In the first group is Ticonderoga’s Brian White, who expects Apple to sell 29.9 million iPhones in the December quarter, a quarter-over-quarter increase of 84 percent. With him, BTIG Research’s Walter Piecyk, who says AT&T’s good news suggests Apple will sell 30 million iPhones in the quarter, just as he predicted in August.

In the second group: Stern Agee’s Shaw Wu and UBS’s Maynard Um. Wu raised his forecast for iPhone sales this quarter to 28 million, up from 26 million. Um went him two million better, raising his estimate to 30 million from 28 million, though he concedes even that might end up being a little light, thanks to high demand in the Asia Pacific region.

“We believe that there is a general strength across the board for iPhone demand,” Um said in a note to clients. “We continue to believe that our estimates are conservative as [they] are still below where expected build plans are.”

In other words, Apple will likely blow out iPhone sales for the quarter, just as CEO Tim Cook said it would during the company’s last earnings call.

Said Cook, “We’re very confident that we will set an all-time record in the December quarter for iPhone sales. We — in our wildest dreams, we couldn’t have gotten off to a start as great as we have on the 4S.”

And already analysts are nodding in agreement.

In his latest note to clients, UBS analyst Maynard Um predicts that strong demand for the iPhone overseas could easily double last quarter’s sales of 17 million, perhaps driving them well over 40 million.

In Apple’s third quarter, the split between U.S. and international iPhone sales was roughly 27.5 percent to 72.5 percent. If the company sells 11.7 million iPhones domestically in the upcoming quarter, as Um predicts, and the split remains roughly the same, we can expect a significant spike in worldwide iPhone sales in the December quarter.

“While the timing of the 70 [upcoming international] launches could have some impact on sales ahead of the launch, the US/International split, and hence our estimates, look conservative,” Um says. “A similar 27.5 percent U.S./72.5 percent international split from this quarter would imply 42.5 million units in CY4Q or an upside of 14.5 million iPhones.”

Many analysts expect iPhone shipments in the 25-30 million range for the December quarter, so Um’s prediction is quite bullish. That said, it’s certainly not beyond the realm of possibility. Apple did sell more than four million iPhone 4S units in the device’s first weekend at market.

“The company did not announce a redesigned iPhone, which many were calling an iPhone 5 and which may disappoint some investors,” Piper Jaffray analyst Gene Munster wrote in a research note to clients. “That said, we believe the iPhone 4S will meet or exceed unit expectations, as it represents the first iPhone launch at two major US carriers (Verizon and Sprint) along with KDDI in Japan.”

J.P. Morgan analyst Mark Moskowitz also bemoaned the lack of the so-called iPhone 5.

“We had expected the company to announce two new devices, an iPhone 5 and a 4-plus,” he said in a note to clients. “We are disappointed that Apple did not introduce a thinner form factor, but we see the feature set improvements in the iPhone 4S and the broader pricing strategy as positives.”

Moskowitz was particularly impressed with Siri, Apple’s new virtual assistant, and views it as an advantage that will raise the 4S above the pack of rivals that perpetually pursue it. “Once investors dig into Siri, we think its addition will overshadow the lack of full iPhone form factor change,” he said.

Goldman Sachs analyst Bill Shope took a similar view, arguing that the big news of the day was really the software that was on display. “Siri represents a more significant platform enhancement than we anticipated,” he said in a research note. “We believe this, coupled with iCloud and iOS 5, suggests today’s event represented a critical positive inflection point for the iOS platform overall.”

UBS analyst Maynard Um echoed Shope and went him one better, suggesting that the addition of Siri to the iPhone is one of those watershed innovations that will again change the way we interact with our mobile devices. “While some may be disappointed by largely unchanged design, Apple used its owned ecosystem to embed the Siri personal assistant throughout its OS to change the way we interact with phones. We believe Siri, iCloud & other iOS 5 features will continue to drive the next wave of demand.”

And in all likelihood they will. Sure, Apple did not meet some of the market’s hardware expectations. But what the market sometimes forgets is that it is software that truly differentiates Apple from its rivals.

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As J.P. Morgan analyst Mark Moskowitz wrote in a note to clients Wednesday evening, Apple’s deep executive bench is very much up to the tasks ahead of it.

