Apple sold a staggering 21 million iPods over the holiday season, accounting for almost $3.5 billion in sales and growing the company's revenue 50 percent.

The record sales also pushed Apple's dominant lead in the portable music player market up to 72 percent, MediaPost reports. Microsoft's recently launched Zune, which hopes to challenge iPod, accounted for only 2.8 percent of the market.

But the Zune did net 10 percent of all 30GB portable music players sold during the holidays.

Microsoft is hoping to sell its millionth Zune by the middle of the year. It is also hoping to help jumpstart Zune's appeal by striking deals with companies such as Harmon Kardon, JBL, Griffin, VAF and Belkin to create accessories for the media player.