TIME Big Picture

Questions About a 5.5-inch iPhone

There’s already a bit of controversy surrounding the launch of Apple’s new iPhones this fall.

Most informed sources seem to all agree that Apple will introduce an iPhone 6 sporting a 4.7-inch screen, as compared to the 4-inch screen on today’s iPhone 5s and 5c models. But there are several rumors coming from the supply chain that suggest Apple is also preparing to release a 5.5-inch version of its newest iPhone, too.

The possibility that Apple could be making a 5.5-inch iPhone leads to a few important questions.

Why make a giant iPhone?

The first: If Apple really wants the 4.7-inch model to be what we in the industry call the “hero” model — one that would drive the majority of iPhone sales going forward — why even make a 5.5-inch model at all?

While we will sell about a billion smartphones this year, fewer than 70 million will feature screens larger than five inches. However, the answer to this question is actually pretty simple: While demand for smartphones larger than five inches is minimal in the U.S. and Europe, there is great interest in smartphones in the 5.5- to 5.7-inch range in many parts of Asia.

For example, well over 80% of smartphones sold in Korea have screens that are at least five inches and above. They have also become big hits in China and other parts of Asia where larger smartphones double as a small tablets, thus driving demand in these regions of the world for what are called “phablets.”

I suspect that if Apple is making a larger iPhone 6 in the 5.5-inch range, it will most likely be targeted at these Asian markets where demand for large smartphones is relatively strong. This is not to say that Apple wouldn’t offer a 5.5-inch iPhone in the U.S. — I believe there could be some interest in one of this size — but like most of my colleagues in the research world, we believe that the lion’s share of those buying the new iPhone would want the 4.7-inch version if indeed this is the size of it when it comes out.

Would you buy it?

The second question: If Apple does bring a 5.5-inch iPhone 6 to the U.S. market, would you buy one?

For the last month or so, I have been carrying three smartphones with me of various screen sizes all day long, and have learned a lot about my personal preferences. In my front pocket is an iPhone 5 that has a four-inch screen. In my back pockets are a Galaxy Note 3, which has a 5.7-inch screen and the new Amazon Fire, which sports a 4.7 inch screen — the same size that is purported to be on the new iPhone 6 when it comes to market.

Here are my observations. Keep in mind they are personal observations, but I suspect that my preferences are pretty close to what the majority of the market may prefer when it comes to the screen sizes in a larger smartphone.

I like to keep my primary smartphone with me all of the time, so my iPhone 5 is in my front pocket. The screen size is very important in this case and, at four inches, it easily fits in my right-front pants pocket and is easy to access as I need it. The other thing that is important about the four-inch screen is that I can operate it with one hand. From a design point, one-handed operation has been at the heart of all iPhones to date, as Steve Jobs was adamant that people wanted to be able to use their phones with one hand. So the idea of possibly moving up to a new iPhone with a 4.7-inch screen has intrigued me, as I wondered if a smartphone with this size screen would fit in my pocket and still be usable with one hand.

So when I got to test the 4.7-inch Amazon Fire phone, I immediately put it in my front pocket. Thankfully, it fit well and continued to be just as easy to access as the smaller iPhone 5s with its four-inch screen. Also, while I had been skeptical that I could still use it with one hand since I have medium-sized hands, I found that I could still operate the Amazon Fire with one hand easily. The other thing about a 4.7-inch screen is that the text is larger; for my aging eyes, this is a welcome upgrade. However, on these two issues, the Galaxy Note 3, with its 5.7-inch screen, flunked both tests. This phablet-sized smartphone did not fit in a front pocket, nor could I use it for one-handed operation.

That led me to wonder if a Samsung Galaxy S% smartphone, with its five-inch screen, would work in these similar scenarios. So I took a Galaxy S5 that I have, put it into my front pocket and tried to use it with one hand. To my surprise, it also worked well. But I had another smartphone with a 5.2-inch screen and, amazingly, that failed both tests. On the surface, at least for me, a smartphone up to five inches did fit in my pocket and allowed me to use it one-handed, but any screen larger than that was a bust.

