Every day is a deal day on Wall Street these days. Sparked by last year’s feverish activity in mergers and acquisitions, which are rollicking again this year, speculation is rampant on the next deal. Much of it, of course, is hogwash, some perhaps not, but still the conjecture goes on and many impressionable investors are quick to fall prey to such talk.

The latest such rumblings center on a possible merger between Sony Corp. and Apple Computer, with the buzz spurred, I’m told, by a recent research commentary from Merrill Lynch’s Steven Milunovich, one of the Street’s leading technology analysts.

Mr. Milunovich’s commentary never suggested an Apple/Sony merger, but rather focused on the prospects of an Apple/Sony partnership, which, apparently to some investors, meant the very same thing. The analyst further heightened takeover speculation by commenting he found it intriguing that Sony President Kunitake Ando was on stage at MacWorld with Apple CEO Steve Jobs. And why, Mr. Milunovich raised the question, did Mr. Jobs say that Apple and Sony could possibly work together on computers and music?

Interestingly, while Street conjecture of an Apple/Sony merger is highly speculative and may, in fact, be far-fetched, it’s noteworthy that at least some recent buying of Apple’s Shares, including at Merrill, is said to be directly related to the possibility of such a transaction, as raised by Mr. Milunovich’s comments.

In his commentary, the analyst, who could not be reached for comment, speculated that a Sony/Apple partnership could take the following forms:

* An iTuneslike iMovies store online streaming Sony and Pixar content.

* A high-performance Apple workstation using a new Cell processor from the team of IBM, Sony, and Toshiba for video editing.

* A network-centric TV with computing for handling the next generation of entertainment feeds.

Such offerings, Mr. Milunovich believes, would put Apple at the heart of the HD and consumer revolution and provide grist for further earnings increases and stock price appreciation. As another plus, he thought Apple could introduce new products based on the IBM/Sony/Toshiba Cell processor.

Mr. Milunovich noted that Apple and Sony have previously worked together in the pre-summer market for video and with success – what with the Shake Artists having taken home the Oscar for the best visual effects for seven years running, including last year’s “Lord of the Rings: Return of the King.”

The analyst noted in his commentary that his thoughts on an Apple/Sony link were logical conjecturing and were not based on knowledge of Apple’s development plans.

Apple did not respond to several calls seeking comment and Sony declined comment. However, one top Sony official, in response to a query about a possible Sony/Apple deal from a fund manager with a sizable Sony stake, is reliably reported to have said, “It makes a lot of sense at a reasonable price and would certainly be worth exploring.”

Given his thinking, Mr. Milunovich has reiterated his buy rating and raised his 12-month price objective on Apple’s shares from $85 to $102. Supporting this hike is his earnings model, which calls for post-fiscal 2006 earnings per-share growth of 33% for five years, followed by sustained growth of 5% per year. For the current fiscal year ending September 30, he estimates that Apple – which posted sales last year of nearly $8.3 billion – will earn $2 a share this year, up from $0.75 in 2004, and record another gain to $2.50 in fiscal 2006.

The analyst also thinks there should be increasing value imbedded in the stock as Apple leverages its iPod success into new product lines.

It all sounds intriguing, but if you’re thinking of adding Apple to your portfolio, some words of caution. Its stock, currently trading at around $87, has already shot up nearly three-fold from its 52-week low of $21.88 to just a shade under its all-time high of $90.88. It also sports a huge price/earnings multiple (69 times trailing 12-month earnings and more than 43 times estimated 2005 earnings). In other words, Apple, at its current lofty price tag, could have some worms in it.