Blackberry 2013 Annual Report Download - page 172

Research In Motion Limited
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The BlackBerry 10 mobile computing platform is a re-designed, re-engineered, and re-invented BlackBerry platform that creates a
new and unique mobile computing experience. The Company’s first two BlackBerry 10 products, the LTE-enabled BlackBerry Z10
and BlackBerry Q10 smartphones, offer a faster, smarter and smoother experience. The Company also launched the BlackBerry
Enterprise Service 10, the Company’s new enterprise mobility management solution. BlackBerry Enterprise Service 10 brings
together device management, industry leading security and mobile applications management for BlackBerry smartphones, including
the new BlackBerry 10 smartphones and BlackBerry PlayBook tablets in a consolidated solution. It also provides a single console
for managing BlackBerry, Android and iOS devices. To assist enterprise customers with the transition to BlackBerry Enterprise
Service 10, the Company launched the BlackBerry 10 Ready program to help enterprise customers prepare their environments for
BlackBerry 10. To date, more than 3,500 unique companies have registered for the program. The Company intends to leverage the
early success of BlackBerry 10 by intensifying its strategic focus on opportunities in mobile computing verticals such as auto,
industrial, networking, healthcare, security and defense applications, expanding its secure network infrastructure for uses beyond
those currently deployed by BlackBerry and through potential licensing opportunities.
The BlackBerry PlayBook tablet represents the Company’s first tablet product and features the BlackBerry Tablet Operating System
based on technology resulting from the Company’s acquisition of QNX. In fiscal 2013, the Company launched the 3G plus
BlackBerry PlayBook tablet and 4G LTE BlackBerry PlayBook tablet, the Company’s first LTE product. The Company has
undertaken a high level of promotional activity in retail-channels to drive sell-through of the BlackBerry PlayBook tablet to end
customers as a result of intense competition in the tablet market. The Company sold out of the 16G BlackBerry PlayBook tablets in
the second quarter of fiscal 2013 and is continuing to sell its 32G and 64G units as well as the 3G plus BlackBerry PlayBook tablet
and 4G LTE BlackBerry PlayBook tablet.
The Company currently generates service revenue from billings to its BlackBerry subscriber base that utilize BlackBerry 7 and prior
BlackBerry operating systems primarily from a monthly infrastructure access fee (sometimes referred to as a “service access fee” or
“SAF”) charged to carriers or resellers, who in turn bill the BlackBerry subscriber. The SAF for consumer customers historically has
been much lower than the SAF for enterprise customers, who receive a higher level of value-added security, encryption and other
services by utilizing the Company’s BlackBerry Enterprise Service (“BES”) platform.
Many of the Company’s competitors do not charge a SAF or equivalent fee as they recover their infrastructure and services expense
in alternate manners. Thus, the Company has faced growing pressure to reduce its existing SAF, especially for the consumer
market. In response to these pressures, the Company has been implementing certain price reduction programs in an effort to maintain
and grow its subscriber base. While the Company expects that existing consumer and enterprise subscribers using BlackBerry 7 and
prior BlackBerry operating systems will continue generating service revenue, the amount of those revenues is expected to decline
gradually in the coming quarters due to the ongoing price reduction programs.
As customers transition to BlackBerry 10, the Company expects SAF revenue to gradually decline further for consumer subscribers,
but expects to continue generating SAF revenue from enterprise customers who elect to utilize the BlackBerry 10 Enterprise Service
and other new services. The Company is focused on developing integrated BlackBerry 10 service offerings that leverage the
Company’s strengths such as BBM, security and
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