Evidently, RIM is looking to ship one million PlayBooks in the first quarter alone. Market sources tell the occasionally reliable DigiTimes that Quanta Computer has begun volume production of the PlayBook with a shipment target “expected to top one million units.” Which seems a decent number. That said, it does pale in comparison to early iPad shipments, the obvious touchstone here. Apple sold more than 300,000 iPads the day the device went on sale. And just 27 days later it had sold one million.

“We know we have tough competition, and this is a completely new product,” Vice President Achim Berg said in an article on the company’s press Web site. “We’re in the race–it’s not a sprint but we are certainly gaining momentum and we’re in it for the long run.”

Until now, Microsoft had said that it was “happy” with sales, but had refused to say how many devices had sold. AT&T and T-Mobile had also declined to say how many models had sold since U.S. sales started Nov. 8. Windows Phone 7 models went on sale in Europe in late October.

Berg repeated that the sales have met Microsoft’s expectations.

“Yes, and I think our expectations are realistic for a new platform,” he said, noting that the company is essentially starting over with Windows Phone 7. He also cautioned against comparing it to the competition. “It’s a bit of apples and oranges comparison; our numbers are similar to the performance of other first generation mobile platforms,” Berg said. “We introduced a new platform with Windows Phone 7, and when you do that it takes time to educate partners and consumers on what you’re delivering, and drive awareness and interest in your new offering. We’re comfortable with where we are, and we are here for the long run; Windows Phone 7 is just the beginning.”

Microsoft is expected to announce an update for Windows Phone 7 in January that will add a copy-and-paste function as well as support for CDMA carriers. That will allow Verizon and Sprint to offer Windows Phone 7 models. Both carriers have said they will, but Microsoft made the decision to delay CDMA support until next year in order to meet its goal of having the initial version out by this year’s holiday season.

Berg also noted it plans to have phones at a variety of price points next year. Nearly all of the models that went on sale in the U.S. were priced at $199, although there has been some significant discounting.

IDC analyst Al Hilwa said in a note that he is particularly impressed by the speed with which Windows Phone 7 applications have hit the market.

“The Windows Phone 7 Marketplace reaching 4,000 apps two months after launch has to be one of the most rapid ramp-ups in recent times,” he said in a note to reporters. “Of course with both iPhone and Android app stores being much bigger, Microsoft still has its work cut out for it. However, reaching this milestone faster than Android which took from Oct 2008 to March 2009 to reach about the same level, it is not bad!”

Hilwa also said that Microsoft hasn’t done bad in having 10 phones on the market in 30 countries.

“Windows Phone 7 has changed the conversation and I would not be surprised if Microsoft had the third largest app portfolio in the industry by the middle of next year,” he said, pointing to the company’s strong set of developer tools.

Update: It is worth noting that the 1.5 million units represent “sell in”–that is, the phones that device makers like Samsung and HTC have sold to carriers, not the number of phones actually purchased by consumers. We’ll have to wait a bit to hear about those “sell through” numbers.

Not a huge number, but together with the 2.5 million units Foxconn’s main production site at Shenzhen can produce each month, it’s presumably enough to offset the inevitable spike in holiday demand. And once Chengdu’s 50 iPad production lines are up and running in 2011, Foxconn will be able to produce about 40 million iPads per year–according to Digitimes, anyway.

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.”

Evidently there’s quite a bit of sales momentum in the iPad 3G, despite its $129 price premium over the Wi-Fi-only version and monthly data costs. Wu upped his forecast iPads to two million units from one million. Meanwhile, Mac sales have been ramping up thanks to the recent debut of new laptops.

“Our sources indicate that Mac momentum is strong helped by a recent significant refresh of the MacBook Pro to new Intel Arrandale processors, offering much better price-performance and an industry best 8-10 hours of battery life,” Wu writes.

“While it is still early,” the analyst adds, “we believe the Mac business is tracking to its third consecutive quarter of 20%+ Y/Y unit growth indicating further share gains.”

With that in mind, Wu has raised his projected Mac sales for the quarter to 3.2 million, a slight increase from his previous forecast of 3.1 million.

Apple (AAPL), as it always does, left plenty of room for upside surprises to revenue when it last reported earnings. Sounds like the company is more than likely to deliver on them when it next reports.

A spectacular gain, which far outpaced the 21.7 percent growth of the broader mobile market. And the fact that it follows a 38 percent surge in the fourth quarter, historically the strongest quarter of the year, makes it all the more impressive.

