Ladies and gentlemen, thank you for standing by. Welcome to Research In Motion's First Quarter Fiscal 2013 Results Conference Call. [Operator Instructions] I would like to remind everyone this conference is being recorded today, Thursday, June 28, 2012, at 5:00 p.m. Eastern Time. And I would now like to turn the conference over to Mr. Paul Carpino, Vice President, Investor Relations. Please go ahead, sir.

Okay. Thank you, Luke. Welcome to RIM's Fiscal 2013 First Quarter Results Conference Call. With me on the call today are Thorsten Heins, our Chief Executive Officer; and Brian Bidulka, our Chief Financial Officer. After I read our cautionary note regarding forward-looking statements, Thorsten will provide a business and strategic update. Brian will then review the first quarter results and our outlook. We will then open up the call for questions. This call is available to the general public via call-in numbers and via webcast in the Investor Relations section at rim.com. The webcast includes supporting slides that can be viewed through your personal computer or your BlackBerry PlayBook tablet. A replay of the webcast will be available on the rim.com website. We plan to wrap up the call around 6:00 p.m. Eastern this evening in order to let as many people as possible ask questions. [Operator Instructions] 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 plans, strategies and objectives and the anticipated challenges and opportunities in the coming quarters, our expectations with respect to product shipments, revenue, gross margin, operating expenses, our anticipated operating loss in Q2, net subscribers, ARPU and our cash position, our product development and marketing initiatives and timing, including our expectations relating to the launch of our BlackBerry 10 smartphone, plans and expectations relating to our CORE program and other statements regarding our plans, objectives and expectations. 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 view with respect to future events and are subject to…

Thank you, Paul, and thank you all for joining the call today. I will let Brian talk about the specifics from the quarter, so I can address some of the challenges and actions that we're taking. As discussed over the past few months, our first quarter results reflect the platform and products and vision we are going through, ongoing market challenges and the competitive dynamics we have seen across many of our markets. This was a challenging quarter for the company on many fronts, and I'm not satisfied with the financial performance we are reporting today. I want to assure you that we're not standing still and that we are continuing to accelerate our focus on our key initiatives. I would like to address 4 key areas on this call, including Q1 sales, the updated timetable for our first BlackBerry 10 device, our outlook for the next couple of quarters and update on our operational and strategic review. So let me get started with Q1 sales. In the U.S., revenue has stabilized, showing only modest declines, but churn has remained high. We are aggressively working with our carrier partners in this region to upgrade customers to BlackBerry 7, and we have had particular success with the BlackBerry Bold product. We're also working closely with our enterprise customers to maintain our enterprise subscriber base and upgrade these customers to BlackBerry 7. In the international market, revenue has declined in the first quarter, reflecting pricing pressure due to competitive market dynamics and the age of our end market product portfolio. However, we have begun to refresh the portfolio with new BlackBerry Curve product in the U.K., Middle East and Asia Pac in the first quarter, and we'll continue to drive these new devices into our global carrier and distribution channels in Q2.…

Thank you, Thorsten. Revenue for the first quarter of fiscal 2013 was $2.8 billion, a 33% decrease from the fourth quarter of fiscal 2012 primarily as a result of decreased BlackBerry smartphone shipments, greater proportion of entry-level products with lower average selling prices and pricing initiatives to drive sell-through and sell-in for BlackBerry 7 handheld devices. Sales outside the United States, United Kingdom and Canada represented approximately 62% of total revenue compared to 68% in Q4. Some of the larger markets comprising the other segment in the quarter were Indonesia, South Africa and Venezuela. The decrease in other markets was primarily as a result of a less favorable product mix with lower ASPs. U.S. sales represented 25% of total consolidated revenue compared to 17% in the fourth quarter. On an absolute basis, U.S. revenue was down slightly as we aggressively implemented pricing initiatives that reduced churn in the United States. Sales in the U.K. in the first quarter represented approximately 9% compared to 10% last quarter, and Canada represented the remainder. RIM shipped 7.8 million smartphones in the first quarter. Estimated sell-through in the quarter was approximately 10.5 million units, including phone-only sales. Channel inventory is down on an absolute basis. However, the trends in certain markets is such that our partners are not carrying as much inventory, they're not replenishing their inventory at the same pace as they have historically. In the first quarter, we shipped approximately 260,000 PlayBook tablets, and sell-through to end customers based on our internal data was higher than this. Hardware revenue was approximately $1.7 billion, or 59% of sales, compared to $2.9 billion or 68% of sales in the fourth quarter. The decrease in hardware sales is primarily attributable to the lower unit volumes, a less favorable product mix with lower average selling prices…

[Operator Instructions] Your first question today comes from the line of Mark Sue of RBC Capital Markets.

