Blackberry 2015 Annual Report Download - page 109

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
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(d) Concentrations in certain areas of the Company’s business
The Company attempts to ensure that most components essential to the Company’s business are generally available from
multiple sources, however certain components are currently obtained from limited sources within a competitive market,
which subjects the Company to significant supply, availability and pricing risks. Many components are at times subject to
industry-wide shortages and significant commodity pricing fluctuations including those that are available from multiple
sources. In addition, the Company has entered into various agreements for the supply of components, the manufacturing
of its products and agreements that allow the Company to use intellectual property owned by other companies; however,
there can be no guarantee that the Company will be able to extend or renew these agreements on similar terms, or at all.
Therefore, the Company remains subject to significant risks of supply shortages, intellectual property litigation risk as
well as potential price increases that can materially adversely affect its financial condition and operating results.
The Company also uses some custom components that are not common to the rest of the industry, and new products
introduced by the Company often 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 or existing product
were delayed or constrained, the Company’s financial condition and operating results could be materially adversely
affected. Further, if the Company was not able to find an alternative source for the necessary quantities, the Company’s
business and financial performance could also be materially adversely affected. Continued availability of these
components at acceptable prices, or at all, may be affected if those suppliers concentrate on the production of common
components instead of components customized to meet the Company’s requirements.
Substantially all of the Company’s hardware products are manufactured by outsourcing partners that are located primarily
in Asia or Mexico. A significant concentration of this manufacturing is currently performed by a small number of
outsourcing partners. Although the Company works closely with its outsourcing partners on manufacturing schedules, the
Company’s operating results could be adversely affected if its outsourcing partners were unable to meet their production
commitments.
(e) Indemnifications
The Company enters into certain agreements that contain indemnification provisions under which the Company could be
subject to costs and damages, including in the event of an infringement claim against the Company or an indemnified
third party. Such intellectual property infringement indemnification clauses are generally not subject to any dollar limits
and remain in effect for the term of the Company’s agreements. To date, the Company has not encountered material costs
as a result of such indemnifications.
The Company has entered into indemnification agreements with its current and former directors and executive officers.
Under these agreements, the Company agreed, subject to applicable law, to indemnify its directors and executive officers
against all costs, charges and expenses reasonably incurred by such individuals in respect of any civil, criminal or
administrative action which could arise by reason of their status as directors or officers. The Company maintains liability
insurance coverage for the benefit of its directors and current and former executive officers. The Company has not
encountered material costs as a result of such indemnifications in the current year. See the Company’s Management
Information Circular for fiscal 2014 for additional information regarding the Company’s indemnification agreements with
its directors and current and former executive officers.
15. SEGMENT DISCLOSURES
The Company is organized and managed as a single reportable operating segment. The Company currently sells an
integrated BlackBerry wireless communications platform solution, which includes the sale of BlackBerry handheld
devices and the provision of data communication, compression and security infrastructure services, which enable
BlackBerry handheld wireless devices 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 BlackBerry
handheld wireless devices when the data services pass through BlackBerry’s Relay and Provisioning infrastructure.