John Chen - Chief Executive Officer James Yersh - Chief Financial Officer.

Tim Long - BMO Capital Markets Maynard Um - Wells Fargo Simona Jankowski - Goldman Sachs Mark Sue - RBC Capital Markets Daniel Chang - Deutsche Bank Richard Tse - Cormark Securities Ashwin Kesireddy - JPMorgan James Faucette - Morgan Stanley Deepak Kaushal - GMP Securities Ehud Gelblum - Citi Todd Coupland - CIBC.

Good day, and welcome to the BlackBerry Second Quarter 2015 Results Conference Call. Today’s conference is being recorded. At this time I would like to turn the conference over to [Joe del Callar]. Please go ahead sir..

Thank you, operator. Welcome everyone to BlackBerry’s fiscal 2015 second quarter results conference call. With me on the call today are Chief Executive Officer, John Chen and Chief Financial Officer, James Yersh.

After I read our cautionary note regarding forward-looking statements, John will provide our business update and James will then review the second quarter results. We will then open up the call for questions. In order to let as many people as possible ask questions, please limit yourself to one question.

This call is available to the general public via call-in numbers and via webcast on 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.

Some of the statements we will be making today constitute forward-looking statements and are made pursuant to 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 perception of historical trends, current conditions and expected future developments, as well as other factors that the company believes are appropriate in the 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 40-F and the company’s MD&A, copies of which filings maybe obtained at www.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 will now turn the call over to John..

Okay, thank you, Joe. Good morning everybody and welcome. Thank you for joining us. Let’s just start right into the quarter. This quarter from all our key operating measures has happened to be a very solid quarter. I like to highlight a few things that we were particularly pleased with.

The focus on margins enabled us to achieve a non-GAAP operating profit. Our non-GAAP loss per share narrowed down significantly down to $0.02 a share which of course compares that to the $0.11 a share last quarter.

Our cash balance, we maintained at $3.1 billion and we dramatically lowered our use of our cash from normal operations to $36 million and may I remind you that was from $255 cash use for last quarter.

We added over a million new users to Blackberry 10 in the quarter and lastly, I am pleased to point out that the hardware business turned in a non-GAAP gross profit for the first time in five quarters which is slightly ahead of our expectation, this is of course directly as a result of our supply chain efficiencies, the improvement in our distribution channel and the strong focus on margin and of course much more work needs to be done and could be done there.

Revenue came in within our range, at the low end of our range. I like to spend a minute or so to just highlight a few factors that affected the revenue this quarter. First, you know we are all as a team very focused on margin and so we have chose to turn down and throughout the quarter a few lower margin deals.

Secondly, it’s our plan to aggressively shift our software business from the perpetual license to a subscription base. So as you, as most of you were familiar with this know the fact that subscription although have a lower revenue in the current quarter but build a much larger and more repeatable revenue stream for future quarters.

We are definitely in the first half of what I referred to the eight quarters recovery and from a revenue standpoint we might not be at the lowest point but we are near the bottoming of those revenue. I will make some comments about that later this morning. Now let me spend a little bit time on the growth part.

We had obviously done with our workforce restructure portion of our plan that was a well leaked document and we are now making judicious investment in growth. Most specifically we are focusing on the following four areas, so first let me start with hardware. As I mentioned earlier we turned a profit this quarter.

Last quarter, we successfully launched the Z3 as you may all know, I think it’s May 12, in Indonesia and since then 12 more countries had been launched including India, Philippines, the UAE and South Africa. Demand of the products continues to be strong. In fact, I think our demand is pacing supply at this point -- outpacing supply at this point.

We have plans to roll out in 10 more countries beyond this point. So, that was about Z3. Couple of days ago we launched Passport in three cities around the world “simultaneously”. And I’m very pleased to announce that we already have orders over 200,000 Passport as we enter the day. For U.S.

the Passport is available Unlocked on Amazon and blackberry.com. If you all know we price the phone at $599 U.S. in the United States and $699 in Canada. And at this level the device is profitable, because many people I point this out because a lot of people have asked me about this question. We have extremely good receptivity for the product.

It’s sold out on blackberry.com within six hours and sold out within 10 hours on amazon.com. In fact, I believe we were the number one selling Unlocked smartphone Amazon on the day that before it was sold out.

The engineering team is now working hard on the Classic which some of you who attended the Toronto event had a glimpse of that, which currently I am using and testing recently, and we expect to launch this product before the end of the year. We also have a very strong role map beyond the Classic.

