BlackBerry Ltd (BB) 2002 Q4 法說會逐字稿

Gentlemen, thank you for standing by.

Welcome to the Research in Motion fourth quarter and year-end results conference call. At this time all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If anyone has any difficulty hearing the conference, please press star, zero for operator assistance at any time. I would like to advise that this conference call is being recorded.

I will now turn the conference to Mr. Dennis Kavelman, RIM's CFO.

Please go ahead, sir.

Thank you and welcome to RIM's fiscal 2002 fourth quarter and year-end results conference call. With me is Jim Balsillie, who is RIM Chairman and co-CEO.

After reading the required forward-looking disclaimer, I will begin by providing an over view of fourth quarter and year-end financial results as well as our guidance for upcoming quarters. I will then turn the call over to Jim, who will provide a business and strategic update. We will then open up the call for questions. I'd like to note that this call is available to the general public via calling number and Webcast. A replay of the Webcast will also be available on the rim.net Web site. We will be wrapping up the call by 6 p.m. Eastern this evening.

The information presented today includes forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995. These include statements about our expectations, beliefs, intentions or strategies for the future, which we indicate by word such as anticipate, intend, believe, estimate, forecast and expect and similar words. While forward-looking statements reflect our current views with respect to future events and are subject to certain risks and uncertainties and assumptions we have made. Important factors that could cause our actual results, performance or achievements to be materially different from those expressed or implied by these forward-looking statements include continued acceptance of RIM's products, intense competition, rapid technological change, timing of rollouts of new network technologies, changes in the macro economic environment, defendants on intellectual property rights, dependence on the success of carriers and distribution partners, risks relating to product defects and product liability, risks relating to foreign exchange fluctuation, changes in Canadian foreign laws and regulations, risks relating to international operations and other risks detailed from time to time in RIM's periodic reports filed with the Securities and Exchange Commission and other regulatory authorities.

One or more of these risks or uncertainties materialize or if assumptions under line the forward-looking statements prove incorrect, actual results could vary materially from those that are expressed or implied by these forward-looking statements.

We base our forward-looking statements on information currently available to us and we do not assume any obligation to update them.

I would now like to provide an overview of the fourth quarter and the year-end results. Revenue for the fourth quarter ended March 2, 2002 was 66.1 million. This represented a decrease of seven percent over the 70.9 million in the previous quarter and a 27 percent decrease from 90.1 million in the fourth quarter last year.

On the December conference call, we guided to a third quarter revenue range of 65 to 70 million. Our actual results were near the low end of this range due softness and layoffs in some of our customer verticals, as well as to a greater percentage of RIM 950 products in the sales mix.

Fiscal year 2002 revenue ended at 294 million, an increase of 33 percent over the 221 million in the prior year. BlackBerry represented 54 million or 82 percent of RIM's revenue during the quarter. This was down slightly from 58 million in the prior quarter. We shipped approximately 50,000 BlackBerry handhelds and BlackBerry handheld ASPs were approximately $420, down from 450 in the prior quarter due to a greater percentage of RIM 950 product in the sales mix.

Non-hardware BlackBerry revenue, which includes service and software was 35 million. The service component was 27 million with the remaining eight million being split between enterprise software revenue and software NRE paid from carriers and other partners for BlackBerry development.

RIM added approximately 60,000 gross subscribers during the quarter but due to the activations of 28,000 net subscribers additions were 32,000 and 157,000 during the fiscal year for a total number of 321,000 as of March 2nd.

Over 14,400 companies are now using BlackBerry, up from 13,200 last quarter and up from 7,800 last year. Five thousand companies have installed the BlackBerry enterprise server in their organization, up from 3,800 at the end of November and up from 2,200 at this time last year.

Non-BlackBerry wireless handhelds accounted for approximately 11 percent of RIM's revenue. Approximately 24,000 non-BlackBerry wireless handhelds were shipped in Q4 and non-BlackBerry handheld ASPs were approximately $300, down from $400 in the prior quarter due to Cingular ordering the majority of their product in the 950-form factor. Total handhelds BlackBerry and non-BlackBerry wireless handhelds were shipped in Q4 and non-BlackBerry handheld ASPs were approximately $300, down from $400 in the prior quarter due to Cingular ordering the majority of their product in the 950-form factor.

Total handhelds BlackBerry and non-BlackBerry shipped during the quarter were approximately 74,000. Total handhelds shipped during the fiscal year were approximately 380,000.

Sales of OEM radios and other revenue such as accessories, was 4.4 million or seven percent of revenue for the quarter.

Gross margin for the fourth quarter was 42.1 percent versus 37.4 percent for the previous quarter and 38.3 percent for the same quarter a year ago. This increase exceeded our targeted range and was due to mainly an increase percentage of software and service in the revenue mix and to material cost reductions.

As expected gross R&D spending was 14.8 million for the quarter. This compares to 14.1 million gross for the preceding quarter and 9.1 million in the fourth quarter of last year. The majority of this expense was direct personnel costs, as well as prototyping materials and other costs for initiatives such as GPRS, TDMA and new item products. For the year gross R&D expenditures wee 49.5 million as compared to 25.7 million in the prior year. R&D expenditures net or government funding for the quarter were 12 million or 18.2 percent of revenue. This was in line with expectations.

