BlackBerry's (BBRY) CEO John Chen Hosts 2016 Annual General Meeting (Transcript)

| About: BlackBerry Ltd. (BBRY)

BlackBerry Limited (NASDAQ:BBRY)

2016 Annual General Meeting

June 22, 2016 10:00 PM ET

Executives

John Chen - CEO

Phil Kurtz - Deputy General Counsel & Assistant Corporate Secretary

Analysts

John Chen

Good morning everybody and welcome to our annual meeting. This is John Chen, the Chief Executive Officer of BlackBerry and Executive Chair of the Board of Directors. On behalf of the Board and the management, it is my pleasure to welcome you all to our company’s Annual and Special Meeting of the shareholders.

Before we begin, I would like to introduce you the member of the company’s Board of Director who are here with us today; Mike Daniels; Tim Dattels; Dick Lynch; Laurie Smaldone Alsup; Barbara Stymiest; Prem Watsa; and our newest Board member, Wayne Wouters.

In addition to the Board, we also have members of the company’s senior leadership team in attendance and with me on stage here is Phil Kurtz, the Deputy General Counsel and Assistant Corporate Secretary of the company. The formal part of the meeting will be chaired by me following the completion of the formal business for which the meeting was called. I will present an update on BlackBerry business and there will be opportunity for shareholders to ask questions.

And with this now I’d like to call this meeting to order and as chair of the meeting I will ask Phil Kurtz to act as Secretary of the meeting. Phil will now go over the voting procedures and certain other items of the business. Phil?

Phil Kurtz

Mr. Gould [ph] there will an opportunity for questions in due course, if you can hold your comments please, welcome back. Thank you John, I’m registering for the meeting today. All registered shareholders and proxy holders with voting rights for this meeting should have received a handheld electronic voting device. These devices which we have used previously enable us to avoid the marking, collecting and counting associated with using paper ballots. These devices speed up the voting process and enable us to provide you with the results of the vote much more quickly. If you’ve voted in advance by proxy, your vote would already have been compiled by the scrutinizers and you do not need to vote again using the handheld device, unless you wish to change the vote or instructions you previously submitted.

If you have the handheld voting device, please make sure that the arrows at the bottom of the smartcard are facing you and the card is inserted up to the red line. A welcome message will appear when the card is ready and inserted correctly. Should you need assistance please ask one of our representatives. When voting using the handheld voting device you will be asked after each proposal is put to the meeting to cast your vote by pressing one of the buttons numbered 1, 2 or 3 on your keypad to indicate your voting preference.

When the poll opens, the handset will display the voting options. Once you’ve made your selection, the word received will appear on the screen of your hand held device to indicate that your vote has been counted. Should you wish to change your vote simply press again on the corrected button. The last button that you press prior to the vote closing will be the vote accepted by the system. I'll provide further instructions before we do the vote.

For this meeting Pina Pacifico and Margaret Barden of Computershare Investor Services will act as scrutineers. I confirm that we have received the declaration of Computershare Investor Services confirming that the notice of this meeting was properly given to all of the shareholders entitled to receive it and to the directors and the auditors and that the notice was accompanied by the management information circular and [formal] [ph] proxy.

In order to facilitate the proceedings we have prearranged with certain people attending this meeting to make and to second certain motions. As all shareholders should have previously received a copy of the notice of meeting I’ve asked for a motion to dispense with the reading of the notice.

All in favor? Any opposed? Recognized we have proxies Mr. Gould, that carry the motion.

The scrutineers report stating that a quorum of shareholders is present has been tabled. The report shows that there are at least seven shareholders or proxy holders present at this meeting representing in person or by proxy 326,062,061 shares being 62.4% of the total of 522,512,216 outstanding shares of the company. I therefore declare this annual and special meeting of shareholders to be regularly called and properly constituted for the transaction of business.

The first item of business is presentation of the financial statements of the company for the fiscal year ended February 29, 2016. These include consolidated balance statements as at February 29, 2016 and February 28, 2015 and the related consolidated statements of shareholders equity, operations and cash flows together with the auditor's report. As copies of these materials were mailed to all shareholders who requested a copy I would ask someone to move that the reading of the materials be dispensed with.

All in favor? Any opposed? Recognize Mr. Gould, motion is carried with the proxies held by Mr. Chen and Mr. Watsa.

We'll now proceed with the election of directors for the ensuing year. As determined by the Board the number of directors to be elected today is eight. As set forth in our management information circular each of the following persons has been nominated for the position of director of the company to hold office for the ensuing year and each has agreed to serve as director if elected, John Chen, Michael Daniels, Timothy Dattels, Richard Lynch, Laurie Smaldone Alsup, Barbara Stymiest, Prem Watsa and Wayne Wouters.

Bylaw number [84] [ph] of the company sets out a procedure requiring shareholders to provide advanced notice to the company if they wish to nominate any person for election as director of the company. The company has not received notice from any shareholder intending to nominate any person for director at this meeting. Accordingly we'll now proceed with the vote for the election of director.

As noted earlier we'll vote on the election as on all matters today through the use of the electronic ballots. If you're a registered shareholder or proxy holder and have not yet voted your shares by proxy you'll need the hand held device together with your smart card.

Now it’s time to vote for each of the director nominees in turn. The names will appear on the screen behind me. Each time you see the name of the nominee highlighted on the screen you'll have to vote by pressing either 1 to vote for or 3 to withhold your vote. You may change your vote by selecting a new choice while the vote is open and if you represent more than one account please be reminded that all of your accounts have been linked to the smart card loaded on your device and you're voting on behalf of all the accounts you're representing.

With that the vote is now open for Mr. Chen. Few seconds especially for the first one, get the fingers warmed up. And the vote is now closed.

The vote is now open for Mr. Daniels. Thank you. The vote is now closed.

The vote is now open for Mr. Dattels. The vote is now closed.

The vote is now open for Mr. Lynch. Vote is now closed.

The vote is now open for Dr. Smaldone Alsup. The vote is now closed.

The vote is now open for Ms. Stymiest. The vote is now closed.

