John Naughton: Apple's thinking too small for its rapidly growing boots

Over the past two months, Apple's market capitalisation (ie its value as measured by the stock market) averaged out at US$229.8 billion ($315.9 billion).

The corresponding figure for Microsoft was US$215.9 billion. Yes, you read those numbers correctly: Apple is now worth significantly more than Microsoft, and the difference isn't just a flash in the Wall Street pan.

This has implications for all of us who follow these things. The mainstream media, for example, need to discard the rose-tinted spectacles through which they have viewed Apple ever since Steve Jobs returned to the helm in 1997. Apple is no longer the Lucky Little Company That Could but a looming, secretive, manipulative corporate giant.

Recent developments suggest that Apple itself also needs to adjust to its new status as just another company. Last month it released the iPhone 4, the latest version of its smartphone, to near-universal media acclaim.

But shortly after the release of this magical device, complaints began to surface about problems with its wireless reception - specifically that if one held the phone in a certain way while making a call, then it dropped the connection.

Apple at first ignored these irritating complaints, but eventually issued a soothing "Letter from Apple regarding iPhone 4".

"The iPhone 4 has been the most successful product launch in Apple's history", it began, in best Listen With Mother style.

"It has been judged by reviewers around the world to be the best smartphone ever, and users have told us that they love it.

So we were surprised when we read reports of reception problems, and we immediately began investigating them." The "letter" went on to explain that the problem was caused by a mistake in the algorithm (ie mathematical formula) used to calculate the number of bars in the signal strength indicator.

A software update would, it said, soon fix that.

This patronising "letter" proved to be a spectacular (and misleading) misjudgment. "I couldn't believe this was meant to be taken seriously," wrote Dave Winer, one of the blogosphere's elder statesmen.

"It's the kind of story The Onion might have written on a bad day. Or Jon Stewart. That a corporate PR team wrote this says how unseasoned their people are. That they thought this answer was going to satisfy anyone says how out of touch they are with the world they are in."

In fact the algorithm excuse was a smokescreen. The real problem was that if you hold the phone naturally, your fingers bridge the gap between the two segments of the antenna contained in the device's bezel. (Which might just explain why Steve Jobs carefully held the phone by its top and bottom edges when showing it to the Russian president recently.) So it wasn't a software problem, and the resulting "shitstorm" grew and grew.

Things got so bad that Apple eventually decided on the nuclear option: a Steve Jobs press conference.

The event was an instructive shambles. In summary, the message was: Apple is good and makes great products; all smartphones have reception problems; Apple loves its customers, which is why it built all those cool retail stores for them; the iPhone problem can be fixed by fitting a rubberised "bumper" over the bezel; and Apple will give everyone a free bumper, so what's the problem?

The press conference was instructive because it provided such a vivid demonstration of how inexperienced Apple is in its new role as just another company - and how inept Jobs is when faced with the hostile scepticism that is the routine experience of other chief executives.

"When it comes to responding to hostile or sceptical media coverage," wrote one experienced commentator, "Jobs & co seem to be like a presidential contender who's been able to skip the primaries and go straight to the general election - missing all the vetting and the hundreds of debates that help to surface any weakness or issues of concern, providing time to develop the skills necessary to respond to any situation. Jobs demonstrated what I've never seen him do in front of an audience: he not only lost his cool, he lost his charm. He was a like an arena rock star who can't perform acoustic."

And no free T-shirt from the gig, either.

- OBSERVER