So why did the number of pay-TV subscribers increase in just the last three months?

They didn’t grow much — a modest 422,000 subscribers, for a very modest 0.2 percent growth rate — but they still grew.

Those numbers come from Bernstein Research’s Craig Moffett, a longtime skeptic that “cord-cutting” is a real and pervasive problem for the cable guys (at least for now). It’s not the first time he’s shown evidence of barely-there growth for cable TV — last quarter, for instance, he gathered similar numbers.

But his numbers do conflict with other reports that show evidence of cord-cutting. Earlier this month, for instance, Nielsen said that pay-TV subscribers had shrunk by 1.5 million in 2011.

The easiest way to reconcile Moffett’s numbers with other reports is to note that almost all of the analyst’s data comes from the publicly traded pay-TV providers themselves — like Comcast, Time Warner Cable and Verizon — in the reports they offer up to shareholders. Most of the other stuff you’re seeing comes from polls and surveys.

Here’s his data. You’ll need to click the image to enlarge it:

But what about all of you folks who tell me, over and over, that you’ve ditched cable for some kind of combo of Netflix, Hulu, Apple TV, or even pirate streams? Surely I’ll hear from some of you again, just as soon as I publish this.

And I believe you folks, too. I can certainly imagine many scenarios where tech-savvy people — and even not-that-tech-savvy people — are able to satisfy their video urges without paying for a TV subscription. But my operating theory, for now, remains my vegan analogy: “They’re real, and they’re out there. They’re particularly notable in certain places like New York, the Bay Area and college towns. And they over-index at certain Web gathering places, like this one. But McDonald’s sales are still chugging along.”

But people are still watching a whole lot of TV — perhaps as much as ever. So the more nuanced answer is that some people are swapping out the Web for TV, some of the time. And other times Web video consumption may end up leading to more TV-watching.

Here’s some evidence supporting that idea: New data from Bernstein Research that tracks TV viewing habits for Netflix streaming subscribers. It shows a drop in kids’ TV viewing — but an increase for networks like AMC and FX. Presumably that’s because Netflix users are discovering old episodes of shows like “Mad Men” and “Sons of Anarchy” on Netflix, which is prompting them to watch new episodes of those shows on cable.

This chart shows a dropoff for programming on kids’ networks like Disney and Nickelodeon:

And this chart shows spikes for AMC whenever the network shows new episodes of shows that have old episodes on Netflix:

Bernstein put its research together using data from TiVo users. So on the one hand the numbers are pinpoint accurate, since they’re tracking actual TV usage. And, on the other hand, it may not be representative of the entire country.

Still, it makes intuitive sense, and certainly syncs up with the way the Web gets used in our house: Our kids are unaware you can do anything with an iPad other than watch “Backyardigans” and “Dinosaur Train.”

Meanwhile, I just plowed through the first four seasons of “Breaking Bad” on Netflix (and iTunes) last month — and am going out of my mind waiting for the fifth season to start on AMC this summer. Let’s cook!

But that hasn’t happened yet. And it’s possible that even as Web video grows, TV will continue to do just fine.

That’s the thesis of Bernstein analyst Todd Juenger, who made his case to investors earlier this week. Two slides from his presentation sum it up well.

First, he notes that even though eyeballs have moved away from broadcast TV, ad dollars have not (click to enlarge):

Even more important: Though the Web ad business is growing, TV continues to grow, too. And while other old media industries have shrunk, their losses haven’t turned into equivalent gains for the Web (click to enlarge).

But what about consumer spending? After all, Netflix is streaming more than 2 billion of hours of video every three months. That has to cut into TV, right?

Not really, says Juenger, noting that overall TV viewing is still up. Instead, he says, Netflix, iTunes, Amazon et al are eviscerating the DVD business. Important distinction.

And yes, all of this could eventually change, particularly if the digital guys figure out how to break up big cable’s lock on programming. But as we keep pointing out, that’s a very strong lock. It’s not going away anytime soon.

Latest example: It appears that the pay-TV guys actually increased their subscriber totals last quarter. Not by much — something like 240,000 new accounts, which translates into a growth rate of 0.2 percent — but an increase is an increase.

Chart via Bernstein Research (click to enlarge):

So what do you want to make of that? Not much, probably — just like the subscriber declines we’ve seen in previous quarters haven’t meant that much. If we saw a sustained move in one direction or another, that would be meaningful, but for now it’s more or less a flat line.

Google has asked federal regulators for permission to sell pay TV in Kansas City, where it has been working on a broadband/fiber buildout, and the WSJ thinks it could launch in a couple months.

It would be awesome if Google could use this as an opportunity to break up the cable bundle, and let people buy individual channels instead of big expensive blocks of programming they mostly ignore.

But that’s very unlikely to happen, because the cable programmers love the bundle, and don’t have any incentive to break it up (see: Viacom’s Philippe Dauman and ESPN’s John Skipper last month at Dive Into Media). If Google wants cable TV programming, it’s going to have to play by cable TV’s rules.

So what can Google offer that will make someone switch from Time Warner Cable, which dominates the pay TV business in Kansas City?

