Blackberry 2014 Annual Report Download - page 161

BlackBerry Limited
Management’s Discussion and Analysis of Financial Condition and Results of Operations
31
Revenue
Revenue from continuing operations for the fourth quarter of fiscal 2014 was $976 million, a decrease of approximately $1.7
billion, or 63.6%, from $2.7 billion in the fourth quarter of fiscal 2013.
Comparative breakdowns of the significant revenue categories are set forth in the following table:
For the Three Months Ended
March 1, 2014 March 2, 2013 Change Fiscal 2014/2013
Millions of BlackBerry handheld
devices recognized 1.3 6.0 (4.7) (78.3)%
Revenue (in millions)
Hardware $ 358 36.7% $ 1,640 61.2% $ (1,282) (78.2)%
Service 548 56.2% 947 35.4% (399) (42.1)%
Software 56 5.7% 63 2.4% (7) (11.1)%
Other 14 1.4% 28 1.0% (14) (50.0)%
$ 976 100.0% $ 2,678 100.0% $ (1,702) (63.6)%
Revenue by Geography (in millions)
North America $ 297 30.4% $ 587 21.9% $ (290) (49.4)%
Europe, Middle East and Africa 412 42.2% 1,227 45.8% (815) (66.4)%
Latin America 127 13.0% 479 17.9% (352) (73.5)%
Asia Pacific 140 14.4% 385 14.4% (245) (63.6)%
$ 976 100.0% $ 2,678 100.0% $ (1,702) (63.6)%
Revenue by Category
Hardware Revenue
Hardware revenue was $358 million, or 36.7% of consolidated revenue, in the fourth quarter of fiscal 2014, compared to $1.6
billion, or 61.2% of consolidated revenue, in the fourth quarter of fiscal 2013, representing a decrease of $1.3 billion or 78.2%.
The Company recognized revenue related to approximately 1.3 million BlackBerry handheld devices in the fourth quarter of
fiscal 2014, reflecting a decrease of approximately 4.7 million devices, or 78.3%, compared to approximately 6.0 million
BlackBerry handheld devices in the fourth quarter of fiscal 2013. Most devices recognized were BlackBerry 10 devices. The
Company believes that the significant decrease in hardware revenue over the prior fiscal year was primarily attributable to
decreased demand and lower sell-through for the Company's new devices, due to very intense competition. Significant
judgment is applied by the Company to determine whether shipments of devices have met the Company’s revenue recognition
criteria, as the analysis is dependent on many facts and circumstances. The Company also believes that previously disclosed
announcements concerning the Company's operational restructuring, recent management changes and the Company's
workforce reductions, may have continued to negatively impact demand for the Company's products in the fourth quarter of
fiscal 2014. In order to improve sell-through levels and stimulate global demand for BlackBerry devices, the Company
continues to implement sell-through programs with its carrier and distributor partners. As previously disclosed, the Company
can no longer reasonably estimate the amount of the potential sell-through programs that may be offered on certain BlackBerry
devices in future periods, resulting in revenues for BlackBerry 10 devices, and BlackBerry 7 devices in certain 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 prior to the fourth quarter of fiscal 2014 and which reduced the
Company's inventory in channel. Of the devices that sold through to end customers in the fourth quarter of fiscal 2014,
approximately 2.3 million were BlackBerry 7 devices. The number of BlackBerry smartphones that were sold through to
end customers was 4.3 million in the third quarter of fiscal 2014 and 7.7 million in the fourth quarter of fiscal 2013.