Seeking Alpha
Profile| Send Message|
( followers)  

I have been following the BlackBerry (NASDAQ:BBRY) saga for some time now, and I have noticed a trend with the company that is very troubling: It just can't seem to get anything done when it says it will. Every time a time frame/deadline is setup, it doesn't get met. And, I've noticed that it's usually somebody else's fault or some other underlying cause for the delay. These problems go back years and now those problems, coupled with other major immediate industry challenges, are going to cause a significant short-term problem for the company's shares.

In addition, based on the company's past actions and history, I believe a delay in the release of the phone in the U.S. is possible. Obviously, any further delay in the launch of the new phones in the U.S. or other significant industry developments could present an investment opportunity should this happen and you can get out in front of it.

Look at the history of the creation of BB10:

Dec. 14, 2011: BB10's long list of delays begins. The company announces that the new BB10 will not be available in early 2012 as had been previously planned. The reason given: The chipset that the phone will use will not be available until the second half of 2012. But, in another report from the time, it was alleged that then CEO Mike Lazaridis was outright lying when he gave that reason. The real reason, according to the source in that report, was that there was no clear vision yet as to what the product would be. The chip excuse allegedly was just an attempt to buy some time.

Jan. 23, 2012: One month later. CEO Lazaridis is out, and the company announces that Co-Chief Operating Officer Thorsten Heins has been promoted to CEO. Being an insider, he clearly knew where things stood internally with the status of the new devices. He reiterated the previous company guidance (from December 2011), that the devices will be available in late 2012, even though it was said the prior month that the chips wouldn't even be available until then.

June 28, 2012: Six months later. BlackBerry announces that because of the sheer volume of software code it has to deal with, BB10 will now not be available until the first quarter of 2013. A New York Times article from then points out that up until a few weeks before this announcement, CEO Heins was still saying that BB10 was on track for a holiday 2012 release. Was he being disingenuous or just misinformed? Or had the sheer volume of code suddenly risen exponentially?

July 10, 2012: Two weeks later. At the company's annual meeting, the company reiterated its hope that the device would be available at least in some countries in January 2013. The company tried to spin this as a positive. According to Bloomberg, Frank Boulben, the chief marketing officer, said this could actually help sales because the new device wouldn't have to compete with the other new device roll-outs during the holiday shopping season. I guess BBRY figured nobody does releases other than at Christmas time. But, just to hedge himself, he said that there were no assurances that it would be released then because of the time associated with the "carriers' testing of the device." He explained that this testing can take up to eight to 12 weeks. What he did there is called, "planting the seed." How convenient, that he provided a built-in excuse that could be used later if needed. What it really says is that even then, the company was aware that carrier testing can take time to complete and that it should plan accordingly for a January 2013 release.

Aug. 14, 2012: One month later. Again, CEO Heins was out in the public proclaiming all the progress that is being made. In an interview with the Wall Street Journal, he said that in the next few weeks BBRY would begin showing beta versions of the device to carriers to get feedback and make sure everyone is involved in the development process. Again, he said both devices are set for first-quarter 2013 release.

Oct. 30, 2012: Two months later. The company announces that it had received "lab entry" at 50 different carriers worldwide. This was naturally taken as a positive since lab entry is the process whereby the carriers formally evaluate the device on their specific networks. On its face, this sounded great. It sounds like a lot. But a Wikipedia search shows there are 100s of carriers in Europe alone. Here is the Europe list. When looked at from this perspective, it appears that maybe BBRY was not as far along as the company made it seem. Who were the carriers that granted lab entry? Did it include any from the U.S.? It's curious the company didn't mention who had accepted it though there was a catch-all statement in the release that said, "This process will continue in the coming months as more carriers around the world formally evaluate the devices and our brand new software." Read literally, this means that conceivably lab entry could occur as late as December or January 2013 for some carriers. We now know that this is exactly what happened in the U.S. The WSJ recently reported that the phones weren't given to U.S. carriers for testing until the second half of January 2013. The company had to know in October that it would be hard to have a U.S. launch for even one, let alone two devices in the first quarter of 2013 given that the carriers weren't even close to receiving devices for testing. The company stated in this same press release that it expected a "flawless release" of the devices in the first quarter.

