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Motorola, Inc.
Company Profile
Publication Date: 11 Aug 2008
www.datamonitor.com
Datamonitor Hong KongDatamonitor GermanyDatamonitor EuropeDatamonitor USA2802-2803 Admiralty CentreKastor & PolluxCharles House245 5th AvenueTower 1Platz der Einheit 1108-110 Finchley Road4th Floor18 Harcourt Road60327 FrankfurtLondon NW3 5JJNew York, NY 10016Hong KongDeutschlandUnited KingdomUSA
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Motorola provides wireless handsets, wireless communications systems, and end-to-end broadbandsystems. It is one of the major providers of end-to-end networks used for the delivery of video, voice,and data services over hybrid fiber coaxial networks. The company primarily operates in the US. Itis headquartered in Schaumburg, Illinois and employs 66,000 people.
The company recorded revenues of $36,622 million during the financial year ended December 2007(FY2007), a decrease of 14.5% over 2006. The decrease in net sales was due to a $9.4 billiondecrease in net sales of the mobile devices segment. The operating loss of the company was $553million during FY2007, compared to the operating profit of $4,092 million in 2006. The net loss was$49 million in FY2007, compared to the net profit of $3,661 million in 2006.
KEY FACTS
Motorola, Inc.Head Office1303 East Algonquin RoadSchaumburgIllinois 60196USA
Motorola builds and markets products, services and applications that make simple and seamlessconnections to people, information and entertainment possible through broadband, embeddedsystems and wireless networks. The company provides wireless handsets, wireless accessories,digital entertainment devices, wireless access systems, voice and data communications systems,and enterprise mobility products. The company operates in the US, China, the UK, Germany, Israeland Singapore.
Motorola operates through three business divisions: mobile devices, home and networks mobility,and enterprise mobility solutions. The mobile devices segment designs, manufactures, sells andservices wireless handsets with integrated software and accessory products, and licenses intellectualproperty. Their wireless subscriber product comprises wireless handsets with related software andaccessory products. The company has structured mobile device product portfolio and developmentinto four primary product segments: mass market, feature, multimedia and productivity. The massmarket product segment focuses on voice-centric devices with targeted features.The feature productsegment focuses on delivering iconic, fashionable phones with high-end features. The multimediaproduct segment is focused on the convergence of voice capabilities with multimedia experienceson a single mobile device. The productivity product segment is growing due to increasing demandfor robust wireless handsets and email on the mobile.
In 2007, the company began shipping flagship RAZR2 devices with Crystal Talk, a proprietarytechnology that automatically adjusts audio quality based on ambient noise conditions to providethe optimal conversational experience.The company markets its products worldwide to carriers andconsumers through direct sales, distributors, dealers, retailers and, in certain markets, throughlicensees. The largest distributor of the company is Brightstar Corporation. The largest customersof the segment include Sprint Nextel, AT&T, Verizon, China Mobile and America Movil.The company’shandsets are mostly manufactured in Asia. Its largest manufacturing facilities are located in China,Singapore and Brazil. Motorola also uses several electronics manufacturing suppliers and originaldesign manufacturers to enhance its manufacturing capabilities.
The home and networks mobility business designs, manufactures, sells, installs and services: digitalvideo, internet protocol (IP) video and broadcast network interactive set-tops (digital entertainmentdevices), video delivery solutions, broadband access infrastructure systems, and associated dataand voice customer premise equipment (broadband gateways) to cable television and telecomservice providers, and wireless access systems (wireless networks), including cellular infrastructuresystems and wireless broadband systems, to wireless service providers.
In the home business, the segment is a provider of networks used for the delivery of video, data andvoice services over hybrid fiber coaxial (HFC) networks, digital subscriber line (DSL) and passiveoptical networks (PON). The company’s portfolio includes: Moving Picture Experts Group MPEGvideo encoding equipment for standard-definition and high-definition television (HD); video processingand multiplexing systems; and video-on-demand, switched digital video and conditional accesssolutions used by network operators and programmers to deliver video programming.
The company provides a broad array of digital entertainment devices supporting analog, digital andIP video delivery including HD and digital video recording (DVR) applications. In the wireless networksbusiness, the segment provides cellular networks, including radio base stations, base stationcontrollers, associated software and services, application platforms and third-party switching forCDMA, GSM, iDEN and UMTS technologies.The segment also offers a portfolio of WiMAX productsto create mobile IP broadband access. The segment’s products are marketed primarily to cabletelevision operators, television programmers, telecom operators, wireless service providers andother communications providers worldwide and are sold primarily by the company’s sales personnel.
The segment’s largest customers include Comcast, Verizon, KDDI (a service provider in Japan),China Mobile and Sprint Nextel. The company’s design, integration, manufacturing and distributioncenters are located in Arlington Heights and Schaumburg, Illinois; Chandler and Tempe, Arizona;Fort Worth, Texas; Swindon, England; Arad, Israel; Hangzhou and Tianjin, China; Munich, Taunussteinand Berlin, Germany; and Penang, Malaysia.
The enterprise mobility solutions segment designs, manufactures, sells, installs and services analogand digital two-way radio, voice and data communications products and systems for private networks,wireless broadband systems and enterprise mobility solutions to a wide range of enterprise markets,including government and public safety agencies (government and public safety market) as well asretail, utility, transportation, manufacturing, healthcare and other commercial customers (collectivelyreferred to as the commercial enterprise market).
In the government and public safety market, Motorola is the provider of advanced mission-criticalsystems worldwide, with more than 65 years of experience in custom, rugged devices; publicsafety-grade private networks; sophisticated encryption technology; interoperable voice and broadbanddata; and complex network design, optimization and implementation services. In the commercialenterprise market, the company’s products include advanced data capture products, mobile computingplatforms and software management tools, wireless infrastructure, and radio frequency identification(RFID) infrastructure and tags, and are sold as both integrated solutions and individual devices.
