Competing Forecasts on Kindle Sales

Amazon is expected to release version 2 of the highly popular Kindle book reader product on February 9, 2008, and several analysts are estimating past sales and forecasting future sales of the product, which differ widely.

Merrill Lynch/BofA analyst Justin Post has used long-term unearned revenue numbers and sequential changes in unearned amortization from Amazon’s financials to estimate 2008 kindle unit sales of 374K and 3Q unit sales of 142K. He also estimates Kindle revenues (both hardware and media) of $48 million in 2008 and is forecasting sales of $207 million in 2009, or 1% of 2009 revenues, and $422 million in 2010. As a side, he is estimating 500K Prime additions in 4Q.

Citigroup analyst Mark Mahaney estimates unit sales of 500K Kindles in 2008 but thinks that it is not unreasonable to assume unit sales of up to 750K. He is basing his estimates on revelations in Sprint's filings. He is estimating Kindle related revenues of $153 million in 2008, $429 million in 2009, and $1.2 billion in 2010, off the strength of 500K, 1 million, and 3.5 million unit sales for those years, respectively. His forecasts is based on comparisons to iPod adoption rates and Kindle pricing.

The Citi analyst was the first to cause a stir with Kindle estimates last year, which were then somewhat disapproved by Amazon as too aggressive. Here are his thoughts on what to expect at the Feb. 9 conference.

"What To Expect On February 9th...
Amazon will be hosting a news conference next Monday, February 9th, at the
Morgan Library & Museum in NYC. CEO Jeff Bezos will host the event.
Expectations are running high that Bezos and company will debut the Kindle
2.0. We believe these are reasonable expectations.
Blogs and newspapers have carried reports and prototype pictures of the
Kindle 2.0 for several months now. What seems consistent is that the new
device will be longer and thinner than Kindle 1.0, with a more user-friendly
keypad and device side-buttons that are less prone to accidental
hits/accidental page turns. We don’t expect the device to have touch-screen
capability, nor do we expect the device to have a color screen. We also expect
the device to incorporate faster page-turning functionality.

Among other key issues, we will be looking to see whether the price point is
lowered from the existing $359 level and whether Amazon will be able to
announce any new wireless carriers for the device, particularly in international
markets. On price, Amazon already lowered the price of the Kindle from the
initial $400 level to $359, and we would expect continued pricing cuts going
forward. We wouldn’t be surprised to see the new Kindle come out closer to
$300. And as for international wireless carriers, we are actually surprised that
Amazon hasn’t been able to line these up already. But we wouldn’t be
surprised to see them introduced along with the 2.0 version."