Blackberry 2007 Annual Report Download - page 51

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in percentage of device shipments was offset in part by
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 and 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.
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 the quarter ended March 3, 2007
compared to the quarter ended December 2, 2006 and the
quarter ended March 4, 2006. The Company believes it is
meaningful to provide a comparison between the fourth
quarter and the third quarter of fiscal 2007 given the quarterly
increases in revenue realized by the Company during fiscal
2007.
Three Month Fiscal Periods Ended
March 3, 2007 December 2, 2006
March 4, 2006
(as restated)
$% of Revenue $
% of
Revenue $
% of
Revenue
Revenue $ 930,393 $ 835,053 $ 561,219
Research and development $ 67,321 7.2% $ 61,184 7.3% $ 44,322 7.9%
Selling, marketing and administration 167,112 18.0% 146,569 17.6% 93,347 16.6%
Amortization 22,021 2.4% 20,334 2.4% 15,322 2.7%
$ 256,454 27.6% $ 228,087 27.3% $ 152,991 27.3%
Research and Development
Research and development expenditures increased by $23.0
million to $67.3 million, or 7.2% of revenue, in the fourth
quarter of fiscal 2007 compared to $44.3 million, or 7.9% of
revenue, in the fourth quarter of fiscal 2006. The majority
of the increase in expenditures during the fourth quarter of
fiscal 2007 compared to the fourth quarter of fiscal 2006 were
attributable to salaries and benefits, third party new product
development costs, travel and office expenses, as well as
related staffing infrastructure costs.
Selling, Marketing and Administration Expenses
Selling, marketing and administrative expenses increased
by $73.8 million to $167.1 million, or 18.0% of revenue, for the
fourth quarter of fiscal 2007 compared to $93.3 million, or
16.6% of revenue for the comparable period in fiscal 2006.
The net increase of $73.8 million was primarily attributable
to increased expenditures for marketing, advertising and
promotion expenses including additional programs to
support new product launches, salary and benefit expense
primarily as a result of increased personnel, external
advisory fees, travel and office expenses as well as related
staffing infrastructure costs. The increase also includes
legal, accounting and other professional costs incurred by
the Company in fiscal 2007 as well as other costs incurred
by the Company under indemnity agreements in favor of
certain officers and directors of the Company, in each case in
connection with the Review, the Restatement and related
matters.
Amortization
Amortization expense relating to certain capital and all
intangible assets other than licenses increased by $6.7 million
to $22.0 million for the fourth quarter of fiscal 2007 compared
to $15.3 million for the comparable period in fiscal 2006. The
increased amortization expense primarily reflects the impact
of amortization expense with respect to capital and certain
intangible asset expenditures incurred primarily during the
first three quarters of fiscal 2007.
Litigation
As at November 26, 2005, the Company had an accrued
liability of $450.0 million in respect of the NTP litigation
which represented, at that time, management’s best current
estimate as to the litigation expense relating to this matter
based on then current knowledge and consultation with
legal counsel. As the full and final settlement amount paid
on March 3, 2006 was $612.5 million, an additional charge