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Research In Motion Limited (RIMM)

January 23, 2012 8:00 am ET

Executives

Unknown Executive -

Barbara G. Stymiest - Independent Board Chair and Chairman of Audit and Risk Management Committee

Thorsten Heins -

Analysts

Jeffrey T. Kvaal - Barclays Capital, Research Division

Richard Kramer - Arete Research Services LLP

Gus Papageorgiou - Scotiabank Global Banking and Market, Research Division

Tavis C. McCourt - Morgan Keegan & Company, Inc., Research Division

Jim Suva - Citigroup Inc, Research Division

Operator

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Research in Motion Names Thorsten Heins President and Chief Executive Officer Conference Call. [Operator Instructions] I would like to remind everyone that this conference call is being recorded today, Monday, January 23, 2012, at 8:00 a.m. Eastern time.

I'll now turn the conference over to Paul Carpino [ph], Vice President of Investor Relations. Please go ahead, sir.

Unknown Executive

Great. Thank you, John, and thank you, everyone, for joining us today. By now, all of you should have seen today's news that the board has unanimously named Thorsten Heins as President and Chief Executive Officer and he has also been appointed to RIM's board. We also announced that Mike Lazaridis, former Co-Chair and Co-CEO, has been appointed as Vice Chair of the Board and Chair of the board's new Innovation Committee. Jim Balsillie, former Co-chair and Co-CEO, is also remaining a Director of the board. The board also announced that Barbara Stymiest has been named as Independent Board Chair, and Prem Watsa has been named as Independent Director of the Board.

On our call this morning is Thorsten Heins, President and Chief Executive Officer; Barbara Stymiest, Board Chair; and Edel Ebbs, Senior Vice President, Investor Relations. This call will last approximately 30 minutes. To ensure we get as many questions as possible, we will take one question per individual.

I would also like to remind everyone that this is not a financial update call, so we will not be taking any questions related to our guidance or financial results.

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 RIM's plans, strategies and expectations going forward, RIM's prospects and potential, role of RIM's vice chair and its new Innovation Committee, RIM's intention to recruit a new chief marketing officer, the anticipated benefit of the company's efforts and other statements that are not of a historical nature. We will indicate forward-looking statements by using words such as expect, plan, anticipate, estimate, may, will, should, forecast, intend, believe, continue, prospects, potential, opportunity, vision 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 the risk factors set forth in the Risk Factors and Cautionary Note regarding forward-looking statements section of 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 Barbara for some opening remarks.

Barbara G. Stymiest

Thank you, Paul, and good morning. First, I want to express the board's respect and admiration to Mike and Jim for the steps they're taking to further position RIM for the future. Mike and Jim created RIM, they nurtured it and in the process they not only built an iconic brand but literally pioneered the smartphone industry. Under their leadership, RIM changed the way people communicate. It is still today one of the leading brands in the world. When Mike and Jim came to the board with the idea that it was time to implement the succession plan that they had previously submitted and appoint Thorsten as CEO, the board agreed to consider the proposal. And following its due diligence and based on its experience with Thorsten in increasing senior executive roles at the company over the past few years, the board unanimously agreed with their recommendation that Thorsten was the right person to lead RIM and to assume the role of President and CEO at this time.

During Thorsten's tenure with RIM, he has served as Senior Vice President for Handheld Business Units and Hardware Engineering, Chief Operating Officer for Product Engineering and Hardware and Chief Operating Officer for Product and Sales. In each role, he has done an outstanding job and made significant contributions to the company. The board unanimously believes that Thorsten possesses the capabilities, the organizational skills and he has the passion and vision to effectively assume the reins from Mike and Jim. We are delighted that Mike and Jim will continue to serve RIM in their roles as board members and that Mike will serve as Vice Chair and Chair of the new Innovation Committee and we plan to continue to draw upon their strategic counsel and extensive experience and relationships.

