BlackBerry has momentum but still faces uphill battle in U.S.
BlackBerry still faces an uphill battle in the U.S., despite positive momentum from Wednesday’s announcement of a purchase order of one million BlackBerry 10 units, analysts warn.
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TORONTO — BlackBerry still faces an uphill battle in the U.S., despite positive momentum from Wednesday’s announcement of a purchase order of one million BlackBerry 10 units, analysts warn.
The surprise announcement — the day before Samsung was to unveil its Galaxy S4 phone in a flashy news conference in New York’s Radio City Music Hall — caused BlackBerry shares to surge Wednesday and prompted RBC Capital Markets to boost its sales predictions for the phones.
RBC analysts Mark Sue and Paul Treiber adjusted their fourth-quarter sales estimates for BlackBerry 10 to 500,000 units from 350,000 on Thursday, citing strong demand in India, the U.K. and other markets.
However, they warned that the company’s overall success depends on the crucial U.S. market, where carrier support and advertising plans appear “tepid” so far.
“The U.S. is BlackBerry’s largest market ... but probably the most difficult to recapture lost consumer share,” the analysts wrote.
The BlackBerry Z10 is set to become available in the U.S. through AT&T on March 22. T-Mobile and Verizon Wireless will also carry the phone, while Sprint has chosen to pass.
However, AT&T preorders are showing much less consumer interest than in Canada and the U.K, the analysts said. Further, they cautioned the highly anticipated Samsung Galaxy S4 and soon-to-be-lower-priced Galaxy S3 would challenge Z10 sales.
International Data Corporation analyst William Stofega said BlackBerry needed to spend more on television advertising and make better use of Alicia Keys, the company’s new creative director, to raise its profile in the competitive U.S. market.
But he said the company’s media strategy had improved recently, as it may have timed its purchase order announcement for a day before Samsung’s Galaxy S4 press event.
“I’m glad they have chosen to be a little more aggressive ... especially going against a behemoth like Samsung, you have to do something.”
BlackBerry’s share price fell three per cent on Thursday on the Toronto Stock Exchange to $15.48 after an eight per cent surge Wednesday.
The company also announced Thursday that it will extend its Secure Work Space technology to mobile devices powered by Google Android and Apple iOS operating systems by late June.
The technology, expected to appeal to corporate and government clients pressured by a “bring your own device” trend, allows users to switch between a work and a personal profile while keeping work files secure.
Peter Misek, an analyst at Jefferies LLC, said BlackBerry’s mobile device management software would gain traction this year and see a significant rise in revenues in 2014.
“Supporting devices with the best, most secure, and easiest-to-use mobile solution should enable RIM to transform into what we believe is an attractive model,” he said in a report released Thursday.
He said his research showed the one-million purchase order, likely made by a U.S. carrier or distributor such as Ingram Micro or Brightstar, was intended for near-term sales to existing BlackBerry customers.
Misek maintained his revenue projections of $4.2 billion in the first quarter and $4.1 billion in the second quarter, which are significantly higher than Wall Street estimates of $3.2 billion and $3.1 billion, respectively.
But some analysts warned against overreacting to the one-million purchase order.
“While it’s nice that somebody has voiced enough support to purchase one million units, we would not put too much stock into such an announcement,” said James Faucette of Pacific Crest Securities in a note released Thursday.
He pointed out that the company’s news release simply stated one million “BlackBerry 10” units had been ordered, without saying if they were the Z10 or the Q10. The agreement is likely spread out over an extended period of time and across several models of BlackBerry 10 devices, he said.
“The real impact, apart from the scintillating headline, could be negligible unless there is real growth in underlying demand.”
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