iPhone sales still strong, but tablets tumble and profits decline

Sales of 31.2 million iPhones and 14.6 million iPads during third quarter ended June 29 enabled Apple to generate sales of $35.3 billion, but lower prices led to gross margin contraction and a nearly $2 billion decline in profits.

Apple’s quarterly revenue was essentially flat with the prior year while net income of $6.9 billion, or $7.47 a share, was well below the prior year’s profit total of $8.8 billion or $9.32 a share. Gross margins also declined to 36.9% from 42.8%.

Sales of the venerable iPhone totaled 31.2 million units in the quarter, well above last year’s 26 million, while iPad sales declined to 14.6 million units from 17 million units. Sales of Mac computers also declined to 3.8 million from 4 million last year.

“We are especially proud of our record June quarter iPhone sales of more than 31 million and the strong growth in revenue from iTunes, Software and Services,” said Tim Cook, Apple’s CEO. “We are really excited about the upcoming releases of iOS 7 and OS X Mavericks, and we are laser-focused and working hard on some amazing new products that we will introduce in the fall and across 2014.”

The company said it generated $7.8 billion in cash flow from operations during the quarter returned $18.8 billion in cash to shareholders through dividends and share repurchases. In conjunction with the release of its results Apple announced a $3.05 a share dividend.

During the current third quarter, Applie is expecting sales to range from $34 billion to $37 billion with gross margins holding steady in the 36% to 37% range.