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Apple Profits Despite iPhone 4 Controversy

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

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

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.”