After the markets close tomorrow, Demand Media will report its second-quarter earnings.

Wall Street is expecting a solid performance from the Santa Monica, Calif.-based online content maker compared to last year.

The consensus of estimates by analysts is for Demand to lose one cent a share, which is much smaller than the 55 cents a share loss from the same period a year ago. It is also an improvement on a previous loss of five cents a share for this quarter that investors had been predicting.

Nonetheless, the company’s stock hit its all-time low yesterday, after a strong IPO in January. Since the summer, it’s been all downhill, with Demand shares off 50.4 percent since early May.

Since it went public, the stock is off 63.1 percent.

That’s the theory put forth today by Bernstein analyst Toni Sacconaghi, who believes Apple’s market-share aspirations for the iPhone are a lot like those for its iPod business. Sacconaghi sees an iPhone Nano or Mini as an inevitability, one that would dramatically expand Apple’s addressable market.

“We are surprised that Apple hasn’t moved sooner to introduce a lower priced offering that could help secure a more dominant installed base,” Sacconaghi said in a note to clients today. “After all, the smartphone world is a platform war, where first mover advantage and scale matters. The dual facts that (1) iPhone has not been available at several very important global carriers and that (2) it carries a very high price point have contributed to creating an opportunity for Android that has been successfully exploited. Particularly with Android now outselling iOS, the imperative for Apple to expand its installed base has never been higher.”

A scaled-down version of the iPhone with a cheaper data plan–or one that required no data plan at all–is one very obvious way of doing that. Roll out a device like that with a street price that falls somewhere between $149 and $199, says Sacconaghi, bring it those carriers that don’t yet offer the iPhone, and mass-market adoption will follow. Serious mass-market adoption.

“It is difficult to estimate the size of a market for a product that we don’t yet know the form-factor or timing for. But as a rough guide, we estimate that at an end-user price of $150-$200 and no data plan contract, Apple could address potentially all of the remaining smartphone segment, the non-smartphone postpaid segment, and about 15 percent of the non-smartphone prepaid segment. This would amount to an incremental 700M+ units and $90 billion in revenue in terms of market opportunity; even if Apple succeeded in capturing just 5 percent of these incremental units, it would add $12+ billion in revenues and $4.50+ in EPS.”

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

A few key findings from the survey:

• People estimate they need 711 wireless anytime minutes per month, but in truth they need quite a bit less. BillShrink found 651 minutes to be the average.
• The average person uses 1,555 text messages per month, yet most consumers believe they use 2,566. (1,555 per-month is the average!?!)
• People assume they need 54MB of data per month, yet most need 81MB. Ironically, most tiered carrier plans start at 150MB.

What’s driving these disparities? Consumers’ skewed perception of their wireless needs, obviously. But the carriers are to blame too. Their tiered pricing plans might offer more choice, but they also make it tougher to assess our voice, text and data needs, and make it quite a bit easier to overpay for them.

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.”

The bigger picture is that Armstrong’s turnaround is still in progress. Ad revenue was down 29 percent in the last quarter, though that number is worse than it looks. A big chunk of the decline comes from moves AOL has intentionally made that will cut revenue in the short run in return for more profitable sales down the road.

A more representative data set for Armstrong are his display ad sales, which are down 14 percent overall and 8 percent in the U.S..

The bad news is that the rest of the Web ad industry is well into rebound mode; the good news is that AOL has trained Wall Street to expect numbers like these. If you’re waiting to see positive sales numbers, Armstrong said during AOL’s earnings call this morning, wait until the second half of this year.

For a while recently, it looked like Yahoo shares might start pulling out of their longtime $16 range, boosted by various and sundry rumors about the sale of its Asian assets and other machinations.

But, as worries about its next earnings call in less than a week coalesce, the Internet giant’s stock has settled right around its 50-day moving average of $16.59, closing down 1.85 percent at $16.50 yesterday.

That’s not bad given the stock has a 52-week low of $12.94 (and a 52-week high of $19.12).

But, it did not stop Morgan Stanley from downgrading Yahoo shares on Monday and cutting its revenue and earnings estimates.

