Apple reported strong quarterly earnings, boosted by record Mac and iPhone sales returning $9.6bn revenue, up 35 per cent.

Unit shipments of the iPod were 22.1 million, up 5 per cent over the previous year. Apple sold 2.3 million iPhones during the quarter, up from 1.12 million in its fourth fiscal quarter. It shipped 2.3 million Macintosh computers, a 44 per cent growth from the year-earlier quarter.

Sales of the iPhone will continue to grow as the product enters Asia and other European countries in 2008, said Tim Cook, Apple's chief operating officer, during a conference call to discuss the results. "We remain confident of hitting the 10 million goal for 2008," he said.

The number of iPhones that were bought to be unlocked, so that they can be used on other networks, was significant, and shows the heavy worldwide interest in the iPhone, according to Cook. However, he declined to comment on plans to introduce 3G capabilities in the iPhone.

Apple is shifting its strategy around the iPod to position it less as a simple music player and more as a complete W-Fi and mobile application platform, Peter Oppenheimer, Apple's chief financial officer, said. The company recently introduced five mobile applications for the iPod Touch, including an application that allows users to watch movies from the iTunes store.

According to figures from IDC, Apple's PC shipments in the US grew 30.9 per cent to 1.06 million during the fourth quarter last year, with a 5.7 per cent market share, behind Dell, Hewlett-Packard and HP. Apple was not among the top five vendors in PC shipments worldwide, according to IDC.

In the final quarter of 2007, Apple announced the Mac OS X Leopard operating system. It started the current quarter with a bang, announcing a movie rental service for iTunes and an ultrathin laptop, the MacBook Air, which CEO Steve Jobs proclaimed was the "world's thinnest notebook" during a keynote address at the Macworld Conference and Expo in San Francisco.

A week prior to Macworld, Apple announced revamped versions of the Mac Pro workstations and Xserve servers powered by Intel's power-efficient Penryn processors.

Asked if the MacBook Air would cannibalise sales of other MacBook products, Cook did not address the question directly. "The customer reaction has been great, and the customer orders have been strong," he said. "The MacBook Air will appeal to travellers … to different kinds of people who want to access a computer wherever they are," Cook said. The ultramobile segment was great for Apple and it would continue to pursue that sector, Cook added.

The customer response to Leopard has also been strong, Oppenheimer said. About 19 per cent of Mac OS X users have switched to Leopard, and the OS generated revenue of $170m during the quarter.

Apple's international revenue grew 46 per cent year-over-year, he said. Revenue from Europe was $2.47bn, up from $1.71bn the previous year. Revenue from Japan was $400m, up 40 per cent.

Apple forecast revenue for the second quarter at $6.8bn, up 29 per cent from the same quarter a year earlier. That would be lower than the $6.98bn forecast by analysts. Investors reacted poorly to the news, pushing Apple's shares down 11.4 per cent to $137.85 in after-hours trading on the Nasdaq.