Very high-speed Internet access, for starters. And perhaps Larry Page will figure it’s worth his while to offer the service at an extremely low margin, because the whole project is a very expensive test, anyway.

Beyond that, here are some guesses/predictions from Bernstein Research analysts Carlos Kirjner and Craig Moffett, who have a pretty good handle on this stuff. They’re the ones who predicted on Tuesday that Google would file for cable licenses “very soon.” This prognostication comes from that same note:

DVR in the Cloud: “We would expect Google to store (and make available to consumers) the content across all or most TV channels it will provide, making available to users not just the live stream but also past content going back several days or weeks, if not longer. With the addition of good search and discovery and user interface capabilities, this would make DVRs obsolete.”

TV Where You Want It: “We would expect Google to offer access to something like ‘Cloud TV,’ described above, including the live TV stream, across multiple devices, such as computers, tablets and handsets.”

A Programming Guide That Doesn’t Suck: “It is not very hard to imagine a much better user interface than the one currently provided by the MSOs and satellite TV providers,” presumably along the lines of what they’ve been showing off with the revamped Google TV.

Again, the big caveat here is that none of this happens unless the cable programmers play along. And while none of the stuff described above seems truly mind-blowing, some of it — like live mobile streaming — will stil require programmers to give Google capabilities they haven’t given to heavyweights like Comcast and Time Warner Cable.

And even though the cable programmers often tangle with the cable providers, they’re at least comfortable with them in general. Google, though, still scares the bejesus out of lots of traditional media companies, so I’m not sure how many of them will play along.

One pretty good bet: Google’s foray into cable TV won’t include anything from Viacom, since the cable giant is still suing Google in the YouTube copyright case. So no Snooki for Kansas City.

[Shutterstock/Dwight Smith]

Here’s a helpful reminder, via a Bernstein research note out today. By 2016, analyst Carlos Kirjner predicts, the majority of Web search queries will come from mobile devices.

One interesting caveat to that projection: It doesn’t include searches from tablets. I gather this is because Kirjner is trying to distinguish between searches conducted via wireless networks and those made using broadband connections, via Wi-Fi, although I’m not quite sure why that matters.

But if you added tablet searches, you’d reach the tipping point that much earlier. And it will get there much sooner in the U.S., anyway, because smartphone penetration is much higher here than other parts of the world.

Given that Apple’s iOS devices use Google search now — last fall, Google said that two-thirds of its search traffic comes from iOS — all mobile growth is good for Google.

But at some point, Kirjner suggests, Apple may decide to jettison Google for a competitor like, say, Microsoft. And that could cause real problems for Larry Page and company. But those problems would be much, much worse if Google hadn’t created an iPhone competitor in the first place.

Now that new HP CEO Meg Whitman has decided to keep the PC business rather than spin it out as her predecessor Léo Apotheker had proposed, HP appears to be heading back, however slowly, toward the kind of stability for which it had long been known.

But can it still perform? Bernstein Research analyst Toni Sacconaghi took the opportunity to examine the company’s business units and finds that, yes, the prospects for growth aren’t unreasonable. The current portfolio of HP’s business, he estimates, is likely to grow its sales organically by a combined 2.5 percent on an annual basis going forward. Add to that additional growth from the planned shifts toward higher-margin IT service, networking and software businesses, and the picture gets brighter, Sacconaghi writes in a note to clients issued yesterday. HP, he argues, should be able to grow its per-share earnings by 9 to 10 percent annually over the next three to five years.

Part of his assumption is that HP uses about $4 billion of its $8-$10 billion in annual free cash flow for share buybacks, which will help goose earnings on a per-share basis by reducing the number of outstanding shares; plus another $3 billion annually for acquisitions, buying companies at reasonable multiples of about five times revenue.

So how does each sector of HP’s business look?

PCs: Sacconaghi reckons that the global market for PCs will grow about 6 percent a year on a unit basis, down from historical averages of about 10 percent, and that it will grow on a revenue basis by about 2 percent a year through 2015. As the biggest supplier of PCs in the world, HP will, at the very least, hold its market share. While PCs are HP’s largest business, accounting for $40 billion in its last fiscal year and about one-third of its overall sales, the unit generates only 13 percent of operating profits. And, yes, while tablets are a threat, Sacconaghi sees no reason that PCs and tablets can’t grow together. The increasing need for an Internet connection everywhere and the increasing amount that consumers are willing to spend on technology, coupled with price declines over time, mean that consumers will be willing to spend more on notebooks and tablets.

Printers: As with PCs, HP is the market leader in printers, and as that market grows its revenue by about 3 percent a year, HP will probably hold on to its share of the market. Tablets may have a long-term impact on printing behavior, but Sacconaghi argues that consumer behavior tends to change slowly. A decade ago, he says, investors worried that email and the paperless office would kill printing. “Despite these ostensible headwinds, HP and Lexmark collectively grew their supplies revenues by 7 percent per year between 2000 and 2010, driving low to mid single digit growth for the printer industry.” HP’s printer division accounted for $25.8 billion in revenues in the last fiscal year, or about 20 percent overall, and because of its 17 percent operating margin, delivered 29 percent of the company’s profits. It’s a classic razor blade business, as HP loses between 20 and 25 percent on the printing hardware, only to make it up on supplies that command a 60 percent margin. The presence of tablets could actually boost printing, and thus increase the sale of those supplies down the road. Overall, the printer business should continue to grow at about 3 percent a year, Sacconaghi says.

