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7/13/2010
03:00 PM
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iPhone Woes Could Hit Apple Earnings

Stock down as testers call into question Cupertino's "optical illusion" explanation for iPhone 4 signal trouble.

Apple shares were getting a haircut Tuesday, one day after Consumer Reports said it would not recommend the iPhone 4 for purchase due to its glitchy antenna.




Image Gallery: Apple iPhone 4, A True Teardown
(click for larger image and for full photo gallery)

Shares of Apple were off 2.02%, to $252.09, in late afternoon trading on the tech-heavy NASDAQ exchange.

Earlier, Kaufman Bros. analyst Shaw Wu said the iPhone 4 antenna debacle could impact Apple's earnings. "Should this antenna issue become a bigger deal, there could be a risk to our as well as consensus estimates," Wu said in a research note. Apple is scheduled to report third quarter earnings on July 20.

Analysts surveyed by Thomson Reuters, on average, expect the company to post earnings per share of $3.07 for the period, on revenue of $14.6 billion. iPhone 4 went on sale June 29. Shortly thereafter, reports about the faulty antenna began to emerge.

Many iPhone 4 buyers said the signal falters if the device's bottom left corner is covered by the palm of the user's hand—a situation common if it's wielded by lefties. Reports suggest the problem arises because grasping the phone in such a manner covers a particularly sensitive part of the antenna.

Apple has claimed the issue has nothing to do with the antenna, and is in fact a malfunction in the way the IPhone 4, as well as the iPhone 3GS and all other iPhones for that matter, displays signal strength.

"Upon investigation, we were stunned to learn that the formula we use to calculate how many bars of signal strength to display is totally wrong," Apple said in a statement released July 2. "Our formula, in many instances, mistakenly displays 2 more bars than it should for a given signal strength. For example, we sometimes display 4 bars when we should be displaying as few as 2 bars," the company said.

But Consumer Reports isn't buying it. The venerable product testing outfit said its engineers tested three iPhone 4s, and all exhibited the so-called "grip of death" problem.

"Our findings call into question the recent claim by Apple that the iPhone 4's signal strength issues were largely an optical illusion caused by faulty software," Consumers Reports staffer Mike Gikas said in a blog post.

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