I also did this test with some of the women in our office. We have a very casual workplace and most wear jeans to work, so I had them try the 4.7-inch Amazon Fire. They were also surprised that it fit O.K. in their front pockets and could still be used in a one-handed operation mode. However, like me, a screen larger than five inches did not fit in pockets and was impossible to use with one hand for all of them. These women did point out to me though that for most women, it’s less likely that they would carry a smartphone in their pockets as more keep them in a purse or handbag. That being the case, at least for the women in our office, a smartphone with a 5.5-inch screen was acceptable to them, although one person said she would prefer the smaller 4.7-inch smartphone if push came to shove.

Ultimately, it probably comes down to personal preference, yet I suspect that an iPhone with a 4.7-inch screen would take the lion’s share of Apple’s iPhones sales if this is indeed the size of the company’s new iPhone.

What about tablets?

But a 5.5-inch smartphone begs a third question that, at the moment, has stymied many of us researchers: Would a 5.5- or 6-inch smartphone eat into the demand for a small tablet?

I find that in my case, even though I do use the 5.7-inch Galaxy Note 3 often for reading books while out and about or while standing in line, my iPad Mini is still my go-to tablet due to its size. I also have a 9.7-inch iPad Air with a Bluetooth keyboard, but I almost exclusively use that tablet for productivity and less for any form of real data consumption.

Some researchers have suggested that, especially in parts of the world where larger smartphones or “phablets” are taking off, this has really hurt the demand for smaller tablets — and that’s partially why demand for tablets has been soft in the last two quarters. Unfortunately, the data is still inconclusive on this, but my gut says that “phablets” are at least having some impact on demand for tablets in many regions of the world.

With the expected launch of Apple’s new larger-screen iPhones just around the corner, those planning to buy a new iPhone might want to keep my experience in mind. There’s a very big difference between how a person uses smartphones that are less than five inches and smartphones that have larger screens. For those who keep them in their pockets and/or want to use them with one hand, they have only one real choice. For them, a smartphone smaller than five inches is their best bet.

But for those that don’t keep their smartphones in their pockets, the virtue of a larger screen is that it delivers much more viewing real estate. Consequently, it’s much easier to use when reading books, web pages and for other tasks where a large screen can deliver a real benefit. The good news is that if these Apple rumors are true, people will have better options coming from Apple. For the first time in the iPhone’s history, Apple might give users multiple screen sizes to choose from.

Bajarin is the president of Creative Strategies Inc., a technology industry analysis and market-intelligence firm in Silicon Valley. He contributes to Big Picture, an opinion column that appears every week on TIME Tech.

TIME Apple

These 5 Facts About Apple Will Blow Your Mind

Berlin Apple Store Opens For Business
Apple Inc. iMac computers are seen on display at the new Apple Inc. store located on Kurfurstendamm Street in Berlin, Germany, on Friday, May 3, 2013. Bloomberg—Bloomberg via Getty Images

Even in a slow quarter the iPhone by itself generates more revenue than all of Amazon

fortunelogo-blue
This post is in partnership with Fortune, which offers the latest business and finance news. Read the article below originally published at Fortune.com.

After Apple reported its quarterly earnings Tuesday, Slate’s Jordan Weissmann offered several eye-opening comparisons. Among them:

  • If the iPhone were a company in its own right, it would be bigger than McDonald’s and Coca Cola combined.
  • The iPad generated more revenue last quarter than Facebook, Twitter, Yahoo, Groupon, and Tesla combined.
  • Apple’s sales from hardware accessories is larger than Chipotle’s revenue.
  • Apple’s iTunes, software, and services businesses are bigger than eBay.
  • While sales of the old iPod line may be shrinking, it’s still 77% larger than Twitter.

LINK: If Apple Products Were Their Own Companies, They’d Be as Big as …

Follow Philip Elmer-DeWitt on Twitter at@philiped. Read his Apple AAPL coverage at fortune.com/ped or subscribe via his RSS feed.

