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.”

That’s what ngmoco co-founder and Electronic Arts (ERTS) alum Neil Young said of Apple’s iconic handset at the Game Developers Conference in San Francisco earlier this year, and it’s worth reflecting on a bit in light of a new report from Bernstein Research analyst Toni Sacconaghi that claims the iPhone OS will soon create pricing and customer migration pressure for traditional gaming platforms.

Noting that some 665-760 million games may have been downloaded from the Apple (AAPL) App Store during the last 12 months, Sacconaghi estimates that the installed base for the iPhone and iPod touch platform could amount to about one third of the total handheld gaming installed base by 2012.

“We believe that gaming embodies the power of Apple’s App store: it has dramatically lowered the entry barriers for both developers and gamers alike, resulting in an unparalleled number of available games at affordable prices, which is creating lock-in and enhanced interest in Apple’s high-margin iPhone (and iPod Touch) platforms,” Sacconaghi writes.

Continuing, the analyst adds: “By most measures, gaming has been the killer App Store category, accounting for an estimated 40% of all downloads. Most importantly, we believe that gaming is providing yet another incremental, differentiated reason for consumers to purchase iPhones and iPod Touches, and creates powerful lock-in to the App Store platform and Apple products on a go forward basis.”

The upshot of all this is bad news for traditional gaming console developers–particularly those who have dismissed it as a novelty. “Most gaming developers today view the iPhone and other smart phones as an incremental opportunity, which targets the casual gamer but not the dedicating gaming enthusiast,” Sacconaghi explains. “Over time, however, we believe that the combination of evolutionary improvements in iPhone/iPod gaming functionality, the convenience of the App Store download model, the App’s Store leading title selection and lower price points could cause some migration among gaming enthusiasts to the Apple platform and/or pressure traditional gaming incumbents’ hardware and software pricing.”

And this is clearly what Apple (AAPL) is aiming for. Consider these recent remarks from Phil Schiller, the company’s senior vice president of worldwide product marketing: “People are starting to see what a great gaming device this is. When you think about the companies that came before us…when you played those other systems, they seemed so cool, but now when you look at them, they don’t stack up against the iPod touch….No Multi-Touch user experience, Games are expensive, No App Store, No iPod, Expensive Games ($25-$40) and uncomfortable retail buying experience. [There are] 607 games for PSP and 3,680 games for Nintendo DS. [But there are ] 21,178 Game and Entertainment Titles at App Store.”

In a research note issued this morning, Bernstein analyst Toni Sacconaghi wondered whether Oracle (ORCL) might even consider walking away from the deal, though he ultimately concluded that it was unlikely.

“Given ORCL’s repeated and strident commentary, it appears very unlikely that it will walk away from the deal, although it would not face a break-up fee if it did (unlike Sun, which faces a $260+ million break-up fee),” he wrote. “We continue to believe that the JAVA-ORCL deal is very likely to close, but it will be interesting to see if Oracle’s conviction level waivers at all on its earnings call today.”

Indeed. Certainly, there are plenty of reasons to think that it might. For one thing, notes Sacconaghi, Sun’s (JAVA) recent financials are going to make it difficult for for Oracle to hit its promised $1.5 billion in first-year accretion profits.

“Our forecast now calls for [Sun] to be barely break even on a non-GAAP basis next year,” Sacconaghi says, adding that earnings are likely to be nearly $900 million less than he modeled when the deal was first announced. “Accordingly, assuming no material revenue synergies, our analysis suggests that in order to hit its $1.5B accretion target, Oracle may need to reduce Sun’s workforce by 15,000, which represents over 50 percent of Sun’s current headcount and appears implausible.”

So Oracle could hit its aggressive Year One accretion targets. It would just have to gut Sun to do it.

One last point worth noting here. Sacconaghi seems confident the European Union will ultimately approve Oracle’s acquisition of Sun, though possibly with conditions around mySQL. But he thinks approval will take time. And the longer it takes, the worse it will be for Sun, whose business is already suffering from the uncertainty surrounding it.

“…The EU took an average of 140 days between the time that a Phase II [review] was announced and a merger was ultimately approved,” he explains. “Given that Phase II for the JAVA deal was announced on September 3rd, this implies a January date for resolution, and would require JAVA to go through another two full quarters as a standalone company. With uncertainty around the ORCL deal already weighing on JAVA, this suggests the potential for further erosion in Sun’s financials.”

