Don't Pay Too Much Attention to BlackBerry Sales Rumors

In the first week after BlackBerry (NASDAQ: BBRY  ) launched its new Z10 smartphone, many analysts and observers claimed that early sales in the U.K. and Canada (two of BlackBerry's top three markets) were very strong. More recently, though, sentiment has been turning against BlackBerry. Several analysts have issued bearish forecasts for Z10 sales, arguing that initial sellouts were due to low unit shipments rather than high demand.

Investors should try not to get too worked up about the sales rumors that have been flying around Wall Street. First, there is no way to judge the accuracy of these rumors; we will not know the true level of device shipments until BlackBerry reports earnings next month. Second, the other device BlackBerry has announced -- the Q10 QWERTY keyboard model -- will not go on sale until next quarter. Since the keyboard is a major attraction for BlackBerry's biggest fans, it is likely that many are waiting for the Q10.

The latest rumors
On Wednesday, Pacific Crest analyst James Faucette stated that his checks point to roughly 300,000 BB10 unit shipments in the current quarter, below the consensus of about 1 million units. Furthermore, he expects only 1 million to 1.5 million shipments next quarter, below consensus of 3 million to 4 million. Another bearish analyst, Michael Walkley of Canaccord Genuity, wrote on Tuesday that BB10 devices are not likely to sell well because they will have the same subsidized price of $199 as Apple's (NASDAQ: AAPL  ) iPhone 5 and Samsung's upcoming Galaxy S IV.

Apple's iPhone and Samsung's Galaxy S and Galaxy Note smartphones are all very strong competitors, but analysts who are solely focused on the competition are missing the point. The smartphone market is massive, and BlackBerry only needs to secure a small niche (perhaps 5% of the market) to justify a much higher share price. With nearly 20 million devoted BlackBerry fans in the U.K., U.S., and Canada, the company is virtually assured of seeing a strong upgrade cycle this year.  To remain relevant thereafter, all the company needs to do is convert a small percentage of iPhone and Android users in the next few years.

Timing is not everything
The best way to think of BlackBerry's current strategy is that the Z10 touchscreen phone aims to poach users from the iPhone and various Google Android devices, while the Q10 QWERTY phone aims to keep existing BlackBerry users happy. I am not very worried about reports of slow Z10 sales, primarily because many of the existing users will wait for the Q10. Meanwhile, with the Z10 in stores, BlackBerry can try to raise consumer awareness of the new platform.

The "late" release of the Q10 does not bother me, either. While the Q10 will become available close to the expected launch date of Samsung's Galaxy S4 (and even the rumored iPhone 5S), it addresses a different market, and is thus not really in competition with the Samsung and Apple offerings. Regardless of the exact country/carrier launch timings, I expect BB10 devices to sell well and put BlackBerry back in the black in the coming year.

Like any company going through a major transition, BlackBerry has encountered its fair share of naysayers. But over the next few years, BlackBerry is likely to prove doubters wrong. Even once-untouchable Apple has hit a wave of negativity in recent months, with many prominent investors questioning whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on both reasons to buy and reasons to sell Apple, and what opportunities are left for the company going forward. To get instant access to his latest thinking on Apple, simply click here now.


Read/Post Comments (15) | Recommend This Article (9)

Comments from our Foolish Readers

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  • Report this Comment On February 21, 2013, at 8:51 PM, greenember wrote:

    I would love to know what the 'killer features' of the upcoming 5S and S4 are expected to be that are going to crush out all of BlackBerry's hopes. Apple hasn't done anything noteworthy (no Samsung pun intended) in several years. S3 already packs the latest technology. We may see a few neat software tricks, but does anyone really think there will be something ground-breaking about these upcoming phones? I don't imagine BBRY will face significantly more competition than it currently does.

  • Report this Comment On February 21, 2013, at 9:14 PM, voytekp wrote:

    Keep reassuring yourself fan-boys...

  • Report this Comment On February 21, 2013, at 9:30 PM, TimKnows wrote:

    Nice article Adam, if you have a Z10, you certainly wouldn't worried about Apple this year. This phone just keeps giving, something new and leading edge each day.

  • Report this Comment On February 21, 2013, at 10:04 PM, digitally404 wrote:

    I second greenember.

    iPhone 5S and SG3 are only going to have incremental hardware upgrades.

    The software isn't changing. So in the end, same old same old.

  • Report this Comment On February 21, 2013, at 10:14 PM, CZZZZZZ wrote:

    Has Pacific Crest analyst James Faucette made any credible analysis of Blackberry in the last 6 months, a broken clock is right more often so why quote him as a source now......lazy reporting, these market manipulators are playing you for fools, or in The Fools case you're simply willing accomplices...hows your short BBRY and long APPL doing the last 6 months fellas !

  • Report this Comment On February 21, 2013, at 10:29 PM, Batousai wrote:

    He's not quoting him as a "source", he's quoting him to refute him... RTA

  • Report this Comment On February 21, 2013, at 11:19 PM, wb12746 wrote:

    It is a pleasure to read a common sense analysis!

    It seems most articles want to take a negative side of Blackberry with no real numbers and speculate the doom-and-gloom.

    The big questions unanswered is;

    1) Did BB produce way to few Z10s hence the low stock availability in the UK and Canada - thats actually good news, Z10 is selling!

    2) Is the Z10 selling much better than expected - hum that would actually be good news also?

    Seems to me this new platform from Blackberry is doing great with either scenario!

