- Associated Press - Tuesday, July 13, 2010

NEW YORK (AP) - Shares of Apple Inc. took a hit Tuesday amid investor concerns over antenna reception problems with the latest iPhone and a related decision by Consumer Reports magazine not to recommend the device.

THE SPARK: Consumer Reports said Monday it will not recommend the iPhone 4, which went on sale in June, until Apple finds a permanent and free way to fix the problem. Buyers of the iPhone 4 have been complaining that holding the phone a certain way can cause reception to fade and calls to drop.

Apple has said that any mobile phone can lose signal strength when it’s held in certain ways. But Consumer Reports said it tested several other phones that use AT&T Inc.’s network, and only the iPhone 4 seemed to have the reception problem.

THE BIG PICTURE: Some analysts called the concerns overblown. Ben A. Reitzes of Barclays Capital said he continues to think Apple’s stock valuation is “very attractive” and the stock can benefit from strong iPad and iPhone demand.


THE ANALYSIS: “As users, we have experienced some issues w/call drops; however, we have found drops go away after attaching a bumper accessory, which is quite useful anyway,” Reitzes wrote in a note to investors.

He added that Apple will issue a software update and work on fixing the issue, and that he has not “not seen any overwhelming evidence of iPhone 4 units being returned.”

Kaufman Bros. analyst Shaw Wu said so far his checks into Apple’s supply chain “do not indicate slowdown in build plans or demand.” But he added that a “greater focus on this issue could create risk to estimates.”

SHARE ACTION: Shares of Cupertino, Calif.-based Apple fell $7.93, or 3.1 percent, to $249.35 in midday trading Tuesday. The stock has traded in the 52-week range of $137.53 and $279.01.