Nov. 13, 2012: Two weeks later. In a Reuters story, Chief Operating Officer Kristian Tear said that he was confident that the BB10 would be 100% ready and would be in stores "not too long after" the January 30 launch. Again, how did he not know about the time delay associated with U.S. carrier testing once they actually receive the device (which they still hadn't yet)?

Jan. 9, 2013: Two months later. The company was still proclaiming, through its chief marketing officer at the Consumer Electronics Show, that the devices were launching later in the month and giving the impression that they would be 100% available. Even at this advanced stage, per the WSJ article cited above, the devices had still not been given to U.S. carriers for testing.

Jan. 30, 2013: Worldwide launch. The company announces that the devices are not 100% available yet. Instead, it is announced that there is going to be staggered roll-out. They won't come out in the U.S. until mid-March for the Z10 model and April for the Q10 (keyboard) model. The CEO claimed the delay was due to the rigorous testing procedures of the U.S. carriers. Technically, he is correct. If the carriers didn't have to test the device, they could start selling it immediately. But BlackBerry knew that these had to be tested and, it knew that it didn't get the device to the carriers (again, see WSJ article cited above), until the second half of January, so to blame it on the carriers when it was really BlackBerry's delay that caused the late testing is a little misleading.

Feb. 6, 2013: One week later. It was reported in an AP interview that CEO Heins now expects the Q10 model to be debuted in the U.S. eight to 10 weeks after the Z10. He said he still expects the Z10 to be released in mid-March according to the interview. This now pushes the date of the Q10 release until at least mid-May at the earliest or as late as early June.

So that's where we stand right now. The carriers are allegedly holding up the process. And we have a tentative release date of mid-March for the Z10, and eight to 10 weeks after the Z10 for the Q10 model. This presents a problem for the shares of BBRY now. Everyday we are hearing of another new smartphone being introduced or rumored to be. And worse, Samsung announced that it will now introduce a competing smartphone in mid-March that will directly compete with what was considered to be one of the main advantages of the BB10: Its ability to separate the business from the personal use of the phone. The BB10 hasn't even been released yet, and already a competitor has trumped one of its main features. All announcements like this over the next few weeks will serve to further diminish any kind of positive prospects for a successful launch and sell-through. These announcements will likely be followed by continued downward pressure on the stock.

But an even bigger immediate issue is BBRY's timetable for carrier testing. It appears that BBRY is using its standard estimate for carrier testing (which is eight to 10 weeks). This would also confirm why it is estimating mid-March. That is about eight weeks from when the phones were submitted to the carriers. However, according to a Verizon spokesman in an article on Bloomberg, the testing process can be more lengthy for new operating systems. Now, couple that lengthy testing process with the fact that this also has to be done for each of the other three main U.S. carriers (AT&T, Sprint, and T-Mobile). What may be an issue for one may not be for another, and vice versa. But BlackBerry has to devote resources to and resolve both. The same issue may have to be resolved at all four carriers but each requires a different fix. The potential problems and derivatives thereof are endless. There could still be substantial delays announced affecting just one or two of the carriers. It seems ambitious for BBRY to assume this process will go smoothly or quickly.

Given the company history described above, there is no indication or reason to believe that the Z10 will be introduced in the U.S. in mid-March as the current guidance suggests. In fact, until such time that we get a specific date, one can safely assume that it will actually be later than the time given by the company. After all, every single announcement that didn't involve a specific date about when the BB10 would be available turned out to be wrong. And we still haven't gotten an announcement with a specific date for the U.S.

I'm sure there will be an excuse for the delay. Maybe the company didn't anticipate demand in the emerging markets and production quantities weren't high enough to compensate? Or maybe just blame the rigorous testing of the carriers again? I can't say for sure what the reason that will be given this time, but it wouldn't surprise me if it happened given the company history regarding the device and the handling of its release. Obviously, any further delay will cause a sell-off in the stock as it will just be another disappointment in the widely expected release.

These two main problems facing BlackBerry in the immediate short term are great opportunities to take advantage of the decrease in share price we should see in the next couple weeks. I would recommend getting ahead of any potential negative short-term news by selling the stock or putting on other positions that could benefit from a fall in the stock price.

Source: Can We Believe What BlackBerry Says?