I think, I’m going to talk about that a little bit more in detail at the Mobile World Congress in March and will also see you guys in Barcelona for those of you interested in looking at those. Moving on to the Enterprise software side. I think the highlights of the quarter have definitely the success of our EZ Pass Program.

It has been extremely successful. We added 3500 total registration customer registration. By the end of Q1, just as a reminder, 90 days ago a little more than 90 days ago, 120 days ago we were at 1.2 million license traded in, by the end of last quarters 3.4 million license has been issued above three times the number in our last earnings call.

And we could just look at the math a little bit, the quarter brought in 2.2 million new licenses, over 900 new customers. So we are seeing a much more bigger global companies signing on with BlackBerry.

Of the 3.4 million licenses, 840,000 licenses has been traded in from our competitors, such as Mobile Iron, Good and AirWatch, this is 25% of the total license. And this of course jumped from 10% of the total license from competitors a quarter ago.

With such a strong uptick of our EZ Pass Program and our upcoming release of BES 12 in November, we are potentially considering ending the EZ Pass Program earlier than January like we originally intended to. We currently have 70 customers in beta program on the BES 12 many of whom are Fortune 500.

Now moving onto the value-added service, which is a reminder to everybody, is our part of the strategy to grow the value-added services to replace the decline on the service activation fee or known as the SAF. We just introduced – a couple of key points there. We just introduced Blend, which is our secure unified communication platform.

It is now available free for all the BlackBerry device who are on BB10.3 release and on iTunes and Google Play. The receptivity again has been tremendous in the last few days and we have enterprise and we have a pretty strong plan in attacking the enterprise space for monetizing this feature.

We are releasing also later on this year, releasing the identity management software, which is of different from plan but in tandem with Blend.

We also know that many customers want to access cloud services like Box and Workday, so we want to have our customer do this in a secure manner with our identity manager solution, this is part of their release.

Other products that have been introduced and will be introduced over the next 90 days will include the BBM Protected, BBM Meetings and BBM Money. BBM now reported 91 million monthly active user, MAU which is up 6% from a quarter ago and 44% by the way over a year ago. We also recently released BBM on the Window Phone.

We started generating revenue for BBM Protected in finance government and healthcare vertical already. And we also expect to launch the BBM Protected on iOS and Android later in the year. In addition to the internal value added services investment which we talk about, which was Blend and identity management and the BBM part.

We had been making some acquisitions, strategic acquisitions; particularly I like to point to the two of them in the past 90,120 days.

First we acquired company in Germany by the name of Secusmart, which should be close with a government regulatory approval assuming we get the government regulatory approval by the end of the year, which will provide us a secure voice and text communication.

To put a little bit in context, BlackBerry has always been known as the leader in secure data with all the encryption technology and so forth. And of course we have the BBM Message which is highly secure, so we have data and messaging covered.

With this acquisition we also cover voice and text; thereby we believe we have covered all the medium of the communication interactions. The second company acquired is Movirtu. Movirtu is a U.K. based company, they provide a virtual Sim solution that allow users to have both the corporate or personal number on a single device.

The single device could be Apple iOS, could be Android and could be BlackBerry device. This is what we’ve been hearing from a lot of our customers wanting to implement a secure BYOD Solutions and also help them to facilitate the split building solutions.

So with our balance -- with our 10.3 features it is called Balance, the Movirtu users now could securely manage work and personal use on one device, then I’ll of course assume that’s BlackBerry device but it works on the other two.

Lastly to begin our effort to license and monetize our technology asset, in the quarter we created BlackBerry technology solutions. The idea behind a BlackBerry technology solutions to bring QNX, Certicom, Paratec and many other technology assets including our 44,000 strong patent portfolio as well as the Project Ion.

The BTS, the BlackBerry Technology Solutions will sell and license these products and assets across different industry including the connector cod, automotive industry, healthcare and many others that we are targeting. And more importantly, BTS will lead the BlackBerry IoT strategy. The unit will report to Dr.

Sandeep Chennakeshu, many of you actually know Sandeep from his time as President of Ericsson Mobile. We also added season technology leaders like the name of Marty Beard as our Chief Operating Officer. Marty had previously served as the CEO of LiveOps and brings with him extensive experience in operations especially in Cloud based business.

Talking about Cloud-based business, our next release will be BES 12 and it is now scheduled for November 13 somewhere in the Bay area, California that is.

Given the success of our EZ Pass Program and all the growth initiative I just outlined for you, let me share some of our software expectation with you and again remind you that we are – now we are happy in the forward looking statements this is really reminding you of forward-looking statement, I assume that you don’t want Joe to repeat what he said, I was very amazed with the string of the words that he used.

