Blackberry 2007 Annual Report Download - page 45

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43
decreased 6.8%, or $26, in fiscal 2006 to $356 from $382 in
fiscal 2005, primarily as a result of overall device mix. The
Company believes revenue and subscriber account additions
were adversely affected in the latter part of fiscal 2006 as a
result of certain customers delaying purchases due to the
uncertainty created by the NTP litigation.
Service revenue increased $148.0 million, or 63.0%,
to $383.0 million and comprised 18.5% of consolidated
revenue in fiscal 2006 compared to $235.0 million, or 17.4%
of consolidated revenue, in fiscal 2005. This also reflects the
impact of the 53 week fiscal year in fiscal 2006 compared
to the 52 week year in fiscal 2005. BlackBerry subscriber
account base additions were approximately 2.3 million in
fiscal 2006, or a 93.1% increase on the total subscriber base,
compared to approximately 1.44 million subscriber additions
in fiscal 2005. The total base of BlackBerry subscriber
accounts at the end of fiscal 2006 was approximately 4.9
million.
Software revenue increased $24.7 million to $156.6 million
in fiscal 2006 from $131.8 million in fiscal 2005, primarily
as a result of increased sales of CALs as well as increased
revenues from technical support and maintenance.
Other revenue increased by $37.0 million, or 74.5%, to
$86.6 million in fiscal 2006, compared to $49.6 million in
fiscal 2005. The majority of the increase was attributable to
increases in non-warranty repair and accessories revenue.
Gross Margin
Gross margin increased by $426.1 million, or 59.7%, to $1.14
billion, or 55.2% of revenue, in fiscal 2006, compared to
$714.1 million, or 52.9% of revenue, in the previous fiscal year.
The net improvement of 2.3% in consolidated gross margin
percentage was primarily due to the following factors:
• Favorable changes in BlackBerry device product mix;
• A decline in certain fixed costs as a percentage of
consolidated revenue as the Company continues to realize
economies of scale in its manufacturing operations as
well as certain raw material cost reductions relating to the
leverage of its supply chain;
• Improved service margins resulting from cost efficiencies
in RIM’s network operations infrastructure as a result of the
increase in the BlackBerry subscriber account base;
• Reductions in unit warranty rates and net warranty
expense (see “Critical Accounting Policies and Estimates –
Warranty” and note 14 to the Consolidated Financial
Statements);
• A decline in amortization expense as a percentage of
consolidated revenue, as the Company continues to realize
economies of scale in its manufacturing operations; and
• An increase in non-warranty repair revenues.
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 fiscal 2006 compared to fiscal 2005.