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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________________________
FORM 40-F
REGISTRATION STATEMENT PURSUANT TO SECTION 12 OF THE SECURITIES
EXCHANGE ACT OF 1934
or
ANNUAL REPORT PURSUANT TO SECTION 13(a) OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended March 1, 2014 Commission File Number 0-29898
__________________________________________________________
BlackBerry Limited
(Exact name of Registrant as specified in its charter)
Ontario 3,661 Not Applicable
(Province or other Jurisdiction
of Incorporation or Organization) (Primary Standard Industrial
Classification Code Number) (I.R.S. Employer
Identification No)
2200 University Ave East
Waterloo, Ontario, Canada,
N2K 0A7
(519) 888-7465
(Address and telephone number of Registrant’s principal executive offices)
BlackBerry Corporation
5000 Riverside Drive, Suite 100E,
Irving, Texas, USA 75039
(972) 650-6126
(Name, address and telephone number of agent for service in the United States)
__________________________________________________________
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Common Shares, without par value
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
For annual reports, indicate by check mark the information filed with this Form:
Annual information form Audited annual financial statements
Indicate the number of outstanding shares of each of the Registrant’s classes of capital or common stock as of the close of the
period covered by this annual report.
The Registrant had 526,551,953 Common Shares outstanding as at March 1, 2014.

Table of contents

  • Page 1
    ...FORM 40-F REGISTRATION STATEMENT PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934 or ANNUAL REPORT PURSUANT TO SECTION 13(a) OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 1, 2014 Commission File Number 0-29898 _____ BlackBerry Limited (Exact name of...

  • Page 2
    ...mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90...

  • Page 3
    ... financial statements for the fiscal year ended March 1, 2014, filed as Exhibit 1.2 to this Annual Report. D. Changes in Internal Control Over Financial Reporting See Management's Discussion and Analysis of Financial Condition and Results of Operations for the fiscal year ended March 1, 2014...

  • Page 4
    ... can be found in its Management's Discussion and Analysis of Financial Condition and Results of Operations for the fiscal year ended March 1, 2014, included in Exhibit No. 1.3 to this Annual Report, under the heading "Financial Condition - Aggregate Contractual Obligations". K. Identification of...

  • Page 5
    ... debentures, convertible into Common Shares of the Registrant, to certain investors, including Fairfax Financial Holdings Limited, pursuant to the terms of a subscription agreement, dated November 4, 2013, as amended, and (ii) the grant of 13,000,000 restricted share units to John Chen (of this...

  • Page 6
    ..., information relating to the securities in relation to which the obligation to file an annual report on Form 40-F arises or transactions in said securities. B. Consent to Service of Process The Registrant has previously filed with the Commission a Form F-X in connection with its Common Shares.

  • Page 7
    ... certifies that it meets all of the requirements for filing on Form 40-F and has duly caused this annual report to be signed on its behalf by the undersigned, thereto duly authorized. BLACKBERRY LIMITED Date: March 28, 2014 By: Name: Title: /s/ James Yersh James Yersh Chief Financial Officer

  • Page 8
    ... 1.2 Annual Information Form for the fiscal year ended March 1, 2014, dated March 28, 2014. Audited Consolidated Financial Statements for the fiscal year ended March 1, 2014, prepared in accordance with U.S. generally accepted accounting principles. Management's Discussion and Analysis of Financial...

  • Page 9
    Table of Contents Exhibit 1.1 BLACKBERRY LIMITED 2200 University Avenue East Waterloo, Ontario Canada N2K 0A7 Annual Information Form For the fiscal year ended March 1, 2014 DATE: March 28, 2014 1

  • Page 10
    ... OF THE BUSINESS INDUSTRY BACKGROUND SUCCESS FACTORS STRATEGY PRODUCTS AND SERVICES THIRD PARTY SOFTWARE DEVELOPERS INDUSTRY ASSOCIATIONS SALES, MARKETING AND DISTRIBUTION CUSTOMERS COMPETITION PRODUCT DESIGN, ENGINEERING AND RESEARCH & DEVELOPMENT INTELLECTUAL PROPERTY PRODUCTION REGULATORY MATTERS...

  • Page 11
    ... its current products and services, or develop new products and services in a timely manner or at competitive prices, including risks related to new product introductions and adoption and the relevance of hardware in light of the Company's decreasing market share of the smartphone industry; the risk...

  • Page 12
    ...technologies and products; reliance on strategic alliances and relationships with third-party network infrastructure developers, software platform vendors and service platform vendors, including the Company's ability to promote and advance the development of an ecosystem of applications and services...

  • Page 13
    ... in the Company's business strategy and the rapid technological changes, evolving industry standards, intense competition and short product life cycles that characterize the wireless communications industry. These difficulties in forecasting the Company's financial results and performance are...

  • Page 14
    ... business and Messaging; • Announced further management and Board changes as part of the on-going reorganization of BlackBerry including: • appointment of James Yersh as Chief Financial Officer (replacing Brian Bidulka), • appointment of Eric Johnson as President, Global Sales, • appointment...

  • Page 15
    ... the world under the iconic name BlackBerry, effective January 30, 2013; • Commenced trading under its new ticker symbols "BB" on the Toronto Stock Exchange and "BBRY" on the NASDAQ Global Select Market, on February 4, 2013; • Introduced new services and features for BlackBerry 10 smartphones...

  • Page 16
    ... sharing and discovery service; • Launched the BlackBerry PlayBook tablet and, later in fiscal 2012, launched BlackBerry PlayBook OS 2.0, a free software upgrade for BlackBerry PlayBook tablet users that includes new features to enhance productivity and communications, including built-in email...

  • Page 17
    ... technology ("IT") departments for access to corporate messaging and data applications. As the market has evolved, IT departments now look for enterprise mobility solutions that can handle a range of requirements. The Company has introduced products to address this market shift including BlackBerry...

