Q2 Financial Information-1

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manufacturers to enhance their products and services with wireless connectivity. RIMs portfolio ofaward-winning products, services and embedded technologies are used by thousands of organizationsaround the world and include the BlackBerry wireless platform, the RIM Wireless Handheld productline, software development tools, radio-modems and software/hardware licensing agreements. Founded in1984 and based in Waterloo, Ontario, RIM operates offices in North America, Europe and Asia Pacific.RIM is listed on the Nasdaq Stock Market (Nasdaq: RIMM) and the Toronto Stock Exchange (TSX:RIM). For more information, visit www.rim.com or www.blackberry.com.

Media Contact:

Marisa ConwayBrodeur Partners (PR Agency for RIM)[email protected]

Investor Contact:

RIM Investor [email protected]

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This news release contains forward-looking statements within the meaning of the U.S. Private SecuritiesLitigation Reform Act of 1995 and Canadian securities laws, including statements relating to RIMsrevenue and earnings expectations for the third quarter of fiscal 2009, anticipated growth in subscribers,

product shipments, expectations relating to RIMs margin and operating expenses in the third quarter offiscal 2009, and other plans relating to RIM. The terms and phrases momentum, gearing up,continues, expected, and similar terms and phrases are intended to identify these forward-lookingstatements. Forward-looking statements are based on estimates and assumptions made by RIM in light ofits experience and its perception of historical trends, current conditions and expected future developments,as well as other factors that RIM believes are appropriate in the circumstances including, but not limitedto, general economic conditions, product pricing levels and competitive intensity, supply constraints andnew product introductions. Many factors could cause RIMs actual results, performance or achievementsto differ materially from those expressed or implied by the forward-looking statements, including, withoutlimitation: risks relating to the restatement of RIMs previously-filed financial statements as a result of theinternal review of RIMs historical option granting practices, and regulatory investigations and litigationrelating to those matters, including possible sanctions or penalties against the Company or its directors or

officers; risks relating to RIMs intellectual property rights; RIMs ability to enhance current products anddevelop new products; RIMs reliance on carrier partners, third-party network developers and suppliers;risks relating to the efficient and uninterrupted operation of RIMs network operations center; risks relatedto RIMs international operations; and intense competition. These risk factors and others relating to RIMare discussed in greater detail in the Risk Factors section of RIMs Annual Information Form, which isincluded in its Annual Report on Form 40-F and RIMs MD&A (copies of which filings may be obtainedat www.sedar.com or www.sec.gov), and RIMs other public filings with the Securities and ExchangeCommission and Canadian securities regulators. These factors should be considered carefully, and readersshould not place undue reliance on RIMs forward-looking statements. RIM has no intention andundertakes no obligation to update or revise any forward-looking statements, whether as a result of newinformation, future events or otherwise, except as required by law.

The BlackBerry and RIM families of related marks, images and symbols are the exclusive properties andtrademarks of Research In Motion Limited. RIM, Research In Motion and BlackBerry are registered withthe U.S. Patent and Trademark Office and may be pending or registered in other countries. All otherbrands, product names, company names, trademarks and service marks are the properties of theirrespective owners.
http://www.rim.com/http://www.blackberry.com/http://www.blackberry.com/http://www.rim.com/


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Research In Motion LimitedIncorporated under the Laws of Ontario

(United States dollars, in thousands except per share data)(unaudited)

Consolidated Statements of Operations

For the three months ended

August 30,

2008

May 31,

2008

September 1,

2007

August 30,

2008

September 1,

2007

Revenue $ 2,577,330 $ 2,242,565 $ 1,372,250 $ 4,819,895 $ 2,454,161

Cost of sales 1,270,473 1,105,208 667,833 2,375,681 1,189,674

Gross margin 1,306,857 1,137,357 704,417 2,444,214 1,264,487

Gross margin % 50.7% 50.7% 51.3% 50.7% 51.5%

ExpensesResearch and development 181,347 127,776 88,171 309,123 163,105

Selling, marketing and

administration 379,644 326,592 197,943 706,236 375,426Amortization 43,633 36,552 25,350 80,185 49,145

604,624 490,920 311,464 1,095,544 587,676

Income from operations 702,233 646,437 392,953 1,348,670 676,811

Investment income 17,168 18,977 18,984 36,145 35,431

Income before income taxes 719,401 665,414 411,937 1,384,815 712,242

Provision for income taxes

Current 200,918 225,658 137,643 426,576 267,809

Deferred 22,937 (42,759) (13,391) (19,822) (66,472)

223,855 182,899 124,252 406,754 201,337

Net income $ 495,546 $ 482,515 $ 287,685 $ 978,061 $ 510,905

Earnings per shareBasic $ 0.88 $ 0.86 $ 0.51 $ 1.73 $ 0.91

Diluted $ 0.86 $ 0.84 $ 0.50 $ 1.70 $ 0.89

Weighted average number of common

shares outstanding (000s)

Basic 564,899 563,564 558,991 564,222 558,422

Diluted 574,831 574,650 572,165 574,738 571,379

Total common shares outstanding (000's)565,370

564,418 559,820565,370

559,820

For the six months ended


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Consolidated Balance Sheets

As atAugust 30,

2008

March 1,

2008

Assets

Current

Cash and cash equivalents $ 1,131,074 $ 1,184,398

Short-term investments 422,121 420,709Trade receivables 1,766,774 1,174,692

Other receivables 118,537 74,689Inventory 512,904 396,267

Other current assets 136,628 135,849

Deferred income tax asset 126,223 90,750

4,214,261 3,477,354

Long-term investments 686,457 738,889

Capital assets 1,005,658 705,955

Intangible assets 869,773 469,988

Goodwill 114,455 114,455

Deferred income tax asset 2,642 4,546

$ 6,893,246 $ 5,511,187

Liabilities

Current

Accounts payable $ 640,154 $ 271,076

Accrued liabilities 977,827 690,442Income taxes payable 156,757 475,328

Deferred revenue 60,186 37,236Current portion of long-term debt 6,906 349

Deferred income tax liability 7,196 -

1,849,026 1,474,431

Long-term debt - 7,259

Deferred income tax liability 66,995 65,058

Income taxes payable 28,669 30,873

1,944,690 1,577,621

Shareholders EquityCapital stock 2,199,813 2,169,856

Retained earnings 2,631,155 1,653,094

Paid-in capital 104,049 80,333

Accumulated other comprehensive income 13,539 30,283

4,948,556 3,933,566

$ 6,893,246 $ 5,511,187


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Consolidated Statements of Cash Flows

For the three

months ended

August 30, 2008

For the six

months ended

August 30, 2008

Cash flows from operating activities

Net income 495,546$ 978,061$

Items not requiring an outlay of cash:

Amortization 69,316 125,995

Deferred income taxes 24,073 (18,678)

Income taxes payable (1,779) (2,204)

Stock-based compensation 9,700 19,600

Other 12,089 12,080

Net changes in working capital items (17,242) (515,775)Net cash provided by operating activities 591,703 599,079

Cash flows from financing activities

Issuance of common shares 6,883 21,927

Excess tax benefits from stock-based compensation 1,453 12,146

Repayment of long-term debt (83) (166)

Net cash provided by financing activities 8,253 33,907

Cash flows from investing activities

Acquisition of long-term investments (59,946) (173,642)

Proceeds on sale or maturity of long-term investments 48,591 143,674

Acquisition of capital assets (190,389) (386,039)

Acquisition of intangible assets (234,135) (331,027)

Acquisition of short-term investments (161,863) (335,768)

Proceeds on sale or maturity of short-term investments 156,322 408,171

Net cash used in investing activities (441,420) (674,631)

Effect of foreign exchange loss on cash and cash equivalents (11,679) (11,679)

Net increase (decrease) in cash and cash equivalents for the

period 146,857 (53,324)

Cash and cash equivalents, beginning of period 984,217 1,184,398

Cash and cash equivalents, end of period 1,131,074$ 1,131,074$

As at August 30, 2008 May 31, 2008

Cash and cash equivalents 1,131,074$ 984,217$

Short-term investments 422,121 391,939

Long-term investments 686,457 700,400

2,239,652$ 2,076,556$


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RESEARCH IN MOTION LIMITED

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORTHE THREE MONTHS AND SIX MONTHS ENDED AUGUST 30, 2008

eptember 29, 2008

The following Managements Discussion and Analysis of F inancial Condition and Results of Operations (MD&A) should be read togethwith the unaudited interim consolidated financial statements and the accompanying notes (the Consolidated Financial Statements) ofResearch In Motion Limited (RIM or the Company) for the three months and six months ended August 30, 2008 and the Companysudited consolidated financial statements and accompanying notes, and MD&A, for the fiscal year ended March 1, 2008. The Consolidated

Financial Statements have been prepared in accordance with United States generally accepted accounting principles (U.S. GAAP).

