FOR all the thousands of column inches written about the iPod, Apple Computer is only now beginning to reap the full commercial benefits from its digital music player.

Until recently, the iPod was a metropolitan and a media phenomenon. Customers were counted in hundreds of thousands, not millions. The iPod was a great business, but not a particularly big one.

Well, forget that. The latest quarterly results show that the iPod is approaching a “tipping point” that will make it a genuine mass-market product. And Christmas is just round the corner.

In Europe, the UK is at the forefront of this phenomenon. Pascal Cagni, Apple’s European boss, has recently relocated to Britain, which has just overtaken France to become the biggest market in the region.

Cagni said: “The UK is our strongest country now, no question. We have been performing superbly with the iPod. The adoption curve is much stronger than in other countries in Europe. The Christmas to come will be immense.”

Before then, Apple will open a showcase store on London’s Regent Street — the first such shop in Europe.

Cagni spelt out the significance of the transformation under way at Apple. For more than three years, Apple’s sales were stagnant at about $1.5 billion (£830m) a quarter.

The success of the iPod has given Apple the confidence to forecast that sales in the current quarter will approach $2.9 billion.

In other words, in the space of 18 months, Apple will have gone from being a $6 billion-a-year company to a $12 billion-a-year company.

The iPod has itself become a $2 billion-a-year business. Sales and volumes more than doubled between the third and fourth quarters, to $537m and more than 2m units. It now represents 22% of group sales.

The delayed European launch of the mini iPod — the 1,000-song player that comes in five “candy” colours — has clearly contributed to this, although Apple is not quantifying the impact. Total European sales were up 31% year-on-year.

The popularity of the iPod is creating business for many other firms. Altec Lansing and Bose are selling speaker systems for the iPod, allowing customers to listen to their digital music without headphones. Griffin Technology is selling a wide range of add-ons, including a plug-in radio receiver and a car charger.

More mundanely, Micro Anvika, the London electronics retailer, is selling its own version of an Apple power adapter for an eye-watering £24.99. The delayed launch of the mini iPod meant many customers bought them while in America, but needed a compatible power supply.

Apple believes we are still in the foothills of the digital music revolution. iTunes, its online music store, has now sold more than 150m songs, but this is still a tiny fraction of total music sales. Cagni said: “The iTunes music store is the key driver to establish the iPod as the Walkman of the 21st century.”

That is the comparison that fixates Apple at the moment. Sony has sold 300m Walkman personal hi-fis since it introduced them 25 years ago. So far, Apple has sold a mere 6m iPods, more than half of them this year. “We are only at the very beginning of something really big,” said Cagni.

The challenge for Apple is to hold on to its early dominance of the market as it grows. Critics — including Microsoft’s Bill Gates — have suggested that Apple is repeating its mistake with the Macintosh computer in the 1980s, by pinning its faith on its own technology and the AAC music file format. Microsoft, and many others, are backing rival formats.

This time round, Apple has some powerful allies. Hewlett-Packard is selling its own version of the iPod, greatly increasing Apple’s distribution power. Apple is also working with Motorola, the mobile-phone company, to install a version of iTunes on mass-market handsets.

Cagni said he was “very pleased” with the European launch of iTunes, particularly in the UK. Apple will shortly introduce a Europe-wide version of its music store, extending its existing reach beyond the UK, Germany and France.

Apple launched in June without securing agreements with many independent record labels. Although it has made some progress, there are still many important gaps. For example, the Stone Roses’s debut, recently voted best British album of all time, is absent. So are the Beatles, who were runners-up with Revolver. And so is the vast bulk of Elvis Costello’s 25-year recording career.

Cagni suggested Britain’s strong music industry is one reason why the iPod has done so well here. “It’s a country which loves music,” he said. It’s also a “very consumerist” society well served by competitive retailers.

The growth of the iPod threatens to put Apple’s original computer business in the shade. The latest quarterly results were unimpressive, with declining revenues from the iMac desktop model and the iBook and Powerbook laptops. This rather contradicted what Tim Cook, Apple’s head of sales and operations, told The Sunday Times in September, when he said the Mac business was doing “very, very well.”

Cagni suggested this was a blip before the introduction of the new iMac — a beautifully sleek machine, with the computer mounted behind the screen in a box only two inches thick, that has been greeted with rave reviews. As with the mini iPod and its fashionable Powerbook laptops, Apple has struggled to keep up with the interest from customers. “The biggest problem we have is meeting demand,” conceded Cagni.

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