It sounds that it will have to be BlackBerry 10, whatever it takes. So the question is: How do you bridge the gap between now and then? What can you do to protect your installed base outside of major price cuts so that you'll have a base to upgrade later? And also, what else can you do to reduce your cost structure? Because with the announcements, it does seem like you're getting to the [indiscernible] of things, and I'm not sure what else the -- what other options you might have.

Okay, let me respond to that, Mark, on the question how do we bridge the gap. We intended to have BlackBerry 10 launched later this year. Now we move into calendar Q1. We still are in the process, as I described, to aggressively put BlackBerry 7 into the market. We still have a lot of BlackBerry 5, BlackBerry 6 out there. And we also have -- in those regions where we are very strong in the entry-level and mid-tier kind of smartphone portfolio, we've just recently launched Jet Series [ph], as I said in my text. And we're seeing quite -- some good pickup on that. So I expect this to help us in the next quarters and to stay relevant in those markets and have offering for our customers in this market. And in enterprise, as I said, we are still upgrading our enterprise customers towards BlackBerry 7, making good progress with this. I expect us to be successful in bridging this gap and in protecting our installed base for those measures. On the cost structure, I would let Brian comment on any further actions and activities that we could take.

Sure. And as I mentioned, we're -- the CORE team is looking at all opportunities to try and accelerate cost savings earlier in the process and earlier in this fiscal year. And certainly, as it relates to manufacturing and our product -- actual product cost, we're looking at everything we can do on bringing those product costs down. And I think we can gain a lot on the efficiency side with our EMS sites that I mentioned. And again, we're looking at every opportunity to really -- to push the savings as early as we can in this fiscal year, and I think that’s what the teams’ focused on.

Well, your next question does come from the line of Kulbinder Garcha of Crédit Suisse. Kulbinder Garcha - Crédit Suisse AG, Research Division: I have just a clarification question. My clarification is, I guess, for Brian. Did you guys have negative gross margins in your hardware business this quarter? Because I'm backing into it given that your services gross margin should be in the 80s or maybe 90%. And if that is the case, I'm just not sure what gets that better on top of BlackBerry 10 because your products you're selling, unless you've got something major coming out, new product-wise, in the next 3 months, you're probably going to operate at that level for sometime, number one. That's my first question. The second one is, Thorsten, with respect to the strategic conversations you're having, I'm sure you can't disclose too much. But like how extreme a scenario are you prepared to consider in the next 6 months? Like is a breakup of RIM really on the cards? Or is it that the conversation you've had lead you to belive that your best course of action for shareholders is to really continue with your existing strategy? What do you think?

Yes, I'll take the hardware gross margin. I've mentioned that there were some sales activities that were re-classed into the offer of new categories. So that did have an impact in our hardware margin as well. But certainly, our hardware margins were at a low point for what we've seen. But that, again, speaks to the opportunities we're trying to drive in terms of pricing initiatives to drive sell-in and sell-through of our BB7 devices. Kulbinder Garcha - Crédit Suisse AG, Research Division: But the question, Brian, is do you have negative gross margins in hardware? That's w hy I struggled – find it hard to belive that, that happened so quickly. Or is that just the way that the business has evolved, so it deteriorates so rapidly?

I'd say there were certain products that we definitely had seen some push-down on ASP. And again, I go back to the point about the -- on lower volumes and the fixed costs being absorbed over the lower volumes. That did have another effect on our overall handheld margin relative to Q4.

Okay, let me -- Kul, let me answer on the strategy question. I mean, you're absolutely right, we have engaged and the teams are working together on evaluating strategic options in various dimensions. And we're working through this as we speak with the teams, and we will have to share results probably later when the teams are done. However, I want to really make clear that we're not just building a new product, right? We're building a full, new, mobile computing platform that cannot be underestimated. So I think in terms of long-term stakeholder value, this platform will provide a basis to really create that long-term stakeholder value. It's not just about the next smartphone or the next tablet. It is really about a great new platform that we're building. So the teams are fully focused on this. They are working hard to get that done. I guess would we have loved to be a bit earlier? For sure. But we are where we are in quality and a -- just an outstanding user experience, that is what we want to deliver when we bring BlackBerry 10 to market. And we will do this. And in parallel, we are running those strategic assessments, as you have asked about. And they range from RIM executing on its plan, stand-alone, to whatever other model you could think about. However, this is not the time to share any detail. We will share the details and the progress we're making when we have those results. And it's actually also a matter of the board deciding on what strategic direction they want to take the company into.

