BlackBerry Ltd (BB) 2008 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen, thank you for standing by.

Welcome to the Research In Motion fourth quarter, fiscal 2008 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.

Instructions will be provided at that time for you to que up for questions.

(OPERATOR INSTRUCTIONS).

I would like to remind everyone that this conference is being recorded today, Wednesday, April 2, 2008, at 5:00 p.m.

Eastern time.

I would now like to turn the conference over to Ms.

Adele Ebbs, Vice President, Investor Relations.

Please go ahead.

Thank you, welcome to RIM's fiscal 2008 fourth quarter and year end results conference call.

With me on the call today is Jim Balsillie, RIM'S Co-CEO, and Brian Bidulka, RIM's Chief Accounting Officer.

After I read the required forward-looking statements disclaimer, Jim will provide a business and strategic update.

Brian will then review fourth quarter results and I will discuss our outlook for the first quarter of fiscal 2009.

We will then open the call up for questions.

I would like to note that this call is available to the general public by a call-in number and webcast.

A replay of the webcast will also be available on the rim.com website.

We plan to wrap up the call before 6 p.m.

Eastern this evening.

Some of the statements we will be making today constitute forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995, and applicable Canadian securities laws.

These include statements about our expectations and estimates with respect to revenue, gross margin, operating expenses, CapEx, depreciation and amortization, investment income, earnings, earnings per share, channel inventory, seasonality, and ASPs for Q1 and beyond, our expectations regarding RIM's near and long-term tax rates, our estimates of the number of BlackBerry subscriber accounts, subscriber account additions, replacement device sales and other non-financial estimates, our product development initiatives and timing, developments relating to our carrier partners, new and expanding markets for our products, and other statements regarding our plans and objectives.

We will indicate forward-looking statements by using words such as expect, anticipate, estimate, may, will, should, forecast, intend, believe, continue, and similar expressions.

All forward-looking statements reflect our current views with respect to future events and are subject to risks and uncertainties in assumptions we have made.

Many factors could cause our actual results, performance or achievements to be materially different from those expressed or implied by our forward-looking statements, including risks relating to the restatement of our previously filed financial statements as a result of our internal review of historical stock option granting practices, and regulatory investigations or litigation relating to those matters.

Risks relating to intellectual property, the efficient and uninterrupted operation of RIM's network operation centers, restrictions on import and/or use of RIM's products in certain countries due to encryption of our products, the occurrence or perception of a breach of RIM's security measures, our reliance on suppliers and third party manufacturers, general economic conditions, our ability to enhance our current products, and develop and bring to market new products and services, our reliance on carrier partners.

Risks relating to competition, risks relating to possible product defects and product liability, our ability to effectively manage our growth, risks associated with our expanding foreign operations, foreign exchange risks, and other factors set forth in the forward-looking statements section of today's news release, and the risk factors in MDNA sections in RIM's filings with the SEC and Canadian Securities Regulators.

We base our forward-looking statements on information currently available to us, and we do not assume any obligation to update them except as required by law.

I will now turn the call over to Jim.

Thank you, Adele.

We are pleased to end the year and the fourth quarter with revenue growth over 100% versus the same quarter last year, and earnings more than doubling year-over-year.

It has been an exciting year at RIM, with the introduction of a record number of new devices, numerous new software introductions, and a strong focus on expanding our distribution channels.

We continue to diversify our customer base, and at the end of the year approximately 38% of the BlackBerry subscriber base were non-enterprise, and well over half of the net new subscriber account additions in the quarter came from non-enterprise customers.

CDMA in North American was particularly strong in Q4 with the launch of the BlackBerry Pearl 8130 ramping across all of our North American CDMA partners.

But we also saw strength in a number of European markets, the up-performance in the quarter was largely North American based.

The percentage of subscriber account base outside North America was approximately 33% at the end of the quarter.

Demand for BlackBerry products and services in Q4 was strong, with approximately 2.18 million BlackBerry net subscriber account additions, which was in line with our February 21 update, but much higher than our December forecast, and 32% higher than the approximately 1.65 million subscriber accounts added in Q4.

This takes the total BlackBerry subscriber account base at year end to over 14 million.

This growth was driven by a strong showing by our carrier partners throughout December, particularly in North America.

The ramping of new direct distribution channels, and the success of numerous promotions in January and February that mitigated the typical seasonal slowdown in the consumer market.

In addition, the heavy promotion of the CDMA Pearl drove high numbers of net new activations throughout U.S.

and Canada.

But we saw unusually strong growth in BIS during the fourth quarter, it is important to note that we did not see any evidence of slowdown in our enterprise business, outside of normal seasonal trends.

There has been significant adoption of the CDMA Pearl since it began its ramp at the end of Q3, and with the introduction of different colors and pricing plans during the fourth quarter.

Verizon Wireless put substantial support behind the launch of the pink Pearl 8130, leveraging the color exclusive to bring the product to market with programs focused at professional women.

At Sprint, the Pearl 8130 in amethyst and red, along with the attractive device and service pricing, and the Valentine's Day promotions in national media, helped sustain the launch momentum through Q4.

It is also worth noting that we saw the CDMA Pearl drive a very high percentage of net new additions, more than replacements or upgrades.

This is consistent with our experience with Pearl on edge networks and helps explain the higher proportion of net new adds we saw this quarter relative to upgrades.

In general, we see the Pearl family being the strongest driver of net new adds, as a percentage of sell-through, with Curve and the 8800 series driving new adds and significant upgrades.

