By Ian Sherr and Roger Cheng, Dow Jones Newswire

[excerpt]

Apple Inc. (AAPL), answering mounting criticism over the reception issue and antenna design of its recently launched iPhone 4, admitted the phone drops more calls than the previous version and said it would give away cases as a remedy.

Apple “screwed up” with the signal algorithm of the phone, Chief Executive Steve Jobs said during a press conference on Friday. But he denied that there was a design problem with the antenna, sticking to the company line that the problem is common with all smartphones. He added the issue was blown out of proportion, and that there was no “Antennagate.”

“Haven’t we earned credibility for the press to give us the benefit of the doubt?” he asked.

Apple has sold 3 million iPhone 4s since they were available on June 24, and the device quickly became the company’s fastest selling product ever. But the phone, which has an unusual antenna design, was immediately dogged by complaints about its reception, particularly when owners held the device in a way that covered the bottom left corner.

The problems cascaded into a full-blown public relations disaster for Apple, which initially told owners to hold the phone differently and then blamed the reception difficulties on software. The company’s problems worsened when influential product review publication Consumer Reports said it could not recommend the phone. The escalating criticism is of particular concern for a company like Apple, which stakes its reputation on the quality of its products.

“To customers that are having problems, I apologize to them,” Jobs said.

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