SAN FRANCISCO (Reuters) - Apple Inc posted a smaller-than-expected 6 percent rise in quarterly revenue on Tuesday, after selling 35.2 million iPhones in an increasingly competitive smartphone market.

The company, which derives most of its business from the high-end mobile device, reported sales of $37.4 billion in its fiscal third quarter ended June, falling short of Wall Street's expectations for about $38 billion.

Gross margins were better than expected at 39.4 percent, up from 36.9 percent in the year-ago quarter, primarily due to cheaper product costs and strong sales of the Mac.

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But iPad sales at 13.3 million fell a little short of analysts' projections for more than 14 million. The tablet has come under increasing pressure from cheaper Android rivals.

Shares in Apple held steady at $94.72 on Nasdaq after the news.

Whether Apple can again produce a revolutionary new product, something it has not done since the iPad in 2010, remains the central question in the minds of investors and Silicon Valley executives.

Many investors expect Apple to make a play for the wearable device market with a sensor-laden smart watch, dubbed iWatch. Analysts also expect the company to introduce two versions of its smartphone this fall, including a 5.5-inch model that thrusts Apple into the market for larger-sized phones that rival Samsung helped popularize.