Blackberry 2015 Annual Report Download - page 125

BlackBerry Limited
Management’s Discussion and Analysis of Financial Condition and Results of Operations
14
Rockstar Patent Portfolio Sale
On January 28, 2015, Rockstar Consortium US LP, in which BlackBerry is a limited partner, sold its portfolio of approximately
4,000 patents. Following the sale, the Company received a distribution of proceeds out of the partnership in the amount of
approximately $134 million and recorded investment income of $115 million (pre-tax and after-tax) (the “Rockstar Sale”).
Results of Operations - Fiscal year ended February 28, 2015 compared to fiscal year ended March 1, 2014
Revenue
Revenue from continuing operations for fiscal 2015 was $3.3 billion, a decrease of approximately $3.5 billion, or 51.0%, from
$6.8 billion in fiscal 2014.
Comparative breakdowns of the significant revenue categories and geographic regions are set forth in the following table:
For the Fiscal Year Ended (in millions)
February 28, 2015 March 1, 2014 Change
BlackBerry handheld devices recognized 7.0 13.7 (6.7) (48.9)%
Revenue
Hardware $ 1,431 42.9% $ 3,785 55.5% $ (2,354) (62.2)%
Service 1,620 48.6% 2,698 39.6% (1,078) (40.0)%
Software 234 7.0% 235 3.5% (1) (0.4)%
Other 50 1.5% 95 1.4% (45) (47.4)%
$ 3,335 100.0% $ 6,813 100.0% $ (3,478) (51.0)%
Revenue by Geography
North America $ 991 29.6% $ 1,811 26.6% $ (820) (45.3)%
Europe, Middle East and Africa 1,431 43.0% 2,991 43.9% (1,560) (52.2)%
Latin America 380 11.4% 907 13.3% (527) (58.1)%
Asia Pacific 533 16.0% 1,104 16.2% (571) (51.7)%
$ 3,335 100.0% $ 6,813 100.0% $ (3,478) (51.0)%
Revenue by Category
Hardware Revenue
Hardware revenue was $1.4 billion, or 42.9% of revenue, in fiscal 2015 compared to $3.8 billion, or 55.5% of revenue, in fiscal
2014, representing a decrease of 62.2%. The Company recognized revenue related to approximately 7.0 million BlackBerry
handheld devices in fiscal 2015, compared to approximately 13.7 million BlackBerry handheld devices in fiscal 2014.
Approximately 67% of the devices recognized in fiscal 2015 were BlackBerry 10 devices. The Company believes that the
significant decrease in hardware revenue over the prior fiscal year was primarily attributable to intense competition and an
aging product portfolio, as well as a reduction in the average selling prices for the Company's devices as the Company sold
through substantially all of its older model BlackBerry 10 inventory. The Company expects the average selling prices of its
devices to increase due to the higher selling prices of the Company's new devices, including the Passport and Classic.
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. See “Accounting Policies and Critical
Accounting Estimates - Critical Accounting Estimates - Revenue Recognition” in this MD&A and Note 1 to the Consolidated
Financial Statements, which is included in the Annual Report, for a description of the Company's revenue recognition
accounting policy and revenue recognition critical accounting estimates with respect to hardware revenue.
During fiscal 2015, approximately 8.5 million BlackBerry smartphones were sold through to end customers, which included
shipments made and recognized prior to fiscal 2015 and which reduced the Company's inventory in channel. The number of
BlackBerry smartphones that were sold through to end customers was 20.5 million in fiscal 2014.
Service Revenue
Service revenue decreased by $1.1 billion, or 40.0%, to $1.6 billion, or 48.6% of revenue, in fiscal 2015, compared to $2.7
billion, or 39.6% of revenue, in fiscal 2014. Service revenue in fiscal 2015 included approximately $41 million relating to cash