All financial information herein is presented in United States dollars, except for certain financial information contained in tables which isxpressed in thousands of United States dollars, and as otherwise indicated.

RIM has prepared this MD&A with reference toNational Instrument 51-102 Continuous Disclosure Obligations of the Canadian SecuritAdministrators. Under the U.S./Canada Multijurisdictional Disclosure System, the Company is permitted to prepare this MD&A in accordawith the disclosure requirements of Canada, which requirements are different from those of the United States. This MD&A providesnformation for the three months and six months ended August 30, 2008 and up to and including September 29, 2008.

Additional information about the Company, including the Companys Annual Information Form, which is included in RIMs Annual RepoForm 40-F, can be found on SEDAR at www.sedar.com and on the U.S. Securities and Exchange Commissions (SEC) website atwww.sec.gov.

pecial Note Regarding Forward-Looking Statements

This MD&A contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 andpplicable Canadian securities laws, including statements relating to:

The words expect, anticipate, estimate, may, will, should, intend, believe, plan and similar expressions are intended todentify forward-looking statements. Forward-looking statements are based on

the Companys plans and expectations with respect to matters relating to its historical stock option granting practices, includingregulatory investigations and litigation in connection therewith;

the Companys expectations regarding the average selling price (ASP) of its BlackBerry devices;

the Companys estimates regarding revenue sensitivity for the effect of a change in ASP;

the Companys expectations regarding gross margin and operating expenses;

the Companys estimates regarding its effective tax rate;

the Companys estimates of purchase obligations and other contractual commitments; and the Companys expectations with respect to the sufficiency of its financial resources.


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Research In Motion LimitedManagements Discussion and Analysis of Financial Condition and Results of Operations

stimates and assumptions made by RIM in light of its experience and its perception of historical trends, current conditions and expected fuevelopments, as well as other factors that RIM believes are appropriate in the circumstances. Many factors could cause RIMs actual resuerformance or achievements to differ materially from those expressed or implied by the forward-looking statements, including, withoutmitation, the following factors, which are discussed in greater detail in the Risk Factors section of RIMs Annual Information Form, wh

s included in RIMs Annual Report on Form 40-F:

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risks related to the restatement of RIMs previously filed financial statements as a result of its internal review of its stock option

granting practices, and regulatory investigations or litigation relating to those matters, including possible sanctions or penalties agathe Company or its directors or officers;

third-party claims for infringement of intellectual property rights by RIM and the outcome of any litigation with respect thereto;

RIMs ability to successfully obtain patent or other proprietary or statutory protection for its technologies and products;

RIMs ability to obtain rights to use software or components supplied by third parties;

RIMs ability to enhance current products and develop new products;

RIMs ability to establish new, and to build on existing, relationships with its network carrier partners and distributors;

RIMs dependence on its carrier partners to grow its BlackBerry subscriber account base;

RIMs dependence on a limited number of significant customers;

the efficient and uninterrupted operation of RIMs network operations center and the networks of its carrier partners;

the occurrence or perception of a breach of RIMs security measures, or an inappropriate disclosure of confidential or personalinformation;

RIMs ability to manage production facilities and its reliance on third-party manufacturers for certain products;

RIMs reliance on its suppliers for functional components and the risk that suppliers will not be able to supply components on a timbasis or in sufficient quantities;

the continued quality and reliability of RIMs products and services;

risks associated with RIMs expanding foreign operations;

restrictions on import and use of RIMs products in certain countries due to encryption of the products and services;

effective management of growth and ongoing development of RIMs service and support operations; risks associated with acquisitions, investments and other business initiatives;

reduced spending by customers due to the uncertainty of economic and geopolitical conditions;

intense competition within RIMs industry, including the possibility that strategic transactions by RIMs competitors or carrier parcould weaken RIMs competitive position or that RIM may be required to reduce its prices to compete effectively;

dependence on key personnel and RIMs ability to attract and retain key personnel;

reliance on third-party network infrastructure developers and software platform vendors;

foreign exchange risks;

changes in interest rates affecting RIMs investment portfolio and the creditworthiness of its investment portfolio;

government regulation of wireless spectrum and radio frequencies;


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These factors should be considered carefully, and readers should not place undue reliance on RIMs forward-looking statements. RIM has nntention and undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, futurevents or otherwise, except as required by law.

Overview

RIM is a leading designer, manufacturer and marketer of innovative wireless solutions for the worldwide mobile communications market.Through the development of integrated hardware, software and services that support multiple wireless network standards, RIM provides

latforms and solutions for seamless access to time-sensitive information including email, phone, short messaging service (SMS), Internet ntranet-based applications. RIM technology also enables a broad array of third party developers and manufacturers to enhance their producnd services with wireless connectivity to data. RIMs portfolio of award-winning products, services and embedded technologies are used bhousands of organizations around the world and include the BlackBerry wireless solution, software development tools, and other hardwa

nd software. The Companys sales and marketing efforts include collaboration with strategic partners and distribution channel relationshipromote the sales of its products and services as well as its own supporting sales and marketing teams.

ources of Revenue

RIMs primary revenue stream is its BlackBerry wireless solution, which includes sales of wireless devices, software and service. TheBlackBerry wireless solution provides users with a wireless extension of their work and personal email accounts, including MicrosoftOutlook, Lotus Notes, Novell GroupWise, MSN/Hotmail, Yahoo! Mail, POP3/ISP email and others.

RIM generates hardware revenues from sales, primarily to carriers, of BlackBerry wireless devices, which provide users with the ability to nd receive wireless messages and data. RIMs BlackBerry wireless devices also incorporate a mobile phone, a personal information manaPIM) including contact, calendar, tasks and memo functionality, which can synchronize with the users desktop PIM system, and web-rowsing capability. Certain BlackBerry devices also include multimedia capabilities.

RIM generates service revenues from billings to its BlackBerry subscriber account base primarily from a monthly infrastructure access fee

arrier/distributor where a carrier or other distributor bills the BlackBerry subscriber. The BlackBerry subscriber account base is the total oubscriber accounts that have an active status at the end of a reporting period. Each carrier instructs RIM to create subscriber accounts andetermines whether the subscriber account should have an active status. That carrier is charged a service fee for each subscriber account ea

month with substantially all service fees having no regard to the amount

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the costs and burdens of compliance with new government regulations;

continued use and expansion of the Internet;

regulation, certification and health risks, and risks relating to the misuse of RIMs products;

tax liabilities, resulting from changes in tax laws or otherwise, associated with RIMs worldwide operations; and

difficulties in forecasting RIMs quarterly financial results and the growth of its subscriber base.


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f data traffic the subscriber account passes over the BlackBerry architecture. If a carrier informs RIM to deactivate the subscriber accounthen RIM no longer includes that subscriber account in its BlackBerry subscriber account base and ceases billing from the date of notificatif deactivation. On a quarterly basis, RIM may make an estimate of pending deactivations for certain carriers that do not use a fully-integrarovisioning system. It is, however, the carriers responsibility to report changes to the subscriber account status on a timely basis to RIM. umber of subscriber accounts is a non-financial metric and is intended to highlight the change in RIMs subscriber base and should not beelied upon as an indicator of RIMs financial performance. The number of subscriber accounts does not have any standardized meaning

rescribed by U.S. GAAP and may not be comparable to similar metrics presented by other companies.An important part of RIMs BlackBerry wireless platform is the software that is installed on corporate servers. Software revenues include from (i) licensing RIMs BlackBerry Enterprise Server (BES) software; (ii) client access licenses (CALs), which are charged for eacubscriber using the BlackBerry service via a BES; (iii) maintenance and upgrades to software; and (iv) technical support.

RIM also offers the BlackBerry Connect and BlackBerry Built-In Licensing Programs, which enable leading device manufacturers toquip their handsets with BlackBerry functionality, in order that users and organizations can connect to BlackBerry wireless services on aroader selection of devices and operating systems. BlackBerry Connect technology enables a variety of leading manufacturers to takedvantage of proven BlackBerry architecture to automatically deliver email and other data to a broader choice of wireless devices, operatinystems and email applications. BlackBerry Built-In technology enables leading manufacturers to incorporate popular BlackBerry applicatinto their mobile phones and handheld devices in addition to supporting push"-based BlackBerry wireless services.

Revenues are also generated from sales of accessories, repair and maintenance programs and non-recurring engineering services (NRE).

Critical Accounting Policies and EstimatesGeneral

The preparation of the Consolidated Financial Statements requires management to make estimates and assumptions with respect to the repomounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. These estimates and assumptionased upon managements historical experience and are believed by management to be reasonable under the circumstances. Such estimatesssumptions are evaluated on an ongoing basis and form the basis for making judgments about the carrying values of assets and liabilities tre not readily apparent from other sources. Actual results could differ significantly from these estimates.

