Research In Motion Limited F1Q11 (Qtr End 05/29/2010) Earnings Call Transcript

Research In Motion Limited F1Q11 (Qtr End 05/29/2010) Earnings Call Transcript
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Research In Motion Limited (RIMM)

F1Q11 (Qtr End 05/29/2010) Earnings Call

June 24, 2010 5:00 p.m. ET


Edel Ebbs - VP, IR

Jim Balsillie - Co-CEO

Brian Bidulka - CFO


Ittai Kidron - Oppenheimer

Maynard Um - UBS Securities

Ehud Gelblum - Morgan Stanley

Matt Thornton - Avian Securities

Jeff Kvaal - Barclays Capital

Jim Suva - Citi

Vivek Arya - Bank of America Merrill Lynch

Gus Papageorgiou - Scotia Capital

Mike Abramsky - RBC Capital Markets



Welcome to the Research In Motion first quarter fiscal 2011 results conference call. (Operator Instructions)

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

Edel Ebbs

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Thank you. Welcome to RIM's fiscal 2011 first quarter results conference call. With me on the call today is Jim Balsillie, Co-CEO and Brian Bidulka, CFO. After I read the required cautionary note regarding forward-looking statements, Jim will provide a business and strategic update. Brian will then review the first quarter results, and I'll discuss our outlook for the second quarter of fiscal 2011. 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 webcast. A replay of the webcast will also be available on the website. We plan to wrap up the call before 6:00 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 product shipments, revenue, gross margin, operating expenses, CapEx, depreciation and amortization, earnings and ASPs for Q2 fiscal 2011 and beyond, our expectations regarding RIM's near and long-term tax rates as well as the effect of changes to Canadian tax laws, our estimates of the number of net subscriber account additions and other non-financial estimates, 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 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 our intellectual property rights, our ability to enhance our current products and develop new products and services, risks relating to competition, our reliance on carrier partners, third-party manufacturers, third-party network developers and suppliers, risks relating to network disruptions and other business interruptions, our ability to manage our production facility, security risks, risks associated with our international operations, our ability to manage growth 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'll now turn the call over to Jim.

Jim Balsillie

Thank you, Edel. We're pleased to be kicking off fiscal 2011 with a strong footing with unit shipments for the first quarter of approximately 11.2 million and the shipment of RIM 100 millionth BlackBerry smartphone.

Earnings per share in the quarter were at the high end of our expectations and grew more than 40% over adjusted earnings per share in the same quarter last year. We added 4.9 million net new BlackBerry subscriber accounts for a subscriber base of approximately 46 million at the end of the quarter. Unit shipments in Q1 were impacted by later-than-anticipated shipment of certain new products scheduled for the latter part of the quarter.

Revenue for Q1 was at the low end of the range we forecasted in March, primarily due to the slightly lower than expected shipments and the resulting product mix that favored lower ASP products. Product mix also led to the higher-than-expected gross margin in the quarter. Channel inventories remained relatively flat in Q1 and we're not anticipating a significant increase in weeks of channel inventory in Q2.

BlackBerry smartphones are available through over 550 carrier and distribution partners in over 175 countries, and international markets continue to be a strong driver of growth. We saw ongoing success in our efforts to increase BlackBerry penetration in enterprise, consumer and prepaid markets around the world during the first quarter.

Net subscriber account additions outside North America were particularly strong in Q1 and approximately 40% of the subscriber account base is now outside of North America. We are expecting second quarter BlackBerry smartphone shipments in the range of 11.6 million to 12.1 million and to add between 4.9 million and 5.2 million in net new subscriber accounts.

Forecasting the second quarter is challenging given that we're planning two significant new product introductions that will likely bridge the end of Q2 into Q3. The specific time of these launches will have an impact on how much of these products shipped in Q2 versus Q3. These products also have higher ASPs, so a shift in the percentage of these products in the mix for Q2 also has a meaningful impact on our revenue and earnings forecast.

We have an exciting line of products, services and promotions expected to be introduced between now and the end of the fiscal year, and we believe that these together with the introduction of new tiered service pricing in the U.S. and around the world are setting the stage for an acceleration of growth in Q3 and beyond.

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