The largest of the segment’s customers are the US Government, Scansource, IBM, Ingram Microand Wal-Mart. The company’s largest resellers and distributors are Scansource, IBM and IngramMicro, which primarily sell to the commercial enterprise market.
In January 2008, Motorola announced that it is evaluating alternatives for the structural and strategicrealignment of the Mobile Devices business to regain its global market leadership and enhanceshareholder value. This may include the separation of the mobile devices business from Motorola’sother businesses to permit each to grow and better serve their customers. Later, in March 2008, thecompany’s Board of Directors commenced a process to create two independent, publicly-tradedcompanies, mobile devices business, and broadband and mobility solutions business.The companyexpects that the separation of its businesses would take place in 2009.
Motorola’s research and development laboratories are organized into discrete centers of excellencein key research areas such as networks research, physical realization research, embedded systemsresearch, wireless and solutions research, human interaction research, and applications research.
Motorola was founded in 1928 as Galvin Manufacturing by Paul and Joseph Galvin. The companyproduced battery eliminators, which enabled battery operated radios to function on ordinary householdcurrent. In the 1930s, the company launched the first auto radio under the Motorola brand.
During the 1950s and 1960s, the company expanded into the production of semiconductors for othermanufacturers. In 1967, Motorola expanded into Australia, Canada, France, Hong Kong, Israel, Italy,Japan, Malaysia, Mexico, Puerto Rico, South Korea, Taiwan, the UK and West Germany.
In 1973, Motorola demonstrated a design for the DynaTAC (Dynamic Adaptive Total Area Coverage)portable radio telephone. This was the prototype of the world’s first commercial portable telephoneusing cellular technology. The first Motorola microprocessor was introduced in 1974. In the 1980s,the company entered the communications sector. It supplied more than 50,000 Pocket Bell pagersto Nippon in Japan in 1983, and thereafter, entered into several deals with other communicationcompanies.
In 1991, the company developed a range of technologies for non-voice wireless messaging andmulti-media products. In 1994, Motorola developed its first commercial digital radio system thatintegrated paging, data communications, voice dispatch and wireless telephones in a single radionetwork and a single handset.
Towards the end of the 1990s, the company undertook a restructuring plan. In 2000, Motorola mergedwith General Instruments. In 2001, Motorola acquired RiverDelta Networks, a provider of carrier-classbroadband routing, switching, cable modem termination system (CMTS), and service managementsolutions.
The company acquired NetPlane Systems and the Internet infrastructure business of ConexantSystems in 2003. In the same year, Motorola acquired Winphoria Networks, a core infrastructureprovider of next generation packet-based mobile switching centers for wireless networks.
During 2004, Motorola acquired Quantum Bridge Communications, a provider of fiber to the premisessolutions based in Andover, Massachusetts. Later, in 2004, Motorola spun off its semiconductorproducts division as Freescale Semiconductor in an initial public offering on the New York StockExchange. Also, the company acquired MeshNetworks, a privately-held leading developer of mobilemesh networking and position location technologies. It also acquired CRISNET, a privately-held,leading developer of advanced records management and related systems for criminal justice andpublic safety customers.
At the start of 2005, Motorola acquired privately-held Ucentric Systems, a Massachusetts-basedprovider of media networking software.This acquisition enabled Motorola to market connected homesoftware solutions to third party service providers and consumer electronics manufacturers. Motorolaannounced the launch of a new 3G Development Center in China in mid 2005. At the end of 2005,
the company acquired Melco Mobile communication Europe, a subsidiary of Mitsubishi ElectricCorporation.
In 2006, Motorola acquired cable network technology assets from Broadband Innovations (BI), aprivately held San Diego-based developer of radio frequency (RF) and digital technologies. Thecompany also announced a 10 year partnership with Eastman Kodak for cross licensing and marketingalliance relating to mobile imaging. The connected home solutions division of Motorola completedthe acquisition of Kreatel Communications, a developer of innovative IP based digital set-top boxes.
Motorola signed an agreement to acquire Orthogon systems to strengthen its presence in highperformance fixed wireless solutions. In 2006, the company reached an agreement to acquire TTPcommunications. The company also announced plans for a manufacturing facility in India with aninitial investment of $30 million.
The company sold its automotive electronics business to Continental, a leading automotive supplier,for approximately $1 billion in 2006. In the same year, the company along with Movistar launchedits first ’Global Flagship Store’ in downtown Shanghai. Movistar is a major mobile phone operatorowned by Telefónica Móviles. It also launched M-channel, an information service which lets Movistar’sclients access news items, sports and entertainment directly from the start-up screen on their terminal.The company also launched G24 EDGE, a Versatile Wireless Module for the M2M Market; i670model mobile device; and Motofone hand set in the same year.
Motorola and Yahoo! agreed to distribute Yahoo! Go for Mobile on tens of millions of new Motorolamobile devices. Wipro and Motorola formed a joint venture to deliver managed services in 2006. Inthe same year, the company acquired Broadbus Technologies, a provider of content on-demandtechnologies. Motorola introduced incident scene management solutions for public safety andgovernment users and released FOMA M2501 (M2501), a high-speed downlink packet access(HSDPA) card, a PC card.
In 2006, the company started a new research and development center at Hyderabad, India. Thecompany acquired NextNet Wireless, a former Clearwire Corporation subsidiary and provider ofOFDM-based non-line-ofsight ("NLOS") wireless broadband infrastructure equipment.
Motorola launched Moto Q PRO Solution in January 2007 to deliver security, functionality andservices for enterprise users. During the same period, Comcast and Motorola expanded theirrelationship with a next-generation digital set-top deal. In the same month, the company acquiredSymbol Technologies. Motorola secured India’s first Universal Mobile Telecommunications Service(UMTS) cellular network contract from Mahanagar Telephone Nigam Limited (MTNL) during thesame period.
