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Has BlackBerry Made a Big Mistake?

Thursday - 5/2/2013, 4:30am  ET

QWERTY fans rejoice! The highly anticipated, QWERTY-based BlackBerry Q10 is expected to reach the U.S. by the end of the month.

Just be prepared to pay up for the privilege of owning a modern-day QWERTY smartphone.

BlackBerry Q10.

BlackBerry has confirmed that the Q10 will run users $249 on a two-year contract in the U.S. Clearly, BlackBerry believes it can get away with charging a 25% premium over the Apple iPhone 5, the Samsung Galaxy S4, and other flagship Google Android devices since the Q10 takes aim at deep-pocketed business customers, which can likely spare the expense.

Quite frankly, it's a risky move, considering BlackBerry lacks pricing power and market share. Between Apple and Android controlling over 90% of the smartphone market, there isn't a whole lot of mindshare left for BlackBerry. Not to mention Apple experienced a 77% activation rate among enterprises in the first quarter, an area where BlackBerry remains highly committed. So unless you're an enterprise customer with specific needs or you're a die-hard loyalist, there's isn't any economic incentive to "trade up" to the Q10.

76 million strong
Naturally, BlackBerry's most desirable customers are the ones it already has, which as of last quarter stood at 76 million subscribers worldwide. Although this pales in comparison to Android's 750 million and Apple's 500 million devices sold, it gives BlackBerry a solid foundation of loyalists who are the most likely to upgrade to the BB10 ecosystem. The unknown is the pace at which these loyalists will upgrade.

This hasn't stopped BlackBerry CEO Thorsten Heins from setting lofty expectations for the device. Although he wasn't clear as far as timing goes, he expects Q10 unit volume to be in the "several tens of millions" range, which to me sounds like a gross exaggeration.

3 touch, 1 QWERTY
During an interview conducted by Bloomberg in December, Heins told investors that he expects touch device sales to outpace QWERTY devices by 3-to-1. In other words, the CEO of all things QWERTY doesn't believe that the addressable market for QWERTY devices will be nearly as robust as touch devices.

Perhaps when Heins was referring to "several tens of millions" Q10 devices, he meant over the life of the device. Sill, this figure would imply (based on the 3-to-1 ratio) that "several 30s of millions" of touch devices sold, which seems a bit unrealistic.

By the end of the year, BlackBerry expects to have six BB10 devices, covering a range of price points, equally split between QWERTY and touch-only designs. Given the fact that future products are coming, I don't believe BlackBerry has necessarily made a mistake with overpricing the Q10. The company is likely testing the waters with deeper-pocketed clients. If it can sell potential users on the idea that they'll be more productive with a physical keyboard, perhaps BlackBerry is coming from a position of strength.

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This article was originally published as Has BlackBerry Made a Big Mistake?on Fool.com

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