The Companys critical accounting policies and estimates have been reviewed and discussed with the Companys Audit Committee. Thereave been no material changes to the Companys critical accounting policies and estimates from those disclosed in the Companys annual

MD&A for the fiscal year ended March 1, 2008 other than the adoption of Statement of Financial Accounting Standards (SFAS) No. 157Fair Value Measurements in the first quarter of fiscal 2009.

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FAS 157 clarifies the definition of fair value, establishes a framework for measurement of fair value, and expands disclosure about fair vameasurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007, except as amended by Financial Accounting

tandards Board (FASB) Staff Position (FSP) SFAS 157-1 and FSP SFAS 157-2 which is effective for fiscal years beginning afterNovember 15, 2008. FSP SFAS 157-1 and FSP SFAS 157-2 allow partial adoption relating to fair value measurements for non-financial and liabilities that are not measured at fair value on a recurring basis. Effective March 2, 2008, the Company adopted SFAS 157, except aspplies to the nonfinancial assets and nonfinancial liabilities subject to FSP SFAS 157-2, with the impact described in note 3 to the

Consolidated Financial Statements. The Company will adopt the remaining portion of SFAS 157 in the first quarter of fiscal 2010 and doesxpect the adoption to have a material impact on the consolidated financial statements and the accompanying notes.

Restatement of Previously Issued Financial Statements

Overview

As discussed in greater detail under Explanatory Note Regarding the Restatement of Previously Issued Financial Statements in the MD&or the fiscal year ended March 3, 2007 and Note 4 to the audited consolidated financial statements of the Company for the fiscal year ende

March 3, 2007, the Company restated its consolidated balance sheet as of March 4, 2006 and its consolidated statements of operations,onsolidated statements of cash flows and consolidated statements of shareholders equity for the fiscal years ended March 4, 2006 and

February 26, 2005, and the related note disclosures (the Restatement), to reflect additional non-cash stock compensation expense relatingertain stock-based awards granted prior to the adoption of the Companys stock option plan on December 4, 1996 (as amended from time me, the Stock Option Plan) and certain stock option grants during the 1997 through 2006 fiscal periods, as well as certain adjustmentselated to the tax accounting for deductible stock option expenses. The Restatement did not result in a change in the Companys previously

eported revenues, total cash and cash equivalents or net cash provided from operating activities.

The Restatement is the result of a voluntary internal review (the Review) by the Company of its stock option granting practices, which wommenced under the direction of the Audit Committee of the Companys Board of Directors, at the initiative of Dennis Kavelman, the

Companys former Chief Financial Officer (now the Companys Chief Operating Officer Administration and Operations), with the suppf Jim Balsillie, the Co-Chief Executive Officer of the Company, and the executive management team of the Company. Following the recuf two Audit Committee members who also served on the Compensation Committee, the Review was completed by the remaining two

members of the Audit Committee as a special committee of independent directors of the Board of Directors (the Special Committee). Thpecial Committee was assisted in the Review by outside legal counsel and outside accounting advisors in both Canada and the United Sta

The Special Committee reviewed the facts and circumstances surrounding the 3,231 grants of stock options to acquire common shares thatwere made between December 1996 and August 2006 to 2,034 employees and directors of the Company. The Special Committee also revietock based awards granted prior to the adoption of the Stock Option Plan.

The Review identified three significant types of accounting errors being: (1) the misapplication of U.S. GAAP as it relates to a net settlemeature contained in the Stock Option Plan until February 27, 2002, which resulted in variable accounting treatment, (2) the misapplication

U.S. GAAP in the accounting for certain

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and Nominating Committee, and has changed various management roles. In addition to Ms. Barbara Stymiest and Mr. John Wetmwho became directors of the Company in March 2007, Mr. David Kerr and Mr. Roger Martin were elected as directors of theCompany at the Annual General Meeting of the Company on July 17, 2007. Each of the new directors is independent within themeaning of applicable securities laws and stock exchange rules. As previously disclosed, each of Mr. Douglas Fregin, Mr. KendalCork and Dr. Douglas Wright did not stand for re-election at the Annual General Meeting of the Company in 2007. Mr. Cork andDr. Wright were appointed to the honorary position of Director Emeritus of the Board effective July 17, 2007 in recognition of the

substantial contributions to the Company over many years.

Other Changes The Company has established an internal audit department and an individual commenced employment with the Compin the fourth quarter of fiscal 2008 in the position of Senior Vice President, Internal Audit. This new officer reports directly to the chair the Audit Committee as well as administratively to the Co-Chief Executive Officer, Jim Balsillie. Additionally, the Company has enhancits capabilities in U.S. GAAP and in securities disclosure and compliance matters issues by establishing two new permanent full-timepositions which have been filled, respectively, by an employee with expertise in U.S. GAAP and an employee with expertise in securitiedisclosure and compliance. The latter employee will assist in the administration of RIMs equity awards granting program.

Review Costs

ncluded in the Companys selling, marketing and administration expenses in fiscal 2008 and fiscal 2009 are legal, accounting and otherrofessional costs incurred by the Company as well as other costs incurred by the Company under indemnity agreements in favor of certainfficers and directors of the Company, in each case in connection with the Review, the Restatement, and the regulatory investigations and

tigation related thereto.Mr. Jim Balsillie and Mr. Mike Lazaridis, the Companys Co-Chief Executive Officers, voluntarily offered to assist the Company in defrayosts incurred in connection with the Review and the Restatement by contributing CAD $10.0 million (CAD $5.0 million each) of those co

The Company received these voluntary payments in the second quarter of fiscal 2008, which were recorded net of income taxes as an increo paid-in capital. In addition, as part of the Notice of Application that was filed with the Ontario Superior Court of Justice-Commercial Lispension fund shareholder, seeking various orders against the Company and named directors, the Company and the other defendants enter

nto an agreement with the shareholder to settle the Application and a proposed derivative action. Under the settlement, among other thingsRIM agreed to the payment of CAD $1.1 million on account of the shareholders legal costs, and consistent with their earlier voluntarygreement (described above and in RIMs March 5, 2007 press release summarizing the results of the Review) to contribute CAD $5.0 milach to defray the costs incurred by RIM in connection with the Review, RIMs Co-CEOs, Jim Balsillie and Mike Lazaridis, agreed to pay

RIM a further CAD $2.5 million each to defray the Review costs incurred by RIM. The Company received these voluntary payments of CA2.5 million each in the third quarter of fiscal 2008, which were recorded net of income taxes as an increase to paid-in capital.

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Risks Related to the Companys Historical Stock Option Granting Practices

As a result of the events described above, the Company has become subject to the following significant risks, each of which could have amaterial adverse effect on the Companys business, financial condition and results of operations:

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The Companys historical stock option granting practices are subject to ongoing investigations by the SEC, the OSC and the USAOThe investigations and requests for information, including interviews with the Companys management and others, have requiredsignificant management attention and resources. The period of time necessary to resolve the investigations or to adequately responrequests for information is uncertain, and these matters could continue to require significant additional attention and resources thatcould otherwise be devoted to the operation of the Companys business. While there can be no assurance as to the outcome of theinvestigations, the Company anticipates that RIM and certain of its directors or officers could be subject to potential enforcementaction, penalties or other remedies. For example, whether as part of a negotiated settlement with the regulators or as part of theresolution of any enforcement proceedings, the Company or its officers could be required to pay substantial damages, fines or othepenalties, and the regulators could seek an injunction against the Company and its directors and officers, or seek to ban an officer odirector of the Company from acting as such. In addition, if the USAO determines that an intentional violation of securities laws oother laws has occurred, it could commence a prosecution seeking to impose criminal sanctions against the Company or its officerdirectors. Any of these actions could have a material adverse effect on the Company. There can be no assurance that other regulatoagencies in the United States, Canada or elsewhere will not make inquiries about, or commence investigations into, matters relatinthe Companys historical stock option practices.