“While the day-to-day contributions of Mr. Jobs will be missed, we believe that the level of creativity and intelligence assembled throughout the management team and legion of Apple employees can sustain the Apple model and its industry leadership,” Moskowitz said. “We do not expect too much to change within the organization. In our view, the far-reaching successes of the iPhone, iPad, iPod, and MacBook Air reflect the work of many, not one. We have a favorable view of new CEO Tim Cook. He has a proven track record. As COO, Mr. Cook has been integral to driving the company’s unprecedented revenue and earnings growth phase, limiting disruptions to the operations. We expect his knowledge of Apple and its rigid product cycles, supply chain, and partners to result in little change to the go-to-market strategy.”

Barclays analyst Ben Reitzes echoed those sentiments, remarking on Cook’s proven track record. “While we do not believe that Steve Jobs is replaceable, it is worth noting that Tim Cook is a proven executive who can handle the pressure and knows how to run the inner workings of Apple in Jobs’ shadow,” he said. “… While the economy remains a concern for all companies in our sector, we anticipate Apple to gain substantial share in smartphone and PC-related segments as the entire company executes its strategy.”

Piper Jaffray analyst Gene Munster described Cook as “the ideal candidate” to assume the role of the irreplaceable Steve Jobs. “Cook is capable of running Apple, but his rare combination of extreme humility and insatiable motivation make him uniquely suited to assume Jobs’ role as CEO and carry on his work with a peerless executive team,” Munster said. “While there may be concerns among investors as to whether or not Cook can continue Jobs’ streak of innovation, we believe there is no better candidate to assume the role. And in many ways, it will be Jobs and his deeply rooted vision that will always guide Apple and its leaders.”

And finally UBS analyst Maynard Um said he really doesn’t expect things at Apple to change much at all with Jobs no longer CEO. “We expect there to be no transition issues as Cook had been running daily operations as interim-CEO,” he said in a note to clients. “From a longer-term perspective, we believe Apple’s strategy is well laid out and believe Cook and his management team will continue to execute.”

And in all likelihood, that’s exactly what will happen. Because in the end Apple has one of the deepest and strongest managerial benches in the business, and it has been crafted by one of the most innovative minds in the industry. As I wrote back in 2009, “Yes, Jobs’s sensibility pervades Apple’s culture and its products, but that culture and those products are not tethered to his health or day-to-day presence at the company. And Apple’s deep executive bench is more than capable of running it — and running it well — in his absence.”

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At $328 billion, Apple’s market capitalization is the second largest among U.S. companies. How much higher can it go? Plenty — particularly if the company launches that Internet-connected HDTV it’s rumored to be developing.

UBS analyst Maynard Um says Apple stands to gain an incremental $50 to $100 billion in market capitalization if it pulls off a successful television-set offering — one that inspires the same sort of consumer rabidity as the iPhone and iPad.

But in order to do so, the device must be differentiated enough not just to stand out from the competition, but to shift market value away from it, as the iPhone has from incumbent smartphone manufacturers.

Um believes iTunes will provide that differentiation, but not for some time and not until Apple feels consumers are ready for it.

“We believe Apple will have to build out its own content ecosystem such that a set made by Apple could be differentiated enough from a content perspective to potentially lead to ‘cord-cutting,’” Um says. “However, we do not believe the market is ready for cord-cutting nor do we believe the content is robust or cheap enough.”

But they will be at some point. And when they are, Apple may well be there to meet them with that long-rumored third screen. After all, the opportunity is massive. In-Stat expects the digital TV market in 2011 to hit 144 million units and $76.7 billion in revenue.

[Image credit: Chart by Piper Jaffray]

Traditionally, Apple launches its new MacBook Pros in April, well into its third quarter. This year, it didn’t. It launched them in the second, and that’s where the resulting spike in sales will be reflected.

And if the company sells enough of them, we could see a nice little bump in its earnings-per-share for the period, says UBS analyst Maynard Um.

“The refresh comes with about 6 weeks remaining in what is typically Apple’s seasonally weakest Mac quarter of the year,” Um said in a note to clients. “However, AAPL’s last three MacBook Pro refreshes came in FYQ3, so the accelerated cycle could provide upside to our estimates for this quarter. Every incremental 100,000 portable Mac units would add ~$0.02 to EPS in FYQ2 assuming slightly lower gross margins.”

After all, the CDMA iPhone Apple’s built for Verizon promises to expand the company’s addressable market domestically and abroad. The device isn’t exclusive to Verizon, which means Apple’s almost certainly going to pursue additional partnerships with CDMA carries in other parts of the world– China Telecom and SK Telecom, for example.

“We see this as the single biggest lever Apple has to pull in calendar 2011,” said Piper Jaffray analyst Gene Munster, who raised his iPhone unit estimates by 2.5 million because of the Verizon deal.

