This summary is based on the latest second-quarter earnings call conducted on September 28th, 2005.

Key Investors Issues

- Revenue for Q2 was $490.1 million, up 8% from $453.9 million in Q1 and up 58% from $310.2 million in Q2 of last year.
- The revenue breakdown was approximately 70% for handhelds, 18% for service, 8% for software and 4% for other revenue.
- Approximately 620,000 new BlackBerry subscribers were added in Q2, which is at the low end of the expected range of 620,000 to 650,000. At the end of the quarter, the total BlackBerry subscriber base was approximately 3.65 million.
- The company expects to surpass $2 billion in annual revenue and the 5 million subscriber milestone before the end of the fiscal year.

Q2 Shipments and Channel Inventory

Total handsets shipped in Q2 of approximately 955,000 are up from the 840,000 shipped in Q1. Management believes the company has visibility into its channels as it can reconcile handheld shipments with activations on the BlackBerry networks and estimate carrier inventory levels.

In the quarter, the difference between handset shipped and net activations was higher at 335,000 handhelds versus 248,000 handhelds last quarter. The company saw an increase in the number of gross new handset activations which infers that the number of handsets being sold through for replacements or upgrades is increasing. Entering a period of new product introductions, the company expects the BlackBerry handset upgrade cycle to accelerate. Despite the fact that there were a higher number of handsets shipped in Q2 relative to net activation, overall channel inventory did not materially increase during the quarter.

Unit Average Sales Prices

Handheld average ASPs decreased to approximately $360 versus $375 in the prior quarter, in line with expectations. As a result of expected shift in product mix, the company forecasts ASPs to decrease to approximately $350 in Q3 and increase to the $360 to $370 range in Q4.

The company is not seeing big pressures on handset pricing. The mix is 7100s and is certainly a factor to some of the higher priced handsets. This indicates transitioning from the older gen products to some brand new stuff that's being launched.

Service revenue was $86 million or 18% of revenue for the quarter, an increase over the $77 million in the prior quarter. This increase was in line with the increase in the company’s subscriber base.

Summer slowdown catches of the BlackBerry in Q2

Approximately 620,000 new BlackBerry subscribers were added in Q2, which is at the lower end of the expected range of 620,000 to 650,000.

Summer seasonality was the main factor in the modest growth in Q2 subscriber addition, according to the company. In addition, certain North American carriers had lower-than-expected results due to execution distractions from their merger activities. Management said they are working closely with these carriers to ensure that sales execution and new product launches proceed as planned in the second half of the year.

The total BlackBerry subscriber base at the end of Q2 was approximately 3.65 million. The company adjusted the total base down from 3.75 million by 85,000 due to incremental deactivations resulting from account clean-ups being carried out by a number of the company’s major carrier partners.

The company will continue to report its quarterly subscriber addition number based on carrier reported activations and deactivations. For large carriers that are still not regularly reporting deactivations, the company is estimating deactivations at a normalized rate at quarter end in order to calculate the true subscriber additions for the quarter. Any deactivation file that may occur in the future due to carrier system clean-ups will be broken out separately and subtracted from the overall base.

Gross margin for Q2 increased.

Gross margin for Q2 increased to 56.2% on a pro forma basis from 55.1% in the prior quarter. This was in line with the company’s expectations and there were no surprises in product mix or ASPs. The company had a $6.2 million provision that pertained to a write-down of excess accessories inventory and a specific incremental warranty item in Q2. Factoring these items, gross margin was still within the targeted range at 55%.

Q2 Expenses

- R&D spending was $37.7 million or 7.7% of revenue, in line with forecasts.

- Selling, marketing, and administrative expenses increased by 15% to $72.3 million from $62.9 million in Q1 and was 14.7% of revenue, slightly higher than the 13.8% in Q1 and flat from a year ago.

- The company recorded an incremental expense of $6.6 million in Q2, which relates to additional estimated legal costs associated with the NTP matter.