BlackBerry Ltd (BBRY) Shouldn’t Pin High Hopes From Z3

BlackBerry Ltd (BBRY) Shouldn’t Pin High Hopes From Z3
<a href="">jieyirain</a> / Pixabay

BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) has finally launched its low-cost Z3 smartphone in Indonesia. While the ailing company claims that Z3 sold out on first day of its launch in Jakarta, a report by AFP says that only a few dozen people had queued up in one of the biggest shopping malls in Jakarta to buy the new device, indicating a lukewarm response. Anyway, actual images of crowd lined up to buy the budget smartphone suggest that demand was quite good.

BlackBerry shifting focus to software and services

Indonesia is one of the last bastions of BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB). With a price tag of $190, the Canadian company is hoping to attract consumers once again. This new smartphone will be the acid test for BlackBerry even in Indonesia because its fortunes have changed in the past few years. Its market share in Indonesia has declined from 43% in 2011 to less than 4% in the first quarter of this year, according to research firm IDC.

The Z3 is the first BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) device designed and produced by Foxconn Technology Co Ltd (TPE:2354). The John Chen-led company’s partnership with Foxconn signals a new path for BlackBerry. The Waterloo-based company’s smartphone sales have been declining rapidly. In the latest quarter, BlackBerry sold just 1.3 million devices, down from 6 million units in the same quarter last year. But the phone business is still vital to the company’s business as John Chen shifts focus to software and services.

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Without the handset business, BlackBerry will be a very small company

John Chen tried to buy himself some time with the Foxconn Technology Co Ltd (TPE:2354) deal, says the New York Times. ABI Research analyst Nick Spencer said that Chen is sustaining the handset business as he sorts out the future path. But the phone business, BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) will be a very small company. During the latest quarter, the hardware business accounted for more than 37% of its $976 million revenues.

Though Foxconn Technology Co Ltd (TPE:2354) can’t reverse the decline in BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB)’s popularity, it does eliminate several financial risks for the Canadian company. Last year, a big chunk of the company’s $5.9 billion loss was due to writing off unsold devices and phone components. Now Foxconn assumes that risk.

Z3 unlikely to revive BlackBerry’s fortunes

IDC analyst Michael Palma says that BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) will benefit from Foxconn Technology Co Ltd (TPE:2354)’s buying power, and have a clear idea of the cost of a device right from the outset. The Taiwanese company has also shortened the development cycle. BlackBerry is notorious for being slow to develop new handsets. But Foxconn took just four months to design and develop Z3.

Analysts aren’t really optimistic about BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB)’s future in Indonesia, even after the launch of Z3. Its BBM is wildly popular in the country. But once BlackBerry made BBM available on Android, many Indonesian consumers began using BBM for Android rather than buying a new BlackBerry device. Jakarta-based independent analyst Ruby Alamsyah says that even Z3’s lower cost may not be enough. Many Android devices are available at $90, less than half the price of Z3. 

BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) shares inched up 0.34% to $7.28 at 10:26 AM EDT on Monday.

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