The vote is open for Mr. Watsa now. The vote is now closed.

And the vote is now open for Mr. Wouters. The vote is now closed.

We'll show the results of this vote at the end of the formal part of the meeting.

The next item of business is the re-appointment of the independent auditors of the company. Will someone please move that Ernst and Young LLP be reappointed as the independent auditors of the company until the next annual meeting of shareholders and that the Board of Directors of the company be authorized to fix the auditor's remuneration.

Thank you.

With that the vote is now open. Please vote now pressing 1 to vote for or 3 to withhold your vote. Thank you, vote is now closed. Again we'll show the results of this vote on the screen behind me at the end of the formal part.

The next item of business is the approval of unallocated entitlements under the company's Equity Incentive Plan. The number of common shares reserved for issuance under the company's Equity Incentive Plan can be replenished in certain circumstances. Such as when outstanding equity awards are forfeited or cancelled before they're vested. The replenishment features of the company's plan are described in detail in our management information circular. Because of these features the company’s plan does not have a fixed maximum number of shares issuable under it and it's considered to be an evergreen plan.

Under Toronto Stock Exchange rules, unallocated equity awards, being awards that remain available for grant under evergreen plans are subject to shareholder approval every three years. Shareholders initially approved our equity incentive plan three years ago in 2013. Would someone please move that the resolution to approve the unallocated awards under our plan as set out in the management information circular be adopted. If the sound could be tuned up slightly in the booths please. I'll try to stay closer here, but I have another mike.

Unidentified Company Representative

I shall move [ph].

Unidentified Company Representative

I second the motion.

Phil Kurtz

Thank you. With that the vote is now open. Please vote now pressing 1 to vote for or 2 to vote against, conscious of the feedback. Thank you. The vote is now closed. We'll show those results later as well.

And the final item of voting business is the approval of the non-binding advisory resolution on executive compensation. The resolution provides that on an advisory basis and without diminishing the role and responsibilities of the Board of Directors, shareholders accept the approach to executive compensation disclosed in our management information circular. A copy of the Company’s Say on Pay policy is set out in Schedule A to the circular. Would someone please move that the resolution be adopted?

Unidentified Company Representative

I will move.

Unidentified Company Representative

I second the move.

Phil Kurtz

Thank you.

Unidentified Company Representative

We should have some discussion.

Phil Kurtz

Again Mr. [Gould] [ph] we have a Q&A session where you’ll have an opportunity.

Unidentified Company Representative

No, I want to have some discussion on what we vote on. that’s in order.

Phil Kurtz

It's not in order. Do you have a proposal to bring forth because there's no proposal before the meeting.

Unidentified Company Representative

[Indiscernible] executive compensation, I want to know how these people are taking so much money and just sucking and bleeding this company dry. I want to know why, I want to hear them talk about this.

Phil Kurtz

Our executive compensation philosophy is set out in great detail sir in our proxy circular.

Unidentified Company Representative

When I last attended here you agreed to look at the ISO 26000 as a matter of corporate [indiscernible] behavior and you are not demonstrating this and I would like [indiscernible] hear it now unless [indiscernible] doesn't want to have this discussion. I will stand here and ask everybody if you all want to hear a discussion on compensation of these executives that are taking hundreds of millions of dollars out of the company that they’re running into the ground.

Is there anyone that wants to hear it discussed, can I see hands? If I see no hands I will shut up. I see a few hands, see a few more hands. I think we -- can we -- do you want to have a vote on whether or not we should talk about it.

I want to hear what they’re doing with the money they’re taking.

Phil Kurtz

Mr. [Gould] [ph], if I can remind you please. We remain in the formal part of the meeting. The voting procedures have been set out plainly in the circular and that is the part that we were doing now. The time for discussion in this meeting is coming later. If you have concerns about executive compensation as a shareholder you're free to raise them with the Company in-between meetings, we have an Investor Relations department, we have plenty of opportunities for you to make your views known.

Unidentified Company Representative

No because you don’t agree with -- you don’t live up to your agreements. [Indiscernible] on the condition that you and I would have a meeting.

Phil Kurtz

That was not our arrangement sir.

Unidentified Company Representative

We did not have the meeting and you said we did not accept an agreement. You are [indiscernible].

Phil Kurtz

Your disruption is out of order, I will remind you, I did not agree to any further meeting, but to look at the standard which we considered and we're not adopting it and it's that simple sir. So, I would ask you to refrain from disrupting further, so we can continue with our meeting.

Unidentified Company Representative

Please acknowledge all of the hands that went up that said they wanted to have a discussion.

Phil Kurtz

I acknowledge them, this isn't the forum for it at this time. We have a Q&A session coming up.

Unidentified Company Representative

So, you want us to vote before we talk about them? That’s how you run the company, backwards? Nobody does that.

Phil Kurtz

Can we continue with the meeting?

Unidentified Company Representative

You can do what you like, you’re [paid] [ph] to do it.

Phil Kurtz

This is all in order with [indiscernible] Canadian corporate law and our circular and standard practice in the Canadian corporate world.

We had the motion and now the vote remains open. Thank you. Press 1 to vote for and 2 to vote against. Thank you the vote is now closed. We'll now show the results of the votes on each resolution that was voted on today on the screen behind me.

First we have the results for the vote on the election of directors and on reappointing the auditors. The following eight persons have been elected as directors of the company to hold office until the next Annual Meeting in 2017 or until their respective successors are elected or appointed. John Chen, Michael Daniels, Timothy Dattels, Richard Lynch, Laurie Smaldone Alsup, Barbara Stymiest, Prem Watsa and Wayne Wouters. I confirm that all director nominees received more votes for than votes withheld and therefore all are elected.

The motion reappointing auditors is carried and I declare Ernst & Young LLP to have been reappointed the independent auditors of the company in accordance with the motion. I confirm E&Y as reappointed by at least the majority of the votes cast.

Now let's show the results for the remaining votes. First, we have the motion approving the unallocated entitlements under the equity incentive plan, which is carried. I confirm that this resolution has approved by at least the majority of the votes cast.

