By Kasper Jade

Published: 08:00 AM EST

Noting that Apple and Sony have collaborated and competed for years, Merrill Lynch said today that the next step between the companies could lead to a full-fledged partnership.

In a research note released to clients on Tuesday, Merrill Lynch analyst Steven Milunovich said his firm found it intriguing that Sony President Kunitake Ando was on stage at Macworld with Apple CEO Steve Jobs, speculating on a potential partnership between the two tech companies.

"Why did Steve Jobs say that Apple and Sony could possibly work together on computers and music? We think Apple could introduce products based on the IBM/Sony/Toshiba Cell processor," the analyst said.

Merrill Lynch believes that an Apple/Sony partnership could form around an iTunes-like iMovies store online using the H.264 codec and streaming Sony and Pixar content; a high-performance Apple workstation using Cell for video editing; or a network-centric TV with computing for handling the next-generation of entertainment feeds.

"Our thoughts represent logical conjecture and are not based on knowledge of Apple’s development plans," the firm cautioned. "Such offerings, however, would put Apple at the heart of the HD and digital consumer revolution and provide grist for further earnings increases and stock price appreciation."

Merrill Lynch reiterated its 'Buy' rating on Apple with a new price objective of $102 per share, which is supported by a two-stage discounted earnings model that assumes post-fiscal year 2006 earnings per share growth of 33% for five years followed by sustained EPS growth of 5% per year.

"Alternatively, there should be an increasing real option value embedded in the stock as Apple leverages iPod success into new product lines," the firm said.

Yesterday, UBS also raised its 12-month price target on Apple, citing the upside of Apple's software business while Piper Jaffray maintained an "outperform" rating on Apple.