Amazon.com's (Nasdaq: AMZN) hush-hush ways when it comes to spilling sales data on its Kindle e-book reader has led most watchers to assume the worst. The company has never been shy in trumpeting its milestones.

If Amazon had sold 100,000 of the devices since its November rollout -- or even 50,000 -- the company would surely have issued a press release to sing its praises. So the thing's a dud, right?

Not so fast.

Leave it to Citi analyst Mark Mahaney to break from the pack with some refreshing exuberance. Mahaney sees the Kindle growing in popularity, ringing up between $400 million and $750 million in related sales -- or as much as 3% of Amazon's total revenue -- come 2010.

That would be huge, since the $399 reader has been off to a suspiciously silent start, despite Amazon promoting the device prominently on its home page over the past six months.

Not another mistake
Mahaney has certainly been wrong before.

  • He downgraded Yahoo! (Nasdaq: YHOO) -- lowering his target price from $28 to $18 -- the day before Microsoft (Nasdaq: MSFT) stepped in with a $31 offer.
  • He reiterated his sell rating on Netflix (Nasdaq: NFLX) over the holidays, a few months before the stock barreled toward an all-time high.
  • Switching gears on Yahoo!, he raised his price target from $31 to $34 last month, just weeks before Microsoft walked away.

Amazon certainly hopes that he's not wrong this time. Even the low end of his target, at $400 million, is pretty lofty. That would be the equivalent of a million Kindle devices at today's prices, though the readers will probably sell for much less than $399 by then. Just compare the falling prices on things like DVD players, video game consoles, and laptops. Prices drop after the early adopters overpay. It's the only way to broaden its reach to the masses.

Naturally the $400 million to $750 million figure isn't just about the hardware. The real beauty of the Kindle for Amazon comes in the delivery of electronic books, magazines, and even blogs. Publishers will loosen up their stiff ransoms once they see Amazon selling a ton of inventory-free books, giving Amazon a high-margin proprietary channel that may transform Amazon into more than just a low-margin Web retailer.

If consumers are buying a lot of Kindles in a few years -- hopefully better models with improved Web navigation, multimedia playback, and touchscreen interfaces -- Amazon will be a much bigger force than it is today in physical retail.

Anecdotal flaws
Mahaney estimates that Amazon has sold between 10,000 and 30,000 Kindles so far. It's a wide range, but that's the kind of speculation that even seasoned money managers have to resort to when the company is mum on actual sales data.

TechCrunch points out the four areas that Mahaney singled out in coming up with that number.

  • Kindle has consistently been on the company's best-seller list for consumer electronics.
  • There are more than 2,500 reviews for the device on Amazon.com.
  • The tone of the reviews has been "relatively positive."
  • One of the reviews has been viewed by fellow Amazon visitors roughly 27,000 times.

I can't fault Mahaney for taking a very unscientific approach here. Amazon is turning us all into wild guessers. However, I wouldn't lean too comfortably on many of those metrics. Perhaps the biggest flaw is that, since Amazon does not require a purchase before posting a product review, some of those reviews aren't from owners. I singled out a few examples of this happening last month.

The Kindle -- and e-books in general -- is a very touchy subject. Amazon is a magnet for booklovers, so it's only natural that they should be opinionated. As for the review with nearly 27,000 "yes" or "no" votes about its helpfulness, I will only say that Amazon has been pitching the Kindle at the top of its home page since November. A click there takes you to the information page that includes that particular review.

Just because you have a passionate opinion on something doesn't make it popular. Everyone probably has something to say about Vonage, but that doesn't mean that the Web-based telco service is a hit.

I've suggested it before, so I may as well suggest it again. Why doesn't Amazon place a counter on its Kindle page, the way it has for products like Harry Potter books? Amazon is the only company selling these things. There's no rival reader by Sony (NYSE: SNE) that you can snap up somewhere else.

A digital counter would help enlighten the public, entertain the spectators, and make the early adopters feel special.

"Hey, did you know that I am the 24,285th person to ever buy a Kindle?"

If the number is embarrassingly low, that will only create greater incentives for the early adopters to buy. We're a wacky bunch that way.

There is so much potential with the Kindle. I have applauded the simplicity of its self-publishing tool, a major reason why Amazon's store offers an unparalleled 120,000 titles in digital form.

I want Mahaney to be right. I want Amazon to be right. Why is the silence making me feel so wrong?

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