But, so let me focus on software a little bit. In this particular fiscal year we expect the software number to be roughly above 250 million, which includes software as a software license sales as well as the T support.

Next year, our plan – expectation of our plan is to double that number and that growth in a software and T support should be able to cover the SAF decline to the future.

Our next release will be on BES 12 on November 13 at San Francisco as I said and in conjunction with that we also will host a Analyst Day in the Bay area of course, and we will provide you additional details on our growth strategy, the product road map and the make up of some of those doubling of the software revenue numbers.

So please save that date. Now I like to hand this off to James and for further details – there in the numbers of the quarter..

Thanks John and good morning everyone. And as I normally do I’ll start with the income statement. Revenue for the second quarter was $916 million; hardware represented 46% of revenue compared to 39% last quarter. We recognized revenue related to approximately 2.1 million devices in the second quarter, up from 1.6 million in the previous quarter.

Services revenue represented 46% of revenue compared to 54% last quarter. Service access fees declined 13% compared to last quarter’s normalized SAF revenue. I just want to remind everyone that last quarter SAF revenue actually benefited from a $30 million cash payment from the carriers in Venezuela which at the time we said would not repeat.

We continue to model the SAF decline of approximately 10% to 15% in the next quarter. Software and other revenue represented 8% of revenue. Non-GAAP gross margin was approximately 45% consistent with the previous quarter. GAAP gross margin for the quarter which includes restructuring cost was 46.4%.

Hardware gross margins as John mentioned were positive this quarter due to an increase in both the number of units recognized and the cost per units on the -- current portfolio as well as the reduction of manufacturing related fixed costs. Non-GAAP operating expenses were $433 million down from $504 million last quarter.

GAAP operating expenses were $623 million and included in GAAP operating expenses were $33 million of restructuring charges as well as a non-cash charge of $167 million for our convertible debt. As I have explained in the prior quarters, GAAP requires us that we record a charge as the value of our debt goes up.

This non-cash charge has no impact on the face value of our debt, on our liquidity or on our operations and cash flow. Amortization expense was $75 million in Q2.

The GAAP tax recovery in the quarter was approximately 5% and going forward, we expect the quarterly recovery to be about 15% as the company still anticipates utilizing all the available losses available for carry back during the fiscal year. Non-GAAP net loss was $11 million or $0.02 per share.

GAAP net loss which includes the impact of the debt and restructuring was $207 million or $0.39 per share. Now moving on to the balance sheet and working capital performance. Our cash balance increased by $11 million compared to last quarter.

Adjusting for items not part of normal operations, we used $36 million of cash in the second quarter as John previously outlined. This use of cash decline by over 85% compared to the 255 from Q1. The reduction was [attributable] to improvements in collections of receivable as well as overall reductions in operating expenses and capital expenditures.

During the second quarter, we also completed the Canadian real estate sale as well as some other smaller asset sales. Total proceeds from these activities amounted to $56 million. Purchase obligations and other commitments amounted to approximately $1.6 billion.

Purchase orders with contract manufacturers represented approximately $344 million of the total, which is up slightly quarter-over-quarter but expected due to our new hardware launch activities. Total cash, cash equivalents and investments was $3.1 billion.

Taking into account strategic investments in the business, we do not expect our cash balance to fall below $2.5 billion at any point in fiscal 2015. Looking forward, we continue to expect the cash flow break even before the end of fiscal year and continue to forecast income statement, non-GAAP profitability during fiscal year '16.

That concludes my comments. And I’ll hand it back to John..

Okay, thank you James. Okay, operator could you please open the Q&A part of the session..

Certainly. (Operator Instructions) We’ll take our first question from Tim Long with BMO Capital Markets.

Good morning..

Good morning..

Good morning..

Thank you. James, just one quick clarification and then a question.

That down 10% on service this next quarter is that after we normalize for the $30 million Venezuela? And then the question on the software side it looks like this quarter was a nice 9%, 10% improvement sequentially after some declines and it sounds like you're expecting a double next year.

Could you just give us a little insight into maybe what drove the turnaround? Is this EZ Pass or what is driving us up in the August quarter? And is that the same is that main driver to double this business next year? How broad and diversified does the business get to double that business? Thank you..

Okay, Jim you want to take the SAF one, I’ll take the software….

Tim, just to clarify I think your question referred to a 10% decline quarter-over-quarter and normalizing for Venezuela. My comments were that SAF declined 13% normalizing for Venezuela. So what I am doing there is taking the $30 million off of Q1 effectively and then comparing that to where we landed in Q2.