Selling, marketing and administrative expenses were 26.6 million or 30.6 million as adjusted when excluding a one-time pre-tax recovery for receivables collected during the quarter that were previously written off. This was an increase over the 25.7 million in prior quarter, as planned advertising in North America, branding programs in Europe and investment with our many different network partners continues. For the year, selling, marketing and administration expenses were 102.4 million as compared with 65.2 million in the preceding fiscal year.

Depreciation and amortization was 5.8 million, up from 4.4 million in the prior quarter. The sequential increase related to the acquisition of R&D and production equipment, as well as to the amortization of SAP software and GPRS licenses. Depreciation and amortization for the year was 17.5 million, up from 8.6 million in the prior year.

Investment income in the fourth quarter was 4.3 million. The decrease from 5.2 million in the prior quarter was due to lower interest rates as discussed on a previous conference call and due to a decrease in cash, cash equivalence and marketable securities of 11.7 million. Investment income for the year excluding the second quarter one-time write down of investments was 25.7 million, up from 22.9 million in the prior year.

The net loss for the quarter was 8.55 million or 11 cents per share basic and fully diluted and 11.3 million or 14 cents per share excluding the 3.95 million pre-taxed receivable recovery. For the year, net loss was 28.5 million or 36 percent per share. This compares with a net loss of 6.2 million or eight cents per share in the prior fiscal year. RIM's balance sheet continues to be very strong with high cash reserves, improved AR and inventory balances and with

long-term debts. The end of the fourth quarter RIM was holding 644.6 million in cash and cash equivalent to marketable securities, a decrease of 11.7 million from the prior quarter.

Cash flow from operations equaled 1.7 million due to strong efforts in collections and the decrease in inventory on hand. Acquisition of capital and intangible assets equaled 14.3 million. We are conservatively modeling a cash burn rate of 25 million to 35 million per quarter over the next several quarters not withstanding any future acquisitions or ongoing share repurchases.

Trade accounts receivable increased slightly to 42.6 million from 42.2 million in the prior quarter. Trade DSOs for Q4 decreased to 59 days compared to 63 days in the previous quarter. Other receivables decreased to 6 million in the fourth quarter, down from 13.9 million in the prior quarter. Other receivables primarily relate to government funding and Canadian and U.K. sales taxes.

Inventories decreased to 37.5 million in the fourth quarter, down 10.9 million from 48.4 million in the prior quarter. The majority of RIM's inventory continues to be raw material components. The inventory balance has steadily decreased as

and

raw material balances are reduced and as ongoing inventory management exercises continue. Net capital and intangible assets increased by 10.1 million in the fourth quarter to 182.2 million.

The increase was due to the acquisition of intangible assets and capital assets with respect to property and buildings, R&D, and production-related assets. Accounts payable

liabilities decreased to 46.9 million from 54.2 million at the end of the third quarter. Deferred revenue of 9.8 million was slightly higher than the 8 million last quarter as a direct result of the company's BlackBerry subscriber growth and continues to be primarily composed of prepaid customer air time usage fees for BlackBerry Internet addition, deferred licensing revenues, and deferred warranty payments.

Weighted average basic and diluted shares used in the EPS calculation for the quarter was 78.7 million. Actual basic and diluted securities outstanding as of March 2 were 78.8 million and 88.9 million respectively, and there were no share repurchases during the quarter.

At this time, I would like to discuss our outlook for the upcoming several quarters.

I will provide a financial outline and Jim will expand upon the individual products and channels. Again, a reminder that these forward-looking statements reflect management's best current estimates and should be taken in the context of the risk factor outlined at the beginning of the call and outlined in our regular filings.

On the December conference call, we provided a revenue estimate for the May quarter in the range of 75 million to 80 million. Due to slippage in the BlackBerry launch dates of several European carrier partners, we are lowering this slightly and are currently forecasting revenue in the low $70 million range sequentially up from Q4.

Given the flow through effects of these launch date delays, our current estimate for the second quarter is in the range of 75 million to 80 million. Up side could come from strong sale through with subscriber growth as well as on schedule launches of these new carrier partners.

On the last call we stated that we were increasingly confident in our visibility going forward. Our feeling that the February quarter was the bottom of the transition period to GPRS hasn't changed, as we are looking for sequential growth in the first quarter. The evidence from our North American, European product launches is that there is strong demand for the new products. We still believe that an economic recovery and improvements in enterprise spending would be strong sales catalysts. The significant number of new relationships and carrier partners does give us a great deal confidence in the long-term revenue growth outlook.

We are currently modeling a steep increase in revenue in the second half of the year as most of our European, North American, Asian carrier partners and channels are expected to have successfully launched their BlackBerry offerings. We have had a substantial number of partnership announcements in the last quarter and have also announced the new strategic initiative of licensing reference designs. However, while carrier deals are extremely important, we do need to demonstrate strong sell through and subscriber growth in these new markets. Until we see the evidence of successful sell through and subscriber growth, as well as demonstrated and proven in the enterprise spending environment, we feel that it is prudent to remain more conservative on the steepness of the second half growth curve. Therefore, our current expectations for revenue for the 2003 fiscal year are in the range of 375 million to 425 million, lower than current analysts consensus forecast of approximately 440 million.

Corresponding hardware shipments for this revenue range, would be approximately 625,000 to 725,000 units for the year and net subscriber additions in the range of 300 to 400,000 for the year.