In January 2007, the company completed the acquisition of Good Technology for approximately$500 million in cash. Good Technology provides enterprise mobile computing software and services.In February 2007, the company completed the acquisition of Netopia, a broadband equipmentprovider for DSL customers, for approximately $200 million in cash. In March 2007, the company
acquired Tut Systems, which delivers industry-leading content processing and distribution productsfor deploying next-generation video and Internet Protocol (IP) services over broadband networks.
Motorola and ECI Telecom announced a new strategic relationship in April 2007 pairing ECI’sformidable IP DSLAM portfolio with Motorola’s innovative and market-leading Fiber-to-the-Node(FTTN) and Fiber-to-the-Premises (FTTP) solutions. In the same month, Motorola and TerayonCommunication Systems, engaged in creation of video processing solutions, entered into a definitivemerger agreement, under which Motorola will acquire all of the outstanding shares of Terayon’scommon stock for $1.8 per share in cash.
Motorola signed a definitive merger agreement with Modulus Video in May 2007. Modulus Video isa leader and innovator in MPEG-4 Advanced Video Coding (AVC) compression systems designedfor delivery of high value video content in the IPTV, cable, broadcast and satellite marketplace.
In May 2007, Motorola announced that based on an estimate of the votes cast at its annual meetingof stockholders held in Chicago, the stockholders have re-elected Motorola’s Board of Directors anddid not elect Carl Icahn, a private investor who had sought a seat on the company’s board. In thesame month, the company signed a distribution agreement with Tai Full Technologies Corporation,which would enable wider access to Motorola’s broad range of embedded communications computingproducts to original equipment manufacturers (OEMs) in Taiwan.
In the following month, June 2007, Motorola signed a distribution agreement with Dragon TechnologyDistribution (HK) to meet increasing demand for open, standards- based AdvancedTCA andMicroTCATM based products in China. In the same month, Motorola won a contract from MarubeniCorporation to provide a TETRA (TErrestrial Trunked RAdio) digital radio communications systemto the Taiwan Taoyuan International Airport (formerly Chiang Kai Shek Airport) rail transit network.
In July 2007, Motorola completed its acquisition of Modulus Video, a privately-held company. ModulusVideo is an innovator in MPEG-4 Advanced Video Coding (AVC) compression systems designedfor delivery of high value video content in the IPTV, cable, broadcast and satellite marketplace. Inthe same month, Motorola has signed a definitive merger agreement to acquire privately heldLeapstone Systems. Leapstone is a communications software developer that provides a unifiedplatform for rapidly creating, managing and delivering converged video, voice and data servicebundles across multiple networks and devices. Subsequently, Motorola, and Microsoft extendedtheir relationship, which enabled joint partners to develop Microsoft Dynamics-based applicationsfor select Motorola mobile computers. Also, the company partnered with National BasketballAssociation (NBA) for a multi-year marketing partnership. In the same month, July 2007, Motorolacompleted its acquisition of Terayon Communication Systems. Motorola acquired all of the outstandingshares of Terayon’s common stock for $1.80 per share in cash.
Motorola signed a contract worth $394 million with China Mobile Communications Corporation(CMCC) for GSM network expansion in August 2007. In the same month, the company completedthe acquisition of Leapstone Systems. In September 2007, Emerson and Motorola, entered into adefinitive agreement under which Emerson would acquire Motorola’s Embedded CommunicationsComputing (ECC) business for $350 million in cash.
In October 2007, Motorola secured two contracts for WiMAX network infrastructure from Taiwan’sFar EasTone Telecom (FET) as part of the operator’s role in the national M-Taiwan project. In thesame month, Sony Ericsson and Motorola signed a definitive agreement under which Motorola wouldacquire a 50% interest in UI Holdings, the parent company of UIQ Technology, which is currentlywholly owned by Sony Ericsson. In the same month, through Motorola Ventures, its strategic venturecapital arm, Motorola made an equity investment in Siimpel Corporation. Siimpel is a developer andmanufacturer of silicon MicroElectroMechanical System (MEMS) based solutions for mobile imagingapplications. In November 2007, the company’s subsidiary MI, Inc launched a tender offer to acquirea controlling interest in Vertex Standard, a global provider of 2-way radio communication solutions.Motorola also completed the testing of 3G femtocell solution and has started trialing the solutionwith a major European operator in the Europe, Middle East, and Africa region. In the same month,the company opened inaugurated research and development complex in Beijing, China. Also, thecompany received approval from China Banking Regulatory Commission for the establishment ofits own finance company in China.
Motorola entered into an agreement with Mobilink for the deployment of WiMAX access network forthe operator (Mobilink) in Pakistan in December 2007. During the same time, Motorola launchedG24-Lite in its G24 Machine-to-Machine (M2M) wireless modules, enabling increased scalability ofM2M applications. The RFID division of the Enterprise Mobility business and Intelleflex entered intostrategic relationship for the development and delivery of extended capability RFID solutions by boththe companies. Also, the company’s subsidiary MI, Inc. extended its tender offer duration to acquirecontrolling stake in Vertex Standard. Motorola and Metrologic Instruments along with their subsidiariesresolved all outstanding patent infringement disputes through an agreement.
The company expanded its ROKR family product through the addition of ROKR E8 mobile device,the EQ5, and EQ7 wireless speaker systems and new stereo headsets, in January 2008.Subsequently, the company signed a definitive agreement to acquire Soundbuzz, a privately pan-Asianmusic provider. The company through Motorola Ventures, its strategic venture capital arm, made astrategic investment in INSIDE Contactless, a provider of contactless payment chips and near fieldcommunications (NFC) technologies for mobile devices.
