When the story first surfaced that Apple's (Nasdaq: AAPL) new iPhone 4 had a problem with its antenna -- holding the phone a certain way can cause the signal strength to drop dramatically, even to zero -- it didn't seem that serious. And Steve Jobs' response -- "Don't hold it that way" -- treated it as such.

But reports have mounted up. Most recently, Consumer Reports did a controlled test and compared the "Kung Fu grip of doom" on the iPhone 4 to several others, including the Hewlett-Packard (NYSE: HPQ) Palm Pre, which did not have the same issue. Despite this, Apple has continued to stonewall. The last official comment from Apple has been that the problem arises from a miscalculation in the "real" number of signal strength bars. "Our bad."

Which prompts me to ask: How can holding the phone a certain way cause a software glitch to show up, yet putting a rubber "bumper," even a piece of duct tape, on and holding it the same way not do that?

Videos showing the loss in strength continue to be posted around the Internet. This video uses an app to measure the signal strength in decibels right off that phone. As the tester shows, the signal drops ... and drops ... and drops, to the lowest level the phone can measure. It's not an issue about the number of bars anymore. This story has even made it onto the Today show!

Mr. Jobs, you have a big problem. It doesn't even matter anymore if the issue is physically real or not. It has become real in people's minds and is causing your company to lose some of what has made it so special: Its reputation that Apple products just work. Cleanly. Smoothly. Without hassle.

Google (Nasdaq: GOOG) executives must be dancing down the halls -- I mean more than they normally do -- as you and your company continue to fumble this issue. Microsoft (Nasdaq: MSFT), long the hated one in computer land, is laughing up its tailored sleeves. I'm just waiting for an Android commercial mocking your series of "I'm a Mac, I'm a PC" ads with a new version: "I'm an Android, <silence due to no signal>." Nokia (NYSE: NOK) has already mocked you with a blog post on alternative ways to hold their phones.

Take a page from Johnson & Johnson's masterful handling of the Tylenol tampering issue back in the 1980s. Don't have customers buy the rubber bumper (at $29 each), but give it out free as a temporary fix. Thoroughly investigate reliable claims and demonstrations of the problem -- I'm sure Consumer Reports would be more than happy to talk with you. If necessary, change the design of the phone and then replace the defective ones, for free.

And you better have such moves in place by next Tuesday at 2:00 p.m. PT, because that will be high noon for you, when analysts start gunning for you on your third-quarter earnings conference call.

Remember, a reputation is so easy to lose, and so hard to get back.