Fire in the Hole! Amazon May Ship 9-Inch Kindle by Midyear.

There’s no question that Amazon’s going to sell a lot of Kindle Fires this year. And it might sell even more if it rolls out new and larger versions of the device. And according to some, that’s the plan.

Pacific Crest analyst Chad Bartley this week raised his Fire sales estimate for this very reason. “We are raising our 2012 sales forecasts to 14.9 million from 12.7 million,” he wrote. “But we believe there is an upward bias, particularly from the new 7- and 9-inch models, which we expect to launch in mid-2012.”

It’s been speculated upon before, but it’s interesting to hear that Amazon may have a 9-inch version of the Fire headed to market later this year, particularly now that we know Apple’s iPad 3 will debut next month. Makes you wonder how the retailer’s loss-leader strategy will translate to the larger-screen tablet market that Apple dominates.

Maybe they’ll call it the Kindle Conflagration.

One other point worth noting here: In raising his Fire estimates, Bartley also reduced his Kindle e-reader unit estimates to 24 million from 28.6 million. It’s not clear that increased Kindle Fire adoption is responsible for that decline and Bartley doesn’t offer an explanation for it. But it’s pretty easy to make the argument that the Fire is cannibalizing sales of its less-capable predecessors.

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