Apple on Friday denied that the iPhone 4 had a faulty antenna, claiming that the problem was the software that determines how many signal bars to display.

Apple said that's the reason behind widespread complaints from users that the iPhone 4 can show a sudden plunge in signal strength when they hold it in a way that covers a small black strip on one edge of the phone.

That drop seems exaggerated because the phone can wrongly display four or five bars of signal strength when it shouldn't, Apple said.

"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, "Apple said in a statement.

To fix this, Apple is adopting AT&T?s 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, Apple said. The company will also make bars 1, 2 and 3 a bit taller so they will be easier to see.

Apple 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, the company added.

Apple apologized to customers "for any anxiety we may have caused," and claims that iPhone 4?s wireless performance is the best they have ever shipped.

For all those who are still not fully satisfied with the iPhone 4, they can return their undamaged iPhone to any Apple Retail Store or the online Apple Store within 30 days of purchase for a full refund, Apple said.

Despite the complaints Apple says iPhone 4 is its most successful phone launch ever, with sales of 1.7 million by the end of June 26.