BlackBerry (BBRY) BB10 Sales Off to 'Decent' Start - Sterne Agee

March 1, 2013 7:35 AM EST
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Sterne Agee analyst Shaw Wu said checks show BlackBerry (NASDAQ: BBRY) BB10 is off to a "decent" start, although they remain concerned with the road to profitability.

"The supply chain feedback we have gotten is constructive where it appears to be doing well in Canada, the U.K., and U.A.E. From our understanding, it is currently in final testing at VZ and AT&T for an important U.S. launch in mid-March," Wu notes. However, he also said, "with only a month of data, it is frankly too early to call how BB10 will do"

Wu said he remains concerned with the company's road to profitability given lower service fees and rising BOM costs.

On units, the analyst said they've picked up build plans of 1-1.5 million units for the Z10 of which they estimate about 500-750k units may have shipped in the February quarter.

While the analyst said near-term BB10 momentum looks good, they are concerned with sustainability. "Our feedback indicates buyers are long-time loyalists as opposed to new customers," he comments. "It remains to be seen if BB10 can gain mainstream acceptance that BB once commanded that is now owned by Android and iOS. In addition, we are concerned with the company's road to profitability given rising BOM costs (build-of-materials) with the use of more premium parts including touchscreens, glass, and metals and as its higher-margin service revenue (36% of revenue) will likely get impacted as BB10 ramps as a larger contributor."

Wu also said the fundamental question remains if there is room third or fourth mobile OS platform. He note that new platforms - including Windows 8 - have had lukewarm receptions from customers and developers despite strong reviews and carrier interest. "To us, it's not just the number of apps, but the quality of apps and whether developers are making money and customers are using them," he said.

Sterne Agee maintains its Neutral rating.

For an analyst ratings summary and ratings history on BlackBerry click here. For more ratings news on BlackBerry click here.

Shares of BlackBerry closed at $13.36 yesterday.

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