“Speculation is rife that Apple will end its exclusive U.S. iPhone service deal with AT&T when the current contract expires in June 2010 and begin to offer phones that work with the Verizon network,” iSuppli analyst Francis Sideco said in a research note today. “However, iSuppli doesn’t believe this will be the case. The main reason Apple is likely to stick with AT&T beyond 2010 is the relatively wide usage and growth expected for the HSPA air standard used by the carrier for 3G data.”

As Sideco explains, “Cumulative global subscribers of HSPA wireless services, consisting of High-Speed Downlink Packet Access (HSDPA) and High-Speed Uplink Packet Access (HSUPA), are set to rise to 1.4 billion in 2012, up from 269.1 million in 2009. In contrast, cumulative subscribers for the EVDO standard used by Verizon will amount to 304.6 million in 2013, up from 145.2 million in 2009.”

A point worth noting, though it’s hard to imagine that Apple (AAPL) doesn’t harbor some resentment toward AT&T (T), which has undermined its carefully crafted iPhone experience. And if that’s the case, wouldn’t it make more sense for the company to extend its deal with AT&T, but not as an exclusive? That would allow Apple to hammer out a second deal with Verizon (VZ), which, according to some analysts, would more than double U.S. iPhone sales in the near term.

As Bernstein Research analyst Toni Sacconaghi noted this summer, “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.”

Bernstein Research analyst Toni Sacconaghi estimates that Apple (AAPL), though it is only the fifth-largest handset vendor, claimed nearly a third of handset industry profits in the first half of 2009 (see table below; click to enlarge).

“Our analysis indicates that Apple’s iPhone accounted for only 8% of handset industry revenues but 32% of industry operating profits in 1H09,” Sacconaghi wrote in a note to clients today. “Even if we exclude the operating losses generated by Motorola and Sony Ericsson, Apple still accounted for 25% of industry profits. iPhone’s success is akin to Apple’s position in the PC industry–where the company enjoys an estimated 25% of industry profits, despite capturing only 6% of industry revenues.”

Quite an achievement considering that the iPhone is just two years old. How did Apple manage it? According to Sacconaghi, Apple succeeded by claiming a first-mover advantage in an expanding high-end market.

“With the iPhone and its Apps Store, Apple has established a formidable smartphone ecosystem, which history suggests is very difficult to overcome,” the analyst explains. “In fact, Apple has the potential to become a de-facto standard of sorts in the consumer smartphone market, much like it became in the portable media player market with iPods, due in large part to its first mover advantage and tight software and hardware integration.

“We believe that over time,” Sacconaghi continues, “single function standalone handheld devices (portable music players, digital cameras, navigation systems, etc.) will become increasingly converged. Apple’s estimated installed base of 75+ million individual iPod and iTunes users provides customers with a seamless migration path to a fuller featured, higher-end integrated device.”

Though Sacconaghi believes Apple should be able to grow faster than the overall handset market without materially lowering prices, he suggests a lower price point might give a signifigant bump to its iPhone business. “We believe Apple will ultimately need to lower price (and margins over time) to expand its addressable market opportunity, including offering a lower-cost, non-data plan iPhone,” he concludes.

Sacconaghi believes that Dell (DELL) isn’t interested in a “transformational” acquisition, though its interest in the handset market might suggest otherwise. Rather, the company is mulling the acquisition of small- to medium-sized enterprise-related companies.

“While there has been speculation that Dell could look to acquire a handset company and we continue to believe that a consolidation play in the PC space could make sense for additional details, Dell appears focused on boosting its enterprise business by acquiring small to medium sized companies with strong margin profiles and higher levels of recurring revenues,” Sacconaghi writes.

Which companies? Software, services or storage and networking outfits, most likely, says Sacconaghi. Companies like Perot Systems (PER), Salesforce.com (CRM), Compellant (CML) and 3Com (COMS).

“We see Dell potentially looking to acquire a smaller remote infrastructure management company, or a smaller outsourcer–Perot fits the latter description, and is possible, but it is unclear that it is a willing seller, and its unique concentration (50 percent) in healthcare may be too narrow a platform for Dell’s offerings,” the analyst writes.

