To allow for giving away iPhone 4 bumpers, Apple will set aside $175 million of iPhone 4 revenue in the September quarter, according to Apple CFO Peter Oppenheimer.
The issue with the antenna in the iPhone 4 has lately been causing Apple a fair few problems, but now the company have announced a temporary way to fix this; by giving away free Bumpers.
During the Q&A following Apple's third quarter financial results, Oppenheimer explained that the company will be deferring revenue for those iPhone 4s that haven't been sold with Bumpers until the end of the September quarter. This is so that the company has a pool of cash to allow them to provide the free Bumpers.
"There are two impacts of this. First is that we will need to defer revenue for the iPhone 4s that we sell where we've not delivered the bumpers and where we have not heard from the customers wanting to place an order," Oppenheimer explained.
Oppenheimer expects the accrual, the amount set-aside on the balance sheet to meet the liability, to be $175 million.
"I expect the accrual we'll need to make (a revenue accrual with no cost) will be about $175 million in September quarter and will be recorded as revenue in the December quarter," Oppenheimer told analysts.
"We will expense the cost of Bumpers when we ship them to customers and our most important objective is to take care of every customer," he added.
While giving away free bumpers to the tune of $175 million (£114 million) is a significant cost, it's far cheaper than if Apple had called a product recall. That would have cost them $1.5 billion, according to Techdigest.
Apple is taking the iPhone 4 bumper off the market, so that it can amass stock to send to iPhone 4 customers.
People are said to be concerned that they will not be receiving an Apple-made Bumper, but a cheaper, third party case. Apple CEO Steve Jobs told the audience of invited journalists at the press conference to discuss the iPhone 4 issues: "We can't make enough bumpers. So what we're going to do, is source some other cases and give users a choice of cases. And they'll be able to pick one."
Apple's free Bumper deal will only be available until 30 September, suggesting Apple may be working on a more permanent solution for phones sold after that date. After the press conference where Apple announced the free Bumper fix, Consumer Reports said: "We look forward to a long term fix from Apple. As things currently stand, the iPhone 4 is still not one of our recommended models."
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Comments received
treadmill said on Wed, 21 Jul 2010
And how do we order these bumpers?
Dragonfly said on Wed, 21 Jul 2010
I think there could be a minor hardware revision to the iPhone4 in the coming months. Probably before the 'Holiday Season' (iPod launch event ?)
It may or may not be a real world problem, but Apple won't want a perceived shadow hovering over the iPhone's reputation for too long. It may be something simple like doubling the width of the insulator.
Whatever it is, Apple would probably have already redesigned the case to alleviate the problem. I'd be very surprised if Apple's manufacturers are still manufacturing the v1 surround.
White phones not white enough ? I may be wrong but I think that could be a case of misdirection. :-)
Mark Hattersley said on Wed, 21 Jul 2010
Apparently you will order them via the Apple Web site. We're waiting for more information on that one.
ttreen said on Thu, 22 Jul 2010
With the last quarters' record profits of $1.83billion, and the huge cash mountain Apple have, I would say the ending of negative publicity would be considered well worth the cost, which isn't exactly going to cripple Apple...
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