Sanford C. Bernstein analyst Toni Sacconaghi looked at Apple Inc.'s (NASDAQ: AAPL) latest sales numbers and thinks that the company may have an iPhone inventory problem:

We believe the data points to a significant amount of iPhone channel inventory ... This is negative in two ways: (1) it indicates end-user demand for iPhone is lower than many investors may think based on Apple's sales figure; and (2) it points to slower iPhone sales in the current quarter, since much of this inventory is likely to be drawn down.

Check out News.com's coverage of the report for more details and insight.

Apple's stock has been hit hard of late, and this latest inventory report underscores one of the reasons I wouldn't buy Apple stock (I wouldn't short it either): The company is 100% dependent on its continued ability to innovate and stay ahead of the competition with each new product introduction. Even a blockbuster hit can only carry the company for so long.

Any investment in Apple is essentially a bet on the company's ability to continue being an innovator. Call me crazy but if I'm going to pay 6+ times book and 25 times earnings, I'd prefer a strong moat that doesn't require continued brilliance.

Amazon.com Inc. (NASDAQ: AMZN) got an important upgrade today.

Sanford C. Bernstein increased its rating on the stock from "market perform" to "outperform." The firm also raised its price target to $95 from $81. The stock opened up at about $81.

Bernstein assumes that Amazon's margins will rise due to higher third-party sales on the website. Amazon receives a fee for these sales.

The huge online retailer's stock has been as high as $89 this year, and it is up more than 100% year-to-date. Short interest in the shares fell 4.8 million to 35.8 million as some investors anticipated a price increase.

Third-party fees are not the only reason the stock is doing well. But, it is something of a surprise that an analyst believes that it can do even better after its big run.

Coca-Cola Co (NYSE: KO) will be reporting its first quarter 2007 earnings before the market opens next Tuesday (April 17). The last time the company reported earnings was back on Valentine's Day, when it was able to put up better than expected earnings for its fourth quarter 2006. At that time, the company posted earnings of $0.52, which came in higher than analyst estimates of $0.50. Sweet.

Coca-Cola has a strong history of beating Wall Street's expectations, so it would come as no surprise to me if the company is able to beat its numbers again this quarter. In fact, to find the last time that Coke was unable to post better than expected earnings, you would have to go all the way back to April 16, 2003 when it matched estimates for its first quarter 2003 report.

Yesterday I liveblogged the speech given by Microsoft CEO Steve Ballmer at the Sanford C. Bernstein Strategic Decisions Conference, and if you read that, you already know: Microsoft is planning to keep investing significant dollars in operating expense, despite the shock-and-awe felt by the Street.

But now that the transcript's available on Microsoft's web site, I'd like to point you to a couple of Ballmer's justifications for this expense. He says that it's important to be on the front end of innovation (not exactly the place Microsoft's been known to be these last several years) and that the hardest decision was, what to invest in? "   When I first talked to Bill Gates about this and some of our other senior technology guys, Ray Ozzie, they came back with a list of, I don't know, 70 things. I said, Bill, you can't have a list of 70 things. He said, but there's 70 things, Steve. And I said, you've got to pare it down. He said, no ... with an R&D budget that's going to come on $7 billion, we could probably afford to do 60 or 70 different things."

What are those 70 things, though? The one thing he talked about most: obliterating paper. You heard me right. Steve Ballmer told the investors gathered at his talk, "I look in this audience, and I see a lot of paper and pencil. Ten years from now, I won't see paper and pencil if we in the hardware industry do our jobs right. Pencil and paper will be replaced by superior technology that is digital." If he has anything to do with it, it will be Microsoft that profits from the death of paper and pencil.