So which smartphone manufacturers benefited most from this spike in growth? None more than Apple (AAPL). The company saw sales of its iPhone rise 131.6 percent year-over-year for a 16.1 percent share of the global smartphone market. Motorola (MOT) and HTC, too, experienced dramatic increases in sales. Motorola’s rose 91.7 percent for a market share of 4.2 percent; HTC’s rose 73.3 percent for a 4.8 percent share (see table below; click to enlarge).

Still, the market leaders remained the same: A 56.9 percent surge in sales gave Nokia (NOK) the top spot in the market with a 39.3 percent share and the 45.2 percent increase Research in Motion (RIMM) enjoyed landed it in the number two spot with a 19.4 percent share.

Apple’s first quarter was a blowout, as was the one before it. So too is the company’s latest. Reporting second-quarter earnings after the bell Tuesday, Apple rolled out the big numbers once again. The company posted a profit of $3.07 billion on revenue that rose 49 percent to $13.5 billion. Earnings per share were $3.33, far more than the $2.45 per share analysts had been expecting.

Apple (AAPL) said it sold 8.75 million iPhones for the quarter, up more than 131 percent from the year prior; 2.94 million Macs, up 33 percent; and nearly 10.9 million iPods, down one percent. Strong numbers, all. Even iPod sales beat the Street’s consensus of nine million units shipped.

“We’re thrilled to report our best non-holiday quarter ever, with revenues up 49 percent and profits up 90 percent,” CEO Steve Jobs said in another variation of the statement the company has sent out so many times before. “We’ve launched our revolutionary new iPad and users are loving it, and we have several more extraordinary products in the pipeline for this year.”

At $261.36, Apple shares are up nearly seven percent in after-hours trading.

Apple’s earnings release below as well as notes from the earnings call.

Notes From the Call

• During introductory remarks, Apple CFO Peter Oppenheimer pointed out that sales of Macs outpaced those of PCs. According to IDC, PC sales grew 24 percent during March quarter. Mac sales rose 33 percent.
• iPod touch sales grew 63 percent year-over-year. Apple controls over 70 percent of the U.S. market for digital media players.
• Apple’s iTunes Store generated $1.1 billion in sales (music, video and apps). Some four billion apps have been downloaded to date. There are currently 3,500 apps for iPad.
• Retail store revenue was $1.68 billion, a 22 percent increase. The company sold 606,000 Macs through its retail outlets, an increase of 38 percent. Half of those were sold were to customers who never owned a Mac before. Apple plans to open 40 to 50 new stores in fiscal 2010.
• Didn’t quite catch it, but there was some mention of a “future product transition.” Not sure what this refers to, but certainly interesting.
• This was the best quarter ever for iPhone sales–131 percent year-over-year growth. That’s three times the growth IDC has estimated for the smartphone market as a whole.
• Are folks who would have bought Macs now buying iPads instead? Apple COO Tim Cook said the company hasn’t seen any Mac cannibalization yet. He also said it’s far too early to tell which version of the device–Wi-Fi-only or Wi-Fi plus 3G–is selling better.
• iPhone units shipped in the Asia-Pacific region were up year-over-year more than nine times, Cook said. “Through the first half of the fiscal year, our revenue from greater China was over 1.13 billion,” he added. “That’s up over 200 percent year-over-year.”
• On iAds: “We’re just putting our toes in the water, so don’t expect much from us this calendar year.”
• Remarking on the company’s iPhone exclusivity agreements, Cook said that in those markets where Apple has moved from exclusive to nonexclusive, it has seen its unit share and market share improve. No comment on whether or not the company will end iPhone exclusivity in the U.S.
• Cook: “We think the market size for the iPad is very large.”
• Asked about the delayed international launch of the iPad, Cook said there isn’t “a production problem per se…but the level of demand has shocked us, at least initially.”
• Apple is still happy with AT&T (T) and its network? AT&T has made “big strides,” he noted, adding that “we look forward to continued improvement.”
• Cook on Apple TV: “It’s still a hobby for us.”
• Cook on iPad versus netbook: “I can’t think of a single thing the netbook does well….To me it’s a no-brainer that someone would buy an iPad over a netbook.
• Are consumers buying different kinds of apps for the iPad than for the iPhone? Too early to tell, though app sales and book sales are both quite strong.
• Question about the “extraordinary products” Apple mentioned in its earnings release. No comment. “We’re not going to help our competitors by answering that,” said Oppenheimer.

Apple Reports Second Quarter Results
Record March Quarter Revenue and Profit
iPhone Sales More Than Double
CUPERTINO, California—April 20, 2010—Apple® today announced financial results for its fiscal 2010 second quarter ended March 27, 2010. The Company posted revenue of $13.50 billion and net quarterly profit of $3.07 billion, or $3.33 per diluted share. These results compare to revenue of $9.08 billion and net quarterly profit of $1.62 billion, or $1.79 per diluted share, in the year-ago quarter. Gross margin was 41.7 percent, up from 39.9 percent in the year-ago quarter. International sales accounted for 58 percent of the quarter’s revenue.

