Thorsten Heins at the BlackBerry 10 Launch

I've spent the last two days reading online BlackBerry Z10 reviews, getting used to my own device, and of course reading Wall Street analyst reports on the stock. I've had tons of requests to do a summary post outlining what Wall Street thinks along with my own perspective. So here it is. 


It's interesting to note that BlackBerry's stock price opened higher on Wednesday morning, prior to Thorsten taking the stage. It had closed at $15.66 the night before and then opened on BlackBerry 10 launch day at $16.08 climbing to a high of $16.62 in the first hour of trading. By 10:30 it was in free fall.

Why? It was really cool to see BlackBerry organize a global event the way they did. But because they had already rolled out Dev Alphas, posted tons of videos, and given so many demonstrations in media interviews over the prior months, there wasn't anything really new left to show off. Anyone paying attention wasn't surprised by any of the product details. Instead, we were (pleasantly) surprised by things like the renaming of the company, and the addition of Alicia Keys to Team BlackBerry.

Then to top it all off, BlackBerry confirmed that the US market will get the BlackBerry Z10 later than everyone else, and that the Q10 won't arrive until April. I already wrote about how we figured the US would be a bit later than other markets. But I was not expecting the Q10 to come two months after the Z10.

I completely understand the initial reaction by traders in the stock. Beyond that, analysts have the job of looking at the fundamentals, looking at the product details, and then publishing intelligent opinions about the situation. I expect analysts to be well balanced in presenting arguments, and honest about what they know versus what they don't know. Without naming names, I am rather disgusted by how many analysts seem to turn their reports into BlackBerry Z10 reviews without having spent that much time using the device.

Most of the media who got review devices had a week to test them. Analysts do not get review copies, and most of them haven't spent any real time with a Dev Alpha either. So most of them aren't qualified to render an opinion on the device. They should be sticking to financial analysis or digging up relevant industry data points. The good ones do.

Let's take a look at Wall Street's reactions. 


Starting with the bulls, we have Goldman Sachs. Their analyst, Simona Jankowski, had a huge hate-on for BlackBerry over the last few years but she seems to buy into the turnaround. She seems focused on potential sales in Canada, the UK and other markets in February, along with the average selling price (ASP) effect it will have on BlackBerry's financial results. I find myself agreeing with her points, and I'm glad she hasn't tried to turn her report into a review. She thinks other analysts will have to raise estimates as these devices sell into the market, driving the stock price higher.

Next we have Tom Astle. He's been covering tech stocks longer that almost every Wall Street analyst, and his view is required reading. Tom points out that most media who had a week to review the Z10 loved it. See what I mean about the good analysts not trying to position themselves as device reviewers? Tom liked the well polished, coordinated launch, differentiated UI, and change in branding to BlackBerry. He worries a bit about the "slight delay" in US availability, UI learning curve and initial software version glitches and missing features. I can't argue with that.

On valuation, Tom thinks the company can post $1.60 in EPS next year but points out how much drift there can be in either direction because when doing a sensitivity analysis (i.e. how much things like ASP and gross margin change the outcome). Bottom line: BlackBerry is executing well and things are looking better.

I'm throwing RBC in the bull camp only because they have a $18 target price on the stock. But they do not have a buy rating on the stock, and the report is much more balanced. The analyst, Mark Sue, has a good reputation for looking at both sides of the story. That said, I found the RBC report didn't dig into issues much. It read more like a summary of what BlackBerry announced along with a nice table showing which apps BlackBerry has versus the top paid and top free apps in the iOS store. RBC points out that the BlackBerry 10 is differentiated enough to attract people who have grown tired of "the status quo of homogeneous devices".

I have not seen the initial Jeffries report on BlackBerry, but there is a thread over on the CrackBerry Forums where the Jeffries analyst believes several hundred thousand Z10s have already sold in the UK market with many stores now being sold out.

This brings up a good point. Yesterday we started seeing evidence of lineups in the UK. That, along with pre-order data from Canada, seems to be largely ignored by the market right now.


Credit Suisse was, from my read, the most bearish on BlackBerry. Kulbinder Garcha is the analyst here, and he's been covering the stock for a few years now. I think dating back to the original Pearl. Long enough, in any case. 

He spent most of his time writing about the business model changes facing BlackBerry. I've written at length about the risks to service revenue. So much so that it pisses some of you readers off. But it is what it is. The risk is real and this is the major issue that bugs Credit Suisse. But let's face it - the launch on Wednesday does absolutely NOTHING to change any of this, so I'm not sure why he's picking this time to publish on the topic. Anyway, Kulbinder thinks that BlackBerry's service revenue will decline by almost a billion dollars over the next year.

What did he say about the actual product launch? Nothing positive. He shows no balance of view, which makes it hard for me to take the work seriously. I don't like reading reports where the author seems to pick and choose data points to make a case.

Credit Suisse is picking on a few things. First, he describes the hardware as "ok but nothing special". Seriously. First of all, the expert reviewers have all pretty much weighed in on this. RIM's hardware specs now match other high end phones.

He also seems to think that BlackBerry won't be able to gain traction in the high end market simply because Apple and Samsung are already there dominating. "The difficulty of gaining meaningful traction within the above $400 smartphone market is that there are entrenched competitors as Apple has enjoyed a market share of around 45% over the last 2-3 years, and we expect this trend to continue with the recent launch of iPhone 5."

This is rear view mirror analysis. It would be like evaluating the fast food market and saying that customers buy mostly pizza and hamburgers, so the guy who launches a Subway sandwich is bound to fail. Everyone just wants pizza and burgers.

Finally, Credit Suisse suggests that BlackBerry is #4 in terms of app ecosystem. They reference the 70,000 apps at launch without realizing, it seems, that there will be over 100,000 apps by the time the Z10 launches on US soil. I just can't take this guy seriously He's using a developer survey to suggest that developers are losing interest in BlackBerry rather than actually pay attention to the results (tons of big name games and apps in App World that were not present last year). Sorry, but surveys are just never going to be as good as measuring actual RESULTS.

Cannacord Genuity is another bear. They have a sell recommendation on the stock. Their headline includes "little differentiation versus [the] competition". The analyst is Mike Walkley, who has been around a long time and has a (generally) good reputation.

He doesn't believe the product is differentiated, and writes, "We are not sure this is enough to convince users to switch back to BlackBerry." Funny, why do these guys fail to notice that approximately 50% of Canadian pre-orders for BB10 came from customers who are not currently BlackBerry users. Unless they're all migrating from feature phones (unlikely for preorders), I think this evidence flies in the face of what the analyst is saying.

This report also brings up the service revenue risk. I'm in full agreement that this is a risk. However, I'm not really in agreement with his analysis.. Numbers-wise, Walkley thinks that BlackBerry has 18 million enterprise subscribers. That's aligned with my view, but he's saying revenue will be under pressure from the BYOD trend. This I don't agree with. BYOD connected to a BES will still generate revenue. It just (probably) wont' flow through the carrier. And there will be new revenue opportunity from non-BlackBerry hardware connected via Mobile Fusion. This is upside that remains to be seen, quite honestly.


It's obvious that all analysts want to see more BlackBerry apps. The views are mixed on whether or not the OS is differentiated (I think it is), and the bear camp is very worried about service revenue (reasonable). Most analysts reduced estimates yesterday because of the launch timing of the Q10 and the slight delay in getting the Z10 into the Unites States.