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Communications

BlackBerry Prices Cut Already in UK; Is It Underperforming?

BlackBerry Prices Cut Already in UK; Is It Underperforming?
March 4, 2013 11:14AM

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Analyst James Faucette said the BlackBerry price cuts in the U.K., in addition to indicating that sales were not that strong, were positioning the BlackBerry Z10 as a mid-level device rather than as a competitor to high-end stars like Apple's iPhone and the Samsung Galaxy S III. Mid-level devices, he pointed out, have relatively low gross margins.

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It's been just over a month since Research In Motion changed its name to BlackBerry and launched its BlackBerry 10 platform and devices. Now, following several recent developments, the question is whether the new BlackBerry is succeeding.

Two of the developments could indicate that the phone maker is not achieving its desired liftoff in momentum. At the BB10 launch on Jan. 30, AT&T, T-Mobile and Verizon Wireless all said they would offer both of the new BB10 models, the all-touchscreen Z10 and the Q10, which features a physical keyboard. Sprint was the only one of the big four U.S. carriers that did not announce it would offer the Z10 model. Some observers assumed Sprint was still deciding about the Z10, but now that company has confirmed that it will only sell the Q10.

The other bit of disappointing-for-BlackBerry news comes from the United Kingdom, where the Z10 is on sale. Two major U.K. retailers have cut the price of the phone, leading to rumors that its sales need a boost.

Carphone Warehouse, Vodafone

The U.K.'s Carphone Warehouse chain has reduced the Z10's price to 29 pounds (about $44) per month on a two-year contract, plus 29 pounds for the phone. The previous price: 36 pounds monthly with no charge for the handset.

Similarly, Vodafone is offering the Z10 for 33 pounds (about $50) per month for online orders, resulting in a 72-pound reduction in its previous pricing.

Pacific Crest analyst James Faucette told The Telegraph in London that, in addition to indicating that sales were not that strong, the pricing move was positioning the Z10 as a mid-level device rather than as a competitor to high-end stars like Apple's iPhone and the Samsung Galaxy S III.

Mid-level devices, he pointed out, have relatively low gross margins. The high level of profitability for high-end handsets has been seen as needed by BlackBerry for its long-term recovery, in part to offset losses from its service business.

The pricing adjustments follow encouraging reports in early February. A research note from industry research firm CIBC indicated that half of early purchases of the Z10 in Canada were by customers who had not previously been BlackBerry users. This meant that, in Canada, at least, BlackBerry was expanding beyond its customer base and was acquiring iPhone, Android or feature phone users.

Software Update

Last month, BlackBerry CEO Thorsten Heins had also described the launch day in Canada as 50 percent "better than any other launch day in our history" in that country. He said the sales in the U.K. were "close to three times our best performance ever for the first week of sales for a BlackBerry smartphone." (continued...)

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Tell Us What You Think
Comment:

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Bob Smith:

Posted: 2013-03-05 @ 3:11pm PT
They had a sale on for a few days - that's all!!



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