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Apple's strong results still disappoint investors

SAN FRANCISCO -- There was little for investors to complain about in Apple's fiscal third quarter results, which were reported after the close on Tuesday.

Earnings topped analysts' projections for the period as Apple (AAPL) sold 35.2 million iPhones -- a 13 percent increase from the same time last year. The company earned $7.7 billion, or $1.28 per share, for the three months ending June 28. That represented a 12 percent 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.

Nonetheless, investors found plenty to complain about and the stock declined in after hours trading. For one, Apple missed revenue estimates. Sales rose 6 percent from last year to $37.4 billion -- about $600 million below analysts' forecasts.

Investors also worry that Apple's gross margin guidance reflects a lack of pricing power when the new iPhone is launched later this fall. The iPhone 6 is expected to be Apple's biggest launch yet, but competition among smartphone models is increasingly competitive.

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

Apple management expressed confidence that new products in the pipeline would create excitement the rest of the year.

"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."

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 have been speculating 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 on their smartphones. A bigger-screen iPhone might also tempt consumers already accustomed to the larger screens on a variety of smartphones running on Google's Android operating system.