Apple sold 2.94 million Macintosh® computers during the quarter, representing a 33 percent unit increase over the year-ago quarter. The Company sold 8.75 million iPhones in the quarter, representing 131 percent unit growth over the year-ago quarter. Apple sold 10.89 million iPods during the quarter, representing a one percent unit decline from the year-ago quarter.

“We’re thrilled to report our best non-holiday quarter ever, with revenues up 49 percent and profits up 90 percent,” said Steve Jobs, Apple’s CEO. “We’ve launched our revolutionary new iPad and users are loving it, and we have several more extraordinary products in the pipeline for this year.”

“Looking ahead to the third fiscal quarter of 2010, we expect revenue in the range of about $13.0 billion to $13.4 billion and we expect diluted earnings per share in the range of about $2.28 to $2.39,” said Peter Oppenheimer, Apple’s CFO.

Speculation about a potential Google/Bing swap on Apple’s platforms has swirled for months, but Barclays Capital analyst Douglas Anmuth notes that we’ll get our first real clue in a couple days.

When Apple ships its first iPads on Saturday, lots of Google (GOOG) investors will head straight to the gadget’s Web browser to see which search engine Apple (AAPL) is using as its default choice. Straightforward logic: If Bing ends up on the iPad, then the iPhone–with its installed base of 48 million units–would be next.

Microsoft (MSFT) would certainly like to have pole position, and Anmuth notes that the company has bought Bing some distribution via toolbar deals with HP (HPQ), Dell (DELL), Verizon (VZ) and others. So what does he think will happen this weekend?

Overall, we believe there is a better than 50% probability that Google remains the default on Apple mobile devices–if nothing more because Apple is extremely focused on the user experience and Google’s 65%+ search market share speaks for itself. As a result, Apple may not want to risk disrupting the iPad or iPhone user experience with a shift to Bing.

Shorter version: Google may stay. Or go. We’ll see.

Which is not to say that Sacconaghi disputes the iPad’s potential as a market-defining device. He just wonders if there aren’t a bit too many unknowns at present to make hard and fast predictions about its sales trajectory.

“What will international pricing be?” Sacconaghi asks in a research note issued this morning. “What sort of media content will be available, and how quickly? How rapidly will Apple increase distribution beyond the 10 countries announced so far, compared to the iPhone which is available in 89 countries? How prevalent will non-Apple distribution be?”

Reasonable questions. And without answers to them, Sacconaghi is playing it safe with his sales estimates. He expects Apple (AAPL) to sell between 300,000 and 400,000 iPads over launch weekend–including pre-sales. But he figures the device will sell five million in its first full year at market and 6.8 million in fiscal year 2011.

“We note that the initial iPad launch will be a US only launch and will not include 3G models; we suspect that total (including pre-sales) first weekend sales will be slightly higher than the original iPhone’s first weekend (270K), given the iPhone had a similar price, and was US exclusive (although it did not offer pre-orders),” Sacconaghi writes.

“Our analysis suggests that iPhone sales run rates have fallen significantly (i.e., by a factor of 4x – 9x) following launch weekends; we think a drop-off in sales at the high end of this range is likely appropriate for the iPad, given that pre-sales will have boosted first weekend sales. Such a drop-off in iPad sales from our launch weekend forecast would result in unit sales for year 1 of about 5 million units in-line with our estimates.”

That might not be an “over-zealous” estimate in Sacconaghi’s eyes, but it’s certainly a bullish one. Still, the analyst concludes that the iPad’s near term financial implications for Apple may not prove to be as magical as investors hope.

“We believe that while the iPad may evolve meaningfully over time, we expect its impact on Apple’s earnings to be minimal during FY 10,” he says. “In the immediate term, iPad expectations appear over-zealous, which could provide a relative short-term disappointment for investors.”

FURTHER READING:

Launch Day iPads Sold Out

iPad Available at “Most Best Buy Stores” This Saturday

Apple Grabs iPad Trademark From Fujitsu

Apple Now Accepting iPad App Submissions

Early Supplies of iPad Accessories Dwindling?

Initial iPad Demand Greater Than Initial iPhone Demand

iPad TV?

Apple’s Tablet: Read Different?

Rumored Apple Netbook Actually an E-book?

Coming Soon From Apple: Big Touch?

iTablet: Apple’s Killer App for Higher Ed

COMPLETE IPAD COVERAGE

“Obviously, we’re disappointed in our sell-through and we’re working very aggressively right now to resolve that. … We’re working closely with all of our carrier partners and our future partners. … We want to make sure that the point of sale is well trained. So step one is to make sure that we can get in with the point of sale. Remember, webOS is a brand new operating system. And it takes a while for the people in the stores to get accustomed to something new.”

