BlackBerry Ltd (BB) 2010 Q3 法說會逐字稿

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

Welcome to the Research In Motion third quarter fiscal 2010 results conference call.

At this time all participants are in a listen-only mode.

Following the presentation we'll conduct a Question and Answer Session.

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

(Operator Instructions) Like to remind everyone this conference call is being recorded today, Thursday, December 17, 2009 at 5 pm Eastern Time.

I will now turn the conference over to Edel Ebbs, VP of Investor Relations.

Please go ahead.

Thank you.

Welcome to RIM's fiscal 2010 third quarter results conference call.

With me on the call today is Jim Balsillie and Brian Bidulka.

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

Brian will then review third quarter results and I will discuss our outlook for the fourth quarter of fiscal 2010.

We will then open the call up for questions.

I would like to note that this call is available to the general public via 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'll 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 product shipments, revenue, gross margins, operating expenses, CapEx, depreciation and amortization, investment income, earnings, seasonality, ASPs, and foreign exchange related matters for Q4 and beyond.

Our expectations regarding RIM's near and long-term tax rates as well as the effective changes to Canadian tax laws.

Our estimates of the number of net subscriber account additions and other nonfinancial metrics.

Our product development initiatives and timing, developments relating to our carrier partners and other statements regarding our plans and objectives.

We will indicate forward-looking statements by using words such as expect, plan, 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 and assumptions we've 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 our intellectual property rights; risks relating to the uncertainty of general economic conditions; our ability to enhance our current and develop new products and services; our reliance on carrier partners, third party manufacturers, third party network developers, and suppliers; the efficient and uninterrupted operation of RIM's network operation centers; risks associated with our international operations; foreign exchange risks; risks relating to competition; and other factors set forth in the risk factors and MD&A 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're pleased with the results for the third quarter with record shipments of BlackBerry smartphones and revenue, diluted earnings per share, and net subscriber account additions that exceeded the ranges we forecasted in September.

During the quarter, RIM's manufacturing teams did an exceptional job of ramping production which allowed us to ship over 10 million BlackBerry smartphones in a single quarter for the first time ever, which brings the total number of BlackBerry devices shipped to date to over 75 million.

Revenue in Q3 grew 41% over the prior year to $3.92 billion and diluted earnings grew 60% to $1.10 per share.

Approximately 4.4 million BlackBerry net subscriber accounts were added during the quarter, up approximately 16% from the last quarter and up 70% from the same quarter last year.

The biz subscriber base has grown steadily over the past couple of quarters, reflecting successful execution of our plans to expand into broader market segments and over 80% of net new subscriber account additions came from non-enterprise customers again in Q3.

RIM's enterprise subscriber base continued to grow in Q3 with particular strength in international markets and we are looking forward to launching new strategies to address additional enterprise and business market segments and drive increased growth in this segment in the coming months.

During the third quarter RIM's product development teams did an excellent job of launching three new BlackBerry smartphones including the BlackBerry Storm 2 with Verizon and Vodafone, the BlackBerry Bold 9700 with multiple carriers in North America and around the world, and the BlackBerry Curve 8530 for CDMA networks.

Storm 2 was announced in October and offers a number of enhancements over the original Storm including improved tactile feedback, increased memory, addition of Wi-Fi, and BlackBerry 5.0 handheld software which delivers a number of enhancements including a faster browser and increased responsiveness.

The BlackBerry Bold 9700 was also launched in Q3 and the response to this product had been exceptional with many reviewers calling it the best BlackBerry ever with praise for its tremendous battery life, sleek look and feel, and new higher resolution screen, and many other feature enhancements.

Towards the end of the quarter we also launched our newest Curve, the Curve 8530 for CDMA networks, and we expect this product to ramp throughout December and into the new year.

Previously launched BlackBerry smartphones such as the Curve 8900, Tour 9630 and Bold 9000 also continue to drive adoption of the BlackBerry platform during Q3.

Focused execution in international markets led to the strongest quarter ever for growth outside of North America with 37% of revenue coming from these markets and approximately 35% of the BlackBerry subscriber base now outside of North America.

With the launch of products such as the BlackBerry Curve 8520, the BlackBerry Bold 9700, and the ongoing popularity of the BlackBerry Bold 9,000 and BlackBerry Curve 8900, we expect this momentum to continue into Q4 and beyond.

While the Curve 8520 and the Bold 9700 have been instrumental in driving strong growth in international markets, we're also seeing a halo effect on other BlackBerry products in these markets once the new products are launched.

International growth is driving strong profitability to our business as these markets typically have gross margins at least as good as their North American counterparts despite different product mix and go to market strategies.

There are now over 530 carriers and distribution partners offering BlackBerry products and services in over 172 countries around the world and there's tremendous potential to gain share in these regions by driving deeper relationships with our carrier partners and continued expansion of indirect channels.

North America also continued to be a significant driver of growth in Q3.

We launched two new products with Verizon during the quarter, the BlackBerry Storm 2 in early November, and the BlackBerry 8530 in late November.

Verizon continued to support BlackBerry product with the buy one/get one promotion, and attractive and placement in the retail stores.

Sprint has had an exceptional quarter with aggressive promotion of the BlackBerry Tour at $149 and Curve 8330 at $49 which was coupled with the launch of a BOGO promotion that led to substantial growth in the Sprint BlackBerry subscriber base in the quarter.

