China sales polish Q2 earnings for Apple

The Apple logo is pictured on the front of a retail store in the Marina neighborhood in San Francisco, California April 23, 2014. [Photo/Agencies]

Strong iPhone reception in Asia props up modest 6% revenue rise

Apple Inc posted a smaller-than-expected 6 percent rise in quarterly revenue on Tuesday, but revenue surged 28 percent in greater China despite stiff competition in the US tech company's third-largest market.

It sold 35.2 million iPhones in the June quarter, up about 13 percent and in line with analysts' projections. Its strong performance in the Asian market was considered crucial to Apple's long-term growth prospects.

Chief Executive Officer Tim Cook told analysts on a conference call that Apple's Chinese performance was "honestly surprising."

Unit iPhone sales jumped about 48 percent, and Mac computer sales rose 39 percent in the second quarter, Chief Financial Officer Luca Maestri said in an interview.

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

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This month, Samsung Electronics Co Ltd estimated its April-June operating profit to be far below most analyst forecasts, as its Galaxy S5 sold more slowly than expected in the face of stiff competition.

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

Apple iPhone sales tail off in the quarters 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 the surprisingly robust Chinese figures, Apple continues to struggle in the more saturated, developed regions of the United States and Europe, its two largest markets.

It forecast revenue of $37 billion to $40 billion this quarter, weak compared with Wall Street's outlook for $40 billion or more.

But whether Apple can again produce a revolutionary new product, something it has not done since the iPad came out in 2010, remains the central question for investors.

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

Analysts also expect the company to introduce two new 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.

The iPhone maker, which derives most of its business from the high-end device, reported sales of $37.4 billion in its fiscal third quarter ended June, falling short of Wall Street's expectations of about $38 billion.

At 13.3 million, sales of iPads - which, like smartphones, are under growing pressure from Android rivals - fell a little short of analysts' projections of more than 14 million sold.