– Palm CEO Jon Rubinstein

Palm shipped 960,000 smartphones during its third quarter–23 percent more than in the previous quarter. Too bad the company sold fewer than half of them, because now, on top of all its other woes, Palm (PALM) is developing an inventory problem, a nasty one, too. Looking over the company’s latest financials, Morgan Stanley (MS) analyst Ehud Gelblum puts Palm’s total channel inventory at an “alarming” 1.154 million devices.

That’s 197 days of inventory Palm hasn’t been able to move off the shelves.

Gelblum figures that even if Palm reduces its channel sell-in in its fourth quarter and manages to boost sell-through from 408,000 devices to 575,000 devices, the company will end up with a full quarter’s worth of excess inventory at the end of May.

That’s just gruesome. And as hard as Palm is striving to improve sell-through, it’s not likely to improve any time soon. Says Gelblum: “We expect Palm’s new in-store initiatives and better advertising to improve sell-thru, but excess inventory, which we estimate at 882k units or nearly 197 full days of inventory likely weigh on new device shipments and thereby revenue for several more quarters.”

Adding detail, Gelblum paints a challenging picture. “With channel inventory levels sky high, cash burn going well north of $130-150M next quarter and both a new Android phone and likely a new iPhone model all hitting store shelves in the spring and summer timeframe, we see little way numbers could begin to move back up again until at least the end of the calendar year at the earliest.”

How can Palm drag those sky-high inventory levels back to earth? Perhaps a price cut like the one inspired by its 2001 inventory glut?

In a research note this morning, Canaccord Adams analyst Peter Misek says he has heard rumblings that production issues at Apple’s (AAPL) manufacturing partners may keep the company’s iPad in short supply when it first goes on sale.

“We have…heard that the upcoming iPad launch may be somewhat limited as a manufacturing bottleneck has impacted production of Apple’s newest device,” Misek writes.

“An unspecified production problem at the iPad’s manufacturer, Hon Hai Precision,” the analyst explains, “will likely limit the launch region to the US and the number of units available to roughly 300K in the month of March, far lower than the company’s initial estimate of 1,000K units.”

Looking ahead, he adds, “The delay in production ramp will likely impact Apple’s April unit estimate of 800K as well. It is also possible that, given the limited number of units available in March, the launch will be delayed for a month.”

If Misek is right–and that’s a big if; Misek’s prediction earlier this year that Apple would debut a brand new iPhone on Verizon (VZ) at its January special event proved woefully off–it’s a slight setback for Apple, which obviously wants to take good advantage of enthusiasm for the device to really blow out first-year sales. That said, since this would be only a temporary production delay, it probably wouldn’t have that much effect on sales.

Says Misek: “We believe that the only material impact from the iPad delay could come in the form of frustrated consumers and some modest loss of lustre for the company’s product launch.” He figures Apple will sell 550,000 units in its third quarter, which ends in June, 1.2 million in fiscal year 2010 and 3.5 million in 2011.

The resulting demand for NAND flash will be “insatiable,” says iSuppli analyst Michael Yang. And supplies for the year will likely be strained. iSuppli figures that in 2010, iPhone shipments will reach 33 million units, up from 25.1 million in 2009–each with an average of 35.2 gigabytes of NAND.

That’s a hell of a lot of flash. Add to that the memory requirements of Apple’s iPod line and its new iPad slate and, well, you can see where things are going (see chart below; click to enlarge). Says Yang: “With the iPhone already the largest application for NAND, this huge growth is likely to lead to some periods of under-supply for the year.”

That’s not likely to be a problem for Apple (AAPL), which typically inks long-term supply agreements with its flash suppliers to ensure that its needs are met. Recall that the company boasted of a half-billion dollar flash memory deal with Toshiba last July.

“We did a long-term supply agreement with Toshiba,” Apple COO Tim Cook explained at the time. “As a part of that, as part of the terms and conditions, we paid them $500 million as a pre-pay earlier in the quarter. You know, we view Flash as a very key component for us because as you know we use it in so much on so many of our products and also we are a reasonable percentage of the user of Flash on a worldwide basis.”

But an undersupply of flash will almost certainly cause difficulties for other consumer electronics companies, which may be forced to grapple with part shortages and price increases across the entire NAND flash market.

According to ABI Research, the iPhone’s share of the worldwide smartphone market in Q4 2009 slipped to 16.6 percent from 18.1 percent in the previous quarter.

Now, while it’s certainly ironic to lose market share in a record quarter, it’s important to keep a few things in mind.