JP Morgan analyst Mark Moskowitz took a similar view, suggesting that the Verizon iPhone could boost Apple’s EPS by at least $1.25 per annum. “For Apple, we believe that this new carrier relationship will be a major catalyst for U.S.-related iPhone sales over the next 18-24 months,” he wrote. “In our view, Verizon’s wireless network offers a higher quality user experience compared to AT&T’s. We expect that this dynamic will drive a significant numbers of subscribers to switch to Verizon, in addition to the adoption rate of the iPhone by existing Verizon subscribers.”

At Standard & Poor’s, Clyde Montevirgen wrote that the deal more than doubles Apple’s U.S. market opportunity and said he expects incremental unit sales of 7 million via Verizon in calendar 2011.

UBS analyst Maynard Um issued this bullish call: “Apple has set itself up for a solid year of iPhone sales. Today’s agreement with Verizon Wireless should provide additional momentum to already strong iPhone unit growth. We also expect the company to launch the iPhone 5 this summer which would serve as another catalyst for this product segment. We currently expect AAPL to ship 67.3mn iPhone units in CY11.”

And finally, over at William Blair, analyst Brian Nugent offered a few observations about the Verizon iPhone’s effects on other industry players (beyond AT&T), specifically Research in Motion and Qualcomm. For RIM, he views it as a clear negative. “While dependence on Verizon has declined significantly in the last year, Verizon still accounts for roughly 10% of RIM’s sales (by our estimate),” he said. “An iPhone at Verizon will further pressure RIM’s market share and net subscriber additions in the United States, and could hurt its average selling prices and gross margin.”

But for Qualcomm, it’s a boon. “Although we view the introduction of the iPhone at Verizon as positive for Qualcomm (which we believe is the baseband provider in the iPhone), given that Qualcomm has over 95% of Verizon baseband share, today’s announcement may not be material to the company in the near term,” he said. “On a longer-term basis, we view today’s announcement as the beginning of a closer working relationship between Apple and Qualcomm that may potentially extend beyond the Verizon handset deal.”

PREVIOUSLY:

• AT&T: Verizon iPhone? Whatever.
• Verizon iPhone: What, AT&T Worry?
• Why Verizon’s iPhone Won’t Be So Bad for RIM
• How Might the Verizon iPhone Differ From the iPhone 4 (Besides Being Able to Make Calls)?
• Tired: Speculating About Verizon iPhone. Wired: Speculating About Verizon iPhone Sales.
• Verizon iPhone to Debut With Unlimited Data Plan
• Apple CEO Likely to Appear at Verizon iPhone Event
• Verizon Event Set for Tuesday–iPhone Time

Apple’s shares broke $300 for the first time last week, pushing its market cap to well past $280 billion–second only to that of oil behemoth Exxon Mobil. Should the company’s rally continue, it won’t be long before it overtakes Exxon on the Standard and Poor’s 500.

And there’s no reason at all to think that it won’t. Apple is scheduled to report its fourth quarter results today after the bell, and by most accounts it will be another blowout. Consensus among analysts seems to be that strong sales of the iPhone 4, the iPad and the Mac will push Apple’s earnings per share to $4.05 on revenue of $18.8 billion–quite a leap over the earnings of $1.82 per share on revenue of $9.87 billion the company posted during the same period last year.

And according to some analysts, this quarter’s leap may well leave the company poised for an even higher one in the next quarter. Said UBS analyst Maynard Um, “With continued momentum in all product lines as well as easing supply constraints for both iPhone and iPad, we see the potential for Apple to surprise to the upside on guidance again.”

“Sales of traditional notebooks appear to be feeling pressure from the iPad, causing a scramble by vendors to launch iPad-like tablets,” Um wrote in a note to clients. “We believe that a majority of this impact is occurring on the lower end of PC sales as the iPad is priced close enough to this range that it becomes attractive to consumers looking to make purchases within this segment. We are not sold that the iPad is purely cannibalizing PC sales, as the functionality of the iPad can not yet fully match the functionality of notebook PC’s. However, consumers who purchase iPads may be more willing to delay purchases and upgrades of existing PC’s.”

And with few, if any, real iPad rivals at market, this trend will continue well into 2011. While competition in the tablet market is increasing–and rapidly, too–viable threats to Apple (AAPL) will be few and far between, says Um. With that in mind, he expects iPad unit shipments for calendar 2011 to be 28 million, a number that Um says “could still be conservative.”

