Apple saw its quarterly profits triple in its fiscal second quarter thanks, in the most part, to sales of the iPod.

Apple CEO Steve Jobs said: "We experienced growth in most areas of our business – most dramatically in selling a record 807,000 iPods, up more than 900 per cent over the prior year."

The iPod accounted for about half of the quarter's revenue growth and sales increased more than tenfold. Apple's revenue from iPod sales was $264 million, up from $31 million a year ago. In fact, this quarter saw Apple sell more iPods than it did all of its Macintosh computers combined; iMac, iBook, Power Mac, and PowerBook sales totalled 749,000 – 58,000 less than sales of the iPod.

iPod sales actually beat the levels seen in the December quarter – which saw the gadget become one of the most sought-after Christmas presents. According to chief financial officer Fred Anderson, 2.8 million iPods have now been sold. (AP)

The iPod sales figures have even surprised some analysts. Cross Research analyst Shannon Cross told Reuters: "Apple shipped more iPods this quarter than they did during the Christmas quarter, which is pretty telling." According to Reuters, she had expected Apple to sell 600,000 iPods in the quarter.

Schwab Soundview Capital analyst Michelle Gutierrez told Associated Press: "The iPod sales blew my numbers out of the water. I had expected a seasonal decline of 20 per cent instead of the 10 per cent surge from the December quarter."

President of Al Frank Asset Management John Buckingham told Bloomberg: "Who knew the iPod would be so popular? We're happy the earnings blew away expectations.''

Slipping margins

However, Apple admitted that its gross margins on the iPod slipped from 27 per cent to 23 per cent – unit shipments increased by nearly 75,000 but revenue only increased by $8 million – an average unit selling price decline from nearly $350 to $337.

The company expects this trend to continue as it begins shipping iPod minis worldwide and when HP launches its own branded iPod. Apple told analysts on a conference call that it anticipates 20 per cent margins on its iPod in the future.

Executives also admitted that the company expected supplies of the iPod mini to be scarce throughout the next quarter, but maintains that it will be able to meet demand for the standard iPods. High demand for the iPod mini has already led Apple to delay its international release until July.

Senior vice president of finance and soon to be CFO, Peter Oppenheimer admitted: "When supply of the iPod mini is less constrained we expect to see a larger number of people choosing the mini over the regular iPod." To date Apple had only seen a limited amount of cannibalization of the higher-end iPods by the iPod mini.

Responding to reports of problems with the iPod mini, Apple said it was "highly confident" with the quality of the iPod mini, but that it had an "extremely small" number of complaints. Oppenheimer encouraged those with problems to contact AppleCare tech support.

Apple also noted that iPod mini was not part of the HP-Apple alliance, but confirmed that it may be added in the future. The company confirmed that HP has shipped 300,000 computers pre-loaded with iTunes software already.