'We aren't perfect': Free cases to alleviate iPhone 4 problems (Update 2)

CEO Steve Jobs apologized Friday to people who are less than satisfied with the iPhone 4, even as he denied it has an antenna problem that needs fixing.

"We're not perfect," Jobs said at a news conference. "Phones aren't perfect."

The more than 3 million people who have already bought an iPhone 4 can go to Apple's website starting late next week and sign up for a free case, he said. Apple can't make enough of its $29 "Bumper" cases for everyone, so the company will let people chose from several case styles.

New buyers through Sept. 30 will also be eligible. Apple will send refunds to people who already bought a Bumper.

Jobs, expressing irritation with the critical coverage of the phone's reception problems, echoed an earlier statement from Apple that no cell phone gets perfect reception. He played a video showing competing phones, including a BlackBerry from Research in Motion Ltd., losing signal strength when held in certain ways. He talked for 45 minutes and took 45 minutes of questions with Apple's chief operating officer, Tim Cook, and Bob Mansfield, a senior Apple executive in charge of hardware engineering.

Phones usually have an antenna inside the body. In designing the iPhone 4, Apple took a gamble on a new design, using parts of the phone's outer casing as the antenna. That saved space inside the tightly packed body of the phone, but meant that covering a spot on the lower left edge blocked the wireless signal.

Consumer Reports magazine said covering the spot with a case or even a piece of duct tape alleviates the problem. It refused to give the iPhone 4 its "recommended" stamp of approval for that reason, and on Monday it urged Apple to compensate buyers and fix the problem. The company had been criticized about spotty iPhone service even before the newest model came out.

On Friday, in the company's first remarks following the magazine's report, Jobs said Apple was "stunned and upset and embarrassed."

Jobs said the iPhone 4's antenna issue isn't widespread, with just over five out of every 1,000 complaining to Apple's warranty service and less than 2 percent returning the device.

"We're not feeling right now that we have a giant problem we need to fix," Jobs said. "This has been blown so out of proportion that it's incredible."

Analysts have criticized Apple's responses to reports of reception problems as dismissive, and cautioned that the company shouldn't come across as arrogant. A curt note attributed to Jobs told one early iPhone buyer to either hold the phone a different way or buy a case.

Apple has also said the main problem is actually with software, not antenna design. Apple said it recently discovered that iPhones display more cell phone signal "bars" than they should, leaving people who believed they had a strong signal frustrated by dropped calls. Apple issued a software update Thursday that it said would make the number of bars shown on the phone's face more accurate.

But Consumer Reports painted the problem as much broader. On Friday, the magazine said the free cases were "a good first step toward Apple identifying and finding a solution for the signal-loss problem of the iPhone 4."

Dan Hays, who focuses on telecommunications at management consulting firm PRTM, said it was striking that Jobs said the iPhone 4 drops one more call out of 100 than the previous model, the 3GS. That doesn't sound like a big difference, but a typical U.S. phone only drops one to 1.5 calls per 100, so it could be that the iPhone 4 drops nearly twice as many calls as the older model, Hays said.

No phone owner wants a gadget that doesn't work. But many people who have bought an iPhone 4 or are considering one seem willing to forgive the antenna problem because they like its other features so much.

"It's not really my concern because I hardly make calls," said Ross Beck, a 22-year-old student in Seattle. "Honestly, it doesn't faze me. I know Apple and I know they fix their mistakes."

Helen Ferszt walked out of Apple's flagship store in New York City on Thursday after ordering the iPhone 4, her third model, despite having heard of the reception problems.

"I love the iPhone," said the 78-year-old psychotherapist from New York. But she added that Apple needs to do better than giving away a free case.

"No, I want it to be fixed," she said. "They can't just hang us out to dry."

Jobs apologized Friday to buyers who had less-than-perfect experiences with the new device.

"We're going to do whatever it takes to make them happy and if we can't make them happy we're going to give them a full refund and say we're really sorry we inconvenienced you, and we're going to do better next time," he said.

The refund applies even for those who have long-term contracts with AT&T Inc., the iPhone's exclusive U.S. wireless carrier.

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