Investors didn't appear too thrilled with digital-music company Creative Technology's (NASDAQ:CREAF) latest earnings report. Shares fell more than 15% in Thursday's trading following the announcement of fiscal Q2 (ended Dec. 31) financial results, which came in below last year's figures both with and without special items attached.

Singapore-based Creative, which is taking on Apple Computer (NASDAQ:AAPL) in hopes of snaring a big chunk of the portable digital music player market, said Q2 sales were up 50% year-over-year to more than $375 million, a massive jump from $250 million the year before. But net income was $25.5 million, or $0.30 per share, down from $28.3 million and $0.34, respectively.

For the record, those numbers ignore a big investment gain and an even bigger asset impairment charge this year, as well as a tax writeback and investment gain last year. If you include those numbers, net income fell to $11.8 million from $41.5 million last year.

Is the market too hard on Creative? It's a question worth considering. The company's products are selling well, as evidenced by the huge bump in sales. Management, meanwhile, expects a similar revenue boost in Q3. And while margins have fallen year-over-year, they're expected to hold fast sequentially during the current quarter. If the company can manage this while boosting sales at the impressive rate it's experiencing, profit growth can't be far off.

For now, investors will probably have to accustom themselves to swings in their company's market value. It's thrown itself into a growing but highly competitive marketplace currently dominated by one company. The long-term trend, meanwhile -- and this is a good thing in consumer electronics, because it means there's sustained, rather than faddish, demand -- is for prices to come down, testing margins as volume increases.

Digital-music investors need to remember that their business becomes less technology-focused each day -- at least relative to the importance of marketing, order fulfillment, and component pricing. (Investors in PC makers like Dell (NASDAQ:DELL), itself a digital-music competitor, know this well.) Creative looks like a very credible competitor that should be around for the long, if difficult, haul.

Fool contributor Dave Marino-Nachison doesn't own any of the companies in this story.