Defiant Jobs stands by iPhone 4

CUPERTINO, California Sat Jul 17, 2010 10:21pm EDT

1 of 14. Apple CEO Steve Jobs appears on stage during a news conference at Apple headquarters in Cupertino, California, July 16, 2010.

Credit: Reuters/Kimberly White

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CUPERTINO, California (Reuters) - A defiant Steve Jobs on Friday rejected any suggestion the iPhone 4's design was flawed, but offered consumers free phone cases to address reception complaints that have hurt Apple Inc's image and shares.

At a rare, 90-minute press conference, the Apple chief executive asserted that reception issues were a problem shared by the entire smartphone industry, naming specifically rivals Research in Motion, Samsung Electronics and HTC Corp.

Jobs maintained there were no problems with the iPhone 4's wraparound antenna design and accused the media of trying to "tear down" a company that had grown so successful.

After the June 24 launch of the iPhone 4, some users reported drastically reduced signal strength when they held the touch-screen phone a certain way, in what has come to be known as the "iPhone 4 death grip."

Apple has lost more than $16 billion of its market value since June 28, with at least some of that attributed by analysts to the iPhone snafu.

Apple set the tone of Friday's event early, leading off with a YouTube video poking fun at the so-called "Antennagate" controversy (here).

"This has been blown so out of proportion, it's incredible," Jobs, 55, told reporters and analysts in an auditorium at Apple's Silicon Valley headquarters.

"This is life in the smartphone world. Phones aren't perfect. Most every smartphone we tested behaved like this."

Analysts said sales of the iPhone 4 had not been impacted by the antenna flap, though some warn about longer-term damage to a reputation for quality products honed on the iPod.

Most on Wall Street have not altered -their iPhone sales estimates for the current quarter, which range from 10 million to 12 million units.

Communications experts said the flap has always been less about a presumed flaw in the iPhone than the secretive Apple's slow and uneven response to it.

The cost of Apple's remedy should be insignificant. One analyst estimated simple cases would cost the company as much as $45 million, while an in-store repair program would have run as much as $300 million.

Shares of Apple climbed as much as 1.4 percent after Jobs offered the free case to users, but closed 0.62 percent lower at $249.90 in an overall market sell-off.

Some analysts said they had expected more from Apple to address the issue, and thought that Jobs should have taken full responsibility.

"Apple is held to a much higher standard. You don't want to compare yourself to the competition," said Ashok Kumar, an analyst with Rodman & Renshaw.

A CROCK?

Others lauded Jobs -- who apologized to users only after he was asked if he was sorry -- for offering a free fix.

Experts say covering a small gap in the antenna with a plastic case -- or duct tape -- will help boost signal strength by preventing contact with a user's fingers.

"This was a difficult thing for Steve to do ... but he did the right thing," said Gleacher & Co analyst Brian Marshall. "He probably helped consumer sentiment. They stand by their products."

Jobs said Apple will offer the free cases through September 30, when the company will reassess the situation. "Maybe we will continue it or maybe we will have a better idea," he said.

If iPhone 4 users were not satisfied, Jobs said Apple will offer a full refund within a month.

Jobs admitted Apple and the phone were "not perfect" and said he first heard about issues with the antenna 22 days ago. He called a Bloomberg report that he had been warned about the issue well before the June launch a "total crock," and dismissed a New York Times report for "making this stuff up."

The Apple chief said the iPhone 4 drops just a tad more calls than its predecessor, the 3GS, with a return rate of less than a third of the older model. Just 0.55 percent of iPhone 4 users have complained to the company's tech support, he said.

"We're pretty happy with the antenna design," he said. "We're not feeling right now that we have a giant problem that we need to fix."

The high-margin iPhone is Apple's most important product line and yields 40 percent of revenue. The company is embarking on an ambitious push to drive iPhone growth in overseas markets. Jobs said Apple has sold well over 3 million units of the iPhone 4 in the three weeks since launch.

"Jobs was a little bit defensive, and Apple has a tendency to do that," said Gartner analyst Van Baker. "They'll be criticized for that. But at the same time, the position that they outlined about their product relative to others is fair, and their offer is generous."

But some shoppers who were interviewed by Reuters at an Apple store in New York were not impressed by the offer of a free case. "I probably wouldn't buy one still. It's expensive and the calling plan is restricted, and now the case is restricted," said one shopper, Nathaniel Johnson.

Another shopper, Jason Slab, said, "The fix doesn't make much sense; it just seems cheap."

In a Reuters online poll, 213 out of 373 respondents -- 57 percent -- said the entire controversy made them less likely to buy an iPhone. But just 43 out of 253 respondents who owned an iPhone said they would return it.

Its first public statements advised consumers to hold the phone differently. Then, earlier this month, it blamed the problem on a software glitch that overstates signal strength.

The iPhone controversy followed Apple's very nasty public spat with Adobe Systems Inc and the imposition of new restrictions on app developers, which many viewed as onerous.

(Additional reporting by Matthew Lynley and Paul Thomasch in New York, Carolina Madrid and Alex Dobuzinskis in Los Angeles; Writing by Edwin Chan and Tiffany Wu; Editing by Richard Chang and Sofina Mirza-Reid)

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Comments (4)
Majick1 wrote:
Oh PLEASE. “Death grip” how else would YOU hold a slippery $400 piece of equipment then by its perimeter? If Steve drops his while holding it between his thumb and forefinger he just gets a fresh one off the shelf.
Oh and I always duct tape expensive electronics it is so vogue. Show us yours Steve.
You owe it to your loyal customers to make it right by sending them a brand new properly designed iPhone instead of your normal rush to market junk, remember this is your 4th try and you really messed it up this time. Don’t blame the media on this one look in the mirror.

Jul 17, 2010 11:36pm EDT  --  Report as abuse
Majick1 wrote:
@Reliability
Yes, very little in this world is perfect and magical, but to equal the performance of others when it is below the performance of your previous production is a sad excuse for excellence. Progress is excelling in what you do, not making a small group of people wealthy off the ‘peons’ expected to buy their merchandise. Apple has always meant quality and innovation that was worth the extra cost, and Apple people are loyal, sometimes to the point of distraction; but they deserve the best that Apple can produce not a bunch of excuses for an inferior product. Imagine your happiness at buying a car that won’t start if you sit in the seat without an inner tube around your body.
That goes for every company in the world including those other phone manufacturers. Lest you think I am an Apple basher, MS has never sold an OS that works, it is always “get the money coming and patch-on-the-fly”. Oh, that’s right I forgot, Apple and Linux do that too – follow the leader. This kind of “progress” keeps the world a poorer place or else you would have a new cell phone that doesn’t drop out.
It is time for someone to step up and take responsibility and ethics of being the BETTER, not just richer.

How about it Steve – is Apple going to lead or be an ‘also-ran’.

Jul 18, 2010 10:18am EDT  --  Report as abuse
Raskolnikov wrote:
@Majick1 – I think you have drank too much Apple Kool Aid. Apple will discourage early adopters if they do not fix this and issue a recall. Many previous early adopters will now wait to see if the newest iPhone has issues before buying.

Consumer Reports did extensive testing and confirm that this flaw has nothing to do with a “Death Grip” or “holding the phone improperly”. Apple simply let one slip through quality testing. It happens, just ask Microsoft. Why not make it right for affected customers, if only to save the brand more bad press?

Jul 18, 2010 10:37am EDT  --  Report as abuse
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