BlackBerry (BBRY) Z10 Launch 'Mediocre at Best', Margin Concerns Run Rampant - Analyst

March 5, 2013 2:20 PM EST
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BlackBerry (Nasdaq: BBRY) is about one percent lower Tuesday amid new comments on the launch if BlackBerry 10 last month.

Tim Long at BMO Capital called the debut of BB10 "mediocre at best" and he is concerned about the U.S. launch in March.

Long thinks about 275,000 Z10 units were sold since launch, a far cry from the one to two million units expected by analysts. Long sees sales of just one million Z10 units in the quarter, ratcheting that up to seven million in the following fiscal year.

The Z10 is BlackBerry's flagship smartphone running BB10.

Long also thinks BB10 isn't necessarily attracting new customers. He believes that most of the initial adaptions will be made from current BlackBerry users.

"Even with hardware that can compete with Apple (Nasdaq: AAPL) iOS and Google (Nasdaq: GOOG) Android platforms, we believe that the ecosystem is still lacking," Long states.

Finally, like several other analysts, Long is concerned over the dip in subscriber revenue. BlackBerry needs special equipment for data encryption and to run services like BlackBerry Messenger. While BlackBerry used to get a certain fee from carriers for each user, the new structure BlackBerry plans to implement will clip gross margins, which previously sat at about 80 percent.

BMO has BlackBerry at Underperform with a price target of $9.

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 $12.81 yesterday.

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