Also, Motorola completed the tender offer to acquire controlling interest in Vertex Standard forapproximately JPY12 billion in cash. After the settlement of the offer, the company owns around78% of Vertex Standard. The company extended its relation with Qualcomm for making chipsetsinto certain UMTS 3G handsets by end of 2008 and in 2009. In the same month, the companyinitiated exploring structural and strategic realignment opportunities to enable its mobile devicebusiness recapture its global market share and to enhance shareholder value. In January 2008,Motorola announced that it is evaluating alternatives for the structural and strategic realignment ofMobile Devices business to better equip it to recapture global market leadership and to enhanceshareholder value. This may include the separation of the mobile devices business from Motorola’sother businesses to permit each to grow and better serve their customers.
In February 2008, Motorola released its first 3G femtocell customer premises equipment (CPE), thefirst two units from a portfolio of CPEs that will be commercially available in the second half of 2008.In the same month, the company through Motorola Ventures, its strategic venture capital arm, made
a strategic investment in DesignArt Networks, a supplier of silicon system-on-chip (SoC) solutionsfor WiMAX radio access network infrastructure. BAA and Emirates airlines selected Motorola RFIDSolution for Heathrow Airport. In the same month, Motorola completed its acquisition of Soundbuzz,a leading pan-Asian music provider. Motorola launched its full line of DOCSIS 3.0-based customerpremises equipment (CPE) designed to deliver high-capacity cable voice and data services. MotorolaTechnology planned investments to expand its global two-way radio centre of excellence in Malaysia.
Motorola signed a $335 million turnkey contract in March 2008 to deploy and manage a 2G/3Gmobile communications network for Zain in Saudi Arabia.The Enterprise Mobility business of Motorolareleased its AP-7131, the industry’s first tri-radio 802.11n access point (AP) featuring Motorola’snew adaptive AP architecture. Motorola, through Motorola Ventures, its strategic venture capitalarm, made a strategic investment in INVIDI Technologies Corporation, one of the leaders in advancedaddressable advertising for the television industry.
Swisscom through its Hospitality Services subsidiary has signed a distribution agreement withMotorola to deploy mT2a PowerBroadband system in partner hotels across Europe and NorthAmerica. Motorola signed a $165 million WiMAX 802.16e infrastructure contract with Etihad AtheebTelecommunication Company (Atheeb) in March 2008 to enable the new service provider to offerbroadband services to subscribers in the Kingdom of Saudi Arabia. Later, in March 2008, thecompany’s Board of Directors commenced a process to create two independent, publicly-tradedcompanies, mobile devices business, and broadband and mobility solutions business.The companyexpects that the separation of its businesses would take place in 2009.
In April 2008, Motorola expanded its portfolio of MOTOwi4 Fixed Point-to-Point (PTP) WirelessEthernet Bridges to include the PTP 45600 Integrated and Connectorized models. Motorola andCarl Icahn reached an agreement under which William R. Hambrecht, Founder, Chairman And ChiefExecutive Officer of WR Hambrecht + Co. and co-founder of Hambrecht & Quist, and Keith Meister,a Managing Director of the Icahn investment funds and Principal Executive Officer of IcahnEnterprises, will be nominated for election to Motorola’s Board of Directors at the 2008 AnnualMeeting of Shareholders and included in the company’s 2008 proxy statement. In addition, Mr.Meister has been appointed to serve on the Board, effective immediately.
The company also expanded the Motorola wi4 WiMAX access point portfolio with the introductionof the new 802.16e Wave 2-ready WAP 450. In the same month, Motorola through Motorola Ventures,made an equity investment in VirtualLogix, a maker of virtualization software for communicationsdevices and infrastructure equipment.
Motorola introduced the Motorola Netopia 7000 Series VDSL2 Gateways in April 2008. The 7000Series gateways are designed to deliver high-speed data and IPTV services over ultra-broadbandnetworks that are easy for service providers to install and manage. The company staked its claimin the Korea’s 3G market with the introduction of the new Z8m handset.
Motorola achieved DOCSIS 3.0 certification for the Motorola SURFboard SB6120 and SBV6220cable modems and DOCSIS 3.0 bronze qualification for the Motorola BSR 64000 cable modemtermination system (CMTS)/edge router in May 2008. The company introduced its portfolio of
advanced advertising delivery technologies for the cable industry that leverages both operators’existing Motorola products as well as new product offerings to support a wide range of advertisinginitiatives. Motorola introduced the Motorola SmartStream Terminal Data Collector (STDC), a solutionfor remote collection and presentation of set-top diagnostic information.
Motorola launched a modular embedded Multimedia Terminal Adapter (M-eMTA) in May 2008, thatprovides cost-effective, flexible, multi-line IP voice and high-speed data (HSD) services all in onedevice. Motorola introduced the smallest body-worn TETRA Covert Radio, the TCR1000 that providesfully featured TETRA radio functions to users in covert operations. Later, in the same month, aconsortium comprising Eircom, Motorola and Sigma Wireless (TETRA Ireland) has secured Ireland’sNational Digital Radio Services contract. The 8-year ‘build-own-operate’ contract would start withthe roll-out of services in an area covering parts of Dublin (including the port and airport).
Motorola made available Good Mobility Suite version 6.0 in June 2008, which includes a newmanaged-service virtual private network (VPN) as well as an enhanced device management andsecurity platform. In the same month, Motorola was selected by TDF, a European provider of networkservices to broadcasters and telecom operators, to design and deploy 802.16e WiMAX networksfor several regions in France where HDRR, a TDF subsidiary, holds WiMAX frequency licenses.Later, Motorola’s WiMAX WAP 25400 base station achieved the WiMAX Forum Certified seal ofapproval by passing required interoperability and conformance tests as outlined by the WiMAXForum.
Motorola launched its expanded Broadband Access Network portfolio in June 2008, adding significantFiber Deep capabilities to Motorola’s hybrid fiber coaxial (HFC) platform.The expansion would allowMSOs worldwide to drive fiber closer to the home while protecting their infrastructure investmentsand minimizing downtime and installation costs. Motorola announced contracts worth $28 millionwith Viet Nam Posts and Telecommunications (VNPT) Group for the expansion of the VinaphoneGSM network across 12 Northern provinces in Viet Nam in a signing ceremony held in Washington.