“…Dell’s software acquisitions to date have largely centered around systems management and we believe that similar types of companies could be acquired to further expand Dell’s capabilities. Also in software, we believe that [Salesforce.com] would be strategically consistent with Dell’s efforts to drive business at mid to large enterprises, but would be expensive ($4.8B current market cap) and would have a limited impact on revenues ($1.1B in their last FY)….

“Given that Dell’s biggest enterprise partnership is in storage, we believe the company could look to acquire additional IP for its own use. Compellent and CommVault (CVLT) could be appropriate targets. We think a networking deal is less likely, but purchasing someone such as 3COM and attempting to commoditize the networking space would not be inconsistent with Dell’s stated enterprise strategy.”

An interesting list of targets. Still, you’ve got to wonder why it doesn’t include Palm (PALM). After all, Dell really can’t afford to miss out on the handheld market completely. Can it?

With the AT&T (T) iPhone exclusivity deal set to expire in mid-2010, Apple (AAPL) has a big decision to make: extend that deal, or abandon it and sign on Verizon (VZ) as a second carrier partner.

In a note to clients today, Bernstein Research analyst Toni Sacconaghi considers the implications of both choices and concludes that the latter is the best option for Apple. Why? A deal with Verizon could more than double U.S. iPhone sales in the near term.

“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,” Sacconaghi explains. “Since the iPhone first launched in June 2007, AT&T has reported activating 2.6M units of the first-generation iPhone and 5.9M of the iPhone 3G, for a total of 8.5M units through the end of March 2009. This represents 14 percent of AT&T’s total postpaid subscriber base of 61M; assuming 1.5M iPhones have already been retired (despite the fact that even the very first iPhone buyer is still on his/her two-year service contract), we estimate 11-12 percent of AT&T’s postpaid base currently uses an iPhone. Within AT&T’s smartphone user base, we estimate the iPhone’s penetration is around 35 percent (given 32 percent of AT&T’s postpaid subscribers use smart phones–as confirmed by CEO Randall Stephenson). This suggests Apple has increasingly limited opportunity to attract new iPhone users within AT&T’s base; and if Apple maintains exclusivity with AT&T, iPhone sales will increasingly be driven by replacement sales, making it critical for Apple to introduce compelling new models.”

An attractive scenario for Apple, although–as Sacconaghi suggests–it does have its downside. Were Apple to refuse to extend AT&T’s iPhone exclusivity, the carrier would almost certainly reduce the subsidy it currently pays on the device. Untethered from AT&T, the iPhone would no longer be the powerful subscriber retention tool it once was. Sacconaghi figures that might inspire AT&T to crop the subsidy it pays on the device from an estimated $450 to around $250 to $350. If that were to happen, Apple might be forced to modestly raise the iPhone’s retail price, perhaps to $249, and take hit on margins.

Of course, might is the operative word here, because given the iPhone’s tremendous impact on AT&T’s wireless business, the last thing the company wants to do is annoy Apple. And really, what room does AT&T have to negotiate here? It’s not like it can suddenly stop selling and supporting the iPhone…

According to Sacconaghi, the smartphone market isn’t a natural fit for Dell, which could see its efforts hamstrung by its historically lousy industrial design sensibility and lack of software development experience and wireless technology, not to mention unenthusiastic carriers hesitant to add a Dell phone to their lineups.

“We believe Dell’s foray into the smartphone market is risky and its success uncertain,” Sacconaghi writes. “In our view, the biggest risks are that (1) Dell invests a disproportionate amount in the initiative…; (2) the high margins earned on smartphones today collapse by the time Dell establishes itself in the market…; (3) it causes too much management distraction…; (4) the business simply fails.”

(4) the business simply fails.

A harsh prediction–especially when we don’t even know if the business will ever exist. Clearly, Sacconaghi doesn’t have much faith in Dell’s ability to execute on an initiative like this. And why should he? Dell’s track record in adjacent electronics businesses is littered with the corpses of PDAs, MP3 players and TVs.

Shares in the company dropped more than 27 percent percent to $6.48 in premarket trading following reports that Sun’s board rejected a formal acquisition offer by IBM (IBM). After weeks of negotiations, the two companies were thought to be finalizing a deal for about $7 billion. But IBM lowered its offer over the weekend and then withdrew it after Sun balked at the price and terms of the sale. IBM is believed to have originally offered $10 and $11 a share for Sun, but subsequently reduced that bid to $9.40 a share, which was a bit too low for the fading company’s taste.