Your next question comes from the line of Jim Suva of Citi.

Just a clarification. It sounds like that you're saying the operating loss in Q2 is going to be even greater than Q1. Did I hear that correctly?

I didn't say that.

You did or did not?

No, I didn't. So I just said we're going to have an operating loss in the quarter.

Okay, all right. And then do you think RIM is going to be able to maintain its cash flow generation or start burning cash?

Thanks for that question. In terms of our cash flow, it's obviously a priority. And within our CORE program, working cap management is one of the areas of focus. So we're looking at inventory turns, CapEx, investment. And you can see that in the last -- the trending in the last few quarters on our CapEx investments, or spend, has gone down. Based on our current liquidity and cash flow projections, and we also have an unused credit facility, we think it's sufficient in the near term to support our business, but we are continuing to work with our banks on renewing that facility as well. And we continue to -- continually evaluate our needs for our business. And as I mentioned, our focus within the CORE program and ensuring the liquidity of the company is critical for us.

So no comment about using cash as opposed to understanding your bank lines of credit and such?

Right. I said that within the -- in this coming fiscal quarter, we're going to maintain our cash position, and it's a continual focus on our CORE program to drive opportunities for efficiency in our cash flow management. Inventory is one huge area of focus, and our CapEx spend and where we're investing is another.

Your next question comes from the line of Amitabh Passi from UBS.

Just a clarification from my end as well. I think you talked about OpEx savings of about $300 million this fiscal year, fiscal year '13. Just wanted to clarify. Is that total savings you'll see relative to fiscal '12? Or if I took the existing OpEx structure, you think it would drive another $75 million of savings on a quarterly savings by the time we exit fiscal '13?

No, I -- what I was referring to was in all of the initiatives, we've done it within the CORE program. We've executed on initiatives that will affect $300 million of savings in this -- the rest of this fiscal year. So it could come through our cost in materials, it could come through OpEx. And I won't get into the specifics of the allocation.

Okay. And then just as a follow-up now, maybe for you, Thorsten. Can you, Thorsten, remind us, what key performance metrics is your compensation based on? And similarly, the Chief Marketing Officer coming in or Chief Operating Officer, how should we think about what metrics would you be assessing their performance on or the board in terms of their compensation?

I think that question is a discussion between me and the board and the relation between the board and I. So I'm not in any way in a position to comment on that or give any information out.

[Operator Instructions] Your next question will come from the line of Rod Hall of JPMorgan. Rod B. Hall - JP Morgan Chase & Co, Research Division: My question pertains to the services business. I mean, your ARPU, as we -- we calculated, right? The ARPU decline year-over-year was around 10% in the quarter. And so I just wondered, Brian. You mentioned there's continuous pressure on those ARPUs. I wonder if you could walk us through maybe a little more color on exactly what's going on there. And also, it'd just be interesting if you could help us understand what the mechanics of the ARPU renegotiation process are? Are there contractual terms that may cause that process to go more quickly or more slowly? If you could give us any idea on that. And then I -- just also, on services, while you're at it, could you help us understand whether you'd be willing to give us more detail on that services business? We all kind of can take a guess that it's high margin and so on, but it would be helpful to know a little bit more about it to be able to calculate returns on capital in that business and so on. So a lot of people out here trying to value that business. I just wonder if you guys would be willing to give us any more detail on it.

So your first question on the ARPU change, I don't have exact number year-on-year in front of me. But just some of the mechanics of the change I had mentioned, how the subbase -- some of the churn that we're seeing in the U.S., that, that churn may be coming off the higher-tiered plans. And we're actually picking up subscriber growth internationally. It's coming in the lower-tiered plans. So that's where you get a significant ARPU change quarter-on-quarter, which is impacting the overall base of -- on our ARPU change. So we continue to see that in our forecast coming forward, and that's the reference point I was making on the ARPU change.

Your next question comes from the line of Simona Jankowski of Goldman Sachs.

I just wanted to ask about the delay in the timing on BlackBerry 10. Given how fast we tend to see innovations in things like chipset road maps and displays and so forth, by definition, wouldn't you expect it to have slipped back in terms of its competitiveness, even just from a hardware perspective, if it's going to have kind of 6 -month-older technology at that point?

