Christmas sales of iPods hit the right note for Apple

Apple sold 21 million iPods in the last three months of last year, blowing through even the most bullish forecasts and confirming the music player as the must-have gadget for Christmas for another year.

The company's profits for the quarter - always its busiest - surged 78 per cent, taking it past $1bn for the first time.

Apple is now selling two or three iPods every second, and Steve Jobs, its chief executive, was able to boast yesterday that the launch of Microsoft's rival music player, the Zune, in the US had failed to make a noticeable dent.

"We are incredibly pleased to report record quarterly revenue of over $7bn and record earnings of $1bn," Mr Jobs said. "We've just kicked off what is going to be a very strong new product year for Apple by launching Apple TV and the revolutionary iPhone."

Wall Street has sent Apple shares to record levels since Mr Jobs unveiled the iPhone last week, but yesterday there were questions about whether the touch-screen device would eat into future iPod sales. Apple's financial officer, Peter Oppenheimer, told analysts that iPod sales would fall back after the Christmas rush, but declined to forecast what would happen after the iPhone's launch in the US in June.

Steve Ballmer, Microsoft's chief executive, dismissed the $500 iPhone yesterday as "the most expensive phone ever in the marketplace".

Apple shares fell because, at 1.6 million, the number of Mac computers sold in the quarter was no higher than in the previous three months.