  • Page 18
    ... access to key corporate data stores; • connectivity to enterprise email and applications; • end-to-end security; • protection of intellectual property rights; • trusted and reliable brand; • return on investment; • push-based outbound port architecture; • integrated hardware, software...

  • Page 19
    ... to manage both work and personal content without having to sacrifice security. With Secure Work Space, users can securely access personal information, including calendars, corporate contacts, intranet browsers, documents and email accounts without having to set up a virtual private network. Support...

  • Page 20
    ... communications into true mobile computing. Expansion of the BlackBerry partner ecosystem and the development of end-to-end offerings that leverage the BlackBerry product portfolio are also key elements of the Company's strategy to re-capture market share in the Devices business. Enterprise Services...

  • Page 21
    ...release of BBM delivered numerous new features such as free voice calling over Wi-Fi, oneclick sharing of files and photos, Dropbox integration, location sharing and BBM Channels, among others. BBM Channels extends the popular BBM experience to brands, artists, businesses and communities, connecting...

  • Page 22
    ... partners. The Company also generated revenue from the embedded market through licensing QNX software products and providing professional services to support customers in developing their products. The Company also generated other revenue from accessories, non-warranty repairs, BlackBerry World...

  • Page 23
    ... Messaging (enables users to securely communicate over Microsoft Lync, Microsoft Office Communication Server or IBM Lotus Sametime). In addition, BlackBerry 10 smartphones feature BlackBerry World, a content distribution storefront managed by the Company that enables developers to reach BlackBerry...

  • Page 24
    ..., a new family of products and services that work with BlackBerry smartphones and the BlackBerry enterprise solution, BES and BES 10, to provide enterprise-class mobile messaging that brings together the core strengths of BBM with features and capabilities aimed at enterprises. BBM Protected will be...

  • Page 25
    ... services, push notifications, in-app payments and advertising, advanced location services, application usage information, and social gaming features. QNX Software Development Platform 6.6 will also run most Android Gingerbread 2.3.3 and Jellybean 4.2.2 applications without any code changes...

  • Page 26
    ...'s carrier partners through training, technical account management and sales and marketing support. As of March 1, 2014, the Company's marketing, sales and business development, BlackBerry operations, customer support and technical support teams consisted of approximately 1,600 full time employees...

  • Page 27
    ... to connect their own smartphones to corporate networks, have increased competitive pressure on the Company in the enterprise market. New products and services such as BlackBerry 10 smartphones with BlackBerry Balance, which allows for the secure co-existence of enterprise and corporate data...

  • Page 28
    ... for medical, security and life safety critical applications. Product Design, Engineering and Research and Development The Company's research and development ("R&D") strategy seeks to provide broad market applications for products derived from its technology base. As of March 1, 2014, the Company...

  • Page 29
    ... markets Operating System Technologies Richer user experiences, common application ecosystem, embracing of open standards Multi-tasking and rich developer environment Embedded Middleware Highly scalable, modular software for infotainment applications Award winning products / outstanding customer...

  • Page 30
    ..., application runtimes, networking technologies, and BlackBerry applications; • developing server and desktop software for enterprise and consumer environments; • developing infrastructure systems to provide the underlying support for wireless network and Internet connectivity; • providing...

  • Page 31
    ... on iconic design, world-class security, software development and enterprise mobility management while simultaneously addressing fast-growing markets, leveraging Foxconn's scale, efficiency and supply chain to allow the Company to compete more effectively while reducing the Company's inventory risk...

  • Page 32
    ...-time employees: 4,353 in the product development area; 903 in sales and marketing; 329 in customer care and technical support; 370 in manufacturing and supply chain; and 2,102 in administration and business professional functions, which includes information technology, BlackBerry network operations...

  • Page 33
    ... and marketing activities in Latin and South America are supported by approximately 26,391 square feet with locations in Brazil, Argentina and Mexico. Of the total square footage in USA & Latin America, 412,612 square feet was either sold or listed for sale as part of the CORE program in fiscal 2014...

  • Page 34
    ... 5, 2012, plaintiff filed the Consolidated Amended Class Action Complaint, alleging that during the period from December 16, 2010 through June 16, 2011, the Company and certain of its officers made materially false and misleading statements regarding the Company's financial condition and business...

  • Page 35
    ...in all cases. RISK FACTORS Investors in the Company's common shares should carefully consider the following risks, as well as the other information contained in this AIF, and Management's Discussion and Analysis of Financial Condition and Results of Operations for the fiscal year ended March 1, 2014...

  • Page 36
    ...be able to enhance its current products and services, or develop new products and services, in a timely manner, at competitive prices, or to meet customer requirements. The wireless communications and embedded software industries are characterized by increasingly rapid technological change, evolving...

  • Page 37
    ... the technologies and related hardware or software products and services that the Company develops will be brought to market by it or network operators as quickly as anticipated or that they will achieve broad customer acceptance among operators or end users. In the case of the Company's BlackBerry...

  • Page 38
    ... may be able to expand the size of its addressable market for recurring service revenue. The Company believes this strategy will help broaden the BlackBerry ecosystem over time, which will potentially give the Company and its application developers access to a broader market into which to sell their...

  • Page 39
    ... sell-through programs as well as significant price reductions in order to drive sellthrough for BlackBerry 7 and BlackBerry 10 handheld devices. Some of the Company's competitors have greater name recognition, larger customer bases and significantly greater financial, technical, marketing, public...

  • Page 40
    ... be able to compete successfully and withstand these competitive pressures. The Company's ability to compete successfully will also depend on its ability to control the costs associated with the development, manufacture and marketing of new products. In order to drive demand for BlackBerry products...

  • Page 41
    ... uses and the addition of Foxconn as a strategic EMS partner, the number of locations it manufactures from, how it provides after-market support services and the suppliers it uses. These changes, and other changes to its supply chain, could increase the risk of production delays, quality issues and...