Yes, thanks for asking that question. When we designed BlackBerry 10, we did not just design a product, we designed a platform. And consequently, in this platform, we were going for really, really high-end spec because that is an aspirational product that is supposed to really excite the customers. So without going into specifics before we actually launch it and disclose all elements that make up this great product, good questions, but I'm very, very confident that this product will absolutely deliver on its performance. And hardware plays a key role in it, but what will be really, really different and exciting about BlackBerry 10 will be the entire user experience where the applications that you will see on that product will be the features that are really targeted to the BlackBerry segment of people that use a BlackBerry for their purpose. So hardware plays a role in it. In my view, that is very, very well covered. I'm not concerned about that, and I think, based on the hardware we provide, we will be more than competitive and we will have a great user experience based on the BlackBerry 10 platform on it.

Your next question comes from the line of Scott Sutherland of Wedbush Morgan Securities.

When you look at the ecosystem of the BlackBerry 10 launch, and I know you did some acquisitions on some cloud-based solutions, your competitor out there has 125 million subscribers. How do you plan to create a road map, maybe your 78 million subscribers or other device users, to move them to a cloud-based system that could make this more a successful launch?

The way I look at this is twofold. You have applications that reside on the device itself like the whole PIN suite or your -- all of your communication channels. And then today, the cloud is basically used to store data on the cloud. We have designed BlackBerry 10 to be a real open system for its end users. So you basically can use the cloud of your choice, and it's extremely easy and comfortable to connect to the cloud of your choice and build and drive that. BlackBerry 10 is really an all-encompassing architecture. It's not just, as I said, a device with software on it. The way it connects to the ecosystem, the way it leverages the ecosystem, the way it leverages media content coming to the device is a whole new user experience. So I think it's important to take away from this question that the BlackBerry 10 platform is a fully open platform, and it's really easy through the developer toolkit or the run times that we have to really easily connect to that system.

Your next question comes from the line of Tal Liani of Bank of America.

The question is, what are the arguments for maybe doing something completely different in a sense that it seems to me like you're trying to do exactly what Nokia has tried to do initially and others, and it's -- don't you think it's a little bit too late to try to develop another ecosystem and another set of applications, et cetera? So the question is really going back to core discussion of strategic value and what are the values of the company and how can you create value? Or rather maybe, the right strategy is to focus and shrink and go only to the corporate market and focus on this market. So I really want to hear the -- just your line of thinking when it comes to long-term strategy rather than the quarters, how they play out.

Yes. So I think the answer to your question is that exactly, in light of the long-term strategy, long-term value creation, we came to the decision that joining the family of the Android players, for example, would not fit [ph] RIM's strategy and its customers. We are not trying to be one of many. We're trying to be different. We're trying to be the best solution for our customers that buy a BlackBerry, know why they want a BlackBerry. And we're aiming for nothing less than being a viable, successful, mobile computing platform of the future. This is what we're aiming at. And I think that's the difference. If you compare us with others, did we take the hot rod? Absolutely. Absolutely. But having done this and building and completing this new mobile computing platform that then expresses itself as a smartphone or as a tablet or as a vertical application or embedded in cars, whatever you want to do, that is where we will take BlackBerry. And this is -- that's why it was absolutely required and necessary to build its own platform. I would argue the other way around. If I continue to rely on somebody else's OS and somebody else's platform, would that allow me in the long run to really differentiate towards my customers and provide them the services and the environment that they request from me and that they would like to have? I have a big question mark around this. So I think going this way and building the platform we are building has the absolute intent to serve our customers and our markets better than on a standard-based OS and platform.

Sorry, Tal, we'll get back to you.

Your next question comes from the line of Kevin Smithen of Macquarie.

I wondered if you could go through some of the amortization here. Looks like there's a -- obviously a wide gap between -- you've reported $136 million in a positive free cash flow this quarter yet a large operating loss. Your amortization looks like it was up close to $80 million year-over-year in the quarter. Why are you still adding intangibles? And can you explain this discrepancy? And where -- when does amortization peak out?

Thanks for the question. In terms of the – and I'm not sure what you mean by the discrepancy, but in terms of the increase year-on-year, it's obviously reflecting CapEx investments that we've made. And the other question on the intangibles, we do have ongoing investments in prepaid license agreements that we've been seeing over the last number of quarters. And when we -- as you can see, that our -- as I mentioned earlier, our CapEx investments have been coming down quarter-on-quarter, and that should reflect it in lower amortization. And that is another focus on the -- on our CORE team and how we're actually managing CapEx investment relative to our amortization line and how that gets depleted. So from an EBITDA perspective, you're right, we do have positive EBITDA, and the increase year-on-year on the amortization reflects those investments over the outlook or...

