Apple reported $3.5 billion in revenue for the first quarter of its 2005 fiscal year on the strength of a huge increase in iPod sales during the holiday season, the company said Wednesday.

That figure was a record for quarterly revenue at Apple, CEO Steve Jobs said in a statement. The company also set a record for net income in the quarter, with $295 million in profits for the period ended December 25, 2004.

Analysts polled by Thomson First Call had expected Apple to record $3.2 billion in revenue for the quarter. The $3.5 billion in revenue represented a 74 per cent increase in revenue compared to the first quarter of Apple's 2004 fiscal year, while the net income figure was up more than 350 per cent compared to the same period last year.

During a keynote address at MacWorld on Tuesday, Jobs said Apple shipped 4.5 million iPod music players during the quarter, a whopping 525 per cent increase compared to last year. But while Apple has received a great deal of attention for the iPod, consumers also increased their purchases of the company's flagship Macintosh computers. Shipments of Macintosh units increased 26 per cent compared to last year, the company said in a release.

Apple shipped just over one million Macintosh computers in its first quarter, the highest number of Macs shipped in a quarter in over four years, said Peter Oppenheimer, Apple senior vice president and chief financial officer, on a conference call following the company's earnings announcement. The iMac was the most popular unit in the quarter with 456,000 units shipped, Oppenheimer said.

The iPod was Apple's top revenue-producing product for the second straight quarter. The company earned $1.2 billion on iPod shipments in the quarter, almost double the $620 million the company earned on sales of iMacs.

Apple executives were unable to point directly to the popularity of the iPod among users of Microsoft's Windows operating system as a reason for the increase in Mac shipments. However, the company has seen some data in its retail stores that points to a large number of Mac shipments going to new users, Oppenheimer said.

Apple expects to report $2.9 billion in revenue during its second fiscal quarter. Like most hardware companies, Apple typically posts higher revenue in the second half of a given calendar year compared to the first half.

Financial analysts asked several questions about Apple's new products, the Mac Mini and the iPod Shuffle, during the conference call. Apple unveiled the Mac Mini, a small $499 computer, and the iPod Shuffle, which is based on flash memory, during Jobs' keynote speech at MacWorld Tuesday.

Both new products have smaller margins than their more expensive counterparts in Apple's product lineup, Oppenheimer said. The company has internal projections for 2005 shipments of those products, but doesn't plan to share those at this time, he said.