TIME Tech Policy

Meet the Woman Keeping Silicon Valley in Check

Federal Trade Commission Chairwoman Edith Ramirez Cade Martin 2014

Edith Ramirez is probably not the most popular person in Seattle right now. As the chairwoman of the Federal Trade Commission, she’s currently suing two of the city’s biggest tech companies: Amazon, for allegedly making it too easy for kids to rack up in-app purchases on their parents’ Kindles, and T-Mobile, for allegedly cramming unwanted charges into customers’ phone bills. That’s to say nothing of the recent settlements with Snapchat over false marketing and Apple over in-app purchases. It’s all come under the watchful eye of Ramirez, who assumed the chairwoman’s position in March 2013 and has taken a laser focus to the activities of tech companies, particularly in regards to mobile.

The new FTC head talked to TIME about the hidden permissions lurking in terms of service agreements, Facebook’s controversial mood study and whether Americans should ever expect a “right to be forgotten” online. An edited version of the conversation is below.

TIME: How important is the technology sector as a whole for the FTC right now? Is it an area of focus for you personally?

Ramirez: Our fundamental mission is to protect consumers and promote competition and so we are going to be wherever consumers are. The reality is that technology has been playing a critically important role for the agency for a number of years. Because we see consumers really gravitating to mobile devices, it’s crucial that the agency be very much informed about and keenly aware of what’s happening in the mobile sphere.

TIME: What are the biggest challenges or dangerous that consumers can face with the rise of mobile?

Ramirez: You want consumers to be able to partake in all of the terrific innovation we see in the marketplace. One way to assure that is to make sure the products that are out there take into account what’s of concern to consumers—that includes, among other things, taking into account concerns about data security and privacy, and also making sure that some of the basic protections that we’re all used to when we walk into a grocery store or a local convenience store, that we also have those basic protections available to us when we’re engaging in a transaction on our smartphone.

Data security is paramount in my view. The more connected we are, the more information and data that is being gathered by all sorts of different companies. It’s crucial that this personal information that is being collected and being used, that companies take reasonable steps to ensure that data is protected.

TIME: We live in this era now where people sign up for services and they don’t read the fine print. Do you think there’s a base level of privacy or control that Internet companies should be affording their customers?

Ramirez: I do. We realize that consumers aren’t going to be poring over long, confusing privacy policies. Now that we’re in a mobile world, what’s the likelihood that anyone’s going to be scrolling through on a mobile device some lengthy privacy policy? That’s become increasingly unlikely.

Companies need to be thinking about privacy from the get-go, when they first start conceiving of any new product or service. If you’re developing an app that’s a flashlight app, do you really need to have access to my contacts? Do you really need to have access to my geolocation? If they want to access information that goes beyond what one would expect, they ought to be asking for permission to do that.

I think we’ve seen a tremendous improvement, even in the course of the time I’ve been at the agency. We’ve seen companies realize that consumers really do care very deeply about maintaining their information [security] and they want to also exercise greater control. At the same time I think a lot more needs to be done in this area. A lot in this area still continues to take place behind the scenes in a black box. Consumers may not fully appreciate the extent of data-sharing that’s taking place.

TIME: Last month people were upset because Facebook had done this experiment where they were altering people’s News Feeds to change their mood in some way. Do you think that experiment was appropriate for them to do?

Ramirez: I can’t really comment on the specifics of what Facebook did, but I think what it does show is again the need for consumers to be in the driver’s seat. They want to know what companies are doing, how they’re using the information that they’re sharing. It just goes to show that consumers don’t want to be in the dark about this. That’s a basic responsibility companies have—they ought to be transparent about what they’re doing, they ought to give consumers an opportunity to have control over how their information is being used, what information is being collected. Simply because [consumers] are receiving a service, and even it happens to be free, that doesn’t mean they don’t want to be in control.

TIME: Does the FTC plan to investigate the Facebook issue formally?

Ramirez: We can’t comment on how investigations we conduct. What I can tell you is these are issues we are concerned about and we are monitoring the marketplace.

TIME: In Europe, the courts recently enshrined a “right to be forgotten,” so people can delete articles about themselves from search results. Do you think that’s something Americans should have the right to for privacy reasons?

