There is usually lots of publicity surrounding the launch of a new Apple product. The iPhone 4

was no exception. Unfortunately, much of it was negative, with some critics even labeling the

introduction "antenna-gate." Within days of the product's release, reports surfaced of reduced

signal strength and dropped calls. The problem resulted from the sleeker, slimmer phone's

antenna, consisting of a metal band around the side of the phone. Apple's response was that all

smartphones have signal problems, users should hold the phone differently, and users should

purchase a case for about $30 to fix the problem. It turns out that Apple engineers knew of this

issue a year before the product was launched, but Steve Jobs, CEO of Apple Inc., liked the

design and opted to go ahead with it. The controversy even caught the ear of a U.S. senator, who

urged Jobs to fix the problem at no cost to consumers. Contrary to typical industry practice,

AT&T, the exclusive service provider for Apple's phones, was allowed to test only a disguised

phone for a very limited time without touching it, so the problem was not discovered during

testing. Apple later announced that all purchasers would receive a free case and reimbursed users

who had already purchased one. This controversy didn't hurt sales, though; Apple sold three

million of the new phones in just three weeks and could not keep up with demand.

1. Should Apple have released the iPhone 4 when engineers were aware of the antenna problem?

Discuss the pros and cons of further testing before launching the product.

2. Did Apple handle the situation effectively? Did Apple's iPhone lose brand equity from this

controversy?