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Tuesday, July 13, 2010, 10:00 am PT (01:00 pm ET)

iPhone 4 antenna fix could impact Apple's operating income by 1%

The iPhone 4 antenna issue has reached a "boiling point," though investors in Apple should not overreact to the problem, a Wall Street analyst said Tuesday.

Gene Munster with Piper Jaffray said in a note to investors that investors should "not lose site of the forest for the trees" in the ongoing iPhone 4 antenna controversy. He projected that a potential fix from the Cupertino, Calif., company could impact its operating income by 1 percent.

"Ultimately we believe this PR black eye takes away from near-term upside potential to our iPhone estimates, but it does not change the long-term trajectory of the iPhone," Munster wrote. "While the issue has gained significant traction in the press, the reality is we estimate this problem periodically affects 25% of iPhone 4 users given the fix is easy (a case for the iPhone), and 75% of customer choose to use a case anyway."

The analyst gave a list of options that Apple could use to resolve the antenna issue. First among those would be giving away free $29 bumper cases, which the company has said will resolve the problem by covering the metal band on the exterior of the phone, which serves as its antennas.

Another option for Apple: do nothing. Munster said that because he believes only 25 percent of iPhone 4 users are periodically affected by the issue, the company could "weather the storm," and let demand for the product speak for it self.

Finally, Apple could do a recall, an option Munster said he feels is "highly unlikely," given that the problem is resolved with a simple case. He sees the first two as realistic options for the company.

How could this happen? The analyst said it's likely a result of the secrecy used by Apple when testing its products in the wild.

"We believe Apple field tests every iPhone model. However, recall that the lost iPhone 4 prototype was disguised as an older model iPhone with a case," he wrote. "Given its proclivity to secrecy, it is possible that Apple required all test units to have a case, which would render the issue undetectable. In other words, Apple may never have known the problem existed on test units in the field because they all had cases on them."

Piper Jaffray remains unfazed by the hardware issues with the iPhone 4, and continues to expect that Apple will have strong June and September quarter results, largely putting the discussion behind it. The firm has maintained an overweight rating for AAPL stock with a price target of $351.