What I Learned Reading Research In Motion Ltd (BBRY)’s Annual Report

Page 1 of 2

Digging into a company’s annual report is a great way to find hidden risks and trends that may be otherwise missed. Research In Motion Ltd (NASDAQ:BBRY)‘s 40-F didn’t disappoint.

BlackBerry Ltd (NASDAQ:BBRY)

Here are three things I learned from the company’s annual report.

1) Dodd-Frank

I didn’t think Dood-Frank would have a significant impact on non-financial companies, but I was wrong.

“In fiscal 2013, the SEC adopted new disclosure requirements implementing Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 for manufacturers of products containing certain minerals that are mined from the Democratic Republic of Congo and adjoining countries. These so-called “conflict minerals” are commonly found in metals used in the manufacture of certain of the Company’s products.” BlackBerry 40-F

The new Dodd-Frank legislation requires companies to report all products containing conflict minerals – like tin, tantalum, tungsten, and gold – from the Congo. Conflict for control of the mineral wealth is behind some of the most violent human rights violations in the country.

For Research In Motion Ltd (NASDAQ:BBRY) and other technology companies, this regulation creates several problems including higher compliance costs, higher component prices, and potential reputational risks.

Apparently, Apple Inc. (NASDAQ:AAPL) is the best prepared for this new legislation.

In 2010, the company was named the worse abuser of so-called ‘conflict-minerals’ by The Enough Project – a non-profit humanitarian organization.

Since being called out, the company has made significant efforts to clean up their operations by surveying suppliers and auditing smelters. Apple Inc. (NASDAQ:AAPL) now requires its suppliers to move their sourcing of tin, tungsten, and gold to certified conflict-free sources.

Last year, Apple was given top marks against other technology giants for its reduce use of conflict minerals. This means Apple Inc. (NASDAQ:AAPL) will have the lowest compliance costs and reputational risks when the law comes into effect next year.

2) Significant credit risk to….Venezuela?

Sometimes when digging through annual reports I’m surprised to find where companies have exposures that could result in unexpected losses.

“As of March 2, 2013, the Company has accounts receivables outstanding related to service access fees provided to wireless service providers in Venezuela [...] As a result of the currency devaluation and given the uncertainty around future changes to the Venezuela leadership, the Company could face additional challenges in obtaining payment on its receivables if the Venezuela carriers cannot secure governmental approvals to buy and remit USD for services provided.” Blackberry 40-F

Latin America accounts for 20% of Research In Motion Ltd (NASDAQ:BBRY)’s revenues and Venezuela was chosen to spearhead the continent’s BB10 launch. But doing business in this country comes with risks.

On Feb. 13, the Venezuela government devalued the Bolivar 32% against the U.S. dollar. Yet despite the move, there’s still a shortage of American currency in the country. As a result, Venezuelan companies could default on their obligations to Research In Motion Ltd (NASDAQ:BBRY) because they cannot convert funds into U.S. dollars.

3) Patent trolls

I knew about the growing problem of patent trolls – entities that hold patents for no other reason than to sue companies - in the technology industry.

But their influence really hits homes when you start digging through Research In Motion Ltd (NASDAQ:BBRY)’s annual report. In all, Research In Motion Ltd (NASDAQ:BBRY) is involved in 42 intellectual property cases, almost all of which involve patent trolls.

Here’s an amusing case.

“On March 15, 2012 Varia Holdings LLC (“Varia”) filed a lawsuit against the Company in the U.S. District Court for the District of Delaware. The complaint alleges infringement of U.S. Patent No 7,167,731 [...] The court has stayed proceedings while the parties negotiate settlement.” BlackBerry 40-F

Basically, Varia Holdings is suing Samsung and Research In Motion Ltd (NASDAQ:BBRY) for the unlawful use of its ‘emoticon input apparatus’ – a method of inputting emoticons into text through a button the user presses to bring up a list.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

On the Move: The 10 Fastest Growing Businesses in 2015

Fast Money: The 10 Highest Paying Fast Food Restaurants

Mixing It Up: The 14 Best Music Mashups of 2014

Rito Pls Buff: The 10 Least Played Champions in LoL Season 4

10 Covers of Popular Songs that are Better than the Originals

Must See TV: The 9 Most Anticipated Shows of 2015

The 15 Biggest Box Office Bombs of All Time

10 Things The World Can’t Stand About Americans

Picture Perfect: The 6 Smartphones with the Best Cameras

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!