Enterprise, servers, storage and networking: Sacconaghi expects HP to grow revenues in the ESSN unit by about 2 percent a year, slightly below the industry growth rate of 3 percent. He bases this on the expectation that HP can grow its networking business, hold its market share in the Intel-based servers, and lose share in its enterprise storage business to players like EMC and NetApp, and also lose share in the Unix storage business because of Oracle’s decision not to support the Itanium chip.

Services: This unit should grow by about 2 percent annually, slower than the market, which is growing at 4 percent. “We believe that outsourcing is a maturing business, and that EDS, which HP purchased in 2008, is and was an underperforming asset,” Sacconaghi writes. “As a result, we forecast HP’s outsourcing revenues to remain flat.” Expect it to grow in line with the enterprise hardware business, and along with the consulting business.

Software: The market research firm IDC expects the end markets for HP’s software to grow by 7 percent a year. If you assume that HP makes more software acquisitions, which Sacconaghi does, then you can reasonably predict its software revenue will grow by 10 percent a year.

So what’s the risk to all this? Leadership. “Ultimately, our projections for HP are predicated on the company choosing a disciplined financial approach to running the company that includes modest revenue growth, small and leverageable acquisitions, a strong operations focus, and high returns of capital to shareholders,” Sacconaghi writes. The last two CEOs who tried to “transform” HP — Carly Fiorina and Léo Apotheker — failed.

HP’s isn’t “broken,” but in fact offers a favorable risk for patient investors, Sacconaghi says. He rates HP shares as an “outperform,” with a price target of $37.

IBM, he says, should meet expectations for the quarter by delivering per-share earnings of $3.31, slightly better than the consensus estimate of $3.21. On top of that, he expects IBM to raise its guidance for earnings on the year to $13.35 per share or higher. Sacconaghi says IBM may earn as much as $13.60 a share this year, depending on how much it ultimately saves from workforce reductions and a lower tax rate. He says that IBM has beat its consensus in each of its last 15 quarters and raised annual earnings guidance in nine of its last 11 quarters.

All good, right? Sure, but how long can IBM keep this sort of thing going? Certainly not forever, especially in a tough global economy. Revenue growth this year will be difficult to compare to last year, Sacconaghi writes, especially in light of a stronger U.S. dollar, a slowing business cycle in hardware upgrades and a slowdown in services growth over the last 18 months. As such, his estimates for revenue growth are below those of the Street consensus: Where the Street expects IBM to report sales of nearly $112 billion in fiscal 2012, Sacconaghi expects $109.3 billion.

“IBM has benefited from a favorable currency environment, which has boosted the company’s headline revenue growth number, which is likely to reverse and pressure IBM’s reported revenues in the first half of 2012 at current spot rates,” he writes. “While we don’t expect this to lead to earnings misses versus the consensus given that IBM hedges, we believe that revenue estimates need to be revised downwards from current levels.”

In a scathing assessment from an analyst who’s rarely so negative on HP, Sacconaghi argues that investors are universally opposed to the Autonomy deal based primarily on the high price that HP is paying, which works out to 11 times sales, versus the option of using HP’s precious cash reserves elsewhere.

Unhappy HP investors have little recourse, Sacconaghi writes, and Autonomy shareholders seem especially eager to get the deal done. As the Financial Times reported yesterday, the fact that 42 percent of shareholders signed on to the deal so early in the tender process gives an indication of their opinion that the price HP is paying is a favorable one that’s not likely to be met by another bidder. It’s also an unusually high response rate this early in the process.

And there’s little if any chance that HP shareholders could stop the deal now even if a majority of them wanted to, he says. By paying cash for Autonomy, HP doesn’t need shareholder approval, and according to the terms of the deal, HP has to follow through absent a “material adverse change,” such as new negative information about Autonomy (like a major legal problem or something on that scale).

There’s certainly plenty to dislike about the deal. As Bloomberg News reported, HP sold $4.6 billion worth of bonds in order to help pay for the deal, though with yields on corporate bonds near record lows the timing to take on debt could be worse.

But even with corporate bond rates at relatively low levels, HP is paying more to finance its debt than its peers. Compare, for example the five-year fixed-rate bonds that HP issued yesterday with a coupon rate of 3 percent. In July, IBM issued five-year fixed-rate bonds at a coupon rate of 1.95 percent. I’m not exactly an expert on corporate bonds, but the way I understand it is like this: If you think of bonds like a credit card, HP is paying more than 1.5 times the interest on its debt than IBM is. That block of five-year bonds represents $1.3 billion worth of the $4.6 billion offering, making it the biggest portion of the debt offering disclosed in an HP regulatory filing yesterday.