We are also excited to have announced the CDMA Curve with Verizon and Sprint, which is expected to be available later this quarter, and believe that we will see a similar strong take-up in this product as we saw with the CDMA Pearl over the past two quarters.

AT&T continued to show unprecedented sales growth in the fourth quarter.

Following the momentum created by Black Friday, the Curve 8310 and Curve 8100 played a key role in AT&T's regional customer holiday promotion, which was followed by an aggressive campaign in the new year that featured the Curve for $99, as part of AT&T's National Winter Smart Phone promotion, in both national television and regional media.

The Red Curve was also a central part of their national Valentine's Day promotion, which included national media and merchandising.

In late January, AT&T began offering a $20 per month unlimited messaging plan, which has proven very popular for customers interested in using their BlackBerry Smart Phone as a voice and text messaging device, and lead to an increase this quarter in the number of devices sold independent of a BlackBerry service plan.

This quarter, AT&T also announced the availability of a Pearl 8120, with a range of enhancements including Wi-Fi.

Recently, T-Mobile launched the Wi-Fi enabled BlackBerry 8820 and BlackBerry Pearl 8120 with Wi-Fi, in conjunction with their Hot Spot at Home offering.

This offering allows customers to make unlimited nationwide calling over any home, corporate or public hot spot location for a 9.99 all you can eat price.

During the holiday season, they positioned the Pearl 8110 as a must-have product, and continued to leverage their offerings of multiple colors of Pearl at an attractive $99 price point, which lead to solid performance in the fourth quarter.

In Canada, Telus embraced the Pearl this quarter with heavy promotional activity, including a $0 device price point in certain markets.

Cell Mobility also saw strong growth after their launch of the Red Pearl in the 8130 World edition in all channels.

Rogers launched the BlackBerry Curve 8310 and Pearl 8110, supported by a consumer media campaign utilizing national television and radio to promote the Curve as the device to accurately and quickly post messages, and upload pictures of facebook, myspace, and other social networking sites.

In Europe, Vodafone launched the BlackBerry Pearl 8110 in Spain, with an aggressive 6 Euro per month plan.

And in Italy they launched the 8110 in three colors with a variety of promotional campaigns to support their efforts.

TIM also saw success with the Pearl and launched an outdoor campaign in large Italian cities called "Fall in Love with BlackBerry."

In France, WIC continued its strong promotion of the BlackBerry solution, and we have seen good momentum with our devices being available across their 1,200 direct and indirect stores, and supported by pricing promotions as well as marketing campaigns.

We have also been working with Orange to put together a unique Wi-Fi offering to target their Soho and corporate customers with Wi-Fi enabled BlackBerry devices.

This quarter we announced several new products in Latin America, including Curve 8310 with CTI in Argentina, Pearl 8120 with Telephonic in Ecuador, and Pearl 8130 with our CDMA partner, Iusacell in Mexico.

We are pleased with the support we are getting from our carrier partners throughout the region, as well as the media and customer reaction to the product line-up.

In Asia-Pacific, Optus Australia launched the Curve 8310 in conjunction with Sony BMG, to offer a micro SD card preloaded with the latest Alicia Keys album, to target the consumer market and create greater awareness of the multi-media functionality of BlackBerry Smart Phones.

We also saw good support from [chelstra] with reduced service pricing, which helped drive sales during the holiday period.

In China, the BlackBerry 8700 is now available in major cities and will be rolling out to more of the regional operators in the coming months.

We continue to have a strong relationship with China Mobile and Alcatel-Lucent, and we're working closely with our Chinese partners to grow BlackBerry device availability and sales across the main land.

We are pleased with the progress we are seeing in the expansion of our indirect channels around the world.

In January, we launched with Ingram Micro in both UK and the Netherlands, and in February, we launched with 2020 in the UK and the Phone House in Netherlands.

In addition, we continue to expand our relationship with the Car Phone Warehouse, with an exclusive launch of the pink BlackBerry Pearl, and the Sunset 8100 and the Sunset Red 8120 in the UK and an expansion of our footprint in the retail stores and online.

These two products have received prominent placement and were featured in the windows of many of their highest traffic locations.

In North America, Best Buy positioned the Red Curve 8310 from AT&T in all 400 Best Buy Mobile stores.

It's on the front cover of February's Buyer's Guide.

We plan to further expand our presence in these down-stream channels throughout the coming year.

Carriers around the world continue to lower BlackBerry service pricing to drive adoption of the BlackBerry platform.

We now have dozens of carriers in many geographies offering sub-$20 per month BlackBerry service plans, and are working with our partners to support innovative introductory plans for the consumer market.

In addition, Alcatel-Lucent recently announced plans to develop and distribute a prepaid solution for the BlackBerry platform.

This real time solution will be integrated into existing carrier networks and will enable customers to track the minutes and data used against the amount remaining and easily refill the account as necessary.

We believe a prepaid option will add significant value to our carrier partners and further broaden customer interest in the BlackBerry platform, especially in emerging markets.

At Loewsphere 2008, we showcased some of the new BlackBerry platform enhancements for BAS 4.1.5.

Users will be able to edit Microsoft Word, PowerPoint, and Excel files directly on their devices as a result of integrating Documents To Go by DataViz.

In addition, users will be able to use remote email search for retrieval of messages no longer stored on the device.

They'll be able to do busy calendar look-up to check the availability of colleagues before putting together a meeting request, and advanced enterprise instant messaging to improve address book integration to perform IM to click to call, and convert IM sessions to calls.