In July 2008, Motorola through Motorola Ventures, its strategic venture capital arm, invested inApprion, a market leader in open industrial wireless networks and applications. In the same month,the Enterprise Mobility business of Motorola, released the 802.11n planning tools featuring predictivenetworking capabilities, Motorola’s 11n LANPlanner. In the same month, Motorola signed a definitiveagreement to acquire privately held AirDefense, one of the leading wireless LAN (WLAN) securityproviders.
Board: Executive BoardJob Title: President and Chief Executive OfficerSince: 2008Age: 47
Mr. Brown has been the President and Chief Executive Officer of Motorola since 2008. Prior to thisrole, he was President and Chief Operating Officer of Motorola. He has been an Executive Officerat Motorola since 2003 and most recently served as President of Motorola’s Networks and Enterprisebusiness. Prior to joining Motorola in 2003, he was Chairman and Chief Executive Officer ofMicromuse, a publicly traded network management software company. Before that, he was Presidentof Ameritech Custom Business Services, a business that provided large business customers withcustom communications and information technology. Mr. Brown also was President of AmeritechNew Media. Before joining Ameritech in 1987, he held a variety of sales and marketing positionswith AT&T for five years.
An active member of the civic and business communities, he was appointed by the White House toserve on President Bush’s National Security Telecommunications Advisory Committee (NSTAC) in2004. In addition, he is on the Board of Directors for World Business Chicago, the Chicago Councilon Global Affairs, and the US-China Business Council. He also is a member of the NorthwesternUniversity Memorial Hospital Board.
David W. Dorman
Board: Non Executive BoardJob Title: ChairmanSince: 2008Age: 53
Mr. Dorman has been the Chairman of Motorola since 2008. He is the Senior Advisor and Partnerof Warburg Pincus, a global leader in equity. Prior to that, he was the Chairman and Chief ExecutiveOfficer at AT&T, a provider of internet and transaction based voice and data services, from November2002 until his retirement in 2006. He began his career in the telecommunications industry at SprintCorp. in 1981, and ultimately served as the President of Sprint Business Services. He serves on theboards of CVS Corporation, YUM! Brands, Firethorn Mobile, the Georgia Tech Foundation, and theWoodruff Arts Center in Atlanta. He was also a Director at Scientific Atlanta until its acquisition byCisco Systems was completed in 2006. He received a BS degree in Industrial Management fromthe Georgia Institute of Technology.
Board: Non Executive BoardJob Title: DirectorAge: 72
Mr. Hambrecht is a Director at Motorola. He has been Founder, Chairman and Chief ExecutiveOfficer of WR Hambrecht + Co, a financial services firm, since December 1997. In 1968, Mr.Hambrecht co-founded Hambrecht & Quist, from which he resigned in December 1997 to form WRHambrecht + Co. Mr. Hambrecht currently serves on the Board of Trustees for The AmericanUniversity of Beirut and is on the Advisory Investment Committee to the Board of Regents of theUniversity of California. He also serves on the Advisory Council to The J. David Gladstone Institutes.In 2006, Mr. Hambrecht was inducted to the American Academy of Arts and Sciences. Mr. Hambrechtgraduated from Princeton University.
Thomas J Meredith
Board: Non Executive BoardJob Title: DirectorSince: 2005Age: 57
Mr. Meredith has been a Director at Motorola since 2005. He is a co-founder and currently a GeneralPartner of Meritage Capital, an investment management firm specializing in multi-manager hedgefunds. He is also Chief Executive Officer of MFI Capital. Previously, he was the Managing Directorat Dell Ventures and Senior Vice President, Business Development and Strategy at Dell from 2000until 2001, and was Chief Financial Officer at Dell from 1992 until 2000. Mr. Meredith is a Directorof Motive, Surgient and VoxPath Networks.
Mr. Meredith is also an adjunct Professor at the McCombs School of Business at the University ofTexas, and serves on the advisory boards of both the Wharton School at the University ofPennsylvania and the LBJ School at the University of Texas. Mr. Meredith received a B.S. degreein Political Science from St. Francis University, a J.D. degree from Duquesne University and anLL.M. degree in Taxation from Georgetown University.
Judy C Lewent
Board: Non Executive BoardJob Title: DirectorSince: 1995Age: 58
Ms. Lewent has been a Director at Motorola since 1995. She has been Chief Financial Officer atMerck & Co, a pharmaceutical company, since 1990, and in addition, Executive Vice President of
Merck since 2001. She had additional responsibilities as President, Human Health Asia from 2003until 2005, when she assumed strategic planning responsibilities for Merck. She is also a Directorat Dell. She serves as a Trustee of the Rockefeller Family Trust and is a life member of theMassachusetts Institute of Technology Corporation. She is a member of the American Academy ofArts & Sciences. She received a BS degree from Goucher College and an MS degree from the MITSloan School of Management.
Keith A. Meister
Board: Non Executive BoardJob Title: DirectorSince: 2008Age: 34
Mr. Meister has been a Director at Motorola since August 2008. Since 2003, he has served as ViceChairman of the Board of Icahn Enterprises G.P, the General Partner of Icahn Enterprises, adiversified holding company engaged in a variety of businesses, including investment management,metals, real estate and home fashion. From August 2003 through March 2006, Mr. Meister alsoserved as Chief Executive Officer of Icahn Enterprises G.P; and since March 2006, Mr. Meister hasserved as Principal Executive Officer of Icahn Enterprises G.P. Since November 2004, Mr. Meisterhas been a Managing Director of Icahn Capital, the entity through which Carl C. Icahn managesthird-party private investment funds.
Since 2002, Mr. Meister has served as Senior Investment Analyst of High River Limited Partnership,an entity primarily engaged in the business of holding and investing in securities. Mr. Meister alsoserves on the boards of directors of XO Holdings, WCI Communities, and Federal-Mogul Corporation.Mr. Icahn either controls or has an interest in each company mentioned above through the ownershipof securities. Mr. Meister received an A.B. in government, cum laude, from Harvard College in 1995.
