April 12, 2013 2:25 pm

BlackBerry seeks official probe of analyst report

Shares of BlackBerry (TSX:BB) have fallen below the $10 mark.

Mario Tama/Getty Images

BlackBerry is fighting back against what it says is a “false and misleading” analyst report that claims the company’s new touchscreen smartphones are being returned in unusually high numbers.

The smartphone maker is asking securities regulators in Canada and the United States to investigate comments made by Boston-based investment firm Detwiler Fenton which it says harm both its reputation and its shareholders.

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At issue is a report published by Detwiler Fenton on Thursday which claims that a very high level of BlackBerry Z10s – the first of a new generation of BlackBerry smartphones – were being returned to stores by customers.

“We believe key retail partners have seen a significant increase in Z10 returns to the point where, in several cases, returns are now exceeding sales, a phenomenon we have never seen before,” the investment firm said.

The report said the biggest customer complaints are the “unintuitive nature of the user interface, the maps app, and the lack of apps.”

BlackBerry (TSX:BB) quickly countered the claims after the report was published, calling them “absolutely false” on Thursday.

But after investors appeared to brush aside the company’s initial rebuttle, with BlackBerry’s volatile shares falling more than seven per cent on Thursday, the smartphone maker took a stronger stance.

“Everyone is entitled to their opinion about the merits of the many competing products in the smartphone industry, but when false statements of material fact are deliberately purveyed for the purpose of influencing the markets a red line has been crossed,” BlackBerry chief legal officer Steve Zipperstein said in a release on Friday.

BlackBerry called for an immediate investigation by the Ontario Securities Commission and the U.S. Securities and Exchange Commission.

The SEC said it never confirms whether an investigation is ongoing, while the OSC had not received a formal request from the smartphone maker as of Friday afternoon.

“If and when we do, we will review accordingly,” OSC spokeswoman Carolyn Shaw-Rimmington said in an emailed statement.

It wasn’t immediately clear how the OSC would be involved in a potential investigation as Detwiler Fenton isn’t a registered operation in Ontario.

Anne Buckley, general counsel and chief compliance officer at Detwiler Fenton, said the firm stands by its claims and welcomes any regulatory inquiry into the report. She also noted that neither its research analyst nor any officer or director at the firm owns BlackBerry shares.

BlackBerry has said Detwiler Fenton refused to make its report or its methodology available even after the smartphone maker said the findings were “absolutely false.”

The report tarnishes what has been a relatively smooth launch for the new BlackBerry touchscreen in the United States, though sales figures haven’t been made public by the company. While some analysts have expressed concern over the lack of promotional marketing, few have called it an outright failure.

BlackBerry chief executive Thorsten Heins said sales of the BlackBerry Z10 have been meeting expectations and data collected from retailers and carriers demonstrate that customers are satisfied with their devices.

The company did not disclose any of the U.S. sales data.

“Return-rate statistics show that we are at, or below, our forecasts and right in line with the industry,” Heins said in a release.

“To suggest otherwise is either a gross misreading of the data or a wilful manipulation. Such a conclusion is absolutely without basis and BlackBerry will not leave it unchallenged.”

Verizon Wireless, the largest U.S. wireless carrier also rejected the claims by Detwiler Fenton. An emailed statement from the company said that “after the first 14 days, the quality performance of the Z10 has been in line with similar devices we’ve launched.”

But a series of analyst reports published this week paint a less enthusiastic image of the BlackBerry U.S. launch which suggests that the rollout isn’t going as well as the company insists.

MKM Partners, a research firm based in New York, released the findings of a survey which found “unimpressive” awareness of the BlackBerry 10 operating system, with only 17 per cent of respondents aware that the new phone launched in Canada and Europe in late January.

The findings also showed that U.S. customers didn’t seem particularly captivated by the BlackBerry 10 phones, with 32 per cent saying they were “interested,” while 68 per cent said they were “not at all interested.”

MKM Partners said it surveyed nearly 1,500 customers in the three weeks after the U.S. BlackBerry launch in March.

A separate report from a Raymond James analyst found a similarly low level of enthusiasm for the device in the U.S. Its survey showed that 71 per cent of respondents said they would never buy a BlackBerry device, versus 31 per cent for an Android device and 20 per cent for an iPhone.

The Raymond James report also showed that 26 per cent of respondents were aware of the BlackBerry Z10 compared to 62 per cent for the next generation of the iPhone, which hasn’t been released nor announced yet.

The company noted that its research was completed in mid-March when the BlackBerry Z10 promotional campaign was just getting started, a few days before the release of the phone.

Last month, BlackBerry reported that it has shipped about one million Z10 models during its fourth quarter which ended March 2 – before the devices were available for sale in the United States, the company’s biggest market.

BlackBerry shares closed up three cents at C$13.85 on the Toronto Stock Exchange on Friday.

© The Canadian Press, 2013

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