As previously disclosed, the Company was served with an application filed by a pension fund shareholder in Ontario, Canada, whi

among other things, sought to commence a shareholder derivative action relating to the Companys historical option granting pracand also made certain demands with respect to the conduct and scope of the Review. Such action was settled in the third quarter offiscal 2008. On November 5, 2007, the Ontario Superior Court of Justice granted an order approving the settlement and issuing arepresentation order that binds all RIM shareholders to the terms of the agreement, except for those who had opted out. Approximone hundred shareholders opted out of the settlement. Those who disclosed the number of shares held by them indicated that,combined, the opt-out shareholders hold approximately 27,400 shares (approximately 0.005% of all outstanding shares). Howevercertain opt-out shareholders did not disclose the number of shares held by them. On December 10, 2007, the Ontario Superior CouJustice issued an order extending the opt-out deadline to January 22, 2008 for customers of Goldman Sachs Exchange & Clearing who did not receive notice of the settlement in the initial mailing. As a result of that extension, additional shareholders holding 47shares as at the record date opted out. While that lawsuit has been settled, additional lawsuits, including purported class actions anadditional derivative actions, may be filed relating to the Companys stock option granting practices. The amount of time to resolvany such lawsuits is unpredictable, and defending against such lawsuits could require significant additional attention and resourcescould otherwise be devoted to the operation of the Companys business. In addition, an unfavorable outcome in any such litigationcould have a material adverse effect on the Companys business, financial condition and results of operations.


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ummary Results of Operations Second Quarter of Fiscal 2009 Compared to the Second Quarter of Fiscal 2008

The following table sets forth certain unaudited consolidated statement of operations data, which is expressed in thousands of dollars and aercentage of revenue for the interim periods indicated, as well as unaudited consolidated balance sheet data, which is expressed in thousanf dollars, as at August 30, 2008 and September 1, 2007.

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The Company could incur significant liabilities in connection with any litigation relating to its historical stock option grantingpractices, which liabilities may not be covered by insurance. In addition, the Company has indemnity obligations (including for legexpenses) for former and current directors, officers and employees, which are described in greater detail in the CompanysManagement Information Circular dated May 28, 2008.

As noted above, in connection with the Restatement, the Company has applied judgment in choosing whether to revise measureme

dates for prior stock option grants. While the Company believes it has made appropriate judgments in determining the correctmeasurement dates for its stock option grants in connection with the Restatement, the issues surrounding past stock option grants afinancial statement restatements are complex and guidance in these areas may continue to evolve. If new guidance imposes additioor different requirements or if the SEC or the OSC disagrees with the manner in which the Company has accounted for and reportethe financial impact, there is a risk the Company may have to further restate its prior financial statements, amend its filings with thSEC or the OSC (including the Consolidated Financial Statements and this MD&A), or take other actions not currently contemplaAdditionally, if the SEC or the OSC disagrees with the manner in which the Company has accounted for and reported the financiaimpact of past option grants, there could be delays in subsequent filings with the SEC or the OSC.

The Company may face challenges in hiring and retaining qualified personnel due to the Restatement, the investigations relating toCompany and any potential tax consequences to employees who received grants of stock options with incorrect accountingmeasurement dates. In addition, restrictions on the Companys ability to grant stock options or other equity awards to new employunder its policy on granting equity awards, which provides for quarterly grants of stock options or other equity awards except inlimited and exceptional circumstances, may make it more difficult for the Company to attract new employees. The loss of the serv

of any of the Companys key employees or challenges in hiring new employees could have a material adverse effect on its businesand growth prospects. In addition, the Company may receive claims by employees who may be subject to adverse tax consequencea result of errors in connection with its historical stock option grants.


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Executive Summary

Revenue for the second quarter of fiscal 2009 was $2.58 billion, an increase of $1.21 billion, or 87.8%, from $1.37 billion in the second quf fiscal 2008. The number of BlackBerry devices sold increased by approximately 3.0 million, or 101.2%, to approximately 6.1 million inecond quarter of fiscal 2009, compared to approximately 3.1 million in the second quarter of fiscal 2008. Device revenue increased by

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As at and for the Three Months Ended

ChanQ2 Fis

August 30, 2008 September 1, 2007 2009/2(in thousands, except for per share amounts)

Revenue $2,577,330 100.0% $1,372,250 100.0% $1,205

Cost of sales 1,270,473 49.3% 667,833 48.7% 602

Gross margin 1,306,857 50.7% 704,417 51.3% 602

Expenses

Research and development 181,347 7.0% 88,171 6.4% 93elling, marketing and administration 379,644 14.7% 197,943 14.4% 181

Amortization 43,633 1.7% 25,350 1.8% 18

604,624 23.5% 311,464 22.7% 293

ncome from operations 702,233 27.2% 392,953 28.6% 309

nvestment income 17,168 0.7% 18,984 1.4% (1

ncome before income taxes 719,401 27.9% 411,937 30.0% 307

Provision for income taxes 223,855 8.7% 124,252 9.0% 99

Net income $ 495,546 19.2% $ 287,685 21.0% $ 207

Earnings per share (1)Basic $ 0.88 $ 0.51 $

Diluted $ 0.86 $ 0.50 $

Weighted-average number of shares outstanding (000s)Basic 564,899 558,991Diluted 574,831 572,165

Total assets $6,893,246 $3,989,379 $2,903Total liabilities $1,944,690 $ 920,262 $1,024Total long-term liabilities $ 95,664 $ 77,798 $ 17

hareholders equity $4,948,556 $3,069,117 $1,879

Notes:

1) The Company has not paid any cash dividends during the last two fiscal years.


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1.04 billion, or 96.5%, to $2.12 billion, reflecting primarily the higher number of devices sold. Service revenue increased by $132.3 millio333.7 million, reflecting the Companys increase in BlackBerry subscriber accounts since the second quarter of fiscal 2008. Software revencreased by $7.1 million to $64.3 million in the second quarter of fiscal 2009.

The Companys net income for the second quarter of fiscal 2009 was $495.5 million, an increase of $207.8 million, or 72.3%, in the seconduarter of fiscal 2009, compared to net income of $287.7 million in the second quarter of fiscal 2008. Basic earnings per share (basic EPS

was $0.88 and diluted earnings per share (diluted EPS) was $0.86 in the second quarter of fiscal 2009 compared to $0.51 basic EPS and

0.50 diluted EPS in the second quarter of fiscal 2008, reflecting a 72.0% increase compared to fiscal 2008. The $207.8 million increase inncome in the second quarter of fiscal 2009 primarily reflects an increase in gross margin in the amount of $602.4 million, resulting primarrom the increased number of device shipments, which was partially offset by an increase of $374.5 million in the Companys research andevelopment expenses, sales and marketing programs and provision for income taxes.

A more comprehensive analysis of these factors is contained in Results of Operations.

elected Quarterly Financial Data

The following table sets forth RIMs unaudited quarterly consolidated results of operations data for each of the eight most recent quarters,ncluding the quarter ended August 30, 2008. The information in the table below has been derived from RIMs unaudited interim consolidainancial statements that, in managements opinion, have been prepared on a basis consistent with the Consolidated Financial Statements o

Company and include all adjustments necessary for a fair presentation of information when read in conjunction with the Consolidated Finatatements of the Company. RIMs quarterly operating results have varied substantially in the past and may vary substantially in the future

Accordingly, the information below is not necessarily indicative of results for any future quarter.

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Results of Operations

Three months ended August 30, 2008 compared to the three months ended September 1, 2007

Revenue

Revenue for the second quarter of fiscal 2009 was $2.58 billion, an increase of $1.21 billion, or 87.8%, from $1.37 billion in the second quf fiscal 2008.

A comparative breakdown of the significant revenue streams is set forth in the following table:

12

Fiscal Year 2009 Fiscal Year 2008 Fiscal Year 2007

Second First Fourth Third Second First Fourth ThiQuarter Quarter Quarter Quarter Quarter Quarter Quarter Quar

(in thousands, except per share data)

Revenue $2,577,330 $2,242,565 $1,882,705 $1,672,529 $1,372,250 $1,081,911 $930,393 $835,0Gross margin $1,306,857 $1,137,357 $ 968,222 $ 847,872 $ 704,417 $ 560,070 $497,358 $452,6

Research anddevelopment,Selling, marketing and

administration, andAmortization 604,624 490,920 403,768 357,978 311,464 276,212 256,454 228,0

nvestment income (17,168) (18,977) (20,114) (23,816) (18,984) (16,447) (14,794) (12,6

ncome before incometaxes 719,401 665,414 584,568 513,710 411,937 300,305 255,698 237,2

Provision for incometaxes 223,855 182,899 172,067 143,249 124,252 77,085 68,314 62,0

Net income $ 495,546 $ 482,515 $ 412,501 $ 370,461 $ 287,685 $ 223,220 $187,384 $175,

Earnings per share (1)

Basic $ 0.88 $ 0.86 $ 0.73 $ 0.66 $ 0.51 $ 0.40 $ 0.34 $ 0

Diluted $ 0.86 $ 0.84 $ 0.72 $ 0.65 $ 0.50 $ 0.39 $ 0.33 $ 0

Research anddevelopment $ 181,347 $ 127,776 $ 104,573 $ 92,150 $ 88,171 $ 74,934 $ 67,321 $ 61,

elling, marketing andadministration 379,644 326,592 267,881 238,175 197,943 177,483 167,112 146,5

Amortization 43,633 36,552 31,314 27,653 25,350 23,795 22,021 20,3

$ 604,624 $ 490,920 $ 403,768 $ 357,978 $ 311,464 $ 276,212 $256,454 $228,0

Notes:

1) The Company has not paid any cash dividends during the last three fiscal years.