The reason? “Deteriorating fundamentals” and a belief that “users will increasingly consume media/content on Facebook vs. Yahoo!”

You think? (As Yahoo has found, it appears that the kids love to social network!)

Thus, despite a healthy valuation for those Asian assets in the Alibaba Group and Yahoo! Japan and some speculation about the sale of them–the lack of any revenue growth in Yahoo’s core U.S. market is still the big drag on the Silicon Valley icon.

Because of that, there has also been increased short seller activity recently, which means all eyes will be on Yahoo’s fourth-quarter earnings release next Tuesday, Jan. 25.

Currently, Wall Street analysts expect higher earnings of 22 cents a share on revenue of $1.19 billion for Yahoo.

That revenue number is lower than a year ago, due to a weakening display advertising business and declines in search ad revenue at the company.

And it will not help if Google, as expected tomorrow, turns in a blow-out quarter, especially if it shows strength in its own display business.

So, after its continued lackluster revenue in the last quarter, top executive turnover in its media business and layoffs in December, investors are going to be expecting some long-promised sign of turnaround from Yahoo CEO Carol Bartz.

Whether she can finally start to deliver on that or not next week remains to be seen.

With strong global demand for its products and few retail stock-outs over the holidays, Deutsche Bank analyst Chris Whitmore believes the company racked up sales above already lofty expectations. And he raised his estimate on Apple today, following channel checks that revealed better-than-anticipated iPad and Mac demand and unwavering demand for the iPhone–even ahead of an expected Verizon announcement.

Over the holidays, Whitmore’s team checked up on 50-plus Apple Stores and retail partners, and found long lines, heavy store traffic and limited stock-outs at the majority of them.

“Apple continues to benefit from the strongest product offering in its history and the strong double-barreled product cycle is driving massive global demand for iPads and iPhones,” Whitmore said. “Both categories are benefiting from additional carriers, international expansion and limited competition. In addition, while we expect an onslaught of new tablet announcements at CES this year, we do not expect material competition to arrive until the second half of 2011. We have not seen anything that matches Apple’s iOS product suite in terms of form factor, usability, integrated hardware/software and the breadth and depth of the App store.”

Whitmore now expects Apple to sell 60 million iPhones in calendar 2011, up from 55 million. And that’s without a Verizon iPhone. With it, he says, iPhone sales should rise by another five million to seven million units. “We expect a CDMA based iPhone to be a significant positive for AAPL with limited cannibalization at AT&T,” he said. “Our DB colleague Brett Feldman, who covers Telecom Services, estimates that Verizon will add roughly 15M iPhones in 2011 with 6M cannibalized from AT&T.”

However, according to a graphic elsewhere on the company’s Web site (see above), that’s still short of the service at peak times (and one would assume that, absent an outage, two days before Christmas might be one of those peak sorts of times).

The blog goes on to mention a few of the other lingering issues. “Please note that some features may not work as reliably as expected,” it said, adding that “peoples’ online status may be slow to update, and instant messages might not be delivered as quickly as they are normally. Group video calling will take longer to return to normal.”

Of course, all that is a lot better than yesterday, when the bulk of the service was down for millions of people.

UPDATE, 11:50 am: Things are looking up, according to the latest post from CEO Tony Bates. He reports that there are now about 16.5 million users online, about 80 percent of normal for this time of day. And a make-good offering is in the works. “I realise that it’s difficult to compensate you for not being able to talk to or see your friends, family or colleagues, but we’re planning to offer Skype Credit vouchers to all of our loyal paying customers to thank you for your continued support,” said Bates.

Here’s the video of his message:

UPDATE, 3:02 pm: Another dispatch from Bates, this time reporting that traffic volume is up to 90 percent of normal now, the system has been stabilized and the engineers think they know what went wrong (and it wasn’t a malicious attack). Bates also offered a few more details on the customer compensation plan. Here’s the video:

Sales were $8.6 billion, helped mostly by new software license sales that grew 21 percent to $2 billion, while updates and product support revenue grew 12 percent to $3.7 billion. The consensus estimate was $8.34 billion. Sales grew 47 percent from the same period a year ago.