First, counting units sold is just one measure of a device’s success at market. Another measure worth considering is profits relative to revenue. And according to some analysis we’ve discussed here before, Apple (AAPL) claims an inordinate share of the handset industry’s profits.

Second, iPhone sales typically spike in the third quarter–the first full quarter after the latest iPhone launch (in this case, the 3G S), and then taper off slightly after that. They did so after the 3G debuted, and they’ll almost certainly do so again when the company launches the device’s next iteration.

Finally, the fact that Apple has managed to claim 16.6 percent of a market in which it had no presence whatsoever three years ago and that it did so with a single device is astonishing.

So, does loss of market share signify the beginning of a decline in the iPhone’s popularity or the profits it generates for Apple? Not likely.

Remarkably, Nokia (NOK), which saw its share of the smartphone market decline to 35 percent from 41 percent last quarter, managed to push it back up to 40 percent in Q4. Quite a surprise considering that many expected the company’s smartphone share to fall even lower this quarter.

Anyway, on to the numbers:

Fourth-quarter net income was 948 million euros ($1.33 billion), or 26 eurocents a share. That’s up from 576 million euros, or 15 eurocents a share earned in the year-earlier period, and above consensus estimates, which called for earnings of 19 eurocents a share. Sales during the quarter fell 5.3 percent to 12 billion euros. But the number of handsets shipped rose 12 percent to 126.9 million units.

“In the fourth quarter the demand environment for handsets ended up being better than we anticipated and we took advantage of this upside,” Nokia CEO Olli-Pekka Kallasvuo said during a conference call.

It remains to be seen whether Apple (AAPL) has created an entirely new computing category with the iPad. But at the very least, analysts seem to believe the company has created an enduring growth engine.

• Charlie Wolf, Needham & Company
  “Because Apple is defining a new category of devices, sales of the iPad are likely to ramp slowly. But the $500 starting price point is low enough to attract a sizable portion of the early adopter crowd, consisting of iPhone and iPod owners. It’s noteworthy that the iPad’s initial price is below the iPhone’s initial price and not much higher than the price of the first iPod, introduced in 2001. Our best guess at this time is the Apple could sell four million iPads in its initial year on the market, which translates into at least $2 billion of revenue.”
• Gene Munster, Piper Jaffray
  “Originally we were estimating sales of 2m units in the first calendar year at a price point of $600-$800. With the actual $499/$629 price point, we believe Apple will sell 3m-4m units in the first 12 months….After using the iPad, we believe it will cannibalize iPod touch sales, but not Mac sales. The gadget is a premium mobile device, not a computer; as such, we see some iPod touch buyers stepping up to the iPad, but consumers looking for an affordable portable computer will likely stick with the MacBook lineup.”
• James McQuivey, Forrester
  “The iPad is a grown up iPod Touch. Apple has taken the safe route of offering its existing customers an option that goes beyond today’s iPod Touch in size and capability, but it has not offered a new category of devices that tackles the 5-6 hours of media we each consume every day. With no integrated social media for sharing photos, recommending books, and sharing home video, the iPad misses a big piece of what makes media so powerful. As it stands, by relying on the App Store as the single most important draw of the device besides its attractiveness, the iPod Touch is a significant step toward making tablets respectable. But making tablets respectable should have been the least of Apple’s ambitions. It had (and still has) the opportunity to create a new media experience in consumers’ lives. As it stands, a quick, well-structured response from Amazon in the next version of Kindle could easily be a contender here. That’s why I say that the iPad is priced lower than expected because it is less revolutionary than expected.”
• Mike Abramsky, RBC
  “Like the first iPod and iPhone, uptake may in time surprise as future versions improve and costs decline. The iPad’s intuitiveness and simplicity at key tasks (browsing, email, media, watching videos, games, reading, working) may appeal to consumers for whom existing PC experiences are intimidating, inadequate, delivering 90%+ of the features of traditional PCs with less complexity than traditional PCs. Uptake however may require in-store demos to truly experience the richness of iPad’s experience.”
• Tavis McCourt, Morgan Keegan
  “The iPad has been long anticipated so we are not shocked by the lack of stock movement. Given the price point, we suspect initial sales will be strong (this is Apple, and there are many enthusiasts), and then simmer down a bit after a few months. The ultimate success of a new product category will be the unique apps developed for this device, and with the SDK just going out today, it is hard to know how impressive they will be. However, the good news is that aside from maybe modest iPod Touch cannibalization, we doubt that the iPad will cannibalize any revenues from the massive margin pools within the iPhone and Mac product categories.”
• Craig Moffett, Bernstein Research
  “Longer term, the iPad offers the potential to redefine the boundaries between print and video, turning formerly passive media into active ones, and in the process making what are currently low bandwidth applications (say, reading a newspaper) become much more bandwidth intensive (e.g. by embedding video rather than still pictures).”
• Mark Moskowitz, J.P. Morgan
  “iPad is not for everyone, and the first-generation product is sure to have its critics given the prelaunch buzz. In our view, the iPad is a smart, nimble device for heavy content users–Apple’s core customer. iPad is a hybrid of sorts, marrying select benefits of the smartphone and notebook. We expect the market to be small at first, but the gamer and education verticals should construct a meaningful growth ramp longer term.”

