Today we noticed an article in The Telegraph and the headline was quite negative, suggesting that retailers are slashing BlackBerry Z10 prices. They also quoted an analyst, James Faucette from Pacific Crest, talking in very bearish terms about all this.
For the record, I have not seen the Pac Crest report, however the way The Telegraph portrays it, the whole thing appears to be very incomplete. It may be misrepresented by the media, or it may be that this analyst is spinning minor news to support his negative rating on the stock without thinking through the facts clearly.
What's really happening? Gigantic UK mobile retailer Carphone Warehouse included the BlackBerry Z10 in their "This Week's Smart Deal" section. They are promoting the Z10 on a £29/month plan and the sticker price of the phone is also set at £29. This plan operates over the 3‘s network in the UK.
Pacific Crest supposedly wrote in their report, "The case for [BlackBerry's] recovery has been that in the long run, the company could return to selling high-end handsets that would feature enough profitability that handset profits could more than offset long-term declines in the highly profitable service business" and also "We believe that meaningful price cuts so soon after launch, while probably at the initial discretion of the carriers, is likely to relegate the Z10 to being a mid-tier device with very low gross margins."
In plain English, this analyst is saying that price cuts to the Z10 probably mean BlackBerry will never be able to position itself as a high end vendor, and they'll only make little money on handsets.
There is SO MUCH wrong with that analysis! I spent some time digging into pricing and conversing with carrier experts who actually live in the UK market to better understand the situation.
First of all, it's important to note that the Carphone Warehouse (CPW)is a weekly promotion. 3's own website does not match this price. It's quite likely that CPW and 3, together, chipped in to support an aggressive sticker price on the phone for this promo period. If you don't need more than 500 minutes of voice, this is a pretty good deal, by the way.
But to call this a price cut that relegates BlackBerry to the low margin segment? That's just crazy. In fact CPW currently has the Samsung Galaxy S3 on an even better promotion. The phone is free with a £21/month plan on a 2 year agreement. That must mean Samsung is dead in the water with negative margins correct? Oh, right ... we shouldn't read too much into individual promotions.
So let's check out the 3 and EE websites, shall we? If you do this you'll see that the Z10 is priced the same as the new HTC One which is a very high end new phone. I'm not sure how anyone can justifiably conclude that the BlackBerry Z10 is seeing aggressive price cuts.
For those of you reading who actually live in the UK and see the retailer pricing behavior every day please let us know what you think. Our take is that promotional pricing at retailers is extremely common, and the Z10 is otherwise positioned alongside other high end phones at this time.
Source: The Telegraph