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Total Mac sales topped 2.3 million on the back of surging desktop shipments. Apple sold 977,000 iMacs, Mac minis and Mac Pros, an increase of 20% on the previous quarter and more than 50% on the same period in 2006. Laptop sales fell slightly on the previous, back-to-school quarter when they traditionally peak, but were still 38% higher than the previous year.

But iPod sales grew by just 5% to 22.1 million, short of projections of 25 million and prompting suggestions that the market may be approaching saturation point. This was enough to scare investors already worried by the prospects of an economic downturn, and in after-hours trading Apple's stock price dropped by more than 11%, to $137.93.

Investors also appeared to be concerned that Apple forecast 29% sales growth for the current quarter, which is faster than previous years but not, it seems, fast enough for Wall Street

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- even though Apple typically underestimates next-quarter earnings.

Apple's chief financial officer, Peter Oppenheimer, rejected the idea that the market for iPods might begin to decline, noting that although unit sales rose only slightly, revenues from iPod sales were up by 17%. That indicates that Apple is selling more high-end models, such as the iPod touch.

"We don't think revenue growth like this is characteristic of a saturated market," Oppenheimer claims.

Apple believes that new iPod capabilities - such as video and wireless internet access on the touch model - will continue to drive new sales. "We believe one of the iPod's future directions is to become the first mainstream Wi-Fi mobile platform," he said.

Music, retail and software

The quarter also saw rising music and software sales and a sharp upturn in revenues from Apple's retail stores.

Music and Related products and services totalled $808 million, a 27% increase on 2006, while software sales rose by 80% to $628 million, boosted no doubt by the release of OS X 10.5 Leopard and what chief operating officer Tim Cook said was a significant increase in pro audio sales since the release of Logic Studio.

Retail sales of $1.7 billion were 49% higher than last year.

Steve Jobs expressed delight at the record results, before suggesting more of the same in 2008. "We're thrilled to report our best quarter ever, with the highest revenue and earnings in Apple's history," the Apple chief executive says. "We have an incredibly strong new product pipeline for 2008, starting with MacBook Air, Mac Pro and iTunes Movie Rentals in the first two weeks."