Apple exceeded expectations for its second quarter, the company announced yesterday.

Although Apple's Q2 profits were lower than the year-ago figure it did manage to take in almost the same amount of revenue, despite a drop in units sold.

Apple returned a net profit of $14 million. This compares to a net profit of $40 million in the second quarter of its fiscal 2002 year. Second-quarter revenue was $1.48 billion, down from $1.5 billion a year ago. However, Apple also received $23 million in interest on its investments during the quarter. Without this it would have posted a $9 million loss.

Analysts had predicted earnings per share of $0.02 and revenue of $1.46 billion.

The company shipped 711,000 Macintosh units in the second quarter, down from 813,000 units for the year-ago quarter. Of that total, 42 per cent were notebooks, led by sales of the 12-inch Powerbook introduced at Macworld in January. Apple shipped 82,000 12-inch Powerbooks, but delays in availability of the 17-inch Powerbook limited shipments of that notebook to 14,000, Fred Anderson, Apple's executive vice president and chief financial officer, said during the conference call: "There's a large amount of unmet demand for this product."

Two of Apple's core markets - creative professionals and education customers - have been hit especially hard by the economic troubles of the past year and Apple needs an upturn in the economy to boost sales in those sectors, Anderson said.

The company is delighted with the number of Powerbooks sold in the quarter, he said. But sales of Apple's iMac declined to 256,000 units from 372,000 units in the second quarter of 2002. This breaks down to 41,000 CRT iMacs, 86,000 eMacs, and 129,000 flat panel iMacs

Apple expects revenue in the third quarter to be flat compared to the second, and expects to post a slight profit in that quarter, Anderson said.

"We are very pleased to have achieved our revenue target for the second quarter while maintaining channel inventories under 4.5 weeks," he said.

"Continued strong asset management enabled us to increase cash to over $4.5 billion. Looking ahead to the third quarter of 2003, we expect revenue to be relatively flat and expect a slight profit for the quarter," he explained.