Research in Motion Ltd Earnings Call Insights: BlackBerry 10 Demand and Gross Margin Decline

Research in Motion Ltd (NASDAQ:BBRY) recently reported its first quarter earnings and discussed the following topics in its earnings conference call.

BlackBerry 10 Demand

Gus Papageorgiou – Scotia Capital: I guess fundamentally probably your success in the near term here depends on demand for BlackBerry 10 devices. I’m just wondering if you can kind of characterize how demand has been versus your expectations and with the launch of Q5 at lower tiers do you expect to see your sales improve in developing world where you’ve been clearly losing some subscribers?

Thorsten Heins – President and CEO: Gus, this is Thorsten. I mean, if you look at where we are today with the BlackBerry 10 product launches, as I’ve said in my report, we are five months in Z10 launch, Q10 launch, just came to the S in the last week. Q5 is just launching in Dubai. We are in the middle of launching all of these products in all of our various markets and regions. Certainly the Q5 is geared to those selected markets in Asia Pac and it’s too early to say how well we are doing, but we see strong demand, we see a good reception of the device and let’s see how it does in those selected markets where we are pushing it.

Gross Margin Decline

Maynard Um – Wells Fargo: I know you don’t provide gross margin by the segments, but if I look at the mix of your hardware, you had a greater BlackBerry 10 mix, which I presume higher-margin lower BlackBerry 7, which is lower margin. If I run the math and make some assumptions, it actually looks like the implication as the hardware gross margin decline sequentially, can you just maybe just walk us through that, why that is despite the mix and I am a little surprised that despite the number of operators you have, the number of shipments per operators still seems pretty small, particularly in light of the sales and marketing dollars that you’re putting out there. If you could just walk us through that as well, that would be appreciated.

Brian Bidulka – CFO: Maynard, it’s Brian. So just on the gross margin, so as it relates to just the overall mix, it’s obviously dependent upon the mix of hardware and even inside hardware and then the mix of hardware relative to service revenue. So we are continuing to focus on that cost management, make sure we’ve got the right efficiencies, procurement manufacturing supply chain. So as we look through the mix of our hardware side, with Q5 coming on, it does have a different margin stack than of the other products, but we are working to drive those efficiencies and it’s early in the cycle and we’re looking to get BES10 deployed and rolled out as well.

Thorsten Heins – President and CEO: As you were asking, Maynard, about the marketing spend versus result, I think if you look at the launch schedule that we had, Q10 isn’t even available in our markets that we just went through the U.S. last week. So I think it’s really early to say and as you know, you have to provide these marketing spends earlier to create the promos, promotional windows around the various product launches. Also, it is a very competitive market. So, yes, we have to take the measures that we have to take to be successful. But all-in-all, I think it’s pretty early days still as we still haven’t even completed the entire portfolio. One more element of this, by the way, is that we’re just launching BES10 into the market and as you know, there’s a correlation between BES10 – numbers of BES10s out there, then testing in enterprises, then purchasing the devices. So from that perspective, I think it’s too early to really say there is, let me say, some sort of a stable, predictive way of predicting the future. But what we see so far in terms of BES10, I gave you numbers in my script of the earnings call and on Q10 is encouraging.

A Closer Look: Research In Motion Ltd Earnings Cheat Sheet>>

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