During Q3 T-Mobile launched its first 3G BlackBerry smartphone, the Bold 9700 and supported the Curve 8520 in both direct and indirect channels with online and TV marketing.

The Bold 9700 was also launched with AT&T during the quarter and they also recently launched the BlackBerry 8520.

AT&T is heavily promoting BlackBerry products for the holidays with a special 50% off promotion on BlackBerry smartphones including the Bold 9700 and Curve 8520.

We look forward to continued success from this promotion into the new calendar year.

In Canada, Rogers launched the Bold 9700, the Bold 9000 in white and the Curve 8520 in two colors and has been supporting these products with a holiday marketing campaign.

Edison Bell also launched the Bold 9700 on their new HSPA network and supported the launch with both holiday and enterprise focused media campaign.

Telus also launched the new BlackBerry Storm 2 in time for the holidays.

Heading into Black Friday we also saw strong performance from indirect channels in North America such as Wal-Mart and Best Buy.

These channels continued to grow in terms of their contribution to subscriber account additions and are becoming increasingly important as more and more North American consumers choose to purchase smartphones through these channels.

In the week leading up to the US Thanksgiving, Wal-Mart had tremendous success with promotion that offered $100 Wal-Mart gift card with the purchase of any BlackBerry smartphone.

Online channel included Amazon and Let's Talk also offered aggressive holiday promotion which drove strong sell through over the period.

In Europe Carphone Warehouse introduced several BlackBerry smartphones in multiple colors and the Curve 8520 was the most successful BlackBerry smartphone launched ever through this channel.

We're seeing strong support from our carrier partners in Europe.

Vodafone UK had a strong quarter with launches of Storm 2, Bold 9700 and Curve 8520.

They also ran an extensive marketing program to support the Curve 8520 with the tag line.

"Tweet your heart out," which positioned the new Curve as the ultimate social messaging smartphone.

Also in the UK, ORH had a strong quarter with record BlackBerry sell through driven by aggressive promotions of the Curve 8520 which included a service bundle that offered a free 8520 with a GBP20 postpaid plan and GBP179 prepaid offering.

We had an excellent quarter in France with all carriers in the region delivering strong growth.

These carriers successfully targeted the 15 to 25-year-old market segment with the Curve 8520 and offered cap service pricing packages which were support by marketing and promotional campaigns targeting this segment and highlighting unique features of BlackBerry platform such as BlackBerry Messenger.

There continues to be strong demand for BlackBerry smartphones in the Middle East.

In Saudi Arabia the Curve 8520 was launched across multiple carriers and when coupled with an expanded retail presence and the introduction of prepaid service on Saudi Telecom the BlackBerry subscriber account base in the region grew substantially.

In the United Arab Emirates, Etisalat saw a significant increase in sell through with their launch of the 8520 and the introduction of a BOGO promotion on certain BlackBerry smartphones.

These offers were combined with Etisalat's ongoing free bus for three months offer that was launched last quarter.

Q3 was also an exceptional quarter in South Africa where Vodacom promoted BlackBerry products on TV and other media as well as their retail channels and MTN gave the Curve 8520 center stage in their promotional activities during the quarter.

In Latin America the success of new product launches such as the Curve 8520 and Bold 9700 have moved BlackBerry products to the leadership position in the smartphone market in the region.

This combination of appealing new handsets, tiered pricing structures and strong brand recognition has enabled BlackBerry products to continue to aggressively grow in the market.

Carriers throughout Latin America are offering attractive service packages and supporting BlackBerry smartphones with extensive promotional and marketing support.

For example, in Venezuela Telefonica and Digicel both promoted the launch of the Curve 8520 with integrated marketing campaigns and point-of-sale promotions targeted at both university students and corporate customers.

In Mexico Telcel aggressively launched the 8520 which was supported by a marketing effort that highlighted BlackBerry smartphones in combination with their existing lower tiered pricing packages and promoted the capabilities of BlackBerry Messenger.

Also in the region Nextel International launched the new red 8350i with attractive pricing and best in service plans and PC World in Latin America voted the BlackBerry Bold 9700 the best smartphone for professionals in 2009.

India continued to show strong growth in Q3 building on the momentum of the Curve 8520 launch and the expansion of our distribution relationship with Redington.

Redington now offers several BlackBerry smartphones including the BlackBerry Curve and BlackBerry Storm through the network of retail stores in 45 cities throughout India.

In Q3 we also launched App World in India.

They have a strong pipeline of applications for local developers that would be launched for both enterprise and consumer customers in the region.

Southeast Asia extended the strong momentum from Q2 with the introduction of BlackBerry Curve 8520 in markets including Indonesia, Malaysia, Philippines, Thailand and Singapore.

Many service providers in these countries introduced compelling prepaid and other plans targeted at Gen Y segments with emphasis on social networking and non-email messaging.

Other developments in the region included the launch of App World with free apps along with a growing list of local applications in India and Singapore.

Availability of the first CDMA based BlackBerry smartphone in India, Indonesia with Smart Telecom and the debut of the new BlackBerry Bold 9700 Smartphone in the Indonesian market.

China represents a large new market opportunity for BlackBerry products and services and we're moving forward with our plans to more aggressively target this region.

Last week RIM and China Mobile announced a deepening of our strategic relationship with plans to launch BlackBerry service for individuals and joint collaboration on the development of BlackBerry smartphones that support TD-SCDMA as well as TD-LTE.