  • Page 42
    ...services, or promotes the products and services of a competitor over those of the Company, it could have a material adverse effect on the Company's business, results of operations and financial condition. There were no customers that comprised more than 10% of accounts receivable as at March 1, 2014...

  • Page 43
    ... of new product introductions, levels of sales, returns on the Company's investment portfolio, timing of deliveries and collection of receivables, inventory levels, capital expenditures, operating expenses, and customer and supplier terms and conditions. The Company's ability to maintain or increase...

  • Page 44
    ...the Company's Venezuelan carrier partners to timely obtain U.S. dollars in exchange for Venezuelan Bolivars, and the Company is continuing to monitor development in this area as it considers strategies to secure payment of its outstanding invoices. The application and approval process continue to be...

  • Page 45
    ... adverse effect on the Company's business, operations and financial position. The Company faces substantial inventory and other asset risk, including risks related to its ability to sell its inventory of BlackBerry 10 products, manage its purchase obligations with its manufacturing partners and...

  • Page 46
    ..., and expands its ecosystem to offer third party products and services in conjunction with its own. The Company's business depends on a strong brand, and failing to maintain and enhance its brand would hurt the Company's ability to expand its base of users, customers and partners. The brand identity...

  • Page 47
    ... new corporate name was approved by shareholders at the Company's Annual General and Special Meeting in July 2013. The Company also made significant investments in marketing in cooperation with its U.S. carrier partners and its other global customers to promote and support the launch of BlackBerry...

  • Page 48
    ... and services in a timely manner at competitive prices, its ability to collect accounts receivables in jurisdictions with foreign currency controls and its access to the capital markets." The Company is subject to general commercial litigation, class action and other litigation claims as part of...

  • Page 49
    ... transition in the Company's business strategy and rapid technological changes, evolving industry standards, intense competition and short product life cycles that characterize the wireless communications industry. These difficulties in forecasting the Company's financial results and performance are...

  • Page 50
    ... to financial obligations to a third party, or to the risk of legal action that could impact the salability of the Company's products or services, if one of the Company's providers of third-party applications or content or other suppliers fails to procure necessary intellectual property rights...

  • Page 51
    Table of Contents The Company may not be able to obtain patents or other intellectual property protections necessary to secure its proprietary technology and products. The Company's commercial success depends upon its ability to develop new or improved technologies and products, and to successfully ...

  • Page 52
    ... BlackBerry wireless solution or its existing security procedures for the personal information that its transmits and stores, its business, results of operations and financial condition may be adversely affected. The Company's network carriers or other customers, partners or members of its ecosystem...

  • Page 53
    ... from sole source suppliers. Some components are also becoming supply constrained, in part due to the continuing convergence of the mobile communication industry and computer industry, and increased competition. Some of the Company's competitors have greater name recognition, larger customer bases...

  • Page 54
    ... to adequately maintain, protect or update their software or intellectual property rights, could delay the Company's ability to ship its products while the Company seeks to implement alternative technology offered by other sources and could require significant unplanned investments on the Company...

  • Page 55
    ... its customers' networks and equipment, are used with third party applications and are used to deliver confidential or personal information, the sale and support of these products and services may entail the risk of liability due to product liability, warranty or other claims tied to the security of...

  • Page 56
    ...'s business could be negatively affected as a result of actions of activist shareholders. Publicly-traded companies have increasingly become subject to campaigns by investors seeking to advocate certain governance changes or corporate actions such as financial restructuring, special dividends, share...

  • Page 57
    ... become increasingly significant as the Company endeavors to enter new foreign markets. Reduced spending by customers due to the uncertainty of economic and geopolitical conditions may negatively affect the Company. Many of the end users of the BlackBerry wireless solution and other Company products...

  • Page 58
    ... obtain required regulatory approvals or network certifications for any new products on a timely basis could have a material adverse effect on the Company's business, results of operations and financial condition. There has also been public speculation about possible health risks to individuals from...

  • Page 59
    ... Instruments" in Management's Discussion and Analysis of Financial Condition and Results of Operations for the fiscal year ended March 1, 2014 for a discussion of credit risk related to the Company's investment portfolio. Copyright levies in numerous countries for the sale of products may negatively...

  • Page 60
    ... business strategy, rapid technological changes, evolving industry standards, intense competition and short product life cycles that characterize the wireless communications industry. These difficulties in forecasting the Company's financial results and performance are magnified at the present time...

  • Page 61
    ... number of common shares, an unlimited number of class A common shares and an unlimited number of preferred shares, issuable in one or more series. The Board has the authority to issue preferred shares and determine the price, designation, rights, preferences, privileges, restrictions and conditions...

  • Page 62
    ... and the class A common shares. The Board has the authority to issue series of preferred shares and determine the price, number, designation, rights, privileges, restrictions and conditions, including dividend rights, of each series without any further vote or action by shareholders. The holders...

  • Page 63
    ... Senior Indebtedness, Purchase Money Security Interests (as defined below) securing permitted Indebtedness, liens on real property incurred in connection with a sale and leaseback of permitted Indebtedness, and any other lien not prohibited by the Company's existing asset-backed lending facility...

  • Page 64
    ... thereat by holders 56 Indebtedness secured by a Purchase Money Security Interest including Capital Leases (as defined below); Indebtedness incurred in connection with a sale and leaseback of real property; Indebtedness incurred under a securitization or factoring of receivables; Indebtedness of any...

  • Page 65
    ... purchase price of property or services, other than for consumable non-capital goods and services purchased in the ordinary course of business, including arising under any conditional sale or title retention agreement, but excluding for greater certainty ordinary course accounts payable; obligations...