And finally, the motion approving the non-binding advisory resolution on executive compensation is carried. I confirm that this is approved by at least the majority of the votes cast.

And now John, will conclude the formal part of the meeting.

John Chen

Okay, thank you, Phil. Having completed all the formal part of the business of the meeting I would ask for a motion to terminate this Annual and Special Meeting of the shareholders for the Company.

Unidentified Company Representative

[Indiscernible].

Unidentified Company Representative

I second the motion.

John Chen

Thank you. All in favor? Any opposed? Okay, the motion carries. I declare the meeting terminated. Now, Phil will discuss the forward-looking statements.

Phil Kurtz

Before John provides his comments on the Company's performance and strategic direction. Please note that his presentation and the question-and-answer session that follows will contain forward-looking statements. Shareholders should be aware that any forward-looking statements are made based on certain assumptions and are subject to risks and uncertainties that could cause actual results, performance or achievements of the company to differ materially from those disclosed here today.

We’re adopting for this presentation the cautionary language regarding forward-looking statements that is set out in the Company's annual report on form 40-F, to which we refer you for additional details concerning the risks, uncertainties and assumptions relating to our forward-looking statements.

Now our Executive Chair and CEO, John Chen.

John Chen

Thank you. So the business section of this meeting is going start like this. We will show you a video of what we do as a company and then I will follow a brief presentation of the progress in the last 12 months, and then will open up for question-and-answer.

Okay, so let me just start the video first.

[Audio/Video Presentation]

Any feedback on the video? No. I'm sorry.

Question-and-Answer Session

Q - Unidentified Analyst

[Indiscernible]

John Chen

That's right. Actually it's little bit more than just a history lesson. The company was founded 30 years ago, had done tremendous amount of work for the communication field, and you all know the background of that. But then advance this to the current and number of the unfortunate disaster of the world, back there we actually served a very key role in the aftermath of dealing with the crises as recent as the June crises, the UCLA campus shooting. So and it is really because of that that we wanted to build and highlight the strength of our strategy and this is the strategy chart.

We obviously look at the world now no longer just about handsets. The world has moved on, the world is talking about securities, the world is talking about connect. So the future of this global footprint is going to be a connected footprint.

Unidentified Analyst

[Indiscernible]

John Chen

IOS?

Unidentified Analyst

[Indiscernible].

John Chen

Let me get to that. We will have a question and answer session. I'll make sure that I answer that question, but it is part of the strategy that we laid out. Anyway it is going to be a connected world. What we do and how we do it is, we’re going to get in to provide the best secure mobile platform and end-to-end solution. And this will include other people, operating system, environment, including Apple. And what we allow the customer to do is to be able to build the most competitive [ph], most secure mobile infrastructures to deal with the future world of the IoT, basically that’s the mission of our life. So -- okay this one thing is not connected.

Phil Kurtz

I think you’re live now.

John Chen

Okay, I may have to exchange with you.

Unidentified Analyst

[Indiscernible].

John Chen

Oh, Microsoft. No wonder. We have worked very hard in the last couple of years to take a lot of the technology that the company always had enjoyed in the last 30 years. And add on to it by having a number acquisitions, to the number like six acquisitions and build this particular map and this is our end-to-end solution and our capability. I don’t expect you all to follow me and go through all, but I'd like to point out a few big pieces of this.

The top one, blue word insert, secure interconnect which is the NOC, the Network Operating Center, which Blackberry has always enjoyed from day one. That’s going to be the most secure, this is the reason why enterprises, government uses Blackberry to power all the communication and mobile communications. We had that NOC connected to over 600 telephone operators around the world. It’s one of the very -- most sophisticated asset in right here -- I guess in Cambridge, in Cambridge, Ontario not right here in Waterloo, but it’s near here. With many, many data centers and at network nodes around the world that connect, this is a very sophisticated system. And we obviously tend to use that as an advantage to how we deal with the global interconnect going forward.

All the other four pieces are the inter link of the end-to-end solutions, starting from the most right which was the handset technology. You heard that last year we have taken the best of Blackberry and put it on with the best of android has to offer. And we want to make android, the most secure android in the industry and we have one device, unfortunately too high end and it's not moving as fast as we like, but we have -- we have more plans to come forward to address it.

So if you look at the handset being your first point of security entry and then you work towards messaging technology, which have -- a has lot of those power, power of the crisis management situation you have seen in the video and then move on to the IoT technology, we just released some new products that’s related to connected cars. So we are aiming at the right place you know all the growing parts of the markets, and then that’s the -- you may be familiar with [indiscernible] QNX.

Lots of time when I first came to the company one of the thing that I was always impressed by is the breath and the depth of our IP portfolio, I just wondering seeing that the former management team had done extremely well, which has created almost 40,000 patents that are tradable -- trademark patents that protected our technology and our knowhow around the world, huge assets to the company that we are taking advantage of.

And then last but not least is, we do have the most complete mobile infrastructure software that the industry has to offer. We are now the market share leader in many of those categories. Some of those categories included file share -- collaborate file sharing, some of those category included workflow engines, some of the -- and so all these are our EM Ram [ph] capability for example the enterprise mobile management Blackberry is the market by itself, we own 19% or 20% of the market being the number one today.

So then we built, below the bottom of that is something that we have been working hard and building in the last 12 months. Systems are getting more complicated. Securities are very much needed and is also getting extremely complicated, we have created services capability to help enterprise to take advantage of the technology we have and also do threat analysis and risk management. And if you look at cyber security consulting, it’s a brand new thing, we started probably no more than three months ago maybe, implementation services that’s actually started no more than six months ago since November last year and customer support is to beef up, we’re building a very robust customer support system just like any serious enterprise people will need.

So this is the very important roadmap for us. These are technologies that we are delivering today, not technology that -- I’ll come back to questioning later. These are not only technology that we dream of putting together but this is the results and is the fruits of the last couple of years.

In last 12 months, I’d like to point out a number of -- on the business side, a number of accomplishments. I’ll be brief on that, on the left hand quadrant is the software and licensing, we have new product released, ADAS, it stands for advanced driver assist, for safety, for the vehicle we’re obviously with QNX, so those of you who know about QNX, it’s one of the leaders in infotainment system for cars for the auto industry, we’re going to branch that into the connected car world which obviously is the one everybody used -- retailed and used a lot.

