iPhone News Updated

Dropped Calls Miff iPhone 3G Users

The Apple (AAPL - Cramer’s Take - Stockpickr) 3G iPhone’s connection may not be worthy of the name, something that should benefit rival handset makers that have been looking for a chink in the device’s armor.

iPhone owners are flooding blogs, message boards, and Apple’s Web site with complaints that the new iPhone 3G is not functioning correctly on the high-speed 3G networks it was designed for.

Many U.S. and foreign users are complaining that calls on 3G connections are frequently dropped, while others claim that they are stuck on the slower EDGE connection despite being stationary in a 3G coverage area.

“I have had the phone for a couple of weeks and I haven’t had any dropped calls until a couple of days ago. Now, at least 50% of my call get dropped or I get a ‘call failed’ message when trying to make a call even though I have [a strong signal] on 3G,” writes one iPhone owner on Apple’s iPhone support forum. “The phone will also bounce from 3G to EDGE to ‘No Service’ and then back to 3G. The phone works fine if I turn off 3G, but that defeats the purpose of having a 3G iPhone.”

London-based Nomura International equity analyst Richard Windsor released a research note this morning citing Apple’s use of Infineon Technologies’ (IFX - Cramer’s Take - Stockpickr) 3G chipset as the problem, and that even with an industry leading user interface and experience, an unreliable connection causes these advantages to be “quickly be reduced to nothing.

“This is not surprising as the Infineon 3G chipset solution has never really been tested in the hands of users,” Windsor writes. “This shows the risk of not going with a tried and tested solution.”

Windsor says that because Infineon’s “immature” chipset is embedded in the iPhone, Apple cannot remedy any 3G connection problems with a simple software update. Windsor does add that some iPhone owners will not experience the connection problems as it is only in areas where “the radio signal weakens…[and]the immaturity of the stack really shows.”

Spokesmen for Apple and Infineon were not available for comment.

AT&T (T - Cramer’s Take - Stockpickr) has already received complaints from U.S. iPhone users, although AT&T Wireless spokesman Mark Siegel says AT&T and Apple are working “to make sure everyone has a great experience.

“We couldn’t be happier with the device,” Siegel told TheStreet.com Tuesday. “This device is working great on our 3G network. We are thrilled with the customer interest in it.”

Siegel did say that iPhone 3G users’ experiences will depend on a variety of factors. “Are you in buildings? Are there tall trees? Are you in a mountainous area? Wireless networks are shared resources. The traffic has to be managed,” Siegel said.

Nomura’s Windsor says that the 3G connection problems are not being reported with other 3G devices on AT&T, which implies the problems are specific to the iPhone. While he isn’t reducing his expectations for iPhone shipments yet, Windsor calls it “a worrying sign.

“This give competitors such as Nokia NOK, HTC and Research In Motion RIMM time to get their user experiences up to Apple’s standard as a poor radio is big deterrent,” Windsor writes. “This is negative for Apple and Infineon, whose business at Apple could easily be at risk if this issue is not quickly resolved.”

The risk has yet to hit shares, though. Apple rose nearly 2% to $176.73 Tuesday, and Infineon added 3.2% to $8.97.

[Thanks: http://www.thestreet.com]

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