Apple Q3 net rises 31% as Mac shipments set record

The company also issued fourth-quarter guidance that is in keeping with its tendency to be conservative in its pronouncements about future results, helping to drive shares down 4.6% in after-hours trading.

"We're proud to report the best June quarter for both revenue and earnings in Apple's history," said Chief Executive Steve Jobs "We set a new record for Mac sales, we think we have a real winner with our new iPhone 3G, and we're busy finishing several more wonderful new products to launch in the coming months."

The maker of Macintosh computers and the iPod reported net income for the quarter ended June 28 of $1.07 billion, or $1.19 a share, up from $818 million, or 92 cents a share, a year earlier.

Revenue rose 38% to $7.46 billion.

Analysts polled by Thomson Reuters expected per-share earnings of $1.08 on revenue of $7.37 billion. In April, the company said it expected earnings of $1 on revenue of $7.2 billion.

Shipments rose 12% to 11 million for the iPod and 41% to 2.5 million for the Mac. IPhone shipments more than doubled to 717,000 from 270,000.

International sales accounted for 42% of revenue, compared with 44% in the second quarter. Oppenheimer said the company grew a "little faster" internationally, but U.S. growth was strong.

"We had the highest June quarter store revenue and earnings in our history, and the U.S. played a big part in that," Chief Financial Officer Peter Oppenheimer said. He also said Apple had a better-than-expected quarter of iPod sales, which jumped 10% sequentially, or twice even the most optimistic of estimates.

Last week, industry watcher IDC said Apple had climbed into a tie for third place in U.S. personal-computer market share in the calendar second quarter, raising expectations for the company.

Apple's gross margin narrowed to 34.8% from 36.9% a year earlier.

Apple's gross margins also came in higher than expected, due to higher revenue, more favorable component prices and "a good product mix," Oppenheimer said. He added there was also a one-time line item about which he wouldn't disclose more information.

Looking ahead, Apple expects fourth-quarter earnings of $1 a share on revenue of $7.8 billion. The outlook is well short of the earnings of $1.24 a share on revenue of $8.32 billion that analysts expect, but Apple is known to be conservative in its guidance.

Oppenheimer said he expects the company will sell more iPhones in the fourth quarter than ever before.

However, the initial impact of the 3G iPhone launch will be blunted by Apple's adoption of deferred revenue accounting for its sales. Instead of booking the $525 price at the time of sale, the company recognizes the revenue over the two-year life of the cellphone service contract, as required by Sarbanes-Oxley. A Sanford Bernstein analyst expects iPhone revenue to total almost $400 million during the quarter.

Apple faces concerns that it won't be able to keep up with demand for the new iPhone, a situation that was exacerbated at the launch by technical glitches in the activation procedure. That problem forced Apple to abandon a requirement that the phones be activated in the store. The company, known for its normally strong customer service, suffered a second setback when the launch of MobileMe, a software companion to the phone, proved rockier than expected.

In after-hours trading, Apple shares were down to $158.60. The shares ended the regular session up 0.7% at $166.29.