IoT platform, we have a transportation device to track and secure containers which is a huge market, we just released that and I think the shipment, the massive shipment of that is going to be in July, mid-July event. And then voice encryption, we have a high-end technology that we acquired from Germany that a lot of the German government, starting from the head of states has deployed and used for anti-eavesdropping and that is a very expensive technology or expensive product for each individual use. So the government, heads of states, they have the need for it and therefore they will be willing to pay for that technology. We have made that technology a lot more affordable by enterprise executive and so that’s what a secure suit is working with telecom company, it’s being rolled out in Europe right now.

Moving from that to the right, the top right, that’s where we take the BlackBerry 10 Operating System to the next level, we’ve got the network certification. The government, the agency require network certification, we are in the process of the final process of getting it certified, it should be released in a very short period of time on BlackBerry 10.

We talked a little bit about taking the best of Android connected with the best of BlackBerry and that’s the first part of reveal called the Priv. We also built a secure tablet, now this is not being available worldwide at this point, we have a secure tablet for one of the project, I believe to the German army and it’s been very successful with the German army, this is not meant to be [indiscernible], but the problem is the German army is not big enough. So we would like to get that product over the world and it’s a very, very cool collaboration of a number of companies including Samsung, IBM and us. So it’s a great device.

So down here on lower left, we started to gain a couple of 2 to 3 years ago, if you open up any analyst report it’s always negative, everything BlackBerry does is bad. It doesn’t matter, even if we sit in a corner of the street and start passing out money, it’s still bad. And they will question how much money we’re passing out, why we’re doing it and so forth and it’s not enough type of thing. So I am pleased to announce that working with them in the last few years, we finally got through some recognition and these are important, the reason why these are important is customers read those, customer subscribe to those plans, Foster, ITC, Gartner they look at those things before they make the final choice of buying decision and we’re starting to gain traction on the software, enterprise software side Foster Waynflete, EM solution, ESSF is an acronym, very secured document sharing, that’s what it is. Think about Dropbox being secure and be able to share on the internet in a secured and encrypted way. Foster and Gartner had both recognized that as a leader of industry.

And then last but not least, that part of the excitement of the future comes from not only us assembling -- part of the future is not only about us assemble that set of strengths in terms of technology and services capability and network capability, but what market are we really serving. So if you look at, we are serving some really exciting new markets that is needed, that is going to be growing, that is going to be robust, cross platform software and I think I owe the gentlemen there a word on that. When we were doing very well, as a company in handset, I believe 2007, 2008, everybody uses a BlackBerry, we all grew up using a BlackBerry. At that it was easy to create a software that’s just to connect with BlackBerries. Unfortunately a number of events have taken and by the early or by early 2010, 2011 we started losing that market status.

So today, there are at least 3 billion cell phones out these and is growing and replaying. Unfortunately we don’t enjoy the leading share of that. We still have some very strong footprint in the selected industry like the government, but we don't have, we don't the mass [indiscernible] of it. And so result of that we need to recognize to grow our business, will you grow on everybody’s devices, not just Blackberry devices.

So this why you see that cross platform in the last two years has been the most important part of it. I personally do not believe devices is going to be the future of any company. This is no difference from PC today or server from today and I think what runs on the devices and what connects the devices and what might make the device do better is where the future is going to be and this is why we do have a cross platform strategy. In fact our software technology and the company that we acquired Good Technology they have over 70% of their businesses on the iOS devices and this is where we wanted to diversify our footprint, so that anybody could be our customer not just a Blackberry user. We of course love Blackberry users but this is why you see that cross platform.

And in addition to that the solution that we put together like the emergency alert system and crisis management system you have to assume it's the community, it’s a community like the city, like a country, for many in a city and country cannot be dependent on the fact that they all uses Blackberry, so they will be using all kinds of phones the choices are individuals. So anyway that's, it's secure messaging, we talk about cyber security, I don't want to spend time on that and then Cloud opportunity and this is where the cooperatition proposition maybe that's the right word comes together. Microsoft does compete with us on certain level we do actually partner in certain levels, Microsoft is building what we believe is a pretty robust Cloud strategy and the deal that we have struck was to be able to take our software and put it on their Cloud, so customers could enjoy both. And so if you take the Microsoft Cloud they certainly could take Blackberry software, that's the reason for it.

So this is what happened in the last 12 months on the business side, on the financial side our revenue came in at 2.2 billion, the highlight is software, we doubled the software business went from I believe 234 million a year before to 527 million. We have done business in 10,000 enterprises for getting the software businesses from them. On the profitability side we lost $0.19 a share for the year, but our adjusted EBITDA, you know earnings before income tax and amortization it's a positive 433 million and therefore consequently that generated free cash flow of 244 million. So the company versus 2.5 years, 3 years ago is no longer in a position of having cash trouble. We are cash rich now, we’re heading up for a long time, we're investing cash, we invested almost a $1 billion in the last 18 months in acquiring technology company channels and so forth.

Software, so one of the biggest challenge to our company is that SAF [ph], the people who follow this the Service Activation Fee which made our company extremely successful in the 2000s which was everybody who uses a Blackberry and you wanted to get connected to the network or get email or messaging for that matter you pay through your phone bill a set amount of money to the telephone company that provides you with the services. That number -- that paradigm is no longer true. So the company doesn't charge you any more, our competitors doesn't charge you anymore. So therefore as a result that number is continuously going down, even if the people using an old Blackberry and upgrade it to a new Blackberry 10 we still have no issue with that number going down. That number is going away and its high margins business we enjoyed it for a very long time, but this is something that we cannot reverse the trend. So what is the strategy of doing that?