Nicholas Negroponte
Board: Non Executive BoardJob Title: DirectorSince: 1996Age: 64
Mr. Negroponte has been a Director at Motorola since 1996. He is the Founder and Chairman ofthe One Laptop Per Child non-profit organization created to design, manufacture and distributelaptops that are sufficiently inexpensive to provide every child in the world access to knowledge andmodern forms of education. He is currently on leave from the Massachusetts Institute of Technologywhere he was Co-Founder and Chairman emeritus of the MIT Media Laboratory, an interdisciplinary,multi-million dollar research center focusing on the study and experimentation of future forms ofhuman and machine communication. He founded MIT’s pioneering Architecture Machine Group, acombination lab and think tank responsible for many radically new approaches to the human-computer
interface. He joined the MIT faculty in 1966 and became a full professor in 1980. He received a BAand an MA in Architecture from the Massachusetts Institute of Technology.
Samuel C Scott
Board: Non Executive BoardJob Title: DirectorSince: 1993Age: 63
Mr. Scott has been Director at Motorola since 1993. He is the Chairman, President and ChiefExecutive Officer of Corn Products International, a corn refining business. He was the President ofthe Corn Refining Division of CPC International from 1995 through 1997, when CPC Internationalspun off Corn Products International as a separate corporation. Mr. Scott serves on the Board ofDirectors of Bank of New York, Inroads/Chicago, Accion International and the Chicago Council onGlobal Affairs. He also serves as a Trustee of the Conference Board. He received a bachelor’sdegree in engineering and an MBA from Fairleigh Dickinson University.
Ron Sommer
Board: Non Executive BoardJob Title: DirectorSince: 2004Age: 58
Mr. Sommer has been a Director at Motorola since 2004. He was the Chairman of the Board ofManagement of Deutsche Telekom from 1995 to 2002. He is a Director at MuenchenerRueckversicherung, Celanese, AFK Sistema, Tata Consultancy Services and Weather Industries.Mr. Sommer is also a Member of the International Advisory Board of The Blackstone Group. Hereceived a PhD degree in Mathematics from the University of Vienna, Austria.
James R Stengel
Board: Non Executive BoardJob Title: DirectorSince: 2005Age: 52
Mr. Stengel has been a Director at Motorola since 2005. He is currently the Global Marketing Officerof Procter & Gamble Company. He joined Procter & Gamble in 1983, where he served as VicePresident Global Baby Care Strategic Planning, Marketing and New Business Development from2000 until 2001, when he became a Global Marketing Officer. He served as the Chairman of theAssociation of National Advertisers from 2004 through 2006. Mr. Stengel is also on the Seven HillsSchool Board of Trustees, the National Underground Freedom Center Board of Trustees and the
United Way Tocqueville Society. He received a BA degree from Franklin & Marshall College and anMBA from Pennsylvania State University.
Anthony J. Vinciquerra
Board: Non Executive BoardJob Title: DirectorSince: 2007Age: 53
Mr. Vinciquerra has been a Director at Motorola since 2007. He was named President and ChiefExecutive Officer of Fox Networks Group, a primary operating unit of News Corporation that includesthe Fox Television Network, Fox Cable Networks, FOX Sports and Fox Networks Engineering &Operations, in June 2002. Mr. Vinciquerra also oversees Fox Sports Enterprises, which comprisesFox’s interests in professional sports franchises like the Colorado Rockies, stadiums and leadingstatistical information provider STATS. Mr. Vinciquerra joined Fox in December 2001 as Presidentof the Fox Television Network. Prior to joining Fox, he was Executive Vice President and ChiefOperating Officer of Hearst-Argyle Television, a position he had held since 1999. A past Chairmanof the National Association of Television Program Executives, he is also a Director of the Boston-basedGenesis Fund, the fund-raising organization of the National Birth Defects Institute, and a memberof the Board of Trustees for Southern California Public Radio. Mr.Vinciquerra received a B.A. degreefrom the State University of New York.
Douglas A Warner
Board: Non Executive BoardJob Title: DirectorSince: 2002Age: 61
Mr. Warner has been a Director at Motorola since 2002. He was Chairman of the Board and CoChairman of the Executive Committee at JP Morgan Chase & Company, an international commercialand investment banking firm, from 2000 until he retired in 2001. From 1995 to 2000, he was theChairman of the Board, President and Chief Executive Officer at JP Morgan & Co. He is also aDirector at Anheuser-Busch Companies and General Electric Company. He is on the Board ofCounselors at the Bechtel Group and is a member of The Business Council. Mr. Warner is theChairman of the Board of Managers and the Board of Overseers of Memorial Sloan−Kettering CancerCenter. He is a trustee of the Pierpont Morgan Library and a member of the Yale InvestmentCommittee. He received a BA degree from Yale University.
Mr. White has been a Director at Motorola since 1995. He is currently Chancellor of the Universityof Arkansas. He served as Dean of Engineering at Georgia Institute of Technology from 1991 toearly 1997, having been a member of the faculty since 1975. Mr. White is also a Director at JB HuntTransport Services and Logility. He received a BSIE from the University of Arkansas, an MSIE fromVirginia Polytechnic Institute and State University and a PhD from the Ohio State University.
Miles D White
Board: Non Executive BoardJob Title: DirectorSince: 2005Age: 52
Mr. White has been a Director at Motorola since 2005. He has been the Chairman of the Board andChief Executive Officer of Abbott Laboratories since 1999. He joined Abbott in 1984. He received abachelor’s degree in mechanical engineering and an MBA degree from Stanford University. Mr.White is a Director at Tribune Company and is Chairman of the board of the Federal Reserve Bankof Chicago. He also serves on the Board of Trustees of The Culver Educational Foundation, TheField Museum in Chicago and Northwestern University.