Non-GAAP per-share earnings were 51 cents, beating the 46-cent forecast estimate of analysts surveyed by Thomson Financial. Earnings after one-time items were 37 cents, up from 29 cents a year ago.

Gross margins on Sun-branded hardware increased to 53 percent.

Shares are up almost 4 percent in after-hours trading.

There’s a quote from CEO Larry Ellison, reminding us how fast his new products are, and digging once again at the competition:

“Sun’s new SPARC Supercluster computer shattered the world record for database transaction processing performance by running 3 times faster than IBM’s fastest computer, and a stunning 7.5 times faster than HP’s best ever database performance,” said Oracle CEO, Larry Ellison. “Our new generation of Exadata, Exalogic and SPARC Supercluster computers deliver much better performance and much lower cost than the fastest machines from IBM and HP.”

Here’s another quote, from Oracle co-President (and former HP CEO) Mark Hurd, about the Exadata product line:

“Since joining Oracle I’ve met with and visited many customers that have expressed a high level of enthusiasm around our strategy of engineering hardware and software that works together,” said Oracle President, Mark Hurd. “That enthusiasm translates into an Exadata pipeline that has now grown to nearly $2 billion. That number is a good leading indicator that customers are planning to increase their investment in Oracle technology.”

Yes I would say there’s enthusiasm. It was precisely because of the Exadata line that Macquarie Research upgraded Oracle today.

More from the conference call, which starts at 5 pm ET.

4:53 pm: Seven minutes to go before the Oracle earnings conference call starts. Right now it’s all mellow classical guitar.

Call is running a little late.

5:10 pm: And we’re underway with the safe-harbor statement.

Ellison, Hurd and president Safra Catz are on the call.

Americas grew 32 percent in U.S. dollars.

5:15 pm: Balance sheet: $24.8 billion in cash and short-term investments.

Generated $3.7 billion in free cash flow.

5:15 pm: Safra Catz is now speaking. We exceeded the high point of license guidance. Even excluding a payment for legal fees, we beat guidance by 4 cents.

5:16 pm: All geographies reported double-digit growth.

5:16 pm: “We continue to take share from SAP.”

5:17 pm: With Sun, included operating margins were 44 percent, which is better than SAP. [Another dig.]

5:18 pm: Hardware guidance: $1.1 to $1.2 billion in revenues.

Non-GAAP EPS expected to be 48 to 50 cents, and 34 to 36 cents on a GAAP basis.

Here’s Larry:

5:19 pm: Our goal is to be No. 1 in high-end market for servers. Right now our numbers are behind HP and IBM.

5:20 pm: IBM’s and HP’s servers are slow, and software is slow and expensive and have no software value-add. [Another dig at the competitors.]

5:22 pm: Exadata pipeline continus to grow. We expect our new generation of Sun machines will enable us to win significant share, and position us in the No. 2 position behind IBM very soon. And then we’ll fight it out for No. 1.

5:23 pm: Now Mark Hurd is speaking.

5:23 pm: I want to focus on our opportunities to grow significantly.

5:24 pm: Deal volume was spread across companies of all sizes and strength in the public sector as well.

5:24 pm: All of our customers and competitors are reacting to us.

5:25 pm: 150,000 Middleware customers. We ended the quarter with a record hardware backlog.

5:26 pm: Now going to Q&A:

A question from UBS. Are you starting to see a halo impact on adoption of the Oracle suite?

Larry: Close rates are improving. You’ll see great improvement in Exadata sales from Q2 to Q3. Because it’s new, people were running a lot of benchmarks and trying it out first. We’ll sell a lot more Exadata in Q3 than in Q2.

As for the halo effect, when you buy these servers you buy them to run specific software. Engineer them at the same time and make sure they run well together. We have a huge advantage over IBM and HP. The notion of systems, hardware and software that run well together will dominate the high end of the business.

Q: You clearly have a lot of irons in the fire with Fusion apps coming up and Exadata. Focus on Exalogic. Can you share early feedback from customers and compare that to Exadata ramp.