The strategy of attracting that is to build a software business fast enough so that it will cover the decline on the quality basis. On that charge you see that in Q4 we were fortunate enough to be able to grow the software fast enough to cover the sales decline. We're at that junction now, we cannot do it every quarter, some of that because of seasonalization, but we expect for the year, this fiscal year which started in March and expect to end in the February, we expect the entire year basis we're able to cover it. So that's one part of the strategy that this a charge that we look at intensely very frequently to make sure that we could achieve that KPI for example. Strong cash position and investment of that, I've already gone through that.

Okay, I myself and most of the management team around here who's working hard at this been here about 2.5 years. 2.5 years ago I mapped our plan, which is a multistage plan and the multistage plans basically goes like this that we need to fix the balance sheets. When we first started the company was losing a $1 billion both in income and in cash per quarter, And as some of you may know that that we were literally within one quarter of having problem with funding the cash. These are historical numbers, so you could go back and look at those. We no longer are in that situation. Now our cash burn requirements are in the 200, 300 area. And we now have on the gross cash basis about 2.6 billion, 2.7 billion, 2.8 billion, on a net cash basis about 2.2 billion, I mean 1.2 billion sorry, 1.2 billion. Now we are generating cash so, therefore we probably are not going to run our cash until -- unless some of us go crazy in how we spend it. So I can assure you, that is not going to happen as long as I'm going to be around.

So, we did repair our balance sheets, done well there. We made investment, so it’s just not about just shrinking the company. We made an investment to prepare for the future, the future which I have shown you earlier. Let's see, so, we got to the free cash flow and then we formulate the strategy and we invest in it. That stage we have done. Now we have to find a way to stabilize the revenue and the challenges of revenue stabilization are two. One is the [indiscernible] view I just explained to you, this number is going down, unfortunately somewhat -- something that I can't do anything about, nobody could do anything about. So, we just have to try to cover the decline. The other area is the handset business, the handset business is intensely competitive, we're kind of coming back from behind. Whether we could actually get there or not, we're certainly trying very hard every day and we believe we could and we need to make that profitable and that is the number one objective for this year is, we need to get the device business profitable and we have a time for it and we're actually tuning [ph] to that.

So, once we stabilized revenue of all the stuff that I told you little earlier you should start thinking in and go into business. I have some statistic flow here that tell you why there is some level of hope that we will be able to grow that business. First of all is the, on the software side is what you would call the addressable market, the total addressable market. What are the market that we would sell into, what are the major trend that actually it's going to start growing. If you notice in 2012 when the company is really focusing the software, focusing on something called the MDM market, mobile device management, this is where we talk about earlier that somebody will buy a server and they will manage the devices out there for the company. In that particular case a good example would be Hillary Clinton could won in some kind of a battle, for example. But that's a mobile device management.

But that number -- that actual market is a still market, you could see that 525 million in 2012 and it grew to 1.7 billion, nice growth but still a smaller space and then it grew to 2.6 -- subjective to growth by 2.6 billion in 2019, decent numbers by the way from the analyst which we talked about earlier, the Gartner, the ITC and Foster people. We have what we have done in all the investment that we have made and with the whole map that I showed you with our strategy and all the product and delivery we are now steadily growing into enterprise solution and technology solutions, and enterprise solutions are applications like file sharing and collaborative secure file sharing, that's the enterprise solution. And technology solutions are IT, embedded system, QNX [ph], automobile, cars, connected cars and all that.

So, if you could see in 2015 the market that we could sell into is above 4.9 billion and everything that we're doing and investing in all the verticals whether it's automotive and legal, finance, healthcare and government which are where we are focusing ourselves on, will give you a total space of about 17.6 billion in 2019. So, if we just go in and get our fair share of the average market growth rate and we'll position ourselves correctly in executing this normally we should be able to start growing the software business in a very nice way. So, this is the reason of that.

Unidentified Analyst

[Indiscernible].

John Chen

I'm sorry.

Unidentified Analyst

Have you involved with Blockchain?

John Chen

No, we have not got involved in the Blockchain technology.

Unidentified Analyst

Why?

John Chen

There are multiple reasons, the A it's bandwidth, we just don't have enough bandwidth to get into too many different things, we have to pick and choose. Blockchain itself maybe a secure emerging thing that is being sought by many people and there are banks and financial institution that actually are against it and creating their own. So, I wasn't going to enter myself into an area which A, our engineers know very little about and B, it's certainly unsettled at this point. So, and it's a bandwidth issue, we can't just keep delivering all these things, add some more and keep adding onto it.

On the hardware side of the equation, two things that you need to know. First, I talked about it twice already, what we attempt to do is to build the most secured android phone. Android enjoys 80% of the market share in terms of OS. Well the other iOS is [indiscernible] because Apple is not opening up iOS, so there is not [indiscernible]. And that brings all kinds of applications for our customer to use, which is something that we need to solve upfront. But I don’t want to give up the Blackberry heritage and security, and I think the world needs a secure Android, so we are going to build the best Android phone, the most secure Android phone that the market could see. So this is why we were combining the two together.

That being kind of the hardware, operating system strategy. As far as the market, going to market is concerned, we are now bifurcated to both selling handsets as how we sell handset, whether through distributors and carriers, e-shops and all of that, we would still do that and through the enterprises directly. But we are also now starting to position ourselves to be able to license our software knowhow. The company has tremendous amount of software technology for those of you who use the Blackberry, you know we have not only the Hub and special techniques to manage the connectivity, special techniques software to manage power consumption, you know we have all of that technology. We would love to share that technology and the licenses, haven’t really set it up that way in the past. I recall Blackberry productivity, Blackberry experience, you would see more and more of that's happening, and that will be a good software business to be in, very recent more margins.

And last as, I spoke about -- okay now we have the market, we have the product, so how do you get at it. Why did we become successful? So we've been focusing on couple of KPIs distinct points. On the top left there, quota carriers. We have increase the quota carriers of the company by 29%, in within 12 months. The reason why this is important is because the go to market is so different. When we were doing very well in the handset business, ourselves direct people, who we are selling to as a carrier, so it will be the there is a Talus, The Bell, The Rogers and The AT&T and all of that, that landscape has been shifted and completely changed. And so we need to go into the enterprise directly and that's one of the reason why that 29% increase is an important aspects of productivity.

