No wonder it was a blowout quarter.

After market close Monday, Apple reported a fiscal fourth-quarter profit of $1.67 billion, or $1.82 a share, on revenue of $9.87 billion. That topped the estimates of analysts surveyed by Thomson Reuters, who’d expected the company to earn $1.42 a share on revenue of $9.2 billion.

The company sold 3.05 million Macs during the quarter, a 17 percent increase over last year. It sold 10.2 million iPods, an eight percent decline from the year-ago quarter.

And iPhones? Apple (AAPL) sold 7.4 million of those–seven percent more than during the same period last year. So much for those supply-chain issues that some analysts warned might undermine iPhone sales.

“We are thrilled to have sold more Macs and iPhones than in any previous quarter,” said CEO Jobs. “We’ve got a very strong lineup for the holiday season and some really great new products in the pipeline for 2010.” [Editor's Note: "...really great new products"--is that code for a tablet?]

Apple shares, which closed at $189.86 today, are spiking as I write this. At $203.90, they’re up more than seven percent in extended trading.

Looking ahead to its fiscal first quarter, Apple estimates it will earn between $1.70 and $1.78 a share on revenue in a range of $11.3 billion to $11.6 billion. That’s comically lower than the $1.91 a share on $11.45 billion in sales that analysts are forecasting. But as today’s results clearly demonstrate, Apple subscribes to the underpromise-and-over-deliver school of guidance theory, so there’s likely little cause for concern.

So, to recap: Apple sold more Macs and more iPhones than in any previous quarter in the company’s history. Before the holiday quarter. And in midst of the worst economy we’ve seen in 50 years.

Notes From the Earnings Call:

• Apple COO Tim Cook and CFO Peter Oppenheimer are handling the earnings call. CEO Steve Jobs will not be attending.
• Oppenheimer says this was Apple’s second-highest quarterly revenue ever. Highest-ever operating margin. “We are thrilled with these record-breaking results, particularly given the economic environment around us.” Obviously.
• Macs are showing “fantastic momentum,” says Oppenheimer. Sales have outpaced the market in 19 of the past 20 quarters. Quarterly sales were up 17 percent; portable sales, 35 percent. Interesting: 42 percent growth in Asia.
• Moving on to iPods: Sales were down to 10.2 million from 11 million a year ago. But iPod touch sales doubled. MP3 market share in the U.S. is now more than 70 percent (according to NPD, I think).
• iPhone sales were up seven percent. Apple will begin selling iPhones in China later this month. More than 85,000 apps in App Store. Two billion downloads.
• Apple opened 15 new stores during the quarter. Now has 273. Will soon open first two stores in France, including one at the Louvre.
• Moving on to the Q&A. Asked about those iPhone 3GS supply issues I mentioned earlier, Cook acknowledges that demand did outstrip supply in a number of countries. But the situation improved “markedly” in September. How are things looking for China? Cook: “I would have liked to have had more, honestly, because we were still short in some countries at the end of the quarter.”
• Apple is obviously very excited about the iPhone’s impending debut in China. “There’s a good opportunity, and we’re really excited to get started,” says Cook. “It’s the largest market in the world in terms of total phones.”
• No comment on the broader economy. “We just spend our time projecting our business and leave the economy to the economists.”
• Does Apple worry about iPhone rivals? Android? Not really, says Cook. “We feel very good about suiting up and competing against anyone.” Our competitors are still trying to catch up with the first iPhone, he adds.
• Snow Leopard? Cook says the company’s been “pleasantly surprised” by sales of Apple’s latest OS.
• How does Apple benefit from carrier-exclusivity iPhone deals? Cook says carriers with exclusivity deals are willing to invest more in the platform and that means greater innovation. Visual voicemail is an example of that. That said, he adds, “We’ve found no lack of people wanting to sell iPhones, frankly.”
• International store revenue up more than 20 percent, on average.
• More on iPhone supply issues. Cook insists this is not a component issue, though he notes that silicon can sometimes be hard to get. “We feel good about our position now.”
• And still more on iPhone supply issues: How many iPhones would Apple have sold if it had an adequate supply? Impossible to say, really, Cook says, adding that 3GS units were in short supply virtually everywhere in September.
• Enterprise demand for the iPhone is very strong. It’s either being deployed or already in use at some 50 percent of Fortune 100 companies. Same with Europe and the FT 100. Widely used in higher ed and government as well.
• But perhaps not widely enough. Asked about institutional sales, Cook says Apple isn’t seeing much stimulus funding. The company’s worried about state spending. Says Cook, “We may see more this quarter, but it’s too early to tell.”

