Apple Profits Despite iPhone 4 Controversy

By Joseph Palenchar On Aug 2 2010 - 4:01am




CUPERTINO, CALIF. — When it comes to the iPhone, nothing is going Apple’s way, except for sales and profits.

Apple CEO Steve Jobs has defended the iPhone 4’s reception, contending that many smartphones suffer degraded reception when held a certain way, and blamed the media — particularly a Consumer Reports review — for blowing the problem out of proportion. Apple, nonetheless, is offering a free Bumper case to prevent a user’s fingers from reducing reception strength by touching a part of the phone’s antenna.

Only 0.55 percent of all iPhone 4 users have called Apple customer care to complain about reception, CEO Steve Jobs said. The iPhone 4 “drops less than one additional call per 100” compared with the iPhone 3G S, and AT&T’s return rate of 1.7 percent for the iPhone 4 in its initial weeks of availability compared favorably with a 6 percent return rate for the iPhone 3G S, he argued.

Competing handset suppliers, however, took umbrage and faulted Apple’s antenna, which wraps around the outside of the phone. RIM, for example, said it has “avoided designs like the one Apple used in the iPhone 4 and instead has used innovative designs which reduce the risk for dropped calls, especially in areas of lower coverage.” Motorola co-CEO Sanjay Jha faulted Apple’s antenna design. “It is common knowledge in the industry that antennas on the outside of products have known issues, and despite the fact that they lead to smaller phones, we have avoided them because consumers don’t like being told how to hold the phone.”

For its part, Nokia said in a statement that “we prioritize antenna performance over physical design if they are ever in conflict.”

With competitors piling on, Apple suffered a self-inflicted wound by once again delaying sales of the white version of the phone. The white version had been postponed until the end of July, but the company now says the model won’t be available “until later this year” because the white model is “more challenging to manufacture than we originally expected.”

Despite the setbacks, Apple keeps selling more iPhones and making more money. Jobs called the iPhone 4 “the most successful product launch in Apple’s history,” pointing to sales of “well over” 3 million in the product’s first three weeks in the U.S. and other countries.

In its fiscal third quarter ended June 30, during which the iPhone 4 was available for only about a week, Apple reported it sold 8.4 million iPhones worldwide, up 61 percent over the yearago quarter. The company also said it sold 9.41 million iPods during the quarter, representing an 8 percent decline from the year-ago quarter. And iPad sales, which started in the quarter, came to 3.27 million.

For its part, AT&T said it activated 3.2 million iPhones in its second quarter ending June 30, up from the yearago quarter’s 2.4 million to match the previous quarterly record of 3.2 million in 2009’s third quarter. In its fi rst quarter, AT&T activated 2.7 million iPhones, up from 1.6 million in the year-ago quarter.

With rising iPhone and Mac sales combined with iPad sales, Apple reported revenues of $15.7 billion and a net profit of $3.25 billion in the quarter compared to .the year ago’s $9.73 billion in revenue and $1.83 billion in net profit. International sales accounted for 52 percent of revenue.

Said Jobs in a prepared statement, “It was a phenomenal quarter that exceeded our expectations all around, including the most successful product launch in Apple’s history with iPhone 4. iPad is off to a terrific start, more people are buying Macs than ever before, and we have amazing new products still to come this year.”

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