We actually have hired a lot of people despite of that effect that we have to do some painful cut back ourselves. This is to rebalance the resources of where the company should focus on in terms of where the resources to go. We have 1,485 new employees, I think roughly about 60% or maybe half to 60% are from acquisition, I checked the number this morning, and the other half are just hiring directly from the market, focusing a lot on engineering and sales.

And then down there the two things is the new license enterprise license, the mix of the cost platform, so this is the important things, which is what the gentlemen asked me earlier, is that in the past FY15, our [indiscernible] who runs 70% of the time on Blackberry devices and the remainder time on other people’s devices said we are able to completely shift that only because that now we have a completely different markets space to go to, a huge much bigger market space to go to.

And channel partners you might have heard last earnings quarter I made and we made a number of very high profile hiring executive, who knows about channels, about partners including programs both in the enterprise side, as far as the device side, as well on the QNX side. So that's continuing to be a focus of ours, which we are going to be more invasive [ph] to the ecosystem out there and we track that on a continued basis.

I’m going to summarize what is important to us in the FY17 that we are in today. We tell ourselves that we want to grow our software business faster than the market growth. We’re targeting 30%, but market is not probably going about 15%. So we are going to be double in the market growth rate that's number one.

The second thing is, the device business must be profitable. Because we don’t want to run that business that drags on to the bottom line. And we try everything, we look at the logistics, part of the design, the logistics, look at the market, we look at our choice of partner's operating systems, everything. We have gone through everything we were a statistic for those people, who are in the business amortization.

I think we have [indiscernible] it is time for us to get to the profit and we’ve even gone to segment reporting starting tomorrow. So you will see all that, all of the results of how we got o there -- got there this year, so [Indiscernible] needs for the year. For the year we are going to maintain our being positive cash flow, free cash flow.

So those are the three kind of guiding principle for the FY17, and that's my -- that's a conclusion of my presentation. I'm going to ask Phil to make some Safe Harbor Statement and then we could have the discussion.

Phil Kurtz

Thanks John. Just a few comments ladies and gentlemen on the question period. The question period will last approximately 20 minutes today. We have two microphones that are available in the room held in hand, one in each of the aisle on the side. If you have a question and we’ll alternate taking questions from each side.

Before asking your question, please state you name and as there are a number of shareholders that wish to ask questions, please limit yourself to a single question and keep your question brief, not more than a minute in fairness to everyone else in the room. So with this mind, can we please have the questions from the middle and from this side?

Unidentified Analyst

Thank you. Hello Mr. Chen, I think you have done an excellent job, great vision, great plan and execution, so far very happy with that. But I have one question regarding the marketing and rolling out of the device. If you look at any review, BlackBerry PRIV is an excellent phone, probably the best phone out there. So why are we doing so poorly in marketing, what do we learn from that to the next time when we roll our new device? Thank you.

John Chen

Thank you. So first of all, I would say that the biggest issue that we face in marketing is affordability. We have not gotten a phone that gives us enough margin for us to do the right level of marketing. We also have been trying different avenue because the change is now -- it’s changing. We have gone for example on TV to market the PRIV and through the presidential nominating debate and because we want to get to that audience, the audience, the people who are on -- mostly business people, that look at those things out. Happen to one of the candidates in the United States were Bernie Sanders is at apparently he has a lot of younger people that work, but when they show the debate live on TV, we actually have a banner that shows the marketing of the device.

We have done marketing mostly online, banner ads and all those stuff, starting to show up more on buses and transportation bus stops and all that. But I would say simply we don’t have enough money to blanket the market and also is sustainability, you cannot just do marketing and advertising campaigns for a couple of days and then somehow people will get that impression. So I agree with you, I’m not going to tell you that we’ve done great marketing, we attempt a lot of things, I don’t know whether, we for example jump into a Raptors games, with the Raptors were playing the final series, where unfortunately the Raptors didn’t move forward because if they moved on forward than we will have -- you will have seen that more on TV and on the nba.com or raptor.com.

So we’ve done as much as we could afford, there is always a balance of that. When things are better, we know what to do, we could do more, we are still trying to push for more and learn about that. But I agree with you, I mean I can’t tell you that we are a great marketing company, but we’re trying to rebuild our brand and trying to rebuild the interest into the phones.

Unidentified Analyst

A magnificent understatement.

John Chen

Good, Thank you. At least you agree with me on something. [Indiscernible].

John Chen

Can we have the next question please?

Unidentified Analyst

Hi, my name is Allan Headley, thanks very much for hosting the questions and the presentation as such. My first quick question is the Z30 phone, want to click on the phone icon in the lower left hand corner, it default to the call screen, I’ve been trying to ask an employee via twitter and direct message on how to get it to default to the dial pad and leave it there as a setting. There is nothing more annoying as taking my term region water bill and having to input my code and having to keep going back to the call back screen, so that’s just a little personal, but please make it just a setting that I can choose to either have the call back or dial pad.

My second question is again recognizing the extreme competitiveness in handsets and the company going against, there is a bevy of other choices out here the Z30, like PRIV is a 5 inch screen most of the other cell phone manufacturers are making these 5 inch and 5 inch plus screens and I’ve seen a few stats on mobile TV usage of that, that’s continuing to expand and even watching like movies, wondering a known entity like RedBox in U.S. has a vast library, would there ever be a potential partnership as an avenue for watching movies from your phones on that type of thing and then again a handset with a bigger screen like a 7 inch screen in that phablet market. Thank you.

John Chen

I’m actually not equipped good enough to discuss the pros and cons on handset device features. There are now in the industry driving, two driving force that are directly opposite to each other in terms of, for example on the last point on screen size, and you guys, it’s based on depending on the usage. I mean there are people that have asked us to pull back and do a tablet and that will give you a 7 inch square situation. So I would make sure that, my colleagues are here, they are already here themselves so I’ll make sure that they at least will consider the thing you talked about.

Unidentified Company Representative

[Indiscernible].