Separately, two securities law firms said today they have launched investigations of HP and its board of directors. The Briscoe Law Firm, headed by former Securities and Exchange Commission attorney William Briscoe, and Powers Taylor LLP announced they’re investigating what they call “potentially misleading statements” by HP between Nov. 22 and and August 18. During that period, the firms allege that HP executives and directors made false statements or failed to disclose material information about the TouchPad tablet and the webOS operating system running on it. HP, they say, “lacked a reasonable basis for their positive statements,” and thus caused HP shares to trade at artificially high prices, peaking at $48.99 on Feb. 16. HP shares were nowhere near that high today, closing at $22.93, up 23 cents.

Fifteen years after their initial Comcast investment, Microsoft’s vision of a Windows-based gateway to the television still hasn’t materialized. Now it is Google’s turn to storm the fortress. And, like Microsoft before them, they have decided to do it from the inside.

Bernstein Research’s Craig Moffett, in a note (reg. required) savaging the notion that buying Motorola will allow Google to disrupt the TV business. Moffett does see a role for Google in helping cable operators measure and target TV advertising, though. For a less pithy take, read AllThingsD.

Moffett expects to see the cable guys like Comcast and Time Warner Cable lose a total of more than 300,000 subscribers, while the satellite TV companies may eke out about 70,000 new customers.

Those results could be balanced out by growth from the TV services offered by AT&T and Verizon, who have added 412,000 new subscribers. And overall pay TV numbers could end up positive for the quarter, but Moffett says that’s no sure bet at all: “Our conviction in a positive aggregate number is all but zero.”

Moffett is quite skeptical that pay-TV customers are actually cutting the cord and satisfying their TV needs with Netflix, Hulu, etc. For quite some time he’s been arguing that pay TV growth is a function of new household formations — and since there’s none of the latter, there can’t be any of the former.

Again, note that Reed Hastings and the rest of the Netflixers have been diligently announcing that they don’t believe there’s cord-cutting either — and if there is, they’re certainly not contributing it. But there are a lot of people who will see the next few weeks’ numbers as evidence that cord-cutting is, indeed, for real.

Apple is succeeding in the category because it reinvented it. Now anyone that hopes to compete in it must do so by peddling products similar to it. And because of that, Apple will dominate the tablet category in much the same way it dominated the portable music player category.

So there is a tablet market, but it’s been subsumed by the iPad market, just as the MP3 player market was engulfed by the market for the iPod.

Consider this observation from a new Bernstein Research survey: “We find that consumers are not interested in form factors that deviate from the benchmark set by Apple. Few consumers, less than 15 percent prefer the 7″ screen size versus the 10″ screen of the iPad. Over 50 percent of respondents are firmly in favor of the 10″ screen, which leads us to conclude that the 7″ tablet models recently launched, like the BlackBerry PlayBook, are destined for failure. Consumer’s preference for the 10″ form factor explains the lukewarm response to Samsung’s 7″ Galaxy tablet and the rapid introduction of larger screen models in that series.”

In other words, success in the tablet market may well be dependent on how similar a manufacturer’s offering is to the iPad. Which is quite a challenge given the formidable combination of hardware, software and app ecosystem that the iPad represents — not to mention the sheer power of its brand.

Said Bernstein, “Fifty percent of respondents preferred Apple over all other brands. There is a remarkable degree of unanimity in consumer’s preferences for the iPad over competing products. … In the US, we find that Apple has more than double the brand appeal of BlackBerry, HTC, Motorola, Nokia and Samsung combined. These manufacturers have a very high level of brand equity and visibility in adjacent categories. It is striking that they hold so little appeal for consumers in tablets.”

No surprise then that Bernstein sees the tablet market playing out in two ways, each with Apple in the catbird seat.

UPDATE: Some additional perspective on this from Instapaper creator Marco Arment (via Daring Fireball)

Analysts at Bernstein Research are offering a different take. They argue that passage of the deal may well lead to less competition and higher prices. However, they say that’s not such a bad thing.

The firm notes that American wireless firms have lower profit margins than their European counterparts and that consumers here consume twice to three times as much data, but pay only half or a third as much per megabyte for that data.

“Given the economies of scale of wireless, the constraints of CEOs and historic decisions with regard to spectrum, only further consolidation of the U.S. market is likely to deliver better infrastructure and lower prices,” Bernstein said in a report. “In short, more wireless competition may (though there is no guarantee of this) deliver lower prices near term, but it will almost certainly deliver lower quality infrastructure.”

The surest path to higher quality, the firm reasons, is consolidation.

“If U.S. regulators want to redress the lamentably lousy wireless service Americans receive, one of two things must happen: U.S. operators must be able to reduce their cost to serve (probably through consolidation) or Americans must pay more per unit consumed,” Bernstein’s analysts say in the report. “If the ‘Just Say No crowd’ gets their way, they may well end up with cheaper telephony near term (although this is far from certain), but they will certainly receive a poorer wireless service.”

It’s an interesting argument, though probably not the one we will hear from AT&T as it lobbies for government approval of the deal. Both the Federal Communications Commission and Department of Justice have to sign off on the transaction, while several state attorneys general have said they are looking into the matter. Sprint has also vowed to fight the deal.

For one thing, January’s restructuring of the board of directors has left a bad taste in the mouth of a pair of shareholder advisory firms, who have publicly called upon HP investors to vote against the re-election of as many as three sitting directors and against some say-on-pay proposals.