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Device revenue increased by $1.04 billion, or 96.5%, to $2.12 billion, or 82.1% of consolidated revenue, in the second quarter of fiscal 200ompared to $1.08 billion, or 78.5%, of consolidated revenue in the second quarter of fiscal 2008. This increase in device revenue over therior year is primarily attributable to a volume increase of approximately 3.0 million units, or 101.2%, to approximately 6.1 million devicehe second quarter of fiscal 2009 compared to approximately 3.1 million devices in the second quarter of fiscal 2008. ASP decreased to $34he second quarter of fiscal 2009 from $353 in the second quarter of fiscal 2008 due primarily to a change in the BlackBerry device mix. T

Company currently expects ASP to be approximately the same in the third quarter of fiscal 2009 when compared to the second quarter of f009, however, as RIM expands its market focus into the consumer market and as the technology continues to mature, the Company expec

he ASP to decline. ASP is dependent on projected future sales volumes, device mix, new device introductions for the Companys enterprisrosumer and consumer offerings as well as pricing by competitors in the industry.

The Company estimates that a $10, or 2.9%, change in overall ASP would result in a quarterly revenue change of approximately $61 millioased upon the Companys volume of devices shipped in the second quarter of fiscal 2009.

ervice revenue increased $132.3 million, or 65.7%, to $333.7 million and comprised 12.9% of consolidated revenue in the second quarteriscal 2009 compared to $201.4 million, or 14.7% of consolidated revenue in the second quarter of fiscal 2008, reflecting the Companysncrease in BlackBerry subscriber accounts since the second quarter of fiscal 2008. BlackBerry subscriber account additions werepproximately net 2.6 million for the second quarter of fiscal 2009 compared to approximately net 1.5 million for the comparable period laear. The total BlackBerry subscriber account base at the end of the second quarter of fiscal 2009 was approximately 19 million compared pproximately 10.5 million at the end of the second quarter of fiscal 2008. The percentage of the subscriber account base outside of North

America at the end of the second quarter of fiscal 2009 was in the low 30 percent range.

oftware revenue includes fees from licensed BES software, CALs, technical support, maintenance and upgrades. Software revenue increa

7.1 million, or 12.4%, to $64.3 million in the second quarter of fiscal 2009 from $57.2 million in the second quarter of fiscal 2008.

13

Change - FiscalQ2 Fiscal 2009 Q2 Fiscal 2008 2009/2008

Number of devices sold 6,148,000 3,056,000 3,092,000 101

Average Selling Price (ASP) $ 344 $ 353 $ (9) (2

Revenues

Devices $2,116,451 82.1% $1,077,165 78.5% $1,039,286 96ervice 333,687 12.9% 201,415 14.7% 132,272 65oftware 64,290 2.5% 57,203 4.2% 7,087 12

Other 62,902 2.5% 36,467 2.6% 26,435 72

$2,577,330 100.0% $1,372,250 100.0% $1,205,080 87


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Other revenue, which includes accessories, non-warranty repairs and NRE, increased by $26.4 million to $62.9 million in the second quarteiscal 2009 compared to $36.5 million in the second quarter of fiscal 2008. The majority of the increase was attributable to increases in saleccessories and non-warranty repair.

Gross Margin

Consolidated gross margin increased by $602.4 million, or 85.5%, to $1.31 billion, or 50.7% of revenue, in the second quarter of fiscal 200ompared to $704.4 million, or 51.3% of revenue, in the same period of the previous fiscal year. The decrease of 0.6% in consolidated gros

margin percentage was primarily due to a higher percentage of device shipments which comprised 82.1% of the total revenue mix in the seuarter of fiscal 2009 compared to 78.5% in the same period of fiscal 2008 and a change in the BlackBerry device mix. Gross marginercentage for devices is generally lower than the Companys consolidated gross margin percentage. The decrease in gross margin percentelating to the increase in percentage of device shipments was offset in part by improved service margins resulting from cost efficiencies in

RIMs network operations infrastructure as a result of the increase in BlackBerry subscriber accounts. The Company expects gross margin e approximately 47% in the third quarter of fiscal 2009, reflecting primarily a decrease in blended handset margins relating to certain newroducts that are feature rich and designed to operate on new network technologies, offset in part by operating expenses that are 1% 2%ower as a percentage of revenue than the second quarter of fiscal 2009.

Research and Development, Selling, Marketing and Administration, and Amortization Expense

The table below presents a comparison of research and development, selling, marketing and administration, and amortization expenses for uarter ended August 30, 2008, compared to the quarter ended May 31, 2008 and the quarter ended September 1, 2007. The Company belie

t is meaningful to provide a comparison between the second quarter of fiscal 2009 and the first quarter of fiscal 2009 given the quarterlyncreases in revenue realized by the Company during fiscal 2009.

14

Three Month Fiscal Periods Ended

August 30, 2008 May 31, 2008 September 1, 2007

% of % of %Revenue Revenue Rev

Revenue $2,577,330 $2,242,565 $1,372,250

Research and development $ 181,347 7.0% $ 127,776 5.7% $ 88,171 6elling, marketing and administration 379,644 14.7% 326,592 14.6% 197,943 14

Amortization 43,633 1.7% 36,552 1.6% 25,350 1

$ 604,624 23.5% $ 490,920 21.9% $ 311,464 22


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Research and Development

Research and development expenditures consist primarily of salaries and benefits for technical personnel, new product development costs,ravel, office and related infrastructure costs and recruiting.

Research and development expenditures increased by $93.1 million to $181.3 million, or 7.0% of revenue, in the second quarter of fiscal 2ompared to $88.2 million, or 6.4% of revenue, in the second quarter of fiscal 2008. The majority of the increases during the second quarteiscal 2009 compared to the second quarter of fiscal 2008 were attributable to salaries and benefits due to an increase in the average headcossociated with research and development activities, new product development costs, travel and office and related staffing infrastructure co

elling, Marketing and Administration Expenses

elling, marketing and administration expenses consist primarily of, marketing, advertising and promotion, salaries and benefits, externaldvisory fees, office and related staffing infrastructure costs and travel expenses.

elling, marketing and administration expenses increased by $181.7 million to $379.6 million for the second quarter of fiscal 2009 compar197.9 million for the comparable period in fiscal 2008. As a percentage of revenue, selling, marketing and administration expenses increao 14.7% in the second quarter of fiscal 2009 compared to 14.4% in the second quarter of fiscal 2008. The net increase of $181.7 million wrimarily attributable to increased expenditures for marketing, advertising and promotion expenses including additional programs to suppoew product launches, salary and benefits expenses primarily as a result of increased personnel, external advisory fees, office and relatedtaffing infrastructure costs and travel expenses.

Amortization

Amortization expense relating to certain capital and all intangible assets other than licenses increased by $18.2 million to $43.6 million for econd quarter of fiscal 2009 compared to $25.4 million for the comparable period in fiscal 2008. The increased amortization expense primeflects the impact of amortization expense with respect to capital and certain intangible asset expenditures incurred primarily during the lawo quarters of fiscal 2008 and also incremental amortization with respect to capital and certain intangible asset expenditures incurred durihe first half of fiscal 2009.

Cost of sales

Amortization expense with respect to capital assets employed in the Companys manufacturing operations and BlackBerry service operationcreased to $18.2 million in the second quarter of fiscal 2009 compared to $10.5 million in the second quarter of fiscal 2008 and is charge

Cost of sales in the Consolidated Statements of Operations. The increased amortization expense in the second quarter of fiscal 2009 primareflects the impact of amortization expense with respect to these capital asset expenditures incurred during the last two quarters of fiscal 20

nd also incremental amortization with respect to capital asset expenditures incurred during the first half of fiscal 2009.

Amortization expense with respect to licenses (a component of Intangible assets) is charged to Cost of sales and was $7.5 million in the secuarter of fiscal 2009 compared to $5.4 million in the second quarter of fiscal 2008.

