On Friday Apple will hold what one analyst calls an "unprecedented" news conference about the iPhone 4, amid speculation that an even more unprecedented recall is in the offing. The news conference will be held 10 a.m. (PDT) Friday at the company's headquarters in Cupertino, Calif.
It is expected that Apple will announce some sort of fix for the phone's highly publicized antenna problem, which can reduce reception if the phone is held in a certain way. But analysts and PR experts are debating just how far Apple will go to address the problem.
Some say a recall is "inevitable." "Apple will be forced to do a recall of this product," PR expert Matthew Seeger, who specializes in crisis communication, told the Web site Cult of Mac. "It's critically important. The brand image is the most important thing Apple has. This is potentially devastating."
A recall would be expensive, with estimates ranging from $1.5-$2 billion dollars. One analyst thinks that is the way Apple is leaning.
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"A press conference is unprecedented,” wrote RBC Capital Markets analyst Mike Abramsky in a research note Thursday. While cheaper fixes are available, Abramsky said Apple might “prefer to more permanently resolve” the problem to “avoid ongoing impacts to reputation and brand.”
However, UBS analyst Maynard Um wrote that a recall is still “unlikely,” and that Apple will go another way.
That would include giving all iPhone 4 customers a free bumper case that Apple says would cure the problem. That would cost $1-$5 per customer and result in a 1% hit in earnings.
Or Apple could opt for a special coating that is put around the antenna. That could be done in-store, and cost Apple about 12% in earnings this quarter, according to PiperJaffray analyst Gene Munster.
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Apple reportedly has about $40 billion in cash on hand, so none of these fixes would break the bank. That's why many analysts say a full recall is in order -- if Apple can afford to fix the problem once and for all and assure the public that its products remain sound, why wouldn't it?