Needham upgraded shares of Apple ( AAPL) on Wednesday, citing strong iPod sales and a potential PowerMac rebound.

Analyst Charles R. Wolf upgraded the company's shares to buy from hold, set a $23 price target and increased his full-year 2003 and 2004 earnings estimates.

iPod sales have increased unexpectedly since late April after the launch of the iTunes Music Store and the availability of new iPods, Wolf said. He added, "Sales of the iPod should receive an additional boost when Apple ports its award-winning iTunes jukebox software, which powers the iPod, to the Windows platform later this year."

Regarding the company's PowerMac computer line, Wolf expects sales could rebound in the first quarter of 2004. He said he expects a narrowing of the gigahertz gap between PowerMac and Windows machines when Apple unveils its new PowerMacs that run on IBM's ( IBM) 970 processor family in late June. He added that the graphics application Quark Express was released for Mac OS X last week, and said demand for the PowerMac could possibly increase among graphics professionals.

Wolf upped Apple's 2003 earnings-per-share estimate to 23 cents from 22 cents and its 2004 estimate to 60 cents from 50 cents. Analysts expect 15 cents a share in 2003 and 26 cents a share in 2004. The company earned 33 cents a share in 2002.

"Apple is abandoning its long-standing strategy of confining its award-winning software to the Mac platform," said Wolf.

Shares of the Cupertino, Calif.-based company were up 19 cents in early trading at $18.38.

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