Gross margin increased substantially in Q4 to 42 percent. We expect gross margin for the next quarter to increase again to the 42 to 45 percent range with a substantial increase in the amount of software and recurring license and service fees in our revenue mix as well as ongoing cost reduction efforts for our handheld products, we feel that this increased gross margin range is attainable. We are raising our long-term estimate as well and now expect margins to be in this mid-40 percent range.

As we would expect, we are currently maintaining tight control of all operating expenses. We are hiring selectively and investing in necessary projects with the best opportunity for long-term returns. However, as we said on the last call, we are not slowing down the execution of our business plan. We'll continue to invest in the development of new products and in the selling and marketing efforts in existing and new markets even at the expense of near-term profitability.

We are targeting net R&D expenses to increase by approximately 15 to 20 percent in Q1 and then at a lower rate of approximately five to 10 percent per quarter going forward. We do see longer-term leverage in R&D and look for it to drop as a percentage of revenue in 2003. We expect SG&A to increase by 15 to 20 percent in the fourth quarter from the 26.6 million in Q4 and then at a rate of approximately five to 10 percent per quarter going forward.

Selling and marketing expenses will vary depending on the number of new markets and new channel partners being launched and supported in the future. These estimates do include bringing our announced carrier partners to market as well as the cost related to several other pending carrier partners. We continue to forecast an increase in depreciation expense of approximately five to 10 percent per quarter.

Capital expenditures for fiscal 2003 are budgeted at approximately 80 million. Given low short-term interest rates in the U.S., we are currently modeling annualized yields on our portfolio at approximately two percent for Q1. Total investment income the first quarter will, therefore, be in the range of three to 3.5 million. People should continue to adjust their models accordingly.

We are currently forecasting a tax rate of 15 to 20 percent for fiscal 2003 and continue to model a long-term rate of 25 to 30 percent. With respect to earnings, we now expect the net loss for the first quarter to be in the range of 18 to 22 cents, just higher than the previously expected range of 10 to 12 cents. The main reason for this increase and the expected loss is a slight decrease in expected revenue as well as a slight increase in forecasted operating expenses.

Our current estimate for the second quarter is in a similar range to Q1 at a loss of 18 to 22 cents per share. Based on the current forecast for the year of 375 to 425 million, we are forecasting return to profitability in the fourth quarter with an overall loss for the year in the range of 30 to 45 cents per share. I will now turn the call over to Jim.

Thanks very much

. I'm pleased that we met revenue expectations for the fourth quarter. However, our task is now to leverage all the existing -- the exciting deals we've announced into strong subscriber and revenue growth. With VoiceStream's launch of BlackBerry

service in North America, as well as MMO2, we now have two carriers globally offering this next generation BlackBerry service.

Our job over the next few quarters is to bring on line the rest of our carrier partners and really drive subscriber growth through their successes. There is no doubt that there is strong demand for BlackBerry and an exciting number of channel partners, globally, upon which we base our growth plans. However, there's also no doubt that carrier roll outs of GPRS continue to take longer than expected due to the sheer operational and technical complexity in bringing these new services to market.

Our conservative estimates and outlook for Q1 and Q2 are reflection of these delays in carrier launches. We have also taken a more conservative view for the entire year until we see evidence of sell through success and strong execution by our sales and our carrier partners as well as an overall improvement in the enterprise spending environment.

From a partnership and deal perspective, we've had an extremely successful few months since our December conference call. We announced North American launch of the 5810 handheld at COMDEX in Chicago to an overwhelmingly positive reception. In addition to the relationships with MMO2, VoiceStream,

and Nextel, we announced important agreements with AT&T Wireless in North America,

in Europe and Hutchinson in Asia.

We announced an anticipated OEM radio product line for GPRS market and have had a very positive reception from our existing OEM customers as well as potential new OEM customers.

We announced our Java developer environment and have had many significant ISP partners announce support for BlackBerry. Building upon our openness to licensing BlackBerry to other Java

Java handset manufacturers, we also announced a reference design and hardware licensing strategy in partnership with analog devices.

In the next few minutes, I'd like to talk about these new relationships as well as the new licensing strategy and will provide updates on our existing channel partners as well as our internal operations.

I will now provide an update on BlackBerry. At the end of the quarter, we had 321,000 subscribers and over 14,400 companies using BlackBerry. Over 5,000 companies have installed the BlackBerry enterprise server. Net subscriber ads of 32,000 were down slightly from the November quarter. Gross subscriber additions were actually quite strong at 60,000 but were offset by unexpectedly high deactivations. Obviously the downsizing that we saw in the third quarter continued through the fourth quarter as well. For the first quarter we are targeting 30,000 to 40,000 net additions. Again, expecting a high level of gross addition offset by customer deactivations. The BlackBerry note server has been installed in over 500 companies.

I'll now provide an update on our carrier relationships starting with Europe. For MMO2, on January 29th, we announced an expansion of our agreement with MMO2 to include their networks in Germany, The Netherlands and Ireland. Corporate users will have the ability to roam across the MMO2 footprint in Europe and will be extended further throughout calendar 2002. MMO2 also increased the size of their BlackBerry commitment to reflect these additional countries. In March, MMO2 announced that it signed up more than 250 corporations as BlackBerry customers. MMO2 announced that they were already supplying BlackBerry to more than half of all law firms in the city of London and a large number of blue chip banks, financials, and IT firms.

