Is Apple Getting Ready for a Full Recall of the iPhone 4?

Apparently, Apple (s aapl) is hosting a press conference tomorrow. It doesn’t take much imagination to guess what it is about — the iPhone 4 and its antenna problems. And from the looks for it, the company is likely to say that the company has figured out a fix for the problems, or something to that effect. Whether the company will issue an official recall or simply provide free bumpers to iPhone 4 customers remains to be seen.

The timing of the press conference reflects the fact that the company is hosting its earnings call on Tuesday and it makes sense for it to deal with the antenna issue prior to that call. In a note to his clients this morning, Rodman & Renshaw analyst Ashok Kumar wrote:

Our supply chain checks reveal that Apple has instituted a design fix for the iPhone 4 that more adequately insulates the transceiver module. Apple is also likely to offer the bumper, gratis, as an intermediary solution. It is unclear if Apple will announce an official recall.

Offering a free bumper seems common sense to us. Another point to note — AT&T’s replacement policies allow you to return a phone within 30 days of buying it. I suspect Apple and AT&T are going to waive the restocking fee in this case. I am not sure how many people remember this, but Apple’s antenna problems are reminiscent of Intel’s troubles in the early 1990s with an errant floating point bug in some Pentium chips. The story first gained traction in the chip industry trade press and later was picked up by mainstream media, which led to Intel offering to replace the chips. Only a few owners stepped up to replace them, but the affair cost Intel (s intc) close to $475 million.

The same is happening now to Apple. The iPhone 4 related problems were first reported in trade press but lately have been picked up by Consumer Reports, David Letterman and USA Today, prompting the company to take action. In theory, Apple may end up with a much heftier bill on its hands, since each device costs an estimated $187.51 in parts. Regardless of the total cost, Apple is right in addressing this problem, as it would remove any speed bumps in the way of iPhone sales.

Apple, according to Kumar’s estimates, should end the June 2010 quarter having sold about eight million phones, shy of his nine million device estimate, thanks to supply constraints. According to his numbers, the company may have sold about 3.2 million iPads during the quarter, roughly in line with Apple’s own estimates.

We expect Apple to report June quarter revenues that are in line or modestly above guidance levels of $13.0-$13.4 billion … Shortfall in sales of iPods will also constrain the financial results. Apple guided for margins of 36%, versus 39% in March, and we expect profitability to have a near term negative bias from new product releases.