We also added a number of new features to allow for easier administration and monitoring by IT managers.

In January, we launched the BlackBerry client for IBM [Loew's] connections.

This new software, which will run natively, leverages our push based architecture, security and BES controls, to enable [loew's] connections in the Enterprise.

The functionality to allow employee cooperation, internal expert identification and sharing of research across the Enterprise, is a natural fit with our solution, and we are quite excited about its potential.

During the quarter, a number of new partner applications launched for the BlackBerry platform.

Sling Media, the maker of SlingBox and SlingPlayer, has announced the compatibility between their SlingBox classic and the BlackBerry Pearl 8120.

This convergence will allow users to watch their TV and DVR anywhere in the world.

A number of partners today recently launched mobile content services for BlackBerry, including USA Today, National Public Radio, CNBC, and Fox Business News.

We're also pleased that the number of downloads of facebook for BlackBerry have now passed the 1 million mark.

On the Enterprise side, Oracle has launched Oracle Mobile sales assistance to provide users with easier CRM access on BlackBerry devices, and both Pivotal and Goldmine also launched CRM solutions for the BlackBerry platform.

Coming up in May, we will host the seventh annual wireless enterprise symposium in Orlando, together with our many partners.

WES is always a big hit with customers and partners, and we look forward to another intensive lineup of keynotes, break out sessions, case studies, training and technical labs, along with an impressive technology exhibition, where RIM and its partners will showcase a variety of applications and solutions for the BlackBerry platform.

In summary, it has been a year of great progress and record-breaking accomplishments for RIM.

I would like to thank all of those who have contributed to these milestones.

We look forward to another successful year ahead with multiple new product and platform launches planned, along with further enhancements to BlackBerry software and service offerings.

The first quarter of fiscal '09 is shaping up to be strong, as carriers replenish inventory following the exceptional sell-through experienced in Q4, and our CDMA partners gear up for the launch of the CDMA Curve.

This strong forecasted growth, which Adele will discuss in a moment, is also particularly impressive and speaks to the strength of our portfolio, in that the forecast is not dependent on the introduction of new hardware platforms in Q1.

I will now turn the call over to Brian to update you on the Q4 results.

Thank you, Jim.

Revenue for the fourth quarter ended March 1, was $1.88 billion, up 13% from $1.67 billion in the previous quarter.

Hand held devices represented $1.52 billion or 81% of RIM's revenue during the quarter, up from 80% of total revenue in the previous quarter.

Total devices shipped in the quarter of approximately 4.4 million were up from 3.9 million in the prior quarter.

Approximately 3.9 million new devices were activated in Q4, either for new customers or for replacements and upgrades, not including phone-only sales.

Phone-only sales in the quarter increased somewhat as AT&T began offering a voice and SMS-only package for BlackBerry smart phones in the fourth quarter.

In Q4, channel inventory was drawn down as sell-through run rates outpaced forecast at most North American carriers.

The effect of this was a normalization of forward week's inventory at the end of the quarter.

The number of units in the channel increased slightly at the end of Q4, and we expect an increase in forward week's inventory in Q1, as carriers replenish stocks following the holiday season, and as our CDMA partners gear up for the launch of the Curve later this quarter.

Device ASP's in the quarter were approximately $348, we expect ASP's in Q1 to be slightly lower than Q4 at approximately $345.

Service revenue was $254 million or 14% of revenue for the quarter, up $22 million from Q3.

Monthly ARPU declined slightly from the prior quarter due to the certain ongoing growth in BIS as a percentage of subscriber account base, and as certain carriers reached new price tiers because of the growth in their total BlackBerry subscriber account base.

Software revenue was $63 million at 3% of revenue.

Other revenue, including non-warranty repairs and accessories was $43 million or 2% of revenue.

Gross margin for the fourth quarter was approximately 51%, in line with our expectations.

Operating expenses increased by 13%, slightly more than we had forecast last quarter.

R&D spending was $105 million or 6% of revenue for the quarter, and selling, marketing, and administrative expenses increased to $268 million and were 14% of revenue.

Included in operating expenses is stock-option expense of approximately $10 million.

The tax rate for the quarter was approximately 29%, slightly lower than our forecast, primarily due to the enactment of Canadian Federal tax rate reductions in the fourth quarter of fiscal 2008, and some impact from foreign exchange.

Net income for Q4 was $413 million or $0.72 per share diluted.

Weighted average diluted shares used in the EPS calculation for the quarter were 574 million.

Actual shares outstanding as of March 1, were 563 million.

Total options outstanding at March 1, were 16.5 million.

RIM's balance sheet continues to be strong with substantial cash reserves and appropriate working capital balances.

The end of the fourth quarter, RIM had approximately $2.3 billion in cash, cash equivalents and investments.

This was up $211 million from the prior quarter.

During the quarter, RIM generated approximately $616 million in cash from operations.

The primary use of cash in the quarter was capital expenditures of approximately $110 million and the acquisition of intangible assets of approximately $310 million.

I would also like to note we will be required to fund our estimated 2008 corporate tax liability in the first quarter, which will result in a cash outflow of approximately $450 million.

From a working capital perspective, trade receivables were up from the prior quarter, in line with top-line growth, and DSOs were up slightly from the prior quarter at [54] days.

Inventory on hand was approximately $396 million versus $340 million in the prior quarter.

Inventories continue to be primarily raw materials and semi-finished goods to support demand for BlackBerry products.

