iPhone 4: In-store Fix?

Posted on July 15, 2010


In his note to clients on Thursday, analyst Gene Munster gave the odds of what he thought might happen at Apple’s mysterious press conference this Friday.

Munster–who claims to have no inside connections to Apple–says that there are three things that Apple will most likely do:

  • 50% chance: Physically modify existing iPhones (and all future models). In the best-case scenario, this could be done as a free in-store fix, probably by covering the antenna with a non-conductive coating. He estimates this could cost Apple a month of sales, or roughly 3 million units, and shave 12% off its fourth quarter EPS. In the worst case scenario — which Munster believes is unlikely but possible — Apple could replace all existing iPhones with a “more intricate redesign.” He estimates that a recall would result in a one-time charge of $1 billion and reduce Apple’s EPS for calendar 2010 by 7%.
  • 40% chance: Give customers free cases, either Apple’s Bumper, which retails for $29, or something cheaper — a solution Munster had previously estimated would cost the company less than $180 million, or 1% of its 2011 operating income.
  • 10% chance: Simply explain the issue and do nothing, a scenario Munster also sees as “unlikely.”

“Ultimately, we believe Apple will manage these issues in a consumer-friendly way and maintain its pristine brand.” he notes in his closing statements.

Although highly unlikely, a recall is also a possibility, and we can’t rule that out either. Many people, including one US Senator, have been writing to Apple asking for a recall, which would cost the company about $1.5 billion, about 3.5% of their total cash on hand.

Posted in: Apple, Business, iPhone