The Q10 Rollout Could Be a Game-Changer for BlackBerry

A little over a month ago, BlackBerry (NASDAQ: BBRY  ) finally launched its flagship QWERTY phone, the Q10, in the U.K. The Q10 has since launched in Canada and a variety of countries in continental Europe and Asia. However, the new phone has not yet launched in the U.S., which is one of BlackBerry's top two markets (along with the U.K.).

The BlackBerry Q10 smartphone (courtesy of BlackBerry)

That's about to change, as Verizon and T-Mobile (NYSE: VZ  ) are putting the Q10 on sale next week. Even though the Q10 will have a minimal impact on the overall smartphone landscape, it could still be a game-changer for BlackBerry. A passionate minority of smartphone users demand a physical keyboard, particularly for email/messaging use. With the Q10, BlackBerry will regain its position as the dominant vendor for QWERTY smartphones.

Q10 momentum picks up
In the past month, BlackBerry followers have not been able to agree on the initial sales performance of the Q10 smartphone. Analysts at Deutsche Bank think the Q10 is selling fairly well in Canada but underperforming in the U.K. However, some analysts at other Wall Street firms believe that U.K. demand for Q10 is at least as strong as Canadian demand. Furthermore, Deutsche Bank used a dubious methodology for assessing U.K. demand for the Q10 by calling some carriers (including one that had not started selling the phone!) and not others.

While analysts disagree vehemently about Q10 sales levels to date, I think sales in the May and August quarters will beat current expectations for 3 million to 4 million total BB10 sales (i.e., the Q10 plus the all-touch Z10 smartphone). First, we know from last quarter that BlackBerry shipped approximately 1 million Z10 smartphones in the month after its launch.

Second, there is very strong evidence that Q10 has experienced a stronger launch than Z10. In fact, in the first two weeks after its launch in France, the Q10 was apparently the best-selling smartphone at SFR, a major French mobile provider. The Q10's strong initial sales pace is not very surprising, since there was tremendous pent-up demand from longtime BlackBerry (and QWERTY keyboard fans) for Q10. By contrast, Z10 is aimed more at first-time smartphone buyers and current Apple or Android users. As a result, demand will probably build more slowly, if at all, for that product.

Since the Q10 was launched in the U.K. and Canada with roughly a month left in the quarter (similar to the timing of the Z10 launch last quarter), it's probably safe to say that BlackBerry shipped well over 1 million units. If Q10 shipments totaled just 2 million last quarter, and Z10 shipments remained flat or slightly below the February run-rate, BlackBerry will have shipped 4.5 million to 5 million BB10 smartphones in the quarter, above most analysts' expectations.

In addition, at least one analyst thinks that BlackBerry has raised its BB10 build plans several times, and is now building more than 2 million devices per month. If that's true, then 5 million BB10 sales per quarter could be a conservative estimate. This is further supported by a recent report from Digitimes stating that BlackBerry has increased its procurement of smartphone components because of higher-than-expected demand.

So what?
What does all this mean? I think there are a few big takeaways. First, analysts who rely entirely on calling stores to gauge demand for BlackBerry products won't get reliable results. BlackBerry's strength in the corporate world means that many sales go outside normal retail channels, compared with Apple or Samsung, which are primarily consumer brands.

Second, sales of Apple and Samsung smartphones are of a different order of magnitude than BlackBerry. If BlackBerry can ramp up to selling 5 million Q10 smartphones per quarter, which I think is feasible, it will blow away Wall Street's expectations. However, the Q10 would still appear to be an "unpopular" phone at that sales pace, compared with Apple's iPhone 5 or Samsung's Galaxy S4.

Much of the "hype" surrounding BlackBerry stock has faded in the past few months, and I think this sets the stock up for a nice rally this summer if the Q10 phone meets its potential. While the QWERTY smartphone market is a niche area, there are no strong competitors, so I'm definitely betting on BlackBerry.