Seems Sun (JAVA) has quite a bit more in common with Yahoo (YHOO), which notoriously balked at a $44 billion buyout offer from Microsoft (MSFT) last year, than you’d think.

Whether the deal is dead is unclear, but things certainly aren’t looking good–for future negotiations and for Sun, as Sanford Bernstein & Co. analyst Toni Sacconaghi suggested in a research note to clients this morning. “While press reports suggest that the fall-out in discussions may be attributable to brinkmanship, we do think that a collapse in the talks has considerably weakened Sun’s hand, as we see no other likely suitors, and a considerably higher potential for weakened (fiscal year third quarter) results,” he wrote. “… Given the size of the premium and the fact that Sun’s board has presided over a decline in the company’s stock price over the last eight years from over $250/share to less than $5 prior to the acquisition talks being leaked, we believe that (Sun Microsystems) is likely to face significant shareholder unrest, similar to what occurred when Yahoo declined Microsoft’s offer.”

Which means things are about to get ugly–really ugly–for Sun, which doesn’t appear to have any other likely suitors and will almost certainly see its third-quarter results weakened by the doubt it has just instilled in potential customers.

Arguing that the market for standalone portable media players is certain to decline as consumers upgrade to multimedia smartphones, Sacconaghi says it would behoove Apple (AAPL) to migrate its vast iPod user base to the iPhone. But to do this successfully Apple needs a mainstream device–one free of the required $70+ a month voice-and-data service plan, which for some, is prohibitively expensive.

“Apple’s iPhone has so far addressed the data-centric smartphone market only–in fact, in most countries where it is sold, a data service plan is a pre-requisite for buyers,” Sacconaghi writes. “The other 83% of mobile handsets are largely sold without data service, except possibly text messaging. To more effectively address this part of the market, we believe Apple should offer an iPhone that does not require the user to sign up for a data plan.”

Sacconaghi estimates that adding such a device to the iPhone lineup could potentially add $7 billion in revenues and $4 billion in gross profits annually (assuming a three percent market share).

So what would a lower-tier iPhone look like? Sacconaghi envisions two versions–the iPhone Nano and the iPhone Touch. The former would be a physically smaller device without the larger multitouch screen of its predecessor. It would not support Web browsing or run third-party applications. Think of it as an iPod Nano with an onboard cellular radio for phone calls.

The latter, the iPhone Touch, would essentially be an iPod touch capable of making phone calls. It would not require a wireless data service plan and would access the Internet via WiFi, just as the iPod touch does. While that might sound a bit too much like the current iPhone to be plausible, Sacconaghi notes that the 3G iPhone Apple will presumably introduce later this year could provide enough feature differentiation (read: multitasking, video conferencing, etc.) for the market to support it.

“For the more than 100 million iPod users worldwide, we believe Apple has a significant incumbent advantage in migrating these users to the company’s mobile device platform,” Sacconaghi concludes. “Everyone of these users uses Apple’s iTunes software to manage music, and at least half also use the iTunes Store as a source of content. We believe iTunes usage leads to a ‘lock-in’ effect that discourages iPod users from switching to another platform. In part, the lock-in effect is only perceived–many users appear to be unaware that the majority of their iTunes music collection is likely compatible with other devices. However, there is also a real basis for the lock-in, since switching to another platform necessarily requires the user to learn how to operate new hardware and software. Ultimately, we believe that if Apple does not proactively migrate iPod users to the iPhone, many of them could find themselves forced to adopt another converged device platform despite the iTunes ‘lock-in’ effect.”

Over at Kaufman Bros., analyst Shaw Wu is betting on new iMacs as well as a sneak preview of Mac OS X 10.6 Leopard. “Our sense is that investor expectations [for Macworld] are fairly modest since it was announced that CEO Steve Jobs wouldn’t be the keynote speaker,” he wrote in a recent research note. “Nonetheless, we view new Macs as a positive catalyst as Apple’s desktop business (iMac, Mac mini, Mac Pro) needs a refresh to re-ignite sales.”