Going forward, again, 10% to 15% is what the expectation is..

So Tim, the question regarding the software doubling, I guess we have a recently good software quarters this quarter compared to the quarter ago, and next year there is a number of things. It’s not only the EZ Pass that of course we look to contribute.

EZ Pass will also bring us a good uptick on T support as -- the program calls for the customer paying T support beginning of February 1 of 2015.

And in addition to that it’s all little, the software features I laid out earlier, whether it’s in the Movirtu side of the equation, whether it’s in the identity management of the equation and the secure voice equations. And so, and of course there are more to be added to this.

So I have a lot to do with the combination of all those for the next year plan. We will be able to talk more about that on November 13 in San Francisco..

Okay, thank you..

Thanks Tim..

Thanks Tim..

And we’ll move along to our next question from Maynard Um with Wells Fargo.

Hi, May, how are you?.

Morning.

I'm wondering if you can talk a little bit about the conversions in the EZ Pass program? Specifically, how many of the customers that you're seeing are taking the gold versus silver and then the perpetual versus the annual? And I'm curious if you were to end your program early that you talked about, would those in the current program be grand-fathered in to that February 1 payment date or would they all start paying?.

No, no the 3.4 million licenses you know cross over to 2500 customers they are not grand-fathered; we have agreed that they start paying T support February 1 of next year.

So if we added the program as we ended the trading programs that imply that then people are interested in our technology especially in the BES 12, then they have to pay for their licenses, that’s all I meant, you cannot trade in anymore.

And we have not made the determination that we will but I just want to forewarn you know that we might be doing that because of the numbers coming in pretty strong at this point..

Okay and then regarding…..

Sorry, the silver and gold the maturities of silver because of the program conversion and we’re looking forward to enhancing their subscription base with us in gold. And yes, you are right the mature other than some very specific case we are now only taking subscription base offer..

Okay.

I guess I'm just a little surprised that the majority would be silver versus gold because my understanding is if the gold gives you all the features of security that BlackBerry provides I guess what is the opportunity to upgrade them from silver to gold?.

That is the thing that I am looking forward to. I believe….

I believe everything is said is what we expected to be like and then we would going to start expanding them to gold. Because the EZ Pass program only allows you to trade in silver, you could buy gold but it will only allow you to trade in silver..

Got it. Okay, thank you..

Thanks, Maynard..

And we’ll move along to our next question from Simona Jankowski with Goldman Sachs.

Hi, hi Simona..

Hi Simona..

Hi there. I first just wanted to clarify when you guide for non-GAAP profitability for fiscal '16, is that for the entire fiscal '16 or just during some quarter in the year? I then have a question..

Yeah, I’ll talk about that. At some part of the '16 obviously we wanted like everybody else we want it earlier than later. So if you look at the trajectory of some of our progress that we made in our last three quarters, I think, you know I mean personally I would like to see it sooner rather than later of course.

But I can promise you there is entire..

Okay.

And then can you just give a little more detail on what drove the decline in ASPs? I imagine there was some kind of mix in there, but if you can just touch on that in a bit more detail including whether you had any meaningful shipments of the Bold that you are going to bring back for a period of time, and how to reconcile the decline in ASPs with the expansion in gross margins?.

Surely Simona, its James I can take that one. You are absolutely right that mix did play a – was the primary driver in the decline in ASP. The – we are having success with that three for example as John mentioned and the popularity of that of course and that is a lower cost product as we had talked about, so that will have an influence in it.

And also given the age of our Blackberry 10 portfolio you would expect price erosion overtime, so put those two things together you really get that as the two major factors with. Now – flipping to the margin side that part of it is we’re really helped by volume there and the incremental you know half a million units they will be recognized.

The – we do have some products that have positive margin left in them and of course anything above zero times a bigger volume base will get you improvements in margin. And I don’t want to underplay the work that we’ve done on cost that both John and I talked about but that’s another factor as well..

And from an ASP perspective now that Passport has a reasonable receptivity, you know we just released it. We sold it out in many places already, so that of course carry a much higher ASP..

Okay.

Great and did you guys have any meaningful shipments of the Bold? Then I talked about running that again and is that kind of done or is that going to continue to run in small volumes?.

No. we’re pretty much done..

Okay. Okay. Thank you..

Yeah. Thanks, Simona..

And we’ll take our next question from Daniel Chang with Deutsche Bank -- Mark Sue with RBC Capital Markets. I apologize..

Oh, I’m sorry. Hey, is it Mark or Daniel. Mark..

Okay. It’s Mark Sue. Good morning, gentlemen..

Hi, Mark..

