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The Canadian Press - ONLINE EDITION

Apple's fiscal 3rd-quarter report illuminates iPhone maker's brightening outlook

SAN FRANCISCO - Apple's growth prospects are looking brighter as anticipation builds for the upcoming release of the next iPhone, a model that is expected to cater to consumers yearning for a bigger screen.

The latest evidence of Apple's mounting momentum emerged Tuesday with the release of the company's fiscal third-quarter report.

Earnings topped analysts' projections for the period as Apple Inc. sold 35.2 million iPhones. That was a 13 per cent increase from the same time last year, even though many people are believed to be holding off on new device purchases until the next version comes out this fall.

"From an execution perspective, we did a really great job," Apple Chief Financial Officer Luca Maestri said in an interview with the Associated Press. "We have some things in the pipeline that we think people will really be excited about."

Apple earned $7.7 billion, or $1.28 per share, for the three months ending June 28. That represented a 12 per cent increase from income of $6.9 billion, or $1.07 per share, at the same time last year.

The earnings per share for the latest quarter exceeded the average estimate of $1.23 per share among analysts surveyed by FactSet.

Revenue rose 6 per cent from last year to $37.4 billion — about $600 million below analysts' forecasts.

If media reports based on leaks from Apple suppliers prove accurate, the iPhone 6 will boast a screen of at least 4.7 inches compared to the 4-inch display that the company switched to in 2012. Some analysts also speculate Apple will simultaneously unveil an iPhone with a 5.5-inch screen.

An iPhone with a larger screen probably would unleash a flood of sales among Apple fans interested in a smartphone that would make it easier to read and see other features. A bigger-screen iPhone might also tempt consumers already accustomed to the larger screens on a variety of smartphones running on Google Inc.'s Android operating system.

Maestri said the iPhone's third-quarter sales growth was strongest in Brazil, India, Russia and China. The gains are testament to the ongoing allure of Apple's marquee product seven years after the first iPhone came out.

Apple's trend-setting tablet computer, the iPad, seems to be losing some of its appeal amid a bevy of less expensive alternatives. The Cupertino, California, company shipped 13.3 million iPads in the latest quarter, a 9 per cent drop from the same time last year. It marks the second straight quarter that the iPad's sales have fallen from the previous year.

The company is counting on a partnership forged with IBM Corp. last week to help boost iPad sales to corporate customers and government agencies.

The usage of tablets in businesses and government offices is still relatively small compared to the reliance on desktop computers, Maestri said, a situation that Apple hopes to change by tapping into IBM's connections. IBM has agreed to sell iPads, as well as iPhones, to its corporate and government customers.

A steady slowdown in Apple's revenue growth that began nearly two years ago stoked investor worries about the company's ability to innovate in the aftermath of the October 2011 death of its chief visionary and longtime CEO, Steve Jobs. Those concerns have been heightened by the growing popularity of less expensive smartphones made by the likes of Samsung Electronics, which cut its costs by relying on the free Android system.

But now Apple appears to be on the upswing while Samsung is faltering. In its most recent quarter, Samsung's operating income sagged 24 per cent to a two-year low as demand for its more expensive smartphones dried up.

Investors have been flocking back to Apple this year in a show of confidence in Jobs' successor, Tim Cook. Just 15 months ago, Apple's stock had plunged by 45 per cent from its peak reached in September 2012 around the same time that the company last increased the iPhone's screen size.

Propelled by high hopes for the next iPhone and the potential release of a smartwatch, Apple's stock has surged 18 per cent this year. After closing at $94.72 Tuesday, the stock is just $6.01, or about 6 per cent, away from setting a new high. The shares shed 44 cents to $94.28 in Tuesday's extended trading.

The chances of Apple unveiling a high-tech watch as a complement to the iPhone and iPad looked even more likely Tuesday when Apple was granted a U.S. patent for a touch-screen device designed to be worn on wrists. Sketches attached to the filing with the U.S. Patent and Trademark Office indicated that Apple intends to call the device, "iTime."

Apple spokeswoman Kristin Huguet declined to comment on the filing or patent approval.

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