BlackBerry Q10 Sales Look Strong

 | Jun 18, 2013 | 10:39 AM EDT  | Comments
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Over the last week, we've been doing our own channel checks at about two dozen New York City-area stores to see how well the new BlackBerry phones from Research In Motion (BBRY) are selling.

Next Friday morning, June 28, BlackBerry will reveal its quarterly results for the period that ended in May. That report will be critical for the stock, which is now trading in the $14 range and has become a real battleground stock.

Many analysts are predicting a surprisingly strong quarter. Last week, Societe Generale raised its revenue estimate for the quarter to $3.7 billion, up from $2.7 billion. SocGen foresees strong sales of the new Q10 and Z10 devices from BlackBerry of 5 million devices.

Most analysts, however, have much more cautious expectations for the quarter. The consensus estimate is for $0.08 in earnings per share and $3.4 billion in revenue.

Since 38% of the stock's float is held short, any positive signs -- either about the May quarter or about how things are going (especially in the U.S.) in the August quarter -- could really help the stock.

The U.S. still represents more than 20% of all of BlackBerry sales. So this is a critical market for BlackBerry to turn around. It has been steadily bleeding subscribers for the last three years, from 20 million to fewer than 5 million.

We decided to canvass a bunch of New York stores to see how the new phones -- especially the Q10s, which went on sale this month -- are selling. We found some very positive news as well as some concerns for BlackBerry.

First, the positives. The Q10 seems to be selling very well. Except for a few stores that have not received much inventory yet, most have the phones in stock, and they are selling well. Many stores signed up existing BlackBerry subscribers to get the first few phones that came available. It wasn't uncommon to hear about stores selling about 40 or 50 in their first week of availability.

Now the concerns. It appears that sales volumes for the Z10 have really slowed down, especially since the Q10 went on sale. The question is, can the Z10 rebound once the initial rush of demand for the Q10s subsides? It's not clear yet. There were also many stories of high returns of Z10 devices -- usually in exchange for the Q10s. Again, the question is whether this is just an initial reaction to the availability of the Q10 phones or whether it will persist.

We also heard of complaints from some longtime BB7 customers who found the new BB10 operating system a little disorienting because of the new gestures involved. I don't believe this is a major concern. It's simply going to take some getting used to, and then these complaints should go away.

Another concern was that the sales clerks we spoke to said that almost all the new Q10 (and Z10) buyers were existing BlackBerry customers. The new device isn't attracting iOS or Android users as BlackBerry had claimed was happening in the U.K. and Canada.

These concerns are not killers for BlackBerry. Overall, it's very good news that existing BlackBerry subscribers in the U.S. are interested in the new Q10 devices and are upgrading. This suggests that BlackBerry can retain its hold in the enterprise space with power messaging users.

BlackBerry needs to stabilize and then grow. And it must stabilize in the U.S.

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