No Warranty? No Problem: Apple Offers iPhone 5 Button Repair
Apple (NASDAQ:AAPL) has launched a free parts replacement program for owners of certain iPhone 5 models that may have a faulty sleep/wake button mechanism. As noted by Apple, some iPhone 5 models have sleep/wake buttons that “stop working or work intermittently.” Apple has established a website to manage the replacement program where iPhone 5 owners can enter the serial number of their device to see if it qualifies for a button repair. According to Apple, only a small percentage of iPhone 5 models manufactured through March of 2013 are affected by this issue. The program covers eligible iPhone 5 models for up to two years after the first retail sale.
Although the program currently only covers iPhone 5 owners in the U.S. and Canada, Apple stated that the program would roll out worldwide beginning on May 2, 2014. Eligible iPhone 5 owners can either bring their devices to an Apple Store or Apple Authorized Service Provider, or they can mail their device to an Apple Repair Center. Apple recommends backing up all of your iPhone data to iTunes or iCloud before getting the button replacement. Apple also noted that any devices running iOS 6 will be upgraded to iOS 7, the latest iPhone operating system. The button replacement process is estimated to take four to six days. Owners of affected devices that have already replaced their sleep/wake button can also apply for a refund from Apple through the newly established website.
It should be noted that Apple rarely conducts large-scale recalls of its devices. According to the latest U.S. wireless smartphone customer satisfaction study from J.D. Power and Associates, Apple took the top ranking at all four of the major U.S. carriers. However, the Cupertino-based company has faced complaints about similar button issues in the past.
Last August, a California judge dismissed a RICO (Racketeer Influenced and Corrupt Organizations Act) class action suit against Apple and AT&T (NYSE:T) that alleged the companies conspired to conceal problems with a defective power button on the iPhone 4 and iPhone 4S models. However, hardware problems with iPhones are rare, and the company typically offers to replace devices with known problems. As noted by Reuters, Apple previously offered replacement phone casings for iPhone 4 owners who experienced signal issues in a 2010 recall that was dubbed “Antennagate.”
Apple’s recently released quarterly 10-Q filing revealed that the company’s warranty accruals decreased by $824 million compared to the previous quarter. Increased warranty accruals typically indicate that a company is having more devices break during the warranty period. According to Wells Fargo analyst Maynard Um, Apple’s decreased warranty accruals in the past quarter likely boosted the company’s gross margin by 181 basis points or $0.93 in earnings per share.
Although Apple did not disclose how many iPhone 5 models were affected by the sleep/wake button issue, it should be noted that this model is no longer manufactured by the company and will therefore not likely have much of an impact on Apple’s total warranty accruals in the current quarter.
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