Blackberry 2013 Annual Report Download - page 179

Research In Motion Limited
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Revenue from continuing operations for fiscal 2013 was $11.1 billion, a decrease of approximately $7.4 billion, or 39.9%, from $18.4
billion in fiscal 2012. Hardware revenue decreased by $7.1 billion, or 51.8%, to $6.6 billion, primarily due to lower shipment
volumes and lower average selling prices. The lower shipment volumes were a result of the Company’s aging product portfolio in a
very competitive environment in which multiple competitors introduced new devices beginning in early fiscal 2013. The lower
average selling prices were due to the continuation of pricing initiatives to drive sell-through for BlackBerry 7 handheld devices, in
advance of the launch of BlackBerry 10 smartphones. The number of BlackBerry handheld devices shipped decreased by
approximately 20.9 million, or 42.7%, to approximately 28.1 million in fiscal 2013, compared to approximately 49.0 million in fiscal
2012. The number of BlackBerry PlayBook tablets shipped during fiscal 2013 was approximately 1.1 million, representing a decrease
of 0.2 million compared to 1.3 million in fiscal 2012. Service revenue decreased by $164 million to $3.9 billion in fiscal 2013, which
was primarily attributable to a decrease in subscriber accounts and a reduction in infrastructure access fees compared to fiscal 2012.
Software revenue decreased by $57 million in fiscal 2013 to $261 million as a result of a decrease in CALs and maintenance revenue.
Other revenue increased by $17 million to $254 million in fiscal 2013 compared to fiscal 2012, which was primarily attributable to
gains on revenue hedging instruments and IP licensing, partially offset by decreases in non-warranty repair revenues and accessories.
The Company’s net loss from continuing operations for fiscal 2013 was $628 million, a decrease of $1.8 billion compared to net
income of $1.2 billion in fiscal 2012. The decrease takes into account the impact of an income tax benefit of $166 million related to
the settlement of uncertain tax positions, including related interest and foreign exchange gains, restructuring charges of $220 million
related to the CORE program and the Q1 Goodwill Impairment Charge of $335 million incurred in fiscal 2013, as well as the impacts
of the PlayBook Inventory Provision, the Q4 Goodwill Impairment Charge the Q4 BlackBerry 7 Inventory Provision, the Q3 Service
Interruption and restructuring charges of $125 million related to the Company’s previous cost optimization program incurred in fiscal
2012. The decrease is primarily attributable to a decrease in the Company’s gross margin, partially offset by a reduction in operating
expenses and a recovery of income taxes. The Company’s consolidated gross margin in fiscal 2013 was negatively impacted by the
lower shipment volumes due to the Company’s aging product portfolio in a very competitive environment in which multiple
competitors introduced new devices beginning in early fiscal 2013 as well as the continuation of pricing initiatives to drive sell-
through for BlackBerry 7 handheld devices and the impact of allocating certain fixed costs, including licensing costs, to lower
shipment volumes, compared to fiscal 2012. The decrease in gross margin was partially offset by the higher average selling prices of
BlackBerry 10 devices shipped, favorable renegotiations of key contracts associated with elements of the Company’s hardware
business and benefits from a leaner and re-architected supply chain.
Basic and diluted loss per share from continuing operations were both $1.20 in fiscal 2013 compared to basic and diluted earnings per
share (“EPS”) from continuing operations of $2.23 in fiscal 2012, which reflects the impact of an income tax benefit of $166 million
related to the settlement of uncertain tax positions, including related interest and foreign exchange gains, and charges of $220 million
related to the CORE program and the Q1 Goodwill Impairment Charge of $335 million incurred in fiscal 2013, as well as the impacts
of the PlayBook Inventory Provision, the Q4 Goodwill Impairment Charge the Q4 BlackBerry 7 Inventory Provision, the Q3 Service
Interruption and restructuring charges of $125 million related to the Company’s previous cost optimization program incurred in fiscal
2012.
The Company expects to increase its marketing spending in relation to the global launch of BlackBerry 10 during the first quarter of
fiscal 2014 by approximately 50% compared to the fourth quarter of fiscal 2013. However, the Company expects to approach
breakeven financial results in the first quarter of fiscal 2014 as a result of its lower cost base, more efficient supply chain and
improved hardware margins.
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