most everyone I know who has iPhones puts a case on. And from what I know, those who don't have hand sizes and natural positions that don't involve "bridging the gap".



    So drop in the bucket + non-issue = an ever more profitable Apple.
  • Reply 2 of 110
    bklynkidbklynkid Posts: 36member
  • Reply 3 of 110
    ilovestuffilovestuff Posts: 143member
    A free bumper with your iPhone4 and be done with it!!!

    Of coarse, Apple haters will never let it go, but who gives a f__k what they think anyway!

    On the other hand, if a software fix is actually possible, that would be even better.

    A full recall is not going to happen because the iPhone4 works great with a damn bumper on.
  • Reply 4 of 110
    mbarriaultmbarriault Posts: 237member
    Non-profit? Don't you have to pay for a subscription to their site just to see their reviews?
  • Reply 5 of 110
    They'd better get started, then.
  • Reply 6 of 110
    finetunesfinetunes Posts: 2,065member
    I'd like to see Apple take more time testing their products before releasing them. Seems like a rash of problems with new releases of iPhones, 27" iMacs, iPads and 2009 release of MBP.



    I've been lucky with Apple products--but I'm not one to be the first kid on the block to get the new Apple item.



    Looking forward to the release of the iPod Touch in September--128 GB I hope--but will wait until sure that there's no problems.
  • Reply 7 of 110
    anantksundaramanantksundaram Posts: 19,304member
    Quote:
    Originally Posted by AppleInsider View Post




    As some examples, the analyst noted Apple's "limited disclosure practices, its attack on Adobe's Flash, its investigation into its lost iPhone prototype (which culminated in a reporter's home being searched while he was away and computers being removed), its restrictions on app development, and its ostensibly dismissive characterizations of the iPhone's antenna issues (i.e., phone needs to be held a different way; a software issue that affects the number of bars displayed)."



    Sacconaghi further speculates that "these issues may, over time, begin to impact consumers' perceptions of Apple, undermining its enormous prevailing commercial success."



    Nail. Meet head.



    I say that as a shareholder (not just as a loyal consumer). I was hoping that Jobs's absence would be a great opportunity for Apple to discover a new way of being what it is without the attitude. Unfortunately, Jobs has come back more omnipotent, more irascible, more paranoid, and less appealing than ever.



    No one else in the company seems to have the guts to say a damn thing. Not Cook, not Oppenheimer, not the Board.
  • Reply 8 of 110
    cvaldes1831cvaldes1831 Posts: 1,832member
    Quote:
    Originally Posted by anantksundaram View Post


    Nail. Meet head.



    I say that as a shareholder (not just as a loyal consumer). I was hoping that Jobs's absence would be a great opportunity for Apple to discover a new way of being what it is without the attitude. Unfortunately, Jobs has come back more omnipotent, more irascible, more paranoid, and less appealing than ever.



    No one else in the company seems to have the guts to say a damn thing. Not Cook, not Oppenheimer, not the Board.



    Yes, now that Jerome York is gone, the last remnants of the Old Republic have been swept away.
  • Reply 9 of 110
    How are only 25% of the users affected? If it's a design flaw (and I'm not suggesting it is) wouldn't it be more like 100%?
  • Reply 10 of 110
    tt92618tt92618 Posts: 444member
    The biggest danger for Apple is not a recall, it is the inevitable fall that pride and hubris bring. If Apple succeeds in eroding the enormous brand loyalty they currently enjoy, they will inevitably enjoy less success in the sectors they currently dominate. Pride and arrogance can undermine and destroy the biggest leads, and the greatest of accomplishments can be brought low through them.



    41 billion seems like a lot of money, but express it in terms of yearly operational costs and it stops seeming so big.



    This issue isn't really about an antenna anymore - its about the perception people have of Apple as a company, and ultimately that is much more important than a single product.
  • Reply 11 of 110
    anantksundaramanantksundaram Posts: 19,304member
    Quote:
    Originally Posted by cvaldes1831 View Post


    Yes, now that Jerome York is gone, the last remnants of the Old Republic have been swept away.