Ramirez: Of course we’re operating here in the U.S. under a very different legal regime than folks are in Europe. An expansive “right to be forgotten” is not something that’s likely to pass Constitutional muster here in the United States because there is a First Amendment right to both access to public information and freedom of expression. At the same time, I do understand the need for us to think about controlling our own information. By way of example, I know that consumers want to be able to delete information. If they’re on a particular platform, they will want to be able to be assured that if they close out their account that their information will be deleted. This is exactly an element of an order we have with Facebook. It’s not an expansive right to be forgotten, but there are certain controls and tools that I think U.S. consumers would like to have.

TIME: As we see these tech companies like Google and Amazon getting bigger and bigger, taking up a larger portion of their sectors, do you think there are antitrust issues with these companies as they continue to grow?

Ramirez: With any large company, if they have market power, monopoly power, we would be looking closely at how they use that. We did conduct an investigation relative to Google a couple of years back. In that particular investigation, we opted not to take action.

TIME: A lot of times when people FTC settlements come out, people see the dollar figure, and it seems like a slap on the wrist to these companies that are generating billions of dollars in revenue every year. Are the actions you take are actual deterrents to stop companies from abusing consumers in various ways?

Ramirez: We do not have general civil penalty authority. We can’t assess a fine when we find a violation of law under our general statute. What we can do is seek to obtain consumer redress or we can, if appropriate, ask a company to disgorge any unlawful gains that resulted from the unlawful conduct.

In any particular case, the amount that you may see, you may think, ‘Well how does that compare to the profits of a company?” But that’s not really the analysis. The analysis on our end is, “Are we successfully recovering money that would compensate consumers for the damage that they have suffered.”

I think our enforcement work is sending important signals to the marketplace. In the privacy arena, Facebook, Google, Twitter [are] under order. It’s sent important signals to them, and I think as a result of the action that we’ve taken, companies are more aware of what their responsibilities are.

TIME: How are you able to strike a balance between this goal of consumer protection and allowing companies to innovate and try new things?

Ramirez: Whether it’s having information about what you’re paying for, whether it’s knowing what information an app might want to have access to when I’m downloading it—all of these things really work side by side with innovation. I don’t think consumers should have to sacrifice their privacy, the security of their information…when they avail themselves of all these terrific products that we see today. In fact I think for companies to flourish, it’s really important that consumers feel they can trust the products that they’re using, that they feel that they know the full extent of what is happening when they download a service. Companies will flourish all the more if they provide basic protections.

TIME Rumors

That 5.5-Inch iPhone Is Still Pretty Mysterious

A larger iPhone seems likely for this fall, but don't bet on an even larger "phablet" version just yet.

There comes a time in every Apple rumor’s life when it starts to feel like inevitability–when the sum of insider information, leaked images and “supply chain” speculation becomes too difficult to dismiss.

That seems to have happened with the 4.7-inch “iPhone 6,” which is widely expected to arrive this fall. But that’s not the only iPhone that Apple is reportedly working on. Reports of a 5.5-inch iPhone have been circulating since last year, and they’re starting to reach that threshold of inevitability as new reports keep rolling in.

Still, looking at the dozen or so rumors about the extra-large iPhone, there’s little consensus on when the phone would arrive, how it would differ from the 4.7-inch iPhone and what the larger screen would mean for apps and software. Until we get answers to more of these questions, it’s foolish to assume an iPhone “phablet” is imminent.

Last week, the Wall Street Journal reported that Apple was telling its suppliers to prepare for a record number of iPhones, including 4.7- and 5.5-inch models. But the paper also said that Apple was struggling to get good production yields from the larger model, which may not enter mass production until a month after the smaller iPhone.

We’ve seen other publications make similar claims, but the timing is always murky. 9to5Mac, for instance, says that Apple hasn’t decided whether to debut the 5.5-inch iPhone in September along with its smaller sibling. Chinese media sources claim that mass production on the larger model won’t even start until September. Analyst Ming-Chi Kuo–a hit-or-miss source for Apple rumors lately–believes the 5.5-inch iPhone won’t arrive until after October, or possibly next year.