Is that likely to keep cash flow positive over the next couple of quarters, even if there's an operating loss?

Well, I don't want to comment on the next couple of quarters. But in terms of what I was saying about next quarter, in terms of maintaining our cash position, that's accurate.

Your next question comes from the line of Daniel Ernst of Hudson Square Research.

In the competitive landscape, you have a lot of developments and competition at that high end with now iOS 6 coming out and with Windows 8 coming out, and Android 4.1 all going into devices at the high end. BlackBerry 10, which addresses that high end is late, and so I imagine you'll need to have customer erosion in that segment. But also, you're seeing pressure at the low end of the market, which is being served by Android devices, which are still app- and touch-centric devices. What do you have in the pipeline? What can you say about your competitive response to also try to maintain that low end of the market as it goes more sort of app-centric, cloud-based low-end devices?

Yes, there's a lot of competition coming. That's the nature of consumer electronic business and being in a growing market and we're not afraid of this. Again, as I said to the question before, this is why we have built our own platform, because we want to be distinct, we want to be differentiated and we want to deliver to the BlackBerry people. We really want to serve our market segment, and we want to be the best in helping BlackBerry people to achieve what they want to achieve. And I think with our future BlackBerry 10 offering, we have a very distinct value that we can bring to the market, and that you will hear later about. As far as the low end is concerned, yes, I think the trend you're describing is correct. There is -- that's where the volume segment is. This is where the majority of the onboarding happens from feature phone and regular phones into the smartphone segment. And we're addressing this through the recently launched Jet Series [ph], a 2G and a 3G product. And we have had great success with our former product, the 8520. So we strongly feel about being able to cover that segment even in a more competitive environment. The question about the form factor, you were talking about touch, app centric. I mean, if you look specifically into those markets where we are very, very strong like Latin America, Africa, certain countries and regions in Asia Pac, this is actually where messaging still plays a major role. This is also where many, many BBM users are out there. And they're still very much attracted by the QWERTY form factor that we provide them. So we see the competition. We know we have to be able to compete. But also with a new product line on the Jet Series [ph], we feel we are prepared to do this.

Actually, your next question comes from the line of Scott Thompson of FBR Capital. Scott Thompson - FBR Capital Markets & Co., Research Division: A quick question on patents. There's a lot of valuing of these assets going on. Can you give us a little more detail around what type and what you hold and what they might be worth and that sort of thing moving forward?

I mean, on the patent side, you're right. The whole industry is focusing around patents and what are the various patent holding of various companies. Given the activity in this sector, I ask for your understanding that I'm not in a position to really give you detailed information here. What I can say is that RIM is a very innovative company. We employ strong research groups. And writing patents, getting good patents, meaningful patents has and always will be part of RIM's DNA. And I think we are pretty successful in getting there. So without getting into any further detail, I think we are in a good position on patents.

Your last question comes from the line of Mark McKechnie of ThinkEquity.

Oh, great. Just a simple question. I'm not sure you said this already. But one is, how many employees do you have -- will you have before and after the 5,000 reduction? And then if you could just clarify also? I heard a bunch of different answers, but on a net cash balance, do you expect it up, down or flat at the end of August versus the $2.2 billion?

Okay, let me -- okay, Thorsten.

On the employee number, we have 16,500 people on board right now, and the math tell us that using this, about 5,000 people, will lead us to 11,500. Now the way we do this is -- has had different strategies that Brian was talking about, potentially outsourcing certain functions that are meaningful to a business but are not key and are not core to a business. So we can leverage and we can use economy of scale over the company. So it will be a mix of various activities that we will be taking. But it will be around an 11,000 number globally, employee number for RIM.

That's by year end, right? Or by the fiscal year end?

I mean, we -- so we -- as I said, we're trying to be as responsible and as respectful to our employees and the communities we are in. So we're trying to do this as fast as we can to really avoid any uncertainty with the people that are affected, but the number is supposed to be reached by the end of the fiscal year.

And as it relates to the cash balance, I had mentioned earlier that we were -- based on our current productions and expectations, that we would expect to maintain our cash position by the end of this -- by -- at the end of Q2. And -- however, that could be impacted by, as Thorsten was just mentioning, the implementation of some of these CORE activities, which could have -- well, likely would have a cash impact on it. And it would depend on the timing of those initiatives.

Great. Thank you, Luke, and thanks everyone listening on the call, and we look forward to speaking to you on the next conference call. Thank you.

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