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In a terse press release on 16 April, Apple CEO Steve Jobs declared the company 'has never made any offer to invest in or acquire a major music company'.

If this extraordinary statement was meant to dampen industry speculation and refocus attention on the fact that Apple returned to profit for its second financial quarter, it had little effect. Apple's already perilously low stock price slumped from $13.39 per share to $13.24 and in after-hours trading it fell further to just over $13.

For a company that reported an albeit-slim profit after several loss-making quarters and increased margins on nearly static sales, the market response was puzzling, even by the quixotic standards of Wall Street. Apple's cash mountain increased to $4.5bn, and the company recently announced a high-profile strengthening of its board of directors, yet it was valued at just under $4.8bn on the day it announced its quarterly results. This means Apple, the Mac business, the iPod business, all the company's brand name recognition, goodwill, buildings, employees

Clearly, few financiers believe there is a profitable future in the PC hardware business. And it is significant that Apple's most successful product introduction in the past couple of years has been the iPod. Indeed, Apple's success in the consumer electronics market has focused the company on the home entertainment business. Jobs has said that Sony is a role model for Apple, and Sony bought its own music and film company in a bid to ensure content would work with its hardware products. This strategy was always controversial and has enjoyed a mixed record. For example, Sony Records' support for the Sony MiniDisc format has not made it the dominant standard in the music world.

Apple faces problems of its own in trying to build on the early success of the iPod. At the moment Mac users are virtually ignored by the music industry's attempts to provide legal, paid-for music download services to counter the post-Napster world of peer-to-peer MP3 file-sharing. As a result, Jobs has been on a frenetic round of meetings with owners of the big five record companies to canvas support for an Apple-branded download service. It is from these meetings the Vivendi rumours appear to have derived. However, if there is anything that is in even worse shape than the PC business, it is the music industry.

It's little wonder, then, that the financial community's response to a union between these two beleaguered industries has been less than enthusiastic.