We're also very pleased to welcome Prem Watsa as a new Independent Director. Prem is one of Canada's most respected business executives and we expect to benefit enormously from his counsel and business acumen.

The board is very excited about RIM's prospects for the future and we are confident the company will continue to flourish in the mobile communications industry under Thorsten's leadership.

Thorsten, over to you.

Thorsten Heins

Yes, thanks, Barbara. And first, let me express my gratitude to Mike, Jim and the board for their confidence and trust. And I pledge to do everything possible to exceed the expectations of all of the company's shareholders.

This is an amazing company with a passionate and loyal global customer base. And I believe that RIM truly has tremendous potential and we are absolutely committed to deliver on this opportunity.

When I came to RIM 4 years ago, it was because we are not just a device company, we are an integrated solution company. We're not just a service company, we run a network, we run services and we run devices and we can create formidable integrated solutions. This is a very unique position in the wireless landscape.

RIM has earned its reputation by focusing relentlessly on the customer and delivering unique mobile communication solutions. We intend to build on this heritage, to expand BlackBerry's leadership position. We have an exceptional foundation to build upon. We have a strong and loyal customer base, now with over 75 million people using our BlackBerry services every day. And we have 55 million customers embracing our unique BlackBerry social experience of BlackBerry Messenger. And we have a strong balance sheet, a sound financial foundation with approximately $1.5 billion in cash at the end of last quarter.

RIM has undergone and is still completing a major transformation, having gone quickly over the last 10 years from annual revenues of $294 million to just under $20 billion. Like all companies that scale and that grow globally, you hit a few bumps in the road here and there, but it is key that we learn from those mistakes. So without question, we are stronger today because of what we have been going through and I'm so proud of our teams for the progressions we have made.

Mike and Jim are visionaries who not only created an iconic company, but also pioneered the development of the smartphone industry. And 18 months ago, Mike and Jim took a bold step when we had to make a major decision around our future platform and where to go, and they purchased QNX to shepherd the transformation of the BlackBerry platform for the next decade. Right now with PlayBook 2.0 coming out in February, we see and we are more confident than ever that this was the right path to go.

BlackBerry 7 has been well received. We had the biggest launch ever in RIM's history, bringing 7 products globally to the market and our teams executed tremendously well on this and they deserve all of my gratitude.

We are very excited about PlayBook 2.0 and BlackBerry 10. The reception of PlayBook 2.0 and BlackBerry 7.1 at this year's Consumer Electronics Show was very encouraging for us and underscored the importance of our decision to go for a new platform. My focus going forward is for RIM to continue to develop and market customer-focused products and services that will carry the company well into the next decade. We will accomplish this by drawing upon our talented hardware and software development teams, implementing processes and controls to ensure effective execution of our strategies and building on our unique competitive advantages.

And we will also bring in new talent as required. We are in the process of recruiting a new chief marketing officer to work closely with our product and sales team to deliver the most compelling products and services.

My approach is to empower employees to take appropriate risks, make decisions and to be accountable for their actions. I will make sure they have the tools and resources they need to be successful. When they succeed as individuals, we succeed as a company.

Going forward, we will continue to focus both on short-term and long-term growth, strategic planning and customer- and market-based product approach and flawless execution. We have terrific products, outstanding people and a very exciting future, and I'm both honored and thrilled to have been chosen for this job.

That concludes our formal remarks. And I'd now like to ask the operator to open the call, and Barbara and I would be happy to answer any questions you may have.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question today comes Jeff Kvaal with Barclays Capital.

Jeffrey T. Kvaal - Barclays Capital, Research Division

This is Jeff. Thorsten, I'm wondering could you help us a bit go into detail on which processes you think might be best for you to take a look at in your first 100 days or so? What are some of the changes that you think are important for RIM to be making in order to position yourself well for the next decade as you suggest?