As for the phone itself, there isn’t much corroborating evidence on how it would be different from the 4.7-inch model aside from screen size alone. Kuo has speculated that it would be the only iPhone with a scratch-resistant sapphire display and optical image stabilization, but without corroboration from more reliable sources, I’m skeptical.

The other big question is how screen resolution would change with the larger display. It’s unlikely that Apple would stretch the screen without increasing the number pixels as well, but there hasn’t been much discussion to address this issue.

None of this leaves me feeling confident that a 5.5-inch iPhone is coming any time soon. If you’re only interested in phones with gigantic displays, and absolutely can’t wait longer than a couple months, you might want to consider other options.

TIME Music

Bose Is Suing Beats Over Headphone Patents

Apple Said To Be In Talks To Purchase Beats Headphones Company
Beats headphones in an Apple store on May 9, 2014 in New York City. Andrew Burton—Getty Images

As Beats is being bought by Apple

Bose is suing Beats Electronics over the noise-canceling technology in Beats’ headphones.

Bose filed suit in a U.S. District Court in Delaware Friday, claiming that Beats violated five different patents in the manufacture of its line of Studio noise-canceling headphones. The patents in question are for technology such as “Dynamically Configurable ANR Filter Block Technology” and “Digital High Frequency Phase Compensation.”

Bose is seeking an injunction to prevent Beats from selling the products it says violate its patents, as well as an award for damages.

Apple agreed to buy Beats for $3 billion in May. The deal is still pending regulatory approval.

TIME Software

Apple’s OS X Yosemite Beta Is Rolling Out Now, but Be Aware of These Issues

The anticipated 10th version of OS X is finally deploying to one million users who signed up for Apple's public beta.

As promised, Apple has started rolling out a public beta version of its forthcoming OS X Yosemite operating system for Mac computers and laptops. The beta build, listed by Apple as 14A299l, is a tick higher in enumeration than the fourth developer preview released on Monday, though it’s not clear whether there’s a meaningful difference between the versions or simply a designative one.

The beta build will go out to one million program participants in the form of a code, downloadable through the Mac App Store. Beta members can retrieve their code by logging into the beta website and following the instructions. Apple says you’ll need to be running OS X Mavericks 10.9 or later, have at least 2GB of memory and at least 8GB of free disk space.

Don’t expect to receive updates as frequently as developers, says Apple, but you’ll be able to upgrade to the final version whenever it’s released (sometime this fall) seamlessly.

Before you dive in, be aware that some of Yosemite’s iOS 8-related features won’t be available in the beta (until you have iOS 8, which won’t be out until this fall, and which is only available now in beta through Apple’s developer program). It’s also worth scanning through the following issues Apple’s listed as present in the initial public beta to determine if they’re deal-breakers for you:

  • Safari may hang when playing certain Netflix content.
  • iPhoto 9.5.1 and Aperture 3.5.1 are required on OS X Yosemite. Update to these versions from the Mac App Store.
  • When entering edit mode in iPhoto, a black screen may be displayed instead of the selected photo.
  • Photo Stream and iCloud Photo Sharing may not function properly when both iPhoto and Aperture are installed.
  • The shared purchase history page on the Mac App Store is disabled for Family Sharing accounts.
  • iCloud Drive may appear empty in the Finder after first time setup. Restart to resolve this problem.
  • AirDrop may not show nearby Macs.
  • Sending files to another Mac using AirDrop may not work.
TIME Tablets

These 2 Charts Show Why Apple Should Worry About the iPad

Apple's iPad Air tablet on October 22, 2013 in San Francisco, California.
Apple's iPad Air tablet on October 22, 2013 in San Francisco, California. Glenn Chapman—AFP/Getty Images

Apple’s flagship product, the iPhone, is humming along nicely, according to the company’s latest quarterly earnings report, but its newest disruptive device has seen better days.

The iPad, which turned four years old in April, is suffering slowing sales on both a sequential and year-over-year basis. The product line sold 13.3 million units between April and June, down 9 percent from the same period last year. That’s bad news for a relatively new device that was supposed to be “better than a laptop” and eventually devour the PC market.