We also recently announced plans to work with Digital China to distribute BlackBerry Smartphones in the Chinese market.

Digital China the largest IT service provider in China with regional centers in 19 major cities throughout the nation.

We look forward to growing our presence through this partnership.

Today we are also pleased to announce that RIM and China Telecom have signed an agreement, and we're working closely on plans to offer BlackBerry products and services to China Telecom's customer base in China.

We will provide more details on the relationship and the launch plans in the coming months.

China is an important and strategic market for RIM, and these partnerships will facilitate the broadening of our platform and help drive adoption throughout the different market segments in the region.

To further support our efforts in China, RIM is also exploring opportunities to manufacture and conduct R&D activities in the region.

As we discussed during RIM's Capital Market day in May we're continuing to implement service price tiering strategies to further segment the market for BlackBerry products and services.

For example, Telkomsel Indonesia, in addition to its full biz offering also offers a lower priced version of biz that gives the customer a more limited feature set that includes only IM and texting for the equivalent of about $7 a month.

In Canada Telus also has a similar plan that includes unlimited email and instant messaging or texting, social networking and IM for $15 a month.

In the United States T-Mobile launched the BlackBerry Curve 8520 with a prepaid voice and data option starting at $50.

This is the first time a large North American carrier has offered a prepaid BlackBerry service plan and we're optimistic that more and more carriers will begin to see the benefits of offering limited use tiered pricing plans in the United States.

We plan to continue to pursue tiered pricing opportunities, particularly in the North American market where there has been limited application to date of these types of pricing plans.

During the third quarter RIM launched its new integrated marketing campaign promoting the "love what you do" theme on TV outdoor, newspaper, digital media in North America, the UK, and Germany.

This new campaign is designed to help support the launch of our new products while expanding the brand footprint from a brand for business to a brand for people from all walks of life.

The "love what you do" campaign has driven significant increases in all of our brand perceptual metrics and through our US digital marketing efforts the brand has also been very successful in channeling prospective new BlackBerry customers to our partners' websites.

This campaign will be expanded in Q4 to address key markets in Latin America and Asia.

In early November we held our second annual developer's conference in San Francisco with more than 1,500 attendees.

At the conference we unveiled a new services platform for developers that will enable them to streamline business processes and build highly responsive location aware revenue generating applications for the BlackBerry platform.

Our goal is to deliver deep rich integration of wireless to provide a transformative user experience.

The new services platform offers a number of enhancements including the ability to more easily offer advertising within applications, the ability to offer built in payment capabilities, support for push content, and support for location based services.

We also announced open GLES support, a Java GUI builder and themed studio to help developers generate dynamic user experiences with the ability to rapidly develop rich content for applications.

Additionally, we announced a partnership with Adobe to deliver support for the BlackBerry platform within Adobe's creative suite which will allow developers to use Adobe flash platform technology and Adobe creative sweep content development and authoring tools to easily create rich content and application experiences for the BlackBerry platform.

During Q3 we also announced a new web platform and widget STK that enables a large community of web developers and designers to create BlackBerry applications through the use of common web technologies including JAVAscript, HTML, CSS, and uniquely integrate them with core BlackBerry APIs and data.

These APIs give developers the capability to access the native address book, calendar, location, and network services, graphics, and more to deliver rich, compelling applications.

These web applications will be able to leverage the unique attributes of the BlackBerry platform and can be easily deployed through BlackBerry App World or through other downloadable methods.

These developments also allow us to help our carrier partners participate in value-added services strategies.

The BlackBerry carrier concierge approach will provide our partners with the ability to strengthen their customer relationships by bringing together context, web feeds, and widgets to deliver relevant, timely, content to the customers.

Carriers can customize the experience to deliver rich, contextually aware applications and services on BlackBerry smartphones and potentially leverage these strategies to participate in new revenue streams.

RIM has always had a strategy of constructive alignment with our carrier partners and the pieces are now in place for us to leverage the always on, multi-threaded, push, presence, location, and context capabilities of the BlackBerry platform to provide a compelling and differentiated user experience that enables rather than disintermediates the carrier.

In addition to these developments, we have also made a number of other announcements at the developer conference including plans to deliver a web kit browser during calendar 2010, plans for delivery of an integrated carrier billing system for transaction on BlackBerry smartphones, support for themes in App World, an optimized eBay application for BlackBerry smartphones and many other services and applications that will drive continued enhancement of the user experience.

BlackBerry App World continues to evolve and during the course support for 18 new countries was added along with multi-lingual support including French, Italian, Spanish, German, and Brazilian Portuguese.

The number of application downloads continues to accelerate and more and more BlackBerry smartphones are now shipping with App World preloaded which we expect to drive even greater adoption.

Growth in e-commerce and transaction based applications for the BlackBerry platform is also accelerating.

Over the past several months applications that leveraged the unique capabilities of BlackBerry have been launched by partners including eBay, Amazon, Mastercard Canada, and n-Stream.

The reality of using BlackBerry smartphones to do everyday transactions is emerging as a significant trend and the push base secure environment of the BlackBerry platform is an important competitive differentiator.

Another unique element of the BlackBerry platform that is driving growth in multiple segments is BlackBerry Messenger.

