Blackberry 2012 Annual Report Download - page 58

The intensely competitive market in which the Company conducts its business and the current economic uncertainty may require it to
continue to reduce its prices. The Company’s competitors, particularly some of those that utilize Google’s Android operating system,
have in the past, currently and may in the future offer deep discounts on certain products or services in an effort to capture or maintain
market share, to reduce inventory levels or to sell other products and services. As demonstrated by promotional activities the
Company undertook in fiscal 2012 to drive sell-through of the BlackBerry PlayBook tablet to end customers, the Company has been,
and in the future may be, required to lower prices on its products or services or offer other favorable terms to compete successfully.
Such changes can result in reduced margins and reduced cash generation, may require the Company to record further inventory
provisions, and could adversely affect the Company’s results of operation and financial condition. The Company’s entry into the
consumer market has already had an impact on its pricing and this risk may further intensify due to the broader choice of
smartphones, tablets and other devices, products and services offered by multiple vendors in this market segment and the BYOD
strategies currently being utilized or considered by some of the Company’s enterprise customers. The Company’s ability to compete
successfully will also depend on its ability to control the costs associated with the development of new technologies, including the
manufacturing costs for new products.
RIM generates service revenues from billings to its BlackBerry subscriber account base primarily from a monthly infrastructure
access fee charged to a carrier or reseller, which the carrier or reseller in turn bills to the BlackBerry subscriber. Given that many of
the Company’s competitors recover their infrastructure and services expense in alternate manners, the Company is facing greater
pressure to reduce its infrastructure access fees. In addition, the infrastructure access fees charged by the Company may also fall
under pressure if the new products it launches do not utilize the network infrastructure in the same way or to the same extent as the
Company’s existing products. The Company is focused on developing an integrated services offering that leverages RIM’s strengths
such as BBM, security and manageability that will continue to generate service revenues. However, if the Company is unable to resist
these competitive pressures or is unable to develop a compelling integrated services offering that will continue to generate service
revenues and enable the Company to recover the costs associated with its network infrastructure, this could have a material adverse
affect on the Company’s results of operations and financial condition.
Changes in the competitive landscape as a result of mergers or strategic partnerships can also adversely affect the Company’s ability
to compete effectively. The Company’s competitors may establish or strengthen co-operative relationships with its carrier partners,
sales channel partners, suppliers or other parties with whom the Company has strategic relationships, thereby limiting the Company’s
ability to promote its products and services. The use of Google’s Android operating system by existing and emerging manufacturers,
as well as the announced acquisition of Motorola by Google, and the partnership of Microsoft and Nokia, are examples of such
strategic relationships. Disruptions in the Company’s business caused by these events could reduce revenue, result in a loss of market
share, and adversely affect the Company’s business, results of operations and financial condition.
In order to drive demand for BlackBerry products and services in the United States prior to the launch of the BlackBerry 10
smartphones, the Company has undertaken a comprehensive advertising and promotional program. There can be no assurance that
such promotional activities will be successful.
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