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

Early this morning, Dell said it will pay about $1.15 billion cash for the data-storage company–an 86.5 percent premium over 3Par’s Friday closing share price of $9.65. For Dell, which has been looking to diversify away from its core PC-manufacturing business, adding 3Par to its portfolio is one more way to do so, solidifying its position in the storage and services markets. A pure-play PC and server maker no longer, the company is fast transforming into a full-fledged consulting and services concern to boot, something it must do if it’s to compete with enterprise-technology rivals like Hewlett-Packard (HPQ) and IBM (IBM). Said UBS analyst Maynard Um, “The 3Par deal helps bolster Dell’s competitiveness and profitability in the mid & high-end of the Fibre Channel SAN segment and strengthens its position for cloud & virtualized environments (key long term areas of focus). We also see opportunity for Dell to drive solid growth of 3Par systems (similar to success achieved with EqualLogic) as only 20% of 3Par sales are from outside the US & 80% of sales come from repeat customers, which provides significant growth opportunities by leveraging Dell’s scale, distribution and global reach.”

Gene Munster, Piper Jaffray
While Apple had yet another stellar quarter, investors will wonder if the pace of growth is sustainable. We believe it is, given Apple has small market share in large, growing markets. We estimate that if Apple meets our Mac, iPhone, and iPad targets in 2011, the company will have only about 5 percent market share in the phone and computer markets, a number that will likely grow over time.

Mike Abramsky, RBC
Apple is now benefiting from what we are dubbing a “Cascade of Cool”–three strong, synergistic product cycles–iPhone, iPad and Mac, combining together synergistically to drive the strongest outperformance in 4 years–with more to come, as Apple remains well positioned against large, addressable markets. Additional drivers/catalysts expected include international rollouts, voice to Smartphone adoption, PC to Mac migration, enterprise adoption.

Chris Whitmore, Deutsche Bank
While current quarter results were very impressive, we see open runway for the 3 major product cycles ramping in C2H10 and beyond which should drive continued momentum. The iPad is off to a very strong start with demand characterized by Apple as “amazing” with widespread appeal to the mass market (i.e. already moved beyond “early adopters”). iPhone 4 demand is outstripping supply despite widely publicized antenna concerns (which we expect to dissipate). Both products continue to ramp internationally (iPhone with 154 carriers in 88 countries) while iPad will be available in 9 additional countries by July 23rd. Finally, we expect the recently refreshed MacBook lineup (and future updates) to perform well in the back-to-school and holiday seasons.

Yair Reiner, Oppenheimer
We were expecting Apple to deliver a strong F3Q10. But we hadn’t girded ourselves for a mammoth revenue forecast, and neither, we believe, had the Street. To those (like us) who fretted that Antennagate might hamper iPhone sales, Apple’s guidance seems to say “antennagate schmantennagate.” Apple is seeing a swell of demand across its product lines and increasingly compelling evidence that the iPhone has unleashed a halo effect in the international markets. These are facts on the ground that even Apple’s stubbornly bearish guidance can’t resist.

Charlie Wolf, Needham and Co.
This is the Apple story in a nutshell. The company remains a small fish in some very large ponds. Despite a quadrupling of shipments over the past several years, the Mac, the major surprise in the third quarter with record shipments of 3.5 million, still commands a small share of the PC market. The iPhone’s share of the fast growing smartphone market is likewise comparatively small. And while the iPad is in a class of its own, it’s beginning to cannibalize the much larger netbook PC market. Indeed, the iPad has jumped to the mainstream market, passing through the early adopter market in an instant.

Maynard Um, UBS
Guidance was much stronger than expected as the rev outlook of ~$18b was uncharacteristically higher (by $1bn) than Street ests. We believe AAPL typically guides to a conservatively achievable target, making guidance all the more impressive. With AAPL selling nearly every iPad/iPhone 4 produced, key variable to magnitude of pot’l upside will likely be the pace of capacity increases.

Katy Huberty, Morgan Stanley
The market underestimates the earnings power of Apple’s mobile Internet devices. We view the combination of new product launches, broader distribution (carrier, international, enterprise), more attractive pricing and strong upgrade rates as the key demand drivers over the next two years. Additionally, we believe iPhone, iPod Touch and iPad margins will remain above the corporate average, driving EPS upside as mix improves.

As you can see, Apple’s financial performance has sent the analyst community into paroxysms of praise. Not a week after its Antennagate press conference, the company already seems to have extricated itself from the public relations quagmire surrounding the iPhone 4’s reception woes.