Sources familiar with the situation confirmed to me that after today’s event, HP’s investor relations team plans to mount what’s being described as a “road show” to counter the recommendations to vote against management made by Institutional Shareholders Services and Glass Lewis among retail investors. Exactly who is involved and whom they plan to visit couldn’t be determined. HP had no comment about it.

At least part of the road show’s mission will be to drive home the highlights of the strategy that Apotheker lays out in his keynote today. But there is some nagging concern that a sufficient number of shareholders, put off by repeated instances of board room drama over the last decade — Carly Fiorina’s ouster in 2002, the pre-texting scandal in 2006, and last year’s departure former CEO Mark Hurd — may vote against the three directors standing for another term: Lawrence Babbio, Sari Baldauf, and Ken Thompson.

That enough investors would vote against management to make a difference may seem unlikely at first until you consider the number of shareholder lawsuits stemming from the Hurd affair that are currently pending both in federal courts and in the Delaware Chancery Court. The fear of an embarrassing defeat for HP and its new board at the annual meeting on March 23 isn’t an unreasonable one.

Then there are the larger questions. As Bernstein analyst Toni Sacconaghi pointed out in a recent note to clients, HP’s stock has underperformed the S&P 500 since Hurd’s departure, and the lag has been driven mostly by uncertainty among investors about its strategy and about Apotheker himself. Its disappointing results in the first quarter didn’t help matters.

There are numerous questions around HP’s hardware strategy, particularly around the PC business. While it has promised to put the WebOS platform it acquired last year when it absorbed Palm into tablets and into every PC it ships, HP is still seen as far behind Apple on the tablet front. We all know why that is.

But the questions go deeper than that. Apotheker, a former CEO of the business software giant SAP, last week sent a strong signal in an interview with Bloomberg News that he plans to acquire some software companies.

What kind of acquisitions? He’s ruled out SAP, for one thing. And in a meeting with Bernstein’s Sacconaghi last month, he said any acquisitions would not be so large as to “keep investors awake at night,” meaning, Sacconaghi suggests, that they would probably not exceed $5 billion. Aside from buying software companies, he’s also signaled that the days of cuts–the hallmark of Mark Hurd’s tenure–are over. Cutting costs is out, investing is in.

But then there’s the larger issue about whether or not Apotheker can steer Hewlett-Packard, the storied Silicon Valley icon, on a course that restores its former glory. The question marks around him on this score are considerable because the task is just so huge. HP is a sprawling $126 billion juggernaut meaning change comes slowly, often in barely perceptible steps that leave impatient investors wondering what’s taking so long.

At the outset, the Apotheker’s strategy appears to be summed up pretty simply: Bring the market-leading position in hardware to bear and combine its offerings with a newly ascendant software business, which together will feed into an IT services business that aims to compete with IBM. It’s not going to be easy and the most important important thing that Apotheker has to do is inspire both analysts and shareholders alike that he’s the man to get the job done. As yet both are understandably skeptical mainly because Apotheker is an unknown quantity.

When Apotheker’s predecessor Mark Hurd took over at HP in 2005, there was very little doubt about what kind of CEO he would be: A relentless, unsentimental cost-cutter, and this much was clear before he was even officially on the job.

And while Apotheker has pointed tentatively in the direction he’d like to take HP, there are still more questions about him than there is certainty. His most important job will be to convince all concerned that he’s the man who can steer HP back on a course to greatness.

PREVIOUSLY:

• Another Advisory Firm Singles Out HP Director Babbio
• Shareholder Group Contends HP’s New Board Is Too Chummy
• “Peripatetic Polyglot” Léo Apotheker Wants to Save HP’s Soul by Buying Software Companies
• HP Earnings Today: Will Léo Apotheker Speak?
• Michael Dell Thinks HP Paid “Way Too Much” for 3Par
• Judge: HP Can Re-Investigate Hurd Departure
• Is This the HP Board That Will Allow Us to Stop Thinking About HP’s Board?
• Meg Whitman, Patricia Russo Among Five Joining HP Board
• HP Plans Another Probe Into Hurd Departure
• Léo Makes It Official: SAP’s Bill Wohl Joins Hewlett-Packard
• Want Enterprise Growth, HP? Think Services
• Mark Hurd Really Wants to Keep the Jodie Fisher Letter Private
• Mark Hurd Doesn’t Want You to Read the Letter That Cost Him His Job
• HP Networking Head: “People Are Tired of Paying for Cisco”
• HP Names Ex-SAP Chief Apotheker as CEO

Nokia spends about five times as much on mobile R&D as Apple. In fact, Nokia has nearly as many engineers working on its smartphone software platforms as Apple does for its entire product line. Says Dediu, “Symbian alone may cost twice as much to develop than the iPhone (including the hardware).”

A shocking metric, if correct. And a pretty dismal return on investment–unless there’s another version of Symbian in the pipeline that will best iOS.

PREVIOUSLY:

• Not Seeing Much Return on That Massive R&D Spend, Are You, Nokia?
• Nokia: Big and Slow

Hamstrung by institutional inefficiencies and the complexity of its legacy platforms, Nokia is spending a lot of money to gain traction in markets in which its handset lineup is clearly uncompetitive, and with little success. Instead it’s suffering steeper share losses at the high end of the market and margin erosion across its entire portfolio. And it’s spending about 4 times as much on R&D as Apple, which has recast the smartphone space from its own vision.

