Blackberry 2013 Annual Report Download - page 174

Research In Motion Limited
Management’s Discussion and Analysis of Financial Condition and Results of Operations
An important part of the Company’s BlackBerry wireless solution is the software that is installed at the corporate or small- and
medium-size enterprise server level, and in some cases, on personal computers. Software revenues include fees from (i) licensing the
Company’s BES software; (ii) BlackBerry Client Access Licenses (“CALs”), which are charged for each subscriber using the
BlackBerry service via a BES; (iii) maintenance and upgrades to software; and (iv) technical support.
Revenues are also generated from non-warranty repairs and sales of accessories.
Cost Optimization and Resource Efficiency
As part of the Company’s ongoing effort to streamline its operations and increase efficiency, the Company commenced the CORE
program in March 2012. The CORE program is a Company-wide initiative with the objective of improving the Company’s
operations. The program includes, among other things, the streamlining of the BlackBerry smartphone product portfolio to offer a
smaller number of devices in market at any given time, the optimization of the Company’s global manufacturing footprint to reduce
complexity and improve delivery performance, the outsourcing of global repair services, the alignment of the Company’s sales and
marketing teams to prioritize marketing efforts to effectively leverage its marketing windows and a reduction in the number of layers
of management to reduce complexity, drive accelerated execution and decision making, improve performance and increase the
transparency of accountability. The Company previously announced that the CORE program was targeted to drive at least $1.0 billion
in savings by the end of fiscal 2013 based on the Company’s fourth quarter of fiscal 2012 run rate. As previously reported, as of the
end of third quarter of fiscal 2013, the Company had achieved savings of over $1.0 billion and continued to generate additional
savings in the fourth quarter of fiscal 2013. The Company has also implemented plans to sustain the savings realized in fiscal 2013
throughout fiscal 2014. The savings have been realized through lower material costs, working capital improvements, greater
efficiencies in manufacturing and supply chain management, workforce optimization and leveraging third-party providers to assist in
reducing indirect spending. As the CORE management team has been reviewing all aspects of the business, the Company continues to
identify more opportunities to streamline cost and drive efficiencies. As a result of the timing of the BlackBerry 10 launch, which
began in certain countries on January 31, 2013, the increasingly competitive environment as well as the identification of additional
cost saving and efficiency opportunities, the Company will continue to execute on the mandate of the CORE program throughout
fiscal 2014 and expects to realize additional cost savings and benefits to come from its more efficient cost base as volumes of
BlackBerry 10 products increase. In connection with the continuing initiatives to be executed by the CORE program, the Company
intends to avoid reductions that would negatively impact key programs such as BlackBerry 10, customer support and BlackBerry
service levels.
As part of the CORE program and the strategic review process, the Company has been reviewing all aspects of its operations,
including the sale of certain assets. In fiscal 2013, certain assets were classified as held for sale and are presented separately on the
Company’s consolidated balance sheet until they are disposed of. Assets held for sale include businesses, property, plant and
equipment that are expected to be sold within the next twelve months.
In December 2012 the Company sold 100% of the shares of its wholly-owned subsidiary, NewBay Software Limited (“NewBay”). As
a result, the Company has recognized a loss on disposal of $3 million, which is included in the discontinued operations line on the
Company’s consolidated statements of operations for fiscal 2013. As part of the transaction, the Company also resolved outstanding
litigation with Synchronoss, as further described in the “Legal Proceedings” section of this MD&A. Results of discontinued
operations are reflected in the Company’s consolidated statement of operations as discontinued operations.
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