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Friday marked the debut of BlackBerry's (NASDAQ: BBRY ) new Z10, the first U.S. smartphone to be released with the new BlackBerry 10 operating system. While nobody was expecting an Apple (NASDAQ: AAPL ) -type release, the event came and went with little fanfare, and, in fact, a recent story in The Wall Street Journal suggested that wireless carrier AT&T (NYSE: T ) showed a complete lack of enthusiasm for the new device. The success of the Z10 in the U.S. will provide a significant indication as to whether the embattled smartphone maker can remain viable against iOS and Google's (NASDAQ: GOOGL ) Android. While both the new OS and the hardware to go with it looking promising, I continue to think the task may be too great. BlackBerry remains a speculative play at best, and one that should be viewed with skepticism.
The release was not well received
Friday’s big Z10 release for actual sale in AT&T stores can be described as underwhelming at best. There were no lines, there were no stories about backed-up traffic or people camping overnight to maintain a spot, and there were no blockbuster sales. Bloomberg interviewed Jorge Garcia, a sales representative at AT&T's Lexington Avenue store in New York, who explained the lack of hype as a sign of BlackBerry’s corporate appeal: "Most of the corporate clients are asking for BlackBerrys." The store expects as much as 90% of sales to come from corporate clients rather than from walk-in business.
The market didn't receive the news any better, punishing shares to the tune of 8%. While there may be an element of "buy the rumor, sell the news" at work, it's hard to imagine what will drive the stock from here. The company plans to release 10 new devices that run on the new BlackBerry 10 OS over the course of the year, but if the flagship Z10 flounders, future devices will be of little importance. The company needs to start attracting reportable market share quickly now that the waiting is done, or users and investors alike will stop paying attention.
Is it really that important?
It has long been the position of many that the ultimate rollout of the next wave of BlackBerry devices would determine whether the company itself could survive. IDC's Ramon Llamas underlines the importance of the U.S. debut: "There's no risk of overstating the importance of the U.S. for BlackBerry. It's such an important bellwether market." BlackBerry once ruled the smartphone market, particularly in the U.S., making the U.S. reception critical in terms of both numbers and perception.
Frank Boulben, BlackBerry's chief marketing officer, said that early demand looks promising and that the company expects the device to do as well in the U.S. as it has in Canada. Does he mean per capita? In terms of total number of units, which would make the U.S. numbers look like a flop? Some other metric? When you wade through it, this is marketing from the head of marketing, so I'm waiting for some hard numbers before making a judgment.
What is a fair standard of measurement?
While the company would be thrilled to see its numbers return to pre-iPhone levels, that's simply never going to happen. At the height of its dominance, the CrackBerry competed with itself and then with Apple; Android didn't really exist, nor did Windows Phone. The nature of the market has shifted dramatically and structurally -- another major change is that during BlackBerry's time at the top, smartphones were largely supported by corporate IT departments that loved the company's enterprise security. In the current "bring your own device" climate, the issues that a smartphone manufacturer faces are different. Today, Android accounts for more than two-thirds of global market share, with iOS resting just below 20%. These are some huge adversaries that BlackBerry must face.
For BlackBerry to survive -- accepting that we should leave the flourishing for after the tombstones stop being polished -- it simply needs to carve out a sustainable niche of the market in which to operate. The company's two biggest challenges are that it lacks a cool image, at a time when cool is king, and even fans like me are taking a hands-off approach. I'd like to see the company survive and re-emerge as a relevant name, but that want isn't likely to translate into a sale. Worse yet, I'm not sure I would even spend much time looking at the device in the store before buying something else. This is likely to be the norm, not the exception; it's something BlackBerry needs to overcome.
Ultimately, I believe there are enough corporate benefits to BlackBerry that it may eke out a corner of the market for the time being. If it can use this real estate to build traction, it may have a fighting chance. As an investment, however, the stock is a long shot and should be treated as such.
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