If we look at the uptick in the software revenues, EZ Pass, BBM, et cetera. Can you give us a sense of where and the nature of your share gains from some of the competitors in mobile management, mobile device management, they have had an earlier start from you.

I’m just wondering how you’re able convince some of your customers to move away from them and keep Blackberry?.

Well, I think this is about the Company stability. I mean -- the product is better and more broader, deeper, and has much more history and experience of most of our customers.

So I think the last couple of years we have some turmoil’s, that is now behind us, while we’re going to reach out to the customer, I spoke to many of our executives across the board has been visiting a lot of customers. People are very interested working with us. Obviously our technology works and works well. They all know that. The government uses it.

Major banks uses it. So wining back, knock on wood I don’t want to jinx myself, but winning we’re starting to see that, many, many places, especially with the very big company. So I feel that -- I don’t what the market share is. I really, you know, because I don’t track that personally, because I only track the license counts.

So as I said, we have over 800 win back or conversion from maybe they even never been BlackBerry customers before in that mix, but I have assumed that many of them have been BlackBerry customers and they have found that our competitive solutions definitely not as good as ours.

And therefore, now they know that we have commitment and the company is stabilized and we have good cash position, good technology and roadmap and we’re starting to win those back and plus some more..

I see, so it’s not just a comfort level of your stability of the organization, but do you feel better about the technology migration?.

Yeah, it’s broader or deeper, I think, while most of the industry analysts are also confirm that. So I’m….

That’s helpful.

And John, as we move on to new revenues and services, is there a way to slow the rate of decline in legacy services, is there way to manage to kind of close the door behind us a little bit slower or is that just -- we just have to model that traditional rate to drop ?.

I don’t – I currently don’t see a way as they convert but I’m working on it. There might be but I don’t see in a obvious way as we go on, moving on to BlackBerry to best hand, but I wouldn’t be overly pessimistic about no way. Besides the basis now is extremely loyal customers, the good new about is that lot of them switches to BB 10.

And the bad news is of course you see rate comes down – I mean, the numbers comes down. But the good news is get to BB 10, and to get the BB 10 and there are other methods and other value that we could provide customers to enhance the software on handset as revenue source..

That’s helpful, thank you gentlemen. Good luck..

Thank you..

Thanks Mark..

And now, we’ll move to Daniel Chang - Deutsche Bank..

Hi, Good morning, guys..

Good morning, Daniel.

Good morning.

When do you expect to see some of these value added service such as Blend and BM Protected make a meaningful contribution to your revenue? And then, can you give us an update on the sub-count and the proportion of BES subs?.

I’ll take the first one. And it’s going to be – my plan is FY ’16. Okay. And on the sub-count, Mark, sorry Daniel, we were down a little bit. I think the rate of decline has slowed. We were 50 last quarter. We’re definitely less than 10% down I would say.

But in terms of the ratio, I think the 80% that of business that John and I have always talked about we’re still in that..

Is it – so these value added services that you have such as Blend and BM Protected, those are only available on BES subscribers is that right or can that also be used by I guess guys using a cloud?.

Yes. People can use the cloud. Blend is both – actually both services on cloud-based, all premise based depending on the customers. But we like to see it more on a cloud based. And its not only BlackBerry, its across the board on all other devices and it will work with the lot of the other people’s MDM.

You know that we have open up our API to many of our peers in the industry, our competitors in the industry on MDM, so its more than just BlackBerry server..

Okay. Thank you..

And we’ll take our next question Amitabh Passi with UBS..

Hi, hello. This is [indiscernible] for Amitabh. Can I just ask you question more on your – you've been expressionizing your OpEx and its been down R&D $10 million and SG&A another $30 million plus.

At some point did I need to reinvest invest in OpEx to support Passport and other devices launch?.

Right. We are already at that point. We believe that this expense line very reasonable. If there is any uptick, it will not be a huge uptick. We’re managing it very carefully. I use the word judiciously. That’s exactly what it meant.

We are aligning a lot of the resources a little differently to focus on key drivers like the BES 12, the value-added services, the BlackBerry technology solutions. So, a little bit more alignment in the company on a few very major initiatives. So, we are comfortable where we are with the expense number.

There’s always opportunity, but we are actually hiring people in selected areas and expanding the Company..

And just add to John’s comment of the reductions that you’re seeing in this quarter was definitely due to the timing.

For example, if we did -- that’s part of our restructuring program, left employees go mid quarter, we wouldn’t have seen the full benefit, whereas with the restructuring program being done and behind us effectively you’re seeing the savings if you’ll catch up to full quarter impact..

