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Wednesday, July 24, 2013

Daily Report: Apple Earnings Beat Expectations Despite Weaker Sales in China

The news from Apple on Tuesday was not particularly good â€" revenue flat, profit lower, iPad sales down. But investors did not seem to mind, at least in the short term, sending the company’s shares about 4 percent higher in after-hours trading. Strong iPhone sales helped beat the expectations of Wall Street, Brian X. Chen reports.

But Apple’s earnings report on Tuesday highlighted some of the challenges the company faces as it continues to expand overseas, where gaining a foothold is increasingly vital for the company. Apple’s growth has slowed in the most recent quarters, as its devices have largely saturated the United States and some top markets in Europe.

China has been especially problematic for the company. Overall sales of Apple devices in China fell 4 percent compared with the same quarter last year. And in Hong Kong, Apple’s sales were down about 20 percent â€" a trend that Timothy D. Cook, the company’s chief executive, found puzzling.

Apple may face a challenge in China, but the tech industry’s other two giants, Microsoft and Google, have their struggles, too. Microsoft posted a profit of almost $5 billion for the quarter, missing expectations of analysts, thanks in part to disappointing sales of its Surface tablet and an industrywide decline in sales of personal computers. Google also posted a profit, of $3.23 billion, but still missed analysts’ expectations as its desktop search business continued to slow and ad prices shrank.

Mr. Cook told investors to stay optimistic about Apple in China. About half a million people there are creating apps for iOS, Apple’s mobile software system for iPhones and iPads, he said. Sales of the iPad in greater China were up 8 percent and up 37 percent in mainland China, he said.

“Over the arc of time, China is a huge opportunity for Apple,” Mr. Cook said, “so I don’t get discouraged over a 90-day kind of cycle with economic factors.”