BlackBerry, in latest crisis, says report of high Z10 returns is 'false'

Latest crisis underscores tentative time in phone maker's recovery

BlackBerry's recent launch of the Z10 smartphone and the upcoming Q10 qwerty device were intended to put the company back on solid ground, but BlackBerry seems to be defending itself from a new crisis every week.

BlackBerry Z10
The BlackBerry Z10 smartphone. (Photo: BlackBerry)

In the latest mini-calamity, BlackBerry on Friday said it will seek a review by U.S. and Canadian securities officials of what it called a "false and misleading report" by investment analysts at Detwiler Fenton that said Z10 smartphones are being returned by customers in unusually high numbers.

Reaction to the Detwiler report, and others citing weak Z10 sales, apparently caused a 7.8% drop in BlackBerry stock on Thursday, down to $13.55 a share.

"Sales of the BlackBerry Z10 are meeting expectations and the data we have collected from our retail and carrier partners demonstrates that customers are satisfied with their devices," said BlackBerry CEO Thorsten Heins in a statement Friday.

"Return rate statistics show that we are at or below our forecasts and right in line with the industry. To suggest otherwise is either a gross misreading of the data or a willful manipulation. Such a conclusion is absolutely without basis and BlackBerry will not leave it unchallenged," Heins said.

The Detwiler report was shared with the investment firm's clients but not directly with BlackBerry or the public. Detwiler could not be reached to comment.

BlackBerry called Detwiler's finding that Z10s were being being returned in unusually high numbers "absolutely false," and questioned Detwiler's research methods, adding it would seek a U.S. Securities and Exchange Commission and Ontario Securities Commission review.

BlackBerry also said that Verizon Wireless had refuted claims by Detwiler that returns were unusually high, but Verizon refused to comment.

Bloomberg quoted the Detwiler report as saying there was a significant increase in customer returns of the Z10 because the interface was not intuitive. "In several cases, returns are now exceeding sales, a phenomenon we have never seen before," Detwiler said.

Questions on smartphone end-user sales

How good, or bad, are Z10 sales?

At a fourth-quarter earnings call on March 28, Heins said BlackBerry had shipped 1 million Z10 smartphones in the quarter that ended March 2, based on sales mainly in Canada and the UK, and weeks before the phone went on sale in the U.S.

Two technology analysts, Bob Egan of The Sepharim Group, and Jack Gold of J. Gold Associates, discounted the Detwiler report based on information they were receiving.

Egan said the 1 million Z10s that had shipped by March 2 represented only 700,000 actual sales to end customers. Half of the 700,000 were customers who had moved over from Android phones or iPhones, he said, based on comments by Heins and BlackBerry officials.

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.

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