I will now turn the call over to Adele to discuss our outlook for Q1.

Thanks, Brian.

Before I discuss our outlook for Q1, I would like to remind everyone that these forward-looking statements reflect management's best current estimates, and should be taken in the context of the risk factors listed at the beginning of the call and outlined in our public filings.

We are forecasting revenue for the first quarter of fiscal 2009 to be higher than Q4, in the range of 2.23 billion to 2.3 billion.

We expect hardware shipments to be over 5.3 million units and an ASP of approximately $345.

The increase in volume expected is due to channel replenishment following the higher than expected sell-through in Q4, as well as ongoing carrier ramp plans and a continuing strong replacement cycle.

We believe we are at the beginning of a new leg in our replacement cycle, in which many BlackBerry 8700 users are coming off of their two-year contracts and are ready to upgrade to a newer BlackBerry handset.

Software revenue in Q1 is expected to increase slightly.

We are targeting net subscriber account additions for Q1 of approximately 2.2 million.

In the fourth quarter, we had a number of record-breaking weeks in terms of net subscriber account additions, due to unprecedented and aggressive holiday and post- holiday promotions.

We believe that as penetration into the consumer market has grown as a percentage of our business, these types of seasonal marketing programs are more of a factor than in the past.

Some of these post-holiday programs ended in late February, and so far in the first quarter we have seen strong net adds but not the record levels we averaged in Q4.

We believe that the positioning of the BlackBerry solution as a mainstream offering by our partners in late Q3 and throughout Q4, has lead to a new base level of net activations from which we can grow in future quarters.

The absolute growth in quarterly net adds in Q4 was the highest it has ever been in our history, and we believe that Q1 is the return to the normalized growth trajectory we have been on for the past several quarters.

We believe that the launch of the BlackBerry Curve 8330 with our CDMA partners, will drive an increase in the run rate of net new sub adds in the latter part of the quarter, and continued extension of BlackBerry into major Western European markets will also lead to growth.

However, we believe it is prudent to assume that without the level of program stimulation we saw in the holiday and post- holiday season in North America, we will return to a more normal run rate in Q1.

We continue to believe that we will experience strong growth in net subscriber account additions in fiscal 2009, as we launch multiple new devices, and new software and service offerings with our partners around the world.

We expect gross margin for Q1 to be flat with Q4 at approximately 51%.

We expect a total operating expense increase for Q1 of approximately 20% from Q4 levels, with R&D increasing by approximately 27 to 28%, and sales, marketing, and administration expense increasing by approximately 17 to 18%.

We are planning to expand our R&D capabilities throughout fiscal 2009, and this expansion, which is anticipated to begin in the second quarter, will increase the base level of R&D expenses in Q2 and beyond.

We expect depreciation and amortization to be approximately 38 million in Q1, higher than Q4 due to ongoing CapEx.

We expect CapEx to be approximately 180 million in both Q1 and Q2.

Investment income is expected to be approximately 19 million in Q1.

We expect the tax rate to be approximately 29 to 30% in Q1, and to remain at this level throughout fiscal 2009.

Beyond fiscal 2009, we would expect to see the rate decrease further due to scheduled Canadian corporate income tax reductions.

Please note that the rate could move outside this range depending on foreign exchange fluctuations.

We expect Q1 EPS to be in the range of $0.82 to $0.86 per share.

I will now turn the call back to Jim.

Thank you very much, Adele.

We're pleased to be entering fiscal 2007 with such tremendous momentum in our business.

We are looking forward to continuing to leverage our partnerships and strong product portfolio to grow our subscriber base, and expand our presence in new and existing market segments.

This concludes our formal comments.

Due to the large number of people on the call, we ask that you please limit yourself to one question per person.

We plan to end the call today shortly before 6 p.m.

Would the operator please come on to handle questions?

Thank you.

Ladies and gentlemen, we will now conduct the question-and-answer session.

(OPERATOR INSTRUCTIONS).

Your first question comes from Mike Abramsky of RBC Capital Markets.

Please go ahead.

Yes, thanks very much.

Could you just give us a little bit of sense of the conservatism in your Q1 sub-guidance.

I was listening to your comments regarding returning to more normalized levels following some very strong promotional, but you have had so much implied shipment strength here going forward in your guidance, and you did 30% quarter-over-quarter growth Q4.

So could you just talk to us a little bit about why you are expecting the guidance and what kind of factors into some of your thoughts?

Well, that's a fair comment.

We just keep getting into newer and newer ground, really, in the business, and we, we're looking at varying run rates.

What are the holiday seasons?

What are the buying cycles?

What are the new device strategies?

What are the programs?

But with this faster growth, we are always heading into new situations, and there's an element of uncertainty.

We're still pretty early into this quarter, and it's always, you go through Easter and all of that, so we don't have a lot of data like we normally would, so, yes, it's -- we have a pretty good handle on revenue, subscriber just sort of plays out with programs as it carries on in the quarter.

It's a fair comment.

We're heading to lots of new ground, and we could be pleasantly surprised on these things, but that's our best level of guidance at this time, but there is a lot of new programs and new initiatives and new launches, and soon to have new products, and -- and yes, there could always be positive things in these areas.

Thanks.

Your next question comes from Jim Suva of Citi Group.

Please go ahead.

Great, thank you very much.

Can you comment about your increase in R&D?

Is it more focused on the infrastructure side, as I know you had an unfortunate BlackBerry outage this last quarter, or is it more on the product side, or how it's split.

