Ladies and gentlemen, thank you for standing by. Welcome to the BlackBerry Fourth Quarter 2014 Results Conference Call. At this time all participants are in a listen only mode. Following the presentation we will conduct a question-and-answer session with instructions provided. [Operator Instructions] I would like to remind everyone that this conference is being recorded. And I will now turn the conference over to Mr. James Yersh, Chief Financial Officer. Please go ahead sir.

Thank you, Luke. Good morning everyone and welcome to BlackBerry’s fiscal 2014 fourth-quarter and year-end results conference call. I’m James Yersh; the Company’s Chief Financial Officer and with me today is Chief Executive Officer, John Chen. After I read our cautionary note regarding forward-looking statements, John will provide a business update, and I will then review the fourth quarter and year-end results. We will then open the call up for questions. This call is available to the general public via call-in numbers and via webcast as noted in the Investor Relations section at blackberry.com. The webcast can be accessed through your BlackBerry 10 smartphone, your personal computer, or your BlackBerry PlayBook tablet. A replay of the webcast will also be available on the blackberry.com website. In order to let as many people as possible ask questions, please limit yourself to one question. Some of the statements we will be making today constitute forward-looking statements and are made pursuant for the Safe Harbor Provisions of the U.S. Private Securities Legislation Reform Act of 1995 and Canadian securities laws. 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. Forward-looking statements are based on estimates and assumptions made by the Company in light of its experience and its perceptions of historical trends, current conditions and expected future developments as well as other factors that the Company believes are appropriate in such circumstances. Many factors could cause the Company’s actual results, performance, or achievements to differ materially from those expressed or implied by the forward-looking statements, including the risk factors relating to the company that are discussed in the Risk Factors section of our annual information form, which is included in the Company’s annual report on form 40F and the Company’s MD&A, copies of which filings may be obtained at blackberry.com. These factors should be considered carefully and you should not place undue reliance on the Company’s forward-looking statements. The company has no intention and undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. I’ll now turn the call over to John.

Thank you, James. I was listening intently about the undue reliance on some of my comments. So good morning everybody and welcome to our call. On our last earnings call we laid out an eight quarter plan and our strategic priorities for returning the Company to growth and as well as profitability. So I'm obviously extremely pleased with the Q4 results because it put us on the track and it is not - slightly ahead. So I would like to on the financial side -- of course James is going to go into much more details -- I'd like to just kind of focus on a few things that I feel pretty good about. The first thing is our operating expenses. It’s on target and it’s actually ahead of target and I understand the Company had made some statements in the past, and I think the numbers shown that we’re about a quarter ahead of schedule at this point. More importantly, our normalized use of cash from operation is now 30% lower compared to last quarter. Our adjusted EPS loss is down to $0.08 compared to $0.67 a quarter ago and as I pointed out, James certainly will go through all the financial details. Maybe I’ll just focus more on the activities for the past quarter and going forward. So in the last few months, we have spent a lot of time streamlining -- I spend a lot of time understanding our channels, and we spent a lot of time streamlining and rationalizing our channels. As a result, channel inventory is down by one third from the work we have done. We have moved all our distributors on their contracts, on their marketing plan, pricing, go to market and various elements, that’s important. So all-in-all, I’m very pleased with the…

Thanks John. There is a lot I want to take you through this morning. So let’s get right to it. Revenue from continuing operations for the fourth quarter was approximately $976 million compared to $1.2 billion in the third quarter. In the fourth quarter hardware represented 37% of revenue compared to 40% in the previous quarter. The Company recognized revenue related to approximately 1.3 million BlackBerry handheld devices in the fourth quarter compared to 1.9 million in the previous quarter. Although the number of devices recognized decreased quarter over quarter, we have been working with our partners to improve sell through levels and to stimulate global demand for BlackBerry devices. 3.4 million BlackBerry smartphones were sold through to end users in the quarter which included shipments made and recognized prior to the fourth quarter and which reduced the Company’s inventory channel. We continue to implement programs with existing partners, and as John mentioned, we’ve actually expanded our reach into some non-traditional channels as well. These efforts were instrumental in decreasing channel inventory of existing products by a third and it allowed us to broaden our global reach. Service revenue represented 56% of revenue compared to 53% last quarter. While service revenue will continue to be generated by current and future users of BB OS devices, we expect revenue to decline in the first quarter of fiscal 2015 by a percentage consistent with the decline experienced this quarter. As John noted, we continue to see good traction with the adoption of BES 10. To help offset the lower service revenue generated by customers using BB OS devices, we expect to see gradual revenue contributions from BES 10 and the recently announced BES 12 beginning in fiscal 2015. Software revenue represented 6% of the consolidated revenue compared to 5% in last quarter.…

Okay. All right gang, let’s start. Operator, could you please poll the questions for us.