As Bernstein analyst Pierre Ferragu observes, Nokia’s business appears to be melting like an ice cube. “At this stage, we believe that even a good success of Symbian^3 would barely stabilize the business,” he says. “A real comeback will need much more effort … and a lot more time, unlikely to happen in the next couple of years, in our view.”

So what can be done? Though some observers argue Nokia should scrap Symbian, Ferragu says that’s impossible given the number of assets the company has that depend on it. The company can’t really make a big move to Android, either. That would undermine its current service strategy and alienate partners, European carriers looking for an alternative to iOS and Android, and Nokia’s developer community.

What it should do, he says, is redouble its efforts on MeeGo and make it a viable competitor to Android and iOS in markets like North America, while continuing to push Symbian to the rest of the world. And then it should integrate the two through QT, its cross-platform application and UI framework. Says Ferragu, “By migrating all UI developments of Symbian on QT, the company can generate significant cost savings, progressively drive the platform towards a single UI between MeeGo and Symbian and a single development environment for applications.”

What’s left to do after that?

Hope for the best.

As CEO Stephen Elop said during the company’s last earnings call, “Nokia must compete on ecosystem to ecosystem basis. In addition to great device experiences we must build, catalyse or join a competitive ecosystem. And the ecosystem approach we select must be comprehensive and cover a wide range of utilities and services that customers expect today and anticipate in the future.”

“Whatever the strategy is we outline on Feb. 11, we very clearly ensuring that it will give us the opportunity to reopen markets such as the U.S. and some others, where we have not recently been present.”

Not only will the Verizon iPhone likely draw new wireless subscribers away from Sprint (and T-Mobile, for that matter), it will boost its churn rate as well. Compounding that effect will be AT&T’s reaction to its loss of iPhone exclusivity and its efforts to hold on to subscribers it fears might defect to Verizon. As Bernstein Research analyst Craig Moffet noted today, AT&T’s not going to stand idly by as Verizon woos away its customers.

“Already in 2Q and 3Q 2010, AT&T partially pre-empted Verizon’s iPhone introduction by upgrading a massive number of its iPhone subscribers, so as to lock them into new 2-year contracts,” Moffet observed in a note to clients today. “This amounts to a massive re-subsidization of existing subscribers, sacrificing margins for subscriber retention. When the actual iPhone introduction at Verizon occurs, AT&T is likely to react further, with more aggressive phone subsidies, incremental advertising, the introduction of other compelling devices, and possibly with price cuts.”

And when it does, Sprint’s share of industry gross additions will inevitably decline.

There’s a wild card here, though: The special event that Sprint has planned for February. If what the company shows off there truly is the industry first it’s promising (and let’s be clear: It’s almost certainly not going to be another CDMA iPhone), perhaps it will indeed make the “impossible possible”–helping Sprint limit subscriber churn in the face of the Verizon iPhone.

“We see 3 immediate effects of expansion of the distribution of the iPhone at Verizon,” Bernstein Research analyst Pierre Ferragu said in a note to clients today. “A) Migration of existing iPhone users from AT&T to Verizon; B) Some migration of Android users at Verizon to the new iPhone; C) More support to Android from AT&T, as a consequence of the loss of the iPhone exclusivity.”

Worst-case scenario, Ferragu figures Motorola, HTC and RIM will lose 10-30 percent of their business to Verizon. But that loss will likely be offset by new gains at AT&T–at least for Android vendors like HTC and Motorola, for whom Ferragu predicts a 0-30 percent increase in shipments at the carrier. Says Ferragu, “If Verizon starts selling the iPhone, we believe there will not be a visible impact for HTC and a limited one for RIM. If there is a medium term impact on Motorola, we believe that the shortfall will be easily made up in the full year.”

Apple (AAPL) sold three million iPads in the first 80 days following its April release. Since then, sales have ramped up to about 4.5 million units per quarter, according to Bernstein Research. That gives the device a sales rate that far eclipses that of the previous fastest-selling non-phone CE device–the DVD player, which sold just 350,000 units in its first year.

If the iPad is able to sustain that rate of sale–and there doesn’t seem to be any reason to think it won’t–it’s on track to becoming the fourth-largest consumer electronics category by the end of next year, right below TVs, smartphones and laptops. And unlike those devices, the iPad is a CE device category of one.

“The iPad did not seem destined to be a runaway product success straight out of the box,” Bernstein analyst Colin McGranahan wrote in an investors note. “By any account, the iPad is a runaway success of unprecedented proportion….In an environment where consumers are facing the reality that consumption dollars are more limited than ever, they are making distinct choices. And they are choosing the iPad.”

And they’ve got the numbers to back it up. According to the two analysts, Android’s device shipment run rate has more than tripled in the past seven months, from 60,000 to 200,000 per day. That means there will be some 53 million Android devices shipped this year. “Even under the conservative assumption that Android’s run rate remains constant for the rest of the year, Android alone will contribute 25 percent points of y/y growth to the entire smartphone market,” Sacconaghi and Ferragu contend (click image to enlarge).

