Cheaper iPads Help Slow Apple's Growth

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More consumers are buying less expensive versions of Apple (NasdaqGS: AAPL - news) 's iPhones and iPads - causing the company's furious growth rate to start slowing down.

Apple has revealed that its third-quarter revenue and net income was up by more than 20%.

While figures like that would be cause for celebration for most companies, it was the worst performance in two years, and failed to meet analysts' expectations.

Net (Frankfurt: A0Z22E - news) income in Apple's third quarter was $8.8bn (£5.7bn), or $9.32 per share. That was up 21% from $7.3bn (£4.7bn), or $7.79 per share, a year ago.

And revenue at the California-based company was $35bn (£22.5bn), up 23%.

Analysts polled by FactSet had been expecting earnings of $10.37 (£6.69) per share and revenue of $37.5bn (£24.2bn).

"The sheen is off the apple. It was a miss, no question about it," said David Rolfe, a chief investment officer at Wedgewood Partners.

Apple routinely beats analysts' expectations, and has only come in under their earnings expectations twice in 10 years.

"We became too confident, in our expectations, that Apple had literally a perfect pulse on end demand throughout the globe," Mr Rolfe said.

"Quite simply, that wasn't the case this quarter."

The volume of sales did not disappoint, as Apple sold 17 million iPads in the April to June period, beating expectations, and 26 million iPhones, at the low end of expectations.

But Apple's average selling prices for the gadgets declined to levels last seen in 2010 for the iPhone and the lowest levels ever in the case of the iPad.

Apple's chief financial officer Peter Oppenheimer said part of the reason was that consumers were buying less expensive versions of the devices.

The firm introduced a new iPad in March, but kept the older model in stores and cut its price.

The strengthening dollar also meant that overseas sales at constant prices translated into fewer dollars for Apple.

Sales in China, which have been a growth engine for the company, also declined compared with the previous quarter.

Chief executive Tim Cook said that was because the iPhone 4S went on sale in China during the quarter that ended in March, and the company stocked inventories in the country.

Mr Cook also blamed the tepid iPhone sales, which were up 28% from a year ago, but down from the previous quarter, on anticipation building for the next iPhone model.

Apple has not said when it is arriving, but most company watchers now expect it in October.

Apple shares fell $34.99, or 5.8%, to $565.93 in after-hours trading, after the release of the results.

Nevertheless, with its market value of $539bn (£347bn), Apple remains by far the world's largest company.