During Q3 we launched BlackBerry Messenger 5.0 with added new features and functionality including an enhanced SMS interface, group functionality, with shared list and calendars, barcode identification to add new users quickly and large file transfer capabilities for different types of shared multi-media.

In November RIM's Board of Directors recently approved a share repurchase program and during the quarter RIM repurchased 12.3 million common shares for a total value of $775 million at an average price of $63.

These repurchased shares were canceled and while the purchase did not have an impact on EPS during the third quarter, there will be approximately at $0.03 per share positive impact on Q4 diluted EPS.

The guidance outlined in the earnings press release that was issued this afternoon reflects this amount.

Before I turn the call over to Brian, I would like to take this opportunity to say that Mike and I are pleased that Brian has agreed to become RIM's Chief Financial Officer.

Brian joined RIM in 2005 and became chief Accounting Officer in 2007.

In addition, we are also pleased to announce the Keith Pardy who joined RIM in the past year has become RIM's Chief Marketing Officer.

I will now turn the call over to Brian to review Q3 results.

Thank you, Jim.

Revenue for the third quarter ended November 28 was $3.92 billion which was 11% higher than the $3.53 billion reported in the previous quarter and slightly higher than the guidance we provided on the September conference call.

NL devices represented $3.2 billion or 82% of revenue during the quarter, slightly higher than the $2.9 billion or 81% in the previous quarter.

Total devices shipped in the quarter were higher than Q2 at approximately 10.1 million units.

This was higher than our forecast in September primarily due to the success of Curve 8520.

Approximately 9 million new devices were activated in Q3 either for new customers or for replacements and upgrades not including phone only sales.

We estimate that four weeks of channel inventory at the end of Q3 were slightly lower than Q2 and we expect channel inventory in Q4 to be similar to Q3.

Device ASPs in the quarter were approximately $317 in line with guidance.

Service revenue was $567 million or 14% of revenue for the quarter, up $66 million from Q2.

Monthly ARPU was similar to the prior quarter.

Software ) revenue was approximately $67 million or 2% of revenue.

Gross margin for the third quarter was 42.7% in line with the guidance we provided in September.

Operating expense in the quarter was $791 million, up 7% over the comparable Q2 levels.

R&D spending was $242 million or 6% of revenue in the quarter in line with our forecast.

Sales, marketing, and administration expense was approximately $465 million, up approximately 8% over Q2.

Operating expenses included stock-based compensation expense of approximately $16 million.

Investment income in the third quarter was approximately $6 million.

Tax rate for the quarter was approximately 29.4% in line with our forecast.

Net income for the third quarter was $628 million or $1.10 per share diluted.

There was no impact on Q3 earnings per share from the share repurchases completed in the quarter.

Weighted average diluted shares used in the EPS calculation for the quarter were $571 million.

Actual shares outstanding at November 29th were 557 million.

Total options outstanding at November 29th were approximately 9.5 million.

As Jim mentioned during the quarter RIM repurchased 12.3 million shares at an average price of $63.

The share count used to calculate EPS beyond Q3 should be reduced to reflect the cancellation of the repurchased shares.

The total cash, cash equivalents, short-term and long-term investments decreased by approximately $90 million to $2.41 billion at the end of Q3 as compared to $2.5 billion at the end of the previous quarter.

During the quarter RIM generated approximately $1.1 billion in cash from operating activities which was offset primarily by the repurchase of shares totaling $775 million, Capital asset additions of approximately $196 million, intangible asset additions of approximately $143 million.

Excluding the share repurchase RIM would have generated approximately $685 million in cash during Q3.

In Q3 accounts receivable were approximately $2.7 billion and DSOs increased to 63 days from 61 days in the prior quarter primarily due to timing and geographic mix of sales in the quarter.

Inventory on hand was up slightly in Q3 to approximately $613 million versus $573 million in the prior quarter.

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

I will new turn the call over to Edel to discuss our outlook for Q4.

Thanks, Brian.

Before I discuss our outlook for Q4, 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 disclosed in our public filings.

We expect to ship between 10.6 and 11.2 million units in the fourth quarter of fiscal 2010 and for revenue to be in the range of $4.2 billion to $4.4 billion.

This growth is being driven by ongoing strong sell through of BlackBerry products throughout December and into the new year and continued ramping of new products including the Bold 9700 and the Curve 8520 and Curve 8530.

ASP in Q4 is expected to be similar to Q3 at approximately $320.

We are targeting net subscriber account additions for Q4 in the range of 4.4 million to 4.7 million.

We are targeting gross margin for the fourth quarter to be approximately 43.5%.

This is slightly above Q3 levels due to product mix and success of ongoing efforts to reduce bill and materials costs.

As Jim mentioned, markets outside North America typically have similar or better gross margins than those within North America.

It is also important to note that it is not necessarily a directional relationship between ASPs and gross margin percentage.

In fact, in many cases our lower ASP products have higher gross margin percentages than the higher ASP products in the portfolio.

Total operating expenses are expected to increase in Q4 by approximately 8% to 9% from Q3 levels.

We expect R&D to increase by approximately 8% to 9% and sales, marketing and administration expense to increase by approximately 9% to 10%.

In the fourth quarter we expect depreciation and amortization to be approximately $87 million and we expect CapEx to be approximately $275 million.

The primary areas of spending for CapEx continue to be expansion of network infrastructure and R&D facilities.

Investment income is expected to be approximately $6 million in Q4.

