Chief Executive Steve Jobs defended Apple Inc.'s newest iPhone against complaints that it has a flawed antenna design, arguing that all smartphones have reception problems and saying the issue has been blown out of proportion.
Mr. Jobs, on stage Friday at Apple's headquarters, admitted the iPhone 4 loses reception when touched in the lower left corner and drops slightly more calls than its predecessor. He said Apple will offer free cases to iPhone 4 owners to alleviate the problem.
But he also showed videos of rival devices that he said had similar reception problems.
"This has been blown so out of proportion that it's incredible," he said. "There is no Antennagate," he added, mocking what he said were media attacks prompted by Apple's size and success.
Motorola Inc. co-CEO Sanjay Jha disputed Mr. Jobs's claim that all phones work this way. "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," Mr. Jha said after Mr. Jobs's presentation.
"To customers that are having problems, I apologize to them," said Mr. Jobs, though he stopped short of saying that Apple's design choices were to blame for what has become a public-relations problem for the Silicon Valley giant.
He said that the company has sold more than three million iPhone 4s since it went on sale June 24, and defended it as "perhaps the best product made by Apple."
Mr. Jobs said less than 1% of iPhone 4 customers had called the company with antenna problems, and added that return rates at AT&T Inc. for the iPhone 4 were 1.7% so far compared with about 6% for the iPhone released a year ago.
Mr. Jobs showed videos of smartphones from Samsung Electronics Co., Research In Motion Ltd. and HTC Corp. that Apple tested and appeared to show similar signal problems. He said it was impossible to make a phone without weak spots.
"This is life in the smartphone world—phones aren't perfect," he said. "And it's a challenge for the phone industry, and we are all doing the best that we can. But every phone has weak spots."
HTC spokesman Keith Nowak said if a person blocks enough of any phone the signal will be affected, but the "single spot" that the iPhone 4 has as a weakness is "probably not true for all phones." Samsung and RIM weren't immediately available for comment.
A Nokia Corp. spokeswoman said antenna performance "may be affected with a tight grip, depending on how the device is held." She added, "that's why Nokia designs our phones to ensure acceptable performance in all real-life cases, for example when the phone is held in either hand."
The iPhone 4, whose edge-to-edge glass case is framed by a stainless steel band that doubles as antennas, was initially lauded for its bold design. But it has proven problematic as the design puts the antennas in direct contact with user's hands, changing the way they are meant to behave, say antenna design experts.
The iPhone 4's design, which has black bands that separate parts of the antenna, made it easier for people to find the antenna's weak point, Mr. Jobs said. "What we did was X marks the spot," he joked.
Apple fueled criticism by initially telling iPhone 4 owners to simply hold the phone differently, and subsequently blamed faulty software that exaggerated reception changes when a user touches the antenna. Apple has now replaced the software, but its problems worsened when the influential publication Consumer Reports said it could not recommend the iPhone 4.
Mr. Jobs said anyone who buys an iPhone 4 through Sept. 30 will get a either a free rubber bumper that wraps around the phone or another case from one of the company's partners. Customers who have already purchased Apple's $29 bumper will get a refund.
Mr. Jobs and two other Apple executives that joined him on stage, all indicated that they choose not to put a case on their own phones.
UBS analyst Maynard Um estimated the bumpers cost Apple $3 each, and freely distributing them would cut into Apple's fiscal fourth-quarter earnings by two cents a share. Apple Operating Chief Tim Cook said he wouldn't provide an update on the financial impact of the free bumpers until its earnings call next week.
Additionally, AT&T subscribers who want to return the device can get a full refund and get out of their contracts without penalties.
An AT&T spokesman said the company supports Apple's move to provide a free bumper and said it would waive the restocking fees for returned iPhone 4s.
Mr. Jobs said the iPhone 4 drops about one additional call per 100 calls compared with the prior model, though he didn't give a total for how many calls are typically dropped.
Nationwide, cellphone users have one to two dropped calls out of 100, according to data provided to The Wall Street Journal by Nielsen, which notes service quality can vary by device, carrier and location.
Mr. Jobs's presentation received mix reviews. Allen Adamson, a managing director of WPP Group PLC branding agency Landor, said Apple was slow in its response but praised Mr. Jobs for taking "the bull by the horns" in confronting the issue. "They handled it in a prudent way," he said, arguing that a recall of the iPhone 4 wouldn't have helped any more.
On the other hand, Mr. Adamson suggested the problems for Apple's much-admired brand won't end right away. "It is going to linger just because Apple is a brand that people love to talk about," he said.
Dan Hays, a director at consulting firm PRTM, said he was surprised that Mr. Jobs tried to minimize the issue by pointing to issues with competing cellphones. "I can't see that making those comparisons will help to solve the problem," he said.
John McNally, a 48-year-old from Brooklyn, who bought a iPhone 4 for himself and his wife, called the bumper deal a positive step that shows good faith. He called Mr. Jobs' response "carefully worded and smugly optimistic," adding "but shouldn't we expect that from Apple by now?"
"The announcement was a real letdown," said Bin Chen, a 27-year-old art director for a bag maker in San Francisco, who has no desire to put a case on his iPhone. "You spend all this money on a beautifully engineered object, why would you go to great lengths to hide it?"
Apple's line of iPod music players were dogged for years by complaints about their poor battery life, and it's possible Apple's phones could face similar scrutiny for their antennas until they unveil a totally new design. Mr. Jobs said he did not yet know how the company might change those designs in the future.
Still despite the negative publicity, demand for the iPhone 4 has continued to outstrip supply. Next Tuesday, the company is expected to report another strong quarter of earnings for the period ended June 30 as analysts estimate that it has sold 8.7 million iPhones, compared to 5.2 million a year earlier.
Apple's stock has taken a beating since the release of the new model, dropping nearly 8% from record highs just a month ago. The stock initially bounced upward following the presentation but at 4 p.m. was trading at $249.90, off $1.55, on Nasdaq.
