The Q5 is now launching in emerging markets – and at a price level that is raw folly. After the May quarter volume disappointment, it seems highly likely that BlackBerry priced the Q10 and Z10 too high.
What the company needs is a staunch Curve upgrade; a cheap, cheerful smartphone that would shore up BlackBerry’s position in Middle East, Africa and South-East Asia. Africa is crucial to BlackBerry; it held more than 50% of the smartphone share in rapidly growing markets like South Africa and Nigeria as recently as in 2012. If BlackBerry Messenger is to have any future as a messaging platform, it rests on BB10 devices maintaining a very high market share in countries like Nigeria, UAE, Malaysia and Philippines. Now that a horde of messaging apps like WeChat, Kik and LINE is taking off in these very markets, BlackBerry can ill afford any further slippage of its hardware share. Universal messaging apps supported by Apple AAPL -1.43%‘s iPhones, Google GOOG -0.87%‘s Android devices and Nokia NOK -1.91%‘s Windows models are threatening to undermine the network effect that created the self-sustaining loop between BBM usage and BlackBerry buying in emerging markets.
The only way BlackBerry can retain a viable smartphone platform is to sell devices that are competitive in emerging markets where smartphone usage is now spreading to middle class from the narrow slice of the most affluent consumers. And this is why the Q5 pricing is so astounding. In Nigeria, one of BlackBerry’s cornerstone markets, the device is now launching at 65’000 nairas – more than $400. This is just 27% below the price of a Samsung Note II – a premium luxury device.
The Q5 is priced more than 100% above the price of a LG Optimus L5 II, a model with a 4 inch display and a 5 MP rear camera. It is 400% above the price of a Nokia Asha 200, a QWERTY feature phone that effectively mimics many BlackBerry features with a cheap hardware build.
Of course, the Q5 is going to sell well in places like Nigeria for a few weeks or a month as it taps into the old, affluent, urban user base it used to dominate. But holding a portion of that base is nowhere close to what BlackBerry needs to achieve right now. The company absolutely must make inroads into the middle classes and rural consumers that are the new source of growth in the smartphone markets of Nigeria, Malaysia and Philippines. Those consumers are now captivated by the smartphone war between Nokia’s $100 Asha phones and $150 low-end Lumias vs. Asian Android devices in the same price points. That $100-200 war raging on in emerging markets is where the volume growth of this business is taking place. Trying to take the high road with a $400 “value” model is lunacy. That price point worked well in 2010 when high-end BlackBerries commanded unsubsidized prices of $600-700 with ease. Those days are gone; BlackBerry needs to duplicate Nokia’s aggressive low-end Lumia strategy as of now. The problem is that the company may not have anything in its near term product road map that fits the bill.
The upcoming budget iPhone could deal a truly devastating blow against this $400 BlackBerry. The time to launch a truly competitive, sub-$250 model is running out.
Source: Forbes.com
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