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Apple brought some bright news to the device sector at last, defying the downturn with a record quarter, even though this was heavily overshadowed by uncertainty over CEO Steve Jobs' health issues, which have forced the charismatic chief to take six months' leave, and by some softness in iPhone performance.

The company turned in a record net profit for its first fiscal quarter, which ended on December 27 2008, though this was only marginally up on the year-ago quarter. It came in at $1.61bn. Revenues were up 6% year-on-year to $10.17bn.

The iPhone, despite much industry talk of excess inventory and slowing sales, sold 4.4m units in the quarter. However, although this figure was better than some had predicted, it still represented a significant fall-off from the previous quarter, even though the December one should be seasonally stronger. In Apple's fourth fiscal quarter, it sold 6.9m iPhones, so it has suffered a 36% sequential drop.

Although Apple did not break down iPhone sales by region very clearly, it is likely that, as with other products, the company saw a shift to international sales. In the iPod and Mac markets, it was rescued from US consumer spending collapse by robust performance round the world and international sales now account for 46% of the firm's total across all products, a record figure (iPod sales fell by 3% in the US but were up 3% overall at 22.7m units(. Gross margin was flat at 34.7%.

The company sold 13.7m iPhones in 2008, well past its target of 10m. A year ago its quarterly revenue from the handset was $241m. This time, it was $1.25bn, though the sale value of the phones was $2.6bn (Apple recognizes revenue from the iPhone over its two-year life). Interim CEO Tim Cook was careful to dampen expectations that Apple would go head-to-head with Nokia in volume markets or start moving to the low end of the phone market. "Our objective isn't to be the unit leader in the cellphone industry. It's to build the world's best phone," he told the analyst results call.

He added: "Our visibility is not as good as in quarters past. Our fear is that the economy may slow the uptake of smartphones. We'll see. But we feel extremely good about our product pipeline."

Of course, an important element of the iPhone's appeal is the tight integration of services, and there was also good news for iTunes and the App Store. The former had its biggest quarter, and its highest sales ever in Christmas week, though Apple did not release precise figures; online stores overall contributed $1.74bn or 17% of Apple's revenue in the quarter, though this figure includes online device sales.

For the current quarter, Apple is predicting revenue of $7.6bn to $8bn and earnings per share of 90 cents to $1.

It also fired a shot across the bows of Palm, whose new Pre smartphone has many features that echo the iPhone's (though, of course, LG would argue that the iPhone borrowed heavily from its own Prada). Cook did not mention Pre by name on the results call, but did say: "We will not stand for having our IP ripped off" when questioned about rising competition from Palm and RIM. Palm's successful Pre launch was masterminded by executive chairman Jon Rubinstein, formerly a key player in the iPod team at Apple, and tipped by some analysts to return should Jobs' health problems prove long term.

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