MMO2 also continues to strengthen its re-seller channels, adding advance visual communications,

,

,

,

,

,

and

as re-sellers to augment its in-house team of BlackBerry sales specialists and

sales force.

Our number one task with MMO2 is to drive customer adoption and subscriber growth. There is some inventory at MMO2 following our initial shipments in Q3 and Q4. We have a dedicated team in the U.K. that is working closely with MMO2 and its re-sellers to rapidly accelerate sale through. As experienced in North America, the implementation of the BlackBerry solution has a somewhat lengthy sales cycle. With the already significant BlackBerry server penetration, we believe that larger corporate rollouts will follow on quickly.

is introducing new marketing campaign, which are also targeted at driving customer acquisition. Digifone launched in February and are showing early signs of success.

in Germany is on target with an April launch and has already started to receive customer orders for BlackBerry. Telecom Italia is expected to launch its BlackBerry service very soon and early customer trials have gone very well.

With 24 million domestic subscribers, we expect TIM to be a very significant partner for RIM in Europe. In February RIM announced a partnership with

to offer BlackBerry through its European distribution channel. This new partnership built upon the previously announced VoiceStream relationship.

intends to market BlackBerry in Germany and the wider European market. We are currently targeting a summer launch for

in Germany and later this year in the U.K. and Austria.

We continue to work closely with several other carriers in Europe and will announce these relationships when appropriate. In North America, in January RIM announced a partnership with AT&T Wireless to offer BlackBerry in North America. We expect AT&T Wireless to be a major carrier partner for RIM. We look forward to commercial launch by AT&T in the near future.

Following the official launch of the RIM

at

in March, both VoiceStream and

have been taking strong customer orders for BlackBerry. Reports from VoiceStream indicate immediate strong customer demand with most users activating voice as well as data to replace their existing cell phone.

Advertising and marketing campaigns are in full swing and we are focused on making our North American carrier partners very successful with BlackBerry.

We continue to work on development of the

BlackBerry for Nextel. In January, we announced further details on the Nextel product offering and also announced a licensing agreement with Motorola that facilitates the development of the

BlackBerry product.

We continue to target product and service availability later this year. Also we continue to work closely with other major GSM and CDMA carriers in the United States and Canada and will provide the details of these relationships as supply and distribution agreements are finalized.

In Asia, on the last conference call, we mentioned that we are making progress with several carriers in Asia. A few weeks ago, we announced an agreement with Hutchinson Telecom to bring BlackBerry to the Hong Kong market. The BlackBerry 5810 will operate on Hutchinson's orange GPRS network. Both RIM and Hutchinson have been carrying out extensive network interoperability testing over the past few months and customer beta trials are currently underway. Many of RIM's North American and European customers with offices in Hong Kong are now testing BlackBerry. We view Asia to be a significant growth region for BlackBerry going forward and look to Hutchinson to be an anchor partner for RIM.

Now, for Cingular and

AT&T update. We continue to ship to Cingular throughout the last quarter with the majority of the product being the 950 handheld. Over the next few quarters, we expect end user demand for handhelds using the Mobitex network to remain relatively steady as nationwide coverage and good service quality remain key customer purchasing criteria. Specifically, many government users are expected to utilize the Mobitex network. Alternatively at Cingular, the Cingular interactive sales force has merged with the Cingular wireless sales force resulting in over 2,500 salespeople selling BlackBerry. We are also working closely with Cingular on their GPRS plans and expect to leverage this longer-term, long-standing relationship as they launch GPRS service later this year.

For

AT&T, also continues to sell Mobitex products in Canada and our expectations for the Canadian market are also for Mobitex sales to continue into targeted verticals due to quality of service and coverage. Again, we are also working closely with

in their GPRS plans and expect to leverage this long-standing relationship as they launch their GPRS service in the very near future.

For a Motion update, in March Motion announced that it anticipates completing its pre-negotiated restructuring and exit from Chapter 11 soon after April 25th, the scheduled date of the court confirmation hearing to approve its plan. Motion remains on its previously announced schedule to complete this restructuring in the spring of 2002 and BlackBerry subscribers on the Motion Network continue to receive excellent service and we look forward to the successful restructuring of RIM's long-term strategic partner and to having ongoing sales opportunities with Motion. Regarding the BlackBerry development environment and

strategy, two weeks ago we introduced the BlackBerry development environment for the

platform to provide the tools needed to support broad development of secure enterprise applications for BlackBerry.

The BlackBerry development environment for

is a fully integrated development environment and simulation tool for BlackBerry that incorporates

specification and RIM's expertise in BlackBerry wireless application development to significantly ease development efforts. Developers, enterprise customers and ISPs that use the development environment can easily and quickly develop applications that leverage the unique features of BlackBerry.

The development environment allows for the building, testing and

of BlackBerry applications including facilities for code profiling and optimization. It includes a handheld simulator that features a full copy of the

to allow developers to test and monitor their performance of their enterprise applications. In addition, it includes a network simulator that provides

connectivity.

It also supports

the industry standards for Java on small foreign factor devices. RIM is offering its free

to developers, enterprise customers and ISPs on its developer zone Web site. RIM has had extensive recent developments with numerous ISPs. For example, Siebel Systems has certified Siebel

BlackBerry. Companies can deploy Siebel e-business applications for sales force automation or field service automation on BlackBerry.

