Flat Apple needs new blockbuster product

The news on Tuesday was not particularly good for Apple: revenue was flat, profit lower, and iPad sales were down. But investors did not seem to mind, sending the company's shares about 4 per cent higher in after-hours trading on Wall Street. Strong iPhone sales helped beat analyst expectations.

But Apple's earnings report highlighted some of the challenges the company faces. It sells plenty of devices in the US, but sales have lagged in some larger overseas markets, which are crucial for its growth prospects.

China has been especially problematic, with sales of Apple devices down 4 per cent on the same quarter last year, and down 20 per cent in Hong Kong.

Gaining a foothold in foreign markets is becoming increasingly vital for Apple. Its growth has slowed in the most recent quarters, as its devices have saturated the US and some key European markets. The tepid growth has led many investors to call for a new blockbuster product to give the stock price a lift. Chief executive Timothy Cook has suggested there are plenty in the pipeline.

The company could decide to introduce a cheaper iPhone, or even a so-called smartwatch that would compete in a brand-new market of wearable computers.

"They need to come up with some game-changers pretty soon," said Laurence Isaac Balter, chief market strategist at Oracle Investment Research.

Apple sold 31.2 million iPhones in the latest quarter, up from 26 million in the same period a year ago. It helped generate net income in the third quarter of $US6.9 billion, down from $US8.8 billion last time. Revenue was flat at $US35.3 billion.