BlackBerry raises stakes in challenging negative report
April 12, 2013, 11:47 AM
Few wireless device launches in recent memory carry the same level of stakes for their manufacturers as does the Z10 smartphone for BlackBerry Inc. BBRY +0.30%
This explains why the company is keen on making the device a success – and why it’s especially sensitive to negative chatter from industry and financial analysts who might cast doubt on how well the product is selling. In this light, it was not a big surprise that the company took the unusual step of publicly challenging a single analyst’s report – though seeking intervention from securities regulators on the matter raised the intensity of the issue in a significant way.
On Friday, BlackBerry disputed a report from earlier in the week from Detwiler Fenton — a Boston-based investment research firm – that claimed high levels of returns for the Z10, which launched in the U.S. in late March. Calling the report “false and misleading,” the company said its return rates on the device are “at or below our forecasts and right in line with the industry” and said it was seeking a review from securities regulators in the U.S. and Canada.
For its part, Detwiler Fenton issued a statement later in the morning, claiming it was “confident in our research methodology and we welcome any regulatory scrutiny.” The firm added that it is “not the only research provider publishing similar reports regarding customer reactions, sales and returns of the BlackBerry Z10.”
That part is true. Several brokers of late have issued negative reports about the Z10 launch. On Thursday, James Faucette of Pacific Crest wrote of “modest initial U.S. Z10 sales” since the launch. Earlier in the week, MKM Partners cited proprietary data showing 6% of the surveyed consumers had plans to buy a BlackBerry device in the next 12 months.
Sussing out actual device sales — and returns — is a challenge for any analyst. But BlackBerry is und.
under intense scrutiny from investors, given that the company’s future hinges on the success of the Z10 and future devices using its new operating system, including the soon-to-be-launched Q10. Short interest on the stock remains above 30% of the total float, according to FactSet. And while the stock is still up more than 75% over the last six months, the shares are particularly volatile. Average daily volume over the last six months is about 51.2 million shares compared to 21.4 million for the prior six months, according to FactSet.
BlackBerry shares picked up more than 1% Friday morning after the company challenged the Detwiler report, after having lost nearly 8% in the previous session. Having just reported results two weeks ago, the company has another three months before investors will get a fuller look at how the Z10 is doing. The stakes will be high.