Updated from 8:38 a.m. EDT

Apple Computer ( AAPL) reported a 30% jump in third-quarter revenue, with "staggering" iPod demand and robust Mac sales helping the company beat analyst estimates on both the top and bottom lines.

The Cupertino, Calif.-based company's Mac-based sales grew 19%, prompting at least two analysts to raise their ratings on the company Thursday despite a manufacturing glitch that will hurt upcoming back-to-school sales. Investors showed their love, recently pushing shares of Apple up $3.18, or 10.8%, to $32.76.

"The upside surprise in core Mac businesses this quarter was an important indicator, in our view. We have been waiting for signs that the anticipated 'halo effect' from Apple's retail stores and iPod would materialize," First Albany analyst Joel Wagonfeld wrote Thursday. "We have greater confidence in Apple's ability to sustain revenue growth and capitalize on operating leverage in its model."

Wagonfeld, who upgraded Apple to buy from neutral, noted that Apple's notebook business was especially robust, with 240,000 iBook shipments, which beat his forecast by more than 15%, while PowerBook shipments outstripped his estimate by 33%. iPod portable music player shipments fell under his 908,000 estimate to 860,000, but it represented a 183% increase from a year ago and a 7% jump from the previous quarter. (His firm hasn't done any banking with Apple.)

Fulcrum analyst Robert Cihra echoed that sentiment: "After eight quarters of losing share, we believe Apple finally looks like it can restart growth in its core Mac PC units, prompting us to upgrade the shares to buy from neutral," he wrote. "Apple did what we weren't sure it could do -- drive upside growth through growth of its core Mac PC units vs. relying just on the stellar iPod." (His firm hasn't done banking with Apple.)

Other analysts raised their estimates in response to the report, while acknowledging the one blemish is a delay in shipping iMacs because of a manufacturing problem with its G5 processors.

"It's impressive that Apple can blow its iMac launch and be chasing G5 and iPod Mini demand yet we're raising estimates," wrote Merrill Lynch analyst Steve Milunovich, who has a buy rating on the stock. (His firm has done non-investment banking business with Apple.)

Needham analyst Charlie Wolf reiterated his buy rating and raised his 2004 earnings estimate by 3 cents to 63 cents a share and his 2005 earnings estimate by 15 cents to 90 cents a share. He noted that Mac shipments were the highest in 3.5 years.

"Apple's music suite -- consisting of the iPod and iTunes music store -- is emerging as a Trojan horse that's beginning to fuel the migration of Windows users to the Mac platform," Wolf wrote. "In particular, higher education students, who have become hooked in iPod and iTunes, appear to be switching to Apple's notebook line."

Wolf also defended the stock's valuation, which some have claimed is lofty, by arguing that when the company's cash hoard of $12.65 a share is factored in, the stock is not expensive. Based on his new 2005 earnings estimate, the stock is trading at nearly 37 times earnings. But after subtracting Apple's cash from its stock price -- a controversial but popular metric with analysts -- the stock's valuation drops to about 23 times earnings. (His firm hasn't done banking with Apple but Wolf, a research associate or member of their family, holds Apple shares.)

Staggering Demand

After the close Wednesday, Apple reported net income of $61 million, or 16 cents a share, in the third quarter, which ended June 26. That compared to net income of $19 million, or 5 cents a share, in the same period a year earlier.

Excluding a restructuring charge, Apple earned a pro forma $67 million, or 17 cents a share, in the third quarter.

Revenue rose 30% from a year ago to $2.014 billion. That was the highest revenue posted in a third quarter by Apple in eight years, the company said.

Wall Street analysts expected Apple to earn pro forma net income of 15 cents a share on $1.945 billion in revenue in the third quarter, according to Thomson First Call.

The company's gross margins were flat sequentially at 27.8%.

Looking forward, Apple expects fourth-quarter revenue of $2.1 billion and fourth-quarter earnings of 16 cents to 17 cents a share, with gross margins falling to 27% to 27.25% because of constraints on microprocessor supply and a high mix of iPod music players. Analysts were forecasting earnings of 17 cents a share on $2.057 billion in revenue for the fourth quarter.

In a postclose conference call, CFO Peter Oppenheimer said Apple expects revenue for the full fiscal year to cross $8 billion, representing 29% revenue growth. That would exceed the current consensus estimate of $7.921 billion.

"The iPod demand in the U.S. is staggering, and on top of that, the orders internationally as we launch later this month, those orders are unprecedented," Tim Cook, executive vice president of worldwide sales and operations, said of the company's hit portable music player.

"The demand for the Mini is extremely, extremely strong," Oppenheimer added, referring to Apple's new iPod Mini digital music player, which Apple plans to sell outside the U.S. later this month.

Music-related business soared 162% in the third quarter compared to a year ago.

But in its core Mac business, Apple is still grappling with a significant supplier problem. The company was peppered with questions on the conference call about delays in the launch of its new iMac computer due to processor manufacturing problems at IBM ( IBM), as announced earlier this month.

The company said it will ship the next version of iMacs in September but will run out of stock of existing iMacs in a few weeks. That means Apple will have to sit out at least part of the crucial back-to-school buying season. The company resisted repeated attempts by analysts to pin down exactly when in September it hopes to ship iMacs and thus determine how much of the back-to-school season Apple will miss.

"We are extremely unhappy with these events," Oppenheimer said. "We believe IBM has placed enormous resources on improving the situation."

On the bright side, analysts noted that the shipments will come before the holidays, another important selling season.

The company shipped 876,000 Mac units, representing a 14% increase in CPU units from a year ago and a 17% increase from a quarter ago. PowerBook sales increased 37% year over year and iBook sales jumped 26% as more customers opted for laptops.

Education has been one area of strength for Apple, and this quarter was no different. The company posted its highest U.S. education channel revenue in three years, with CPU units in the U.S. education sector increasing 4% year over year, compared to a 14% decline in the industry.