A Christmas rally in Apple's share price made it the world's third most valuable new technology company, behind Microsoft and Google, sealing one of the most dramatic corporate turnrounds ever achieved.

The stock price surge has taken the maker of iPods and Macs past industry stalwarts such as IBM and Intel and was capped this week as Apple topped even Cisco, the networking equipment maker. With a market capitalisation of $174bn, up more than $100bn from a year ago, Apple is one of Wall Street's stand-out successes.

Yet while Apple's core business of digital music players and desktop computers remains robust, analysts warned that it faces a significant product transition to mobile handsets and a new generation of home digital media devices.

"They themselves have signalled the move away from the iPod to the iPhone - when the market leader moves, the market is shifting," said Rob Enderle, an independent technology analyst. "Now they're coming up against phone companies who know this market better than they do."

For Steve Jobs, the Wall Street recognition amounts to a powerful vindication for the strategy he embarked on after returning to Apple and becoming its CEO in 1997, more than a decade after losing control of the company he co-founded. At the time of his return, Apple was struggling with a dwindling share of the desktop computer business as even its strongholds like the education market fell to the PC.

While the most visible sign of Apple's recovery has been the iPod digital music player, launched in October 2001, it was based on an approach to product development and marketing that has underpinned all of Apple's recent products and remains its most powerful competitive weapon, according to analysts. "This has been coming for almost a decade now," said Michael Gartenberg, an analyst at Jupiter Research. "It's no one thing, it's a combination of things - investment in design, marketing and innovation."

Mr Enderle said: "They really focused. One of the big problems with tech firms is that they try to do everything at once and nothing very well."

That organisational focus, which relies heavily on the CEO's personal direction of even the smallest details of things such as marketing, is being tested on two significant product initiatives that could determine whether Mr Jobs's next decade can be anything like as successful as his last.

Both the iPhone and Apple TV, a box for transmitting digital video from a computer to a TV set, have generated strong approval in technology circles in their first year but neither has made a sales breakthrough to show that it can rival the iPod as a big driver of growth.

Richard Doherty, an analyst at Envisioneering, said: "As with the iPod when it first came out, the hardware is ahead of the services." Yet both the iPod and Apple TV show promising signs of creating the next platforms on which Mr Jobs can create significant digital media businesses, he added.

The trick will be to expand the market for both products as rapidly as possible before competitors can catch up, said Mr Gartenberg.