As RBC analyst Abramsky quipped, there’s no deodorant like success.

“We now believe there is a 50% chance the company offers a free modification to current iPhone owners and includes the modification on all future iPhone 4s (e.g. a coating around the antenna),” Piper Jaffray analyst Gene Munster told clients today. “We have no knowledge of the company’s plans,” he said, “but we see an in-store fix and modification to future iPhones as the likely scenario (not a recall). Despite these issues, consumers love the iPhone 4; ultimately we believe Apple will manage these issues in a consumer-friendly way and maintain its pristine brand.”

UBS analyst Maynard Um isn’t betting on a recall, either.

“We believe a recall is unlikely as any recall would presumably be more immediate and sales halted by Apple and its operator partners,” he wrote in a research bulletin. “However, if the solution were straightforward, investors are likely to wonder why it wouldn’t be issued by press release (though Apple already addressed the issue in a statement on July 2). We believe an event is necessary, as a press release to address what has become a ‘loud’ issue would likely have drawn more ire.”

And from the shadowy world of anonymous insiders, a “person familiar with the matter” tells the Wall Street Journal that a recall is not in the company’s plans.

Sounds about right. As I wrote the other day, “an iPhone 4 recall? Steve Jobs would rather recall hiring John Sculley.“

[Image credit: Rick Smolan]

“Given the size of the iPhone 4 pre-order and our analysis of the expected upgrade cycle, particularly the remaining 3G users, we believe the full launch weekend of June 24-27 is shaping up to potentially be a 2 million-3 million iPhone event,” Fidacaro said in a research note today.

“[That’s] about 2-3x higher than the one million units sold over the first three days for both the 3GS and 3G launches,” the analyst added. “The strong initial demand seen during the pre-order is a positive for the June quarter and has apparently been limited by supply with new orders now indicating a July 14 delivery date.”

With 600,000 pre-orders racked up as of Wednesday and a few days yet to take more, a two-million unit launch weekend for Apple (AAPL) doesn’t seem much of a stretch. Frankly, neither does three million, given the iPhone 4′s feature set and price, as well as the fact that this year’s launch weekend begins on a Thursday rather than a Friday.

FURTHER READING

• Walt Mossberg’s iPhone 4 Review
• Analysts Raise iPhone 4 Sales Forecasts From Huge to Ginormous
• New iPhone 4 Pre-Orders Now Delayed to July 14
• Apple: Sorry We Sold 600,000 iPhone 4s Yesterday
• iPhone 4 Pre-Orders Sold Out at Apple, Suspended at AT&T
• What Happened to the White iPhone 4?
• AT&T Now Dropping iPhone Calls and iPhone 4 Pre-Orders
• And if You Have Any Questions About Your New iPhone 4, Just Ask Our Radio Shack Geniuses
• Everything You Need to Know About the iPhone 4

In a research note this morning, Piper Jaffray’s Gene Munster increased his iPhone sales estimates for both the June and September quarters to 9.5 million from 8.5 million, arguing that Apple (AAPL) will likely sell one million iPhone 4s during the device’s first three days on the market. He also noted that the six-month extension on upgrade eligibility pricing that AT&T (T) is offering should significantly juice demand.

“AT&T has pulled forward existing iPhone users’ eligibility for upgrade pricing by up to 6 months,” Munster wrote. “In other words, all early iPhone 3GS buyers will be eligible for upgrade pricing on the iPhone 4, but last year early iPhone 3G buyers were not eligible for the iPhone 3GS upgrade pricing. Specifically, we believe that the 8.4m iPhone users activated at AT&T between the Sept-08 and Jun-09 quarters will be eligible for upgrade pricing.”

Over at UBS, analyst Maynard Um went Munster one better. “We expect the iPhone 4 launch to be larger than the iPhone 3GS launch last year which sold 1 million units in its first 3 days. Although dependent upon initial supply, we see the potential for Apple to sell 1 million units on the first day of launch.”

At this point, Um’s scenario seems the more likely. As of this writing, Apple has taken pre-orders for more than 600,000 iPhone 4s. With more than a week to go until the official launch, it’s entirely plausible that the company will hit that number. And if launch day walk-in sales are anything like they’ve been in the past, it may far exceed it.

“The iPad launched in US Apple retail stores on 4/3, impacting nearly the entire month of Apple’s sales in April. As a result, April NPD data gives us the first sign of the degree to which the iPad cannibalizes iPod or Mac sales,” Munster noted. “From the early NPD data, it appears that the iPad has a minimal cannibalization impact on Mac sales, and could be slightly cannibalizing iPod sales.”