We expect the tax rate to be approximately 29% to 30% in Q4, and beyond fiscal 2010 we expect the rate to be lower than this range as budgeted changes in the Canadian corporate tax rate are implemented.

We expect Q4 EPS to be in the range of $1.23 to $1.31 per share diluted.

This reflects the reduction in shares outstanding as a result of the shares repurchased in the third quarter.

I will now turn the call back to Jim.

Thank you, Edel.

We are pleased with the strong financial performance in Q3 and the outlook for the remainder of the fiscal year.

RIM's diversified product portfolio, strong brand, and software and services strategies that enable our carrier and partner ecosystems put us in an excellent position to continue to show strong growth in the coming year.

This concludes our formal comments.

We would like to open the call up for questions.

Please limit yourself to one question per person.

We plan to end the call today by approximately 6 pm.

Would the Operator please come onto handle questions.

Your first question is from the line of Gus Papageorgiou from Scotia Capital.

Please go ahead .

I know you don't usually disclose this but I'm just going to ask this anyway.

In terms of device volume, can you tell us the mix of CDMA devices versus GSM devices?

And also can you tell us which was the most popular selling device in the quarter?

Gus, we don't break that out, and so we're not going to start today.

In terms of the top selling again we don't typically break them out by shipment.

Clearly 8520 was a very successful product for us in the quarter but so was the Bold 9700 and Storm as well as the existing portfolio.

I am not going to be able to break it out for you as to which one was the top seller.

Okay.

Thanks.

Your next question comes from the line of Jeff Kvaal of Barclays Capital.

Please go ahead.

Thanks very much.

I was wonder ing if you folks might delve a little bit into what is underway at Verizon, obviously a pretty heavy promotion from the November quarter, away from you that seems to have come back.

What types of market dynamics are you seeing there and what types of promotional support should we expect going forward, and any comments on your happiness with the Storm 2 trajectory would be super.

Thanks, Jeff.

Clearly Verizon is an important strategic partner and clearly we have had a lot of growth with them in the past year, and also clearly we would like that to continue and extend.

I think the important macro elements that are at play really that, number one, you have read the reports and the proportion of smartphones that are going to be the total handheld market is really crossing 50% right now.

I see that going all the way to 100%.

The only question is the time to getting there and that's something we have said for a while.

So the overall market is growing, and Verizon shares that view for smartphones, and we have a very important place to play in that.

I think what is at play here is you have very differing capabilities.

I think what's at play here is you have very differing capabilities, you have very differing strategies between the different players, and different carriers have different strategies where they engage in that.

We have very special and distinct strategies with Verizon.

We think it creates a lot of opportunity, the space is expanding.

We think the richness of what we avail is clear.

We think the alignment with them is clear.

But the reality of it is there is a lot of turbulence in the ecosystem right now.

There is a lot of turbulence in the channel.

You just see this by the changes in strategies, the extensions in strategies.

There is a very, very small number of material platform players, and it is creating a lot of changes in application strategies.

Some carriers are feeling quite concerned about how they maintain their relevance.

We like to be an agent of that relevance for them, and in trenching it and extending it in a value-added way, but the fact of the matter is there is loss of shifts, and you're going to continue to see that in different geographies, in different carriers, in different platforms, and different applications and strategies.

I would like to think that we represent an element of consistency, of alignment with the carrier, of deep, rich integration.

And all we have done is strategically extend that deep, rich, integration, invest more in that alignment and provide a richer smartphone set, but at the end of the day you can't force love.

But we're doing a lot, and we're looking to do more.

You have to earn it every day, Jeff, and there is no free ride in this.

I don't have a crystal ball.

We have a pretty good sense of what we're doing in the quarter because we're so well into the quarter right now, so we get good confidence of the guidance.

We invest heavily and try to earn these spots and create value and sustain value every day, but things can change.

Certain carriers can really turn up real fast, and others can shift their strategies, and it is a fact of our life.

You can't force love.

But we're consistent in our alignment.

We're consistent in our commitment to their prosperity, and generally they respond positively to that.

Could I ask if your outlook for the fourth quarter includes a decent amount of Valentine's Day promotions as it has in prior years?

You can absolutely be assured that the channel programs are very, very active, and all the channel participants are very, very active, and the services strategies that go with that and the particular types of devices and new services strategies and new promotion strategies is super active.

And there is a lot of extension points we have yet to declare in all of this.

You can absolutely presume that the momentum -- what we saw last year was it carried very well past Christmas and then through January, and then Valentine's really kept it going.

But every year is a new new because we're going into broader, deeper diffusion of the market, and richer sets of services, so it seems to be pleasantly surprising us every year but we're never really quite so sure if it is going to be the same pleasant surprise the next year as it was the past year.

Thank you very much, Jim.

Your next question comes from the line of Maynard Um of UBS.

Please go ahead.

Thanks.

Can you just talk about the $3 to $5 and $10 subscriber fees you're getting for consumer and enterprise subscribers from operators.

And do you think those ranges widen given competition or maybe even volumes as they continue to ramp because there has been some concern out there that you could see some reductions to those rates.

I just also wanted to clarify on your revenue guidance, if I just take the midpoint of your hardware units and the 320 ASP and grow my subscriber revenues, it seems to imply something else is actually going to see a larger uptick,.

Just wondering if my math is right.

Thanks.

Maynard, I think, yes, on the ARPU, let's start there.

