Steve Jobs Looks to Deflect Focus From 'Antennagate'

As Apple Boss Offers Solution to IPhone 4's Reception Problem, Issue Is Not Expected to Damage Brand

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NEW YORK (AdAge.com) -- Apple CEO Steve Jobs cried uncle today in response to what he termed "Antennagate," the first major brand attack on the popular iPhone handset.

Steve Jobs gives a presentation at the iPhone 4 press conference today in Cupertino, Calif.
Steve Jobs gives a presentation at the iPhone 4 press conference today in Cupertino, Calif. Credit: Engadget
But before he offered free cases to iPhone 4 users as solution to the phone's antenna issues, Mr. Jobs, during a press conference at his Cupertino, Calif., headquarters, was sure to kick some dirt on his competitors and share stats in an attempt to minimize the backlash.

"It was interesting that there was a huge preamble" before the announcement, said Will Stofega, mobile analyst of research firm IDC. "It seemed a little defensive from the start."

Apple's iPhone has been in the hot seat over an alleged design flaw in the fourth-generation phone's wrap-around antenna. Since the iPhone 4's arrival three weeks ago, reports have flooded in that the smartphone loses service when human hands grasp the rim on the lower left corner. This marks the first time problems with reception, a longtime issue for the iPhone, have fallen to the hardware maker and not the phone's exclusive carrier, AT&T. Apple scheduled the conference on short notice after Consumer Reports earlier this week said it could not recommend the latest iPhone because of hardware issues.

Despite the antenna reports, Mr. Jobs said Apple has sold more than 3 million units of the newest iPhone in the last three weeks. Of those iPhone 4 owners, less than 1% have called AppleCare to complain, he said. What's more, less than 2% have returned iPhone 4, vs. 6% for the last iPhone, 3GS.

Mr. Jobs was also sure to link competitors HTC, Research in Motion and Samsung to antenna problems. Mr. Jobs told attendees at the impromptu press conference that other phones, namely the Droid Eris, Blackberry Bold and Omnia, suffer from the same problem.

"Phones aren't perfect," Mr. Jobs said. "It's a challenge for the whole industry. Every phone has weak spots."

Mr. Jobs did not bring up free cases until the end of the presentation. Apple's handing out free cases to cover the antenna's weak spot was the expected solution, a cost-effective alternative to a product recall that analysts estimated would cost Apple $1.5 billion.

"This is the most inexpensive [option] for Apple and the simplest solution for consumers," said David Chamberlin, director of crisis and issues at MS&L Group. "But it's a shame it took almost a month for this to come about."

That's not to say this hiccup will have a lasting impact on one of the most hallowed brands in recent memory.

"[The iPhone has] had a better run than any other product I can think of," added Mr. Chamberlin. "Waiting as long as they have to address this caused unnecessary harm to the brand that is worse than would have occurred by taking quick action."

In a small-sample-size impromptu survey, IDC found that 66% of respondents plan to delay purchasing the iPhone because of the antenna problem.

But it still doesn't look like this is the beginning of the end for Apple's untouchable brand run. "Three million in three weeks; that number speaks for itself," said IDC's Mr. Stofega.

"This is the first big, high-profile misstep they've had," said Mr. Chamberlin. "But no one appears to be backing away from the iPhone in terms of their desire to have one."

Branding exec James Fox, chief strategic officer at Red Peak Group, calls "Antennagate" a storm in a tea cup. "I think this is only going to be a blip," he said. "I don't think this is going to have any long-term impact." He characterized the dig at competitors as a "clever little side swipe."

"Will it spoil the brand? A little bit," Mr. Stofega said. "But I think they'll come back. They have a halo around them."

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