Computer Associates is committed to supporting

and

in its industry-leading portfolios of infrastructure and information management solutions including

for enterprise management,

for security,

for storage,

for application life cycle management and so on.

is developing mobile business intelligent solutions for BlackBerry has included BlackBerry support in its

applications.

SAP has securely connected BlackBerry into its -- into their

portal product for secure push enterprise, CRM, ERP, and supply chain management solutions based on SAP. Basically what's happened is carriers have become a platform to plug in applications with

and

and BlackBerry has become the application of choice to plug in for these carrier platforms.

Now for an OEM radio update. In March RIM announced a new family of OEM radio modems for

worldwide. RIM has already begun working with a number of OEM customers to integrate the new radio modem. The GSMG

family of RIM radio modems incorporates six generations of hardware design knowledge and 14 years of packet software experience. We have leveraged our proven BlackBerry handheld technology to provide equipment and terminal manufacturers with powerful radio modems that are reliable, efficient, compact and easy to integrate. The new radio modems similar form factors and electro mechanical interfaces to RIM's current 902M and 802D OEM radio modems, providing manufacturers the versatility to easily deploy products for multiple wireless networks. We anticipate that OEM radio modem sales will continue to be a meaningful part of RIM's revenue mix and look forward, look to growth in this area as the new GPRS radios are integrated into customer product offerings.

Last week we announced a new reference design program that will provide wireless device manufacturers with the designs and services necessary to develop wireless solutions that incorporate java-based BlackBerry applications. To support the reference design program, RIM has signed an agreement with Analog Devices to develop and deliver a DSP microprocessor chip. The RIM ADI chip will be a component of RIM's reference designs. The RIM ADI chip enables manufacturers to build devices that can accommodate GSMG wireless communications and will also be forward compatible to future 3D voice and data networks. The RIM ADI chip can decrease the size, cost and power consumption required for a wireless device through the single chip design that incorporates both radio and data processing. We expect rapid development with our perspective OEM partners and will look for this new strategy to contribute to revenue early next fiscal year.

In the intellectual property area, in February and

announced an alliance to integrate

messaging services with BlackBerry to create a carrier grade offering that will provide seamless integration of voice mail, e-mail, faxed and test messages on a single device.

A settlement was reached of the patent and trademark infringement complaint filed by RIM in May of 2001. Under the terms of the agreement, both parties acknowledge that RIM's single mailbox integration patent is valid and both parties agreed to dismiss all pending claims.

For RIM's internal operations, at the end of August, RIM's head count was approximately 1,950. We continue to hire selectively across different groups in the organization focusing on research and development as well as sales and marketing support for new carrier partners.

The research and development group has been extremely busy with the launch of the BlackBerry 5810, working closely after the European launch of the 5820 handheld. As well, the launch of the Java development environment and subsequent support efforts in working with ISPs were also significant milestones. A large part of the R&D group is dedicated to working with our carrier partners and preparing to offer the BlackBerry service. We also have the teams in place to support the new reference design and licensing program.

We continue to work on the development of the new

BlackBerry handheld for Nextel and are on track with established milestones. Our ongoing efforts in R&D are expected to yield new innovations and new developments in hardware products, the BlackBerry platform and the new reference design in licensing program. For sales and marketing, the sales and marketing team continues to focus on adding subscribers and supporting new channel partners.

We are hiring selectively into these groups. With the signing of multiple carriers in several geographies and the anticipated signing of several more, our sales, marketing and distribution efforts are going to become significantly more complex in the upcoming year. In order to manage this change, we've completed the reorganization of each group into specific carrier teams that will be dedicated to driving P&Ls based on each carrier channel.

The successful launch of the new

handheld was a major accomplishment for our sales and marketing team. Our presence was significant at recent major trade shows and recent press coverage has been extensive and positive. We've been very pleased with the early advertising and selling efforts of our new North American and European carrier partners. We look forward to increased efforts in these areas in upcoming quarters.

In the area of administration and IT, a majority of RIM's IT focus during the quarter continues to be directed towards connecting and testing with new carrier partners in North America, Europe and Asia. Many new carrier connections were established during the last quarter, as well we implemented an improved Web based training system for our carrier partners. Internal projects focused on continued improvements to the SAP system, improved reporting capabilities for customer care, new software to help track R&D, to help R&D track product development, and software specifications, as well as connecting the new manufacturing facility, increase capacity and reliability of RIM's campus network and building network redundancy.

For manufacturing, RIM transferred all manufacturing in March to its new facility on the main RIM campus. This new facility has approximately six times the square footage of RIM's previous facility. We have transitioned our existing production equipment into this facility and will add additional equipment as demand requires. With the current three surface

and associated testing equipment, the current planned capacity is approximately 1.2 million units per year.

This is well in excess of the current forecast for 2003, so we don't anticipate any production bottlenecks. If demand does increase at a faster rate, we are able to add additional lines with very little lead-time. We will continue to evaluate out selling's alternatives.

In summary, I feel we executed and performed well, both financially and operationally in the last quarter. I believe we have delivered extremely well on our commitment to sign up carrier partnerships on a global basis. We will continue to work with other carriers in North America, Europe and Asia and will report the progress of these relationships as they mature. While the carrier deals are very important, it is even more important that we execute well with those carriers to drive sale through and subscriber growth over their networks.