John Chen

Just to say that again we all recognize that it’s highly competitive, there is a lot of trusted brand names in the Android world, but with the mobile TV market which seems to be expanding all the time, in order to watch mobile TV, it’s nice to have a bigger screened phones, so consequently with that tablet to a 5 inch screen device, I think there is still room to make a 6 or 7 or like a Z75 because it’s a 7.5 inch screen, that I can still get that’s ergonomically correct and easy to use so that you’re having your social media experience loveable.

Unidentified Analyst

Hi, my name is Richard Plazy [ph]. I am a software developer and I have my code, sign, keys and all that stuff. I’ve watched the company developed from the earliest phase, first that Mike Lazaridis was back in May 20, 1982 when he came to our hand radio club meeting to talk about his dream. It’s been wonderful watching you grow, I like your vision, I like your switch in philosophy towards a software company because I agree with you that is definitely where the money is, because hardware it dies and changes, but software is persuasive.

My question though, the real test, can you anticipate when you will reward your shareholders with a dividend no matter how little because it is a statement and we’re back on track, is what that says and would certainly build the faith, even at couple of cents a share. Through a few bones out to the peons.

John Chen

So first of all, it is my belief at this stage, thank you by the way for the kind words, and it is my belief that at this stage of the company that the cash is best used to invest in capability and channels and growth. So personally, I think we are stabilized, but we’re not out of woods, so we got to be patient and continue the journey by keeping a really close tight management on more fiscally as we as the strategy part and not getting across too many different things. Thank you.

So we don’t think this is a time to consider the dividends.

Unidentified Analyst

Maybe later.

John Chen

Maybe later, absolutely. Never say never. I’ll like it to be the day so I get up here and tell you that we are going to declare the first dividend because we plan it, where we can both invest and return.

Phil Kurtz

Next question on this side, please.

Unidentified Analyst

Hi, my name is Beatrix [ph]. I’ll try to -- maybe if you can answer two quick ones. One I’m a former employee and student of the BlackBerry, I’m a fairly loyal customer I would say and I’ve been very pleased as a company and its strategies, but one of the things that kills me I guess when I go into Cosco and Walmart, I go to their wireless counter, they have all kind of devices, I know marketing has always keep the -- how much cash do we have available in the market, I understand your answer to the first question, but how hard is it to make available an actual physical working device at every counter that sells wireless devices and not just the dummy plastic device or often times there actually is nothing, the replica ones can’t even pull it from under the counter.

Does that require a lot of money or how can that be done and then the other question I had is, just in kind of relation to the first question, I think it is important for every customer to have the opportunity to get their hands on actual device and that’s why that’s important I think. The other question I had was just around BlackBerry devices. For customers that have reservations about the Android operating system, will you be making Blackberry OS devices available to the average consumer in the future or are you keeping it focused on regulated industries only. I know we're trying to get more into cross platform but is there a plan to still have them available to the average consumer?

John Chen

Actually, as a former employee you probably know a little bit about what I'm going to say. It's a little more complicated, I mean I still love to make sure you go to Cosco or you go to Staple, you go to some of the main chain store, you will see a physical device. So I’d love to do that. And I will tell you that we will work on that. We actually had identified that recently as something that we really need to work on, then you would ask me why so recently, why not longer -- prior?

There are -- one of the thing that, maybe I should say one of the thing that when I came into the company that I'd inherited are a set of contracts that was done when we were doing very well. It carries both business conditions as well as financial conditions that we simply are not in a place to do. And so we have taken time, started originally working, literally the first day of my job with people like Qualcomm, the chipset company and the manufacturers that put the final touch on the devices like the Wistron and the Foxcon of the world and with logistic people.

I'll get to the answer, so we have in the last two years by and large either terminate or renegotiate a more favorable deal for Blackberry and these are pulling teeth because you change to something that they're all used to, to something that's obviously less economic consequences to them. This is not something that they open the door and welcome you with red carpets, but this is something that we have to do to survive. So to address that reality for the supply chain we address that.

Now we're starting to focus on the other side of the equation which is where you pointed out. Which is our contractual agreement with everybody that represents our products out there. Some of them we say, I just recently came across my desk on something small, but philosophically not good which is, I got a device from you I sell, I sell it cheaper, you give me the delta back. This is through one of the names that you actually mentioned. It's not something that running a software business with a predictable profitability that you want to go after, wanted effect. And that takes volume gain, you just want to move as much as you possibly can or you are going to lose some money on every single one of your moves, and so that doesn't work, at least not my philosophy.

So this translates to some of the lack of support in the source that you talk about I would rather have it in a few stores that really do a good contract with us and economically to share the win-win with us and I have to say the best store, the three Canadian telephone companies, and particularly Bell has done a lot of work for us and with us, so is Roger and Talus because I want to make sure that, I seeing media people here and I don't need guys who call me up and yelled at me and say what the hell did you say, because you know, anyway but the phone company and us are getting much better terms and it was not like that when I first showed up. It was quite different. But anyway, sorry I don't have a specific date, but we will work on getting the real devices, live devices to our stores.

Unidentified Analyst

Did you already answer my second question? I don't know if you already answered.

John Chen

The second question on?

Unidentified Analyst

On availability of Blackberry OS devices.

John Chen

Oh, the Blackberry, yes, yes, you're right, the Blackberry OS. Where we are right now is we need to get the certification and IF done, and this is for security reasons so that we can go into the government business. We will continue to focus the Blackberry 10 operating system on that level. So I guess indirectly is what you are going to see in the consumer space is going to be an Android will be Blackberry look and feel, but BB OS, BB 10 operating system.

Phil Kurtz

In the interest of time since we have a number of people waiting to ask, if you could limit yourself to just a single question then everyone can have a chance.

Linda Lamberton

Linda Lamberton, and I'm from London, Ontario, and my question is on marketing and I'm wondering if Blackberry is utilizing the top advertising media that is available at 1/10th of the cost and before I tell you the answer or ask if that’s happening, this comes from a podcast done on radio by the CVC about a month ago saying that credible companies are now getting into this advertising market and I hope to bring a little humor, but it is a serious one, the highest place to advertise at 1/10th of the cost is on the porn site to dropped down damage. So, I'm putting that out for you to investigate.

