The iPhone 4's launch went well for Apple in terms of sales -- moving 1.7 million units -- but not so well in terms of publicity.  Just before the official launch, news of Apple's scheme to track users' whereabouts and use it to target ads at them was aired.  And then the launch itself was marred by some ugly reception issues.

Apple has at last formally responded to those issues, curiously claiming, in essence, that there is no issue at all.  It writes in a press release:

Upon investigation, we were stunned to find that the formula we use to calculate how many bars of signal strength to display is totally wrong. Our formula, in many instances, mistakenly displays 2 more bars than it should for a given signal strength. For example, we sometimes display 4 bars when we should be displaying as few as 2 bars. Users observing a drop of several bars when they grip their iPhone in a certain way are most likely in an area with very weak signal strength, but they don't know it because we are erroneously displaying 4 or 5 bars. Their big drop in bars is because their high bars were never real in the first place.

To fix this, we are adopting AT&T's recently recommended formula for calculating how many bars to display for a given signal strength. The real signal strength remains the same, but the iPhone's bars will report it far more accurately, providing users a much better indication of the reception they will get in a given area. We are also making bars 1, 2 and 3 a bit taller so they will be easier to see.

We will issue a free software update within a few weeks that incorporates the corrected formula. Since this mistake has been present since the original iPhone, this software update will also be available for the iPhone 3GS and iPhone 3G.

We have gone back to our labs and retested everything, and the results are the same— the iPhone 4's wireless performance is the best we have ever shipped. For the vast majority of users who have not been troubled by this issue, this software update will only make your bars more accurate. For those who have had concerns, we apologize for any anxiety we may have caused.

So in essence the long awaited firmware "fix" from Apple is apparently to change the way bars are represented on the phone to reassure disgruntled customers.  

Apple and its U.S. carrier AT&T are already facing a class action lawsuit over the signal issues.  Apple CEO Steven P. Jobs further fanned the flames when he told his critics, "Just avoid holding it that way."

He later revised his statement to be, "There are no reception issues. Stay Tuned." 

Apple's claims that it was merely drawing the wrong number of bars are somewhat strange considering all the complaints of dropped calls that have been reported.  Many users who previously had AT&T and/or iPhones have commented that the problems appear to be largely with the handset itself, rather than the network -- despite the A&T network having more than its share of voice issues.

Customers can get somewhat of a solution for dropped calls if they purchase one of Apple's Bumper cases that seems to nullify some of the signal issues.  The interesting thing is that Apple never before sold first-party cases for the iPhone.  That has led some to accuse Apple of manufacturing the cases either to cover up its signal shortcomings or as a scheme to rake in more of its customers money.

Another curious thing about the incident is that the iPhone appeared to be almost in complete form way back in April -- thanks to Gizmodo's "acquisition" of a lost iPhone.  That raises the question of how such issues went unnoticed when there were months that could have been allocated to usage testing on the completed handsets.