RIM's growth this year depends on ability to make our carrier partner successful. We need to drive wireless data revenue for their new networks. The most important metrics for our stakeholders to monitor as we go forward are the service launches of BlackBerry by our new carrier partners and the subscriber growth on these new networks.

The fundamentals of our strategy continue to strengthen. The new reference design and licensing program will be a key initiative for RIM to address additional market segments beyond our current focus. New entrants and their pending solutions still have a long way to go and a lot to prove before they can be considered valid competitors.

BlackBerry continues to be the premier brand for wireless enterprise data. The demand for wireless data continues to be strong and we continue to have a very bullish outlook on our new relationships with carrier in North America, Europe and Asia.

I would like to remind everyone that we are going to end the call by 6 p.m. This concludes the formal comments, if the operator would please come on to handle questions.

Thank you.

The first question comes from

,

. Please go ahead.

Good evening.

The first question, do any of the new GPRS contracts involve RIM reselling air time?

No.

No. OK, great.

And with reference to SG&A, Dennis, you mentioned that 15 to 20 percent sequential increase is that in reference to the 26.6 or the 30 million?

That was the 26.6.

OK. Great.

And, lastly, on devices, could you give an update on the CDMA side and potential new form factors, please. Thanks.

CDMA is progressing very well. We're doing, we've completed a lot of interop testing and over the air testing with the CDMA infrastructure providers and we have a large array of form factors for GPRS and CDMA coming down the pipe, so, not trying to pre-launch it but we feel very good about the CDMA, one X plans and we think there's going to be a lot of diversity in our BlackBerry devices going forward.

Thank you very much.

The next question comes from

, Bank of America Securities. Please go ahead.

Yeah, thank you.

Hey guys, couple of questions here. First, you know, obviously you spent a long time talking of giving us a good carrier update, appreciate that, can we talk about, you know, obviously a big effort to get these guys revenue ready, and that's what's

driving the cost increases here. And how do we -- how should we be thinking about, you know, the cost as it rolls out and you know I'm assuming your current guidance assumes new carriers, but you know what should we be thinking about after we see you really start, you know, signing up a lot of new guys from here?

Well it's a good question,

. Really what, you know, when you look at this, it's about building a market, what we originally did, and not really -- and then it's building products for the new networks and that really created a context to sign up carrier relationships and now we're working to, you know, as you said, make these carriers revenue ready. And it's -- you know -- you know, it's really quite multifaceted and complex right from how you take orders, how they price it, how we train their sales force, how customer care is managed and how systems are installed.

This is -- this is a new business initiative for the carriers. We're very bullish. We think they're going to generate a lot of revenue, but it's a new business and it's a business we know and we have experience in, and our job is knowledge transfer, and really to say it in its most, you know candid way, the support that we offer and need to offer is multifaceted. You can't pin it on one thing. It's really -- it's really the fact that it's a new service for these carriers and they built the network to handle the service. They've planned their business to do this, but developing the execution

with all right from sales and marketing and care and provisioning and billing and installation and it's non-trivial. But, it's a

entry and it's work that will be done, and it's work that we will complete with them.

, it's Dennis. Just to add, we tried to factor a number of new carrier possibilities into our guidance.

Right. Well, a follow-on, if I could. Can we talk about, you know, two things. You know, how many carriers do we think we're going to be shipping to you know May quarter, August quarter versus, you know, where we've been, you know, February and November. And then the second part of that, when would you expect the new ads for

to surpass the new ads on the current networks

and

?

Well I think when you look at -- we have a large number of carriers we're starting to ship to now, and they are -- they are both carriers that we've announced deals with and some carriers that we have not announced deals with, and so we indicated a lot of these companies on the call. So a number of them are turning on -- are turning on and receiving shipments and really, there's a couple of them turning on in the very near future in April and there's a bunch in May, in June and July, so really, turning on carriers is just a continuous aspect for us and the testing and certification and interop testing and testing the links as well as all the operational processes. You know and clearly we expect the odds to surpass, you know, I haven't put a date to it, you know, Dennis, if you want you can answer that, but we clearly look at these networks throughout the globe and expect those numbers to pass them in the not too distant future.

It'll certainly happen over the next one to two quarters Rob.

All right, thanks guys.

Our next question comes from

, Lehman Bros. Please go ahead.

Hi, Dennis. Hi, Jim.

My question regards your channel partners. I was wondering if you could tell us a little bit about how your channel partners are handling the transition from the or to the new GPRS based networks and if you expect there to be any cannibalization of service along those lines or any end users holding off on new purchases until the GPRS devices are ready?

As part of that, I want to know if the business model shifts from reselling air time to getting this $7 to $10, how that is impacting your outlook for revenues.

Sure.