Daniel M. Moloney
Board: Senior ManagementJob Title: President, Home and Networks Mobility business Executive Vice PresidentSince: 2007
Mr. Moloney is Executive Vice President at Motorola, and President of the company's Home andNetworks Mobility business. Prior to his current position, he was President of the company’s connectedhome solutions business, which develops technologies, applications and services that create richinformation, communication, and entertainment experiences in and around the home.
Mr. Moloney joined Motorola, then General Instrument Corporation, in 1983 as a member of thecorporate financial and planning staff. He has served in various leadership positions for the companyin marketing, product management, finance and strategy. He is also an honorary board member ofCable Positive. Mr. Moloney holds a master of business administration degree in management fromthe University of Chicago and a Bachelor of Science degree in electrical engineering from theUniversity of Michigan.
Mr. Liska is the Chief Financial Officer and Executive Vice President at Motorola. Prior to joiningMotorola, Mr. Liska served as an industrial partner for various private equity firms including MidOceanPartners, CVC Capital Holdings and Ripplewood Holdings. From 2004 to 2006, Mr. Liska served asExecutive Chairman of US Freightways until its purchase by Yellow Roadway Corporation and invarious capacities with Weekly Reader Companies, including Executive Chairman and Chief ExecutiveOfficer. From 2001 to 2004, Mr. Liska held several positions with Sears, Roebuck and Co., includingPresident of credit and financial products and Executive Vice President and Chief Financial Officer.Prior to joining Sears, Mr. Liska was Executive Vice President and Chief Financial Officer of The St.Paul Companies from 1997 to 2001. Mr. Liska also previously served as President and Chief ExecutiveOfficer of Specialty Foods Corporation and in various financial roles at Kraft General FoodsCorporation. He began his career as an accountant at Price Waterhouse and Co.
Gene Delaney
Board: Senior ManagementJob Title: President, Government and Public Safety Enterprise Mobility Solutions business andSenior Vice PresidentSince: 2007
Mr. Delaney is President of the Government and Public Safety business. He joined Motorola in 1978as a Financial Analyst in the Communications Sector. He has held leadership positions in finance,operations, general management, government relations and country management throughout hiscareer. Mr. Delaney has extensive international experience having worked in Japan and led theinternational business for the Networks and Enterprise business. He holds a masters degree infinance from DePaul University and a Bachelor of Science degree in accounting from SouthernIllinois University.
Greg A. Lee
Board: Senior ManagementJob Title: Senior Vice President Human ResourcesSince: 2008
Mr. Lee has been the Senior Vice President, Human Resources at Motorola since January 2008. Inthis role, Lee’s worldwide responsibilities include workforce development, organizational effectiveness,benefits and compensation, staffing, global inclusion, and diversity.
Prior to joining Motorola in January 2008, he was the Senior Vice President, Human Resources atCoca-Cola Enterprises, the world's largest marketer, producer, and distributor of Coca-Cola products.Previously, he acted as an independent consultant providing advice and counsel on talent
management strategies. Earlier in his career, he served as Senior Vice President, Human Resources,for Sears, Roebuck and Company. Other leadership positions he has held include roles with WhirlpoolCorporation, The St. Paul Companies, and PepsiCo. He began his career at Pullman.
Kathy Paladino
Board: Senior ManagementJob Title: President, Enterprise Mobility Solutions business and Senior Vice PresidentSince: 2007
Ms. Paladino is President of Motorola’s Enterprise Mobility business. Joining Motorola (formerlySymbol Technologies) in 2004, she held sales leadership positions in the US and AmericasInternational Theaters and most recently held the position of Senior Vice President of WorldwideSales. Prior to joining Motorola, Ms. Paladino spent eight years with Cisco Systems leading Cisco’sU.S. Cable and Emerging Service Provider business. A 20-year technology industry veteran, shehas held sales management positions at Dell Computer and Wang Laboratories.
Ms. Paladino is on the Board of Directors for the AeA, a nationwide non-profit trade association thatrepresents all segments of the technology industry. In the past, she has served on the board ofdirectors of the Telecommunications Industry Association and was the 2003 Chair of the Women’sAction Network at Cisco. Ms. Paladino holds a BSFS Degree from Georgetown University.
A. Peter Lawson
Board: Senior ManagementJob Title: Executive Vice President, General Counsel and SecretarySince: 2005
Mr. Lawson has been Executive Vice President, General Counsel and Secretary at Motorola since1998. Prior to assuming his current position, he was Senior Vice President, General Counsel andSecretary from 1996 to 1998; Senior Vice President and Assistant General Counsel from 1994 to1996; Corporate Vice President and Assistant General Counsel from 1987 to1994; Vice Presidentand General Attorney from 1985 to 1987; and Associate General Attorney from 1980 to 1984.
Prior to joining Motorola in 1980, he was Senior Attorney for Baxter International, from 1978 to 1980.Earlier, he was an associate with Sullivan & Cromwell, New York, from 1972 to1978.
Mr. Perez has been the Senior Vice President of Motorola’s Integrated Supply Chain (ISC)organization, which encompasses the global operations associated with procurement, new productintroduction, manufacturing, customer fulfillment and repair across the company’s three businessunits.
Prior to being appointed to his current position, Mr.Perez was Senior Vice President of ISC’s globaloperations where he was responsible for ensuring that customers receive the products they orderon time and with good quality. He was also the General Manager of the Mobile Devices supply chainorganization where he was responsible for the manufacturing and distribution of 100 million mobiledevices annually.
Prior to joining the ISC organization, Mr. Perez served as Senior Vice President and General Managerfor Motorola’s network infrastructure business. He was instrumental in starting up Motorola’s iDENsubscriber manufacturing operations. Prior to that, he managed design and development for portabletwo-way radios. Mr. Perez joined Motorola in 1979 as a Mechanical Engineer in Plantation, Florida.
