There's a whole area of business called "crisis management." Some of the more famous case studies are the Tylenol poisoning case, the Ford Pinto controversy and lawsuit, the Valdez oil spill, Deepwater Horizon, the Firestone tire controversy, and it wasn't even that long ago that there was a small case of mass hysteria regarding Toyotas accelerating all on their own that managed to spread to other brands of cars before people realized that these were just careless drivers. As for abandoning a new product, I suppose there's not that many industries where you come out with regular updates like this every couple of years and it's a big deal. I know Microsoft has rebranded a couple of products before. They rolled out Windows 7 instead of trying to convince everyone that Vista was all fixed and not as bad as they say. I suspect this will be a similar case. Hold off until the controversy dies down, then basically just release the current iteration of their phone when people calm down and they can make sure the thing barely runs warm ever.

One of the most high-profile cases I can think of is the Tylenol murders and subsequent recall. The J&J handling of the problem is actually a textbook case of how to handle this kind of thing properly.

https://en.wikipedia.org/wiki/Chicago_Tylenol_murders

Edit: I commented before reading the article and just noticed that this incident was mentioned in the article itself.

Ayds (pronounced AIDS) appetite suppressant candy. After the renaming of GRIDS to AIDS.