UPDATE 1-RESEARCH ALERT-Needham starts Apple at buy

(Recasts, adds details, share movement)

Jan 3 (Reuters) - Needham & Co initiated Apple Inc (AAPL.O) with a "buy" rating and a $235 price target, and said with the surging sales of the Macintosh and the iPhone, Apple is poised to begin the second chapter of its growth story.

Apple shares rose more than 1 percent but pared early gains and were up 16 cents at $195.0 in late morning trade on the Nasdaq amid volatile trading.

"The iPod is yesterday's news. Now the Apple story is all about the Mac and the iPhone," Needham analyst Charlie Wolf wrote in a note to clients.

Wolf said he would be a strong buyer of the stock at $180.

Macintosh's share of the worldwide personal computer market is likely to exceed 7 percent in the next decade, up from the current 3 percent, and the company is expected to post 2008 earnings of $5.25 per share, Wolf said.

For 2009, Wolf expects Apple to post earnings of $6.65 per share.

The analyst was also bullish on the iPhone.

"The iPhone has redefined the smart phone market; and with constant innovation it should remain the gold standard of the industry indefinitely," Wolf wrote.

Wolf expects the iPhone to capture 15 percent of its target market, consisting of carriers who generate high average revenue per unit and view the iPhone as their ticket to subscriber share growth.

With over 50 million annual sales run rate, the iPod remains a crucial driver for Mac sales, in combination with the Mac's newfound ability to run Windows applications, Wolf wrote. (Reporting by Anant Vijay Kala in Bangalore; Editing by Gopakumar Warrier)