Mark: Exadata experience benefits Exalogic. We’ve matured the use case, we think we know where the targets are. The Exadata experience is a big deal for us.

5:31 pm: A question about Fusion Middleware.

Larry: We’ve been in the middleware business for a long time. With release 11 everything has been rewritten. It’s a much better user experience, you can patch our entire suite with a single file. We think the fact that we have an integrated suite gives us a huge advantage over IBM.

5:33 pm: A question about Europe. It was better than expected. Apps business was really strong. Look at competitors. You’ve been gaining share against SAP. We are seeing a pickup in general environment.

Hurd: I’m not an economist, but we’re doing well in Europe. It was broad-based. It was not singular to a deal or country. It was broad-based to countries where we have been gaining share. It’s been one quarter after another, a pretty steady beat.

Larry: We had a wonderful set of industry specific applications, in telecommunications and banking and retail, and that’s unique vis-a-vis SAP. that has helped us a lot to establish us in a lot of industries. Also Fusion is right around the corner.

5:35 pm: Q: How frequently is an Exadata deployment resulting in the displacement of a competitor’s product?

Hurd: About 70 to 75 percent of the time. About 20 to 25 percent of the time it’s a consolidation.

We’ve sold Exadata now in 50 countries, and 30 to 35 percent of our customers have made a second purchase. You’re starting to see repeat purchases. We’ve learned a lot about this and so as we launch Exalogic we can accelerate our learnings.

5:36 pm: Q: Margin was also great. What can we expect going forward and what were one-time items?

Catz: In general, it’s the business. The only nonrepeatable thing is the $120 million legal settlement, which we will not repeat. Hardware margins and operating margins, this is something we’ve done for many years.

5:38 pm: Q: What is visibility for database licenses?

Larry: A couple quarters ago, someone noticed database licenses were growing nicely. We think Exadata is going to be a nice turbocharge to our database business. Across the board our database business is going to get strong with Exadata.

I just looked at after-hours trading in Oracle shares and they’re up more than 4.5 percent.

Hurd: “The secret to Exadata is bringing the smarts to the data, versus bringing the data to the smarts.”

5:42 pm: Q: What continues to drive the database business? Is it just core database, add-ons?

Larry: We think our technology is getting faster and more reliable at a faster rate than that of our competitors.

5:43 pm Larry: As far as applications, we think there are lots of reasons we continue to gain share every quarter over the last few years over SAP.

It’s the industry-specific applications. We have telecom companies that are running only Oracle software. We have some banks that are making the same kind of commitments up and down the stack. SAP just doesn’t have that.

5:44 pm: Larry: We’ve got this extremely modern Java-based suite called Fusion that is going to strengthen our competitive stance against Salesforce.com and against Workday.

5:46 pm: That seems to be it. The call is concluded.

“Given the competitive environment heading into CY11 with the influx of more than 80 new competitive tablet offerings, we believe [selling 10 million units] may be challenging for RIM to achieve, particularly as the PlayBook is positioned as a ‘professional’ device and initially as a companion linked to a BlackBerry,” Susquehanna analyst Jeffrey Fidacaro said in a note to clients today, suggesting that sales of eight million is likely a better estimate. Which seems reasonable, particularly since the PlayBook will only support 3G data connectivity through a tethered BlackBerry.

That said, Apple did sell 4.19 million iPads last quarter. So it’s not entirely inconceivable that RIM could sell 10 million PlayBooks in four quarters, assuming the buzz around the device–which has driven the company’s shares upward since its announcement–continues.

As Kara Swisher has reported, Google (GOOG) and MySpace owner News Corp. (NWS) are close to a “realistic” search deal to replace the famous three-year, $900 million pact signed during the Web 2.0 boom. The old deal expired this summer, and the two companies have been negotiating a replacement while working through a couple of one-month extensions.

News Corp., which also owns this Web site, doesn’t have much leverage here. Its once-hot social network has long been eclipsed by Facebook, and Microsoft (MSFT) doesn’t seem inclined to make a competitive bid for the MySpace business.

Translation: The new deal should save Google $200 million in traffic acquisition costs, Khan says. And he figures that those savings will show up as soon Google’s Q3 results, due out next week: He’s boosted his net revenue estimate to $5.33 billion, up from $5.32 billion.

