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Continued: Apple's earnings fall, iPhone sales rise as more people buy older, less expensive models

  • Article by: MICHAEL LIEDTKE , AP Technology Writer
  • Last update: July 23, 2013 - 7:35 PM

Consumers typically don't pay anywhere near those prices for iPhones because they get discounts from wireless carriers in return for two-year contract commitments. Most U.S. wireless carriers sell the iPhone 5 for $199 and the 4S for $99. The iPhone 4 is usually free with a contract commitment.

IPhone prices would fall even further if Apple decides to design a cheaper model aimed specifically at lower-income countries.

Cook is hoping the iPhone's shrinking average sale price benefits Apple in the long run by introducing more first-time buyers of smartphones to the company's products, including its iTunes store for music, video, books and apps. Revenue tied to iTunes, software and services climbed by 25 percent from last year to $4 billion.

The intensifying battle in the iPad market clipped Apple in the latest quarter. The company sold 14 percent fewer tablets — 14.6 million in the past quarter compared with 17 million a year ago. The average iPad's price plunged 15 percent from last year to $436, down from $515 last year.

The sharp decline reflects Apple's decision to sell a smaller version of the iPad at the end of last year to counter the threat posed by mini tablets sold by Google, Amazon and other rivals.

Google is expected to unveil the next generation of its Nexus tablets on Wednesday in San Francisco. The current Nexus tablet with a seven-inch display screen and 16 gigabytes sells for $199, 40 percent below the price for an iPad Mini with an eight-inch display and the same amount of storage.

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  • Apple's profit fell as expected in the lackluster April-to-June quarter but shipments of iPhones beat Wall Street expectations. File photo of the company's Hong Kong store.

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