  • Page 66
    ... with the transition. The Company also announced the following executive officer appointments during fiscal 2014: on December 17, 2013, John Sims as President, Global Enterprise Services; on December 18, 2013, James S. Mackey as Executive Vice President for Corporate Development and Strategic 58

  • Page 67
    Table of Contents Planning and Mark Wilson as Senior Vice President, Marketing (effective January 2014); on January 6, 2014, Ron Louks as President, Devices and Emerging Solutions; and on January 13, 2014, Eric Johnson as President, Global Sales. The following table sets forth the name, province or ...

  • Page 68
    ... Officer, BT Global Services (2008 - 2013) John Sims California, USA Global Head of Telecom & President, SAP Mobile Services (from 2011 to 2013); President, SAP Mobile Services (2011 to 2013); CEO, 724 Solutions (2001 to 2010) Chief Marketing Officer, Avaya (2012 to 2013); SVP, Corporate and Field...

  • Page 69
    ... or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the director, executive officer or shareholder. On November 7, 2006, as a result of the Company failing to file its second quarter financial statements for fiscal 2007 before the statutory...

  • Page 70
    ..., for the fiscal years ended March 1, 2014 and March 2, 2013, respectively, for professional services rendered by EY for the audit of the Company's annual financial statements or services that are normally provided by EY in connection with statutory and regulatory filings or engagements for such...

  • Page 71
    ... Auditors' Report to Shareholders in respect of the audited annual consolidated financial statements of the Company for the year ended March 1, 2014 and the Report to Shareholders of an Independent Registered Public Accounting Firm on the Company's internal controls over financial reporting. Ernst...

  • Page 72
    ... sales related activities, but also those for marketing, customer service, and technical support. An attack designed to flood a network with unnecessary traffic in order to prevent legitimate users of a system from having access. A way of processing information by storing it as binary numbers...

  • Page 73
    ... (SIM) smart card that contains user account information. High-Speed Packet Access. A family of radio interface standards that will improve the speed and accuracy of traffic over cellular networks. HSPA builds on the existing WCDMA technology that has already been deployed to allow carriers to offer...

  • Page 74
    ... in the GSM system and later supported by all other digital-based mobile communications systems. Secure Sockets Layer. Protocols that provide security to Internet communications by encrypting the segments of network connections. See 3G wireless. See 3G wireless. Wireless Fidelity. A generic term for...

  • Page 75
    ...that management is effectively managing the Corporation's risks. It is the objective of the Committee to maintain free and open means of communication among the Board, the independent auditors and the financial and senior management of the Corporation. 3. COMPOSITION OF THE COMMITTEE Each member of...

  • Page 76
    ...auditors and management to review the Corporation's financial statements, MD&A, annual and interim earnings press releases and related filings prior to their public release and filing with the Ontario Securities Commission ("OSC"), the SEC or any other regulatory body. The Chair should work with the...

  • Page 77
    ... auditors' work; (3) Review the results of the year-end audit of the Corporation, including (as applicable): (i) the audit reports on the Corporation's financial statements and management's assessment of internal control over financial reporting, the published financial statements, the management...

  • Page 78
    ...auditors such accounting policies (and changes therein) of the Corporation, including any financial reporting issues which could have a material impact on the Corporation's financial statements, as are deemed appropriate for review by the Committee prior to any year-end or quarterly filings with the...

  • Page 79
    ... Public Accountants, the Financial Accounting Standards Board, the SEC, the OSC or other regulatory body, or any other significant accounting or financial reporting related matters that may have a bearing on the Corporation; (5) Establish and maintain free and open means of communication between...

  • Page 80
    ... responsibilities set forth in this Charter, the Committee is not responsible for planning or conducting the audit or for determining whether the Corporation's consolidated financial statements are complete and accurate and are in accordance with generally accepted accounting principles. Similarly...

  • Page 81
    ... basis, emerging matters that should be addressed by the Committee; Facilitate the timely, accurate and proper flow of information to and from the Committee and, with input from Committee members, maintain an open dialogue with the Corporate Secretary regarding the timeliness, quantity, quality...

  • Page 82
    ... income, shareholders' equity and cash flows for each of the years ended March 1, 2014, March 2, 2013, and March 3, 2012, and a summary of significant accounting policies and other explanatory information. Management's responsibility for the consolidated financial statements Management is...

  • Page 83
    ... shareholders' equity and cash flows for each of the years ended March 1, 2014, March 2, 2013 and March 3, 2012 of the Company and our report dated March 28, 2014 expressed an unqualified opinion thereon. Kitchener, Canada, March 28, 2014 /s/ Ernst & Young LLP Chartered Accountants Licensed Public...

  • Page 84
    ...Management of BlackBerry Limited is responsible for the preparation and presentation of the Consolidated Financial Statements and all of the financial information in this Annual Report. The Consolidated Financial Statements were prepared in accordance with United States generally accepted accounting...

  • Page 85
    ... 2014 March 2, 2013 Assets Current Cash and cash equivalents Short-term investments Accounts receivable, net Other receivables Inventories Income taxes receivable Other current assets Deferred income tax asset Assets held for sale Long-term investments Property, plant and equipment, net Intangible...

  • Page 86
    ...deficiencies related to stock-based compensation Purchase of treasury stock Treasury shares released for restricted share unit settlements Balance as at March 1, 2014 See notes to consolidated financial statements. $ 2,359 - - 9 97 (2) - (17) 2,446 - - 86 (11) - (90) 2,431 - - 3 68 (13) - $ (160...

  • Page 87
    ... per share data) Consolidated Statements of Operations For the Year Ended March 2, 2013 March 1, 2014 March 3, 2012 Revenue Hardware and other Service and software Cost of sales Hardware and other Service and software Gross margin Operating expenses Research and development Selling, marketing and...

  • Page 88
    ...share data) Consolidated Statements of Comprehensive Income (Loss) For the Year Ended March 2, March 3, 2013 2012 March 1, 2014 Net income (loss) $ Other comprehensive income (loss) Net change in unrealized losses on available-for-sale investments Net change in fair value of derivatives designated...

