Apple admitted its signal strength miscalculation dates back to its original 2007 iPhone. It promised to fix the glitch in a few weeks, but did not directly address concerns that its antenna design causes reception problems for iPhone 4, its newest phone.
Apple's apology -- a relative rarity from the company known for its marketing savvy -- marked the third time in less than three weeks it had to apologize to customers of iPhone 4.
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 an open letter to customers published on Friday.
Since the iPhone 4 hit stores on June 24, consumers have complained about cellphone reception problems when they hold the phone in a certain way. Even while just standing in one place, a rapid decline in the number of signal bars can be observed depending on how the phone is gripped.
Apple has already been sued by iPhone customers in at least three complaints related to antenna problems on the iPhone 4.
Rival Motorola Inc has made a thinly veiled dig at the iPhone's problems. In ads for its Droid X phone, Motorola promised users can hold the phone any way they like.
Apple said that gripping almost any mobile phone in certain ways will reduce its reception by 1 or more bars. It said this problem is not limited to iPhone, but also plagues phones from Nokia and Research In Motion Ltd, as well as phones with Google Inc Android software.
But Apple conceded iPhone 4 consumers complained of a far bigger than normal drop in signal bars.
The iPhone 4's antenna is an unusual design in that it circles the entire perimeter of the device. Phone makers typically try to place the antenna in places the user is less likely to touch in order to make a call.
But with iPhone 4, unless you put a insulating cover around the antenna, the design seems to make it difficult to avoid touching it and unwittingly degrading reception by absorbing electromagnetic waves that carry phone calls, analysts say.
Kenneth Dulaney, a long-time cellphone analyst suggested that Apple's notoriously strict control of information ahead of its product launches may have hurt the ability of its engineers to test the device in as many situations as possible.
It could be that some of Apple's secrecy could be reducing the number of test cases they expose the device to, therefore some of these problems show, said Dulaney.
As a result of user complaints, Apple said it will update its software to in coming weeks using a formula recommended by AT&T Inc, the exclusive U.S. provider for iPhone.
This should give users a more accurate display of signal strength at any given time, the company said.
Apple said that, when users noticed a dramatic drop in the number of signal strength bars on their phone's display, it was likely due to weak network coverage in that area.
Users observing a drop of several bars when they grip their iPhone in a certain way are most likely in an area with very weak signal strength, but they don't know it because we are erroneously displaying 4 or 5 bars, Apple said.
AT&T deferred questions about the letter to Apple. It declined comment on any implication that its network performance, which has faced a lot of criticism, could be even worse than users thought.
Apple has already apologized for website delays when it started online iPhone 4 pre-orders June 15. It then apologized for store shortages after the device hit shelves.
Despite the complaints Apple says iPhone 4 is its most successful phone launch ever, with sales of 1.7 million by the end of June 26.
Apple analysts said the popularity of the record-selling device will likely not be hurt by the technology problem.
The demand is so far past what they're able to supply right now, the impact would have to be massive to hurt sales numbers, said Pacific Crest analyst Andy Hargreaves, who does not see consumers being upset enough about the phone's problems to decide against buying the device.
Another analyst, Ashok Kumar of Rodman & Renshaw, said consumers may be forgiving since Apple is pushing the technology envelope with a new antenna design.
Apple shares closed off 0.6 percent at $246.94 on Nasdaq and AT&T shares fell 0.2 percent to $24.29 on New York Stock Exchange. AT&T rival Verizon Wireless is widely expected to be added to Apple's iPhone distribution in 2011.
Also on the NYSE, the shares of Verizon Communications Inc -- the majority owner of Verizon Wireless -- rose 2 percent. Verizon Wireless is a joint venture of Verizon Communications and Vodafone Group Plc.
(Reporting by Sinead Carew; editing by Derek Caney and Andre Grenon)