A new coating on the antenna — offered free — is the most likely scenario, says an analyst

Photo: Apple Inc.

In a note to clients issued Thursday, Piper Jaffray’s Gene Munster gave the odds — and priced out — several possible outcomes of the iPhone 4 press conference that Apple AAPL has scheduled for Friday at 10 a.m. Pacific (1 p.m. Eastern).

According to Munster — who says he has no inside knowledge of Apple’s plans — the company could:

  • 50% chance: Physically modify existing iPhones (and all future models). In the best-case scenario, this could be done as a free in-store fix, probably by covering the antenna with a non-conductive coating. He estimates this could cost Apple a month of sales, or roughly 3 million units, and shave 12% off its fourth quarter EPS. In the worst case scenario — which Munster believes is unlikely but possible — Apple could replace all existing iPhones with a “more intricate redesign.” He estimates that a recall would result in a one-time charge of $1 billion and reduce Apple’s EPS for calendar 2010 by 7%.
  • 40% chance: Give customers free cases, either Apple’s Bumper, which retails for $29, or something cheaper — a solution Munster had previously estimated would cost the company less than $180 million, or 1% of its 2011 operating income.
  • 10% chance: Simply explain the issue and do nothing, a scenario Munster also sees as “unlikely.”

“Ultimately,” he concludes, “we believe Apple will manage these issues in a consumer-friendly way and maintain its pristine brand.”

[UPDATE: John Martellaro at The Mac Observer has done his own assessment of the options and assigns a 20% probability to the free Bumper option and 70% to the non-conductive coating. See here.]

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[Follow Philip Elmer-DeWitt on Twitter @philiped]