BlackBerry shares dive on reports of muted U.S. debut for Z10

TORONTO (Reuters) - Shares of BlackBerry fell nearly 8 percent on Friday after reports of a flat response to the launch of its new Z10 smartphone in the vitally important U.S. market.

A new Blackberry Z10 smartphone is displayed at a store in New York, March 22, 2013. REUTERS/Brendan McDermid

The well-reviewed device, whose success is essential if BlackBerry is to reestablish itself as a power in the smartphone industry, finally hit U.S. store shelves early on Friday, nearly two months after being formally unveiled.

Several analysts and media reports found the debut lackluster.

“This morning we visited and called stores to survey early demand for the Blackberry Z10,” said Hudson Square Research analyst Daniel Ernst. “We found no lines, no signage announcing the launch, and clerks told us they had very few pre-orders.”

The uninspiring turnout hurt BlackBerry shares, which ended the day down 7.7 percent at $14.91 on the Nasdaq. The Canadian company’s Toronto-listed shares fell 8 percent to close at C$15.19.

Many analysts argue that the Z10’s performance in the hyper-competitive U.S. market could well decide whether BlackBerry can turnaround its faded fortunes.

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 in the market, a realistic but still difficult challenge, analysts say.

“I think the U.S. will be a challenge for BlackBerry more so than some of the countries where they have already launched,” said Morningstar analyst Brian Colello.

“The momentum for iPhone and Android is too strong here. I still think they can win over some enterprise users, but the U.S. is a country where BlackBerry’s brand has been greatly diminished.”

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.

BlackBerry’s new BB10 operating system will now slug it out with Microsoft’s Windows 8 platform to secure the No. 3 spot in the market.

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,” said Raymond James analyst Steven Li in a note to clients on Friday.

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

Best Buy’s head of mobile sales, Scott Anderson, said the retailer has been able to gauge 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, adding that BlackBerry has a window of opportunity over the next month before the new HTC and Samsung smartphones hit store shelves in the United States.


The company was forced to delay the Z10’s launch in the U.S. market because testing by telecommunications 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 launch, though, appeared to be low-key at AT&T stores in New York, where there was no sign of posters or other marketing to highlight the launch day. An AT&T sales associate at one of its stores said the store had sold several of the devices early in the day.

The device went on sale at AT&T Inc stores across the country early on Friday, while 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.

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 reach U.S. store shelves until May or June. The company also plans to launch lower-end versions of the devices 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.

Reporting by Euan Rocha and SInead Carew; Editing by Frank McGurty, Peter Galloway and Nick Zieminski