CORRECTED - Apple sells more iPhones than expected in third quarter

(Reuters) - Apple Inc's iPhone sales fell for the second straight quarter, although the 15 percent drop was less than feared.

The company's total revenue dropped 14.6 percent in the third-quarter ended June 25, also declining for the second quarter in a row.

Apple said it sold 40.4 million iPhones in the third quarter, more than the average analyst forecast of 40.02 million, according to research firm FactSet StreetAccount.

Apple had reported a 16.3 percent drop in iPhone sales in the previous quarter, the first decline since the smartphone was launched in 2007.

Sales of iPhones account for about two-thirds of the total sales of the world's most valuable publicly traded company.

Apple's iPhone lineup includes the iPhone 6S and 6S Plus, as well as the smaller and cheaper iPhone SE.

Apple's quarterly net profit fell 27 percent to $7.8 billion, while revenue of $42.36 billion beat analyst's estimates of $42.09 billion, according to Thomson Reuters I/B/E/S.

Sales in Greater China, once touted as Apple's next growth engine, decreased 33.1 percent, compared with a 112.4 percent growth in the year earlier quarter and a near 26 percent fall in the second quarter.

Apple's services business, which includes the App Store, Apple Pay, iCloud and other services generated nearly $6 billion in revenue, up 18.9 percent from the previous year.

The company forecast fourth-quarter revenue of $45.5 billion to $47.5 billion, largely above Wall Street's average estimate of $45.71 billion, according to Thomson Reuters I/B/E/S.

The forecast, covering the quarter ending September, will likely include at least the first weekend of sales of the iPhone 7 range, which Apple is expected to launch in September.

Up to Tuesday's close, Apple's shares had fallen about 8.2 percent since the start of the year.

(Corrects paragraph 10 to say Apple's fourth-quarter revenue forecast was "largely above" Wall Street's average estimate, not "below")

(Reporting by Anya George Tharakan in Bengaluru and Julia Love in San Francisco; Editing by Savio D'Souza)