The report comes as Apple struggles with declining sales of its 10-inch and 7.9-inch tablets, which are faltering as people replace iPads less frequently than expected and larger smartphones made by Samsung Electronics Co Ltd and other rivals encroach upon sales.

Apple has been working with its suppliers for over a year on larger touch-screen devices. It is expected to introduce larger versions of its 4-inch iPhone next month, although the company has not publicized plans for its most important device.

With sales sputtering, Apple's iPad looks to IBM alliance

Apple Inc's iPad is losing steam just four years after its release but an alliance with International Business Machines Corp could rejuvenate a flagging product by entering into a largely untapped corporate market.

Apple shipped 13.2 million iPads in the June quarter, 8 percent fewer than a year earlier and lagging Wall Street's forecast for 14 million or more. Sales of the device, which accounted for 15 percent of revenue, fell short of Wall
Apple helped create the tablet market in 2010 with its first iPad.

But growth has plummeted from 2012, as larger phones became more popular and people delayed replacing their tablets. And it is ceding market to mostly cheaper Android offerings from Samsung Electronics Co Ltd and Chinese manufacturers using Google Inc software.