The analyst doesn’t expect this to be a big problem for Apple (AAPL). “We believe in the long run Mac cannibalization will exist, but will be minimal,” he concludes. “Apple has successfully limited the iPad functionality to primarily content consumption, vs. content creation on a Mac. And relative to the iPod, the physical size of an iPad provides a meaningfully different value proposition (portability vs. screen size).”

Obviously, it’s a little early for definitive calls on just what sort of effects the iPad is having on sales of Apple’s other products. That said, Munster’s analysis of NPD’s data does jibe with a small survey by UBS analyst Maynard Um that found that most iPad buyers do not view the device as a replacement for their traditional computers.

As I wrote in an earlier post, “So most likely, the iPad will prove additive for Apple. In fact, I wouldn’t be surprised if it generates a halo effect around the company’s products similar to that created by the iPod. Certainly, that’s the sense one has paying a visit to an Apple Store these days or being spotted with an iPad in public.”

UBS analyst Maynard Um surveyed customers in line to buy a 3G iPad in New York on Friday and found that only a handful hoped the iPad would replace their traditional computer. The other 94 percent said they were purchasing the device for Web browsing and personal entertainment. In other words, few people are under the illusion that the iPad is a $499 MacBook or a viable Mac replacement. In that sense, Apple truly has positioned it as a third category of mobile device.

Said Um,”The survey further supports our view that the iPad will not cannibalize Macs & we continue to view the device as a largely incremental growth opportunity for Apple.”

So most likely, the iPad will prove additive for Apple. In fact, I wouldn’t be surprised if it generates a halo-effect around the company’s products similar to that created by the iPod. Certainly that’s the sense one has paying a visit to an Apple Store these days or being spotted with an iPad in public.

Consider this from J.P. Morgan analyst Rod Hall: “No matter how good the product, we believe that penetrating the channel will continue to be difficult for Palm and will only get tougher as more competitive touch handsets come to market through the year.”

And this from UBS analyst Maynard Um: “Demand weakness is not necessarily a surprise as we noted earlier that a slowing US net add environment would likely have the greatest impact on Palm given its small base. However, the magnitude is slightly surprising to us given management’s prior conviction & visibility to orders. While Palm cites deferral of orders to future periods, WebOS demand will likely be called into question. With the US market being Palm’s best opportunity for more levered growth, we are more concerned with the future growth opportunity.”

Finally, there’s this from Deutsche Bank analyst Jonathan Goldberg, who says it’s going to take a long, long time for Palm’s fundamentals to improve, given its weak traction in the smartphone market: “Our concern now is that bad publicity feeds on itself, with the poor stock price performance denting Palm’s brand and causing potential carrier partners to lose interest,” he wrote in a note to clients.

“There are also potential upside risks as well including the potential for Palm to be acquired, but we think the poor showing to date limits the company’s negotiating leverage,” Goldberg added. Ultimately, we think Palm has the resources to survive and potentially build its position back, but it will take considerable time and they face serious risks in the interim.”

Serious risks, indeed. If Palm (PALM) has fared this poorly in the smartphone market of 2009, how will it fare in the smartphone market of 2010 and the more formidable rivals the year brings with it?

It was hard enough to compete against Apple’s (AAPL) iPhone and RIM’s (RIMM) BlackBerry last year. In 2010, Palm must compete with these popular smartphones and a host of new Android phones, not to mention some impressive Windows Mobile 7 devices heading to market. No easy task, particularly when carrier partners like Verizon (VZ) and Sprint (S) don’t quite seem to be giving Palm devices the marketing push they need to succeed.

But you won’t hear Apple boast about how much money it’s making from iTunes. Because there’s not much to boast about.

Even at today’s hyper volume, the digital store is still running at “a bit over break-even,” the company reminded analysts during its earnings call last month.

Here’s the relevant excerpt from that call, via Seeking Alpha (thanks to Venrock’s David Pakman for pointing this out yesterday at the Digital Music Forum East):

Maynard Um–UBS
We have seen a number of industry revenue forecasts for applications and just given kind of the expected explosive growth there I am just wondering if that is still a break-evenish type of business as you look forward over the next couple of years?…

[Apple CFO] Peter Oppenheimer
…Regarding the App Store and the iTunes stores, we are running those a bit over break even and that hasn’t changed. We are very excited to be providing our developers with a fabulous opportunity and we think that is helping us a lot with the iPhone and the iPod touch platform.