And then I have a follow-up?

Well, the investment is pretty broad-based.

Very, very heavy investment on a broad number of hand-helds, and I think you are seeing that, and there's an incredibly powerful road map we are excited about for the rest of the year.

So, definitely heavy R&D in the handsets.

There has been very exciting R&D and the road map for BES and there's been service packs and a new BES architecture coming out, as well as Unite, which is garnering a lot of attention as well as the BES side.

And yes, we are growing our infrastructure, and more high availability and distributed architectures, and so, when you are growing this fast, it's pretty fair to say it's kind of on all fronts, so all areas are growing and all areas are getting lots of R&D, but they are equally important.

They are all critical organs in the system, and critical parts that are requiring enhancements.

I wouldn't weight it to any one.

I would put it pretty broad based.

Thank you, and as my quick follow-up, I believe you said in your guidance, it does not include new product launches if I am correct.

I want to be clear on that.

Some people may interpret that to mean that you are actually not going to launch any new products in the next quarter or so or some people may infer that to mean that, what you announced is definitely enough to get you through your guidance.

Could you maybe just help us understand what you meant by that type of statement, thank you.

Sure, Jim.

Yes, I mean, we -- I think what we said is that, that the guidance that we have given for Q1 isn't based on the launch of a new platform in the quarter.

As you saw, we announced the Curve for CDMA with Verizon and Sprint, so that product is included, but any new product beyond that would not be included, and not scheduled.

Great.

Thank you very much.

And congratulations.

Your next question comes from Deepak Chopra of National Bank Financial.

Please go ahead.

Good afternoon, Jim.

I was wondering if you could talk about how are the carriers going to position BlackBerry in the second half of the year in '09 with respect to marketing and subsidies, and how are they looking to push the market share of BlackBerry's substantially higher over the next couple of years, can you talk about programs?

Yes, that's a fair question.

I would say there's two elements of positioning, one is predictable, I guess, and one is particularly exciting.

For sure there's a much bigger mainstream play going on, much bigger sort of lead-up holiday season positioning, and all of the mainstreamness and, probably the most pleasing stat for me this quarter, beyond obviously sort of the financial number -- the obvious financial numbers, probably my proudest stat is the facebook going over 1 million users.

Because this is very viral, the demographic of facebook is known to be quite young and it's their form of collaboration, so if people think of BlackBerry for email, you are better to think of it as collaboration and you're even better to think of it as a communications architecture of which collaboration is part of.

And to shift to the newer forms of collaboration, instant messaging and social networking, is a real validation of the overall architecture, as opposed to just seeing it as an ap.

So, positioning is absolutely-- and the things like the Unite and the UMA, and all of that stuff.

It's much more of a mainstream thing, it's much more of that kind of holiday thing, so those are very, very good omens, for sure.

I think the other part, which we're seeing pretty interesting activity is deeper B to B, particularly the voice synchronization is pretty exciting for a lot of process re-engineering, and shifting to fixed mobile convergence and the PBX synchronizing, like email.

One thing which is kind of predictable is the more processory engineering deeper with almost more of a voice-lead to it.

And you've seen even a couple of announcements with Spring and Verizon this week.

Take a look at that, because those are real clear indicators that the B to B processory engineering and using voice synchronization and PBX integration is a real, sort of B to B transformation trend, along with the web services stuff we know and the desktop.

But the bigger one is the -- the bigger one is the main stream stuff, and obviously that's something that has really got our attention.

Maybe one last quick question, could you talk about what the $310 million in intangible assets, the acquisition in the quarter was?

That was --

Yes, that was a patent acquisition.

Yes, it's basically buying a patent portfolio.

Some of them are encumbered to some areas, some are not, but it's a lot of fundamental IPR.

It's very, very helpful in having a strong, strong patent portfolio in -- in licensing discussions, and we're very fortunate to have been able to acquire and develop a very, very powerful patent portfolio, and we'll likely continue.

Thank you.

Your next question comes from Jeff Kvaal of Lehman Brothers.

Please go ahead.

Thank you very much.

I was wondering if you could talk to us a little bit about the trajectory that we should expect in operating margins over the next several quarters.

Obviously the OpEx itself is going up steeply, and there's also a bit of a currency headwind.

Thank you.

Hi, Jeff.

Yes, you know that we don't guide out beyond more than one quarter, and it does get tough.

I mean, we did mention that we expect to be ramping R&D throughout '09.

I think what it really comes down to is how fast are we going to grow the top line while we're also investing for the future, and I mean, I think we have talked a lot about some of the initiatives we have coming this year, in terms of new products and new service offerings and new software that should really help drive that, but I can't give you a trend line at this point on what operating margins are going to look like throughout '09.

Okay.

Thanks.

And just, Jim, you mentioned briefly that there was no enterprise impact.

I was wondering if you could go to into a little bit further detail about that.

Does that include net adds, or replacement rates, or any particular verticals?

Thank you.

Yes, I mean, I make these statements with a fair bit of in-market feedback, but a lot of caution because I want to be right and obviously things are subject to change, but I think it's such a productivity tool.

It's, I don't think this is -- it's not one of those things that seems to be such a productivity tool -- in fact I'll tell you with the MVS, the mobile voice service, a lot of companies are looking at that precisely because it's such a good cost saving in challenging economic times.

It saves so much in so many core areas, that it -- there's almost impetus because of the economic headwinds to better control mobility costs, and better control OpEx, and so -- and we're negligible, if almost zero CapEx.

