NEW YORK (Dow Jones)--Apple Inc. (AAPL) admitted Friday that all of its iPhones mistakenly over-inflate their signal strength as criticism mounts over the effectiveness of the wraparound antenna design of the iPhone 4.
The Cupertino, Calif., company said that since the original iPhone, it has used an incorrect method to determine the number of bars to display on the device. In several instances, the iPhone would display two more bars than it should, providing an overly rosy indication of its cellular reception.
Apple said it would issue a software update "within a few weeks" to fix the problem for every model but the original iPhone.
"Upon investigation, we were stunned to find that the formula we use to calculate how many bars of signal strength to display is totally wrong," Apple said in a letter.
Apple, typically immune to criticisms over its highly coveted products, has begun to feel the heat over problems with the antenna, which doubles as the iPhone 4's metal frame. For the company, it marks a rare case of vocal backlash, which includes a number of lawsuits over the issue. For exclusive carrier partner AT&T Inc. (T), the problem represents a setback in its battle against the perception that it runs a spotty network.
"The implication is that what customers thought may have been poor reception in the past may have been worse than they believed it to be," said Ross Rubin, an analyst at market research firm NPD Group.
An AT&T spokesman declined to comment, referring questions to Apple.
The metal frame around the iPhone 4 was supposed to be Apple's response to the reception issues that the prior iterations faced. But shortly after the launch last week, problems cropped up with the signal bars dramatically falling when a person gripped the iPhone 4 in a way that covered the bottom left corner. Apple was quick to respond, advising people to avoid covering the lower part of the device and get a rubber "bumper," which Apple sells for $29.
Apple's explanation wasn't enough to mute the criticism. At least three separate lawsuits were filed Wednesday alleging that Apple knowingly sold a defective product.
In its letter, Apple said a sudden drop in bars indicates that the iPhone is in an area with "very weak signal strength." The phone was likely erroneously displaying full bars before the drop. The company said it would adopt AT&T's method of calculating signal strength to provide a more accurate reading of the coverage.
Apple also argued that gripping "almost any mobile phone in certain ways will reduce its reception by one or more bars."
Apple and AT&T have suffered from a number of high-profile problems in recent months, starting with a security breach in cellular-connected iPads that exposed 114,000 emails, a widespread shutdown of AT&T's system when the iPhone 4 was first made available for preorder, and supply constraints from Apple resulting in limited supplies to its retail partners.
AT&T has been working to improve its network coverage. The company said it expects to finish fixing its network problems in New York by the third quarter, with San Francisco about 90 days behind that.
Still, the iPhone 4 remains popular, with 1.7 million units sold in the first three days, which Apple CEO Steve Jobs said made it the most successful product launch in the company's history.
Apple shares rose 18 cents to $248.66, while AT&T fell 16 cents to $24.18.
