Shares of Amazon, the biggest Internet retailer, rose 3.6 percent after an analyst predicted its long-expected tablet could sell as many as five million units next quarter.

The prediction by Forrester Research analyst  Sarah Rotman Epps sent Amazon shares up $7.23 to close at $206.50.  Epps suggested Amazon could price its tablet significantly below the Apple iPad and possibly carve out a No. 2 slot in the market.

The Seattle-based Amazon would be a bit like David taking on Goliath, Epps said, but an under-$300 tablet might prove a sure bet in a market estimated by IHS to jump 246 percent to 60 million units this year.

Earlier this month, HP announced it would scrap its two-month-old TouchPad, resulting in huge demand in a fire sale that saw shelves quickly emptied at electronics stores like Best Buy. HP has not announced how many TouchPads it sold, some for around $99.

But the demand underscored popularity of tablets, especially those priced below Apple's iPads and that run on Google's Android OS.

Apple, based in Cupertino, Calif., could well launch an iPad3, which would be the first major initiative of new CEO Tim Cook. Some analysts suggest it could then keep iPad2 units around at a discount, while pushing the higher-priced iPad3 into the holiday sales market.

Representatives of Amazon and Apple declined comment on future products.

Amazon is no stranger to handhelds. It's on tap to sell as many as 17.5 million Kindles this year, Citigroup estimates. Like Apple, it sells content to enjoy them, both from books as well as video programs from CBS and NBCUniversal.

Amazon is also reported to be one of the prospective bidders for Hulu, the online entertainment service being sold by broadcasters.

Amazon, whose sprawling network accounts for nearly 10 percent of all U.S. consumer electronics sales, according to Consumer Electronics Association data, plans to enter the tablet market next quarter with an Android-based product  trademarked as Lab126.

Amazon reported second-quarter revenue leaped by 51 percent to nearly $9.9 billion, although net income fell 8 percent to $191 million. The success came as one of the biggest U.S. booksellers, Borders, collapsed and the overall retail economy lagged.

The company, which reported cash and securities exceeding $6.3 billion, could pretty much do whatever it wants. Besides selling books, e-books and consumer electronics, Amazon also offers computing services in the so-called cloud to businesses. Monday's gain brought its market capitalization to nearly $94 billion.