• Business Week, Thursday, July 26, 2007 12:15 PM

Just a day after investors drove Apple shares down nearly 7%, Steve Jobs' empire struck back with yet more stunning earnings, easily beating Wall Street's expectations. The electronics giant boosted sales 24% from last year to $5.41 billion; net income absolutely soared, up 73% to $818 million. Apple shares on Wednesday surged $13 in after-hours before settling again early this morning at around $145.

Yesterday's surge came on the heels of a dip on Tuesday, thanks to lower-than-expected iPhone activations reported by AT&T during its second-quarter earnings. In fact, the iPhone, easily the year's most-hyped consumer electronics device, had little to do with Apple's good news. Instead, it was the Mac's turn to shine, as computer sales rose 33%, nearly three times higher than the PC industry's average growth of 12.5%.

But it's Apple's potential for growth that really sent shares soaring yesterday. Apple is in a unique position to create products that work in concert with each other. The iPhone drives home that point: It runs on the same chips as the iPod, uses Mac's operating software and Safari Web browser, and syncs to Apple iTunes media store. The inevitable result of such integration is boosted profits.

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