  • Page 89
    ...property, plant and equipment Acquisition of intangible assets Business acquisitions, net of cash acquired Acquisition of short-term investments Proceeds on sale or maturity of short-term investments Net cash used in investing activities Cash flows from financing activities Issuance of common shares...

  • Page 90
    ... own supporting sales and marketing teams, to promote the sale of its products and services. The Company was incorporated on March 7, 1984 under the Ontario Business Corporations Act. The Company's shares are traded on the Toronto Stock Exchange under the symbol "BB" and on the NASDAQ Global Select...

  • Page 91
    ... consolidated balance sheets date of the reporting period for which the assessment was made. The fair value of the investment then becomes the new cost basis of the investment. If a debt security's market value is below its amortized cost and the Company either intends to sell the security or it is...

  • Page 92
    ...associated asset, liability or forecasted transaction. Inventories Raw materials, work in process and finished goods are stated at the lower of cost or market value. Cost includes the cost of materials plus direct labour applied to the product and the applicable share of manufacturing overhead. Cost...

  • Page 93
    ... in its physical condition, a significant change in legal factors or in the business climate, a history or forecast of future operating or cash flow losses, significant disposal activity, a significant decline in the Company's share price, a significant decline in revenues or adverse changes in the...

  • Page 94
    ...life cycle, and potential cannibalization of future product offerings. If there is a future risk of pricing concessions and a reliable estimate cannot be made at the time of shipment, the Company recognizes the related revenue and costs of goods sold when its products are sold through to an end user...

  • Page 95
    ... over the 24-month estimated life of the devices. For arrangements involving multiple deliverables of software with technical support services, the revenue is recognized based on the industry-specific software revenue recognition accounting guidance. If the Company is not able to determine VSOE...

  • Page 96
    ... as incurred. Development costs for BlackBerry devices and licensed software to be sold, leased or otherwise marketed are subject to capitalization beginning when a product's technological feasibility has been established and ending when a product is available for general release to customers. The...

  • Page 97
    ... demand for the Company's products. Inventory purchases and purchase commitments are based upon such forecasts of future demand and scheduled rollout and life cycles of new products. The business environment in which the Company operates is subject to rapid changes in technology and customer demand...

  • Page 98
    ... shipped devices to its carrier and distributor partners to support new and continuing product launches and meet expected levels of end customer demand. However, the sell-through levels for BlackBerry 10 smartphones decreased significantly during fiscal 2014 due to the maturing smartphone market...

  • Page 99
    ... shipped devices to its carrier and distributor partners to support new and continuing product launches and meet expected levels of end customer demand. However, the sell-through levels for BlackBerry 10 devices decreased during fiscal 2014, causing the number of BlackBerry 10 devices in the channel...

  • Page 100
    ... notes Commercial paper U.S. treasury bills/ notes Non-U.S. treasury bills/ notes Non-U.S. government sponsored enterprise notes Corporate notes/bonds Auction-rate securities Other investments $ As at March 2, 2013 Bank balances Money market funds Bankers' acceptances/ Bearer deposit notes Non...

  • Page 101
    ... rate securities as long-term investments on the consolidated balance sheets as at March 1, 2014 and March 2, 2013. 4. FAIR VALUE MEASUREMENTS The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market...

  • Page 102
    ... in securities for which there is not an active market, are estimated using a discounted cash flow pricing methodology incorporating unobservable inputs such as anticipated monthly interest and principal payments received, existing and estimated defaults, and collateral value. The corporate notes...

  • Page 103
    ... value on a recurring basis: As at March 1, 2014 Assets Available-for-sale investments Bankers' acceptances Term deposits/certificates U.S. treasury bills/notes Non-U.S. treasury bills/notes Non-U.S. government sponsored enterprise notes Corporate notes/bonds Auction rate securities Total available...

  • Page 104
    ... time of LBIE's bankruptcy for the year ended March 2, 2013). The Company's Level 3 assets measured on a recurring basis include auction rate securities as well as corporate notes/ bonds consisting of securities received in a payment-in-kind distribution from a former structured investment vehicle...

  • Page 105
    ... to sell. Of the total assets held for sale, $194 million were measured at fair value less costs to sell. The fair values of the Company's real estate assets held for sale were determined using bids from prospective purchasers, executed purchase and sale agreements or letters of intent, and market...

  • Page 106
    ... values of the Company's property, plant and equipment, other than real estate assets ("Personal Property"), were determined using replacement cost or sales comparison approaches with inputs including, but not limited to, original costs, inflation indices, useful lives, effective ages, and market...

  • Page 107
    ...408 Replacement cost of sales comparison Volume ratio Effective age Useful life 0 - 14 years (3 years) 2 - 10 years (5 years) 10 - 33% (17%) Licenses 5. $ 226 Volume ratio CONSOLIDATED BALANCE SHEETS DETAILS Accounts receivable, net The allowance for doubtful accounts as at March 1, 2014 is...

  • Page 108
    ... licensing agreements, as well as agreements with third parties for the use of intellectual property, software, messaging services and other BlackBerry related features. For the year ended March 1, 2014, amortization expense related to intangible assets was $738 million (March 2, 2013 $1.2 billion...

  • Page 109
    ... impairment were a significant decline in its share price, which was influenced by delays in new product introductions, intense competition within the Company's industry and a sustained decline in the Company's performance. The result of this analysis concluded that the carrying value of the Company...

  • Page 110
    ...the consolidated financial statements from the date of acquisition. The following table summarizes the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition for fiscal 2013: For the year ended March 2, 2013 Assets purchased Current assets Property, plant and...

  • Page 111
    BlackBerry Limited Notes to the Consolidated Financial Statements In millions of United States dollars, except share and per share...year ended March 1, 2014 March 2, 2013 March 3, 2012 Income (loss) from continuing operations before income taxes: Canadian Foreign $ $ (7,212) $ 28 (7,184) $ (1,365)...

