End of Apple's iPhone 4 Case Program seen as benefit to shareholders

In a note to investors Monday, Shaw Wu with Kaufman Bros. said Apple's announcement last week that it would end the iPhone 4 Case Program is a positive for both customers, who can still receive a free bumper, as well as shareholders.

"As a good gesture, AAPL will continue to offer a free bumper case through AppleCare for those who still want one," Wu wrote. "We believe these moves make a lot of sense for both customers and shareholders. The reason is that AAPL will continue to offer free cases to those who want one even though data points continue to indicate that only a small faction of users experience antenna reception issues."

In addition, he said the $175 million set aside for the iPhone 4 Case Program could actually be accretive, and add between 25 cents and 45 cents to Apple's 2011 earnings per share. He noted the $175 million set aside isn't a lot for a company with $45.8 billion in cash.

"The reason for potential accretion is because in its accounting, AAPL already takes a reserve for warranties on every product it sells including iPhones and the elimination of additional reserves is additive," he wrote.

Last Friday, Apple revealed that the iPhone 4 case program will conclude on Sept. 30. That deadline was originally given when the program was announced in July, but Apple said at the time it would reevaluate the program.

In that evaluation, Apple said it found that the issue of antenna attenuation with the iPhone 4 was "smaller" than they had originally thought. "A small percentage of iPhone 4 users need a case," it said.

The company will still provide free bumpers to customers who contact AppleCare, but they will no longer be able to request third party cases as they could through the iPhone 4 Case Program software on the App Store. The program offered cases from manufacturers including Griffin, Belkin and Speck.

Wu originally predicted that Apple would give away free bumpers in June, when he said such a move would have little financial impact on the company.

Apple initiated the giveaway after complaints about loss of signal when improperly holding the iPhone 4 gained a considerable amount of media attention. Apple responded by stating that all smartphones experience some form of attenuation when held in a certain way.