Apple posts 28% rise in China sales

Apple Inc posted a smaller-than-expected 6 percent rise in quarterly revenue, but sales surged 28 percent in China despite stiff competition in its third-largest market.

It sold 35.2 million iPhones in the June quarter, a rise of about 13 percent that was in line with analysts' projections. It was helped by a strong performance in an Asian market considered crucial to Apple's long-term growth prospects.

Chief Executive Tim Cook told analysts on Tuesday that Apple's Chinese performance was "honestly surprising." Unit iPhone sales jumped about 48 percent and Mac computer sales rose 39 percent in the June quarter, said Chief Financial Officer Luca Maestri.

Lower-cost phones sold by up-and-coming rivals such as Xiaomi appeared to be grabbing market share mainly from other companies that rely on Google's Android software, he added.

This month, Samsung Electronics Co estimated April-June operating profit far below most analysts' forecasts, as its Galaxy S5 sold more slowly than expected in the face of severe competition.

"We have a really good runway in front of us with China Mobile," Maestri said, referring to Apple's main carrier partner in China. "Given our numbers in China, it would seem their success is coming from other Android devices."

Apple iPhone sales tail off in the quarter before a new smartphone launch, as potential buyers hold off. Maestri said the company had taken the usual lull into account in its projections for the September quarter.

Despite a surprisingly robust Chinese market, Apple continues to struggle in the more saturated, developed regions of the United States and Europe, its two largest markets.

It forecast revenue of US$37 billion to US$40 billion this quarter, weak compared with Wall Street's outlook for US$40 billion or more. But whether Apple can again produce a revolutionary new product, something it has not done since the iPad in 2010, remains the central question for investors.

Many expect Apple to make a play for the wearable device market with a smartwatch, dubbed iWatch.

Analysts also expect the company to introduce two iPhone versions this fall, including a 5.5-inch model that thrusts Apple into the market for larger-sized phones that rival Samsung helped popularize.

Apple, which derives most of its business from the iPhone, reported sales of US$37.4 billion in its fiscal third quarter ended on June 30, falling short of Wall Street's expectations for about US$38 billion.

Sales of iPads, which like smartphones are coming under growing pressure from Android rivals, reaching 13.3 million units, falling a little short of analysts' projections for more than 14 million.

Gross margin, however, was better than expected at 39.4 percent, up from 36.9 percent a year ago, primarily due to cheaper product costs.

Net income jumped 12.2 percent to US$7.75 billion, or US$1.28 per share. That beat expectations for US$1.23 and was its best quarterly growth in EPS in seven quarters.