    I was thinking the same thing!
  • Reply 12 of 110
    I'll take a free Bumper, please.



    GTSC
  • Reply 13 of 110
    Quote:
    Originally Posted by AppleInsider View Post


    A recall of the iPhone 4 could cost Apple as much as $1.5 billion, according to one investment research firm.



    Can we stick to reporting the news? As in facts? Stories that feature chatter about what could happen are speculation, even if coming from some Wall St. "analyst" (and by that I mean blogger).
  • Reply 14 of 110
    One thing I agree with is regardless of how big the actual iPhone 4 antennae issue is, the even bigger concern is long term consumer perception of Apple. Tight control, secretive moves, and dismissing complaints might work well when things are going smoothly, but they only compound the problem when things are going badly. At the beginning the iPhone 4 antennae issue might have only attracted the attention of Apple fans, Apple haters, and tech geeks, but now I'm seeing the issue and Apple's handling start being mentioned at nightly news programs where the audience is the general public. This is going to be the freshest thing on people's mind the next time they think of Apple.



    Apple really needs to clarify the hardware antennae issue. If it turns out to be an issue afterall, they need to be clear how they intend to fix it. If they still believe it's a non-issue, they should be upfront about why, such as percent of users complaining, which perhaps is actually very small, specific usage conditions which they feel is unreasonable, data to show that % dropped calls on the iPhone 4 is actually lower than the iPhone 3G S, etc. Perhaps Apple was hoping that the issue will blow over, but that certainly doesn't look like it'll happen. They definitely need to reclaim control of the issue.
  • Reply 15 of 110
    maccherrymaccherry Posts: 924member
    Them analyst can make a dinner date with a rusty spear!

    You can't find the freaking iphone 4. And I went to my local Apple store and there were no iphone 4 cases.

    There ain't going to be any recall. A revision ,IMHO, but no recall.
  • Reply 16 of 110
    8corewhore8corewhore Posts: 833member
    Well, considering they have 41 billion cash in the bank....
  • Reply 17 of 110
    nagrommenagromme Posts: 2,834member
    This “analyst” actually blames Apple for police investigating a crime? He should have the facts, not the sensationalist headlines, at his disposal. But he got some exposure for himself





    Quote:
    Originally Posted by maccherry View Post


    Them analyst can make a dinner date with a rusty spear!

    You can't find the freaking iphone 4. And I went to my local Apple store and there were no iphone 4 cases.

    There ain't going to be any recall. A revision ,IMHO, but no recall.



    I agree—and the revision won’t be soon. People will probably be given cases if they request one, and eventually, some may get a revised model if they ask for one (but that could be many months—or even next year’s update).
  • Reply 18 of 110
    anantksundaramanantksundaram Posts: 19,304member
    Quote:
    Originally Posted by 8CoreWhore View Post


    Well, considering they have 41 billion cash in the bank....



    That cash belongs to shareholders. Not to be wasted on value-destroying payouts when it could be addressed much cheaper and faster.



    Big corporate egos are usually the first symptom of "too clever to fail," and that rarely ends well.
  • Reply 19 of 110
    glgbnafglgbnaf Posts: 11member
    Good apple deserves every bit of a loss finally!!!! I'm one of the 1.7 million who got scammed on a flawed device!!!! Heck with Steve jobs ya he is termally I'll maybe this will enhance more to pay him back haaaaaaaa what comes around goes round!!!!!!!!!
  • Reply 20 of 110
    rbonnerrbonner Posts: 635member
    Quote:
    Originally Posted by iLoveStuff View Post


    A free bumper with your iPhone4 and be done with it!!!

    Of coarse, Apple haters will never let it go, but who gives a f__k what they think anyway!

    On the other hand, if a software fix is actually possible, that would be even better.

    A full recall is not going to happen because the iPhone4 works great with a damn bumper on.



    Bumpers don't fix the proximity sensor issue. Really tired of my cheek hanging. Not a Apple hater, just want my phone to work.
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