Apple Inc. is readying a software update for the iPhone, fixing a security flaw in the device that gives unauthorized access to contacts and e-mails.

``We are aware of this bug,'' Apple spokeswoman Jennifer Bowcock said today in an e-mailed statement. She declined to say when the update would be available. Customers can avoid the problem by changing their settings, Bowcock said.

Apple released a faster version of the Web-surfing iPhone in July, selling 1 million in the first three days, as part of a plan to win customers away from rivals Research In Motion Ltd. and Samsung Electronics Co. Apple put out a software update last week to improve network connections after some iPhone users complained about dropped calls and sound quality.

``Apple needs to fix the software ASAP, but so far demand seems strong,'' said Gene Munster, an analyst with Piper Jaffray & Co. in Minneapolis. He recommends buying the shares, which he doesn't own. ``The iPhone software has been rocky, but it does not seem to be impacting demand.''

The average Apple retail store is selling 94 phones a day, compared with 21 per day a year ago, Munster said. The original device debuted in June 2007.

Data at Risk

Technology site Gizmodo.com was among the first to report that iPhone users' private information was vulnerable, even on password-protected and locked phones. To correct the problem, users can set their phone so that double-clicking the Home button sends them to the home page or the iPod area, Bowcock said. The phone doubles as an iPod, playing movies and music.

Apple, based in Cupertino, California, fell 94 cents to $173.73 at 2:28 p.m. New York time in Nasdaq Stock Market trading. The shares had dropped 12 percent this year before today.

Chief Executive Officer Steve Jobs said he wants the iPhone to become Apple's third main business, alongside the Macintosh computer and iPod, which today account for more than 70 percent of sales.

Apple is selling the new iPhone 3G, which runs on faster third-generation wireless networks, in more than 40 countries, including Italy, Japan, Canada and Mexico. That's up from six markets earlier this year. Jobs expects the device to be available in a total of 70 countries by the end of 2008.

OAO VimpelCom, Russia's second-largest mobile-phone company, said today it will start offering the iPhone 3G this year. Russia is already one of the world's biggest markets for the iPhone, because of illegal imports.

© 2008 Bloomberg L. P..