The World's Apple's Oyster

Upcoming releases and blowout earnings keep the company hot.
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Apple

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can only get sweeter.

The company stunned Wall Street Wednesday with its

second-quarter earnings report as profits rose nearly 87%. But that's only the beginning, say analysts.

Apple is more diversified than ever, and growth in its core PC business is nearly three times the industry average.

And there's more in store: Apple's most anticipated product, iPhone, is set to launch toward the end of June; a new operating system, Leopard, in October could further drive computer sales; and the company may debut a variation on its iPod or Macintosh line in the next few months.

All told, Apple is set to enter the strongest three quarters in the company's history, and the EPS upside that the company showed in the second quarter is no fluke, says Gene Munster, senior research analyst for Piper Jaffray, which makes a market in Apple shares.

"Apple is at a pole position as it capitalizes in a shift in computer buying behavior," wrote Munster in a research report. "It is obvious consumers want computing devices that are focused on entertainment and creativity."

In what was considered a light quarter in terms of major growth drivers and product releases, Apple's Mac computer performed better than expectations, and the iPod juggernaut continued to roll. Apple shipped 1.52 million Mac computers and 10.5 million iPods during the quarter, representing 36% growth in Macs and 24% growth in iPods vs. the year-ago quarter.

"Apple is by far the hottest PC company right now," says Tim Bajarin founder of strategic consulting firm, Creative Strategies. "But they won't be just that. With the Apple TV, iPod and the iPhone, they are changing into a complete communications and entertainment company."

Shares of Apple soared $4.91, or 5.1%, to $100.26 midday Thursday. The stock is up nearly 20% since Jan. 3, and up 47% in a year.

In the second quarter, net income at Apple rose 87% to $770 million, or 87 cents a share. Revenue grew to $5.26 billion, above expectations of $5.17 billion.

The big surprise was in gross margin, which was up 35.1% from 29.8% second quarter 2006.

Though Apple clearly benefited from a fall in pricing of products such as NAND flash and memory, even in the long term, the company said it's targeting gross margin of 27% to 28% -- significantly above that of PC makers

Dell

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and

H-P

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.

"Apple is not just outpacing the industry in terms of PC growth, but it is also not getting into the commodity business" says Bajarin. "Its products are priced much higher, and they still seem to be drawing consumers into stores."

The release of

Adobe's

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Creative Suite 3 product this week is likely to fuel sales to professional users, while

Intel

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-chip based Mac laptops are likely to increase their market share, says Ezra Gottheil, an analyst with independent research firm Technology Business Research.

"Their computer business is absolutely thriving," he says.

If Apple plays it right, the release of iPhone can only drive the Apple mania higher, says Bajarin.

AT&T

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, the sole service provider for the iPhone, has already indicated that the company received 1 million queries for the iPhone, the largest ever for a new phone.

"There's no question in my mind iPhone is going to be a big hit," says Bajarin. "It redefines what a phone looks like and how it should work."