That’s the word from Oppenheimer & Co. analyst Yair Reiner, who says his checks into Apple’s supply chain indicate that “the manufacturing cogs for the [device] are creaking into action.” According to Reiner, the tablet will have a 10.1-inch multitouch LCD display and a price of $1,000.

Apple (AAPL) plans to produce as many as one million units per month. So assuming Apple needs to build five to six weeks of inventory before launch, we can expect the tablet to arrive at market some time in March or April 2010. In preparation, the company has evidently been evangelizing about the device to the publishing industry.

“Contacts in the US tell us Apple is approaching book publishers with a very attractive proposal for distributing their content,” Reiner wrote in a note to clients today. “Apple will split revenue 30/70 (Apple/publisher); give the same deal to all comers; and not request exclusivity. We believe the typical Kindle/publisher split is 50/50, rising to 30/70 if Kindle is given ebook exclusivity.”

Noting dissension in the ranks, Reiner adds, “As innovative as it is, we believe the Kindle has disgruntled the publishing industry (book, newspaper, and magazine) by demanding exclusivity, disallowing advertising, and demanding a wolfish cut of revenue. The tablet is set to change that. It should also make ebooks more relevant for education by simplifying functions such as scribbling marginalia.”

PREVIOUSLY:

• The Apple Tablet Is Delayed? So What?
• $1.9 Billion in Capex? What’s Apple Planning?
• Apple’s Tablet: Read Different?
• Imaginary Demand for Mythical Apple Tablet Exceeds All Estimates
• Apple Tablet Coming to AT&T?
• New From Piper Jaffray Analyst Gene Munster: The Apple iPad
• Rumored Apple Netbook Actually an E-book?
• iTablet: Apple’s Killer App for Higher Ed
• iFugly

Overall, Forrester predicts, U.S. consumers will purchase three million e-readers by the end of this year. That’s a bump from the analyst shop’s earlier prediction of two million. It thinks Amazon (AMZN) will claim 60 percent of the market, with Sony (SNE) taking 35 percent and the rest going to also-rans like iRex.

Have to say, I find that one a bit head-scratching: I gather that Sony’s device is supposed to have created a footprint overseas, but while I see the occasional Kindle on the subway or an airplane, I have never, ever, ever seen a Sony reader in the wild. Have you?

For what it’s worth, Forrester figures e-reader sales will double, to six million next year, pushed by media buzz along with the introduction of new devices, including the Apple (AAPL) wondertablet that everyone is convinced will show up–someday. They may even be right.

But here’s a very slight twist: The sales decline slowed in the most recent quarter. U.S. sales dropped 11.1 percent in Q3, compared to a 14.5 percent drop in Q2, according to Nielsen Soundscan.

That’s the good news. The bad news is that Michael Jackson isn’t going to pass away again–and that unless they finally do come to Apple’s (AAPL) iTunes, there probably isn’t another way to repackage the Beatles again. Billboard:

Renewed interest in the Beatles and Michael Jackson slowed the decline of U.S. album sales in the third quarter, although the industry is still on track to fall for the eighth time in nine years….

Music retailers are hoping that the continued performance of Jackson and Beatles albums and a strong fourth-quarter release schedule will continue to make up lost ground.

During the quarter, Jackson’s June 25 death fueled sales of about 5 million units, and the September 9 re-release of the Beatles catalog has sold 1.3 million units so far.

So far this year 11 albums have topped the 1 million-unit mark, the same number as in 2008. In 2008, the top seller was Lil Wayne’s “Tha Carter III,” at 2.5 million units; this year’s top seller is Jackson’s “Number Ones,” at 1.8 million units.

In a research note issued this morning, Huberty–noting that the iPhone’s market share grew 136 percent in France when Apple switched to multicarrier agreements there–said iPhone sales could more than double if the company took a similar tack in other countries.

“We expect Apple to broaden iPhone carrier distribution over the next two years and believe this opportunity is under-appreciated by the investment community,” she wrote. “This total opportunity is substantial–it adds up to an incremental 20.3M iPhone units and $3.76 in adjusted EPS, 100 percent and 41 percent of iPhone units and adjusted EPS respectively.”