    SUMMARY; time will tell with REAL data and this is one reader who getting sick of the fabricated doom-and-gloom. Thanks for this well thought-out article!

  • Report this Comment On February 22, 2013, at 1:20 AM, Trumpandgates wrote:

    I think this article is well written with proper analysis on market commentary. But what a smart analyst has to consider is company hidden strategy. I feel it is a sheer failure of those research analyst (Including of Canncord Genuity) who miss to notice the stake desolution of former founder, it is a fact that they are shouting it as a big news but they are the only one who miss to notice it during last quarter.

    Also, what all analysts are missing is company's strategy on positioning the product in market in different phases. I personally feel that Blackberry current management is ignoring the stock moment and totaly dedicated over marketing and positioning of their new product which is complex to understand at initial stages. The perfectly designed software and product has very large scalability which even expert developer are not able to assess completely, even expert technology guys are surprised with QNX platform which allow future development of paired apps and devices.

    IT WILL BE A SHOCK FOR COMEPTITORS IF ANY NEW PAIRED DEVICE IS RELEASED IN NEXT QUARTER.

    The Z10 itself has compatibilty to download most of android apps so it is immature on part of analyst who are raising questions over 70000 apps. Just image how will market react if some tablet or other paired device is introduced which will pull the sales figures to a level even Ipod has never seen.

    This game is not of investment or smartphone war, this is about innovation and business operations. The so called market leader already facing valuation bubble which cant be ignored, the stock price fall of APPL $250 ($700-$450) itself denote the problem and falling market confidence, who knows hw much appl management and fund holders has shed from their holdings in last quarter, it will only release in their next SEC filing which I believe will not be discussed like they have discussed in case of BBRY.

    The appointment of Alicia Keys may sound foolish but yes there is something cooking inside company whihc will surprise market sooner or later and anyhow we cant ignore "Research" in "Motion" capacity of innovating and ability to run business with liquidity even in bad times. I will not be afraid if in future APPL release some repeative stupid gadget with some i6-i7-i8 kind of models and consecutive failures like i5 will bring utmost pressure on APPL P/L a/c and any competition will not be easy for APPL as they already have high cost of advertising and operations. It can be assumed as after having such high cash available on balance sheet APPL hasnt paid their shareholders big dividends.

    In current market BBRY will be benefited from pessimism of competitiors, smaller scale operations, reduced operations cost any addition in sales will add to balance sheet and any growth will look big in percentages and hence stock could rise very fast and high.

    I forsee the coming three quarters with positive sales growth and eventually positive EPS.

  • Report this Comment On February 22, 2013, at 8:17 AM, CZZZZZZ wrote:

    They've RAISED the price of the Z10 in the UK 3 weeks after its release by 10%.

    Have you ever heard of a piece of technology going up in price a few weeks after its release?...they're even charging more than the iPhone now, would they do that if it wasn't selling well?

    If the bears were honest and accurate the price would be going down , not up.....on top of that the black market is slling them for over $1000 !

  • Report this Comment On February 22, 2013, at 10:06 AM, johnmarkussen wrote:

    who owns a z10 ? i would love to buy one but they are not availlable yet.in Belgium.

  • Report this Comment On February 22, 2013, at 11:04 AM, TMFGemHunter wrote:

    Thanks for the comments everybody. The new Apple and Samsung phones are expected to have processors that are twice as fast as what the Z10 packs. If the BB10 OS is more efficient than iOS or Android, it won't matter. If they are similar, then the Apple and Samsung phones will be snappier.

  • Report this Comment On February 22, 2013, at 12:37 PM, voytekp wrote:

    @ Trumpandgates - I fully agree with your comments... it has already begun.

    Changing the future of gaming… See the link below:

    http://www.berryreview.com/2013/02/21/blackberry-10-gets-sup...

    By providing “Gamepad API”, Blackberry allows developers to program for and support various hardware support and integration with BB10 platform and all the games that come with it.

    Going forward, your gamepad (whether from Playstation, Xbox, Wii or any other) will be able to be utilised/dubbed for use with BB 10 platform (i.e. Z10)

  • Report this Comment On February 22, 2013, at 1:41 PM, infektu wrote:

    @TMFGemHunter

    Samsung/Android need umpteen core processors in order to deliver an experience _almost_ as smooth as BB Z10 running on a dual core.

    That comes with a price ($, battery life...)

    It's like saying the Hummer is faster than a VW becuase it sucks 5x the gas.

    As for the sales rumors, this is ridiculous. The Z10 price went up by 10-15%, so until we get to see the March and June volumes everything is pure speculation.

  • Report this Comment On February 22, 2013, at 2:59 PM, etgh wrote:

    As I am what you like to call a fanboy, I to am very curious what the numbers are. It's been very quiet around the company with respect to volumes and I'm not sure if that means good news or bad. Certainly Thorsten is a very different cat to the last two CEO's (thankfully) and I'm not certain he would display the same false enthusiasim the last pair did to cover up the train wreck that was RIM.

    All tangible evidense seems to point to a positive start but again, without firm slaes numbers it's hard to tell.

    Like many shareholders, I will be glued to the March 28th quarter results call with much anticipation.

  • Report this Comment On February 22, 2013, at 3:51 PM, cbglobal wrote:

    Right, So even though Blackberry has had not trouble selling 7 to 8 million of their hopelessly obsolete phones every quarter, nobody will want the new phone.

    Since the CEO is on record that the launch is strong, why do you have to rely on analysts who only care about the bonus they get from the profits their firm's trading arm makes on the volatility their report creates.

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