A little over a month ago, Research In Motion Ltd (NASDAQ:BBRY) finally launched its flagship QWERTY phone, the Q10, in the U.K. The Q10 has since launched in Canada and a variety of countries in continental Europe and Asia. However, the new phone has not yet launched in the U.S., which is one of BlackBerry’s top two markets (along with the U.K.).
The BlackBerry Q10 smartphone (courtesy of Research In Motion Ltd (NASDAQ:BBRY))
That’s about to change, as Verizon Communications Inc. (NYSE:VZ) and T MOBILE US INC (NYSE:TMUS) are putting the Q10 on sale next week. Even though the Q10 will have a minimal impact on the overall smartphone landscape, it could still be a game-changer for BlackBerry. A passionate minority of smartphone users demand a physical keyboard, particularly for email/messaging use. With the Q10, BlackBerry will regain its position as the dominant vendor for QWERTY smartphones.
Q10 momentum picks up
In the past month, Research In Motion Ltd (NASDAQ:BBRY) followers have not been able to agree on the initial sales performance of the Q10 smartphone. Analysts at Deutsche Bank AG (USA) (NYSE:DB) think the Q10 is selling fairly well in Canada but underperforming in the U.K. However, some analysts at other Wall Street firms believe that U.K. demand for Q10 is at least as strong as Canadian demand. Furthermore, Deutsche Bank AG (USA) (NYSE:DB) used a dubious methodology for assessing U.K. demand for the Q10 by calling some carriers (including one that had not started selling the phone!) and not others.
While analysts disagree vehemently about Q10 sales levels to date, I think sales in the May and August quarters will beat current expectations for 3 million to 4 million total BB10 sales (i.e., the Q10 plus the all-touch Z10 smartphone). First, we know from last quarter that Research In Motion Ltd (NASDAQ:BBRY) shipped approximately 1 million Z10 smartphones in the month after its launch.
Second, there is very strong evidence that Q10 has experienced a stronger launch than Z10. In fact, in the first two weeks after its launch in France, the Q10 was apparently the best-selling smartphone at SFR, a major French mobile provider. The Q10’s strong initial sales pace is not very surprising, since there was tremendous pent-up demand from longtime Research In Motion Ltd (NASDAQ:BBRY) (and QWERTY keyboard fans) for Q10. By contrast, Z10 is aimed more at first-time smartphone buyers and current Apple Inc. (NASDAQ:AAPL) or Android users. As a result, demand will probably build more slowly, if at all, for that product.
Since the Q10 was launched in the U.K. and Canada with roughly a month left in the quarter (similar to the timing of the Z10 launch last quarter), it’s probably safe to say that BlackBerry shipped well over 1 million units. If Q10 shipments totaled just 2 million last quarter, and Z10 shipments remained flat or slightly below the February run-rate, BlackBerry will have shipped 4.5 million to 5 million BB10 smartphones in the quarter, above most analysts’ expectations.
In addition, at least one analyst thinks that Research In Motion Ltd (NASDAQ:BBRY) has raised its BB10 build plans several times, and is now building more than 2 million devices per month. If that’s true, then 5 million BB10 sales per quarter could be a conservative estimate. This is further supported by a recent report from Digitimes stating that BlackBerry has increased its procurement of smartphone components because of higher-than-expected demand.
So what?
What does all this mean? I think there are a few big takeaways. First, analysts who rely entirely on calling stores to gauge demand for BlackBerry products won’t get reliable results. BlackBerry’s strength in the corporate world means that many sales go outside normal retail channels, compared with Apple or Samsung, which are primarily consumer brands.
Second, sales of Apple Inc. (NASDAQ:AAPL) and Samsung smartphones are of a different order of magnitude than BlackBerry. If Research In Motion Ltd (NASDAQ:BBRY) can ramp up to selling 5 million Q10 smartphones per quarter, which I think is feasible, it will blow away Wall Street’s expectations. However, the Q10 would still appear to be an “unpopular” phone at that sales pace, compared with Apple’s iPhone 5 or Samsung’s Galaxy S4.
Much of the “hype” surrounding Research In Motion Ltd (NASDAQ:BBRY) stock has faded in the past few months, and I think this sets the stock up for a nice rally this summer if the Q10 phone meets its potential. While the QWERTY smartphone market is a niche area, there are no strong competitors, so I’m definitely betting on BlackBerry.
The article The Q10 Rollout Could Be a Game-Changer for BlackBerry originally appeared on Fool.com and is written by Adam Levine-Weinberg.
Fool contributor Adam Levine-Weinberg owns shares of Apple and BlackBerry and is long Jan 2014 $13 Calls on BlackBerry. The Motley Fool recommends and owns shares of Apple.
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