IPhone 4 antenna: the ticking $200 million/ week time bomb

Posted by Mike Luttrell

As speculation picks up that an iPhone 4 recall is inevitable, analysts say that the fix could cost Apple upwards of a billion dollars, and the tab is only going to increase as new units are sold.

As speculation picks up that an iPhone 4 recall is inevitable, analysts say that the fix could cost Apple upwards of a billion dollars, and the tab is only going to increase as new units are sold.

RBC Capital Markets analyst Mike Abramsky said today that Apple faces the serious possibility of a full recall of the iPhone 4 over the glitchy antenna issue. At first Apple outright denied that there was a problem, then they issued an apology that didn't seem to really even address the issue, and now they face a lawsuit that has just been granted class-action status.

Indeed, if a full-scale recall is declared, with 3 million of the $300 phones on the market, the cost to Apple would be as much as $900 million. If the problem is fixable, Abramsky estimates a repair cost of $100 per unit, which could still eat up $300 million of Apple's money. The best-case scenario for Apple is that everyone will be satisfied with a free rubber casing that would hide the exposed antenna - $15 per case would mean a $45 million hit.

However, those are the numbers if Apple enacts action today. The iPhone 4 still remains one of the top-selling phones on the market, so in the full recall scenario, every week Apple does nothing could potentially cost the company an additional $200 million, estimates Abramsky.

The class-action lawsuit, combined with a new statement from Consumer Reports that it cannot recommend the iPhone 4, are creating a whirlwind of problems for Apple. However, because it's Apple, it probably won't hurt in the long run.

"We expect iPhone 4 demand may rebound quickly, still outpacing supply and -- along with global channel fill -- may mitigate possible near-term slowdown in sell-through. The issue, in our opinion, is likely to blow over with media and consumers refocusing on iPhone 4's appeal, market opportunity and strong demand," wrote Abramsky in his analysis.