Updated from 7:42 a.m. EDT

Apple's

(AAPL) - Get Report

second-quarter earnings topped Wall Street's estimates by 10 cents a share, and the company offered an earnings outlook that was better than expected. But investors weren't impressed, selling off the stock.

Shares of Apple were recently off $2.55, or 6.2%, to $38.48 in early trading Thursday.

Indeed, despite the strong results, analysts on a conference call found a number of items to quibble with. For instance, the company's third-quarter guidance -- while above the Street's estimates -- implies that sales will be flat compared with the second quarter and earnings will decline, several analysts noted. Some also observed that Apple's share count ballooned 13% in the quarter, diluting earnings.

The expanded share count had to do with stock options exercises in the quarter, CFO Peter Oppenheimer explained on the call. In terms of the company's guidance, it reflects Apple's normal seasonality and still would represent a 61% growth rate over the year-ago quarter, he said.

"We're very pleased with the results of our first half of our fiscal year," he said. Apple is looking forward to the second half, he added.

Oppenheimer had a lot to be pleased with in the second quarter, as Apple's earnings were six times greater than they were in the year-ago period. In the just-completed quarter, Apple earned $290 million, or 34 cents a share, which was up from $46 million, or 6 cents a share in the year-ago period.

The company's sales jumped 70% to $3.24 billion.

Those results were well ahead of both analysts' expectations and the company's own guidance.

The consensus on the Street was for 24 cents a share in earnings on $3.21 billion in sales, according to Thomson First Call. Apple predicted in January that it would earn 20 cents a share in the just-completed quarter, on $2.9 billion in sales.

Apple predicted that its good times will continue in its fiscal third quarter. It forecast earnings of 28 cents a share on $3.25 billion in sales. In contrast, analysts had forecast a profit of 24 cents a share on $3.21 billion in sales.

In the third quarter last year, Apple earned $61 million, or about 8 cents a share, on $2.01 billion in sales.

That the quarter may be flat sequentially has to do with the company's normal seasonality and with a pickup in lower-priced computers for the education market, Oppenheimer said. Also playing into the company's projected third-quarter results are recent price reductions on the company's popular iPod digital music players, he said. Factoring into the projected decline in earnings, the company expects to see an increase in operating expenses, partially due to costs associated with developing the next version of its operating system, he said.

The company's recent growth rate has been far faster than it expected, Oppenheimer said. "We don't think our revenue will continue to grow at these levels forever," he said.

For the full year, analysts are looking for $1.11 in per-share earnings on sales of $13.34 billion. Apple did not provide full-year guidance.

Apple's standout results were fueled by jumps in sales of both computers and iPod digital musical players. The company sold 5.3 million iPods in the quarter, generating $1.01 billion in sales, compared with 807,000 iPods for $264 million in sales in the year-ago quarter.

On a unit basis, the sales also topped Apple's first quarter, which covers the holiday period. In that quarter, the company sold 4.6 million iPods, worth $1.2 billion. The total revenue generated likely declined, because Apple introduced a discount-priced, flash-based digital music player in the quarter.

The company sold 1.1 million of its Macintosh computers in its second quarter, for $1.49 billion in sales. That compared favorably with the year-ago period, when the company sold 749,000 computers worth $1.16 billion.

But stock options did skew some of Apple's results in the quarter. The growth in earnings per share trailed significantly behind overall earnings growth because of the added shares.

Meanwhile, the company ended the quarter with $7.06 billion in cash and short-term investments, which was up $609 million from the end of the first quarter. While much of that gain was the result of the company's operations, some $287 million of it -- or 47% -- came from stock options exercises and the tax benefit associated with them, Oppenheimer said.

When employees exercise their options, they typically use the proceeds from the sale on the open market of the underlying stock to pay the company for the shares. The IRS considers the gains employees see from their options sales to be a payroll expense that counts as a business deduction.

Even if you factor in the options issue and the flat guidance, Apple's results were "incredible," says Scott Rothbort, president of LakeView Asset Management and a contributor to

TheStreet.com's

sister Web site

Street Insight

. Analysts are going to have to raise their earnings estimates, which means that with the level of cash the company now has, its shares are undervalued, says Rothbort, who is long Apple.

Rothbort says the after-hours selloff was "perplexing."

"The stock should not be where it is now," he says. "This is going to be an easy $50 stock. No doubt about it. The only question is whether

the market allows it to get there."