Thorsten Heins

Yes, happy to answer that question. I already, in the opening remarks, hinted towards our market communication. For sure, we have a very, very strong technology heritage, we have a strong customer base and enterprise and we're growing really strong globally in Asia Pac, Middle East, Africa, Europe. The U.S. is a bit different. The U.S., we were very, very successful coming from the core enterprise business. And in the public opinion, this is still where we're skewed to. So one process we really will put a lot of energy and effort in is really our market communication. We need to be more marketing-driven, we need to be more consumer-oriented because this is where a lot of our growth is coming from. That is essentially in the U.S. you see the first event that we're on, this was the Be Bold campaign that we just recently launched at New Year's Eve at the ABC show. And we need to engage more with the consumer base with all these 75 million and more customers out there that love BlackBerry, and we need to take them with us on the journey of exploring BlackBerry in for the future. So that is one, the entire marketing communication and go-to-market plan. The other element that I want to look in is more in the execution area. We've done a lot since I assumed responsibility, I think it was 10 months ago, for product and sales, which in RIM's definition, is hardware, software and services and the sales forces. And we have to scale these processes further. Resource planning, rigid project management, rigid program management and also the process of defining a product and then executing on a product. You got to understand that RIM has gone through a tremendous growth phase and scaled really tremendously fast and successful, I would say. But we innovated while we were developing the product, and that needs to stop, right? We need to innovate, don't get me wrong, but we will do this now with much more emphasis on prototyping, concepting. We have great teams that can try stuff out. But when we say a product is defined and a product is a product, execution has to be really, really precise and decisively and no churn in existing development programs. And I think if we execute on these 2 things, we will be doing even better in the future and you will see way better execution on RIM's side. You never are perfect, you always strive to get to perfection, but I'm pretty sure that this will really help us a lot and help our customer base a lot.

Operator

Your next question today comes from Richard Kramer with Arete Research.

Richard Kramer - Arete Research Services LLP

I just want to get your thoughts on the low end of the market. It seems that a lot of RIM's success in Asia and Europe has come from products like the 8520 scaling into very low price points. And what are your thoughts about RIM moving further down the price tier to build on the market share you gained in markets like Indonesia and India and others in APAC? Can you give us a sense of how you just tackle that low-end markets? And then maybe if you could give some thoughts on the software transition that RIM's undergoing. What more do you think needs to be done to make sure that you get this and complete ecosystem out in time for next autumn as planned?

Thorsten Heins

Okay. Thanks for your questions, Richard. So to go to the, you say low end, I call it the entry-level smartphone segment, because we have clearly defined where we play and we play in the smartphone segment. That said, we're not going to go feature phone, we're not going to go further down in terms of feature-setting capacities of phones. It's important to understand that there are still a lot of feature phone users out there, kind of different from market-to-market, but 50% to 60%, so there's a huge potential there that we can move from feature phones to smartphones. Now do people jump from feature phones immediately to the top-notch, high-end device? Probably not because users actually don't like to be disrupted in their user experience. So you need to give them a good landing point that allows them to really experience the smartphone capabilities on a BlackBerry. But then, they're in that segment and part of our strategy is to be really strong on on-boarding, that's how we call it internally, so really be a major player in the entry level segment because we want to create our installed base. And the number that -- of users of BlackBerry services going from 50 million to 75 million, I think, speaks for itself. And yes, you're right, in some countries the growth comes exactly from that segment. So the second step will be, Richard, to once we have successfully proven to those customers that BlackBerry is a great value proposition, we want to take them on to a journey to explore more and more powerful smartphones and then go to BlackBerry 10 and move into the domain and the sphere of mobile computing. And so that's the strategy behind, we call, the BlackBerry-for-Everyone strategy. On the other elements, what more needs to get done? I talked about BlackBerry 10 being a whole new platform. BlackBerry 10 is not just a new OS. This has to be really, really clear. It's a whole new architecture, starts actually from hardware, OS, drivers, run times, applications, and to your point, also totally, newly developed environment, right? So HDMI-ed, Native, AIR, Flash, Cascade and we get fantastic feedback from developers at our developer conference in the U.S. and we will go Asia Pac and Europe in the next 2 weeks. So that work is underway so we are preparing for an upgrade of our ecosystem towards BlackBerry 10. And just to explain it also to you guys out there is on PlayBook 2.0 and BlackBerry 10, we'll also have an Android player on it, so we are also covering the long tail of applications so people that just want the choice of, I don't know, 500,000 apps or whatever that's out there, they can select from that. So we are very proud of that element in our product portfolio and I think this will also kind of level base the whole discussion around apps and how many apps you have. So very excited about this and I think that is a very, very strong element of our strategy.

