BlackBerry faces crucial test with U.S. launch of Z10

TORONTO, March 22 Fri Mar 22, 2013 11:22am EDT

TORONTO, March 22 (Reuters) - Nearly two months after its formal unveiling, BlackBerry's new Z10 smartphone goes on sale on Friday in the hyper-competitive U.S. market, a crucial proving ground for the company's ambition to re-establish itself as an industry leader.

BlackBerry , which is already selling the new touch-screen smartphone in about 25 countries, aims to make the Z10's new operating system the clear No. 3 platform on the market, a realistic but still difficult challenge, analysts say.

BlackBerry once ruled the U.S. smartphone market, but it has fallen badly in recent years as devices powered by Apple's iOS and Google's Android operating systems dominate sales both in North America and overseas.

The BlackBerry 10 operating system will now slug it out with Microsoft's Windows 8 platform to secure the No. 3 market position.

But by most accounts BlackBerry has a tough fight ahead. It not only has to win back the hearts and minds of consumers, but the timing is hardly ideal, with the Samsung Galaxy S4, expected to go on sale by the end of April, generating a lot of buzz.

"We believe BlackBerry's launch in the strategically important U.S. market will run into intense competition as Samsung, Apple, HTC and Nokia refresh their line-ups," Raymond James analyst Steven Li said in a note to clients on Friday.

Despite the buzz around other devices, some expect the Z10 to do well in the United States.

Best Buy's head of mobile sales, Scott Anderson, said the retailer has gauged demand for the Z10 based on sales at Best Buy stores in Canada.

"We have fairly consistently increased the allocation of it to our stores as it has got more and more buzz. Even though we aren't releasing any numbers, we do put this in the realm of a serious iconic launch," he said.

U.S. DELAYS

The Canadian company was forced to delay the Z10's launch in the U.S. market because testing by telecom carriers there took longer than expected.

"We've been working very intensely for the last two months with the carriers and partners to ensure the retail experience will be great for customers," BlackBerry Chief Marketing Officer Frank Boulben said in an interview with Reuters.

The device went on sale at AT&T Inc stores across the country on Friday, while rival Verizon Inc is set to begin selling the device in its stores on March 28. Carriers in the United States allowed customers to pre-order or pre-register for the devices earlier this month.

"Relative to the population, we are on the same trajectory as we were in Canada with respect to pre-registration, and as you know we've had a very solid performance in Canada during the first six weeks," Boulben said.

BlackBerry has yet to release hard numbers on initial sales of the Z10 in major markets such as Britain and Canada, where it went on sales soon after the introduction.

The company is expected to provide a first reading on the Z10's popularity when it releases its quarterly results on March 28. BlackBerry's shares surged last week, however, after it said one of its partners had placed an order for 1 million BlackBerry 10 smartphones, the largest single purchase order in the company's history.

BlackBerry shares were up 2.6 percent at $16.58 on Friday morning on the Nasdaq, while its Toronto-listed shares were up 2.1 percent at C$16.86.

The BlackBerry Q10 model, which has a traditional physical keyboard that's likely to appeal to professionals who are heavy email users, is expected to go on sale next month. It won't hit U.S. store shelves until May or June. The company also plans to launch lower-end versions of the devices later this year.

"I really expect a great start from the Z10 in the United States and that will be amplified by the Q10," Boulben said.