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There has been no shortage of doom and gloom reporting around BlackBerry (NASDAQ:BBRY) sales lately. There are two (2) key analysts who seem to have a keen eye towards painting as bleak a picture as possible for BlackBerry and this article will examine some of their most recent reports.

Canaccord Genuity

Analyst Mike Walkley has been on the sell side of BBRY even when the stock was trading in the $7 dollar PPS range.

  • On Feb 19 Walkley made headlines when he "slashed" sales estimates for the Z10 from 1.75 million down to 300k. Sure this made great news, but a small disclaimer in his research paper noted that his 1.75 million estimate had included U.S sales. Adjusting his numbers to reflect the fact U.S. sales would not be included, a fact that had been public knowledge for over six (6) weeks prior to this was very questionable in its timing. It should also be noted that articles such as the one from Forbe's Eric Savitz fails to mention the U.S. sales adjustment and instead points to Walkley's comments around supposed Z10 sales slowdown.
  • In the same article, Walkley claims that T-Mobile will only carry the Z10 version as one reason he is slashing his estimates. This is simply not true and it has been confirmed that T-Mobile will indeed carry both models. Sprint (NYSE:S) is the only major U.S. carrier that has opted to carry just one model (Q10).
  • On March 4/13, a mere 8 business days later, Walkley comes out with another research note. This time Walkley claims he "went too far" in his sales estimate cuts and revises his number back up to 800k units.

As an investor, I would question the timing, history and accuracy of Canaccord Genuity research reports. How an analyst can be off by that much in such a short span is amazing. Maybe the fact that he doesn't know which carriers are selling what models has something to do with it?

Pacific Crest

Analyst James Faucette has been on the sell side of BlackBerry since the stock was trading in the $7 dollar PPS range.

  • In a March 1/13 note to clients, Faucette stated that "In the past 24 to 48 hours, the Carphone Warehouse has lowered the price on the BlackBerry Z10 on 3's network to £29 per month with an upfront fee of £29 from its original contract launch price of £36 per month - this is effectively a price reduction of ~£160 ($240). "
  • In a March 5 note to clients, Faucette states that "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. Canadian carrier stores and retailers also appear to be rapidly approaching targeted levels, in our view".
  • In the same article's comment section there were many questions to the author, including why the graphs had no data and challenging the claims of price reductions. Ray posted the following update:

Update: In response to reader questions about the discounts that Faucette cites today and in Friday's report, I submitted questions to his office asking whether the discounts were either a) standard discounts by competitive retailers for a hot new product; or b) discounts for lowered subscription allotments, as some suggested (e.g., smaller buckets of minutes, etc.).

In an email, Faucette responds as follows. As regards the first point, "it certainly could be the case," says Faucette, though he adds that "I have never seen these 2 retailers [Carphone Warehouse and Phones 4U] discount phones for which they don't have ample supply (but they certainly could/might)."

Faucette adds that "We have seen many cases where "promotional price cuts" by these retailers have led to permanent price cuts," but he immediately qualifies that response by adding, "I would certainly allow that we have seen promotional pricing by those two that did NOT result in permanent price cuts."

As regards the second point, variations between pricing offers, Faucette states, "the cuts were on like for like plans."

Lastly, Faucette adds that "I would point out that our checks found that on-hand inventory had crossed over from typically targeted levels, to 'high levels."

I haven't yet gotten clarification as to why the charts published have no Y-axis values, though I have asked about that matter as well.

As the reader can clearly see, there is more to these stories than meets the reader's eye. It is wise to look deeper and read between the lines when taking good or bad news into one's overall investment strategies.

Taking a look at this one month chart on BBRY, it is clear that the stock "moves with the news:"


(Click to enlarge)

From my view, nothing has changed for the long case with BlackBerry:

  • It has launched the Z10 in major countries all over the globe to many positive reviews that have been well documented.
  • It maintains a good balance sheet with cash on hand and zero debt.
  • It has managed to launch the platform well with its core base of government and enterprise customers, with the German government announcing today an order for 40,000 Z10 units. Sounds like a ringing endorsement to me.

For a platform that back in November Peter Faucette had claimed would be "DOA," I think BlackBerry has done quite well.

CEO Thorsten Heins has given U.S. some hints as to what lies ahead for earnings this month with quotes like this:

  • "We are above our own expectations and our targets were quite ambitious."
  • "The fact is, we were quite surprised with the reaction and we have increased our production in the meantime."
  • "Sales have now changed the tonality of our strategic review."
  • "Sales from non-Blackberry users are in the measurable double digits."

Would a CEO only 4 weeks away from reporting earnings make such statements?

In my view, if sales were off-target, he would have kept the fact that much of the sales are coming from non-Blackberry users in his back pocket to use as a shield at earnings.

All eyes, bears and bulls, will be eagerly awaiting the march 28 earnings report. Maybe Thorsten will throw U.S. a curve ball and announce Z10 sales early?

Source: BlackBerry And The Bad News Bears