So it's kind of-- people aren't sort of shutting off their phone in the economic times, but they want to do these things in an efficient way.

We haven't seen it.

If we do see it we'll let you know.

But we're in such a productivity cycle of this stuff, I think the growth drivers are much more sector specific, and much more management execution specific, than they are macroeconomic.

And don't get me wrong, there are very intense sector specific forces, and there are very intense pressures on management to perform, but interest rates going up or down a little bit and stuff like that, and credit issues have not seemed to have been principal drivers on the factors that are moving our industry, but -- and our sector that we're in.

But that could change, and if it does change, and we start to see evidence that it does change, we'll absolutely communicate that as quick as possible.

Yes, please do.

Keep us posted.

Thanks.

Your next question comes from Andrew Neff of Bear Stearns.

Please go ahead.

Just a question, could you give us an update on the rollout of BlackBerry Unite?

What's going on with that in a little more detail, how you see that having an impact and just in general?

Yes, BlackBerry Unite is going out gold now and carrier deployments are just beginning.

It is very exciting in two segments.

The family, sort of the individual/family consumer, and for the Soho.

And it fundamentally gives you the power of a BES on a windows machine for free.

So it's incredibly attractive to carriers who are looking at two and three and four screen integration strategies, with the mobile being defining.

So it really compliments that, like when you look at the UMA with T-mobile, that's a two-screen play.

Right?

Roll in your local loop home phone into your mobile.

And so creating a broadband synchronization from your PC to your mobile is a big part of that two screens there, and it architecturally links a broadband to a mobile, which is a lot of these carriers want to tie those together, both for the Soho/SME and for the consumer.

It's -- our strategy has really been communications with BlackBerry.

BlackBerry is a communications system, about efficiency, about seamless connectivity, about security, about reliability, but when you got to the family, you got to the Soho, it was always in the cloud and the PC was kind of an island.

So, what is the effect going to be?

Profound, no doubt.

Absolutely defining.

It's very early, but when you use it, it blows you away.

You can take a picture, you can upload it to your directory at your computer, you can download it, you can share, you can do policy controls, limit browsing, limit certain kinds of phone calls, turn on GPS to track somebody if they have permission enabled the phone for safety things, secure wireless family calendar.

On and on it goes.

It's truly powerful and it applies also to the Soho too for business type stuff.

So, it's early in its market impact because it's just early, but it's a definer, no question.

And I haven't met a carrier that isn't incredibly excited about it because it strengthens their three, four-screen strategy, and it strengths their strategy of being a platform.

And there big concern is, are they going to get disintermediated or be a platform?

And there's lots of alternative architectures that people are pushing to disintermediate carriers, and does the wireless carrier have an important strategy, an important role, a strategic role in the three, four-screen evolution, which again is also a big risk to be slow.

So it really supports them in two key strategic thrust areas, where there's also a strategic vulnerability or risk on their part, where they got to surge or be hurt, and we're part of the sort of strategic surge.

So the level of engagement is very positive, but it's early.

Sounds like you have launched it in Spain, are you launching elsewhere, when do you think the rollout --

Yes, we're just rolling out in North America literally this month.

And the quiet betas and trials have been really quite exceptional, and the things you can do with it in synching to your music and stuff like that, you'll be just, it's just so powerful and seamless to synch to your music, to synch to your pictures, to synch to so many things, and I'll reiterate, it's free, you can run it on an old PC.

So if you've got an internet connection in the house with a PC and you got a BlackBerry with whatever kind of data plan or Wi-Fi, all of a sudden you can have that sort of quiet server relationship with your BlackBerry, and it can -- you could also use it with the BES too, so you can integrate or keep separate or merge TIMs with the BES and the Unite.

And it still doesn't preclude you from having your BIS stuff in the cloud too, so we let you converge where you want to converge and present them all to your one universal presentation thing with the BlackBerry front end, so North America is imminent, and it's all very, very, very exciting and positive for sure.

Thank you, Jim.

Uh-huh.

Your next question comes from Rob Sanderson of American Technology Research.

Please go ahead.

Hi, good afternoon, and thanks for taking my call.

And congratulations on another great year, guys.

My question has to do with the relationships between handsets sold and net subscriber additions.

That's something we continue to see pick up, I think it was 1.95 in fiscal '07, 2.12 in fiscal '08, you just reported.

What should we expect going forward, for maybe the next fiscal year?

Is that going to continue to increase?

And related to that, is there any way you could help quantify the number of non-data attached units, or how do we reconcile that contributor to the growth in that relationship?

Thank you.

Sure, Rob.

Yes, I mean, it really has -- we have seen a really big ramp-up in the number of devices that are being sold through for replacements and upgrades, and I think as our base grows, that has to grow as well.

I really don't see any reason for a significant slowdown in that, as you go out into '09.

I think that, as we said on the prepared remarks, that if you look at the 8700 series, the big bulk of people who bought 8700s are really just coming off their two-year carrier contract, service contracts now, and that makes them ripe for an upgrade.

And I think that by the time those folks are upgraded, you have already got people with Pearls who are almost, going on two years old as well, or -- so I think that because we have had such a rapid rate of product introductions over the past 18 months or so, that I think it has to keep the replacement rate quite strong.

On the devices that are sold without a BlackBerry service plan, it did increase in the quarter, as AT&T, this is the first time they have offered BlackBerry handsets without a BlackBerry plan attached to them.