Adding further details to her projections, Huberty continues: “In the top six iPhone markets that are still exclusive, we believe that Apple’s market share could rise to 10 percent, on average, in a multiple carrier distribution model from 4 percent today. These six markets represented almost 70 percent percent of iPhone shipments in C2Q09.”

Huberty also claims that if Apple (AAPL) were to end its exclusivity deal with AT&T (T) and add Verizon (VZ) as a second carrier, its share of the U.S. market would more than double, rising to 12.2 percent from 4.9 percent today.

Huberty, it should be noted, isn’t the first analyst to make such a claim. In June, Bernstein Research analyst Toni Sacconaghi said that a deal with Verizon could more than double U.S. iPhone sales in the near term. Said Sacconaghi: “Verizon’s postpaid subscriber base is not only larger than AT&T’s, but more importantly, is untapped whereas we estimate more than 10 percent of AT&T’s postpaid users already have an iPhone.”

You see, Palm (PALM) defines units sold as products sold to on-the-street customers or to resellers like Best Buy (BBY) and Amazon.com (AMZN). Which means that Palm can report a unit sold while it’s still sitting at inventory at various retail outlets. In other words, a Pre sold is not necessarily a Pre activated. As Eller notes, that’s problematic.

“We have been perplexed by a disconnect between PALM’s device units sold and our estimates of store level sell through,” Eller writes. “According to PALM’s reported sell through, inventory increased by 13k units and since the ‘vast majority’ of both the device units shipped and the device units sold were units of the Pre, there couldn’t be an inventory problem. The gap between the two is only 13k.”

Continuing, Eller adds a cautionary note: “However, since the company recognizes revenue on sell in to the channel and the company defines device units sold as units that have been shipped from Sprint (their primary customer) to either customers or second tier distributors, PALM could offer investors a high number of units shipped but still have a glut of inventory in the channel. We believe that channel inventory is currently about 11 weeks, which we believe will pressure reorder rates and make it more difficult to sell high ASP products going forward.”

An 11-week glut of inventory in the channel? If that’s the case, it’s certainly cause for concern, more so because many investors are evidently unaware that this is even a possibility. “[Palm’s definition of sold] does not appear to be understood by investors,” Eller notes. “We polled several of the investors who attended the Boston road show lunch and each was under the impression that sell through translated into customer activations. How can this be?”

Good question. Palm and Sprint (S) investors both might want to pay a bit more attention to Sprint’s 10-k in the future.

I’ve asked Palm for comment and will update this post when it responds.

UPDATE: This just in from Palm:

“The sell-through data we post reflects carriers’ sales to their customers. For example, Sprint customers include consumers who buy in a Sprint store, and Sprint retail partners such as Best Buy and RadioShack. We rely on our wireless carriers to provide us with sell-through data, and we note this fact in our 10Q.”

[Image credit: Flickr/Spintar]

You see, Palm (PALM) defines units sold as products sold to on-the-street customers or to resellers like Best Buy (BBY) and Amazon.com (AMZN). Which means that Palm can report a unit sold while it’s still sitting at inventory at various retail outlets. In other words, a Pre sold is not necessarily a Pre activated. As Eller notes, that’s problematic.

“We have been perplexed by a disconnect between PALM’s device units sold and our estimates of store level sell through,” Eller writes. “According to PALM’s reported sell through, inventory increased by 13k units and since the ‘vast majority’ of both the device units shipped and the device units sold were units of the Pre, there couldn’t be an inventory problem. The gap between the two is only 13k.”

Continuing, Eller adds a cautionary note: “However, since the company recognizes revenue on sell in to the channel and the company defines device units sold as units that have been shipped from Sprint (their primary customer) to either customers or second tier distributors, PALM could offer investors a high number of units shipped but still have a glut of inventory in the channel. We believe that channel inventory is currently about 11 weeks, which we believe will pressure reorder rates and make it more difficult to sell high ASP products going forward.”

An 11-week glut of inventory in the channel? If that’s the case, it’s certainly cause for concern, more so because many investors are evidently unaware that this is even a possibility. “[Palm’s definition of sold] does not appear to be understood by investors,” Eller notes. “We polled several of the investors who attended the Boston road show lunch and each was under the impression that sell through translated into customer activations. How can this be?”

Good question. Palm and Sprint (S) investors both might want to pay a bit more attention to Sprint’s 10-k in the future.

I’ve asked Palm for comment and will update this post when it responds.

