“If you’re looking for a well known tech stock that’s been able to stand out this year, the pickings are slim. There’s Apple, which has surged 32 percent, and then there’s, uh, well, Apple,” Paul R. La Monica writes for CNN/Money. “Investors certainly need to proceed with caution but several Apple fans think that Wall Street might actually be underestimating the prospect for bigger gains ahead. And it has nothing to do with the iPod.”

“Apple’s long-awaited update of its operating system, dubbed Tiger, should be out soon. The company has only said that it expects to release Tiger in the first half of 2005 but there has been increasing chatter among Mac devotees that it could hit the market as soon as early April. Apple was not immediately available for comment about this speculation,” La Monica writes. “Why is that important? For one, even though software sales only accounted for about 6 percent of revenues in the most recent quarter, this segment is more profitable than Apple’s hardware businesses, said Shannon Cross, an analyst with Cross Research-Soleil, an independent research firm.”

“More important, however, could be the impact that Tiger will have on sales of Mac computers. Shaw Wu, an analyst with American Technology Research said that Tiger will spur a wave of upgrades,” La Monica writes. “Wu said that the operating system’s new features, such as a desktop search function called Spotlight and the latest version of the QuickTime media playing software, could attract the interest of both the Mac faithful as well as PC-owning iPod users, a much discussed phenomenon dubbed the iPod ‘halo effect.’”

“‘Tiger could drive a new hardware cycle and that’s pretty significant,’ Wu said, pointing out that despite the dramatic growth of the iPod, sales of Macs still make up nearly half of Apple’s total revenues. And Macs are more profitable than iPods, said the analyst,” La Monica writes. “So even though consensus earnings estimates for fiscal 2005, ending in September, have surged 43 percent in the past three months, projections could still be too low because analysts aren’t yet factoring in Tiger.”

Full article here.