CUPERTINO, Calif. ( TheStreet) -- The brouhaha surrounding the network reception on Apple's ( AAPL) new iPhone 4 has taken another twist. In a letter released early Friday, Apple explained that the phones have been exaggerating signal strength, and the company promised to fix the glitch.

"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," explained Apple.
Apple

Apple's formula, apparently, sometimes displays two more bars than it should for a given signal strength. "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 four or five bars," said Apple. "Their big drop in bars is because their high bars were never real in the first place."

To fix the problem, Apple is adopting an AT&T ( T) formula for calculating how many bars to display for a given signal strength. "The real signal strength remains the same, but the iPhone's bars will report it far more accurately," said Apple. "We are also making bars one, two and three a bit taller so they will be easier to see."

Apple said that it will issue a free software update within the next few weeks that incorporates the corrected formula. Since this mistake has been hampering users starting with the original iPhone, this software update will also be available for the iPhone 3GS and iPhone 3G.

Apple recently announced that it sold more than 1.7 million new iPhone 4s within the first three days of sales, although reports of antenna problems have swirled around the phone. Many Apple fans have dismissed the problem although Apple, in a widely-reported (and ridiculed) statement, advised people to avoid holding the phone in a specific fashion.

Apple reiterated this point in its latest letter. "Gripping almost any mobile phone in certain ways will reduce its reception by one or more bars," it said. "This is true of iPhone 4, iPhone 3GS, as well as many Droid, Nokia ( NOK) and Research In Motion ( RIMM) phones."

Apple shares rose $1.51, or 0.61%, to $249.99 shortly after market open on Friday, as the Nasdaq gained 0.32%.

-- Reported by James Rogers in New York

Follow James Rogers on Twitter.

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