By Poornima Gupta and Sinead Carew
SAN FRANCISCO/NEW YORK (Reuters) - Apple Inc sold 3 million of its new iPads in the first three days the tablet computers were available, driving optimism for a strong holiday quarter despite intensifying competition.
Sales of the 7.9-inch iPad mini and fourth-generation 9.7-inch version, both Wi-Fi only models, were double the first-weekend sales of the Wi-Fi iPad sold in March, Apple said on Monday.
Apple did not break out numbers for the crucial iPad mini, a smaller version of the original tablet designed to spearhead its foray into a segment now dominated by Amazon.com Inc's Kindle Fire and Google Inc's Nexus 7.
Analysts estimate that about 2.3 million of the new iPads sold over the weekend were the mini-tablets, surpassing expectations of 1 million to 1.5 million.
Wall Street, which was disappointed with Apple's latest quarterly earnings, had been looking to the iPad mini to boost demand during the crucial year-end holiday shopping season as competition reaches a fever pitch. Microsoft Corp became the latest major entrant to the market last month with the Windows-driven Surface.
While lines for the new iPads appeared lighter than usual for a new Apple product when they began selling at stores on Friday, the company said demand was so strong that it "practically sold out of iPad minis."
Apple had never before introduced two different iPad models in one quarter. Raymond James analyst Tavis McCourt said that while the sales numbers looked good, the company would need to sell another 20 million iPads this quarter to meet his estimate.
"There's still a lot of wood to chop in the quarter," McCourt said.
The company said it had already shipped many of the new iPads ordered before the release date, but some would not be sent out until later this month.
"We set a new launch weekend record and practically sold out of iPad minis," Apple Chief Executive Tim Cook said in a statement. "We're working hard to build more quickly to meet the incredible demand."
HOLIDAY SALES CRUCIAL
Apple shares closed up 1.35 percent at $584.62 on Nasdaq on Monday, but that was still 17 percent below the record high set in September.
The strong sales numbers for the iPads came despite both the iPad mini and fourth generation iPad being priced much above competing tablets. The iPad mini's $329 price had prompted some analysts to conclude that the higher price tag may hurt demand.
But Apple is still maintaining its industry leading margins with the smaller tablet, according to a teardown analysis of the tablet by research firm IHS iSuppli.
The Wi-Fi only iPad mini carries a bill of materials of $188.00, IHS iSuppli said, adding that the cost goes up to $198 when manufacturing expenses are added in.
"This differs markedly from Amazon's 7-inch Kindle Fire HD and Google's Nexus 7 tablets, both of which are essentially low-margin or no-margin giveaways at a $199.00 retail price," Andrew Rassweiler, senior principal analyst, teardown services, for IHS, said.
But the California company's dominance of the tablet market eroded in the third quarter as both consumer and commercial shipments declined, partly as people waited for the new iPad mini, while rival Samsung Electronics more than doubled its share, according to tablet shipment numbers from research firm IDC.
Apple's share of the tablet market fell to 50.4 percent from 59.7 percent in the third quarter while Samsung was No.2 with 18.4 percent followed by Amazon with 9 percent. Samsung's market share a year ago was 6.5 percent.
The 7.9-inch iPad mini marks Apple's first foray into the smaller-tablet segment and is the company's first major new device since the death of co-founder Steve Jobs last year.
Versions of iPads with both Wi-Fi and cellular connections will not ship in the United States for another few weeks. And both will be available in more countries later this year.
Apple heads into the current quarter after refreshing almost all of its product lines, from Macintosh computers to tablets.
"We believe the iPad mini has the opportunity to surpass the sales of the regular-sized iPads over the next several years," said Topeka Capital analyst Brian White.
(Additional reporting by Sayantani Ghosh in Bangalore; Editing by Saumyadeb Chakrabarty, Lisa Von Ahn and Phil Berlowitz)