Blackberry 2014 Annual Report Download - page 163

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BlackBerry Limited
Management’s Discussion and Analysis of Financial Condition and Results of Operations
33
Revenue by Geography
North America Revenues
Revenues in North America were $297 million, or 30.4% of consolidated revenue, in the fourth quarter of fiscal 2014,
reflecting a decrease of $290 million compared to $587 million, or 21.9% of consolidated revenue, in the fourth quarter of
fiscal 2013. The decrease in North American revenue is primarily attributable to a decrease in revenue from the United States,
which represented approximately 23.8% of total consolidated revenue in the fourth quarter of fiscal 2014, compared to 14.2%
of total consolidated revenue in the fourth quarter of fiscal 2013. Revenues in the United States have continued to decline and
subscriber attrition has remained high due to the intense competition faced by the Company in this market. Sales in Canada
represented approximately 6.7% of the consolidated revenue.
Europe, Middle East and Africa Revenues
Revenues in Europe, Middle East and Africa were $412 million or 42.2% of consolidated revenue in the fourth quarter of fiscal
2014, reflecting a decrease of $815 million compared to $1.2 billion or 45.8% of consolidated revenue in the fourth quarter of
fiscal 2013. Some of the larger markets comprising this region include the United Kingdom, Germany and South Africa. In the
fourth quarter of fiscal 2014, the Company continued to launch BlackBerry smartphones in certain countries in this region,
including the Z30 in Austria and Hungary, the 9982 in the the United Arab Emirates and Saudi Arabia as well as the 9720 in
Bulgaria.
Latin America Revenues
Revenues in Latin America were $127 million or 13.0% of consolidated revenue in the fourth quarter of fiscal 2014, reflecting
a decrease of $352 million compared to $479 million or 17.9% of consolidated revenue in the fourth quarter of fiscal 2013.
Colombia, Mexico and Venezuela are some of the larger markets comprising this region. In the fourth quarter of fiscal 2014, the
Company launched BlackBerry 10 smartphones in certain countries in this region, including the Z30 in Jamaica, Venezuela and
Chile as well as the Q5 in Mexico.
Asia Pacific Revenues
Revenues in Asia Pacific were $140 million or 14.4% of consolidated revenue in the fourth quarter of fiscal 2014, reflecting a
decrease of $245 million compared to $385 million or 14.4% of consolidated revenue in the fourth quarter of fiscal 2013. Some
of the larger markets comprising this region include Indonesia and India. In the fourth quarter of fiscal 2014, the Company
launched BlackBerry smartphones in certain countries in this region, including the 9982 and 9720 in Hong Kong as well as the
Q5 in New Zealand.
Gross Margin
Consolidated gross margin from continuing operations decreased by $522 million, or 48.6%, to $553 million, or 56.7% of
consolidated revenue, in the fourth quarter of fiscal 2014, compared to $1.1 billion, or 40.1% of consolidated revenue, in the
fourth quarter of fiscal 2013. Excluding the impact of the Q4 Fiscal 2014 Inventory Recovery and charges related to the CORE
program incurred in the fourth quarter of fiscal 2014, of which $17 million was attributable to cost of sales (see “Non-GAAP
Financial Measures”), and the impact of charges related to the CORE program incurred in the fourth quarter of fiscal 2013, of
which a recovery of $4 million was attributable to cost of sales, gross margin decreased by $650 million.
The $650 million decrease in consolidated gross margin was primarily attributable to decreases in service revenue and the
number of devices for which revenue was recognized compared to the fourth quarter of fiscal 2013. Most of the devices
recognized 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 over lower shipment volumes. Hardware revenues have lower
gross margins than the Company’s consolidated gross margin. Service revenues earn higher gross margins than sales of
handheld devices.
Operating Expenses
The table below presents a comparison of research and development, selling, marketing and administration, and amortization
expenses for the quarter ended March 1, 2014, compared to the quarter ended November 30, 2013 and the quarter ended
March 2, 2013. The Company believes that it is meaningful to also provide a comparison between the fourth quarter of fiscal
2014 and the third quarter of fiscal 2014 given that the Company’s quarterly operating results vary substantially.