New Blackberry handsets rumored to be struggling, impacting stock

BBRY update 04.11.2013Enlarge GraphOver the past few days, there have been several different negative data points regarding the ongoing launch of Blackberry’s new Z10 handset. These items include a rumored rash of returns of the phone by new purchasers due to confusing usability of the handset as well as a quick price cut of the handset on Amazon. This is causing BBRY stock to back off quickly from its January high of $17.90 per share.

While Blackberry (BBRY) stock has still rewarded patient intermediate term holders, traders that purchased shares recently may have reason to worry. Over the past two days, several meaningful data points have surfaced that may be pointing to weak demand for the company’s newest handset (see our research highlighting the introduction of the Z10 and the upcoming Q10).

The first issue was highlighted by a small Wall Street research report that mentioned in its channel checks that returns of the Blackberry Z10 handset were actually exceeding sales at some “key” retail partners of BBRY. The biggest complaints, according to the research firm, is the Z10 has a lack of apps and that the nature of user interface is “unintuitive,” which is causing some confusion among users. While we cannot validate the feedback by users on the state of the operating system, we can verify that the new Blackberry handset has just 100,000 applications, or apps, for download, versus the 775,000 apps that Apple (AAPL) has available for use on its various iPhone models.

The second negative data point this week was that Amazon (AMZN) cut the Z10’s price; purchasing a two-year contract with either AT&T or Verizon dropped to $99 from $149 per unit. This could be an indication that the Z10 is not selling well because the price cut comes only one month after releasing the handset in the U.S.

Both these near term items have been filtering through BBRY stock today, which has now backed off substantially from the high of $17.90 on January 22nd of this year. This negative sentiment may linger until the company reports its fiscal first quarter earnings on June 28th; here, the company will likely be able to address these concerns based on consumer reception for its handsets. In our recent research, we highlighted that the company is likely turning 1 in 11 current subscribers into new handset sales (see our research on this item).