(Operator Instruction). Your first question today will come from the line of Mark Sue of RBC Capital Markets. Please go ahead.

John, maybe a question on just kind of the window of opportunity to kind of recompose the business. If I look at your sub base, it’s still eroding maybe less than 50 million now. So well you have a customer base to upgrade and migrate to new software and services. How can you proactively bridge this installed [inaudible]and slow the rate of decline there as you get them to a new destination and what can we do to kind of stabilize that base? And then James real quickly, CapEx plans for the year and maybe how we should think about intangible payments? Is there a fixed component to payments or is it perhaps the number of units and that they actually go away over time.

Thank you, Mark. I’ll go to your first question first. This is a whole reason by we created the BES 12 as an integral part of our strategy. So with the BES 12, if you see why the sub is going down, it’s because people think that they need to move to the BB10 environment and therefore have to leave the BB7 environment or BB5 and part of the reason of that is because of the fact that I spoke about two infrastructure and enterprise obviously are cost conscious and not only on the cost of the servers and the software, but the on-going administrative cost and so forth. In addition to that I think a lot of people doesn’t know how good we are in the cross platforms capabilities, managing iPhones, managing Android devices, managing Window devices. So it was important for us to solve those migration issues or dual infrastructure issues as well as making sure that people know that we have very strong offering, probably the best of class offering. Therefore the BES 12 is why it is important. It will roll out probably the October, November timeframe, more November than October. Every time I talk I reduce it by one month to put pressure on engineering people but it’s really more of a November timeframe and the Classic will also come out and I think it's all going to be very exciting for our end users I pointed out the productivity gain of using Classic and so called muscle memory and having the fastest Internet browser and great multimedia capability. So it’s kind of the best of both worlds for the BBOS and BB10. So, those are our bridging strategy and I feel very good about it whist talking to a customer and people are now pausing, or at least consider, I shouldn’t use the word pausing, I think consider pausing before they get off our platform. And in addition to that, with our push on the BES 10/12 as a server, especially in the cross platform world and it is also -- we could also manage devices, not only just phones. There are a lot of interest from our competitor base that is coming over and as I said earlier, we're now generating quite a bit of a marketing buzz in that and people are visiting our sites and registering with us to learn more about it. So I see this as a good turnaround plan and it will – hoping, knocking on wood, I am hoping that it will help also slowdown the sub erosion.

Mark, it’s James. For your questions on the financials, so CapEx in terms of $22 million, I mentioned that we need to make some investments going forward to support the new services. That will require CapEx. So I would expect that number. It’s going to vary by quarter. I would expect it to be higher as we get through fiscal ‘15. And your question on intangibles, I would say most of our agreements do kind of scale up and down with the business. Last quarter we did talk about the one particular agreement and the fixed payments ending in the November quarter in Q3. So that -- we're still on that timing to execute on that.

Your next question will come from the line of Tim long of BMO Capital Markets. Please go ahead.

John, if we could just get into the growth side of this again. I hear you on the servicing and software business. Just curious how we get there, per James’ discussion on service it still seems like we're going to see double-digit declines sequentially there and software is only 6% of the business and I don’t think it ever really got over 300 million. So, is this just -- including when the Company had huge scale. So are we in a different dynamic now where you think this -- all these monetization of some of these software things which have been free for BlackBerry, will be able to be monetized? So is it a different world or is BlackBerry able to leverage itself in a more aggressive manner on the software side? I am just curious why we haven’t seen this in the past and what’s going to cause this to offset some of the declines that we'll see in the other businesses? Thank you.