  • Page 112
    ... to the Consolidated Financial Statements In millions of United States dollars, except share and per share data, and except as otherwise indicated Deferred income tax assets and liabilities consist of the following temporary differences: As at March 1, 2014 March 2, 2013 Assets Property, plant and...

  • Page 113
    ... and ending amount of unrecognized income tax benefits that, if recognized, would affect the Company's effective income tax rate is as follows: March 1, 2014 March 2, 2013 March 3, 2012 Unrecognized income tax benefits, opening balance Increase for income tax positions of prior years Increase for...

  • Page 114
    ... as the face value, the redemption features or the conversion price. The Company recorded interest expense related to the Debentures of $21 million, which has been included in investment income (loss) in the statements of operations in fiscal 2014. The Company is required to make quarterly interest...

  • Page 115
    ... number of non-voting, cumulative, redeemable, retractable preferred shares. At March 1, 2014 and March 2, 2013, there were no Class A common shares or preferred shares outstanding. The following details the changes in issued and outstanding common shares for the three years ended March 1, 2014...

  • Page 116
    ... table above represents the total pre-tax intrinsic value (the aggregate difference between the closing stock price of the Company's common shares on March 1, 2014 and the exercise price for in-themoney options) that would have been received by the option holders if all in-the-money options had been...

  • Page 117
    ....44 8.15 8.11 2.86 2.89 $ $ 244 237 The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the aggregate closing share price of the Company's common shares on March 1, 2014) that would have been received by RSU holders if all RSUs had been vested on March...

  • Page 118
    ... for working capital and general corporate purposes with a syndicate of commercial banks. The Facility, which is subject to certain availability criteria and limits and customary financial covenants, expires on August 27, 2016 and is secured by the Company's accounts receivable, inventory, equipment...

  • Page 119
    ...court denied Mformation's motion for relief from costs. The Federal Circuit reactivated the appeal on December 20, 2012 after Mformation filed a new notice of appeal. On January 3, 2013, a new entity, Mformation Software Technologies, Inc. ("MST"), filed a motion to substitute parties, alleging that...

  • Page 120
    ... utilize custom components available from only one source for a period of time. When a component or product uses new technologies, initial capacity constraints may exist until the suppliers' yields have matured or manufacturing capacity has increased. If the Company's supply of components for a new...

  • Page 121
    ... of the first quarter of fiscal 2015. The Company incurred approximately $512 million in total pre-tax charges related to the CORE program and strategic review process in fiscal 2014, related to one-time employee termination benefits, facilities and manufacturing network simplification costs as well...

  • Page 122
    ... 2014 (nil in fiscal 2013) related to the write-down to fair value less costs to sell of the assets held for sale. Assets held for sale are expected to be sold within the next twelve months. In fiscal 2013, the Company sold 100% of the shares of its wholly-owned subsidiary, NewBay Software Limited...

  • Page 123
    ... $ $ (11.18) $ - (11.18) $ The Company has not presented the dilutive effect of in-the-money options or RSUs that will be settled upon vesting by the issuance of new common shares in the calculation of loss per share for the year ended March 1, 2014 as to do so would be antidilutive. As at March...

  • Page 124
    ... for the year ended March 1, 2014 were as follows: Gains and Losses on Cash Flow Hedges Gains and Losses on Available-for-Sale Securities Location of loss reclassified from AOCI into income Total Revenue Selling, marketing and administration Research and development Cost of sales Recovery of...

  • Page 125
    BlackBerry Limited Notes to the Consolidated Financial Statements In millions of United States dollars, except share and per share data, and except as otherwise indicated The majority of the Company's revenues for the fiscal year ended March 1, 2014 were transacted in U.S. dollars. However, portions...

  • Page 126
    ... designated as cash flow hedges on the consolidated statement of operations for the year ended March 2, 2013: Amount of Gain (Loss) Recognized in OCI on Derivative Instruments (Effective Portion) Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) Location...

  • Page 127
    ...Other current assets Other current assets Accrued liabilities Accrued liabilities $ 44 - (14) (1) The following table shows the impact of derivative instruments that are not subject to hedge accounting on the consolidated statement of operations for the year ended March 1, 2014: Location of Gain...

  • Page 128
    ... to send and receive wireless messages and data. For enterprise customers, the Company currently sells an integrated BlackBerry Enterprise Server software solution that gives corporate and government customers the ability to set and enforce specific information technology policies to manage their...

  • Page 129
    ... the year ended March 1, 2014 March 2, 2013 March 3, 2012 Revenue mix Hardware Service Software Other $ $ 3,785 2,698 235 95 6,813 $ $ 6,648 3,910 261 254 11,073 $ $ 13,794 4,074 318 237 18,423 As at March 1, 2014 March 2, 2013 Property, plant and equipment and intangible assets Canada...

  • Page 130
    ...per share data, and except as otherwise indicated 17. (a) CASH FLOW INFORMATION Cash flows resulting from net changes in working capital items are as follows: For the year ended March 1, 2014 March 2, 2013 March 3, 2012 Accounts receivable Other receivables Inventories Income taxes receivable Other...

  • Page 131
    ... (the "Company" or "BlackBerry"), for the fiscal year ended March 1, 2014. The Consolidated Financial Statements are presented in U.S. dollars and have been prepared in accordance with United States generally accepted accounting principles ("U.S. GAAP"). All financial information in this MD&A is...

  • Page 132
    ... its current products and services, or develop new products and services in a timely manner or at competitive prices, including risks related to new product introductions and adoption and the relevance of hardware in light of the Company's decreasing market share of the smartphone industry; the risk...

  • Page 133
    ...technologies and products; reliance on strategic alliances and relationships with third-party network infrastructure developers, software platform vendors and service platform vendors, including the Company's ability to promote and advance the development of an ecosystem of applications and services...