I can't give you an exact number, but it would be -- in total it would be in the few hundred thousand range.

Okay.

Thank you very much.

Your next question comes from Peter Misek of Canaccord Adams.

Please go ahead.

Good afternoon, guys.

The big question, really, is if we could elaborate a little bit on the platform that BlackBerry has become.

We had an announcement today from one of your partners on XM Radio on the BlackBerry, and what seems fascinating is that this is over cellular, and when you talk to the carriers, they say that this kind of stuff is impossible or very difficult to do, and then you are rolling out Unite, which seems to be a phenomenal multi-media platform.

Can you help us understand how come you guys are able to do it and other people can't?

Well, I think what some may or may not know is that we have 20 years in wireless data, and that BlackBerry was launched with the evolution of seven or eight generations of wireless protocol stacks that were just sort of broken apart with different interfaces and repurposed elsewhere, and we have close to 150,000 or so servers around the world.

And then with BlackBerry we have got, what -- eight years in that or so?

Nine years of BlackBerry hardening in multiple iterations, and you have to remember that, carriers operate with very, very hard system tolerances because if something is not simple and intuitive and reliable, their customer sat stats just plummet, and their customer call care stuff just soars and it just collapses all of their operational and profitability metrics.

And carriers operate on incredibly tight metrics.

And kind of what we realized is, there's kind of an irony in wireless because people thought the door to the B to B was through the B to C, but in fact we found that the door to the B to C was through the B to B because we had all of this time to harden the protocols and the processes and the leased lines, and the procedures selling BESs.

But you didn't have to have the care metrics just perfect because you had an IT director and a CI in the middle, and looking after customers, and there is such a high business ROI on it, the keys were obviously security and seamless integration, and of course you build reliability fully and completely over time.

And then that -- all of that hardening sort of did the overwhelming majority of the work to evolve into the B to C in the cloud in the BES.

And then when you look at Unite, Unite is just a port of BES to a windows machine.

People are getting the benefits of 20 years in wireless data, a couple dozen revs of protocol architectures and very hardened and market-tested solutions that we migrate to adjacent segments.

And I think you sort of wrap all of that round in the fact that RIM's is purpose built for this product -- for this market.

We're not trying to leverage some other business.

This is not about some business of leveraging an ap, or leveraging a device or leveraging some other media platform, or OS or something like that.

We're not trying to leverage anything, this is a purpose-built convergent strategy, which really doesn't have any strategic compromises that you are trying to leverage, and we also highly focus on inherent realities of wireless, which is a multi-dimensional scarcity equation where you are trying to optimize an experience in five or six factors of scarcity.

So I think, it's kind of a bunch of unique structural reasons why we are where we are, but it's the scale and early entry and hardening and purpose builtness and focus, I think are really the totality of it.

And virtually every strategy I have seen in wireless that you really see seriously pushed, fundamentally comes from some company trying to do a leverage strategy.

They make incursions into wireless as a leverage of the core business to reinforce and support their core business, and that comes with all kinds of strategic realities.

And I would also say strategic tradeoffs.

And so I think that's the core distinction between RIM and others, though others that are making big plays in the wireless on the leverage base, try to represent that their stuff comes with particular value, but with RIM, you know what you are getting, you know what the focus is, you know it's sort of a generic universal enabler with focuses on efficiency and reliability.

And our model is making the carrier a platform, not a disintermediation, we have no disintermediation strategy.

The carrier is the channel, it gives us a lot of leverage, so there is a lot of thought, there's a lot of wholisticness in our thinking, it's not just this one element, and I think these sort of natures and waves, have always made it difficult for people who have tried to make insurgence into our market because they oversimplify the elements in it, and then when they get in to it, if you are missing a couple of key ingredients then you don't get traction because it's a multi-variant game.

I know it's a long winded answer, but it's actually a very good and multi-faceted question.

So just, Jim, one last thing, as the web goes way more broadband than wireless, do you thing the carriers have really started to really appreciate just how much more technologically advanced you guys are than everyone else?

Yes, I think so, because what is happening with a lot of carriers is -- you say the web goes more broadband, you have to remember that Shannon's Law is fixed in physics, that a bit per unit of Hertz, and that doesn't change.

So, if you tenex the bit rate, you tenex the spectral consumption.

And for these licensed spectrum and global propagation they are very expensive to deploy, and that's why things like Wi-Fi and side loading are very important because they offload the capacity.

When you look at -- somebody is saying we do one megabit per second -- it's important to understand that voice with a good kodac is five kbps, so a one megabit stream is using the capacity of 200 concurrent voice channels.

Those of you in urban corridors, can you let me know if any of your carriers are sitting around with 200 concurrent channels of latent capacity there to use?

And then plus when you release -- flow the packets you need the energy, and thus you deplete batteries, and if you try to deplete too much energy too quick, you get the very unstable and heating and flaming characteristics of batteries, and so you get into thermodynamic issues, you get into energy storage issues, you get into size issues, you get into capacity issues, you get into cost issues.

So the carriers we deal with are realizing that you got to respect the network, and the BlackBerry users, as an example, there have been some multi-media launches that have had high profile in the United States, and these high, high profile multi-media devices use on average 20 to 30 times the amount of data that a BlackBerry does, and yet, they get the same or less revenue per device, and so the marginal revenue of scarce capacity per unit of capacity consumption is off by -- using a factor of 20, 30, 40, or 50.

We have all done sort of, micro economics and the sort of value of the sort of marginal increment of something scarce, and some do the math, some don't.

