Research outfit Raymond James says that the debut of BlackBerry’s (NASDAQ:BBRY) new BlackBerry 10 operating system and the two handsets on which it runs have gone a long way toward repairing the home turf market share erosion the company has suffered over the past few years. In the fourth quarter of 2012, BlackBerry’s share of the Canadian market topped out at a dismal 6%. But by the first quarter of 2013 it had more than doubled, rising to 13.5%.
13.5%, a clean double in one quarter?
Did I read that right? And by the way, the Z-10 was only on the market in Canada for less than half of that quarter.
Now to be fair, I own a Z-10. I came from Android as a guy who has ported Android (twice) because I didn't like the versions that shipped with the hardware I owned and have hacked on it and loaded various versions from other people for years.
I undertook all of that because of problems with the software provided "stock"; it was either bloated, unstable or (frequently) both.
The Z-10 continues to impress me, incidentally, although I will not try to snow you and tell you it's perfect. It's not. What I can tell you confidently however is that I vastly prefer the Zed to the Samsung Android devices.
It's just easier, simpler, and more-productive to use.
Canadian and EU carriers have now rolled out version 10.1 of the phone's firmware, which includes several material improvements that I've talked about before. There are various "hacked" versions floating around and it also turns out that loading new firmware on the Z-10 is a trivial matter, where with Android phones it frequently was and is not. While the Triumph (for example) was really nice in this regard certain Samsung phones can be a pain and many have a risk of "hard-bricking" the device inadvertently -- that is, unrecoverably screwing it up to the point where it has to be exchanged. It appears to be nearly impossible to actually hard-brick the Z-10, although I'm sure someone will come up with a better idiot at some point....
Recently I have discovered a way to change software versions on the phone non-destructively. While carrier OTAs (over-the-air upgrades) have typically been able to do this on most devices it has been difficult or impossible to do so as a third party in most cases, and attempting it has usually been fraught with risk (including a device that refuses to cleanly boot and run.)
U.S. carriers still have 10.1 in test and have not yet rolled it out for wide release. However, I've been running it for a while, and a couple of days ago "harmonized" my phone with the Canadian and EU releases, all of which are of the same version as far as I can tell.
If you're still on a 10.0 release you'll like the update, and if the U.S. market share figures wind up anything like the Canadian ones there's going to be quite a shock coming to a number of people. Remember that the U.S. didn't get the phone until April and the Q-10 (with the keyboard) has not yet shipped at all.
Additionally in recent days the LA County Sheriffs Department (largest in the nation) has confirmed it is deploying the new BB10 phones and the underlying corporate BES infrastructure. I expect these announcements to continue now that both BES and the phones are out. In addition I suspect there will be material acceleration in this trend once the Q10 ships in the U.S. market -- an event that is now just a couple of weeks away.
Those who have written off the company in the enterprise space have, in my opinion, made a big mistake.
The bottom line is that the penetration results for Canada thus far are well beyond my expectations, especially considering that the Q-10 is not in those figures. I was looking at the smartphone universe in the US/Canada market as a marketplace where BlackBerry could command a mid-to-high single digit presence and have a nice, stable business. If it actually delivers double that or better then the stock is not just undervalued it is grossly undervalued, particularly given that the margins on the new phones are wildly better than their previous generation devices.
In addition I look at the introduction of the Q5, a somewhat decontented Q10 for emerging markets, as an excellent step forward. Someone will eventually bring that device into the North American market; being a keyboard device it could easily have a great deal of appeal to people who are very heavy text message users at the right price-point, displacing some of the lower-end Android appeal. Again, the issue is one of margins -- if you can replace the commodity-style margins on the older devices with one that returns double that you win big, and it appears that's exactly what BlackBerry intends.
When you add to this the ridiculous amount of short interest in the stock this looks to be quite a warning to those who believe the company is going to fail -- you could well be proved wrong in dramatic fashion.
Disclosure: The author is long BBRY.