Late to the Party, but the Name Has Changed

Callum is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

A Few Months From Now

The company now known as BlackBerry (NASDAQ: BBRY) went out in front of the world and released their new Z10 and Q10 phone lineup. Little did investors and consumers know that it wasn't going to come out in one of their core markets, the US, until mid-March. This sent shares down from $18.32 to $13, but then they recovered and hit $15. While many analysts turned very bearish like Evercore, others, such as Jefferies, maintained their bullish stance. Let's first look at what went wrong during the presentation.

Lame presentation, worse release

A huge problem for investors is that BlackBerry isn't releasing their new BB10 lineup in the US until mid-March for the Z10 and the Q10 (which has a physical keyboard) won't be released until April. This gives more time for the competitors to take away potential BlackBerry customers. The US is getting closer and closer to smartphone saturation. With already over half the populous with a cell phone plan having a smartphone. According to Business Insider, by 2014 the US will hit 80% smartphone saturation, which is considered full saturation.

In Japan when the smartphone market hit full saturation (at around 80%), smartphone sales fell as the number of consumers upgrading from feature phone to a smartphone plummeted. It's the same story in South Korea. This means that as each day passes, the US gets closer to full saturation and the inevitable fall of smartphone sales, which would put a big damper on BlackBerry's turnaround efforts.

Apple (NASDAQ: AAPL) is a big competitor to BlackBerry as they are eating up a lot of their business clients as companies implement BYOD programs (buy your own device). This is one reason why BlackBerry's US market share has fallen from 7% in 2011 to 1.4% in 2012, while Apple's rose from 35.8% to 53.3%. 27% of those buying an iPhone were switching from a different OS. 

A later launch date gives BlackBerry less breathing room for the probable launch of the next generation of the iPhone in the summer or fall. Prior to the iPhone 4S Apple usually released the new iPhone in the summer, but the past 2 launches (the 4S and the 5) were in the fall. Maybe BlackBerry will get lucky and Apple won't release a new phone until the fall, but even so then they have to watch out for Samsung. Samsung likes to release new phones in the spring so it has less competition with Apple. The Z10 and Q10 cost about the same as the iPhone or Samsung Galaxy S3 with a 2 year contract.

Bullish things

One thing BlackBerry offers that most of the competition, even Apple, doesn't offer is the physical keypad. Now for an anecdotal piece of evidence of why this is a great idea take my dad for instance. He doesn't particularly like the touch screen aspect of new phones and it is hard for him to quickly and accurately type in a text or search something on the web. So if a company can offer him a keyboard, which would allow him to do both, that can be a strong selling point to consumers. Nokia had a poll conducted that showed that 48.64% prefer to type in things with a QWERTY keyboard, while only 34.69% preferred the touch screen. This may not be the most accurate poll as it was done online, it does show how the physical keyboard could be very appealing to consumers, especially older consumers (which makes up a large part of the corporate work force).

Also BlackBerry has very strong ties in international markets. While BlackBerry has 5.3% of the global smartphone market, it has around 50% of the smartphone market in Indonesia and is the third largest mobile phone vendor in India. The Z10 launches in February in India and in March for Indonesia. The gives BlackBerry several different markets to push its new devices, but due to the large price tag on the Z10 and Q10 it will be hard to sell in emerging markets.

Final thoughts 

I'm bearish on BlackBerry as the stock has already had its rally and is pulling back after the launch of its new phones, and it won't begin selling these new phones for several months. At $7-8, BlackBerry is a buy for a speculative play, but at $15 the launch of the new phones is already priced in and then some. While these phones may help turn BlackBerry around, they need to hit the shelves first for that to happen. But with all the competition and more companies initiating BYOD programs, it is going to be an uphill battle for BlackBerry in the smartphone market. If you want a real turnaround play I would look at Nokia in this article.  At a reasonable price BlackBerry would be worth looking at as far as a fun speculative play goes, but it simply is too expensive right now.


callumturcan owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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