Thanks, Jim.

That was fantastic.

Have another wonderful year.

Ladies and gentlemen, due to time constraints we have time for one final question.

Your last question comes from Michael Urlocker of GMP Securities.

Please go ahead.

Thank you, it's great when they go in alphabetical order.

My question Jim, is if we could step back from the financial modeling and technical stuff, and really look at it from a customer standpoint, when you think about the telco customers and the consumers, can you describe for me what you think are the new problems or the increasing problems that they have that you are trying to solve for them?

Well, there -- sure.

And that's a fair thing.

I think the -- the core -- the core question for the -- the telco -- there's a couple of core questions, but the principal strategic question, I believe for the telco is, what is my role in this world of voice data convergence with lots of contention in the ecosystems.

If you saw at 3GSM and stuff like that-- where some of the tech guys are saying we don't need the carrier, and the carrier doesn't matter and stuff like that, the most strategic issue for the carrier is, what is their relevance to the customer?

Because they have been selling an ap, voice, with a little bit of peer to peer texting, and that's been their principle business, but that's shifting, and shifting rapidly.

Our strategic offer to the carrier is they become a managed service platform to the market.

And others say, get out of the way, be a pipe and make it a really high volume, high coverage, cheap pipe.

Which we just think in the nature of wireless has very adverse economic consequences to the carrier, and actually really questionable possibilities to the consumer.

So I think that's the strategic issue for the carriers, is how do they play in the platform game as this -- and you see all of these tech players and all of these service guys playing in that, and you have seen how economic fates can shift.

Think of the music industry, they had a known model and then it shifted to a sinking model on an MP3 player.

And all of a sudden their economic fate shifted dramatically and quickly, even though they didn't do anything.

Uh-huh.

And the value of the content shifted, so these things can change when new enablers come into the equation, and they know that.

So I think that's the key thing, and obviously ours is, make the carrier a platform not a pipe, and there's alternative visions out there and that's all going to play out and it will all be very, very interesting.

I think--and they always have to do that in the context of respecting customer satisfaction, customer scarcity -- or sorry -- spectral scarcity, CapEx, and their inherent, and their need to interface with all of these different players in the ecosystem but not capitulate to them.

So you have lots of interesting and uneasy alliances, and navigating that strategically, relationship wise, marketing wise, technologically wise, is an incredibly complex and essential job for a carrier to do.

And our strategy is to OEM some middlewear to them and virtualize a bunch of processes and have a partnership plan and implementation that assists them for purposes of BlackBerry to realize that potential, and the results show.

They have very high ARPU low churn from BlackBerry and that's because they are platform to the customers.

I think the key thing for the customers right now is really one of discovery in an economic model that's attractive to them.

And there's lots of things that are being discovered right now in the enabling.

We have seen some exciting multi-media representation.

We talked about the PC synchronization model.

I think you are seeing a lot of things like social networking evolving from texting.

I think we're going to see a lot of e-commerce and stored value things.

So I think the customer -- and what's the price to the customer, and how does it -- UMA, kind of what does it play in the PTT, you have seen with SlingBox and TiVo, you can time shift and play shift TV content that you have paid for to your mobile and watch it later, and that's all very interesting.

So I think the -- the key thing for the customer is, what are the enabling possibilities?

How are they compelling?

How easy and intuitive are they?

How much do they cost?

And what is the whole discovery process and viral process there?

And I think we're seeing a burgeoning of that happening.

Things for us like Unite, and the GPS, and the UMA, and the better BES, and the partnerships with Google, Microsoft, and Yahoo and Amazon and Ebay, facebook, mySpace, all the PBX synch and Wi-Fi and all that are very important parts of that discovery thing for us.

We have to play the customer enabling demand generation on the B to C, and that's that whole, are we in that positioning where this is what people want to buy?

And are we helping the carrier be in the spot they want to be in and capitalize on that spot?

And I think those are generic issues across the industry, and we tried to insert ourselves nicely in the enabling, discovery, value, intuitive card for users, and the strategic platform positioning for the carriers, and it's pretty distinct from other strategies from the tech industry.

We have been doing this for as you know Mike, seven or eight years with this kind of strategy, and we got 350 carriers in 135-odd countries and growing, so I think we're in a good spot, a helpful spot and a distinctive spot, and we just -- a lot of pressure on operation and execution for us and our carrier partners.

It's a constant, but that happens when you are growing so fast quarter-over-quarter, and the sector specific elements stay as we think they are, we're in the spot where we want to be.

Jim, thank you for that.

If I look at my own experience as a user of BlackBerry and watching consumers on the commuter trains and at airports, I think the number 1 issue, or challenge consumers have is getting music onto their phones or on their device or on their BlackBerry.

Is that something that seems important?

Or am I kind of off in an alley that's unimportant?

No, I would think that very, very seamless synchronization to your PC, for everything on your PC, would be a very, very nice start, and that is something I completely agree with you on, yes, and put that in the category of imminent things.

Okay.

Thank you very much.

Okay.

This concludes the question-and-answer session.

Ms.

Ebbs, please continue.

Thank you.

In closing I would like to remind everyone that there's a post-view service available at 416-640-1917, pass code 21221696 pound or you can listen to the call which has been recorded and is available on the investor relations section of our website at www.rim.com.

Thank you and we appreciate you joining us today.

Ladies and gentlemen, this concludes the conference call for today.

Thank you for your participation.

You may now disconnect your lines.