Quite a showing considering the consensus estimate had Amazon (AMZN) reporting earnings of 61 cents a share on revenue of $6.87 billion.

In a statement, Amazon once again touted the Kindle e-reader as its “#1 bestselling product” and once again declined to offer any hard sales figures on the device, which is becoming increasingly more relevant with the arrival of Apple’s iPad and the expectation that other tablet devices will be landing soon. In a statement, founder and CEO Jeff Bezos said:

“We remain heads-down focused on customers. Amazon Prime has just celebrated its fifth anniversary, adoption of Amazon Web Services continues to accelerate, Kindle remains our #1 bestselling product, and earlier this week, Kindle selection reached 500,000 titles.”

Kindle will debut at Target’s (TGT) flagship store in Minneapolis, as well as 102 locations in South Florida this Sunday, with wider availability to follow.

This is Amazon’s (AMZN) first foray into the brick-and-mortar retail world and one evidently made under duress. Last week, Barnes & Noble (BKS) began distributing its Nook e-book reader through Best Buy (BBY), and, of course, Apple (AAPL) is now selling the iPad at its own retail stores.

With claim to about 90 percent of e-book sales, according to estimates by Credit Suisse Group AG (CS), the e-book market is Amazon’s to lose. As Credit Suisse analyst Spencer Wang noted earlier this year, the retailer may well see its e-book market share slip from 90 percent to 72 percent in 2010, thanks to some formidable new rivals.

“Near term, we suspect that the iPad and the new eBook agency pricing model, which requires that Amazon increase retail prices to be more consistent with Apple’s pricing, will provide Kindle with the most market share headwind,” Wang wrote. “Going forward, we can envision a scenario where Apple, Amazon, and Google eventually split the market. Therefore, we expect Amazon’s share of eBooks business to fall from 90 percent currently to about 35 percent over the next five years.”

That’s a steep decline–though 35 percent does seem extreme. Little wonder, then, that Amazon is willing to give up its sales exclusivity for the device in an effort to temper the projected loss of market share.

Interestingly, the sales figure is also on par with the 270,000 first-gen iPhones Apple (AAPL) sold during that device’s first 30 hours at market in 2007.

It’s important to remember, though, that this first-day sales number is for Wi-Fi-only iPads sold in the U.S. The figure does not include sales of the 3G version of the device, which arrives at market in a few weeks. Nor does it include online pre-orders with an April 12 ship date. Makes you wonder if Apple is purposely lowballing here …

Apple Sells Over 300,000 iPads First Day

CUPERTINO, Calif., April 5 — Apple® today announced that it sold over 300,000 iPads in the US as of midnight Saturday, April 3. These sales included deliveries of pre-ordered iPads to customers, deliveries to channel partners and sales at Apple Retail Stores. Apple also announced that iPad users downloaded over one million apps from Apple’s App Store and over 250,000 ebooks from its iBookstore during the first day.

“It feels great to have the iPad launched into the world — it’s going to be a game changer,” said Steve Jobs, Apple’s CEO. “iPad users, on average, downloaded more than three apps and close to one book within hours of unpacking their new iPad.”

“We estimate Apple sold between 600-700k iPads (including online pre-orders which started on March 12th) on the first day (4/3),” he wrote. “It took Apple three days to sell a million iPhone 3GS and iPhone 3G’s, and 74 days to sell 1m original iPhones.”

Interestingly, Munster said that inventory is not quite as constrained as one would think given Apple’s decision last week to push some iPad pre-order shipments ahead to April 12.

“As of 7:30PM ET on Saturday night (4/3), 19 of 20 stores we called still had availability of all models, which is a positive for first day sales given Apple was able to fulfill most demand,” Munster wrote.

“In addition,” the analyst continued, “we noted longer than expected lines at the five Apple stores we surveyed. For example, at the 5th Ave Store in New York we counted 730 people in line at 9am (when iPad sales began) compared to our count of 350 people for iPhone 3GS, and 540 people for iPhone 3G.”