WSJ.com - Apple's Profit Surges With Success of iPod

WSJ.com - Apple's Profit Surges With Success of iPod: "Apple Computer Inc.'s earnings more than quadrupled from a year earlier as the must-have iPod digital music player continued to fly off shelves and the company saw growing interest in its Macintosh computers.
The company also forecast better-than-expected-results for the current quarter.
Apple, based in Cupertino, Calif., reported net income of $295 million, or 70 cents a share, for its fiscal first-quarter ended Dec. 25. That compares with net income of $63 million, or 17 cents a share, in the same quarter last year.
Revenue rocketed 74% to $3.49 billion from $2 billion a year earlier."

Nice recovery from yesterday's dip, but...
1. iTunes isn't profitable, and probably never will be
2. Profit margins on iPods are going to tumble, as they face very significant competition (including the new iPod shuffle).

This is very reminiscent of the mid- to late 1980s, when Apple could do no wrong and the Wintel duopoly seemed destined to always be a distant second place to the cool Apple innovations (most of which were adapted from Xerox PARC innovations, but that's another story...), elegant designs, and oh-so-hip marketing. Maybe Apple won't repeat all of the same mistakes this time around, but at this point they're definitely on that trajectory... Apple should exploit its current market cap and acquire and/or merge its way into something more sustainable now, rather than watching while a Microsoft-led coalition decimates its latest leads...