Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB) or “Blackberry” is going to debut Z10 in the U.S. on AT&T next week. Other national carriers are also likely to launch BB10-based handsets soon. The U.S. launch is crucial for BlackBerry since it has traditionally been one of its strongholds Analysts Trefis note the tough journey ahead. Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB) faces competition from Android and iOS, both in terms of attracting customers as well as developers. Trefis notes that this BlackBerry will need to not only convert users of other platforms but also stop enterprises from jumping ship After several weeks of delays, BlackBerry (NASDAQ:BBRY) will finally debut its new BB10 platform in the U.S next week. AT&T Inc. (NYSE:T), the second largest wireless carrier in the country, announced Monday that it will launch the long-awaited fully touch BlackBerry Z10 smartphone on March 22nd. Further details from Trefis below:
Prospective Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB) buyers will be able to preorder the Z10 more than a week ahead of launch, starting Tuesday. As for the pricing, AT&T Inc. (NYSE:T) plans to sell the device for $199 with a two-year postpaid contract. Other U.S. carriers have also expressed interest in Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB)’s new smartphone, with T-Mobile having started taking pre-orders for the Z10 from business customers since Monday and Verizon Communications Inc. (NYSE:VZ) expected to launch the same in the coming months. Sprint Nextel Corporation (NYSE:S) remains the only U.S. national carrier that will not release Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB)’s Z10 but is committed to selling the Q10, another BB10 handset with a Qwerty keyboard.
The U.S. smartphone market is crucial for handset manufacturers since success here generally translates into positive consumer sentiment in other markets. The growing number of U.S. carriers announcing support for BlackBerry should increase the company’s hopes of staging a comeback in a market which it used to once dominate. However, while carrier support is a necessary prerequisite, it may not be sufficient to increase user adoption at a time when rivals Android and iOS are attracting the most developer resources and BlackBerry’s limited app availability is being seen as a serious impediment to high-end smartphone experience. The response from the initial launch markets in Canada and Britain may have been positive, according to company executives, but these are still early days and Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB) will need to ensure that the retail demand doesn’t fizzle out post the initial euphoria – something that could prove exceedingly tough in a market largely dominated by the iOS and Android.
BB10s U.S. outlook uncertain
Geographically, what has hurt BlackBerry the most is the drop in perceived brand value in what is one of the most lucrative smartphone markets in the world, the U.S., where the company has now lost its 3rd position to Windows Phone.
According to Strategy Analytics, Windows Phone made good market share gains on some high-profile smartphone launches in Q4 2012 to overtake BB for the first time ever. Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB) will he hoping to reverse the losses now that the Z10 is scheduled to launch on U.S. soil next week, but changing public perception of a company that failed to keep up with Apple Inc. (NASDAQ:AAPL) and Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) in the fiercely contested smartphone world will be tough.
Moreover, it will also have to fight with a resurgent Windows Phone for a greater share of the carriers’ marketing budgets. Sure, carriers are looking to increase competition in the smartphone market and lessen the impact of subsidies on their margins, but it remains to be seen how much marketing weight they are willing to put behind the new OS given iOS and Android’s popularity and Lumia’s strong holiday quarter with WP8. The delays in launching BB10 handsets in the U.S. due to an unusually long carrier-testing phase may have potentially been due to this reluctance.
With BlackBerry nowhere near its peaks of customer appeal, it will look to get its installed base to upgrade to BB10 initially. Trefi expects that most of the early BB10 adopters to be Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB) fans and existing subscribers, of which there are about 80 million around the world currently. A majority of these subscribers are however in international markets where BBM’s appeal is still pretty strong. A U.S. success for BB10 will therefore depend on the number of Android and iOS users it manages to convert, especially now that BlackBerry’s market share has tumbled to a historical low of 1.1% in the U.S. last quarter.
Enterprise focus crucial
As important as retail is to BlackBerry, a lot more crucial will be its ability to latch on to its enterprise clients. By our estimates, the BlackBerry services division, which includes push e-mail fees and that is reliant on continuous enterprise patronage, is the company’s most valuable division currently, accounting for more than 35% of our price estimate for the stock. It is on this division’s high-margin revenues that BlackBerry has managed to generate cash in the last few quarters despite seeing its handset revenues fall by nearly half in the past year.
But a carrier push to reduce fees as well as a loss of more enterprise customers to rival platforms as the bring your own device (BYOD) movement becomes more popular could hinder BlackBerry’s strategic move to boost revenues from the services division. In addition, the new BB10 devices will not be supported by the existing enterprise servers (BES), potentially making the BES 10 upgrade process costlier and complicated, thereby reducing BB10s chances of pushing into the enterprise. (see BES 10 Fragmentation Increases The Risk For RIM)
Making it even tougher for Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB) is increasing competition from retail stalwarts Apple Inc. (NASDAQ:AAPL) and Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) that are upping the ante in the enterprise market as well. Last month, Samsung debuted its KNOX enterprise mobile solution with which it expects to make its Android smartphones more secure and take advantage of the ongoing BYOD trend to directly challenge BlackBerry in the enterprise. Apple, meanwhile, is touting the security of its closed iOS ecosystem and the iPad’s popularity to sign on enterprises at Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB)’s expense. As a result, BlackBerry’s share in the enterprise smartphone market fell to only about 10% last year. Apple, on the other hand, accounted for almost 50% of the smartphones shipped to enterprises, followed by Samsung at 16%.
A lot depends on BB10s reception in the market, and BlackBerry faces an increasingly uphill battle against the well entrenched mobile ecosystems of the iOS and Android that are steadily making their way into the enterprise. Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB)’s mobile market share has plummeted from over 3% in 2011 to an expected 1.8% in 2012. Although Trefis does not expect Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB) to ever reach the heights it once commanded in the smartphone market, if it manages to win market share back to over 3% by the end of our forecast period, there could be 30% upside to our price estimate.