Operator

Your next question comes from Gus Papageorgiou with Scotia Capital.

Gus Papageorgiou - Scotiabank Global Banking and Market, Research Division

I just wanted to pick up from your last comment there. I spoke to you last year at one of RIM's conferences. At the time, you said that you thought that QNX would prove out to be the most important tech acquisition of the decade. So I'm just wondering, what is it in QNX that gives you confidence that it -- you're going to be successful in transitioning to a new platform, that it's going to be successful in the market? I guess the criticism would be that i t's kind of a me-too OS that's just kind of catching up to where the leaders are. So what is it about QNX and BB10 that you think is going to differentiate the platform and convince users, especially in the United States, to come back to BlackBerry?

Thorsten Heins

Okay. So thanks for your question. First, let me address QNX a little bit here because there seems to be, I don't know, a misunderstanding. QNX is not developing an OS. QNX is an existing OS. And it's actually used in various different industries, power grid. Do you know that the Internet, all the core routers in the Internet with 32 multiprocessors actually run the QNX OS as their operating system? So it is a proven OS. And the beauty about the QNX OS is it's a microkernel OS. It's a multithreaded OS. So what that allows us to do, and this is what you see on PlayBook 2.0, it allows true multitasking. I mean, true multitasking. You can have many applications open at the same time and you can really run them real time in parallel. Plus all the other elements that are important for our enterprise customers like security, POSIX certified, government certified. So OS -- the QNX OS is not in the catch-up rate, it is an extremely competitive OS as of today. And I think, frankly, I give big kudos to Mike Lazaridis for acquiring QNX and understanding how valuable this was. We did not take the time to develop our own OS or to go for a third-party system, we worked with the teams from QNX. It's a fantastic integration of both companies. And I have all confidence in that OS, that is only a part of the new BlackBerry architecture, that this will carry us to where we need to be. And we see it, I mean -- and you see it in automotive. QNX won the first award at CES for car integration. And that gives you another hint what we can do with BlackBerry 10. We can really go vertical. That's what QNX is already today. As I've said, power grids, cars, automotive. And we can select based on BlackBerry 10 and QNX into which vertical industries do we want to go. PlayBook is not a tablet only. PlayBook is the first instantiation of a mobile computing platform and that will allow us to address other business segments, other markets so we are very, very excited about it and I'm enthusiastic about it.

Operator

Your next question comes from Tavis McCourt with Morgan Keegan.

Tavis C. McCourt - Morgan Keegan & Company, Inc., Research Division

I wonder if you could comment on the last RIM investor call, Jim talked about a lot of different strategic options that RIM was looking at, at the time. How much of that still exists under your leadership? Should we view any change to kind of the strategic options that you -- that were talked about on the last call?

Thorsten Heins

Not entirely clear what you're talking about. I assume it's about the licensing comments that were made, is that correct?

Tavis C. McCourt - Morgan Keegan & Company, Inc., Research Division

Correct, yes, correct.