  • Page 134
    ... technology ("IT") departments for access to corporate messaging and data applications. As the market has evolved, IT departments now look for enterprise mobility solutions that can handle a range of requirements. The Company has introduced products to address this market shift including BlackBerry...

  • Page 135
    ...10, as well as driving adoption of BlackBerry 10 smartphones, working towards launching the multi-platform BBM social messaging service, and pursuing mobile computing opportunities by leveraging the secure and reliable BlackBerry Global Data Network. On September 23, 2013, the Company announced that...

  • Page 136
    ... officer appointments during fiscal 2014: on December 17, 2013, John Sims as President, Global Enterprise Services; on December 18, 2013, James S. Mackey as Executive Vice President for Corporate Development and Strategic Planning and Mark Wilson as Senior Vice President, Marketing (effective...

  • Page 137
    ..., including building a high-touch enterprise sales force, focused marketing campaigns, an expanded partner ecosystem and the identification of alternative sales channels. In line with this focus, BlackBerry continues to enhance its enterprise offerings and long-term product strategy. New pricing and...

  • Page 138
    ...release of BBM delivered numerous new features such as free voice calling over Wi-Fi, oneclick sharing of files and photos, Dropbox integration, location sharing and BBM Channels, among others. BBM Channels extends the popular BBM experience to brands, artists, businesses and communities, connecting...

  • Page 139
    ... may be able to expand the size of its addressable market for recurring service revenue. The Company believes this strategy will help broaden the BlackBerry ecosystem over time, which will potentially give the Company and its application developers access to a broader market into which to sell their...

  • Page 140
    ... shipped devices to its carrier and distributor partners to support new and continuing product launches and meet expected levels of end customer demand. However, the sell-through levels for BlackBerry 10 smartphones decreased significantly during fiscal 2014 due to the maturing smartphone market...

  • Page 141
    ...'s share price can be affected by, among other things, changes in industry or market conditions, including the effect of competition, changes in the Company's results of operations, changes in the Company's forecasts or market expectations relating to future results, and the Company's strategic...

  • Page 142
    ...life cycle and development plans, component cost trends, product pricing and quality issues. If customer demand subsequently differs from the Company's forecasts, requirements for inventory write-offs that differ from the Company's estimates could become necessary. If management believes that demand...

  • Page 143
    ... quarter of fiscal 2014. As a result, the Company presents, by component, changes in AOCI and the effect of significant reclassifications out of AOCI on the respective line items in net income in Note 14 to the Consolidated Financial Statements. In July 2013, the Financial Accounting Standards Board...

  • Page 144
    ...'s network (the "2012 Service Interruption"). Cost of sales included $103 million, research and development included $76 million, and selling, marketing and administration expenses included $333 million in charges related to the Company's CORE program and strategic review process during fiscal 2014...

  • Page 145
    ...Management's Discussion and Analysis of Financial Condition and Results of Operations (3) Cost of sales included the Z10 Inventory Charge of approximately $934 million, the Q3 Fiscal 2014 Inventory Charge of approximately $1.6 billion and the Q4 Fiscal 2014 Inventory Recovery incurred in fiscal 2014...

  • Page 146
    ...Company's inventory in channel. Of the devices that sold through to end customers in fiscal 2014, approximately 15.5 million were BlackBerry 7 devices. Service revenue decreased by $1.2 billion to $2.7 billion in fiscal 2014, which was primarily attributable to a lower number of BlackBerry users and...

  • Page 147
    ... Limited Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Continuing Operations Fiscal year ended March 1, 2014 compared to fiscal year ended March 2, 2013 Revenue Revenue from continuing operations for fiscal 2014 was $6.8 billion, a decrease of...

  • Page 148
    ... customers to move from BES and other mobile device management programs to BES 10 or BES 12 at the Silver level of service for free, the eBBM Suite (a new family of products and services, including BBM Protected, that will work with BlackBerry smartphones, BES and BES 10 to provide enterprise-class...

  • Page 149
    ... Company plans to refocus its product and services offerings on its endto-end solution of hardware, software and services for enterprises. The Company has experienced a decline in demand for its products and in its overall market share. The intense competition impacting the Company's financial and...

  • Page 150
    ... 1, 2014 % of Revenue March 2, 2013 % of Revenue Change Fiscal 2014/2013 % of Change Revenue Operating expenses Research and development(1) Selling, marketing and administration Amortization Impairment of Long Lived Assets(2) Impairment of Goodwill(3) Debentures fair value adjustment(4) Total...

  • Page 151
    ..., advertising and promotion, salaries and benefits, external advisory fees, information technology costs, office and related staffing infrastructure costs and travel expenses. Selling, marketing and administration expenses decreased by $8 million, or 0.4%, to $2.1 billion in fiscal 2014 compared to...

  • Page 152
    ... the last four quarters. Cost of sales Amortization expense relating to certain property, plant and equipment and intangible assets employed in the Company's manufacturing operations and BlackBerry service operations decreased by $529 million to $664 million for fiscal 2014, compared to $1.2 billion...

  • Page 153
    ...tax provision in fiscal 2014. This accounting treatment has no effect on the Company's actual ability to utilize deferred tax assets to reduce future cash tax payments. The Company will continue to assess the likelihood that the deferred tax assets will be realizable at each reporting period and the...

  • Page 154
    ... geographic regions are set forth in the following table: For the Fiscal Year Ended March 2, 2013 March 3, 2012 Change Fiscal 2013/2012 Millions of BlackBerry handheld devices shipped(1) Millions of BlackBerry PlayBook tablets shipped Revenue (in millions) Hardware Service Software Other (2) 28...

  • Page 155
    BlackBerry Limited Management's Discussion and Analysis of Financial Condition and Results of Operations million BlackBerry handheld devices shipped in fiscal 2012. The decline in the volume of BlackBerry devices shipped was primarily a result of decreased demand for the Company's aging product ...

