As Samsung grows, Blackberry shrinks
Analysts say Canadian smartphone-maker cutting production again amid ‘modest demand’ for Q5
While Samsung Electronics Co. gets bigger, literally, with its Galaxy Mega “phablet” measuring 6.3 inches set for release in the U.S. and Canada, BlackBerry Ltd.’s output continues to shrink. According to Jefferies & Co. analyst Peter Misek, the Waterloo-based device maker has cut its smartphone production by another 10 per cent, on top of a 50 per drop in June that lowered output to one million units per month. Misek said shipments of BlackBerry’s new family of BB10 smartphones, including the keyboard/touchscreen Q10, are below already reduced expectations.
He cited “very modest demand” for the midtier, physical keyboard Q5, the third BB10 handset that has just rolled out in markets including Canada, and said retailers are already reducing prices on the Q10.
Misek said the production decline means BlackBerry will likely report revenue below the consensus analyst estimate for the current quarter and puts the revenue forecast for the subsequent period in doubt.
“We believe the build plan cut indicates sell-though is tracking well below the Street’s $3.1 billion (U.S.) revenue estimate,” Misek said.
“Our Canada store checks indicate the Q5 launch is off to a slow start and Q10 prices have started to get cut.”
Misek, however, maintained his buy rating on BlackBerry stock, though he reduced his price target to $15 (U.S.) per share from $18.
He said the stock may move higher on expectation of an acquisition or BlackBerry breakup after the company said last week it is exploring alternatives including an outright sale.
Analysts said leading shareholder Fairfax Financial may be working to assemble private equity investors for a leveraged buyout of BlackBerry, while China’s Lenovo last week reiterated that it is considering growing its smartphone business through an acquisition to offset declines in PC sales.
Misek, meanwhile, cited pent up demand among business and government customers for the new BlackBerry handsets and service offerings but said enterprise purchases may be put off until clarity about BlackBerry’s future emerges.
Misek’s note, along with a study Monday from Juniper Research showing BlackBerry market share declines in most regions including in its traditional offshore strongholds, pushed the company’s shares 1.8 per cent lower to $10.32 in New York.
BlackBerry’s market value has declined to less than $6 billion from more than $80 billion at its peak as the company ceded market leadership to mobile devices from Apple and the Android mobile operating system.
While BlackBerry has fallen Samsung has risen to become the top smartphone vendor by sales and by dimension — launching bigger-screened phones to better display video and games.
Samsung is debuting the Mega Galaxy in North America after its rollout in Europe and Russia in May, with the device to go on sale in the U.S. this week and in Canada before the end of August.
Samsung said the big handset has the power and multi-tasking of a tablet, with the resolution quality and portability of a smartphone. It said the phone includes features such as split screen multi-tasking and an option that reduces the number of choices for new smartphone users.