What's really happening is the carriers are actively signing up our channel partners as they're agents. So rather than being BlackBerry agents or BlackBerry re-sellers, these companies are now being agents for the carriers, so if a company was an agent for BlackBerry there's very, very little change really, it's a new product. If you're a re-seller who had a billing relationship with the carrier and did some heavy sort of you know, you know, control of the customer experience, that's shifting because they're going to be more of agent with the carrier than before so. But, what we're finding is the carriers are heavily motivated for revenue. They're heavily motivated to get into the channel and these channel partners that we built and others are precious commodities to this industry so, you know, we don't, we see that transition, it's happening now and it's happening actively and smoothly and the biggest issue is, you know, people saying I want the networks ready, I want the product and I want it to operate at level of excellence that I need to be in this market and the issues that we keyed on before. In terms of the cannibalization and over hang, for sure there's an element of overhang from the 2.5 G networks. It's been there for a while. It's actually been chronic for the last two years, I mean, this is slightly interesting, four years ago at this time, I remember speaking at a conference -- investor conference where the largest infrastructure players were talking about the readiness of GPS in the fall of '98. And here we are, you know, ready to go in the spring of 2002. So this overhang has been chronic, but as we've announced it, it's intensified that, and there are people, certainly they're going to be swapping over.

That being said, we said on the call that there's a number of customers and reliability and quality of service and nationwide and predictability is very, very valuable and they said we're sticking with the tried and true network. So, it's going to be a real mixture and that is just the reality of the marketplace we live within, but there's an element of overhang we've lived with, and it's intensifying, and I don't want to pretend it's not there.

In terms of our model, our model stays, you know -- you know, I'll pass that to Dennis.

, I tried to forecast service revenues pretty conservatively to factor in what you're alluding to, what happens when a $40-customer turns into a seven to $10-customer. So we tried to factor that in. We don't think the shift is going to happen instantly because, as Jim said, there are a lot of customers who do really appreciate the service quality and coverage of the

and

networks. So I don't think that that's a shift that's going to happen overnight, and we've definitely tried to be conservative in our service revenue forecast.

Great. Thank you both very much.

The next question comes from Ray Sharma, BMO Nesbitt Burns. Please go ahead.

Hey guys, just a couple of questions. First question for you Dennis, on the most recent Motion 10-K, there was an indication that the company was going to pay RIM $9.9 million plus interest. Is this -- is this accounted for in your guidance for the Q1 numbers -- would be the first question -- or has that already been accounted for in the Q4 numbers?

I'd referenced receivable that have been previously written off that we collected in the Q4.

OK. So there -- it wouldn't -- there would be -- there wouldn't be a chance that it would be slipping into -- or some of it would be amortized into Q1 as well, would it?

No that was taken care of in Q4.

OK, I just want to reconcile one other thing in terms of the guidance for the top line over the next couple of quarters, and I just wanted to look back a little bit. When

first started ramping units into -- when you started ramping products into MMO2

, they took 20,000 units in that first month -- I believe it was the August quarter. And Jim, you were talking about there are several different carriers -- Voice

et cetera, AT&T Wireless and so on that are currently ramping or you are ramping product to right now, and so, would -- with a flatter or slightly sequential

guidance for next quarter or two, how do we reconcile what's going on with the revenues, as they currently stand, with this ramp when we compare it to the ramp as it occurred with

recently?

Well I think, Ray, really in that context, I mean, we have very, I mean the difference in North America was, number one, it's a known market and there's a lot of pent up demand, I mean, it's a very established brand, it's a very established service and the number of our customers have indicated very large numbers but they're interested in extending and that goes back to the issue of sort of over hang that we've been living within. So, I think the context is very, very different and also, when it comes to Europe, you know, BT's done a good job. They were first out of the gate. There was a lot of issues in terms of getting the network ready and the product ready where now turning on voice and I'll be fairly frank, I mean, you know, for 90 percent of our customers, a product just working in North America is just fine. In U.K. for 90 percent of the customers, a product, for our customers, a product working with only in the U.K. is of questionable value and its not to say that the network's not great but there's just or there's not a demand for the product but there's a need for service in more countries. So, really, I think the circumstances are very different. I think the early ship, loading shipments for these other carriers are lot lower and it's a much more predictable model but that's the reality of launching a new service and new product. I don't want to pretend that every aspect is linear and totally foreseeable but I will articulate that we're well positioned and well ahead in what we do and executing fully on it.

OK. Thank you.

Next question comes from Andrew Scott, Needham & Co. Please go ahead.

Hi, good evening.

Dennis, first, what is your long-term operating margin target for the company and, second, for the GPRS BlackBerry, if revenues per subscriber per month is in the $7 to $10 range, what are gross margin dollars and finally, operating dollars per month? Can you give us some guidance there?

Andrew, we've been disclosing gross margin and operating margin on an overall basis and don't break it down into different segments but I will say, that obviously margins on pure the $7 to $10 revenue line are very, very good.

With respect to a long-term operating model, we haven't published a long-term model and try not to go out beyond the foreseeable future and to this point; we've only got it up to one year. I will say that, obviously, our long-term operating model is for sales and marketing and administrative expenses and R&D to come down significantly as a percentage of revenue.

Fair enough. Can you give us some color on the cost you need to -- the cost you need to provide the service for -- where you generate seven to $10 per month in revenues?

Primarily the costs associated with that are running our BlackBerry

and

. So whereas with the $40-service where we are reselling airtime, a significant portion of that was in both selling airtime cost. The cost in the seven to10 is for maintaining the

and

infrastructure.

Super. And finally, if you can provide any more information on GPRS BlackBerry sale through, as you were discussing before. Thanks.

With respect to sale through, I mean as Jim said, the carriers in North America are just starting.

had put out a release a short time ago talking about the number of companies that they have penetration into. That didn't include a subscriber number, about 250 companies of servers is significant. So, we don't have stats on sale through at this point. It's just too early.

