BlackBerry Refutes Z10 Return Fears, but There's More to the Story

Yesterday, it was widely reported that BlackBerry's (NASDAQ: BBRY  ) make-or-break device, the Z10, was being returned faster than it was being sold at key retailers. Although this report from Detwiler Fenton sounds troubling, it contains all the characteristics of a storyline that's likely misrepresenting the truth. For one, device returns cannot technically exceed sales, and the report gave zero specifics to strengthen its credibility.

Despite the story's dubious nature, BlackBerry investors reacted poorly, and shares finished the day down over 7%. Near the end of the market session, BlackBerry responded to the report by releasing a statement saying that Z10 returns are completely along the lines of normal for a premium smartphone device, and in some cases, are actually better than expectations. BlackBerry also failed to go into specifics, which perhaps could be why the stock didn't breathe a sigh of relief.

However, there another storyline that's a bit troubling for the BlackBerry Z10.

Amazon has dropped the price of the Z10 to $99 for customers willing to open a brand new two-year AT&T contract. If you're an existing customer, the price increases to $149 for the device -- still $50 below the $199 what AT&T sells it for on its own website.

Either Amazon has some serious economies of scale working in its favor, or sales aren't living up to expectations. Regardless, investors could easily interpret this development negatively because it undermines the Z10's image as a premium device and suggests that the BlackBerry brand no longer commands pricing power. Over the long term, a business that cannot command pricing power puts its long-term profitability in a potentially compromised position.

It doesn't add up
Until investors get more some more hard data about how the BlackBerry Z10 is actually faring, there's likely to be a continuation of extreme sentiment shifts during the short term. If BlackBerry really wants to calm investor fears, why not release some sales data to back up its response?

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  • Report this Comment On April 12, 2013, at 11:25 AM, TheBigPayback wrote:

    It's clear BBRY is in a transitional phase as they launch their new phones in a staggered fashion. Many existing BBRY customers are probably in the same position I'm in: do I commit to the Z10 without first seeing the Q10? If I don't like the virtual keyboard of the Z10, can I return it and get the Q10? So I'm likely going to wait until both devices are available and make a choice. In the meantime, there will be short-term disruption as we play this waiting game, which may influence what retailers like Amazon do during this period.

    What strikes me as crazy is that there's so much false news spread about the company that even when it's proved false, it's like reporters and analysts just throw up their hands and say, "Well, OK, that wasn't true, but there must be something REALLY BAD going on- so maybe it's *this* instead!"

    Or maybe it's just that the company has been beaten down but now has interesting products for people who actually use them for business who can't afford to transition to a new phone without thinking it through and preparing for it.

    Hundreds of million of dollars were influenced with this false information and a lot of option players got taken to the woodshed from this false information. The SEC better do a full investigation.

  • Report this Comment On April 12, 2013, at 11:28 AM, BR14 wrote:

    Oddly enough Amazon did exactly this the last time a vendor released a smartphone.

    In fact it seems to do something similar every time - assuming such an option is available.

    Isn't that strange. You think not having to maintain a network of thousands of stores and the consequent additional staff means they don't need such high margins?

    Astonishing.

    You'll have to do a lot better than that Steve. Detwiler may have been stupid, but your article isn't much smarter.

    And by the way, there clearly wasn't "more to the story". (The story being Detwilers report). Your headline could be construed to be deliberately deceptive. If there was any significance in Amazons pricing (there isn't they're in line with other pricing on contract), it's still a different story.

    I recommend you take care with your articles.

  • Report this Comment On April 12, 2013, at 11:28 AM, jenfosterabq wrote:

    As a BBRY investor everyday you face a sea of negative news issued with little specifics to back the claims. My favorite was the seeking alpha story where the author went into a retail store on the Z10s release day, saw that no one was there, made a few phone calls to other stores, and concluded that the Z10 was off to a bad start.

    if you're requesting BBRY to offer numbers to support sales, are you also going to ask Apple and Samsung to update smart phone numbers during the quarter too?

  • Report this Comment On April 12, 2013, at 11:41 AM, Oril wrote:

    For someone to insinuate that the Z10 is not a premium device because it is selling for 99 dollars on a two or three year contract is either deliberately misconstruing the facts or else is completely stupid.

    Once a carrier takes shipment they can market it at any price point they wish. They make their money on the thousands of dollars brought in over the term of the contract not on the piddly amount the consumer may or may not have to pay up front.

    If you are not aware of this you are not qualified to have your articles published.

    Perhaps Mr Heins should include Mötley fool in his complaint to the SEC for allowing such garbage to be published.

  • Report this Comment On April 12, 2013, at 11:51 AM, cherryjuice wrote:

    Omg, something happened in the us. Let's drop the stock price by ~7%! .... Who exactly cares about America? This is solely one nation. I really don't get it why everything that is happening in the us becomes such a Big deal? This is crazy :p

  • Report this Comment On April 12, 2013, at 11:51 AM, Fredified wrote:

    A couple minutes Research on Amazon and it appears to me that this is just Amazon Selling ALOT of Phones...

    The BlackBerry Z10 is currently #16 in sales under Cell Phones with Service Plans

    Only samsung Phones are selling higher.

  • Report this Comment On April 12, 2013, at 12:57 PM, infektu wrote:

    "If BlackBerry really wants to calm investor fears, why not release some sales data to back up its response? "

    This is contorted. Itś DF who has to prove their "beliefs". They have provided NO numbers. Zero.

    If tomorrow some 10 people muppet firm "feels" that S4 is off to a bad start, should Samsung provide any numbers?

    RE >>

    "BlackBerry investors reacted poorly" ?

    Well, it depends on which side of the trade they were caught by this circus. :-)

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