  • Page 156
    ... to drive sell-through. 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...

  • Page 157
    ... 2012. Intangible assets are comprised of patents, licenses and acquired technology. For the Fiscal Year Ended (in millions) Included in Amortization March 2, 2013 March 3, 2012 Change March 2, 2013 Included in Cost of sales March 3, 2012 Change Property, plant and equipment Intangible assets Total...

  • Page 158
    BlackBerry Limited Management's Discussion and Analysis of Financial Condition and Results of Operations compared to $952 million for fiscal 2012. This increase primarily reflected the impact of renewed or amended licensing agreements and certain property, plant and equipment asset additions made ...

  • Page 159
    ... 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...

  • Page 160
    BlackBerry Limited Management's Discussion and Analysis of Financial Condition and Results of Operations Summary Results of Continuing Operations Three months ended March 1, 2014 compared to the three months ended March 2, 2013 The following table sets forth certain unaudited consolidated statement ...

  • Page 161
    ... regions, being recognized when the devices sell through to end customers. See "Accounting Policies - Revenue Recognition". During the fourth quarter of fiscal 2014, approximately 3.4 million BlackBerry smartphones were sold through to end customers, which included shipments made and recognized...

  • Page 162
    ... customers continued to decline in the fourth quarter of fiscal 2014. As previously disclosed, as BlackBerry 10 products use the Company's network infrastructure in a different manner than BlackBerry 7 and previous versions, certain elements of the Company's current revenue model have changed. Users...

  • Page 163
    ... in the fourth quarter of fiscal 2014 were BlackBerry 10 devices, which had lower gross margins than BlackBerry 7 devices due to the current sell-through programs offered on BlackBerry 10 smartphones. The decrease in consolidated gross margin also reflects the Company's fixed costs being allocated...

  • Page 164
    BlackBerry Limited Management's Discussion and Analysis of Financial Condition and Results of Operations For the Three Months Ended (in millions) March 1, 2014 % of Revenue November 30, 2013 % of Revenue March 2, 2013 % of Revenue Revenue Operating expenses Research and development(1) Selling, ...

  • Page 165
    ... quarters. Cost of sales Amortization expense relating to certain property, plant and equipment and certain intangible assets employed in the Company's manufacturing operations and BlackBerry service operations decreased by $117 million to $96 million for the fourth quarter of fiscal 2014 compared...

  • Page 166
    BlackBerry Limited Management's Discussion and Analysis of Financial Condition and Results of Operations Investment Income Investment income decreased by $14 million to a loss of $20 million in the fourth quarter of fiscal 2014 from a loss of $6 million in the fourth quarter of fiscal 2013. The ...

  • Page 167
    BlackBerry Limited Management's Discussion and Analysis of Financial Condition and Results of Operations offset by an increase in the recovery of income taxes and a reduction in operating expenditures. The decrease in the Company's consolidated gross margin in the fourth quarter of fiscal 2014 was ...

  • Page 168
    ... Analysis of Financial Condition and Results of Operations Selected Quarterly Financial Data The following table sets forth the Company's unaudited quarterly consolidated results of operations data for each of the eight most recent quarters, including the quarter ended March 1, 2014. The information...

  • Page 169
    ... in previous periods, from customers in Venezuela. The Company continues to face challenges in obtaining timely payments on its receivables and will continue to closely monitor its collection efforts in future periods. The Company also sells products and provides services in additional foreign...

  • Page 170
    ..., software, messaging services and other BlackBerry related features. The decrease in additions of property, plant and equipment for fiscal 2014 was primarily due to the cost saving initiatives of the CORE program, reflecting the Company's targeted investment approach in research and development and...

  • Page 171
    ... obligations and commitments generally increase or decrease along with the demand for the Company's products, or as new service offerings are either launched or exited. Credit Facilities and Other Funding Sources On November 13, 2013, Fairfax and other institutional investors acquired the Debentures...

  • Page 172
    ... given the rapid technological changes, evolving industry standards, intense competition and short product life cycles that characterize the wireless communications industry. These difficulties in forecasting the Company's financial results and performance are magnified at the present time given the...

  • Page 173
    ... 5, 2012, plaintiff filed the Consolidated Amended Class Action Complaint, alleging that during the period from December 16, 2010 through June 16, 2011, the Company and certain of its officers made materially false and misleading statements regarding the Company's financial condition and business...

  • Page 174
    BlackBerry Limited Management's Discussion and Analysis of Financial Condition and Results of Operations Plaintiff filed a Notice of Appeal. The appeal was argued on November 7, 2013 with judgment reserved. Proceedings are ongoing. Between October and December 2013, several purported class action ...

  • Page 175
    ... base in terms of numbers, sales and accounts receivable volumes, and in some instances, new or significantly increased credit limits. The Company, in the normal course of business, monitors the financial condition of its customers and reviews the credit history of each new customer. The Company...

  • Page 176
    ... because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of the Company's internal control over financial reporting as of March 1, 2014. In making this assessment, management used the criteria set forth...

  • Page 177
    ... PUBLIC ACCOUNTING FIRM We consent to the use in this Annual Report [Form 40-F] of BlackBerry Limited (the "Company") for the year ended March 1, 2014 of our reports dated March 28, 2014 with respect to the consolidated financial statements of the Company included herein, and the effectiveness...

  • Page 178
    ... to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer's internal control over financial reporting. Date: March 28, 2014 /s/ John Chen Name: John Chen Title...

  • Page 179
    ... to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer's internal control over financial reporting. Date: March 28, 2014 /s/ James Yersh Name: James Yersh...

  • Page 180
    ... In connection with the Annual Report of BlackBerry Limited (the "Registrant") on Form 40-F for the year ended March 1, 2014, as filed with the Commission on the date hereof (the "Report"), John Chen, as Chief Executive Officer of the Registrant, and James Yersh, as Chief Financial Officer of the...