Thanks.

Our next question comes from

, CIBC World Markets. Please go ahead.

Hey, I just had one follow-up question. In terms of the three-cent gain, or one-cent

or one-cent gain on the three cents. How much revenue was associated with that?

That was collection of receivable pretax of about $4 million.

Of 4 million?

Yeah, so that wasn't -- it wasn't the revenue line. It was an offset to SG&A.

Oh, OK. And so you're not expecting any of that in the future?

That's correct.

Great. Thanks Dennis.

Our next question comes from

, National Bank Financial. Please go ahead.

Good evening gentlemen. I was wondering, Jim, if you could maybe talk about some of the slippage issues you mentioned during your commentary, whether they were sales or marketing related or technology.

I'd say the slippage is principally technology. I think the operational issues, though, are lurking right behind. So, we anticipate these. We're very aware of them. We do all we can to condition the carriers as to the nature of these things, and train for -- you know, there are circumstances where they listen to us. There are circumstances where our concerns are not attended to until the reality hits everyone square in the face. But to date, the issues are principally technology, getting the code

in the network, getting the interoperation goal, getting the connection goal, getting it certified. You know, and I really would stress I mean, you know, here we are in April 2002, all these carriers investing on 2.5 G and the two that I know of that really have operational networks taking orders globally, are BT,

and VoiceStream and, you know, it just shows the complexity of this in many facets and it's a bit of a warning for the complexity of things like 3G, which is much, much more complex in that and we see this as just a inherent aspect of launching the business and the processes we're going through are just going to be the barriers that anyone else is going to have go through. They're going to have to do all these kinds of things. They don't go away for the next entrant.

Do you notice that most of the technology issues that the carriers face like, are the carriers as a group, getting closer to solving them or is when you work with each carrier, individually, that they become closer to solving these issues? Like is it one by one or is it as a group they're getting closer at this point?

You know, it's pretty one by one. I mean, when you have a collaborative group, I mean, every network is different. A lot of these networks were built through acquisition, they have different suppliers, many networks have multiple suppliers. Some networks, they're just getting it working that you can roam from part of the network to another so, you know and every network has a lot of very individual country requirements in data and go to market strategies that are very unique and it's been a comment by us for a quite awhile, you're going to see a lot of diversity in successive carriers based on their go to market execution on wireless data. You're going to see a diversity of strategies, a diversity of technologies and a diversity of execution efficiency and capability and it's inherent and, you know, we do the very best we can. We're, you know, again, we see certain carriers, you know, getting it done. Other ones just on the cusp of launching, I expect to see some very meaningful announcements in the near term and both of launches and of new carrier partners and we all see them progressing towards the finish line. But each one in many respects is charting their own course.

OK and Dennis, just could you maybe just repeat the number of net BlackBerry adds you expect for this fiscal year '03? Thank you.

I'd given a range based on 375 to 425 million in revenue, a range of about 300 to 400,000 net adds.

Thank you.

We have time for one last question and that comes from

,

. Please go ahead.

Yes, thank you.

Two quick questions. Can you comment a little bit more on the OEM market opportunity you recently introduced some GPRS products and

any comments on the business model surrounding the new reference design program you've launched? Thanks.

Sure. Well, really the OEM is a -- is a very exciting opportunity because we have a number of OEM partners who've previously embedded our OEM design. And you know, one of the great benefits for us in the OEM business to our customers is number one, they hang off of all the investment and infrastructure used to create BlackBerry and BlackBerry radios. When you think of, you know, BlackBerry is a certified GPRS radio code, there are no others that have certified at this time, certainly in North America.

And it's because of the intimacy of the -- of our collaboration with the carriers means that they're assured

radio code, and our code is the same in the BlackBerry device it goes in the OEM, and that's a very compelling -- that's a very compelling proposition to the OEMs coupled with the fact that they're building off of all of the R&D and all the test equipment that we provide for the BlackBerry solution.

So we see the OEM as a strategic market, as a growth market, as a large opportunity, and we see -- we have some strategic value-add to our customers and they're responding very positively and expect to see a number of announcements on the OEM front going forward. For the reference design, really it's a manifestation of the same kind of thing that a number of these customers are GSM cell phone companies that use

and they want to get into GPRS and the 2.5 G handheld game with Java, and that's how we create that partnership.

We get a

a license per unit, and we're very active in the reference design and the testing and the certification for these -- for these handset manufacturers and that's a very normal business. Somebody supplies a reference design, and these handset companies, you know, buy a design and implement it and I think creates a lot of opportunity because the difference between data and voice is data there's a lot more diversity in appliance than voice.

I mean voice is pretty horizontal globally. Data's very diverse. There's a lot of opportunity for localization, customization, and differentiation in the data device. So we expect to see a very vibrant data market for devices, both in our applications, in our devices, in our licenses globally.

Is there anything in the guidance for '03 in terms of license -- BlackBerry license sales on that or is that an '04 and beyond?

I -- we haven't put anything in '03 for that

.

OK. Great. Thanks gentlemen.

For the -- could the -- could the operator please come on to handle logistics for question.

I'd like to remind every one there's a post seat service available at 416-640-1917, reservation number is 181806pound. You can also listen to the call at www.rim.netinvestors.

Thanks, very much.

Ladies and gentlemen, this concludes the conference call for today. Thank you for participating and please disconnect your lines.

END