Yes, it is a great question. So, there’s couple of dynamics. First of all you pointed out exactly, before I go into just software and services, I hope nobody think that we don’t take seriously our handset business. One of the reason why we introducing the -- not introducing, wrong word -- but we will still supply the BB7 devices because customer wants it. There's a lot of demand out there. The Classic is a great product. There are other products going to come out that I think people will like. Obviously we think they will like. Otherwise we won’t be building it. And then of course the Jakarta phone and the Jakarta phone pushing into more in the emerging world. That will bring up a lot more BBM plus other areas like we’re working with Windows and Nokia and so forth. So there is still a strong return of the revenue base on that. The difference this time is as we work ourselves out of the prior contractual agreements and generating new agreements, we are very focused on making money from the handset. That will take a little bit of time but you would see both the uptick on revenue as time progresses and as well as the margin of the handsets. But in the software world, you hit one right -- your nail right on the head which is, there is a practice of us "giving software away for free". And I came from the software background. I don’t find that practice very sensible and actually so much IP and services one could add that are extremely valuable and I don’t think giving software away is right strategy going forward. We are building the sales force more towards software and messaging and services sale force. We are building…

Your next question will come from the line of Maynard Um of Wells Fargo. Please go ahead.

So just to clarify you said enterprise customers are holding off turning off Blackberry now. So does that mean the teens decline in fiscal ’15 is coming more from consumer rather than enterprise and then further question, I’m just wondering if you have an expectation of whether your target customers are more likely to buy perpetual versus annual, gold versus silver and then also whether you think customers might wait for the BES 12 release before making that purchase? Thanks.

Okay Maynard, first of all let me clarify. Only a few enterprise that I have met, when we talk about the BES 12 they said yes, we’re holding off and waiting for BES 12 and Classic. I have those, but this is -- I’m not making this overarching statement like the entire market is doing that. So where James had guided about the service revenue going down and all I’m saying earlier to both Kim and Mark was I’m hoping that the BES 12 strategy as we laid out right now will help enterprise to reconsider and start slowing it down and we will some positive effect but it’s not going to be like an overnight instant turn. So please don’t, I don’t want to mislead anybody on the call. Yes I believed most customer will wait for the BES 12, because that’s the most sensible; go to one infrastructure kind of a play. So I believe that’s true. That makes sense?

Great. Your next question will come from the line of Peter Misek of Jefferies. Please go ahead.

So John maybe, you can help us understand the mobile device management market. We’re starting to see some price aggression coming out of AirWatch and MobileIron and good -- AirWatch retooling as [indiscernible] is absorbing it. I really do want to understand how the differentiation will work there, how you guys see that market evolving through your own services. Clearly you have an immaculate [ph] network. That doesn’t some to be always top of mind for these enterprises. It’s a bit surprising to see someone brought our -- some of the more regulator government industries suggesting that maybe they don’t need that level of security. So I’d like to understand that and then just very quickly on the pre cash flow, what kind of level James should we see in terms of cash? What do think is a safe cash level? Should we see the cash remain above $2 billion, $2.5 billion? If you can help us understand that, that’d be great.

Okay, Peter let’s talk about the MDM market. The MDM market, which one, the one that I’ve been in for a very long time; we created -- I was the team who created the MDM solution for the SAP. So I know the market quite well. It’s really not only the MDM market. The MDM market right now is kind of mature. It is getting bigger and bigger but like you pointed out the price comparison is really, really high. That is the basic foundation to play. I spoke about EMM, the Enterprise Mobile Management market. That’s a much bigger market that you have to build on MDM. So this is why it’s so important to become a player in the MDM world. I personally feel that out there for enterprise there's still buying potential and they’re still signing site [ph] type licenses or licenses by count. This is why it is so important for us to provide both that solution as well as a cloud based solution as well as a hybrid solution. So this is why I made a statement but thank you for allowing me to kind of repeat it, just in case anybody missed it. So the real idea is not just compete on MDM but anything that’s beyond MDM. As far as security is concerned, I’m with you. I don’t know why the regulator industry will think that the security is not at the top of my. In fact I know most enterprise company boards look at risk management, IT risk management and mobile risk management as a really big item. So I think this will come around. This is one of the things -- I always tell people this is like an earthquake type thing and where I live in California, right before the…

Hey, Peter, it’s James. On the financial part of your questions, in terms of cash flow, we’ve made some progress quarter-over-quarter and given where we are we’ve got to continue to show progress to get to the objective, being cash flow breakeven. In terms of the numbers you threw out, modeling on our side, I think number is starting with two. I think you’re thinking about that right.

Your next question will come from the line of Kulbinder Garcha of Credit Suisse. Please go ahead.

