Apple's share price plunged by 40 per cent on Thursday after it said fourth quarter sales and profit would fall "substantially below expectations".

The Mac vendor said profit for the quarter ending 28 September would be 30 cents to 33 cents a share on sales of $1.85bn to $1.9bn. Analysts had predicted a profit of about 45 cents a share.

In comparison, Apple reported a profit of 55 cents a share on revenue of $1.82bn in its previous quarter, and a profit of 34 cents a share on revenue of $1.6bn in the same quarter last year.

Steve Jobs, Apple's chief executive, said: "We've clearly hit a speedbump which will result in our earning, before investment gains, approximately $110m rather than the expected $165m for the September quarter."

Investors did not take kindly to the bad news and drove the price of Apple's shares down from $53.50 to $29 in late afternoon trading in the US.

Apple blamed its problems on poor sales in September, which is traditionally a good month as the company has good marketshare in the so-called back-to-school market.

Fred Anderson, Apple's chief financial officer, said: "First, we experienced lower than expected September sales due to a business slowdown in all geographies. Second, our education sales, which normally peak during September, were lower than expected. And third, our Power Mac G4 Cube is off to a slower than expected start, resulting in revenues below expectations."