“There will not be any revolutionary products at this year’s event,” writes Piper Jaffray analyst Gene Munster, who anticipates the announcement of an updated iMac, possibly a redesigned Mac mini and little else.

Analyst Ben Reitzes of Barclays Capital expects a new iMac to the big announcement in an otherwise “neutral event.”

Bernstein Research analyst Toni Sacconaghi has similarly low expectations. “We expect MacWorld to be relatively unexciting, with the major highlights likely to be (1) a demonstration of Mac OSX 10.6 “SnowLeopard,” (2) new Mac desktops (iMac, MacMini) incorporating the same Nvidia chipset in the new MacBooks, and (3) a modest update to the AppleTV,” he writes. “A new iPhone is unlikely, in our view, though we do expect Apple to introduce a lower-end iPhone model within the first half of the year. Apple announced three weeks ago that this will be its last appearance at MacWorld, and that CEO Steve Jobs will not deliver the keynote this year. Given this, and a relative lack of new product rumors, we do not expect any big surprise announcements at MacWorld.”

The short, and obvious, answer to that question is “a hell of a lot.” In a note to clients today, Bernstein Research analyst Toni Sacconaghi argues that Wal-Mart (WMT) can sell between 800,000 and 1.3 million iPhones in 2009, though the retailer’s low price mantra may appear inconsistent with the iPhone’s market positioning. And that would seem to be a reasonable estimate. After all, Wal-Mart has some 2,500 retail outlets in the states, through which 100 million customers stream each week.

“The addition of Wal-Mart will roughly double the iPhone’s distribution in the US to nearly 6,000 outlets,” Sacconaghi writes. “We believe iPhone sales will benefit from the added distribution, though not proportionately; in our view, price (for both the device and service plan) is still the biggest hurdle to mass adoption…. With the iPhone already available at 3,000 Apple, AT&T (T), and Best Buy (BBY) stores, Wal-Mart likely does little to expand the device’s geographic reach. However, we believe Wal-Mart will have a greater impact on the iPhone’s demographic reach in terms of raising awareness and availability among lower-end consumers who are less likely to shop at the Apple Stores or BestBuy.”

One last point worth noting here, Sacconaghi puts little faith in rumors that Wal-Mart will offer a $99 4GB iPhone. “Could there be a cheaper iPhone at Wal-Mart,” he writes. “We think it unlikely, at least initially, but the idea is not completely unfounded. In our view, a $99 price point for the iPhone seems too low, but some modest discount is not implausible.”

We have almost $25 billion safely in the bank and zero debt. This provides us tremendous stability and the ability to invest our way through this downturn. This is what we did during the last downturn–we increased R&D investments and created some of our best new products and businesses, like the Apple retail stores, for one. This downturn may also present some extraordinary opportunities for companies that have the cash to take advantage of them, like Apple does.”

What was that again?

“This downturn may also present some extraordinary opportunities for companies that have the cash to take advantage of them, like Apple does.”

Sanford Bernstein analyst Toni Sacconaghi noted that remark as well and followed up on it during the Q&A. “Steve, you mentioned a couple of times that you thought there were extraordinary opportunities for companies with cash,” he said. “I think you could hire almost every engineer in Silicon Valley on a lifetime employment contract and not really dent that significant cash horde that you have. When you made that statement, are you suggesting that there are significant opportunities for Apple outside of Apple, specifically in terms of acquiring companies?”

Jobs’s reply: “I just meant exactly what I said, which is I think there’s going to be some significant opportunities.”

Could this mean that Apple is considering an acquisition–a major acquisition? It’s hard to say, but the fact that Jobs dropped such a hint at all is certainly interesting. Perhaps it’s time for that long-rumored merger with Adobe (ADBE).

Incidentally, Adobe’s market cap is $14.65 billion. …    

Given all this then, why are Apple shares trading down this morning? Seems concerns about CEO Steve Jobs’s gaunt appearance at Apple’s World Wide Developers Conference in June have not subsided, nor will they, now that The New York Post is questioning his health. “Apple’s hedge fund investors are very worried,” said a Wall Street source who has spoken with some of the company’s stakeholders,” the Post reports. ” … Multiple sources who have met with–and in some cases even dined with–Jobs in the weeks surrounding the introduction of the iPhone 3G on July 11, said they came away troubled by his thin appearance.”