My question or clarification is really on the balance sheet. So maybe for James. The net cash halved to $1 billion. I’m just trying to still reconcile that with the cash flow movement. How much of it was cash burn and how much was you debt being for reasons revised up? Can you just talk through that? And then beyond that, what was -- if you take out one time items, what was this quarter’s free cash flow burn? And what do you think it will be over the balance of the year. The reason why I’m asking is I think at a some point your net cash may have - your net level of net cash may have issues with some of your debt covenants. I’m trying to understand how that dynamic may work? And then for John, just on the service side, you’ve said the people will hold off for BES 12. Your services premium is declining. So then this Company can’t get back to stable services revenue stream until sometime in the middle of next year, is that right when thinking about timing?

Okay, Kulbinder, I'll start. The way that we’ve talked with the $300 million improvement, I think if you ignore the tax refunds in Q3, you ignore kind of the debt in Q3, you ignore the debt in Q4, if you look at the cash burn just from that perspective, that’s where you get to the $300 million. So I think that kind of answers both of those questions. Just to be clear, you mentioned debt covenants. I’m quite sure where you’re getting that. Debt doesn’t really have any financial covenants associated with it. So I just wanted to be clear on that point.

Actually, James, I’m still a bit confused. You net cash went from $2.2 billion to $1 billion. It declined sequentially by that much. The components of that reduction in net cash were exactly what then? Can you explain that -- so that 1 billion decline in your net cash number from last quarter to this quarter, how did it decline by 1 billion?

I’m not sure I follow your math, Kulbinder. Maybe we can just take it off line and we’ll get back to you on that.

Okay, this is about services revenue. We have a decline of roughly about 12% to 15% and I’m hoping that our strategy, when you start tracking, it would slow that decline down that as time progresses and wait for the BES 12 to take hold in the market and then we’ll introduce new services and technology that the customer will want to use and pay for. So the answer of your question is I don’t by mid-year or next year. That certainly will be -- I hope to see good progress by mid-year next year. I’m hoping to see little sooner than that personally, but if you want to use that model, that'd probably be reasonably conservative.

Okay and James just want to clarify one thing then. Your net cash number according to you right now is what $1 billion, correct?

We’re at 2.7, right.

Gross cash [indiscernible] 1.6 it’s about.

But actually own that money now, you actually 1.6 billion.

No, it doesn’t change any of the carrying value of debt, the face value or doesn’t change any of the conversion option. It’s purely -- let’s call it a paper adjustment required by the accounting rules. So the net cash calculation, which still you would subtract to 1.25.

Let me add a layman's view on this, non-accountant view of this thing. The debt convert was $10. In the last quarter there were - the volatility of the trade and in the fact that at the end of the quarter, it went beyond $10. And so therefore we have to take a valuation charge, which are noncash -- though no effects on anything and last quarter on an earnings call -- I say a about lawyers. Now I’m going to apply the same to accountants. It actually makes absolutely no sense. It took me a lot to learn it but I just have to accept it. They had no effect to the Company. It's not a liability and it’s not cash.

And Kulbinder, going forward, as long as the debt instrument is outstanding we’re going to have fluctuations in this number. So we’ll continue to report what the impact is.

Your next question will come from the line of Ehud Gelblum of Citigroup. Please go ahead.

A couple of question. On the channel inventory that fell 30%, if I'm doing the math right, that 30% was the 2.1 million units. There's a difference in your sell through and your shifting. So which means that channel inventory before the quarter was 7 million and channel inventory today is 4.9 million. If we do a little bit more math I get that channel inventory -- that 4.9 million of channel inventory right now is about 20 weeks' worth of inventory on your current sell through. So that’s usually much higher than we see for half the companies -- we used to at least four to six weeks, maybe a little bit higher today. So just wondering, is that the right calculation and should we see that 20 weeks of inventory still come down over the next couple of quarters and so that will restrict the selling. So that’s question number one. Second question is on the services revenue the sequential decline, was that mainly should we assume from subscriber to client as supposed to from ARPU decline. And last quarter you said that enterprise was 20% of the subs outstanding. I want just to see if we can get it updated, it’s still 20%? Or did enterprise fall faster or slower than the consumer? And then on this new run with Vistron on the Bold John, previously from last conference call and conversations you had earlier, you were sort of averse to the hardware business and everything going forward was software. And my understanding was that the whole move to Foxconn was to bring the hardware business to a gross margin breakeven and that the older units that you were still selling, Blackberry 7s were at loss? So is this new run at the Bold at Vistron, is that still at a loss or did you work out a new deal with Vistron as well so that you're at least gross margin breakeven on those new Bolds?

Let me address that. That’s important. Thank you bringing that out. No this is not at a loss. We did work it out with Vistron and in addition to that we have the demand.

