Seeking Alpha
Long only, software, internet, tech
Profile| Send Message|
( followers)  

Certain reports by US analysts paint a deceiving and self-serving picture of bleak sales for BlackBerry (NASDAQ:BBRY) Z10 in the UK. I doubt said analysts have been walking around in London and talking to branch managers of the largest UK retailers to do their channel checks. Whether using Carphone Warehouse's online inventory tool or actually calling stores, I'm not quite sure how they get these channel checks done, but one thing I can assure you is that the process needs to be done in person and preferably not by a guy in a suit with a US accent. Whenever I have called stores I have often gotten lukewarm response as these kids are busy and they don't want to be answering surveys for people who are not going to be buying phones.

Carphone Warehouse:

  • No longer sells the Z10 without contract online.
  • Sim-free sales are only in stores and this depends on each store's inventory.
  • Raised the price of BOTH Z10s from 479 to 529 GBP (iPhone 5 (NASDAQ:AAPL) for 499).

Phones4u

  • No longer sells the Z10 without contract online.
  • Sim-free sales are only in stores and this depends on each store's inventory.
  • Raised the price of the black Z10 from 479 to 549 GBP.

When was the last time the price of a phone was raised post-launch, and even more so, that phone was a BlackBerry? Other than being stranded on a deserted island with nothing but a BlackBerry I cannot see that scenario ever playing out! But it just did. Of course, US bear-side analyst channel checks would not have told you that because said analysts probably never walked into a UK retailer! It also might have raised a serious question mark under the bearish research note.

Another very important point that is made constantly by the retailers is that people are buying these phones sim-free.

Recent Bulletin Tacitly Acknowledges Existence of Black market

Within the last couple of days a special bulletin was sent out by one of the two largest UK retailers to all stores allowing the sale of multiple device units to walk-ins. (There used to be limits here and people circumvented them by sending in wives etc.)

This is important because it is a tacit acknowledgement of a continuing black market for BlackBerry Z10 phones…21 days after launch?

Again do not expect a bearish analyst to reveal a fact like this to you.

Meeting Notes and Methodology…Important Points to Consider:

In each store I sought out a manager or mobile 'aficionado' and I avoided part-time employees et cetera. I sought to have a meaningful conversation rather than a superfluous inventory check, which can be so misleading either way.

Mobile operator stores sell far fewer handsets than the two large UK retailers; a large mobile operator's store can sell maybe 5 -20 contract handsets in a day. It appears to me that these stores service clients who get the upgrades by telephone call or online sales. When US analysts said stores had very few stocks at launch so as to leave the impression of a fake sell-out, they may have been referring to these stores or smaller retailer locations.

Below are top-level highlights and the excerpts of these channel checks:

Raw Notes:

Smaller Location Retailer chat:

They had a small quantity on launch day and they sold all those straight away, waited a few more days got another 10 or 20 in and sold all of those. At the moment though they probably have about five of each. They are probably selling a few a day. It's not as much as they do with the other phones and they probably sell more iPhone 5s, and Galaxy S3s (OTC:SSNLF). He agreed to a 3 to 1 iPhone to Z10 selling rate, which I suggested, so this can only be taken with a grain of salt as I suggested the number.

  • Agreed with statement along the lines of: "I think it's been a better success yes than anybody expected."
  • The store affirms a lot of people are buying them off contract.
  • Black Z10 prices have been moved UP: from 479 to 529.

Highlights from a mobile Operator store: People are 'lovin it up'

  • More people coming in than they expected, but more people want to buy it outright. When they find out the price, they come back and buy it on contract.
  • They are actually selling more than expected.
  • They are working towards a goal of three handsets [contracts only] per day.
  • This compares to 5-6 for iPhones and the S3 each. Basically out of 13-15 high-end smartphones, Z10 should be three of those.
  • They thought they would have to do a lot of work to sell them but they didn't, walk-ins simply know what they want. They just want to be directed onto the right tariff.
  • He also noted 4G is very helpful in selling the Z10, as well as BBM video for the younger generation and the screen sharing.

Larger UK retailer, area Manager supervising numerous stores:

They had raised the price of the black Z10 to 550 GBP

  • They too are experiencing heavy sim-free sales, and fewer contract sales. The top line from here was they were selling a ton of handsets and it was doing very well.
  • They had also just been given the green light to sell multiple units by their head office. (a very recent note within the last day or so.)
  • In his store, the BlackBerry was selling better than the Lumia (NYSE:NOK).
  • It has not affected iPhone 5 sales negatively.
  • His key finding is the BlackBerry Z10 is "taking by storm," the S3 is still selling well, and the Note 2, and the iPhone as well.
  • Also very important to note here they have not had customer complaints or returns due to software glitches etc.
  • I asked if they had stock at launch? To which he answered along the lines that they had massive stock.
  • I told him people are saying BlackBerry gave like five handsets to each store to create fake sell-outs.
  • He told me they had huge amounts and they blew them out. Generally he commented that it was a very organized launch as far as inventory went.

I would like to add that Edgeware road stores are offering to sell these for 800 GBP!

To Conclude:

The recent slew of UK channel checks were designed to do one thing: 'scare you', and with the courtesy of articles titled like, "BlackBerry 10 May Have Been An Enormous, Record-Breaking Flop," it is understandable investors were scared.

My limited UK channel checks have confirmed very important trends:

1.) Prices are being increased post-launch.

2.) The black market exists and is thriving 21 days after launch.

3.) The larger UK stores as expected had 'massive' quantities of launch.

4.) Those stores blew the phones out the door.

I would also like to add a cautionary note that BlackBerry has recently announced launches in France, Malaysia, Singapore, Italy, Germany, and India. All of these have either just launched or will launch in the next couple of days. Basically well before the quarter ends…

Recent analyst comments regarding shipment figures have been overly bearish, but with $2 Billion-plus short BBRY, those analysts clearly have an agenda to help pull their clients out of this mess. Forbes is their preferred voice, but expect more stories as this group is very adept at manipulating headlines to generate fear. If you believe the above thesis, then this market manipulation represents an opportunity to buy. Your mantra in this trade should be "there is nothing to fear but fear itself."

Source: Major U.K. Outlets Hike BlackBerry Z10 Price Above iPhone 5, Black Market Thriving