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This promises to be a joyous holiday season for Steve Jobs and the incandescent Apple. Over the past year, the company's numbers have been stunning: Sales are up 24%, earnings up 75%, margins topping 30%, stock price up 146%. The popularity of the iPod and its snazzy young cousin, the iPhone, has lifted other Apple products, helping boost market share in personal computers in the United States from 2% a few years ago to 8% this past quarter, with Apple leapfrogging Gateway to take third place behind Dell and Hewlett-Packard. The latest upgrade to Apple's operating system--Leopard--is getting strong reviews, in contrast to the indifference that greeted Microsoft's new Vista OS. Apple's market cap is now north of $160 billion; 18 months ago, the crew in Cupertino, California, was worth a mere $60 billion. This $100 billion increase alone equals the combined value of Motorola and Sprint-Nextel.

Yet this is also a dangerous moment for Apple. In a way the company has never seen, the barbarians are massing at the gates. From hardware to software to services, major competitors with serious R&D and marketing budgets are laying siege to the House of Jobs. As Apple moves into new markets, it has made powerful new enemies, some working in concert. Nokia, for example, is banding with telecom companies to offer its own touch-screen hardware in an effort to sway subscribers from the iPhone and Apple's exclusive partner, AT&T. MP3 players from the likes of iRiver, Microsoft, SanDisk, and Toshiba are getting slicker all the time, targeting the iPod at a fraction of the cost. Vivendi Universal scuttled a long-term licensing deal to offer its music on iTunes and is talking with other music companies about building a download store of their own. Likewise, Amazon has created its own iTunes antagonist, Wal-Mart has been low-balling its way into the market, and subscription music sites such as Rhapsody are spending mightily to win consumers over to vast Web-based music catalogs available for a flat monthly fee. Even the tree ­huggers are coming after Apple, threatening to sue under a California consumer-protection statute if certain allegedly toxic chemicals aren't removed from the iPhone.

Recognition of these threats has led in some circles to wariness about Apple as a stock, which as of this writing hovers at $185 a share, near its all-time high. "In a perfect world, our computer model would set Apple's stock at about $135," says Steve Hach, a senior analyst at forecaster ValuEngine Inc., which ranks Apple in the "bottom 33%," largely due to an "unattractive" market-to-book ratio and market valuation. "Apple is far more overvalued than Google, Intel, or Microsoft." Arnie Berman, chief technology strategist at Cowen & Co., points out that Apple and Google are trading at the same P/E ratio, which has never happened before. Apple has been bid up in "paroxysms of excitement over the 'mobile Internet,'" Berman contends, and its shares have "benefited from a powerful hype cycle." The company's soaring valuation led the Jacob Internet Fund to chop its Apple position recently to 1% of assets under management from 2.5%. And Morgan Keegan analyst Tavis McCourt wonders about Apple's long-term prospects. While the company's pace of innovation has been "incredible," he says, its competitors are "also getting better." What's more, "the iPod business is maturing. Apple stores are packed, but they have been for two years now. This may be the last holiday season of substantial year-to-year growth for the iPod."