Analysts: BlackBerry's U.S. Z10 sales off to a weak start

BlackBerry's (NASDAQ:BBRY) shares tumbled nearly 8 percent Thursday, the most in two weeks, as financial analysts questioned the strength of early sales of the Z10, the company's flagship smartphone running its new BlackBerry 10 platform.

Tmobile BlackBerry z10

The BlackBerry Z10 is one of four smartphones promoted on T-Mobile's homepage.

In the United States, AT&T Mobility (NYSE:T) started selling the device on March 22 for $199.99 with a two-year contract, the same price as Verizon Wireless (NYSE:VZ), which started selling the Z10 March 28. T-Mobile USA also started selling the Z10 in late March, and currently offers the phone for $99 under its new no-contract model.

However, the phone hasn't received much marketing support from any of the carriers. Indeed, it is difficult to find on the homepage of AT&T and Verizon.

"The U.S. launch of the Z10 started poorly and weakened significantly as the days passed," Joseph Fersedi, an analyst at ITG Investment Research, wrote in a research note Thursday, citing information from independent dealers.

"(The) recent optimism surrounding the ability of the new BlackBerry 10 products to get BlackBerry back to long-term profitability will ultimately prove unwarranted," Pacific Crest analyst James Faucette wrote in a research note. "We see a combination of market maturity, more aggressive pricing from competitors and smaller resources than those of competing ecosystems frustrating the comeback attempt."

A BlackBerry spokeswoman did not immediately respond to a request for comment. However, BlackBerry did issue a statement after one analyst, Detwiler Fenton's Jeff Johnston, claimed that "in several cases, returns [of the Z10] are now exceeding sales."

"BlackBerry wishes to respond to media coverage today regarding speculation that there have been abnormally high levels of returns of BlackBerry Z10 devices," the company said. "This is absolutely false. Our data shows that return rates for BlackBerry Z10 devices both in the U.S. and on a global basis are in line with or better than our expectations and are consistent with return rates for other premium smartphones in the market today."

Indeed, according to Reuters, BlackBerry plans to ask securities regulators in Canada and the United States to probe the report.

BlackBerry reported that in its fiscal fourth quarter, which ran until March 2, it sold 1 million units of its new flagship touchscreen Z10 smartphone, the first to run its BlackBerry 10 platform. The Z10 first went on sale Jan. 31 in the United Kingdom and sales have since expanded to more than 60 carriers across 40 countries, including Canada and in Europe and Asia.

However, so far it does not appear that BlackBerry's marketing message is sinking in, at least in the United States. MKM Partners conducted a survey during the past three weeks across 1,500 U.S. consumers, asking, "Are you aware that BlackBerry 10 was launched in Canada and Europe in late January 2013?" According to Barron's, 82.6 percent said "no."

"We are running a global rollout here, with BlackBerry 10, so we see strong carrier support, you know, collateral marketing activities with carriers all over the place," BlackBerry CEO Thorsten Heins said on the company's fiscal fourth quarter earnings conference call, according to a Seeking Alpha transcript. "And it varies from promotion to promotion, so there's not just one size fits all kind of an approach. We are still in early days in the U.S. We just launched with AT&T, now Verizon and T-Mobile are coming on board. We see strong marketing support from them.

BlackBerry CMO Frank Boulben told FierceWireless in late March that the company is confident in the support it will receive in terms of marketing at the retail sales level from U.S. carriers. BlackBerry's own TV commercials for the Z10 started airing in late March and Boulben said commercials from carriers would be coming in the next few weeks. "You need a very comprehensive training effort and I'm pleased to report we've done our most comprehensive training program ever with the U.S. carriers," Boulben said.

BlackBerry is also doing something aggressive in its "real-time marketing campaign." According to Forbes, BlackBerry has been working with advertising agency BBDO and several digital agencies from within Publicis group like Razorfish on a campaign to "take over" consumers' PC desktops and iPhone and Android screens to showcase specific features of BB10.

For more:
- see this WSJ article (sub. req.)
- see this Bloomberg article
- see this Reuters article
- see this separate Reuters article
- see this Barron's article
- see this CNET article

Related Articles:
BlackBerry 7 to power new devices targeting emerging markets
BlackBerry sells 1M Z10s, but loses 3M subscribers
Report: Brightstar is mystery buyer of 1M BlackBerry 10 phones
BlackBerry Z10 sales get off to slow start at AT&T, but more U.S. carrier support coming
BlackBerry 10 lands in U.S. as AT&T begins selling Z10
BlackBerry wins order for 1M phones, touts new security features for Android, iOS

Sponsored by ADI

What if we were always connected? With the help of our advanced wireless technology, even people in the most remote places could always be in touch.

What if there were no ocean, desert, mountain or event that could ever keep us from telling our stories, sharing discoveries or asking for help? ADI’s next-gen communications technology could keep all of us connected.

Suggested Articles

AT&T's 5G strategy sounds a little like a cross between T-Mobile and Verizon.

Verizon EVP and CTO Kyle Malady shared a few details about how it's using the 3.5 GHz Citizens Broadband Radio Service (CBRS) band.

Ericsson's latest Mobility report finds that an average of 64% of service providers globally offer fixed wireless access (FWA) service.