iPhone 4 antenna fix could impact Apple's operating income by 1%
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.
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.
Comments
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.
Same with articles quoting Shaw Wu and Katy Huberty.
The ATTITUDE has become the problem
My guess? The stock will reach 151 well before it reaches 351
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.
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.
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.
Unfortunately, Steve Jobs is an arrogant despicable man who would never want to admit he was wrong.
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
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,..
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.
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.
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.