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Apple defied the recession and became one of the few players to increase its quarterly net income, with the iPhone a key contributor. But the company's margins are under pressure for the year ahead and it offered a fairly downbeat forecast.

Apple saw iPhones sales rise 123% year-on-year to 3.79m units on the back of broader availability worldwide, and this contributed to a leap in net profits by 15% to $1.21bn, from $1.05bn a year earlier. Total revenues were up 9% to $8.16bn from $7.51bn though it is hard to judge how much of that came from iPhones, as Apple reports these on a 'subscription-based' model, spread over the device's lifecycle of 24 months. Analysts estimate about $1.5bn, with a margin (also undisclosed by Apple) that is higher than its other hardware products.

CFO Peter Oppenheimer was keen to dampen expectations in the wake of the forecast-beating quarter and warned analysts not to expect a repeat performance in the current quarter. Although it is well known for cautious guidance, which it then regularly beat, Oppenheimer was more dour than usual, and said the gross profit margin, which rose to 36.4% from 32.9%, will come under pressure.

He explained that, so far, Apple has benefited from the downturn by keeping its product prices at the premium level, while paying less for components, but now that suppliers have cleared most of their inventory, prices will rise, especially on NAND memory. Some of the high points in the quarter were one-offs, notably high sales of iWork and iLife software, which carry high margins.

Apple said it expects revenues of between $7.7bn and $7.9bn, and earnings per share of 95 cents to $1, in the current quarter. Executives said the company will defer iPhone 3G revenues until the company releases its 3.0 operating system for the device, scheduled for this summer.

International sales accounted for 46% of the quarter's revenue and in a statement, Oppenheimer said the results were Apple's best "non-holiday" quarter in its history. Acting CEO Tim Cook said that sales of the iPhone and iPod Touch had been boosted by the success of the App Store, which was scheduled to hit a billion downloads this week. He also dismissed speculation that Apple would enter the netbook space soon. "It's not a space that exists today that we are interested in, nor do we believe that customers in the long term would be interested in," he said. "It's a segment we would choose not to play in."

With the iPhone boosting both Apple and its US exclusive carrier AT&T, they are keen to downplay the impact of a soon-to-be-launched rival, Palm Pre. An internal AT&T memo has surfaced that tries to discredit the Palm phone compared to the iPhone. Printed in the Dallas Morning News, the memo makes some factual comparisons - differences in screen size, the Pre's 8Gb internal memory limit, and the lack of GSM support for roaming. It also makes some purely subjective criticisms - including that the Pre's touchscreen controls are "not intuitive".

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