Meanwhile, Apple (AAPL) is shipping “iOS devices” (a grouping that includes the iPhone, iPod touch and iPad) at a run rate of 230,000.

That means the smartphone market is going to see a head-to-head battle for market share between Apple and Google (GOOG) sooner rather than later. Sacconaghi and Ferragu’s advice to Apple if it wants to win that battle: End carrier exclusivity in Germany and the U.S. and add new iPhone carriers in countries that currently have just one, like Japan and South Korea.

“[The iPhone’s] distribution vacuum, coupled with weak competitive offerings from other smartphone manufacturers, has made Android a strong alternative platform,” the analysts argue. “The key to arresting Android’s momentum then will be for Apple to broaden distribution. We believe that a CDMA iPhone is being developed by Apple and are modeling it to be distributed at Verizon (VZ) in mid 2011–various data points suggest it could actually be sooner, likely in early 2011. We believe Apple needs to strike distribution deals with these carriers, even if it has to sacrifice some pricing power since doing so would (1) still be accretive to company gross margins; and (2) take away the strong foothold it currently provides to a potentially formidable competitor.”

Assuming Apple does that and this all plays out as Sacconaghi and Ferragu foresee, what’s going to happen to RIM (RIMM) and Nokia (NOK)? Nothing good. “While Android and Apple are growing above market rates, other platforms are languishing in terms of developer support, and our recent proprietary research points to limited excitement among consumers,” the two write. “Given the continued momentum for Android and Apple, a scenario in which Nokia’s and RIM’s platforms get increasingly marginalized becomes a possibility.”

[Image credit: Bernstein Research]

“The market for corporate mobile e-mail is highly penetrated and saturated outside of SMEs (Small and Medium Enterprises),” Ferragu wrote in a note to clients. “Growth in the number of companies using mobile e-mail will be limited to the SME market, in which RIM (RIMM) is likely to suffer the most from competition. If there is still some growth in the number of users at companies already using mobile email, it is limited and we suspect it will turn into negligible value growth as it will go along with significant ASP decline.”

A significant threat, and not the only one RIM is facing these days. With the iPhone and a growing procession of Android handsets making inroads into enterprise, the BlackBerry’s footing in what was once its stronghold is being eroded.

“… Despite the company’s overall dominance of the segment…74 percent of companies with mobile e-mail have already adopted alternative platforms, including the iPhone and Android,” Ferragu explains. This phenomenon is very new: Almost all these companies “opened-up” their systems in the last two years, half of them in the last 12 months. “We expect these companies to progressively ramp up the installed base of non-Blackberry solutions and therefore expect increased pressure on RIM’s performance.”

If that’s truly the case, what can RIM do to dig in and hold its position?

Not much, says Ferragu. Ultimately, people want to use their personal smartphone at work and their first choice isn’t always the BlackBerry.

“Enterprise satisfaction with RIM solutions is very high, and most managers surveyed said that they expected BlackBerry products to remain innovative and competitively featured,” he writes. “The issue boils down to cost and consumer preferences: employees want to be able to use their own phone, and allowing them to do so presents IT & Telecom managers with a way to substantially cut their operating costs.”

In other words, employees who switch to a non-BlackBerry smartphone save their employer money. And that’s a compelling proposition, as the graph below shows. Among BlackBerry-exclusive companies, BlackBerry-nonexclusive companies and companies with BlackBerry support, 50 percent said they would consider eliminating their BlackBerry solution.

That’s difficult to say, given the limited sales data available. But Bernstein Research analyst Toni Sacconaghi gave it a shot in a note to clients today, and the number he came up with is astonishing, though it’s quite a bit lower than the buy-side number that’s being bandied about these days.

“An analysis based on extrapolating sales trajectories of [the iPhone, iPod touch and all netbooks] suggests that Apple could sell a staggering 25 million iPads or more in FY 11,” Sacconaghi says. “We believe that current buyside expectations for FY 11 for the iPad are now at 20-25 million+ units, largely based on such an extrapolation.” [Ed. note: More like 28 million, Toni ...]

Not that he’s totally confident Apple (AAPL) will hit that number. He thinks sales will end up a bit lower, though he’s wary of offering a definitive forecast. “While iPad’s fast start points to the potential for 25M iPads in FY11, we note that the range of outcomes is wide and uncertain, particularly since the product use-cases and competitive offerings are very nascent. We currently estimate 18M iPads for FY 11, but underscore that we do not have high conviction in our estimate.”

Sacconaghi’s uneasiness here is due largely to fears that extrapolating the iPad’s growth trajectory from sales to early adopters might result in an unrealistic estimate. He also worries that expanded international distribution won’t juice iPad sales as much as the market hopes. Which is understandable. After all, the device is still quite new and its use-cases are still being established.

[Image credit: Gizmodo commenter modestmouse and RBC Capital Markets]

Apple (AAPL) stock is clearly on a tear and will be for some time. But that doesn’t mean it is risk-free, says Bernstein Research analyst Toni Sacconaghi. In a research note issued this morning, he outlined his bear case for the stock, pointing to five potential pitfalls that might undermine it.