Correct but even with the demand before, you are selling BB7s at a loss. So I am assuming -- so all Bolds going forward are no longer at a loss or just the new run of them?

At least this new run. I can’t tell you all Bolds but at least this one. I don’t think this new run obviously is that material. More important to that material in terms of revenue and the margin and I agree -- I don’t know whether it’s going to be a long long-term run that will carry the same margins. But this set of runs will give positive margins.

And back to your questions on channel inventory, your calculation was right but your numbers are -- I am going to call it considerably higher than mine. So I am not sure if there is an issue there that maybe we can talk about afterwards but at least from the existing products, we definitely do can expect channel inventory to continue to go down based on some of the programs and some of the works we’re doing with our partners. Now we are going to launch new product which of course will require channel fill and that may bring those levels up but it’s for a good reason and for an isolated reason.

Enterprise subscribers and then I have a BBM question as well on subscribers.

Yeah I think the mix is constant.

So they both fell -- in concert they both fell to 14% or so.

I think the enterprise is slower than the consumer but not appreciably different but that I think we’ll have opportunity there.

Last on BBM, the 85 million active users, is that comparable to the 80 million you were talking about last quarter or that apples-to-oranges?

Apple-to-apple.

80 million to 85 million?

Yeah.

Your next question will come from the line of Todd Coupland of CIBC. Please go ahead.

I wanted to know if you could tell us how many non-BlackBerry users your BES 10 systems are running now?

I don’t know. I don’t have that number. Sorry about that. We’ll find that out and make sure that people get back to you.

And then just a point of clarification on the BES 12 coming together for common infrastructure. So are you saying that IT managers then can being that together by November and then after that you’d start to see tick up in non-BlackBerry management? Is that the goal? So you’ll put the sales team in place and then hope to being them on after the November quarter?

The sales team -- yes we’re putting a sales team in place. It only needs -- the customer will only need one infrastructure when we got to BES 12 that manages all devices, BlackBerry old, BlackBerry new, iPhone, Windows and Android.

And the availability for that, you'll market it now but enterprises can start to deploy that after November?

Right.

Your final question will come from the line of Simona Jankowski of Goldman Sachs. Please go ahead.

I wanted to go back to the question about Vistron. You talked about negotiating that similar kind of variable cost model for the new BB7 run. Are you still trying to do that for the rest of your manufacturing base and if you can just give us a sense, as you’re existing this year, what percent of your device volume will be on this kind of variable cost model like what you had at Foxconn and this new BB7 run at Vistron versus the more traditional purchase commitments kind of model?

Simona, the problem is I don’t want to do go down this path because I will be forced to reveal some information that I’m not comfortable with two of our partners. And so I could only tell you directionally, I have no intention to lose money on handset. So the handset volume itself isn’t as big a concern for me but the margin is and I’m sorry that I couldn’t give you more detail than that, but we are working out very well with Foxconn obviously and in some instances, and some model with Vistron, but they are both good partners, very good partners.

Okay. And maybe just to then ask that another way, what is your expectation to reaching breakeven on the hardware side of the business in terms of timing and how does that look both from a gross profit perspective but then also from an operating profit perspective?

It will be fiscal year ’16.

For which one, grow or operating, or both?

For both.

Okay. And then just last question is for you John is on QNX where you talked about having a dominant position and certainly we saw a lot of buzz around QNX at both CES and MWC. Can you just give us a few more parameters around that? What kind of penetration or market share do you see? How should we think about the content per car or the revenue level? Just anything you can disclose would be helpful as we start thinking about that business?

I think, okay. The good news about QNX is it’s an embedded play. We already have about half of all the cars out there and with others players coming in and also connected with the QNX, so being compatible with the QNX, I wouldn’t say 100% but the majority of all the cars out there with the connected car will be compatible with QNX and some of them we have direct design win revenue and licenses some we will have indirect side of the equation and this is why we’re also building a cloud based solution to connect with QNX. So I don’t want to say 100% but normally when you say 100% that’s like overly aggressive but quite dominant. I don’t have the numbers and I'd rather not disclose the actual number itself. That’s not what we’re preparing to do, at least not at this point. So I don’t know whether I answer your questions but now if you want more detail that we could connect some people at QNX with you. We're more than happy to do that.

I appreciate it.

Thank you. Hey Luke I’ll turn the call back to you.

Excellent. Ladies and gentlemen, this will conclude the conference call for today. Again we do thank you for your participation and you may now disconnect your lines.