RBC Capital Markets
Analyst Mike Abramsky noted that the iPhone 4 now has an availability of 3 weeks, up from a shipping time of 7 to 10 days from a few days ago, which could imply a transition in production.
"While some have suggested Apple could provide cases or bumpers, in our view Apple may prefer to more permanently resolve the perceived issue, to avoid ongoing impacts to reputation and brand," Abramsky wrote.
If Apple does institute a recall, it would likely impact the timing of the international launch of the iPhone 4, he said, which is planned to debut in 18 additional countries by the end of July, and a total of 88 by the end of September. He sees a recall costing Apple $1.8 billion in revenue and 40 percent earnings per share in its fourth-quarter guidance.
"We believe Apple will do whatever is necessary to correct the perceived iPhone 4 reception problem," he said. "While the fix may come at some cost, Apple with its $42B cash and $16B/yr cashflow can easily afford it. Apple customer loyalty is deep and resilient, and in our view, we expect iPhone 4 demand to rebound quickly. What could change our view is if Apple is perceived as handling the issue badly, the issue is protracted, or sales/financial impact worse than expected."
Piper Jaffray
Analyst Gene Munster with Piper Jaffray still maintains that a recall is unlikely, but he does believe that a hardware modification is more realistic given the fact that Apple is now holding a formal event.
"It is increasingly likely that the company will make an investment in the brand and calm the PR storm by offering current iPhone owners an in-store fix free of charge," he wrote. "Specifically, we now believe there is a 50% chance the company offers a free modification to current iPhone owners and includes the modification on all future iPhone 4s."
The change would likely result in a disruption of iPhone 4 sales for one month in the September quarter, he said, as the company would need to modify and re-stock phones before it sold them. Munster had previously forecast Apple to sell 9.5 million phones in the September quarter, but he believes those numbers would take a 12 percent hit in the event of a hardware modification.
A full recall, Munster believes, would cost Apple $1 billion in a one-time charge. He believes replacing every iPhone previously sold would present an average cost of $250 per handset to the company.
Munster also sees a 40 percent chance that Apple gives away bumper cases that resolve the reception issue. The rubber cases retail for $29. He said there is a 10 percent chance that Apple will explain the issue and do nothing.
"Despite these issues, consumers love the iPhone 4," he wrote. "Ultimately we believe Apple will manage these issues in a consumer-friendly way and maintain its pristine brand."
UBS
Maynard Um also believes a recall is unlikely to be announced by Apple on Friday. Such an approach, the UBS analyst said, would result in the immediate halt of iPhone 4 sales by Apple and its carrier partners.
He said if the solution presented by Apple is straight-forward, some may wonder why Apple didn't just choose to announce it through a press release. Given the considerable media attention the issue has received, Um said that just isn't an option for Apple.
"We believe an event is necessary as a press release to address what has become a 'loud' issue would likely have drawn more ire," he said.
Um sees the toll the news has taken on Apple's stock as a buying opportunity for investors. UBS has a $320 price target set for AAPL stock.