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Read/Post Comments (8) | Recommend This Article (5)

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  • Report this Comment On June 01, 2013, at 12:14 PM, HelpIsHere wrote:

    The Q10 is one amazing phone, I have the Z10 and I learn something new and cool about it every day now. BlackBerry is really hitting on all cylinders and we are about to learn far more positive news in the weeks ahead. How could the DoD not raise their BB usage from 471,000 phones to all of iPhone junk too? That's another 121,000 phones that iPhone would be losing because their product is so unsecure and boring.

  • Report this Comment On June 01, 2013, at 1:11 PM, doingjustfine wrote:

    I believe we are in line for the next great Cinderella comeback story with this company. Netflix screwed up, dropped from over $300.00 per share to less than $50.00. After realizing their mistakes, they have now recovered to over $220.00 and climbing. Sirius Satellite almost went out, dropping as low as a nickel, and now is in $3.50+ territory. There is no doubt that RIM failed miserably by sitting on their laurels while technology and competition raced forward leaving Blackberry in their dust. Their stock price fall is similar to the above. I remember that the president and all his men had wife's company's sales staff also were given a BB. Most government agencies, military, and intelligence had Blackberrys largely for their stable and secure OS. So what makes me think we can get all that back? Well for starters, I'm 58 years old and have no desire to carry that large clumsy Galaxy phone with all the bump and grind features in my pocket. The I-phone is ok, but doesn't quite excite me.I want a handsome functional and easy to use smartphone with all the functionality I need, and raised qwerty style buttons for texting. Ya, that's and about 80 million of my closest friends...the baby boomers. I'm guessing that they too will prefer the Blackberry Q-10 phone, along with the above listed agencies, along with millions of other younger converts. Its just my opinion, but I believe, along with the author of this article that this is going to be a hell of a year for RIM and their Blackberry lineup.

  • Report this Comment On June 01, 2013, at 1:26 PM, mkowalski99 wrote:

    Please stop the good news or we will go to zero ... or even lower. Past month has been nothing but down despite an increasingly positive reality. Shorts should be very nervous

  • Report this Comment On June 01, 2013, at 2:19 PM, Chippy55 wrote:

    Folks, go look at a chart for BBRY that plots total number of shorted shares with the BBRY price per share, and you will understand after a few minutes why the stock has been going sideways. If it's not apparent then you should sell your stock and go to the "safety" of a Bond paying 2% for 10 years. I also expect, with the action this week, of the total number of shorted shares to increase about another 3% to 37.5% or roughly 185 million shares of the 494 million outstanding. Since Verizon and T-Mobile are starting to sell the Q10s on their web site next week, the shorts will continue their illogical and bordering-on-hysteria claims that BBRY phones aren't selling. They have no choice except to disparage the company so they can find an exit point for their ill-conceived decision. Two "analysts" have written in recent weeks that BBRY should be in single digits. It ain't gonna happen. Anything under $15 is a gift, Yahoo has the Book Value at $18.36, why on earth would a short think it's going to half that value?

  • Report this Comment On June 02, 2013, at 2:44 AM, k1moops wrote:

    Should we expect a rotary Blackberry next? Billions of people love the rotary dial phone.

  • Report this Comment On June 02, 2013, at 6:08 PM, CZZZZZZ wrote:

    re:Deutsche Bank used a dubious methodology for assessing U.K. demand for the Q10 by calling some carriers (including one that had not started selling the phone!)

    Thanks for calling out Deutsche Bank, that report was reprehensible, they have lost all credibility but many journalist still print everything fed to them by these corrupt analcysts....they're getting pretty desperate to cover their Short position.

  • Report this Comment On June 03, 2013, at 8:07 AM, TMFGemHunter wrote:

    Thanks for the comments, everybody.


  • Report this Comment On June 13, 2013, at 12:35 PM, jppickens wrote:

    I had a blackberry. It died. I got a temporary phone while waiting for the new blackberries to come out. Now that the Q10 has been released, does anyone know when it will be available for purchase for prepaid and cheap services? So far, only Verizon, T-Mobile and AT&T have it for sale with contracts.

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