We said it was flat in the quarter.

It does move around depending on mix.

We have been talking for some time about offering different tiered pricing strategies to grow the addressable market.

We continue to do that with a lot of our partners around the world and also in North America.

Those bands that we talked about for quite some time, those are still good numbers to work with.

There is times where particularly on the non-enterprise side it is going to be lower than that range, particularly when you start getting into some of the trial introductory BlackBerry plans and those kinds of things.

But for the most part I think the modeling probably are good ones to use for the next little while.

In terms of the revenue guidance midpoint, it should actually work out okay.

Maybe we could take it off line if you're having trouble.

It should work out to the numbers we guided.

Okay.

Thanks.

Your next question is from the line of Jim Suva of Citi Investment Research.

Go ahead, sir.

Thanks very much.

Jim, you talked about you can't force love, and enterprise has clearly loved you guys for an extremely long time.

Are you starting to see any of the competitors such as Apple or Android trying to date some of those enterprise people?

Or how do you look at the competition on the enterprise?

The enterprise, first of all, there is some shifts happening in the enterprise, and there has been some pretty moderate amounts at the lower entry end on this stuff.

But how do I put this?

You're going to see some very, very powerful offerings in both the SMB and with our Alt-N acquisition and in the low end enterprise area, very, very soon, which we think are going to be very, very powerful.

Plus you coupled it with the biz 5.0, the scalability, manageability, and you take the fact that our MVS is really enrichened.

You saw DevCon we had things like the Oracle J Builder Infusion that works with our push widgets.

So now you can just whip off apps because you have such a rich framework, and SAP and Websphere are really gaming up to that, too.

So the richness of that.

Plus the MVS.

That's tracking very well.

I just got the report of the new MVS installations in the chalk media stuff with the enterprise video type stuff.

And that's accelerating.

Quite frankly, we have a very powerful set of extension strategies which our briefings with CIOs has just been absolutely game changing in terms of their ability to manage costs in their whole computing architecture, really leveraging the trusted BlackBerry mobile VPN.

And the fact it can also be on Wi-Fi.

And so I'm seeing very straight forward countering on the low end, knockout SMB plays.

But actually the thing that most gets me out of bed on the B2B is the fact there is a transformation happening in computing architectures where they need more capability but they need to take out costs, and we're the antidote on a re-architected form of corporate enterprises which is pretty easy to evolve from what's installed.

In fact, very easy to evolve.

So I would say the evolution and the B2B, the opportunity addressable market has, I would say, rapidly expanded and strengthened is an understatement.

But a lot of it, elements are in public, some are due to be launched soon.

But in our CIO exchanges, it is hard to overstate the level of enthusiasm because what it does to liberate what they need to do their business in a way that takes down costs, current costs so much, and enables where they want to go, they need to go.

So I actually, though I am really excited about the B2C, I love the B2B because I just have so much history in it and and these are home run strategies.

I would say our competitive position in the B2B is dramatically strengthened in its architectural stuff, but we have a lot of completion of R&D and implementation of the things these guys need.

Briefly, should we think about North America eventually getting back in the growth saddle or should we really think about the growth saddle being driven by international?

Both.

Both.

North America, the level of strategic engagement with the carriers and the developers on the deep, rich integration, because the carrier now concierges the presentation.

They're not this intermediator.

That's the key.

And it is contextualized.

Plus they integrate their building.

They do the defining value add and they just roll in, you run all of these widget based apps that are pushing and multi-threaded in the background, and you do better contextualization, and they control that and they default it and they evolve it.

It is very, very powerful.

They love that in the B2C, and the apps guys love it, too, because of the rich service layers.

And then on the B2B that's ready to go to another level and a lot of that leads out of North America naturally.

But international markets are showing such strength.

But there is a lot of competitive turbulence, so it all rolls up to a nice big number, but there is just so much bobbing and weaving underneath.

Definitely North America is going to keep growing.

It is all growing.

It is subsuming other markets and it's creating value, so we're just happy to be at the subsuming point, obviously.

It is value.

The carriers have to have a key role, and people have new ways to monetize what they do, but you have to have a radio with smart platform capability around it or it gets hard to make it happen.

Thank you and congratulations, Jim.

Your next question comes from the line of Deepak Chopra of Sidoti Capital Markets.

I was wondering, can you provide granularity on the international subscriber additions in the quarter?

I was hoping you could even provide us a number in terms of what was the percentage coming from international regions.

And could you extend that and talk a little about China?

Is that expected to impact numbers in the next three months or when do you think they will start becoming a meaningful partner of your subscriber adds?

We're not going to break out those numbers for you, Deepak, it is not something we typically do.

Jim can talk about China, as he was just over there.

China, we announced the CT deal today, so that's actually really, really good.

Then there is CDMA.

There are three carriers and two are announced, that we partnered with, China Mobile, and CT.

And we're supporting the architectures they want.

We're also putting infrastructure there and manufacturing and R&D and localization and supporting value-added application guides, and sales and channel stuff.

We have a job to do.

We have some enhancements in localizing the product, we've got some new air link stuff to get done in the TD and evolve that.

So we have a lot of work to do, but we're aligned with the interests of users and the carriers and the states.

We're constructive long-term players.

I think we carefully invested there and got to a very good position.

Second half of next year a lot of products and certification that we need and more that you may not expect, and we have to get the WAP support for their Wi-Fi and some other elements of localization to do.

