BlackBerry Z10 UK Pricing Remains at a Premium, Despite Misleading Analyst Report
In an attempt not to get sued, I'm not going to name the "analyst" mentioned above, but I am going to go through his points and refute them one by one for you. You will be shocked at the truly awful hit piece this was. You will not be shocked that a major outlet chose to print it yesterday. Bless his dear heart, the author did finally note this 'analyst' was a bear.
Mirror Mirror on the Wall, Who's the Dearest of Them All?
Before you read any further I would like to show you pricing for the Z10 vs. the iPhone, the Xperia Z, and the HTC One (the last two being brand new, premium 'hot' handsets.) There are really only two phone retailers in the UK and this is the second one.
Would BlackBerry (NASDAQ:BBRY), currently, be the most expensive handset of them all, more expensive than the hottest new releases, and this, one month after it was released?
Don't ask the analyst to mention the above fact to you. Were you to go to the Carphone Warehouse, you would see the Z10 is selling in line with the other phones, but not at a premium, and certainly not at a discount.
"The U.K.'s Carphone Warehouse chain has reduced the Z10's price to 29 pounds (about $44) per month on a two-year contract, plus 29 pounds for the phone. The previous price: 36 pounds monthly with no charge for the handset."
This pricing only applies to the 3 Network, which arguably the weakest network in the UK and susceptible to aggressive moves. Total device price here is GBP 725. Vodafone (NASDAQ:VOD), and everyone else, sells it for 33GBP/month for a two-year contract. 33x24=792, PLUS a 129 GBP one-off fee, so 921GBP in total, a massive premium to all other phones! Unlike Forbes Magazine, TechCrunch discovered this snafu before printing the story.
It appears that the analyst compared the premium pricing of 36GBP per month, used only for the NEWEST handsets in market, and then compared that to a one-off discounter to create a scare. Please see the pricing below from Carphone Warehouse: the 'Hottest Phones', the Xperia Z and the HTC ONE, sell for 36GBP, while regular premium phones [iPhone5, Z10] sell for 33GBP.
While the above statement is technically TRUE, it is disingenuous at best because:
1.) He is referring to 'Carphone Warehouse prices' while comparing prices from different networks within the Carphone Warehouse;
2.) He is comparing a shift away from Hot New Item pricing at major networks Voda, O2, EE, (for the two newer arrivals) to a special deal at the 3 network one-off price;
3.) Please also realize what this means: The BlackBerry Z10 had been running at a PREMIUM (36GBP vs. 33GBP) to the iPhone for over a month. That's crazy!
4.) As I showed you in past articles and above, sim-free the Z10 is still selling at a premium today, sometimes selling as high as GBP550 through these retailers last month.
Now, had he been truly clever, he could have really gotten headlines with this, the current Vodafone UK Web-Only pricing sheet last night:
As mentioned, Vodafone is selling the Z10 for 921GBP and not the 725GBP said unnamed analyst proclaims (Yikes!). But the analyst could have compared that to the 479GBP sim-free price, which would have been a 52% Price Cut!! AHHHHHH!!! The BlackBerry stock would have plummeted with that headline! The short-selling clients would have been saved, but he would most probably be dealing with some hairy consequences for the off-target comparison. You get my point? Pricing is all over the place and so easy to twist to tell your tale! It appears that now that even Tiernan Ray at Barron's is on to him and sending some rather pointed questions.
Now given what you just observed, how do the next statements ring (comments in parentheses):
"We believe that meaningful price cuts [disproved above] so soon after launch [also disproved], while probably at the initial discretion of the carriers, is likely to relegate the Z10 to being a mid-tier device [iPhone 5 is mid-tier?] with very low gross margins."
"the pricing move was positioning the Z10 as a mid-level device rather than as a competitor to high-end stars like Apple's iPhone and the Samsung Galaxy S III."
I'm not sure if he noticed, but in the second image above, the Z10 is selling at 33GBP, vs. 21GBP for the Galaxy S III and 33GBP for the iPhone 5. The Z10 is on par to the high-end star Apple (NASDAQ:AAPL), and at a 50%+ premium to the S III. Is this analyst from another planet?
Last but not least, his channel checks:
"Our checks indicate that as sell-through run-rates for the Z10 have declined meaningfully in the weeks following launch, we believe carriers and third-party retailers in the U.K. are already well above typically targeted inventory levels." - Stop reading and read my checks, done in person here.
Funny thing about that statement is that I walked into two separate Carphone Warehouse stores last Friday and asked about the phone. Each salesman told me that they had suffered stock-outs but they had just been replenished. I asked them how much stock they had and the first had the kindness to go to her computer and said plenty, "in the hundreds." The next store I walked and steered the conversation towards stock, and whether their warehouse was short. After punching away at his keyboard, he kindly retorted '587'. This was five days ago. Carphone Warehouse is the largest retailer in the UK with 800 stores. Do you really think 587 handsets in central storage, for the largest retailer in the UK, represents 'channel stuffing'?
This was not an analyst research note but rather a subjective opinion, dressed up as a news event, with the only intention to scare the marketplace by distorting the truth. This looks like what is commonly referred to as 'short and distort', nothing more than age-old boiler room antics. I can't tell people to hold on as the headlines keeping dropping on us. You must do whatever is best for you. Personally, I am staying the course and hoping for positive news soon.
Disclosure: I am long BBRY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: I am Short Wall Street Analysts