Apple’s solution to Antennagate — free cases — is likely going to cost the company $175 million in revenue.
Apple posted record earnings this quarter. However, its recent success has been marred by controversy over the iPhone 4’s reception issues, specifically how holding it by its lower-right side can decrease reception.
Apple held a press conference last week to address the issue. Its solution to the problem: free cases for all.
Cases don’t grow on trees, though. During today’s Q3 earnings conference call, Apple revealed that it predicts that the free iPhone 4 cases and bumpers will result in $175 million in deferred revenue. It hits Apple’s books as a liability — essentially a debt or a negative balance on the bottom line. Apple says that it will expense the cost of the cases, which will help mitigate the overall cost on the bottom line.
In other words, Apple is accounting for $175 million in lost revenue on its Q4 balance sheet, all due to free bumpers and cases.
While no company wants to lose out on $175 million in revenue, the alternative — reduced iPhone 4 sales due to Antennagate — was far less palatable. And it’s important to note that this is just Apple’s cost estimate — the actual number could end up being more or less than $175 million, depending on iPhone 4 sales and how many customers take advantage of the free case offer.
Still, it looks like Antennagate will be just a drop in the bucket for a company that made $15.7 billion last quarter alone.