I go over there a lot and I'll keep going.

I feel good about China, and it has to roll in something pretty helpful in the back half of the year next year.

The international stuff is going very, very well.

Asia is kicking in big.

Latin is really kicking in big and Europe is really, really kicking in big, and North America is still going good.

You just hate zero basing the stuff.

The problem is you grow your capabilities as fast as you can but att the end of the day you have to cut it off because you run out of hours in the day.

And so it is that high cutoff threshold of zero basing your capabilities, all the time trying to expand your capabilities thoughtfully.

And it is the hardest part of our job is rationing capacity to expansiveness because everyone can do more and wants more if we can support them the way they want to.

That transition of the cell phone to the smartphone is happening at a power curve right now, and it is just the way it is.

Could you talk about how your ability to manage bandwidth for the carriers, how is that impacting the pricing plans you're seeing coming out of international markets?

How do you think the markets here in North America will evolve?

That's a very good question.

We have been saying this for a couple of years.

It is one of those things where until these guys start hitting the wall, they don't believe you.

And they're having huge problems in Europe.

The problems in Europe are just like you heard of problems in QOS North America.

Usually those are air link capacity issues and sometimes backhaul issues, and backhaul is expensive.

Often it is variable.

There is a price per packet.

But also Shannon's Law is a bit per hertz, and it's is theoretically pretty fixed by physics.

So when you up these bit rates of these apps or you up the bit consumption of the apps or you up the bit rate of the spectrum, it doesn't mean you get a big expansion of capacity.

You get a little bit.

China, sure, the government gives China Mobile 50 meg nationwide for TD.

Well, that's pretty orderly.

But the rest of the world doesn't really work that way, they get little bits here and little bits there.

We're very, very efficient with the networks and we always did it holistically because it made it faster, if you have the packets and you double the battery life.

But now carriers are talking about thresholds of network consumption and base pricing and what's net neutrality versus this kind of stuff.

You can't repurpose spectrum like you can fiber, and so I think Wi-Fi and side loading is going to be their friend.

I think careful management of the network is coming on.

I think the tricky part is the carriers are talking about it, they're upping capacity, but the heavy apps and the big file sharing apps are more than gobbling up capacity as it is being put on, and that gap is widening so I think it is an unsustainable model.

So we're pleased we have grown even though this reckoning hasn't fully reckoned.

Those of you that have known us, we have been preaching this for a while.

We said, you have you to ration your scarce capacity thoughtfully and people said capacity can be expanded infinitely basically and there's no limit to CapEx.

I think the CapEx has become really tough.

I think the limits of capacity have shown themselves.

And if you're careless in throwing capacity, people pay less for it anyway, so it is really a death spiral.

And you throw in disintermediation risks, that's a very, very tough economic to the carrier.

I think strategic services engagement that provides thoughtful use of their network in a high value basis has to the epicenter of a thoughtful carrier strategy.

And we're comfortable where we are, but there is a reckoning going on right now, but I don't think the reality of that is fully distilled yet.

I think they're still digesting its implications because it is a technical economic regulatory intersection which is we can't see a way to resolve it other than what we're trying to advocate.

So this is not just biasing to our position I don't have a better idea other than what China did which is just, this is what we're doing nationwide and everybody line up behind it, but they have more forms of latitude in those kinds of planning than the rest of the world that I have seen.

Thank you, Jim.

Your next question comes from the line of Mike Abramsky of RBC Capital Markets

Jim, you earlier said there is a small number of material smartphone players.

That would suggest maybe you view a shakeout coming given the high level of competitive intensity from maybe obviously into the leaders and the laggards.

How do you see that sorting out and what in your view will differentiate those leaders versus the laggards, particularly in the consumer market?

I think what I said was there is a small number of smartphone platform players.

If I didn't, then I will clarify and say that's what I meant.

We view it that you need the consolidated consumer electronics of an efficient high performance smartphone, and you need a services platform to make this digital services reality thing.

I think that's been proven out by where there has been traction.

And I am not talking feature phones.

I am talking smartphones, and that's that whole high ARPU, high value place to go.

I think it irrefutable it is a very finite number of players.

It is just math right now.

There is a bunch of feature phone guys, but I don't think that's enough.

Some carriers are trying to do creation of semi platform stuff internally.

I think that's a tough game if it is not aligned with a more rich global enhanced platform where they can try it.

I think it is going to come down to how capable is the offering in terms of its richness.

And you can define richness in a bunch of ways.

You can define it in breadth of applications.

You can define it in depth of services capabilities.

You can define it in vertical integration of applications.

It can be defined a bunch of ways and the different strategies are pretty clear.

I think one of the key elements is alignment with the elements that the application ecosystem and the content ecosystem and,most importantly, the carrier platform imperatives is super critical.

I think that's what's going to really shake it out.

But it is a bit of a land grab right now, and it is a pretty finite number of guys, and I don't know what the future holds for the feature phone, per se.

We're pretty focused on the connected services platform with the smartphone, so you're getting into shades of gray definition there.

I don't know.

It is hard to know.

We just know it is going more to smartphones, you need connected services platform to really take advantage of what's there.

BlackBerry Messenger is just exploding, and it is actually becoming the youth thing.

The youth really, really, that's what they wanted.

It's just defined in groups and voice notes and all of that, and a lot of other stuff.