Thorsten Heins

Yes. So my view on RIM is a very, very clear view. And guys, I've been in device-only businesses before and I know what it means to be in that segment. And frankly, if you're value proposition is the device alone, it is a cutthroat price-and-cost business. So my view on RIM is very, very clear: We are strong because we have an integrated solution, we are vertical, we have our network, we have our services, we have our enterprise service out there with more than 250,000 enterprises connected to it and we have fantastic devices and a fantastic ecosystem that we're building. I want to build on that. I will not in any way split this up or separate this into different businesses. Now on the licensing piece, I mean if -- I'm absolutely confident that BlackBerry 10 will prove itself as a platform. If there is request coming towards Research in Motion to talk about licensing that platform to other companies, I will entertain those discussions. I will listen. I will assess the business opportunity for RIM. And if it makes sense strategically and tactically to go down that path and then I will make the decision together with the board. But it's not my focus one. My focus one is strengthening RIM's business based on that integrated approach because there's not many companies out there that have this. And one is the other food company that has it and one is us, and I want to leverage this. This is a very, very strong asset to have. A former colleague of mine once said, "Thorsten, you're successful in business when you are in the neuro system of your customers." And you can translate this into you're successful when you have the biggest value contribution to your customers' business. And this is where BlackBerry is and this is where I want to stay, and this is what I want to build upon.

Operator

Your next question comes from Todd Coupland with CIBC.

Thorsten Heins

What's your time frame for adding the marketing person? And what would you like to see their attributes to be?

Thorsten Heins

So I want this ASAP, that's for sure, because I think that is a element that we need to strengthen and that we need to build. Core element of that function is going to be all of the communication to our markets, to RIM's customer base. But it's also to listen. It's not just to communicate one way. This is 2 -- this is bidirectional, right? So I want us to have a bit more of an ear towards the consumer market, understand trends. And not just do what the street is telling you. This is not what I'm talking about. But I feel we need to be closer to, specifically, our consumer user space. We're well-positioned with the enterprises and the CIOs. We have great communication channels with them. However, specifically in the U.S., I think we need to do a better job there and I expect that person to take it a few notches up and that's what we will be doing.

Operator

Your next question comes from Jim Suva with Citi.

Jim Suva - Citigroup Inc, Research Division

The question I have is you've been at RIM since December of '07, so that's been just over 3 years and you were a part of the decision-making in the past few years. So now that you're at the top as CEO, what couldn't you do previously that now you can do as CEO? Kind of what was holding you back or looking back, what now do you have the ability to do that you couldn't before?

Thorsten Heins

You said correctly that I was starting in December 2007 and I joined the company at that point in time that was growing, but it was still acting as a startup, which is important because you want to keep that innovation spirit and drive and energy. But startup processes and environments don't scale. I mean this is every company that succeeded from startup to becoming a really successful global player goes through that phase. I've seen this myself and in other businesses as well. So it was -- I had the opportunity to learn about RIM for 4 years. I needed to understand how the culture works because this is a very, very important asset. So I don't think that there is some drastic change needed. We are evolving. We are evolving our strategy. We are evolving our tactics, our processes. I don't feel that I was held back in any way to do what I needed to do. But when I talked about -- I'm a German, so I like this word, the process discipline. I think that is something we need to get better at. But this is not a seismic change. This is scaling the company further. And we will continue to scale this company up. So one other element is, as I talked about it, we are and we will always be very, very technology-driven because that is the heart of any high-tech company. I want us to focus more on consumer, on consumer marketing. And I have all the support from the board in going down that path. And I think that is a major change for us and that's part of my leadership activities that I'll take on the next months.

Unknown Executive

Thanks, Jim. And sorry, that's -- we're going to have to conclude our call here today. But if there's any questions, please feel free to call anyone on the Investor Relations team and we will be -- you'll probably see us over the next several weeks and we'll then perhaps get some more discussion in as well. Thank you.

Thorsten Heins

Thank you.

Barbara G. Stymiest

Thank you.

Operator

Ladies and gentlemen, that does conclude the conference call for today. Thank you for your participation. You may now disconnect your lines.

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