Phil Kurtz

Thank you. Our marketing guys are here so. Nothing further on this side, so we’ll continue here.

Unidentified Analyst

My name is George Perry [ph], Dr. Perry I'm a shareholder and just a comment first before my question. We were travelling in Norway about three years ago and I just purchased the Z10 and some other people their noticed it and approached us and said that they had just switched over, they were die hard BlackBerry enterprise users, they just switched over to a different device and they found that their bill had more than tripled in the months that they had started. So, I think that really BlackBerry in the interest of the user was great, but they shot themselves in the foot because as you mentioned earlier you sell the phone to these provider and then they sell the phone to the user and they're the ones that make the money off the phone in terms of usage.

So, in the future I think the gentlemen that was over on the other side of the room, he was probably one of the youngest in the room, although there are other young people not including myself and I think that that's where BlackBerry probably has to look if they want to move up their sales for hardware.

And the other thing that I wanted to mention was that if you developed security for enterprise use and you mentioned that there're over 3 billion phones worldwide in use, I think that if you have that expertise software wise, it might be worthwhile considering loading up that software on any device selling it to the manufacturers or the other big providers that or loading it on a single phone and having them pay a buck or two for your software to have that security on their phone regardless of what type of phone it is.

But to I guess comment further on what the gentlemen was talking --.

Phil Kurtz

Sir, do you have a specific question?

Unidentified Analyst

Yes, I do, I'm wondering whether there are any plans -- for my question to jump to that, is if there are any plans for BlackBerry to -- I even called up and talked to so-called local rep who was in California and I asked him about plans to secure devices like desktops, laptops, tablets and cell phones and any other phones, just to provide security for all of the devices that are out there, not just BlackBerry or not just android BlackBerry's and I think that there is a huge amount of profitability to be made there on the software side, but on the hardware side I think the profitability lies with the use of the plan, you have to focus on the use if you want the sell phones. You're not going to focus on us old guys or whether it's business or not, business is a small-small part of the market, you have to focus on the use, you have to maybe have a few entertainers whether they're actors, actresses or whatever, give them phone, pay them, give them some money -- lots of money to show that they're using your phone and everybody will follow, all the other users will want what the entertainers are using, that's the way things go.

John Chen

Thank you, I'm not going to comment on your comments, but I'd like to answer the questions. As one of my slide indicated that we do intent to start the process of licensing our technology to our manufacturers. We did not have any restriction on what form factors, for example it could be like you said a tablet, a laptop or handset or even the TV, the Smart TV for that matter. So, we are planning to do that, there's where one of my slide went to when they had bifurcated stuff.

As far as the other marketing statements and influencer and celebrities and all that, other than the cost itself it could get into a controversial situations depending on the person that you picked. Since we want to focus very much on enterprise and the money that we have saved, that we have is very hard earned money. I'm for one not the kind of person who will go out and pay $5 million for some important figures in the world just to parade around using our phone and the reason is this, if you think about, even if I could make the phone business possible.

You are running a margin of 10% of a phone, assume the phone is $500 you are making $50 bucks on a phone. Okay, if I pay $5 million for somebody to parade around, I need that person to parade a lot. Because it don’t know how many phones that person actually has to himself, so when I calculate the return on investment, rather than, I would take that 5 million to reach out to the have presentation and breakfast freezing and all that to as many of the enterprise customers as I possibly can, they are probably going to be buying more of phones from my 5 million.

So really it’s a return on investment? I’m not big on having these party [ph] stuff, that doesn’t mean it’s not good, I mean it's good for some company, but we are in a very-very highly comparative commoditizing world, you will see less and less of that, I would like you to start taking a look at our competitors on phones and see how many of these people really have big celebrities booked for service. So that is my view.

I’m going to have to take the last one because actually we have the board meeting right after this.

Unidentified Analyst

Thank you. My name is Palak Santapaola [ph] and you did address your efforts with Canadian companies like Bellman Rogers to market your phones. I live in the United States and your comment on Hillary Clinton server [ph] notwithstanding. I wanted to know if you are doing similar work with the providers in the United States like Verizon. Well I have been subjected to insult after insult going into a Verizon store asking to see a Blackberry and been told you don’t want that and where these people will go out of their way to not sell your Blackberry. So what’s the story with the Verizon and these companies?

John Chen

I have heard many, many incidents of what you just describe and every time I heard that I can't just send an email to Lower Manhattan which is the Verizon CEO whom -- we actually know each other on a personal basis. There are stores in Verizon, Verizon have probably a network of 3,000 to 4,000 stores. The stores in Verizon that actually have a very highly promoting Blackberry phone, but most of the stores are the people who are manned -- staffed by much younger people who prefer to sell iPhone and Samsung, part of the reason they have something -- they have some financial incentives to do so and it's an easier thing to sell, no doubt.

So they try to talk you out of it every time we know of a store like that we go back to talk to the management something happens, I mean some positive thing will happen, but it doesn’t happen for really long and it’s just going to go back to its own way.

So this is threat, we are looking at that strategy, I think this is us beating our head against the wall, not with only Verizon but with many other carriers. The management of the carrier, the Verizon and the T-Mobile and the AT&T are very positive of our relationship. But when it gets to the store level, we start losing that traction and something that we worked -- we’re either going to work at, either through selective stores or both through business-to-business part of the each of the phone company at that B2B part of the organization, which unfortunately therefore we’ll take it out of most of all the store itself. I mean that they have some B2B stores that you go in and they will have it, otherwise you are going to have to order it online.

So we are working through the whole process of that. We are not -- our phones are not in high demand and they want to move volume and it is a mismatch of priorities in some way, we will continue to work on it. I think it's an important thing to do.

Okay, thank you all very much. Thank you for coming out and thank you for your continuous support and patience. And I will hope to see you next year.

Unidentified Analyst

Can shareholders come to the Board meeting?

John Chen

Oh no. Alright well. We talk about very confidential stuff as you know and coming inside [ph] is not appropriate.

Unidentified Analyst

[Indiscernible].

John Chen

Yes. I think every company has this. Thank you.

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