Updated from 5:05 p.m. EST

SAN FRANCISCO -- Apple ( AAPL) blew past Wall Street's expectations for the first quarter, but sluggish sales in the company's iPod division prompted investors to keep the stock in a steep downtrend.

Shares of Apple plunged 11.1% in after-hours trading to $138.39 -- a four-month low. The stock has retreated more than 30% from its 52-week high last month.

Apple's Not Totally Baked

Apple posted a first-quarter profit of $1.58 billion, or $1.76 a share, compared with profit of $1 billion, or $1.14 a share, the year-before.

The company reported revenue of $9.6 billion, compared to revenue of $7.1 billion a year ago. Analysts polled by Thomson Financial were expecting earnings before items of $1.62 a share on revenue of $9.46 billion.

About 22 million iPods were sold in the quarter representing a 17% revenue growth. But Wall Street was expecting nearly 25 million devices to move, and unit growth was just 5%.

Music product services accounted for about 50% of total revenue during the quarter, said Apple.

"One of our primary goals for this holiday season was to establish an entirely new type of iPod in the marketplace, the iPod touch," Chief Financial Officer Peter Oppenheimer told analysts on a conference call. "This new iPod has the potential to grow the iPod from being just the music and video player into being the first mainstream Wi-fi mobile platform running all kinds of mobile applications."

The iPod touch helped increase the iPod's average selling price to $181, which drove revenue up 17% from a year ago, said Apple.

Apple shipped 2.31 million Macs, posting a 47% revenue growth from the year-before -- mostly in line with analysts' expectations. In terms of units sold, Macs grew 44% from a year ago.

"That's more than two-and-a-half times the overall market rate of growth for the December quarter based on the latest forecasts published by IDC," said Oppenheimer.

Quarterly iPhone sales came in at 2.31 million devices. That's likely to disappoint many analysts, who had been expecting iPhone sales to range from 2.2 million to 2.5 million units in the holiday season.

Total revenue recognized during the quarter from sales of iPhones, iPhone accessories and payments from carriers was $241 million. Total deferred revenue from iPhone and Apple TV was $1.44 billion at the end of the December quarter, compared to $636 million at the end of the September quarter.

Revenue from Apple retail stores grew 53% from a year ago to $1.7 billion.

The company plans to open about 35 to 40 stores in fiscal 2008. Some 25 of the company's 204 stores are currently outside the U.S. and this year Apple hopes to have more stores internationally, including its first few retail stores in China.