Behind the Market Headline News

BlackBerry device maker, RIM, report its the 3rd quarter results after the bell, as expected, the company's earnings were significantly impeded by the global economy slow down, GAAP net income increased about 7.0% from $370mm to $396mm ($0.70 vs $0.66 per share) with revenue coming in at $2.8 billions. Most interesting to me in the earning release, though, was that RIMM sold 6.7 million BlackBerry devices and booked $2.3 billion revenue. For comparison, in AAPL last quarter (ended 9/27/08), AAPL sold 6.9 million iPhone, but only $806 millions revenue was recognized. So even about 200,000 more iPhone were sold with assumed higher ASP than Blackberries in three month period, AAPL booked 2/3 less revenue than RIMM. The culprit is that AAPL book its iPhone sales using so-called "subscription accounting", namely recognized revenue over 24 month period, but not as sales occur. When AAPL only sold average about 1 mm iPhone in each previous few quarters, iPhone sales have limited...

The momentum darling, RIMM, gave up over $20 after releasing the Q2 financial results (missed by a penny vs expectation, $0.88 vs 0.89), and lower Q3 bottom line and margin on Thursday after market closed. The management downplayed AAPL eroding its profitability and attributed the disappointment to shrinking margins due to increase SGAN and R&D to expand its market share. It is quite interesting even RIMM has shined for so long in the last two years and certainly a bright star among analysts and investors, underneath this seemingly unstoppable bull run, there have been gradual but significant build-up of doubts and worries when we examined the derivative markets. After RIMM skyrocketed about five-folds from fall 2006 t0 Oct 2007, and peaked about 133 in Nov 2007, the bearish sentiment began to emerge. We can assess the sentiment by studying the relative positions of the underlying call and put option open interests during the period. The open interests of call option began to slide...