BlackBerry Friday branded as "absolutely false" a brokerage's report claiming that "in several cases, returns are now exceeding sales" for the company's new Z10 smartphone in the US.
Canada-based BlackBerry, in a statement, says it "would seek Securities and Exchange Commission and Ontario Securities Commission review of a false and misleading report about retail return rates" for the Z10.
The company says that Z10 sales "are meeting expectations" and that "return rate statistics show that we are at or below our forecasts and right in line with the industry." The sharp response and the complaint to regulators reflects the importance to BlackBerry of the all-touch Z10 and the soon-to-be-released keyboard-equipped Q10 phones, announced in January. The phones are the first to run the company's completely new BlackBerry 10 operating system.
The report in question is by Detwiler Fenton & Co., a Boston-based financial services firm that "provides institutional Channel Research and wealth management services for high net worth individuals," according to its website. Excerpts from the report, released only to the firm's customers, surfaced yesterday in various news sites and blogs, such as this post by Will Connors at The Wall Street Journal's Digits blog.
"What could be worse for BlackBerry-maker Research in Motion Ltd. than weak early sales of its new flagship phone?" Connors asked. "The possibility that people who did buy the phone are returning it."
From the Detwiler report, written by analyst Jeff Johnston: "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."
Connors also cited another report, by ITG analyst Joe Fersedi who wrote that the Z10 launch "started poorly and weakened significantly as the days passed." Initially, he says, the Z10 took 4% of smartphone sales at Verizon stores and 7% at AT&T stores, "but those numbers have fallen to about 1% to 2%."
Connors did include in yesterday's blogpost a response by BlackBerry, apparently emailed to reporters and bloggers: "BlackBerry wishes to respond to media coverage today regarding speculation that there have been abnormally high levels of returns of BlackBerry Z10 devices. This is absolutely false."
At the time this story was posted, Detwiler Fenton's PR contact had not replied to an email requesting comment on today's BlackBerry press release.
As the news spread yesterday, BlackBerry's stock price tanked. It dropped over 7% yesterday, from a high of $15.21 on Wednesday to a low of $13.46 on Thursday before ending the day at $13.80.
It was the Detwiler Fenton report that sparked the sharpest denunciation from BlackBerry.
"Sales of the BlackBerry(R) 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 President and CEO Thorsten Heins in a statement.
"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."
The press release indicates that BlackBerry communicated directly with Detwiler Fenton. "Detwiler Fenton refused to make either its report to investors or its methodology available to BlackBerry, even after the Company said the firm's findings were 'absolutely false,'" according to the BlackBerry statement.
In the press release, BlackBerry Chief Legal Officer Steve Zipperstein labels the statements "materially false and misleading." As such, they "harm BlackBerry and our shareholders, and we call upon the appropriate authorities in Canada and the United States to conduct an immediate investigation."
"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," Zipperstein concluded