As Oppenheimer says, this isn’t a new development. Apple (AAPL) has always maintained that iTunes wasn’t a real money maker. It’s supposed to help sell iPods, iPhones, and soon, iPads.

For years, industry observers figured that as the iTunes business scaled, this would change. An alternate theory, held by some of Apple’s media partners–the company was being overly modest about its success.

Apple doesn’t break out iTunes sales, but lumps them into a category called “Other music related products and services,” which generated net sales of $4 billion last year. That’s an increase of 21 percent over 2008, and the company attributed this growth to “increased net sales of third-party digital content and applications from the iTunes Store.”

Analysts mulling over Nokia’s IP infringment suit against Apple seem to be of two minds about how the action will play out. There are those, like Neil Mawston at Strategy Analytics and Ben Wood at CCS Insight, who warn that Apple (AAPL) is on dangerous ground here at best. It’s almost impossible to build a cellphone without using Nokia’s (NOK) intellectual property, they claim. And if that’s the case with the iPhone, then Apple could end up paying Nokia hundreds of millions of dollars in licensing fees if Cupertino ends up on the losing side of this suit. (Click on text image below to see list of patents at issue.)

Some analysts, like Maynard Um of UBS, see Nokia’s action as a preemptory move against a possible infringement suit from Apple aimed at Nokia’s own multitouch handsets.

“We believe Nokia’s suit could be a pre-emptive move ahead of its new handsets launching soon that may have multi-touch capabilities for which Apple has IP,” Um wrote in a note to clients this morning. “We would not be surprised if Apple eventually files an infringement suit if Nokia’s handsets are deemed to infringe its IP and we believe Nokia would prefer any court action to be combined as prior cases have been. We expect the legal process to be drawn out & could involve US Patent Office reviews.”

The endgame here? Most likely an out-of-court settlement and cross-licensing agreements–assuming Apple’s willing. After all, Nokia is on record admitting its fondness for Apple’s technology.

Asked once about the striking similarities between a touchscreen device it was designing and Apple’s iconic handset, Anssi Vanjoki, Nokia’s head of multimedia devices replied, “If there is something good in the world then we copy with pride.”

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“We are very impressed by Apple’s ability to post a record profit quarter during difficult macro spending conditions,” Canaccord Adams analyst Peter Misek said in a note to clients this morning. “A host of new product introductions and continued traction with the iPhone give us confidence in the sustainability of Apple’s operating model.”

Suffice it to say, Misek wasn’t the only the analyst lauding Apple’s (AAPL) fourth-quarter performance. Below a selection of commentary from other Apple watchers:

Gene Munster, Piper Jaffray
“September results were strong despite headwinds of iPhone production constraints and a Mac desktop offering in need of a refresh. We expect these headwinds to become tailwinds in the December quarter, which we believe will be positive for AAPL shares in the coming months.”

Mike Abramsky, RBC Capital Markets
“With strong financial performance and product uptake amidst recession, and further catalysts (iPhone in China, Tablet, refreshed iMacs, iPhone share gains/momentum), we foresee further upside for the shares.”

Maynard Um, UBS
“Upside to virtually every metric in the qtr backs our positive view on Apple. We continue expect greater “recurring” iPhone hardware revenue (growing installed base & stickiness of the App Store), which should drive more visibility into iPhone sales (20%+ of our FY10 iPhone shipments), as well as iPhone expansion driven by new partnerships (& end of exclusivities). Longer term, we believe a service to provide seamless access & mobility of digital content across all products may be the draw (halo) that drives additional future Apple product sales.”

Tavis McCourt, Morgan Keegan
“Overall, Q4:09 was a strong quarter for Apple, as the Mac is nearly becoming the de facto computer for the back-to-school season. Additionally, iPhone trends remain remarkably strong, with unit economics holding up at unheard of levels in the wireless industry.”

Yair Rainer, Oppenheimer
“As usual, Apple appears to be leaving plenty of room for upside surprises to both revenue and margins. On the revenue side, Apple should benefit from continued Mac momentum (particularly in Europe), higher recognized iPhone revenue, and some channel fill for both Mac and iPhone. Gross margin upside is likely to come from a higher proportion of recognized, high-margin iPhone revenue.”

“We are very impressed by Apple’s ability to post a record profit quarter during difficult macro spending conditions,” Canaccord Adams analyst Peter Misek said in a note to clients this morning. “A host of new product introductions and continued traction with the iPhone give us confidence in the sustainability of Apple’s operating model.”

