This week, BlackBerry (NYSE:BB) launched the new Z3 in Indonesia, focusing on a previously lucrative market for the troubled handset maker. The company is bringing the right phone to one of its most valuable markets, which, at the very least, is a step in the right direction. But the Z3 will face massive competition from Samsung's (OTC:SSNLF) low-end devices.
Building back "BlackBerry Nation"
Indonesia used to be called "BlackBerry Nation" because of the device's popularity there. But those days are long gone.
In its fiscal 2014 annual report, BlackBerry said that revenue in Asia-Pacific -- which includes Indonesia and India -- accounted for 16.2% of consolidated revenue. That's down about $457 million in its fiscal 2013 filing.
The drop has come as Android has taken the top smartphone OS spot in Indonesia and left BlackBerry trailing. According to IDC, BlackBerry held 43% of the Indonesian smartphone market in 2011, but took just 13% in 2013. BlackBerry's loss has become Samsung's (OTC:SSNLF) gain, as the Korean phone maker is currently the No. 1 vendor in the country.
For the past several years, BlackBerry's new devices have been priced too high for Indonesian buyers -- the Z10 sold for $750. But the Z3, which starts at $190, should help fix the pricing problem. In addition to that, the device specifically caters to Indonesian consumers.
The Jakarta Edition phone sports a five-inch touchscreen display, local BlackBerry Messenger stickers created by an Indonesian illustrator, and limited devices with a "Jakarta" inscription on the back.
In a press release, BlackBerry CEO John Chen said, "Priced affordably, the BlackBerry Z3, Jakarta Edition will extend the full capabilities of the BlackBerry 10 Operating System version 10.2.1 experience for a new generation of customers in Indonesia."
Of course, all of this doesn't guarantee the Z3's success.
BlackBerry's toughest competition in Indonesia are Samsung's prevalent cheap phones. In 2013 alone, Samsung released a several new devices cheaper than $100 for sale in Indonesia and other emerging markets.
In a Wall Street Journal interview last year, Samsung's co-chief executive, J.K. Shin, had this to say, "In markets like Indonesia, consumers are switching from feature phones to smartphones and the low-end market is developing quickly." Samsung understood this early on, and capitalized on BlackBerry's failure to sell devices to the low-end market.
Samsung is known for creating a wide-range of phones, at varying prices and flooding markets with them. In Indonesia, it's clearly paid off in keeping BlackBerry down.
Considering the BlackBerry Z3 isn't a low-end device, investors shouldn't expect the device to go like gangbusters in Indonesia. But that's not an entirely negative thing. BlackBerry is likely trying to balance the margins of the Z3 with the previous popularity of its devices in the country. If it released a low-end device right now, it may not generate the revenue the company is looking for.
With Z3 sales starting later this week, BlackBerry investors may need to wait a few quarters to gauge how well the device has been received. BlackBerry needs to at least make mediocre gains in operating system market share or it could be one of its last pushes in the country. The Z3 appears to have the potential to do that. Now, it's up to Indonesian consumers to respond.