Blackberry 2014 Annual Report Download - page 31

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It is the Company’s general practice to enter into confidentiality and non-disclosure agreements with its employees,
consultants, contract manufacturers, customers, potential customers and others to attempt to limit access to and distribution of
its proprietary information. In addition, the Company generally enters into agreements with employees that include an
assignment to the Company of all intellectual property developed in the course of employment.
The Company also enters into various types of licensing agreements related to technology and intellectual property rights. The
Company enters certain of these agreements to obtain rights that may be necessary to produce and sell products into the
wireless industry. The Company may also license its technology and intellectual property to third parties through various
licensing agreements.
Production
The Company outsources the majority of its manufacturing to specialized global EMS companies who are positioned to meet
the volumes, scale, cost and quality requirements of the Company. The Company strives to reduce its risk and dependency on
these companies by having various partners located in key geographical locations, thereby increasing leverage on cost, quality
and operational performance. Constant and immediate access to each manufacturing facility is available upon the Company’s
demand, and these facilities are regularly audited by Company personnel trained in this function. The Company also operates a
facility in Waterloo, Ontario, that is approximately 242,000 square feet and is primarily focused on New Product Introduction
(“NPI”) and research and development related activities.
In the coming year, the Company expects to continue to evolve its supply chain model, including through its new partnership
with Foxconn. The Company’s joint device development and manufacturing agreement with Foxconn demonstrates
BlackBerry’s commitment to the device market for the long-term and its determination to remain the innovation leader in
secure end-to-end mobile solutions. Under this new partnership, Foxconn is jointly developing and manufacturing the
BlackBerry Z3 smartphone for Indonesia and other fast-growing markets. The devices manufactured by Foxconn will be
purchased and resold by BlackBerry. The Company expects the partnership with Foxconn will enable the Company to focus 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. The Company’s new hardware model will also strive to provide
a supply chain with speed advantages in designing for faster product life cycles, as well as to leverage scale and manufacturing
strength beyond current volumes.
The Company will also look to continue to enhance its new product introduction and supply chain planning activities through
further integration with internal research and development activities.
The Company generally controls sourcing decisions for materials and services that are incorporated into Company products.
Outsourced manufacturing partners are responsible for transacting business on behalf of the Company with component
suppliers, but the Company generally negotiates pricing of these materials and services. Depending on market conditions, the
Company may order more or less of a particular material or service and when possible, attempts to source components from at
least two suppliers with a view to avoiding different types of supply disruption. Component availability and pricing of
components may also be affected by the volumes the Company generates, compared to the volumes a competitor may require.
See also “Risk Factors - The Company relies on its suppliers to supply functional components and is exposed to the risks that
these suppliers will not supply components on a timely basis or of the desired quality; if the Company’s sales volumes decrease
or do not reach projected targets, it may face increased costs that could make its products less competitive.”
Regulatory Matters
In addition to the regulatory requirements applicable to any business, an access device manufacturer must obtain certification
from the radio/telecommunications regulatory authorities in most jurisdictions before commencing commercial sale of its
products in those jurisdictions. A significant competitive advantage exists for manufacturers with established businesses who
have previously met the certification requirements for their products and who are familiar with the regulatory process.
The Company’s products must be approved by the FCC before they can be used in commercial quantities in the United States.
In Canada, the relevant regulatory authority is Industry Canada. The European Community (“EC”) defines EC marking
requirements within the Radio and Telecommunications Terminal Equipment (“R&TTE”) Directive for use in EC member
states. Regulatory requirements are similar in other jurisdictions. All regulators require access devices to meet various
standards, including limits with respect to interference with other electronic equipment and safety standards with respect to
human exposure to electromagnetic radiation.
The Company’s BlackBerry wireless devices, which are made commercially available by the Company across multiple
markets, meet FCC, Industry Canada, and EC requirements. In addition, Company devices have obtained regulatory approvals
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