UPDATE: This just in from Palm:

“The sell-through data we post reflects carriers’ sales to their customers. For example, Sprint customers include consumers who buy in a Sprint store, and Sprint retail partners such as Best Buy and RadioShack. We rely on our wireless carriers to provide us with sell-through data, and we note this fact in our 10Q.”

[Image credit: Flickr/Spintar]

“There’s room for three to five players in this space. We don’t have to beat each other to prosper.”

– Palm CEO Jon Rubinstein

Palm CEO Jon Rubinstein likes to say smart-phone makers “don’t have to beat each other to prosper,” but it’s beginning to look like they–or, rather, Palm–might have to. Because while the Pre may have put Palm (PALM) back in the game, it’s not clear how long it can keep it there. With competition in the emerging smart-phone market ratcheting up as we head into the holidays, some analysts are predicting that Palm’s quarterly sales may decline–sharply.

“[Palm’s] guidance of a sequential decline in revenues in the second quarter implies that Pre sales are not off to the races,” Needham & Co. analyst Charlie Wolf wrote in a research note today. “Although Palm did not say what Pre sales were in the quarter, they appear to have been around 600,000 units, about 100,000 above our estimate. Palm indicated that revenues could fall to $240 million to $270 million in the second quarter, a number that implies that Pre sales could fall to 500,000 units vs. our previous estimate of 750,000 units.”

Interesting that Wolf pegs Pre sales as being above his estimate, since Palm hasn’t yet broken that number out. Indeed, in a conference call with analysts yesterday the company was so quick to dodge questions about Pre sales that I assumed it’s not an impressive number. But if the company really did ship 600,000 units as Wolf contends, that would suggest it’s doing pretty well at market, though certainly not as well as the Apple (AAPL) iPhone or Research in Motion’s (RIMM) BlackBerry. Odd then, that Palm wouldn’t disclose a hard sales number.

“The Pre and its siblings running on Palm’s WebOS software platform appear to be a serious contender in the smartphone market,” Wolf concludes. “But it would be premature at this point to declare it a winner in view of the fact that the smartphone market will shortly be overrun with new phones from Motorola and others running on the Android platform as well as new BlackBerry models in time for the holiday selling season.”

Sure, there might be room for three to five players in the smart-phone space, as Rubinstein claims. But that space is currently occupied at least seven players–Apple, RIM, Nokia (NOK), Motorola (MOT), Samsung, Sony Ericsson and Palm. Which means somebody’s got to go. So while Palm might not have to beat anyone to prosper, it may have to, to survive.

Excluding charges related to stock options and other items, Palm (PALM) said net losses were $13.6 million, or 10 cents a share, for the recent period. Revenue slipped to $68 million from $366.9 million in the same period last year. Excluding revenue deferred from sales of the company’s new Pre handset, Palm said adjusted revenue would have been $360.7 million. Analysts had expected the company to turn in a loss of 24 cents a share on sales of $291 million.

Palm shipped a total of 823,000 smart phone units during the quarter, up 134 percent over the fourth quarter of fiscal year 2009, but down 30 percent year over year. Smart phone sell-through for the quarter was 810,000 units, up 76 percent from the fourth quarter of fiscal year 2009 and down 21 percent year over year.

Speaking to analysts Thursday afternoon, Palm execs claimed that “the vast majority of new sales” for the quarter were generated by the Pre. But they declined to separate Pre sales from those of other handsets.

Skeptics will no doubt look at this and conclude that Palm didn’t meet expectations for Pre shipments of about 520,000. That, or the company is still selling a hell of a lot of Centros.

“We’re making significant progress with Palm’s transformation, and our culture of innovation is stronger than ever,” said Jon Rubinstein, chairman and chief executive officer. “We’re launching more great Palm webOS products with more carriers, and turning our sights toward growth.”

A few more Jon Rubinstein remarks from the earnings call:

On additional form factors:

I’m a big believer in families of products, and we’ll continue to evolve the line in the future and have a family of products for webOS.

On Carrier Customization:

We don’t really talk about our carrier agreements.

On Pre sales:

Sell-in and sell-through…the vast majority of new sales…relate to the Pre.

On the Pixi cannibalizing Pre sales:

The Pixi is a more cost-effective offering, so yes we expect some people might come into the store looking to buy a Pre and end up with a Pixi. But others might come in looking for a Pixi and end up with a Pre. As I said, we’re big believers in families of products. We’re happy to have two webOS products on the market.

On carrier diversification:

Sprint did a phenomenal launch with the Pre. They invested heavily in advertising….We’re looking forward to launching the Pixi with them as well. We don’t talk about our roadmap, but we’ll have more carriers and more products in the future.

On Motorola’s new Motoblur service:

We don’t really know much about it. To build really great consumer products, you have to own the OS and services. And the fact that we have webOS as our asset is really important.