NEW YORK - More consumers are buying the least-expensive versions of Apple's iPhones and iPads, a new phenomenon that is causing the company's breakneck growth rate to slow.
Apple Inc. revealed Tuesday that revenue and net income posted increases of just over 20 percent - cause for celebration at most companies but meager by Apple standards.
Apple's growth was the slowest in more than two years and failed to meet analyst expectations in the earnings report issued after the close of trading.
Apple shares fell more than 5 percent in after-hours trading.
"The sheen is off the apple: It was a miss, no question about it," said David Rolfe, chief investment officer at Wedgewood Partners Inc.
Apple routinely blows past analyst expectations. It has come in under their earnings expectations only twice in 10 years.
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"We became too confident, in our expectations, that Apple had literally a perfect pulse on end demand throughout the globe ... and quite simply, that wasn't the case this quarter," Rolfe said.
It wasn't so much the volume of sales that disappointed: 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.
Part of the reason was that consumers bought less-expensive versions of the devices, said Apple's chief financial officer, Peter Oppenheimer. Apple introduced a new iPad in March but kept the older model in stores while cutting 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.
CEO Tim Cook said he didn't see any effect of the economic slowdown in China. The troubles in Europe were evident, however. Sales to the continent grew just 16 percent.
Cook also blamed the tepid iPhone sales - up 28 percent from a year ago but down from the previous quarter - on anticipation building for the next iPhone model. Apple hasn't said when it's arriving, but most company watchers now expect it in October.
Apple posted net income of $8.8 billion, or $9.32 per share, for its fiscal third quarter ending June 30. That was up 21 percent from $7.3 billion, or $7.79 per share, a year ago.
Analysts polled by FactSet were expecting earnings of $10.37 per share.
Revenue at the Cupertino, Calif., company was $35 billion, up 23 percent. Analysts were expecting $37.5 billion.
With its market value of $539 billion, Apple is by far the world's largest company.
Apple forecast year-over-year profit growth of just 9 percent.
For revenue, Apple forecast $34 billion, while analysts have been expecting $38.1 billion.
New Mac OS today
Apple Inc. planned to release its new operating system for Mac computers today, with features borrowed from mobile devices and a tighter integration with online file storage.
Dubbed Mountain Lion, the new software narrows the gap between the PC and phone software packages, making Mac personal computers work more like iPhones and iPads.
Mountain Lion will cost $20 and will be sold only as a download. Only computers running the two most recent versions of Mac OS, Lion and Snow Leopard, can be upgraded. Macs bought on or after June 11 can be upgraded for free.