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Total amortization expense with respect to Intangible assets was $24.1 million in the second quarter of fiscal 2009 compared to $9.9 milliohe second quarter of fiscal 2008. See also Note 6 to the Consolidated Financial Statements.

nvestment Income

nvestment income decreased by $1.8 million to $17.2 million in the second quarter of fiscal 2009 from $19.0 million in the second quarteriscal 2008. The decrease primarily reflects the decrease in yields due to lower interest rates, offset by an increase in cash and cash equivalehort-term investments and long-term investments when compared to the prior year. See also Liquidity and Capital Resources.

ncome Taxes

For the second quarter of fiscal 2009, the Companys income tax expense was $223.9 million, resulting in an effective tax rate of 31.1%ompared to income tax expense of $124.3 million or an effective tax rate of 30.2% for the same period last year. The Companys effectiveate reflects the geographic mix of earnings in jurisdictions with different tax rates. The Companys effective tax rate for the second quarteriscal 2009 was approximately 1% higher than managements estimate for the quarter primarily due to the unfavorable impact of theppreciation of the U.S. dollar relative to the Canadian dollar in the second quarter of fiscal 2009. The foreign exchange impact was a resul

U.S. dollar denominated assets and liabilities held by Canadian entities that are subject to tax in Canadian dollars and the related timing ofransactions. Management anticipates the Companys effective tax rate for the remainder of fiscal 2009 to be approximately 29% to 30%. T

Companys effective tax rate could move outside this range depending on, among other things, foreign exchange rate fluctuations.

The Company has not provided for Canadian income taxes or foreign withholding taxes that would apply on the distribution of the earning

ts non-Canadian subsidiaries, as these earnings are intended to be reinvested indefinitely by these subsidiaries.

Net Income

Net income was $495.5 million, or $0.88 basic EPS and $0.86 diluted EPS, in the second quarter of fiscal 2009 compared to net income of287.7 million, or $0.51 basic EPS and $0.50 diluted EPS, in the second quarter of fiscal 2008.

The $207.8 million increase in net income in the second quarter of fiscal 2009 reflects primarily an increase in gross margin in the amount 602.4 million, which was offset in part by an increase of $374.5 million in the Companys investments in research and development expennd sales and marketing programs and the Companys provision for income taxes.

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The weighted average number of shares outstanding was 564.9 million common shares for basic EPS and 574.8 million common shares foriluted EPS for the quarter ended August 30, 2008 compared to 559.0 million common shares for basic EPS and 572.2 million common shor diluted EPS for the same period last year.

Common Shares Outstanding

On September 24, 2008, there were 565.5 million common shares, 13.6 million options to purchase common shares, 5,000 restricted share

utstanding and 12,119 deferred share units outstanding.

ix months ended August 30, 2008 compared to the six months ended September 1, 2007

The following table sets forth certain unaudited consolidated statement of operations data, which is expressed in thousands of dollars and aercentage of revenue for the interim periods indicated:

17


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Revenue

Revenue for the first half of fiscal 2009 was $4.82 billion, an increase of $2.37 billion, or 96.4%, from $2.45 billion in the first six months iscal 2008.

A comparative breakdown of the significant revenue streams is set forth in the following table:

18

For the Six Months Ended

Chan- Fisc

August 30, 2008 September 1, 2007 2009/2(in thousands, except for per share amounts)

Revenue $4,819,895 100.0% $2,454,161 100.0% $2,365

Cost of sales 2,375,681 49.3% 1,189,674 48.5% 1,186

Gross margin 2,444,214 50.7% 1,264,487 51.5% 1,179

Expenses

Research and development 309,123 6.4% 163,105 6.6% 146elling, marketing and administration 706,236 14.6% 375,426 15.3% 330

Amortization 80,185 1.7% 49,145 2.0% 31

1,095,544 22.7% 587,676 23.9% 507

ncome from operations 1,348,670 28.0% 676,811 27.6% 671

nvestment income 36,145 0.7% 35,431 1.4%

ncome before income taxes 1,384,815 28.7% 712,242 29.0% 672

Provision for income taxes 406,754 8.4% 201,337 8.2% 205

Net income $ 978,061 20.3% $ 510,905 20.8% $ 467

Earnings per shareBasic $ 1.73 $ 0.91 $

Diluted $ 1.70 $ 0.89 $

Weighted-average number of shares outstanding (000s)Basic 564,222 558,422Diluted 574,738 571,379


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Device revenue increased by $2.1 billion, or 108.0%, to $4.0 billion, or 82.1% of consolidated revenue, in the first six months of fiscal 200ompared to $1.9 billion, or 77.5%, of consolidated revenue in the first half of fiscal 2008. This increase in device revenue over the prior ys primarily attributable to a volume increase of approximately 6.0 million units, or 111.0%, to approximately 11.5 million devices in the fiix months of fiscal 2009 compared to approximately 5.5 million devices in the first half of fiscal 2008, partially offset by a decrease of $4.2% in ASP to $343 in the current six month fiscal period from $347 in the first six months of fiscal 2008.

ervice revenue increased $251.1 million, or 67.0%, to $626.1 million and comprised 13.0% of consolidated revenue in the first six monthiscal 2009 compared to $375.0 million, or 15.3% of consolidated revenue in the first six months of fiscal 2008, reflecting the Companys

ncrease in BlackBerry subscriber accounts since the second quarter of fiscal 2008.

oftware revenue increased $19.1 million, or 17.2%, to $130.8 million in the first six months of fiscal 2009 from $111.7 million in the firstmonths of fiscal 2008.

Other revenue increased by $41.9 million to $108.2 million in the first six months of fiscal 2009 compared to $66.3 million in the first sixmonths of fiscal 2008. The majority of the increase was attributable to increases in sales of accessories and non-warranty repair.

Gross Margin

Consolidated gross margin increased by $1.18 billion, or 93.3%, to $2.44 billion, or 50.7% of revenue, in the first six months of fiscal 2009ompared to $1.26 billion, or 51.5% of revenue, in the same period of the previous fiscal year. The decrease of 0.8% in consolidated gross

margin percentage was primarily due to a higher percentage of device shipments which comprised 82.1% of the total revenue mix in the firix months of fiscal 2009 compared to 77.5% in the same period of fiscal 2008 and a change in the BlackBerry device mix. Gross marginercentage for devices is generally lower than the Companys consolidated gross margin

19

For the Six Month Periods Change - FiscalQ2 YTD Fiscal 2009 Q2 YTD Fiscal 2008 2009/2008

Number of devices sold 11,546,000 5,472,000 6,074,000 111

Average Selling Price (ASP) $ 343 $ 347 $ (4) (1

RevenuesDevices $ 3,954,788 82.1% $1,901,218 77.5% $2,053,570 108

ervice 626,063 13.0% 375,000 15.3% 251,063 67oftware 130,831 2.7% 111,670 4.6% 19,161 17

Other 108,213 2.2% 66,273 2.6% 41,940 63

$ 4,819,895 100.0% $2,454,161 100.0% $2,365,734 96


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ercentage. The decrease in gross margin percentage relating to the increase in percentage of device shipments was offset in part by improvervice margins resulting from cost efficiencies in RIMs network operations infrastructure as a result of the increase in BlackBerry subscrccounts and a decline in certain fixed costs as a percentage of consolidated revenue as the Company continues to realize economies of scats manufacturing operations.

Research and Development, Selling, Marketing and Administration, and Amortization Expense

The table below presents a comparison of research and development, selling, marketing and administration, and amortization expenses for ix months ended August 30, 2008, compared to the six months ended September 1, 2007.

Research and Development

Research and development expenditures increased by $146.0 million to $309.1 million, or 6.4% of revenue, in the six months ended Augus008, compared to $163.1 million, or 6.6% of revenue, in the first six months of fiscal 2008. The majority of the increases during the first s

months of fiscal 2009, compared to fiscal 2008, were attributable to salaries and benefits due to an increase in the average headcount assocwith research and development activities, new product development costs, travel and office and related staffing infrastructure costs.

elling, Marketing and Administration Expenses

elling, marketing and administration expenses increased by $330.8 million to $706.2 million for the first six months of fiscal 2009 compao $375.4 million for the comparable period in fiscal 2008. As a percentage of revenue, selling, marketing and administration expensesecreased to 14.7% in the current fiscal period versus 15.3% in the comparable preceding fiscal period. The net increase of $330.8 million rimarily attributable to increased expenditures for marketing, advertising and promotion expenses including additional programs to

20

For the Six Months Ended

Change - FiscalAugust 30, 2008 September 1, 2007 2009/2008

% of % ofRevenue Revenue % of Ch

Revenue $4,819,895 $2,454,161 $2,365,734 96.4

Research and development $ 309,123 6.4% $ 163,105 6.6% $ 146,018 89.5elling, marketing and administration 706,236 14.7% 375,426 15.3% 330,810 88.1

Amortization 80,185 1.7% 49,145 2.0% 31,040 63.2

$1,095,544 22.7% $ 587,676 23.9% $ 507,868 86.4


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upport new product launches, salary and benefits expenses primarily as a result of increased personnel, external advisory fees, office andelated staffing infrastructure costs and travel expenses.