Notably absent from this update, however, is the reenabling of iTunes synchronization, which Apple (AAPL) spannered when it released iTunes 9.0 earlier this month. Seems that Palm (PALM) was either unable to develop a way to restore this feature or has thought better of doing so after the USB Implementers Forum took issue with the manner in which it was doing it.

“At the end of the June quarter, Apple was having difficulty keeping the iPhone 3GS in stock; the product seems to have exceeded Apple’s internal expectations,” Munster writes in a research note today, explaining that he sees two primary reasons for the uptick in demand.

In the first place, according to Munster, “Apple’s App Store has been a huge success (65k+ apps and 1.5b+g downloads), and app developers (like Sirius/XM, ESPN, etc.) are promoting their apps, and meanwhile providing free advertising for the iPhone platform (which spurs more iPhone sales, app downloads, and the cycle continues)….”

Second, Munster continues, “The smart phone industry has effectively crowned the iPhone and its App Store the gold standard among touchscreen mobile experiences, and competitors are trying to copy the device and its software. In so doing, the iPhone’s competitors are actually promoting the iPhone, and we believe, driving sales of the device similar to the manner in which competing MP3 players drove sales of the iPod as the gold standard in 2004 by defining themselves in comparison to it.”

Hard to disagree with that assessment given that some of the handset ads we’ve seen recently, particularly from Palm (PALM) and Sprint (S)–see ad above–which, though they insist the Pre was never intended as an Apple (AAPL) iPhone killer, can’t help but compare the two devices in their marketing materials.

In a research note issued this week, Canaccord analyst Peter Misek speculates that Apple (AAPL), which recently debuted an iPhone capable of shooting and editing video, plans to bring the same functionality to the iPod.

“We believe Apple is now targeting to enter the low-end camcorder market by adding this functionality into its iPod lineup,” he writes. “…We believe Apple will unveil various iPod versions with camcorder functionality. We believe this will drive sales not only for traditional MP3 players, but as a new competitive dynamic to the lower end camcorder market that is now dominated by Flip line of digital camcorders.”

Misek sees such a move giving a nice boost to iPod sales, which, as Apple revealed earlier this week, have been declining a bit. “On anticipation of this we have markedly raised our iPod growth assumptions and have raised our iPod shipment forecast from 50 million to 65 million units.”

And what of Cisco (CSCO)? What would the transformation of the iPod into a point-and-shoot camcorder mean for the Flip? Certainly not good things. Who’d want to carry two devices for music and video capture when they could carry just one?

According to Sacconaghi, the smartphone market isn’t a natural fit for Dell, which could see its efforts hamstrung by its historically lousy industrial design sensibility and lack of software development experience and wireless technology, not to mention unenthusiastic carriers hesitant to add a Dell phone to their lineups.

“We believe Dell’s foray into the smartphone market is risky and its success uncertain,” Sacconaghi writes. “In our view, the biggest risks are that (1) Dell invests a disproportionate amount in the initiative…; (2) the high margins earned on smartphones today collapse by the time Dell establishes itself in the market…; (3) it causes too much management distraction…; (4) the business simply fails.”

(4) the business simply fails.

A harsh prediction–especially when we don’t even know if the business will ever exist. Clearly, Sacconaghi doesn’t have much faith in Dell’s ability to execute on an initiative like this. And why should he? Dell’s track record in adjacent electronics businesses is littered with the corpses of PDAs, MP3 players and TVs.

