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Computerworld - More than one in four Apple iPhones break or fail within two years, a company that provides after-sale warranties said today.

SquareTrade Inc., which sells extended warranties for iPhones, said that 26% of Apple's smartphones suffer breakdowns -- or simply breakage -- within the first two years. But that's an improvement over the iPhone's past reliability rating.

"Twenty-six percent is actually pretty good," said Vince Tseng, vice president of marketing at SquareTrade. "And it's encouraging that the failure rates have decreased."

According to SquareTrade, which examined more than 25,000 customer warranty claims, the iPhone 3GS is more reliable, and apparently sturdier, than its predecessors -- the iPhone 3G, which went on sale in July 2008, and the original iPhone, which debuted in 2007.

Last year, a similar SquareTrade analysis found that 31% of all iPhones failed or broke during the first 24 months of ownership. In comparison, SquareTrade's latest finding is that 25.6% of customers who have owned an iPhone during the past 22 months experienced a breakdown or breakage.

Claims filed by iPhone owners in connection with hardware failures or accidents -- SquareTrade's warranties cover both -- were lower this year compared to 2009. While 21% of iPhone-owning customers reported an accidental damage claim and 10% filed a hardware failure claim in the 24 months preceding last summer, only 18.1% and 7.5% filed accident or hardware-related claims, respectively, in the 22 months prior to June 2010.

Of course, phones that people keep using beyond the standard two-year duration of carrier contracts fail at a higher rate. SquareTrade's forecast: Three-year-old iPhones will experience a failure rate of 35% to 40%.

Tseng attributed the decrease in warranty claim rates primarily to improvements that Apple made in the iPhone's touchscreen when it developed the 3GS model.

"The iPhone 3GS is sturdier and can withstand a higher degree of shock," said Tseng, referring to the decline in accident claims, the bulk of which are connected to incidents in which the smartphone is dropped. "But the overall reliability of the iPhone has improved, especially in the touchscreen."

The number of reported iPhone 3GS touchscreen problems is less than half the number reported for the iPhone 3G, according to SquareTrade's data. Overall, Tseng estimated that the iPhone 3GS will have 20% fewer problems than the iPhone 3G.

On the downside, iPhone 3GS owners have reported almost 50% more power issues than users of the older iPhone 3G have reported.

The improvement in iPhone reliability will likely continue, said Tseng, and that's a good sign for the millions of people who have ordered the iPhone 4, which Apple will start selling on Thursday.

"Apple has gotten its manufacturing lines in shape, and failure rates have dropped year to year" over the past few years, said Tseng. "The iPhone 4 should be a good, solid device."

But Tseng said he has one major concern about the new iPhone: The all-glass back.

With the iPhone 4, Apple switched to a glass back, dropping the plastic cover that the iPhone 3G and 3GS had. Industry watchers have speculated that Apple went for the glass to improve voice and data reception, since its smartphone has been plagued with reception problems from the time of its 2007 launch, especially in high-density cities like New York and San Francisco.

"It all depends on how consumers treat the device, of course," said Tseng. "The front glass touchscreen has been fairly prone to cracking, but then people don't put protective covers [that shield] the front of the device."

The best way to protect any iPhone, said Tseng, is to use a cover, a case or silicon skin.

SquareTrade's latest iPhone reliability report can be downloaded from the company's site (download PDF).

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, or subscribe to Gregg's RSS feed . His e-mail address is gkeizer@ix.netcom.com.

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