Did Apple Know About iPhone 4 Issue?

July 16, 2010— -- Did Apple know that its hot, new iPhone 4 had a problem with its antenna?

According to Bloomberg News, a senior antenna expert at the company warned CEO Steve Jobs that the iPhone 4's antenna could lead to dropped calls. It also said that a carrier partner voiced similar concerns before the iPhone's launch. Jobs, famously fond of good-looking gadgets, chose design over function, according to Bloomberg.

But an Apple spokesman denies the report, telling the Wall Street Journal, "We challenge Bloomberg BusinessWeek to produce anything beyond rumors to back this up. It's simply not true."

The new iPhone features an external antenna that wraps around the perimeter of the device. Though it allows for a lighter and thinner phone, it has also been the source of much mayhem since the iPhone 4's June release.

According to tech bloggers and iPhone users, call reception apparently drops when the user's palm covers the bottom left corner of the phone. The so-called "death grip" has led to several lawsuits seeking class action status and a storm of bad press that escalated over the past few weeks.

Regardless of whether the company knew about the issue before its release, "antennagate" has landed the company in the unfamiliar position of defending a new product and its reputation for flawless PR and innovation.

After weeks of getting pummeled in the press over the issue, Apple said Wednesday that it will hold a press conference today at its Cupertino, Calif., headquarters. It disclosed few details, other than saying it will address the iPhone 4.

Analysts and industry watchers say they doubt there is much truth to Internet rumors of a recall, but many say Apple faces an "unprecedented" PR crisis and must offer customers some kind of remedy to emerge from the situation untarnished.

"It definitely is new ground. It's a pretty Teflon-coated company," said Leander Kahney, editor of the blog Cult of Mac. "They've never had to deal with anything like this. This is by far the worst press they have ever received."

In the first three days of its international launch last month, the iPhone 4 found its way into more than 1.7 million hands around the world. The company has called the release of the device, touted by CEO Steve Jobs as the "biggest leap" yet from the original iPhone, the most successful launch in Apple's history.

But the impressive early sales and the buzz that surrounded the launch have been marred by customer complaints that holding the phone in a certain way blocks the external antenna, leading to dropped calls and reception issues.

The backlash reached its peak on Monday, when Consumer Reports said it would not recommend the iPhone 4 (though it still ranked it among the top smartphones on the market). Even David Letterman joined the fray this week with a top 10 list featuring the iPhone's problems.

But Kahney said it's likely that the company will do more explaining than recalling today.

"I think what they're going to do is try to explain it away and say this is the best antenna ever and it works brilliantly under most circumstances unless you're in an area with sketchy reception and you're holding the phone the wrong way," he said.

Apple: Gripping Any Phone Could Reduce Reception

Apple quickly responded after the initial complaints started surfacing online, releasing a statement that said, "Gripping any phone will result in some attenuation of its antenna performance, depending on the placement of the antennas."

Apple also suggested that customers by iPhone cases, called "bumpers," that mitigate the problem.

The company later released another statement, repeating its claim that gripping any phone in certain ways could reduce reception, but indicating its surprise that the phone overstated signal strength.

"Upon investigation, we were stunned to find that the formula we use to calculate how many bars of signal strength to display is totally wrong. Our formula, in many instances, mistakenly displays 2 more bars than it should for a given signal strength," the company said. Apple said it would release a free software update soon to fix the problem.

Apple Will Likely Not Announce Recall Friday, Analysts Say

Cult of Mac's Kahney said he thinks that while it would be expensive, some kind of "soft recall" could adequately address the issue.

"I think that if they say that there's a problem here and we have a good hardware solution, they'll be fine," he said. "I think that's what they've got to do, otherwise this problem won't go away,"

He suggested that the company fix the phone with a coating over the antenna and then let current iPhone 4 customers swap phones if they are experiencing reception problems.

Others emphasize that the company will likely stay away from a recall altogether.

"For them to recall at this point is going to cost tons of money and hurt their brand image even more," said Kevin Tofel, editor of the mobile technology blog JKOnTheRun.

Though he said that though the company was on "unprecedented ground," Tovel said he believes the situation will only be a blip on the radar in the long run, assuming Apple comes up with a solution.

"They can't not do anything anymore. They've lost control of the situation. It's out of control from a PR standpoint," he said. "They've got to hand out free bumpers or figure out some kind of workaround."

Analyst: Apple Needs to Give Clarification, Re-Direct the Media

Tim Bajarin of Creative Strategies, Inc., a Silicon Valley analyst said that while not all of the phones appear to have the antenna issue, the problem still appears large enough that Apple needs to steer the media conversation.

"What I expect Apple to do is clear the air, give everybody a solid understanding of the technology and what they've done," he said. "And, fundamentally, if there is an issue, explain some kind of remedy."

He also said that given the fact that not everyone seems to be experiencing the antenna problem (he, for example, was unable to replicate the issue on seven phones), the company might want to explore the possibility that only a batch of phones were affected during manufacturing.

Still, others point out that despite complaints from customers, it doesn't appear that they're so upset that they're actually willing to give up the phone.

"We've all been talking about this but… are people lining up at stores to return the iPhone? I haven't seen it," said Lance Ulanoff, editor-in-chief ofPC Magazine. "The iPhone 4, in PC Magazine's opinion, is an excellent product, period."