For instance, BoomTown was in Rome earlier this week attending a conference on business, brand and innovation that happens only once every seven years–and one of the biggest takeaways? Hardly any Italians have heard of Twitter, and those who have don’t really use it. Well, that, and conversations with Arianna Huffington, Reid Hoffman, and several Italian business leaders. Mark Zuckerberg, though, is most definitely plugged into the white-hot microblogging service. This week, he used his Twitter account, plus an appearance on “Oprah,” as a platform to herald the launch of Facebook’s own Twitteresque homepage redesign. In other news, Time Warner (TWX) CEO Jeff Bewkes laid off AOL President and COO Ron Grant and Chairman and CEO Randy Falco. BoomTown interviewed Falco’s replacement, Google (GOOG) ad sales exec Tim Armstrong, who’ll start at AOL as Chairman and CEO on April 7.

MediaMemo had the full memo from Time Warner on the Falco/Grant-Armstrong transition and also spoke with Boxee CEO Avner Ronen this week. Boxee is the start-up that lets you watch Web video on your TV, basically bypassing your cable box. Which is probably why it’s caught up in a cat-and-mouse game with Hulu, the joint venture between GE’s (GE) NBC and News Corp.’s (NWS) Fox that would much rather have you watch TV on the Internet instead. Guess who’s the mouse? Still, Hulu is down two networks, ABC and CBS (CBS)–though presumably, the aim is to offer all three. (News Corp. is the owner of Dow Jones, which owns this Web site.) MediaMemo also noted that Google rolled out its behavioral targeting functionality this week and points out that we all might be hearing a lot more from a man named Rick Boucher in the near future as a result.

Behavioral targeting wasn’t the only thing that Google rolled out this week–it also launched Google Voice, the initiative based on the company’s acquisition of voice communications start-up GrandCentral. Digital Daily covered the story. Elsewhere in the telecom world, major Palm (PALM) investor Roger McNamee made some bold (read: crazy) assertions about iPhone users switching en masse to the Pre, which later needed to be clarified (read: backed away from) by Palm itself. RBC analyst Mike Abramsky is also bullish on the Pre and its WebOS, but in a less crazy way. He gave it a glowing write-up on Friday. For a product that hasn’t yet been given a price or a launch date, it’s certainly building itself some high expectations. Of course, it’ll need to fulfill them to compete with the ever-evolving iPhone, which for which Apple (AAPL) is having a press event Tuesday to announce version 3.0 of the device’s OS.

Walt Mossberg reviewed the new version of Apple’s ever-evolving iPod Shuffle this week, which has the distinction of being the first mp3 player to “speak.” His verdict was in Wednesday’s Personal Technology column. In Mossberg’s Mailbox, Walt answered questions about using a stylus with the iPhone and offered an explanation on how to change Apple’s Safari 4 beta so that it looks and works more like the previous version. And in this week’s Mossberg Solution, Katie Boehret took a look at iSkoot’s Notifier, an app designed to endow basic cellphones with smartphone-like capabilities.

More next week. And beware the Ides of March. Or not.

It was an astonishing offer at the time, especially coming from Glaser, who had been a vocal critic of Apple and its decision to make digital music sold through its iTunes store playable only on iPod (”I bought an iPod and can only shop at one store,” Glaser once said. “What is this? The Soviet Union?”)

But it was an offer that Jobs found unappealing. The Apple CEO rebuffed Glaser, declining even to meet with him over lunch to discuss it.

Glaser, of course, took it poorly and spent the next few years slagging Apple and Jobs for declining the partnership. “We think Apple Computer, and Steve personally, are making a mistake by making the software proprietary,” Glaser said at the Digital Living Conference in 2005. “There’s no reason we should penalize Apple customers for Steve’s pigheadeness.”

Course, in the end Real didn’t penalize Apple’s customers. Apple’s customers penalized Real. And today Apple’s iTunes is the largest music retailer in the states. And Real? Well, Real’s “embracing” the iPod.

Funny how that worked out.

This morning the company announced a new MP3 store whose unprotected music files can be played anywhere–even on an iPod. Like Apple’s iTunes, the Rhapsody MP3 Store offers music from all four major music labels at 99 cents per track, or $9.99 for an album. Over five million songs will be made available, at 256k-bit rates. Visitors can preview them in their entirety instead of the 30-second samples offered by iTunes and the like. And, if they’re Verizon (VZ) subscribers, they can download music directly to their phones with the company’s V CAST Music with Rhapsody service.