Amortization

Amortization expense relating to certain capital and all intangible assets other than licenses increased by $31.1 million to $80.2 million for irst half of fiscal 2009 compared to $49.1 million for the comparable period in fiscal 2008. The increased amortization expense for the six

months ended August 30, 2008 primarily reflects the impact of six months of amortization expense with respect to capital and certainntangible asset expenditures incurred primarily during the last two quarters of fiscal 2008 and also incremental amortization with respect tapital and certain intangible asset expenditures incurred during the first six months of fiscal 2009.

Cost of sales

Amortization expense with respect to capital assets employed in the Companys manufacturing operations and BlackBerry service operationcreased to $33.1 million in the first six months of fiscal 2009 compared to $20.8 million in the comparable period of fiscal 2008 and isharged to Cost of sales in the Consolidated Statements of Operations. The increased amortization expense in the first six months of fiscal rimarily reflects the impact of amortization expense with respect to these capital asset expenditures incurred during the last two quarters oiscal 2008 and also incremental amortization with respect to capital asset expenditures incurred during the first half of fiscal 2009.

Amortization expense with respect to licenses (a component of Intangible assets) is charged to Cost of sales and was $12.7 million in the fiix months of fiscal 2009 compared to $9.0 million in the comparable period of fiscal 2008.

Total amortization expense with respect to Intangible assets was $40.6 million in the first six months of fiscal 2009 compared to $18.1 milln the first six months of fiscal 2008. See also Note 6 to the Consolidated Financial Statements.

nvestment Income

nvestment income increased by $0.7 million to $36.1 million in the first six months of fiscal 2009 from $35.4 million in the comparable pef fiscal 2008. The increase primarily reflects the increase in cash and cash equivalents, short-term investments and long-term investments

when compared to the prior year, offset by decreases in yields due to lower interest rates. See also Liquidity and Capital Resources.

ncome Taxes

For the first six months of fiscal 2009, the Companys income tax expense was $406.8 million, resulting in an effective tax rate of 29.4%ompared to income tax expense of $201.3 million or an effective tax rate of 28.3% for the same period last year. The Companys effectiveate reflects the geographic mix of earnings in jurisdictions with different tax rates. The lower effective tax rate in the first six months of fis

008 was

21


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rimarily due to the favorable impact of the depreciation of the U.S. dollar relative to the Canadian dollar during the first six months of fisc008. For the first six months of fiscal 2009, the unfavorable impact of the appreciation of the U.S. dollar relative to the Canadian dollar inecond quarter of fiscal 2009 was offset by favourable foreign exchange related to certain balance sheet items in the first quarter of fiscal 2

The Company has not provided for Canadian income taxes or foreign withholding taxes that would apply on the distribution of the earningts non-Canadian subsidiaries, as these earnings are intended to be reinvested indefinitely by these subsidiaries.

Net Income

Net income was $978.1 million, or $1.73 basic EPS and $1.70 diluted EPS, in the first six months of fiscal 2009 compared to net income o510.9 million, or $0.91 basic EPS and $0.89 diluted EPS, in the prior years comparable period.

The $467.2 million increase in net income in the first six months of fiscal 2009 reflects primarily an increase in gross margin in the amount1.18 billion, which was offset in part by an increase of $682.2 million in the Companys investments in research and development expensnd sales and marketing programs and the Companys provision for income taxes.

The weighted average number of shares outstanding was 564.2 million common shares for basic EPS and 574.7 million common shares foriluted EPS for the six months ended August 30, 2008 compared to 558.4 million common shares for basic EPS and 571.4 million commohares for diluted EPS for the same period last year.

Financial Condition

Liquidity and Capital ResourcesCash and cash equivalents, short-term investments and long-term investments increased by $163.1 million to $2.24 billion as at August 30,

008 from $2.08 billion as at May 31, 2008. The majority of the Companys cash and cash equivalents, short-term investments and long-tenvestments are denominated in U.S. dollars as at August 30, 2008.

A comparative summary of cash and cash equivalents, short-term investments and long-term investments is set out below.

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Three months ended August 30, 2008 compared to the three months ended September 1, 2007

Operating Activities

Cash flow provided by operating activities was $591.7 million in the second quarter of fiscal 2009 compared to cash flow provided byperating activities of $227.1 million in the preceding fiscal year, representing an increase of $364.6 million primarily reflecting the increaccounts payable and accrued liabilities of approximately $324.7 million due to timing of payments, partially offset by an increase of tradeeceivables of $205.5 million in the second quarter of fiscal 2009. The table below summarizes the key components of this net decrease.

23

As at

ChanAugust 30, 2008 May 31, 2008 Q2/

Cash and cash equivalents $1,131,074 $ 984,217 $146hort-term investments 422,121 391,939 30

Long-term investments 686,457 700,400 (13

Cash and cash equivalents, short-term investments and long-term investments $2,239,652 $2,076,556 $163

Three Months Ended

Change - FiscAugust 30, 2008 September 1, 2007 2009/2008

Net income $ 495,546 $ 287,685 $ 207,861

Amortization 69,316 41,277 28,039Deferred income taxes 24,073 (13,356) 37,429

tock-based compensation 9,700 9,000 700

Changes in:Trade receivables (339,673) (134,211) (205,462)Other receivables (20,046) (50,772) 30,726Inventory (51,336) (42,738) (8,598)Accounts payable 225,274 (8,085) 233,359Accrued liabilities 136,489 45,134 91,355Income taxes payable 19,829 106,433 (86,604)All other 22,531 (13,269) 35,800

Cash provided from operating activities $ 591,703 $ 227,098 $ 364,605


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Financing Activities

Cash flow provided by financing activities was $8.3 million for the second quarter of fiscal 2009 and was primarily provided by the proceerom the exercise of stock options and tax benefits from the exercise of stock options. The cash flow provided by financing activities in theecond quarter of fiscal 2008 in the amount of $28.7 million was primarily attributable to proceeds from the exercise of stock options as wehe voluntary payments of CAD $5.0 million each made by the Co-CEOs. See Restatement of Previously Issued Financial Statements

Review Costs.

nvesting Activities

During the three months ended August 30, 2008, cash flow used in investing activities was $441.4 million and included capital asset additif $190.4 million, intangible asset additions of $234.1 million, as well as transactions involving the proceeds on sale or maturity of short-tenvestments and long-term investments, net of the costs of acquisitions in the amount of $16.9 million. For the same period of the prior fiscear, cash flow used in investing activities was $120.1 million and included capital asset additions of $79.0 million, intangible asset additiof $13.7 million, as well as transactions involving the proceeds on sale or maturity of short-term investments and long-term investments, nehe costs of acquisition, amounting to $24.2 million. The increase in capital asset spending was primarily due to increased investment in lannd building purchases, renovations to existing facilities, expansion and enhancement of the BlackBerry infrastructure and computer equipurchases. The increase in intangible asset spending was primarily associated with a patent assignment and license agreement to acquire aortfolio of patents for a total of $202.0 million. All acquired patents were recorded as Intangible assets and are being amortized over theirstimated useful lives.

ix months ended August 30, 2008 compared to the six months ended September 1, 2007

Operating Activities

Cash flow provided by operating activities was $599.1 million in the first six months of fiscal 2009 compared to cash flow provided byperating activities of $450.1 million in the first six months of the preceding fiscal year, representing an increase of $149.0 million andncludes the payment, in the first quarter of fiscal 2009, of approximately $460 million for income taxes relating to fiscal 2008. The table bummarizes the key components of this net increase.

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Financing Activities

Cash flow provided by financing activities was $33.9 million for the first six months of fiscal 2009 and was primarily provided by the procrom the exercise of stock options and tax benefits from the exercise of stock options. The cash flow provided by financing activities in theix months of fiscal 2008 in the amount of $33.8 million was primarily provided by the proceeds from the exercise of stock options in themount of $23.2 million, as well as the voluntary payments of CAD $5.0 million each made by the Co-CEOs. See Restatement of Previoussued Financial Statements Review Costs.

nvesting Activities

During the six months ended August 30, 2008, cash flow of $674.6 million was used primarily to fund $386.0 million of capital asset purchnd $331.0 million for the acquisition of intangible assets, offset by cash flow provided by transactions involving the proceeds on sale or

maturity of short-term investments and investments, net of the costs of acquisitions in the amount of $42.4 million. For the first six monthshe prior fiscal year, cash flow used in investing activities was $313.1 million and included capital asset additions of $145.7 million, intang

sset additions of $23.5 million, as well as transactions involving the proceeds on sale or maturity of short-term investments and long-termnvestments, net of the costs of acquisition, amounting to $140.7 million.

uction Rate Securities

Auction rate securities are debt instruments with long-term nominal maturity dates for which the interest rates are reset through a dutch aucrocess, typically every 7, 28 or 35 days. Interest is paid at the end of each auction period, and the auction normally serves as the mechanisor securities holders to sell their existing positions to interested buyers. As at August 30, 2008, the Company held $40.5 million in face vaf investment grade auction rate securities which are experiencing failed auctions as a result of more sell orders than buy orders, and