“These five concerns are as follows,” writes Sacconaghi. “(1) Apple’s market cap is too large for it to outperform, and its image has migrated from underdog to Silicon Valley bully, which will increasingly pit competitors against it; (2) Increased regulatory scrutiny threatens to undermine Apple’s powerful iOS ecosystem; (3) Sustained growth in iPhones will inevitably lead to margin pressure; (4) Near-term expectations for iPhone and iPad units are getting heady, risking disappointment; and (5) Apple insistence on retaining cash points to a risk of the company squandering it on a flawed acquisition.”

Sacconaghi makes a case for each, but in most instances, it’s a bit of a stretch and seems to hinge on hypothetical scenarios (what if content providers collectively choose to support a non-Apple platform) or unfavorable outcomes to developing scenarios (what if the Federal Trade Commission finds Apple’s behavior in the mobile advertising market to be anticompetitive). So much so, that in the end, the analyst concludes that none of them presents an imminent threat.

“We have articulated the bear case for Apple investors principally as a checklist of issues to monitor,” he writes. “At this point, none of the aforementioned potential pitfalls concerns us sufficiently to change our earnings estimates or price targets….We continue to view AAPL as the most secularly attractive name in our coverage universe.”

This estimate comes from Bernstein Research’s Toni Sacconaghi, who also thinks Apple (AAPL) will do more than $58 billion in sales this year. So that number is nice, if not needle-moving.

But the analyst also points out the real benefit of iAds to Apple: It will generate more than $800 million a year for developers, giving them even more incentive to build programs for iPhones and iPads.

Sacconaghi thinks iAd could throw off $550 million this fiscal year (and double that in 2011); Apple will keep 40 percent of that. And he thinks Apple could keep another $250 million from more conventional advertising that runs on media ads/apps on the iPad.

All told, the analyst figures Apple’s new ad business will end up generating $18 in gross revenue for every iPad/iPhone/iPod touch in the market, which compares quite nicely with the estimated $21 in gross revenue per PC that Google gets. But Google (GOOG) keeps most of that money–$16 per PC–and Sacconaghi thinks Apple will only net about $7 per device.

From his report:

This makes intuitive sense to us–the gross iAd revenue number per device is close to what Google generates since both should be able to serve highly targeted advertisements; however, the net iAd revenue number is lower since Apple would effectively pay 60% “traffic acquisition costs” across all its revenue vs. Google for whom the cost is only incurred on about a third (AdSense) of its revenue.While Apple users’ demographics are undoubtedly more attractive than Google’s, we believe that is counterbalanced by the relatively infancy of the mobile advertising market currently.

But while it is moving into the ad business for the first time, Apple is not really trying to displace Google there. What the company is trying to do is make sure that developers have every incentive to build for Apple. That’s the real intent of iAds, and Scacconaghi thinks it will be effective.

He figures iAds could throw off $825 million to developers, who he had previously estimated would generate $1 billion to $1.8 billion year. That’s a boost of 46 percent to 83 percent.

That’s a pretty good carrot for Apple developers, no?

But there’s a stick, too, of course, in part from restrictions that make it hard to write apps for both Apple’s platforms and its rivals–otherwise known as the Adobe (ADBE) Flash ban–and in part from restrictions that cripple the ability of other mobile ad networks to compete on Apple’s platform. And that’s the stuff that is raising eyebrows in Washington.

He didn’t name any of them, but it’s a safe bet that at least one of the devices to which he referred is Apple’s next-generation iPhone, perhaps the last for which AT&T will have an exclusive.

As much as the debut of that device bodes well for the AT&T (T), the carrier’s dependency on it as a profit driver is becoming a worrisome vulnerability.

Consider this: In its first quarter, AT&T activated 2.7 million Apple iPhones. A third of those, about 891,000, were purchased by new subscribers. Which means, as Bernstein Research analyst Craig Moffett observed today, that the iPhone drove about 174 percent of AT&T’s post-paid net additions (the company had about 512,000 post-paid net adds).

That’s an astonishing percentage. But what would AT&T’s post-paid numbers look like if the company loses iPhone exclusivity and Verizon (VZ) begins selling the device, as some believe it soon might?

My guess: They would be quite a bit smaller. And that’s the concern some analysts are voicing today. As Moffett wrote in a note to clients this morning, “The question of what AT&T will do if and when they lose iPhone exclusivity is hard to escape.” Indeed. By some estimates nearly a third of AT&T’s post-paid customers are sticking with the company primarily because of iPhone exclusivity.

But ultimately, what can AT&T do? Not much, unless it manages to score a similar exclusivity deal on another device that rivals the iPhone in popularity. Other than that? Gird itself for the inevitable blow, I suppose. Continue to improve its network, do its best to hold on to the iPhone owners it has and continue signing up new ones.

The truth is that AT&T has known all along that its exclusive relationship with Apple (AAPL) would change someday and has undoubtedly already factored this into its plans.

As Linder told Reuters today, “…at some point [Apple] will, as they have in other countries, make the decision to broaden [iPhone] distribution and move to a non-exclusive arrangement. When that occurs at some point, I fully expect we’ll continue to be a good partner with them, and continue to carry a full range of Apple devices.”