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BlackBerry says report of high Z10 returns is 'false'

Matt Hamblen | April 15, 2013
Latest crisis underscores tentative time in phone maker' recovery

Questions on U.S. rollout of the Q10

Egan also said he learned from discussions with BlackBerry that the global release of the Q10 will follow the same pattern as with the Z10, with shipments to Canada and the UK first, and the U.S. following, possibly 45 days later.

Using that release pattern, if Canadian retailers put the Q10 on sale by the end of April, it could be late May or June before Q10 sales start in the U.S. "Releasing the Q10 in the U.S in late May or June is a real mistake," Egan said.

His reasoning is based on expectations that the Q10, with its qwerty keyboard, will be more popular than the Z10, especially with traditional BlackBerry users in the U.S.

"The BlackBerry loyalists, many in the U.S., really haven't yet started buying new BlackBerrys," Egan said. "It's illogical to delay the introduction of the Q10 in the U.S. because it's such a strong market that's pretty fertile for them."

The late rollout of the new devices in the U.S. could be because BlackBerry views the U.S. market as less important than some other countries, analysts suggested, although BlackBerry originally said the U.S. delay was due to carrier technology testing.

Total fourth-quarter BlackBerry revenues in the U.S. were 14%, down from 19% the previous quarter, while the areas of Europe, the Middle East and Africa surged to 46% of total revenues in the fourth quarter, up from 43% the prior quarter.

U.S. carriers haven't said when they will ship the Q10, although some Sprint store representatives have told customers that the phone may not arrive until August. Verizon Wireless and AT&T are expected to carry the qwerty device.

Questions on service revenues

Even if BlackBerry does well with sales of the Z10 and Q10, the phone maker still faces serious questions on how much revenue it generates from the services it sells, Egan and other analysts said.

"BlackBerry can be successful selling devices, but in terms of how Wall Street perceives the company, it will be what happens to service revenues," Egan said.

In the past, services revenues were based on what BlackBerry charged for BlackBerry Enterprise Server software, which runs behind corporate firewalls and inside carrier networks to serve consumers, providing management and security capabilities to devices and end users. Going forward, BlackBerry refers to BES as BlackBerry Enterprise Services 10.

In the fourth quarter, 36% of revenues that Blackberry collected were from services. (Hardware revenues were 61%, for new Z10s and older BlackBerry devices. )

Heins said that in the current first quarter, BlackBerry expects to see a single digit decline in service fees, which would bring services to 35% of total revenues.


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