BlackBerry Ltd (BBRY) Slashes Smartphone Production Again: Jefferies

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BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) is apparently slashing production again, according to Jefferies analyst Peter Misek. He said the struggling Canadian handset maker reduced production by 10 percent or more after cutting it in half just 30 days ago.


Demand for BlackBerry Q5 remains modest

The new BlackBerry Q5 handset just went on sale in the company’s home nation last week, and Misek reports that demand for it is still modest according to their channel checks. He said it looks like the Q5 is “off to a slow start.” According to Misek, they checked with “dozens of Canada carrier stores” and Future Shop stores. He said their survey indicated that most stores which offered the Blackberry Q5 did a soft launch rather than major events like they did for the BlackBerry Z10 and Q10.

He also said that most stores didn’t receive very many of the Q5 handsets and that some of them hadn’t sold any when they checked. He even said that some of the stores they checked with had not received any of the handsets.

Another problem area for BlackBerry is sales of the Q10, which don’t appear to be going well either. Misek reported that retailers are starting to slash prices for the BlackBerry Q10. The BlackBerry Q10 now sells for $149 rather than $199 at Bell Canada with a two-year contract.

Misek remains positive on BlackBerry anyway

Last month Misek reported that builds for the BlackBerry 10 Z10 and Q10 were slashed in half to about 1 million per month. In light of this second cut of smartphone builds, Misek suspects that BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) is seeing sell-through that’s far below what Wall Street is expecting. Consensus estimate indicates that the average revenue expected for the current quarter is $3.1 billion.

In spite of Misek’s belief that BlackBerry will miss consensus, he maintained his Buy rating on BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB), although he cut his price target for the stock from $18 to $15 per share. He believes investors won’t be surprised when the company misses estimates. In fact, he doesn’t think the company’s stock price will be affected much because investors are looking forward to the possibility of a leveraged buyout or other sale of the company.

His other reason for remaining Buy-rated on BlackBerry deal with what he expects is “pent up” demand for BlackBerry devices within the enterprise market. He said after enterprise customers see what’s ahead for BlackBerry, they might be more likely to purchase the company’s handsets.

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