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Apple CEO Steve Jobs announces the new iPhone 4 as he delivers the opening keynote address at the 2010 Apple World Wide Developers conference June 7, 2010 in San Francisco, California.

The company that could do no wrong has finally done wrong.

Apple Inc. will hold a news conference Friday to address what has become a public relations nightmare for the firm behind the world's most talked-about phone. The event marks the first time in recent memory that the company has been forced to go on the defensive, a stark change from the ultra-hyped product announcements for which it is known.

Almost immediately after Apple began selling the device on June 24, customers complained that the new iPhone - the fourth generation of its most popular product - dropped calls when it was held a certain way. It quickly became clear that a design decision to wrap the phone's antenna around the outside of the device meant that users could cover the antenna with their fingers, ruining reception.

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Apple initially tried to play down the problem, but in the past week the antenna troubles have ballooned. Consumer Reports, the magazine that had picked the new iPhone as its best-reviewed smart phone, said this week that the dropped-calls issue means it can no longer recommend the device. David Letterman made the iPhone's antenna problems the subject of his late-night show's popular Top 10 list.

With criticism mounting, Apple has been forced to act.

"It's pretty clear that Apple had no choice," said independent technology analyst Carmi Levy. "It has been backed into a corner and it looks like it's going to do the right thing."

To remedy the antenna problem, Apple may offer customers a free "bumper" cover for the phone that would improve reception. Or the company could issue an outright recall.

Launched less than a month ago, the newest iPhone has arguably been the most successful product in Apple's history, at least in its early days. The company says it sold 1.7 million units in the first three days the phone was on the market, making it the fastest-selling Apple product ever.

But the massive sales numbers also mean the iPhone has been the subject of countless reviews and inspection. Just three days after the newest iPhone went on sale, a California law firm announced it would file suit against Apple and AT&T over the reception issues, on behalf of all the phone's users.

Apple suffered a public relations misstep when it issued a statement early this month indicating the reception issues were a result of an error in the way the iPhone calculated signal strength, usually indicated by a set of bars in the corner of the screen. "Our formula, in many instances, mistakenly displays two more bars than it should for a given signal strength," Apple said. However many critics didn't buy the explanation.

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The issue seemed to hit a climax this week when Democratic Senator Charles Schumer of New York wrote a letter to Apple CEO Steve Jobs chastising Apple for its response to the situation.

"The burden for consumers caused by this glitch, combined with the confusion over its cause and how it will be fixed, has the potential to undermine the many benefits of this innovative device," Mr. Schumer wrote.

"To address this concern, I ask that Apple provide iPhone 4 customers with a clearly written explanation of the cause of the reception problem and make a public commitment to remedy it free-of-charge. The solutions offered to date by Apple for dealing with the so-called "death grip" malfunction - such as holding the device differently, or buying a cover for it - seem to be insufficient."

As many observers have pointed out, Apple usually doesn't hold press conferences except to announce new products. However in this case, management may believe the situation has gotten out of control. "We believe an event is necessary as a press release to address what has become a "loud" issue would likely have drawn more ire," UBS analyst Maynard Um said in a note.

Short of a full-blown recall, most observers believe it's unlikely that the antenna issue will have a long-term impact on Apple's brand or bottom line.

"In the long run this is not going to destroy the iPhone franchise, or Apple's position as the maker of arguably the most-admired consumer electronics devices on the planet," said Mr. Levy.

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"It's a black eye. Apple will get over it."


<iframe src="" scrolling="no" height="650px" width="600px" frameBorder ="0" allowTransparency="true" ><a href="" >Following Apple's announcement</a></iframe>

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What happened

June 24: Apple begins selling the iPhone 4.

June 29: California law firm Kershaw, Cutter and Ratinoff file class-action suit against Apple and AT&T over antenna and reception issues for the smart phone.

July 2: Apple issues a statement saying the formula its phones used to calculate reception display bars is wrong, and promises a software fix for the problem.

July 12: Consumer Reports says it cannot recommend the iPhone 4 because of the antenna problems.

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July 13: David Letterman makes the iPhone's antenna woes the subject of his late-night show's Top 10 list.

July 15: Charles Schumer, a Democratic senator from New York, sends a letter to Apple CEO Steve Jobs urging him to provide more answers about the cause of the antenna glitch and provide a permanent fix.

July 16: Apple to hold a press conference on the antenna issue.

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