“We’re no longer competing with the iPod,” said Rhapsody Vice President Neil Smith. “We’re embracing it.”

Pigheadeness, be damned.

And 80% would pay for a legal subscription-based music service that would allow them to discover, swap and recommend music.

Which, if true, illustrates the great disparity between the consumer and industry views of digital music. Because according to the Hertfordshire study, consumers–at least those in this particular age group–view digital music on the Internet as a sort of giant mixed tape to be explored and shared. They don’t have much of an emotional connection with it: “Respondents seem to attach a hierarchy of value to different formats of music, with streaming-on-demand the least valuable (though still valued); ownership of digital files somewhere in the middle; and ownership of the original physical CD the most valuable.”

The recording industry, of course, has failed to recognize that hierarchy. When, and if, it does, the study notes, it may finally succeed in monetizing that mixed-tape ethos that’s befuddled it for so long. “Survey responses suggest that respondents would continue to purchase CDs and go to gigs, even if they subscribed to a legitimate peer-to-peer file-sharing service,” the survey adds. “Fans want to support or pay tribute to their favorite artists and ownership of a digital music file does not necessarily do justice to their sense of devotion.”

Well, it’s taken nearly a year, but the marketplace to which Jobs referred is nearly here. Only it’s not at Apple’s iTunes store. It’s at Amazon.

Yesterday afternoon Sony BMG said it will begin selling DRM-free music through Amazon.com MP3 at the end of this month. That makes it the last of the “Big Four” music labels to abandon DRM and begin distributing its catalog through Amazon. “This is such an exciting day for us and our customers,” Bill Carr, vice president for digital music at Amazon, told the New York Times. “All four major labels will be part of our service. It means our customers will really have access to all the biggest artists in the world.”

Which is obviously great news for Amazon’s fledgling music service and for the major music companies as well. What better way to rein in Apple’s dominant iTunes store than by empowering its worthiest adversary–if only for a moment. Because chances are, Apple was planning on taking iTunes totally DRM-free at Macworld next week anyway. Which may make this a bit of a non-announcement, at least as far as Apple is concerned. Said Pali Capital analyst Richard Greenfield: “My guess is that Apple doesn’t care. The reality is, everyone will now start downloading their songs more cheaply someplace else and using them on their iPods.”

Filed by Windows Media Audio fetishist Stacie Somers in late December, the suit claims Apple’s current dominance of the market for online video, online music and digital music players constitutes a violation of the Sherman Antitrust Act.

“Apple’s iPod is alone among mass-market Digital Music Players in not supporting the WMA format,” the complaint states, noting that America Online, Wal-Mart, Napster, MusicMatch, Best Buy, Yahoo Music, FYE Download Zone and Virgin Digital all support WMA. “Apple has engaged in tying and monopolizing behavior, placing unneeded and unjustifiable technological restrictions on its most popular products in an effort to restrict consumer choice, and to restrain what little remains of its competition in the digital music markets. Apple’s CEO Steve Jobs had himself compared Apple’s digital music dominance to Microsoft’s personal computer operating system dominance, calling Apple’s Music Store ‘the Microsoft of music stores’ in a meeting with financial analysts.”

The suit further alleges that while iPods have the hardware to play WMA files, Apple purposely prevents them from doing so. “Apple, however, deliberately designed the iPod’s software so that it would only play a single protected digital format, Apple’s FairPlay-modified AAC format,” the complaint states. “Deliberately disabling a desirable feature of a computer product is known as ‘crippling’ a product, and software that does this is known as ‘crippleware.’ “

So to summarize: Apple’s hard won success in the digital media market has made it a monopolist. And as a solution to its monopolistic behavior, the plaintiff proposes forcing the company to license a proprietary media format developed by a convicted monopolist. This, in spite of the fact that Apple’s iPod supports not only the FairPlay-modified AAC audio format, but the vendor-neutral AAC format and the MP3, MP3 VBR, Audible, Apple Lossless, AIFF, and WAV formats as well.

See the logic in that?