Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB) has a new friend today. Although many analysts have been bearish on Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB), RBC has a pretty bullish report out. RBC notes that “numerous data points suggest Feb-qtr BlackBerry Z10 sell-through is stronger than Street expectations.” They note the following 1) BlackBerry indicated sell-through is 40% above its (low) projections; 2) several larger retailers have acknowledged strong Z10 demand; 3) the Z10 is no. 5 on Carphone Warehouse’s top 10 monthly phones in the U.K.; and 4) India sold out in two days. The breadth of the launch, covering est. 35% of BlackBerry’s sub base, also appears wider than Street expectations. However, Z10 returns are higher than “normal” and AT&T pre-orders remain inconclusive. Further details below:
Estimates Remain Fluid
RBC has revised their Feb-qtr BB10 estimate up from 350k to 500k. For May, They maintain 2M unit estimate. While Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB) has received a 1M+ unit order from a partner, sell-through appears to be slowing in Canada and the U.K. from launch-week highs (this is normal) and U.S. demand is still too early to quantify. RBC is revising downwards its Feb-qtr legacy BlackBerry shipments from 6.7M to 6.3M.
BlackBerry loyalists eager for a modern platform
In addition to upgraders, BB10 appears to have recaptured some lost users (45% of Z10 buyers are coming from iPhone or Android). While users take some time to become familiar with BB10, RBC checks indicate most are pleased with the BB10 user interface, multi-tasking, and onscreen keyboard. The large number of “coming soon” apps (30% of top 10 free/paid iPhone apps) such as Skype is a lingering annoyance for users but hopefully will be short-lived and resolved before full availability in the U.S. Netflix does not have plans to develop an app for BlackBerry 10 and other developers seem “too busy” with Android and Apple.
BB10 for the enterprise
There appears to be early enterprise demand for BB10 devices and BES10 software, from employees looking to upgrade their device and IT departments. BB10 support of Microsoft ActiveSync aims to regain share among less security conscious enterprises. These changes realign BBRY with the realities of the enterprise market and aim to help regain enterprise share on both the device and software side; however, the transition from a non-mandatory service model is likely a headwind to enterprise service revenue in the near term.
Success depends on the crucial U.S. market.
The U.S. is Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB)’s largest market (est. 20% of total subs) but probably the most difficult to recapture lost consumer share. Carrier support and advertising plans appear tepid (Sprint skipping the Z10). Early checks of pre-orders at AT&T show much less consumer interest than in Canada and the U.K., particularly as it is only weeks before Samsung’s new GS4. Soon to be lower-priced GS3s may be the biggest headwind for BB10.
BlackBerry diehards may choose Q10 over Z10
The next catalyst for Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB) is the launch of the Q10 keyboard device, expected in April (U.S. may lag by one month). Long-time Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB) users may be waiting for the Q10 instead of the Z10. BlackBerry also must move down market with a lower-cost device while also starting to plan the next iteration of its high-end device to multiply its unit growth RBC believes.