Here’s a breakdown of the product’s overall trajectory:

In the most recent quarter, the iPad saw its lowest sales since the first quarter of 2012, when it sold 11.8 million units. Many factors explain the slowdown: For one, new iPad rollouts don’t generate nearly the buzz of a new iPhone launch. Why not? The flagship device hasn’t changed dramatically since it launched in 2010—yes, it’s added a fancy retina display and gotten lighter, but those advances don’t compare to the new features that have accompanied launches of new iPhone models, like the App Store or the Siri personal assistant.

On top of that, people generally seem content to hold on to their iPads for longer than they keep their iPhones. According to mobile marketing firm Fiksu, which tracks the use of iOS on active Apple devices, the iPad 2 was still the most popular iPad in use as of April 2014, even though it had already been out for three years. For comparison, the iPhone 5, released in September 2012, is the most-used Apple smartphone.

That’s partially because iPhones are usually cheaper to purchase in the United States. Thanks to subsidies from wireless carriers, the expensive phones typically cost between $100 and $200 for U.S. customers eligible for an upgrade, while the sans-subsidy iPad starts at $399. Combine that price differential with the fact that Americans have been conditioned to seek out phone upgrades every two years when their contracts end, and it’s no wonder that the majority of iPads are now being sold to first-time tablet buyers, according to Apple.

“I don’t see the purchase cycle [for iPads] as fast as 20 to 24 months,” says Ben Arnold, an industry analyst at NPD.

Another problem for Apple is the iPad’s growing number of competitors. When the device launched in 2010, it became the first breakthrough success in the tablet category. Since then, both Amazon and Samsung have launched tablets with similar features and, in some cases, lower prices. Meanwhile, many laptops with functionality similar to an iPad are now cheaper than Apple’s tablet. Arnold attributes some of the iPad’s current woes not only to its direct competitors but also dirt-cheap netbooks like Google’s Chromebook, which is tailored for web browsing and video viewing.

On the other end of the spectrum, smartphones are slowly approaching the size of tablet — Apple itself is reportedly prepping a new iPhone with a 5.5-inch screen, just 2.4 inches off the iPad Mini. Those big phones, sometimes called “phablets,” are eating away at tablet sales across the board.

The convergent functionality of different device types means the tablet market as a whole may not have as much runway to grow as analysts previously thought. Global tablet shipments declined for the first time ever in the first quarter of 2014, according to NPD. The sales-tracking group cited the emergence of large-screen smartphones as one reason for faltering growth. NPD projects tablet shipments will rebound, but that the growth rate will be 14 percent in 2014, lower than in previous years. By 2017, the growth rate is expected to slip to single digits (NPD expects a growth rate of 13 percent for smartphones through 2017, by comparison).

smartphone sales

“The market is kind of settling into this mature phase,” Arnold says of tablets. “The second generation purchases are slower to come.”

So Apple has a product in sales decline in a rapidly maturing market that faces growing competition from every other type of mobile computing device. What’s the solution? Apple believes it’s enterprise. In his conference call with investors, Apple CEO Tim Cook stressed that the iPad would be a key element of the company’s just-announced partnership with IBM to sell Apple products and services to businesses. Currently just 20% of tablet owners use the devices for work-related activities, according to an April survey by JD Power. Apple believes it can change this by creating apps tailored to different industries like insurance, banking and retail.

The iPad certainly isn’t going anywhere, and at more than 225 million units sold, it’s an incredibly successful device. But it’s not the next iPhone, and that’s what investors have been craving since they catapulted Apple to become the most valuable company in the U.S. Cook, who acknowledged that iPad sales were below analysts’ expectations, tried to put his aspirations for the device in perspective: “Our theory that has been there honestly since the first time that we shipped iPad, that the tablet market would eventually pass the PC market. That theory is still intact.”

TIME Apple

You Can Sign Up to Try the New Mac OS X Now

Mac OSX Yosemite Apple
Mac OSX Yosemite Apple

The sign-up page is open for the Mac OS X Yosemite beta, but probably not for long

If you’re feeling adventurous and can act fast, you can now sign up for access to Apple’s Mac OS X Yosemite beta.