So, does that mean, we should be expecting OpEx to sort of stabilize at this current level?.

Yes. Stabilize if there’s uptick you’ll be covered by margin improvement..

Okay. Got it. Thanks..

And we’ll take our next question from Richard Tse with Cormark Securities..

Hi, Richard. Good morning..

Hi. How are you? Just quick one on [BTS], can you sort of rank the areas of priority in that division. Is it’s a QNX first going after patents and I guess related question, what you guess doing around IoT? Thanks..

Okay. Great questions. QNX and IoT, QNX is a major component to drive IoT strategy. So, is that, that is the number one mandates for the group. And then, of course, we going to – we generate a lot of the research equity around Certicom and Paratek. And so – and then last but not least, but last, it’s about licensing, so it’s in that order. Hello..

That’s great. Thank you..

Thank you..

And we’ll take our next question from Rod Hall with JPMorgan..

Good morning, Rod..

Hi, guys. This is Ashwin Kesireddy on behalf of Rod.

I was hoping you could give some commentary around the improvement in North American revenue and how should we think about that going forward? Also if you could comment on how they could position North America in terms of helping your gross margin during quarter and how should we think about moving forward that will also be helpful? And also, quickly on the licensing portion of BTS, I was trying to understand what exactly are you trying to license here and how should we think about on the monetization opportunities there?.

Okay. What was the first – I’ve missed the first question..

North American revenue, I can take that..

You can take that. Okay..

So the North American increase was actually mostly on the backs of devices, SAF did stabilize a little within North America to help, but really the uptick in revenue can be attributed to devices?.

Okay. Regarding the licensing we just starting to explore these opportunities. So, we really don’t have any numbers tie to it, but I think there are certainly opportunities there. We won’t see that in a very short term.

And because we believe that we have a lot of technology that we definitely could be beneficial to, some of the other people that want to use that technology. So, we’re not against licensing it. But there is no concrete numbers. We just started the whole process thinking about it.

We spoke about this or I have spoken about this a number of months ago, thinking about, hey, this is an area of revenue and value that we could realize for our shareholders. And so that’s all it is. And Sandeep is such an industry veteran.

He knows a lot of the players both in our space and in adjacent space and think that he will be a good ambassador of that..

Okay.

So, John is the idea that you’ll probably try to build a pattern portfolio and go around the industry trying to see if you can monetize that? Is that what you’re thinking?.

No. I’m selling anything. I’m literally offering its licensing. But again, I don’t to go over playing this at this point. Let’s accumulate some experience. Have some time first. And maybe in the future I could speak a little bit more about it..

Okay. Just quickly on BlackBerry 10.

Is there any shipment number that you can provide or that’s kind of comp?.

I think we’re up slightly quarter-over-quarter; the shipments were about 70% to the volume this quarter..

Great. Thank you..

Thank you..

And we’ll take our next question from James Faucette with Morgan Stanley..

Hello, James..

Good morning. Thank you very much..

Good morning..

Just a couple of quick questions. First, John, on the software revenue objectives that you’ve laid out, how does that compare or how do we factor in the target that you laid out last quarter on 100 million and BBM related revenue.

Are those two tied together or is one part of the other et cetera? And then on the EZ Pass what – where we are in terms of getting EZ Pass users to subscribe or commit to [T-Support] and beginning to be able to book it deferred revenues from those customers? Thank you very much..

Okay. Great, question. I was hoping nobody ask me that question. Now you remember both are earnings call. They are different. I do expect from the MDM side and the value-added service side, when I first made the comments about doubling the software revenue. It’s really may basically from those buckets.

And then BBM, I’m still believing that BBM could bring in $100 million in revenue. This is separate, they are additive. That’s number one.

And your EZ Pass, we cannot book it on deferred, because the deal that we structured with the EZ Pass is you sign on, you trade in the licenses whether its BlackBerry licenses or competitors licenses and then you get the silver, which will provide us an ability to up-sell to gold and the T-Support commitment starts February of next year..

So starting in February or after really next fiscal year then is one we should expect to start to see what levels of T-Support attach you’ll have on those EZ Pass users et cetera and then that would start to impact deferred revenues, am I understand that correctly?.

Yes. You understand that correctly, exactly. And those by the way – that T-Support is part of my doubling of revenue, so it’s not separate..

Right. Okay, great. Thank you..

Thank you..

And we’ll move on to our next question from Deepak Kaushal with GMP Securities..

Hi..

Good morning..

Hello..

Good morning..

Good. Can you hear me? Maybe a minor follow up to the previous question and then another question on sales and marketing plans for BES 12.