Suffice it to say, Misek wasn’t the only the analyst lauding Apple’s (AAPL) fourth-quarter performance. Below a selection of commentary from other Apple watchers:

Gene Munster, Piper Jaffray
“September results were strong despite headwinds of iPhone production constraints and a Mac desktop offering in need of a refresh. We expect these headwinds to become tailwinds in the December quarter, which we believe will be positive for AAPL shares in the coming months.”

Mike Abramsky, RBC Capital Markets
“With strong financial performance and product uptake amidst recession, and further catalysts (iPhone in China, Tablet, refreshed iMacs, iPhone share gains/momentum), we foresee further upside for the shares.”

Maynard Um, UBS
“Upside to virtually every metric in the qtr backs our positive view on Apple. We continue expect greater “recurring” iPhone hardware revenue (growing installed base & stickiness of the App Store), which should drive more visibility into iPhone sales (20%+ of our FY10 iPhone shipments), as well as iPhone expansion driven by new partnerships (& end of exclusivities). Longer term, we believe a service to provide seamless access & mobility of digital content across all products may be the draw (halo) that drives additional future Apple product sales.”

Tavis McCourt, Morgan Keegan
“Overall, Q4:09 was a strong quarter for Apple, as the Mac is nearly becoming the de facto computer for the back-to-school season. Additionally, iPhone trends remain remarkably strong, with unit economics holding up at unheard of levels in the wireless industry.”

Yair Rainer, Oppenheimer
“As usual, Apple appears to be leaving plenty of room for upside surprises to both revenue and margins. On the revenue side, Apple should benefit from continued Mac momentum (particularly in Europe), higher recognized iPhone revenue, and some channel fill for both Mac and iPhone. Gross margin upside is likely to come from a higher proportion of recognized, high-margin iPhone revenue.”

“We believe Apple is likely gaining some iPhone traction in enterprise with 19 of top 100 Fortune 1000 companies having iPhones deployed,” Um wrote. “However, we do not think this is a displacement of solutions such as BlackBerry but, rather, believe it is likely at the expense of other Microsoft Exchange capable smartphones.”

Um sees great opportunity in this trend, as long as Apple is willing to step up its game a bit. “In order for Apple to gain greater traction in the enterprise market,” he writes, “the company must overcome some issues including providing 24×7 customer support, providing more future product roadmap details (to allow large enterprises to build ahead and prepare), provide alternatives to OS upgrades solely from iTunes desktop application.”

Ironic, isn’t it, to read such a note in light of all the smack Microsoft CEO Steve Ballmer once talked about the iPhone? “There’s no chance that the iPhone is going to get any significant market share,” Ballmer said in 2007. “No chance. It’s a $500 subsidized item. They may make a lot of money. But if you actually take a look at the 1.3 billion phones that get sold, I’d prefer to have our software in 60% or 70% or 80% of them, than I would to have 2% or 3%, which is what Apple might get.”

PREVIOUSLY:

• Windows Mobile 6.5 “an Amazing Engineering Feat,” All Right…
• Perhaps if They Think of Their Win Mobile Devices as Broken iPhones…

Yesterday, the stock was upgraded by former Palm bears at Citigroup and Deutsche Bank. This morning, UBS analyst Maynard Um made a similar move, raising his rating to Neutral from Sell, and upping his price target to $6.50 from $1.35. “The Palm Pre generated significant buzz at CES, surprised us to the upside and breathed new life into Palm’s stagnant portfolio,” he wrote in a research note. “Though the company still has challenges ahead, it’s clear the winds now appear to have shifted in its favor.”

Um raised his EPS estimate for the May 2010 fiscal year to positive 48 cents from a loss of 52 cents. His revenue forecast for the year jumps to $1.68 billion, from $1 billion.

Um also set a short-term Buy rating on the stock ahead of the 3GSM World Congress in Barcelona in February; he thinks the company will announced a 3G version of the phone, as well as potentially a carrier.

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Um takes over coverage of the stocks from Ben Reitzes, who now covers the sector for Lehman. Um sees 2008 PC global units growing 13 percent, propelled by strong notebook growth and strength in emerging markets. That said, Um reports that his near-term bias on the PC hardware market is “neutral, largely reflecting concerns regarding slowing GDP and consumer/enterprise spending.” While he sees healthy unit growth, he also says that competition, mix shift and technological advances will drive down average prices. He sees industry-wide revenue grow next year at nine percent.

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