And the new services platforms, some are online, some are coming on soon.

I think you have to go deep and rich and you've got to be efficient and you've got to align with the carriers and the developers and the tools because you can't do it all.

So we're trying to be that enabler and we're trying to price aggressively and align well and innovate well.

We think that's a sweet spot, but I could be wrong.

It seems to be working, and the extension points, and there is a lot of stuff we haven't declared which are going to pleasantly surprise people in terms of elements that is e're just not ready.

So I think we're thinking a few steps ahead on this.

It is hard to see how you will want something without that kind of definition around it because it does a lot of stuff that really makes it nice for you and it makes it good for the carrier and it makes it extensible for the developer, and the content guys aren't threatened.

Constructive alignment is our gig.

I hope we're right.

Then just very briefly, on the same line, what in your view prevents the industry from becoming more commoditized if some of these perhaps less valued players turn to price as a way to try to gain market penetration?

That's always a risk, but I also sit there and say you can also provide value.

We talked about the web kit browser.

Boy, when you can get that rendering with our transcoding and our infrastructure, you would be shocked how fast it is and how it shrinks the network consumption.

The contextualizer is a BBM, the push of that.

The whole services layers, the payments APIs, the add APIs for developers, for carriers, the concierging for the carrier platform, the BAS capabilities, these new SMB things we're doing, the Alt-N with push BlackBerry, the geo coding stuff, the peer to peer APIs, the push APIs, the graphics enhancers, the tools.

And this diversity of smartphones and special designs with carriers and channel programs and branding.

The brand really went up a lot, if you saw the brand reports, and we didn't get in any silly brand fights and that really helped in a good way.

So I don't know, you have to earn your place every day, and every day is busy, and there is more to do than there is time to do.

But you're in a good spot and you have to work every day to hold it and extend.

I see lots of extension points.

What I am trying to say is there is lots of innovation points, so when will the world stop having innovation points?

I don't know.

I can't foresee it right now but it is possible.

People have been talking commodity of this stuff for five years and it has been anything but.

I see the richness and diversity and enabling and complexity currently mushrooming, not rationalizing and shrinking.

But it is possible it could change but I don't see it.

Operator, I think we have time for one more

Your last question comes from the line of Chris Umiastowski of TD Newcrest, please go ahead.

Your line is now open.

Sorry, I was on mute.

Thanks very much for taking the question, guys.

I probably asked you this one for the last question.

When I talk to investors and people in the industry, the biggest question that comes up for me, and I am not sure even how to answer it myself, so I am really interested in your answers, consumer awareness of what makes BlackBerry different.

I think as analysts and investors who follow the Company so closely we all know a lot of the things that make BlackBerry special, but I am wondering how are you making consumers aware of what makes BlackBerry special?

And in particular the advertising that we see, "love what you do," it is very brand oriented as opposed to feature oriented or anything like that, and I am sure you have your reasons for doing it.

I am interested in knowing what you really think is the customer perception out there, what makes BlackBerry different and how that might change over time?

The BlackBerry first of all, the brand stuff has been going off the charts, so in terms of what it has done for brand awareness and purchase intensity, it has been fantastic.

So awareness of what it is and what it represents, that campaign has been a home run.

It has been more than a home run for us, quite frankly.

That's what you want to do.

I think a lot of aspects of BlackBerry is very viral like PBM.

I think the carriers have a lot to say in promoting it, and heroing it, and that's helping a lot.

There is elements where there is a couple, you will enhance, when you go to print, you can go more feature like, and we do that.

When you go web you go more feature like.

So don't just judge in terms of what you see on traditional TV media because there is other forms of media where you bring that out, and there is a couple of ways where we can bring that out more intensely.

It is about representing a set of promises, and I can just tell you in terms of all of the elements of consumer awareness of the value of BlackBerry, that campaign has far exceeded our expectations.

And there is strategic extension points to that that are imminent, and some evolutions, and you're seeing some of it tomorrow, and you will see there is evolutions of that at the right time based on the strategy that you will see late winter.

And we complement it with other forms of media, and you're just going to see there is a whole layering of the advertising branding, ease of discovery, UI on the device, new form factors, new platform extensions, new service layers.

It is pretty interesting right now.

It is pretty multi-dimensional, and it is fun, has a lot of possibilities to it.

I think it is working, quite frankly.

I think the consumer side is growing real fast, and the brand has gone real fast, and the purchase intensity has gone up way high.

It's not like this isn't a competitive space with big companies trying to do well and yet we're number one.

So there must be something right there, and it is not in the environment of the heaviest B2B spending ever so one could make a good case not what are we doing for consumer awareness, it would be what was it you did right for consumer awareness because it is showing up in the results, in the numbers.

But we have lots more to do, and there is layers upon layers unfolding here.

But it's a fair question.

We got lots more to do.

I think what we're doing is designed to do that job and seems to be doing that job, but it is a work in progress, not a job done.

I just can't give a lot more detail because there are elements that are confidential in this

Jim, I appreciate the answers.

that's really detailed.

Thanks a lot

Operator, that's all the time we have today.

In closing I would like to remind everyone there is a replay of this call available at 416-640-1917, pass code 4189541-pound or you can listen to the call which has been recorded and it's available in the investor event section of our website at RIM.com.

Thank you.

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

Thank you for participating.

You may now disconnect your lines.