Dogged by slowing iPhone sales and controversy over its AWOL chief executive, Apple finally had some good news today, beating the street to record its best-ever quarter as iPods appeared under 22.7 million Christmas trees.

While iPhone sales, at 4.4 million units for the quarter, were lower than expected, the iPod emerged as Apple's secret sauce, selling 22.7 million units - way more than anyone had expected (especially Business Week - whoops) and representing 3% growth over Christmas 2007, which was celebrated in much more buoyant times.

All the iPod growth took place outside the US, the company said during its results confrence call.

And almost all the iPod growth could be accounted for by a last minute sales rush in the final week of the quarter.

The company also sold 2.5 million Macintosh computers, a 9% year-on-year increase that was slightly above consensus and the second-most successfull quarter ever for the division. Beneath the headline number, MacBook sales leapt 34% year on year to 1.8 million units, while sales of lower-margin desktops fell 25% to 728,000.

AppStore clocked five million downloads for the quarter, but on their results conference call interim CEO Tim Cook and CFO Peter Oppenheimer refused to say what percentage were paid downloads, or break-out AppStore's result.

For the quarter, ended December 27, Apple’s profit rose to $US1.61 billion ($US1.78 a share), a shade up from its year-ago quarter’s $US1.58 billion ($US1.76 a share).

The result easily eclipsed analysts’ consensus expectation of $1.40 a share.

Revenue was also well ahead of the street’s estimate of $US9.74 billion, rising rose 5.8% to $US10.2 billion.

Cash was $US28.1 billion, up $US3.6 billion over the previous quarter with free cash flow of $US3.9 billion.

Stock spikes
Apple shares were up 5.92% in regular trading today to $US82.83, albeit off a two-year low hit yesterday of $US78.20.

In after-hours trading, the stock has surged a further 11% before giving back about half its gains on profit taking.

Weak outlook
The black lining on the silver cloud was a weak outlook: Apple said it expects to earn $US0.90 to $US1 per share on $7.6 billion to $8 billion in sales in the current quarter. The street's consensus is $US1.13 per share on $US8.2 billion in revenue.

However, Apple is notoriously conservative with its outlook, as evidenced by allegedly slow iPod sales in the previous quarter, and its shares continued to pop in after hours trading after the weak guidance was announced.

Dodging Jobs
The first question on the conference call addressed chief executive Steve Jobs' health (now the subject of an SEC enquiry).
But interim CEO Tim Cook and CFO Peter Oppenheimer largely dodged the question.

Asked "How’s Steve? How will Tim run the company differently? Are you the likely candidate if the worst happened?", Mr Oppenheimer replied: "Steve is CEO of Apple and plans to stay involved."

Mr Cook added: "There is an extraordinary depth and breadth in Apple’s executive team. We believe we’re on the face of earth to make great products, and that’s not changing."