The beta program, which lets users test the latest Mac operating system software that Apple announced in June, is open to the first million people who sign up through Apple’s website.

Yosemite is a major update over the current OS X Mavericks, with a new look and improvements to built-in apps such as Mail and Safari. It also has some deeper hooks into the iPhone and iPad, letting users pick up on one machine from where they left off on another, and answer phone calls through their laptops. (Those features won’t hit until iOS 8 launches this fall.)

Keep in mind that as a beta, bugs and glitches will be inevitable. Apple suggests installing Yosemite on a secondary Mac, and only after backing up its contents.

MONEY Tech

Here’s a Look at How Apple and Microsoft Really Stack Up

On Tuesday, both Apple and Microsoft released their quarterly earnings reports, with Apple showing a 12.3% profit jump—and Microsoft showing a 7.1% decline. How do they compete on other measures? Here's a look at how the two tech giants stack up.

TIME

Apple Sees Surging iPhone Sales, but iPad Sluggish

Apple Unveils New Versions Of Popular iPad
An attendee looks at the new iPad Mini during an Apple announcement at the Yerba Buena Center for the Arts on October 22, 2013 in San Francisco, California. Justin Sullivan—Getty Images

As tablets face competition from big phones

Updated July 22 at 6:20 p.m. ET

Apple topped analysts’ projections in the third quarter of its fiscal year with profits of $7.7 billion, the company disclosed in its quarterly earnings report Tuesday. That figure amounted to earnings per share of $1.28, beating analysts’ projections of $1.23 per share. Apple’s revenue for the quarter was $37.4 billion, below analysts’ expectations of $38 billion.

Apple’s profits were again driven by the iPhone, which moved 35.2 million units during the quarter, up from 31.2 million during the same quarter in 2013. At $19.8 billion in sales, the iPhone comprised nearly 53 percent of Apple’s total revenue. iPhone sales were down compared to to the second quarter, when the device sold 43.7 million units. The period between April and June has historically been a weak time for iPhone sales as consumers anticipate the launch of the latest device in the line, which typically occurs in September.

While the iPhone’s business continues to grow, the iPad is showing signs of slowing. The tablet sold 13.3 million units in the quarter, down 9 percent year-over-year and down 19 percent from the period between January and March of this year. This was the second straight quarter the iPad slipped in year-over-year sales—in the second fiscal quarter the device line was down 16 percent. In fact, the entire tablet market was down in the U.S. early this year because of increased competition from large-screen smartphones.

In a conference call with investors, Apple CEO Tim Cook defended the iPad’s performance, saying that the device still has a promising future. “IPad sales met our expectations but we realize that they didn’t meet many of yours,” he said. “What’s most important to us is that customers are enjoying their iPads and using them heavily.”

Cook pointed to a recently-announced partnership with IBM to push Apple devices and services to enterprise customers as an avenue for iPad sales growth. Currently only about 20 percent of tablet owners use the devices for work-related activities, according to an April survey by JD Power. “I honestly believe the opportunity is huge,” Cook said. He also noted that the device’s sales are still growing quickly in less-developed markets such as China and the Middle East.

Though Apple had to defend the iPad, the company noted iTunes software as another area of strong growth. Revenue in the sector, which is comprised mostly of sales in the iTunes and App Stores, grew 12 percent year-over-year to $4.5 billion.

Apple’s line of Macintosh desktops and laptops grew 18 percent year-over-year to 4.4 million units in sales. The iPod line sold 2.9 million units in the quarter, down 36 percent from the same period last year.

Overall the earnings report did little to move Apple stock, which inched up less than 1 percent in after-hours trading. Both investors and Apple fans are currently awaiting the newest generation of iPhone, which will reportedly boast at least one model with a 5.5-inch screen and is expected to launch sometime this fall.

“iPhone 6 is clearly what people are pointing to,” says Bill Kreher, an Apple analyst at Edward Jones. “The company faces heightened execution risk as it increasingly relies on new products to boost growth.”

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