Smart phones, smart investments?
Today's Financial News - Posted June 8, 2009
The cell phone industry is making big moves today. Palm’s (NASDAQ:PPL) new phone release is taking its share price down. While speculation over Steve Jobs and the iPhone is creating its own problems for Apple (NASDAQ:AAPL).
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): It is a pretty dismal day on Wall Street. With thoughts of surging interest rates, an unstoppable rise in unemployment levels and bank fears remaining high, plenty of investors are taking their recent gains and heading back to the sidelines.
With the S&P plunging below the 930 level today and volatility on the rise, it is not a day to put a news release on the Street, especially if it contains less-than-stellar news.
Palm (NASDAQ:PALM) is learning the lesson the hard way today. After releasing its highly anticipated Pre over the weekend and promptly selling out of just about every phone it had available (about 50,000 units), its shares are down by close to 10%.
The hot-selling left 15,000 Pre buyers on a waiting list, but it is opening Palm to increased pessimism. Investors are worried the company will not be able to deliver phones to the market fast enough to fight off fierce competition from rivals, especially strong market leaders like Apple (NASDAQ:AAPL).
There is likely nobody sweating Palm’s productions problems more than Sprint (NYSE:S). The company has just six months to be the exclusive seller of the Pre phone. After that, Verizon (NYSE:VZ) and its army of wireless customers will have access to the product.
Customers that do not get locked into Sprint’s network between now and then will have ample opportunities to check out Verizon’s offering. Sprint needs Palm to deliver every phone it can.
Is the Apple ripe?
Then, of course, there is the 800-pound gorilla, Apple’s iPhone. The phone with a seemingly unlimited amount of downloadable applications has taken the market by storm, making Apple a dominant player in the cell-phone market, a notion that was unthinkable just a few years ago.
But it proves one heck of a good point.
The cell-phone industry is product driven. Produce a high-demand product and a company can be catapulted to the top of a fickle industry. Just because Apple is in charge now, does not mean it will stay that way.
It will be interesting to see what the next generation of the iPhone will bring. Fortunately, we will find out soon enough. Apple and its conference are generating plenty of headlines this week.
As investors, there are multiple ways to play the situation. With volatility on the rise, well-played options contracts will certainly lead to strong profits. But even without the leverage of derivatives, investors can expect to have multiple double-digit profit opportunities.
Palm may be down by 9% today, but the move is certainly not finished. One hint of positive news could reverse the action. Or a single press release can turn it into a long-term trend.
Apple is teetering as well. The iPhone has created a lot of buzz. It will be hard for the company to live up to current standards if the economy does not make the fast rebound that was priced into the markets over the last few weeks.
And then, of course, there is always the risk associated with Steve Jobs’ health. Talk about a wild card.
The point is today’s action has created multiple trading opportunities. Take advantage of big, psychological market swings. In the long run, the market is rational and will work itself out. But all too often (like today), emotions make for wicked short-term mistakes.
Take advantage of them.
Next Article: Selling the news? What’s going on with Sangamo (SGMO)
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