First on the BES services that you guys have installed to-date, can you give us any sense of a split between BlackBerry versus none-BlackBerry devices that you’re managing? And what the trend is in terms of uptick for managing non-BlackBerry devices to BES?.

We’re going to have to find that. I don’t have the number. Do you guys have the number? Let my colleagues start looking for numbers. If we don’t have the number I’ll prepare to speak to that on November 13..

Okay. Perfect..

But I really don’t have it front of me. So that’s….

That’s fine. That’s something I’ll be watching. So I’ll ask again next quarter, if I have to..

You maybe forget..

I won’t..

And then, what is the second question on?.

The second question is really on sales and marketing. I know you guys have put in some structural changes. I wanted to know if you could elaborate on the progress of that in terms of how you’re planning to sell BES services to enterprises.

What kind mix will go through a carrier, how much dependence we have on the carrier for that or how much are you going directly, maybe you can elaborate on that point?.

Okay. Good question..

Thank you..

Right now the – in last quarter mostly of our BES sales are going directly. There are distributors using -- distributing that and I would love to have the carrier care it. So I’m working on that piece. And that’s another part of distribution that we’re going to be adding on.

There has been a number of carriers that I have spoken with are extremely interested on carrying BES 12 and offering that to their customers, so, I kind of part of factoring why I’m so bullish about doubling a software number..

Okay. And then, in terms of those sales -- initial sales for BES 12. You mentioned OpEx at current level is what would expect going forward, plus a minor uptick.

Does this include a sales push for BES 12 or is there an investment for BES 12 on top of that?.

No, no. that’s already included. We are hiring selectively in a lot of places, enterprise software sales people, but again on this particular one the focus on distribution, expansions on both carriers and distributors. So we actually have an infrastructure in place where we made or add some more strength to it, but we don’t, it’s not from scratch..

Okay. Great. Thanks for that. I’ll pass the line..

Thank you..

And we’ll take our next question from Ehud Gelblum with Citi..

Hey, guys. Good morning..

Good morning, Ehud..

How are you? And good seeing up there in Toronto. Question, I want to try and do some parsing on units that you sold. Do give us a sense – I’ve got a bunch of questions in here, but they are all kind of getting at the same concept. If you can give us a sense how many Z3 was actually sold. And when you said, the Passports sold out, separate question.

If you can give us a sense as to what that mean so we get a contextually how many Passports you sold out. But on the Z3, I was doing some math on what, James, you said before. BB 10 was 70% this quarter. You did 2.1 million units, so BB10 was about $1.4 million. That means BB7 was about 700,000 this quarter.

But you did total units last quarter of 1.6, so it just appears that your BB7 units of 700,000 quarter are up a lot. And if that’s true, why did BB7 units grow so much? They're probably looking for BB10s.

And the last part of this whole kind of gestalt is, North America revenue, like you said, was up and you said that was due to devices, but there was no Z3 here. Asia was down, and Z3 went into Asia.

So I guess all these things I'm trying to go at and trying to understand are, why was Asia down if the Z3 was there? Why was North America up? And why does it look like your BB7 devices were up very strongly to 700,000 this quarter for probably no more than 300,000, 400,000, 500,000 last quarter, and are they all related? Then, I have a follow up with something different.

I appreciate it..

Okay. So I think at the end of it, Ehud, I like what you said last. I think they are all related, because I think your math on the units is right. And if you think about what’s popular in North America would be like 900 in Bold which would drive more BB7 type of units going through there as well.

You right that the Z3 wasn’t there, but effectively I think all those stories hang together and drive in and around or explain the uptick in BB7 and some of the strength in devices for that. Now in terms of numbers for both Z3 and for Passport, we’re not going to give those out.

I think John’s commentary in terms of the experience we’ve to-date and the strong demand, it is what we’re comfortable in sharing right now..

Right. I haven’t looked at that number, the device from the angle that you two have been discussing. But on the Passport, as I pointed out, we have – we entered in the launch day with 200,000 units already ordered. We received PO for those.

And the first day, it sold out in many, many places, because literally, the real big shipment to everybody who sign up for distribution is actually seven days after that day, the next Wednesday I suppose. So we have a limited quantity supply, but it sold out very quickly..

Okay. That’s helpful. One of the things the growth in software came up before.

Is it possible, I think QNX is reported in software remind me if its not?.

Yes. It is..

Do you like see in the software. Yes..

