If ever there was a clear-cut sign that IPOs are back: On Friday, when the Dow Jones and Nasdaq plunged, a company called PortalPlayer (NASDAQ:PLAY) saw its stock surge 51% to $25.80 on its IPO debut. In fact, volume was about 10.4 million shares for the day. Keep in mind that the company issued about 6.25 million shares.

Something else: Before the IPO, the company bumped its price range from $11 to $13 to $14 to $16. And then it priced the IPO at $17 -- allowing the company to raise a cool $106.25 million.

PortalPlayer is a fabless semiconductor company. That is, the company does not produce anything; rather, it creates the blueprints for semiconductors whose production is outsourced.

The company was smart to focus on what has become a cultural phenomenon in personal media players: Apple's (NASDAQ:AAPL) iPod. In the IPO world, that's a "story" that can sell a lot of shares to the public.

However, keep in mind that more than 90% of PortalPlayer's revenues come from the iPod. True, this is not a problem if the iPod continues to sizzle (which it probably will). The question is: What if Apple decides to go with another solution or try to squeeze PortalPlayer?

Steve Jobs, the CEO of Apple, is brilliant, as well as tough. Case in point: Pixar (NASDAQ:PIXR), another company in which he presides as CEO. With the huge success at the box office, Jobs wants to take much of the profits away from his longtime partner, Disney (NYSE:DIS).

Perhaps there is already a squeeze on PortalPlayer. For example, even though revenues for the company have skyrocketed from $12.8 million for the first nine months of 2003 to $47.8 million this year, the company still cannot post a profit.

And there is certain to be competition. No doubt, other chip companies are envious of the success of PortalPlayer, such as Intel (NASDAQ:INTC) and Texas Instruments (NYSE:TXN).

But, in the wacky IPO world, such things are in the long term. If anything, the iPod will likely experience a huge Christmas, giving PortalPlayer's stock price even more excitement for day traders and momentum investors.

Fool contributor Tom Taulli does not own any shares mentioned in this article.