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Six Months Ended

Change-FiscAugust 30, 2008 September 1, 2007 2009/2008

Net income $ 978,061 $ 510,905 $ 467,156

Amortization 125,995 78,993 47,002

Deferred income taxes (18,678) (62,151) 43,473tock-based compensation 19,600 14,300 5,300

Changes in:Trade receivables (592,082) (279,931) (312,151Other receivables (43,848) (68,158) 24,310Inventory (116,637) (45,486) (71,151Accounts payable 256,724 51,590 205,134Accrued liabilities 294,238 121,898 172,340Income taxes payable (320,775) 141,573 (462,348All other 16,481 (13,388) 29,869

Cash provided from operating activities $ 599,079 $ 450,145 $ 148,934


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hese auctions have not yet returned to normal operations. The interest rate for these securities has been set at the maximum rate specified irogram documents (a predetermined basis points spread over LIBOR), and interest continues to be paid every 28 days as scheduled. As aesult of the lack of continuing liquidity in these securities, the Company has adjusted the reported value to reflect an unrealized loss of3.2 million, which the Company considers temporary and is reflected in other comprehensive income. In valuing these securities, the

Company used a multi-year investment horizon and considered the underlying risk of the securities and the current market interest ratenvironment. The Company has the ability and intent to hold these securities until such time that market liquidity returns to normal levels,

oes not consider the principal or interest amounts on these securities to be materially at risk at this time. As there is uncertainty as to whenmarket liquidity for auction rate securities will return to normal, the Company has classified the failing auction rate securities as long-termnvestments on the balance sheet. As at August 30, 2008, the Company does not consider these investments to be other-than-temporarilympaired.

tructured Investment Vehicle

A Structured Investment Vehicle (SIV) is a fund that seeks to generate investment returns by purchasing high grade long-term fixed inconstruments and funding those purchases by issuing short-term debt instruments. In late 2007, widespread illiquidity in the market hasrevented many SIVs from accessing necessary funding for ongoing operations. As at August 30, 2008, the Company held $25.0 million faalue of SIV securities that were negatively impacted by the changes in market conditions. In fiscal 2008, the Company recorded an other-emporary impairment charge of $3.8 million on these investment securities. During the first six months of fiscal 2009, the Company did noecord any additional other-than-temporary impairment charges associated with these investments.

n determining the value for these securities, the Company has considered available evidence including changes in general market conditio

pecific industry and individual company data, the length of time and the extent to which the fair value has been less than cost, the financiaondition, the near-term prospects of the individual investment and the Companys intent and ability to hold the debt securities.

The SIV holdings have been placed with an enforcement manager to be restructured or sold at the election of each senior note holder. TheCompany has elected to participate in the restructuring of the securities. The Company believes that the anticipated restructuring will likelyesult in extended maturities and/or a pro-rata distribution of proceeds from the income and principal payments on the assets underlying theecurities. Given the uncertainty of the restructuring at this time, the Company cannot determine the potential impact that a restructuring wave on the value of these securities and has classified these securities as long-term investments. The Company may recognize additionalmpairment charges on these securities if the restructuring is unsuccessful or there is an other-than temporary deterioration in the value of thnderlying assets.

ggregate Contractual Obligations

The following table sets out aggregate information about the Companys contractual obligations and the periods in which payments are duet August 30, 2008:

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Purchase obligations and commitments amounted to approximately $3.3 billion as of August 30, 2008, with purchase orders with contractmanufacturers representing approximately $2.4 billion of the total. The Company also has commitments on account of capital expenditurespproximately $101.3 million included in this total, primarily for manufacturing, facilities and information technology, including serviceperations. The remaining balance consists of purchase orders or contracts with suppliers of raw materials, as well as other goods and servitilized in the operations of the Company. The expected timing of payment of these purchase obligations and commitments is estimated bapon current information. The timing of payments and actual amounts paid may be different depending upon the time of receipt of goods aervices, changes to agreed-upon amounts for some obligations or payment terms.

The Company has not paid any cash dividends in the last two fiscal years.

Cash and cash equivalents, short-term investments and long-term investments were $2.24 billion as at August 30, 2008. The Company belits financial resources, together with expected future earnings, are sufficient to meet funding requirements for current financial commitmenor future operating and capital expenditures not yet committed, and also provide the necessary financial capacity to meet current and futur

rowth expectations.

The Company has a $100 million Demand Credit Facility (the Facility) to support and secure operating and financing requirements. As aAugust 30, 2008, the Company has utilized $18.0 million of the Facility for outstanding Letters of Credit and $82.0 million of the Facility i

nused. The Company has pledged specific investments as security for this Facility.

The Company has an additional $2.4 million Demand Credit Facility (the Additional Facility). The Additional Facility is used to supportecure other operating and financing requirements. As at August 30, 2008, the Company has utilized $1.4 million of the Additional Facilityutstanding letters of credit and $1.0 million of the Additional Facility is unused.

The Companys long-term debt of $6.9 million as at August 30, 2008 consisted of mortgages with interest rates ranging between 6.88% an.90%, against which certain land and building are pledged as collateral. All mortgage loans are denominated in Canadian dollars and matun March 1, 2009.

The Company does not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K under the Exchange Ac

nd under applicable Canadian securities laws.

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One to GreaLess than One Three Four to than F

Total Year Years Five Years Yea

Current portion of long-term debt $ 6,906 $ 6,906 $ $ $Operating lease obligations 157,040 18,901 54,590 29,065 54,4

Purchase obligations and commitments 3,295,475 3,295,475

Total $3,459,421 $3,321,282 $54,590 $29,065 $54,4


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Market Risk of Financial Instruments

The Company is engaged in operating and financing activities that generate risk in three primary areas:

Foreign Exchange

The Company is exposed to foreign exchange risk as a result of transactions in currencies other than its functional currency, the U.S. dollarThe majority of the Companys revenues in fiscal 2009 are transacted in U.S. dollars. Portions of the revenues are denominated in BritishPounds, Canadian dollars and Euros. Purchases of raw materials are primarily transacted in U.S. dollars. Other expenses, consisting of themajority of salaries and income taxes, certain operating costs and manufacturing overhead are incurred primarily in Canadian dollars. AtAugust 30, 2008, approximately 22% of cash and cash equivalents, 23% of trade receivables and 26% of accounts payable are denominatedoreign currencies (September 1, 2007 18%, 30% and 10%, respectively). These foreign currencies primarily include the British Pound,

Canadian dollar, and Euro. As part of its risk management strategy, the Company maintains net monetary asset and/or liability balances inoreign currencies and engages in foreign currency hedging activities using derivative financial instruments, including currency forwardontracts and currency options. The Company does not use derivative instruments for speculative purposes. The principal currencies hedgenclude the British Pound, Canadian dollar and Euro.

The Company has entered into forward contracts to hedge exposures relating to foreign currency anticipated transactions and these contracave been designated as cash flow hedges. For a derivative instrument designated as a cash flow hedge, the effective portion of the derivatiain or loss is initially reported as a component of other comprehensive income and is subsequently recognized in earnings when the hedgexposure affects earnings. The ineffective portion of the gain or loss is recognized in earnings. The cash flow hedges were fully effective at

August 30, 2008. As at August 30, 2008, the net unrealized gain on these forward contracts was approximately $20.8 million (September 1007 net unrealized gain of $26.5 million). Unrealized gains associated with these contracts were recorded in Other current assets and

Accumulated other comprehensive income. Unrealized losses were recorded in Accrued liabilities and Accumulated other comprehensivencome.

The Company has entered into forward contracts to hedge certain monetary assets and liabilities that are exposed to foreign currency risk.These contracts are considered economic hedges that are not subject to hedge accounting, with gains and losses on the hedge instruments becognized in earnings each period, offsetting the change in the U.S. dollar value of the hedged asset or liability. As at August 30, 2008, a nnrealized gain of $0.4 million was recorded in respect of this amount (September 1, 2007 net unrealized loss of $0.6 million). Unrealizeains associated with these contracts were recorded in Other current assets and Selling, marketing and administration. Unrealized losses weecorded in Accrued liabilities and Selling, marketing and administration.

nterest Rate

Cash, cash equivalents and investments are invested in certain instruments of varying maturities. Consequently, the Company is exposed tonterest rate risk as a result of holding investments of varying maturities. The fair value of investments, as well as the investment incomeerived from the investment portfolio, will fluctuate with changes in prevailing interest rates. The Company does not currently use interesterivative financial instruments in its investment portfolio.

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Credit and Customer Concentr

Documents

Q2 Financial Information-1