Apple's ( AAPL - Get Report) outlook has grown even rosier on iPhone sales this year.

The Cupertino, Calif., tech shop has now prepared plans to nearly double its iPhone production in the fourth quarter, say people familiar with the company. The plan calls for the manufacture of 2.7 million iPhones next quarter, up from the 1.54 million originally targeted, these people say.

An Apple representative declined to comment, but the news comes a day after TheStreet.com reported that Apple was boosting production based on a projected resurgence in iPhone demand.

On Tuesday, Apple announced that Telefonica's U.K. wireless unit O2 would be an exclusive sales partner for the iPhone. The introduction of Apple's first European partner comes three weeks earlier than expected and gives the company more optimism and more time to sell phones this year, say observers.

A steep price cut earlier this month also didn't hurt sales. Apple announced last week that it had sold its millionth phone.

Apple's manufacturing plans now call for 4.8 million iPhones to be produced this year, up from the 3.6 million previously targeted, the sources close to the company say.

Apple has waffled on its production planning in the past two months as it tries to predict consumer demand in this new market for the tech giant.

Sales of the iPhone have been solid, but given the expectations built into Apple's stock, there has been much debate about whether the numbers have been strong enough.

To watch Scott Moritz and Farnoosh Torabi's video take of this column, click here .

Last week, Apple hit its official one-million-sold target earlier than predicted. Still, the milestone came 74 days after the phone's introduction, and sources say the company was prepared to sell a million phones on the iPhone's first weekend back in June.

After an early surge of interest in the phone started to wane and inventory levels began piling up, Apple killed the unpopular 4-gigabyte version of the iPhone and cut the price of the 8-gigabyte phone by 33%.

The iPhone is likely to make a very big splash in Europe initially as gadget fans finally get a chance to own the latest tech marvel. But observers say the iPhone may quickly lose its luster since it operates on so-called 2.5G or EDGE technology, a slower technology than the more widely used 3G networks available throughout Europe.

As reported here Monday, Apple won't have a 3G version of the phone available until early next year.

Apple shares jumped $2.90, or 2%, to $141.31 amid a broad-based market rally Tuesday.