Blackberry 2015 Annual Report Download - page 137

BlackBerry Limited
Management’s Discussion and Analysis of Financial Condition and Results of Operations
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Comparative breakdowns of the significant revenue categories are set forth in the following table:
For the Three Months Ended (in millions)
February 28, 2015 March 1, 2014 Change
BlackBerry handheld devices recognized 1.3 1.3 — — %
Revenue
Hardware $ 274 41.5% $ 358 36.7% $ (84) (23.5)%
Service 309 46.8% 548 56.2% (239) (43.6)%
Software 67 10.2% 56 5.7% 11 19.6 %
Other 10 1.5% 14 1.4% (4) (28.6)%
$ 660 100.0% $ 976 100.0% $ (316) (32.4)%
Revenue by Geography
North America $ 205 31.0% $ 297 30.4% $ (92) (31.0)%
Europe, Middle East and Africa 283 42.9% 412 42.2% (129) (31.3)%
Latin America 60 9.1% 127 13.0% (67) (52.8)%
Asia Pacific 112 17.0% 140 14.4% (28) (20.0)%
$ 660 100.0% $ 976 100.0% $ (316) (32.4)%
Revenue by Category
Hardware Revenue
Hardware revenue was $274 million, or 41.5% of revenue, in the fourth quarter of fiscal 2015, compared to $358 million, or
36.7% of revenue, in the fourth quarter of fiscal 2014, representing a decrease of $84 million or 23.5%. The Company
recognized revenue related to approximately 1.3 million BlackBerry handheld devices in the fourth quarter of fiscal 2015,
consistent with approximately 1.3 million BlackBerry handheld devices recognized in the fourth quarter of fiscal 2014.
Approximately 66% of the devices recognized in the fourth quarter of 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 the reduction
in the average selling prices of its devices.
For a discussion of the Company's revenue recognition policies and critical accounting estimates, see the section entitled
“Accounting Policies and Critical Accounting Estimates - Accounting Policies” and “Accounting Policies and Critical
Accounting Estimates - Critical Accounting Estimates - Revenue Recognition.”
During the fourth quarter of fiscal 2015, approximately 1.6 million BlackBerry smartphones were sold through to end
customers, which included shipments made and recognized prior to the fourth quarter of fiscal 2015 and which reduced the
Company's inventory in channel. The number of BlackBerry smartphones that were sold through to end customers was 1.9
million in the third quarter of fiscal 2015 and 3.4 million in the fourth quarter of fiscal 2014.
Service Revenue
Service revenue decreased by $239 million, or 43.6%, to $309 million, or 46.8% of revenue, in the fourth quarter of fiscal
2015, compared to $548 million, or 56.2% of revenue, in the fourth quarter of fiscal 2014. Service revenue in the fourth quarter
of fiscal 2015 included approximately $8 million in cash payments received from carrier partners in Argentina for service
revenue previously deferred.
The decrease in service revenue is primarily attributable to a lower number of BlackBerry users compared to the fourth quarter
of fiscal 2014 and also reflects the Q4 Fiscal 2015 Argentina Service Revenue Deferral, described in the section above entitled
“Fiscal 2015 Summary Results of Operations - Financial Highlights - Argentina Service Revenue”. The year-over-year decrease
also resulted from a continued shift in the mix of the Company’s customers from higher-tiered unlimited plans to prepaid and
lower-tiered plans as well as pricing reduction programs implemented by the Company to maintain the customer base.
Foreign currency restrictions in Argentina have led to the deterioration of collections from carriers to whom the Company
provides services in that country. As a result, the Company recorded the Q4 Fiscal 2015 Argentina Service Revenue Deferral of
approximately $9 million in the fourth quarter of fiscal 2015.