The highly respected Consumer Reports announced that it cannot recommend Apple's ( AAPL) iPhone 4 because of the reception weakness caused when the phone is held in the lower left corner. Consumer Reports mentions that this is unique to the new iPhone 4 model compared to past iPhones and it is also unique to the AT&T ( T) network as no other phones suffer from this type of reception issue.

If the market was at a high, this kind of news would cause Apple to sell off $10. But because the market is near the low end of its trading range, the stock is able to overcome the negative news. A market-wide focus on low valuation is helping Apple on a day like today.

I have four thoughts on the matter:
  • This is nothing new. Anyone with an iPhone 4 has dealt with this. Consumer Reports is merely releasing an independent analysis that is hitting Wall Street today.
  • Nobody is in a hurry to return the phone. Apple users are confident that the problem will be fixed. Users know that Apple will do whatever it takes to resolve this, even if it means giving everyone a new phone. There is still a possibility that this can be fixed with a software update, and we know it gets fixed with the new iPhone 4 Apple cover. In the past, the Apple ecosystem has taken care of its customers better than any other brand out there; in return, Apple receives a high level of consumer loyalty.
  • The Apple model of dealing with problems is that they don't tell us anything until it is resolved. Look no further than Steve Jobs' liver transplant for a precedent. Short term silence might scrape the stock but the most important thing for investors is...
  • These reception issues are not impacting sales. The iPhone 4 is sold out everywhere. In addition, Apple is releasing a new Wi-Fi enabled iPhone in China. iSupply reports that the iPhone is growing 130% year over year but still commands only 3% of the global cell phone market share. With so much room to grow, it is going to take a major debacle by Apple to dampen investor enthusiasm. Does this qualify as a major debacle? Only if you think the problem won't get fixed. Otherwise, this is still a buying opportunity at the low end of Apple's trading range in anticipation of earnings.
  • To me, the 3% global cell phone market share statistic is the single most important bit of data on Wall Street. Apple is set to go on a market share ride.

    -- Written by Jason Schwarz, who is long on Apple.
    At the time of publication, Schwarz was long Apple.

    Jason Schwarz is an option strategist for Lone Peak Asset Management in Westlake Village, Calif. He is also the founder of the popular investment newsletter available at Over the past few years, Schwarz has gained acclaim for his market calls on the price of oil, Bank of America, Apple, E*Trade, and his precision investing in S&P 500 option LEAPS. His book, The Alpha Hunter, is set to be released by McGraw Hill in December 2009.