I don’t know exactly how that line item goes, if you can give us a sense as to how large QNX was within software? Was that a source of growth given, and again I don't understand exactly the dynamics of that business, but given that we're going at this time of year into a new car auto model year around September, does QNX naturally get larger in your August quarter and was that part of the growth in software?.

Well, we did have growth in QNX in the quarter. It does not explain the whole growth. We don’t really breakout every single pieces of this. And so, it’s – the growth – that the majority – if you look at a percentage of growth it’s mostly come from the MDM side of the equation..

Okay. So QNX is not as bigger contributor..

QNX grow pretty well, but it’s not the big component that drove our growth in software..

Okay. One other discrepancy, if I can just get in there? Sub count, James, you said fell less than 10%, but your services revenue if you compensate for the $30 million Venezuela, was down 13% or so. So it would appear that revenue fell faster than the sub count fell. I understand there are averages involved, so it may not work out exactly like that.

But does that appear that ARPU is falling faster and does that mean that your higher ARPU subscribers, which are generally enterprise, are falling faster than your consumer subscribers? Is that the right way to understand that or are there other dynamics in play?.

Well, there’s other dynamics in play. It’s not – remember, depending on how you’re modeling ARPU. We do have some higher biz-type fees as well that we charge that maybe over and above what you are modeling ARPU as well. So it’s not just an enterprise story, I guess that we all answer that Ehud..

Okay. Appreciate it..

And there have been – again, I add this to, because I know it’s helpful to the conversation. There has been a number of big accounts that moved to BB10..

So I'm not saying you're losing them entirely, your just losing the enterprise subscribers from the SAF?.

Right, right. So, yes..

So, there's a 10 side, but you're losing them from the SAF side?.

That’s right. There’s has been there..

Okay. And that would make sense. I appreciate it..

Okay. Sure..

And we’ll take our question from Todd Coupland with CIBC..

Good morning, Todd..

Good morning, John..

Hi, good morning everyone.

I wanted to ask about EZ Pass, if I could? How much of a factor is just the lower price of silver in getting guys to flip back to you?.

The EZ Pass, we charge silver at $19 per year, plus 20% on T-Support, but the EZ Pass high-definition, you don’t pay anything. So it’s not a price-based conversation..

But they know eventually they’re going to pay.

So…?.

Yes. Well, on the people who trade it in, they don’t have to pay other than the T-Support, which is $3.19 or $3.40 I suppose, a year for a license. And then when they buy more they have to pay..

Okay..

Or they upgraded from the silver to gold then of course they have to pay the delta..

Just to follow on to that. BES 12 coming out in November.

Do you think there is pent-up demand for other enterprises to flip to your MDM? Are they waiting for that?.

I like to think so. Yes. Demand has been – the conversation has been very strong. I was just in Singapore giving speech this past weekend and I spoke to a lot of customers there and there the demands are quite strong, very strong interest level on the BES 12..

Like is there any way to characterize the funnel once you get it out there, is it like 2, 3, 4x what you’ve seen so far?.

Oh no, no, no, in a software business, 2, 3, 4 x are too low to convert. You know typically software pipelining you're going to have to be looking at more like 6 to 8 times..

6 to 8 times what you’ve done so far?.

No you have to look at 6 to 8 times – if I’m going to have to bring in 100 million, I have to be working on 600 million to 800 million of pipeline in order to feel like that you could feel comfortable with a 100 million..

That’s okay.

Fair enough, so what’s that pipeline post does 12 launch look like now?.

Well this is embedded into my doubling the software numbers for next year. And I shouldn’t be reporting on pipeline. That number are sometimes are meaningful and sometimes are not as meaningful..

Okay. Fair enough, thanks very much for the color..

Certainly. Thanks, Todd..

And that’s all the time we have for questions. I’d like to turn the conference back over to our speakers for any closing or additional remarks..

Okay, great thank you. Well thank you everybody for on probably staying for the call.

As you said, as we all talk about all the operating metrics, I think one was particularly point to the fact that our margins are good, cash are good and the cash use has been much lower and that should be a good testimony that we will make our cash flow from operation for normal operation break even or positive by the end of next quarter.

So we have six more months of that and if you see a progressively good trend going forward. We spoke about you know some of the leadership decision, a lot of people are interested in the EZ Pass and the MDM and the value-added services. We look forward to continue to have a strong discussion on that.

As far as doubling the software numbers I know that it peaks a lot of people interest, and we would love to give you a little bit more color on that on November 13 in San Francisco where we launched the BES 12 as well as the Analyst Day that follow that launch. So, I look forward to meeting you all and have that discussion.

Thank you very much for joining us and have a great day..

And that concludes today’s conference call. We thank you for your participation..