Ms. Morrison is the Executive Vice President and Chief Information Officer at Motorola. Before joiningMotorola in 2005, she served as Executive Vice President and Chief Information Officer of OfficeDepot. Prior to Office Depot, she served as Chief Information Officer of The Quaker Oats Companyin Chicago. As Chief Information Officer, Morrison oversaw the integration of Quaker's systems withPepsiCo following its acquisition by Pepsi in 2001. Prior to that, she was Chief Information Officerat GE Industrial Systems. Ms. Morrison began her career at Procter & Gamble, where she held anumber of systems management and IT leadership positions.
Karen P.Tandy
Board: Senior ManagementJob Title: Senior Vice President, Public Affairs and CommunicationsSince: 2008
Ms. Tandy has been the Senior Vice President of Public Affairs and Communications at Motorolasince 2008. Prior to joining Motorola in 2007, she served as Administrator of the US Drug EnforcementAdministration (DEA), where she managed a $2.4 billion budget and approximately 11,000 employeesacross the US and in 86 foreign offices. She also served on the Executive Committee of theInternational Association of Chiefs of Police.
Prior to becoming DEA Administrator, she was Associate Deputy Attorney General, responsible fordeveloping national drug enforcement policy and strategies. In this capacity, she also served as
Director of the Organized Crime Drug Enforcement Task Forces. Ms.Tandy previously held a varietyof positions in the Criminal Division of the Department of Justice and served as an Assistant U.S.Attorney in the Eastern District of Virginia and in the Western District of Washington. Prior to joiningthe Justice Department, she served as a clerk for the Chief Judge of the Northern District of Texas.
Motorola is provider of wireless handsets, wireless communications systems, and end-to-end broadband systems. The company's key products and services include the following:
Consumer:Cell Phones Cell Phone Accessories Bluetooth ProductsCordless PhonesTwo-way RadiosCable Modems and GatewaysDigital Voice ModemsDigital Cable Set-topsDigital Video Recorders (DVR)High Definition ReceiversTimbuktu Pro Remote Control Software
The company recorded revenues of $36,622 million during the FY ended December 2007 (FY2007),a decrease of 14.5% over 2006. The decrease in net sales was due to a $9.4 billion decrease in netsales of the mobile devices segment. For the FY2007, the US, the company's largest geographicmarket, accounted for 50.6% of the total revenues.
Motorola generates revenues through three business divisions: mobile devices (51.7% of the totalrevenues during FY2007), home and networks mobility division (27.3%), and enterprise mobilitysolutions (21%).
Revenues by Division
During the FY2007, the mobile devices division recorded revenues of $18,988 million, a decreaseof 33.1% over 2006. The decrease in revenue was driven by a 27% decrease in unit shipments, a9% decrease in average selling price, and decreased revenue from intellectual property andtechnology licensing.
The home and networks mobility division recorded revenues of $10,014 million in FY2007, an increaseof 9.3% over 2006. The increase in revenue was due to higher net sales in the home business,partially offset by lower net sales of wireless networks.
The enterprise mobility solutions division recorded revenues of $7,729 million in FY2007, an increaseof 43.1% over 2006. The increase in revenues was due to higher net sales in all regions and wasdriven by sales from the Symbol business acquired in January 2007, as well as higher net sales inthe government and public safety market due to strong demand in North America.
Revenues by Geography
The US, Motorola's largest geographical market, accounted for 50.6% of the total revenues in theFY2007. Revenues from the US reached $18,548 million in 2007, a decrease of 1.2% over 2006.
China accounted for 7.2% of the total revenues in the FY2007. Revenues from China reached $2,632million in 2007, a decrease of 43.6% over 2006.
The UK accounted for 2.9% of the total revenues in the FY2007. Revenues from the UK reached$1,070 million in 2007, a decrease of 18.1% over 2006.
Israel accounted for 2% of the total revenues in the FY2007. Revenues from Israel reached $741million in 2007, an increase of 12.4% over 2006.
Germany accounted for 1.4% of the total revenues in the FY2007. Revenues from Germany reached$516 million in 2007, a decrease of 41% over 2006.
Singapore accounted for 0.3% of the total revenues in the FY2007. Revenues from Singaporereached $128 million in 2007, a decrease of 27.3% over 2006.
Other nations accounted for 35.5% of the total revenues in the FY2007. Revenues from other nationsreached $12,987 million in 2007, a decrease of 20.8% over 2006.
Motorola builds and markets products, services, and applications that make simple and seamlessconnections, information, and entertainment possible through broadband, embedded systems andwireless networks.The company operates through three business divisions: mobile devices, networkand enterprise, and connected home solutions. Motorola has strong technological capabilities.Motorola was one of the early advocates for WiMAX 802.16e as the technology has the bandwidthto deliver the multimedia experiences at a fraction of the cost of 3G technologies. Stiff competitionacross its operating segments could adversely affect the company's market share and profitability.
Intense competitionSeparate mobile devices segmentEnvironmental, health and safety lawsStrategic acquisitionCredit ratingsNew contract wins
Research in nanotechnology
Strengths
Strong focus on WiMAX
Motorola was one of the early advocates of WiMAX 802.16e. The Wi-Max technology has thebandwidth to deliver the multimedia experiences at a fraction of the cost of 3G technologies. Motorolais continuing its investments in WiMAX, a next-generation wireless broadband technology based onthe IEEE standard 802.16e. At the end of 2007, the business had won several commercial WiMAXcontracts and participated in over 40 WiMAX trials globally. In June 2008, Motorola’s WiMAX WAP25400 base station achieved the WiMAX Forum Certified seal of approval by passing requiredinteroperability and conformance tests as outlined by the WiMAX Forum. Motorola is among the firstcompanies to have its 2.5GHz WiMAX products certified by WiMax Forum.
In 2007, the segment delivered WiMAX network equipment to Wateen Telecom in Pakistan andSprint Nextel and Clearwire in the US. In 2007, the company deployed WiMAX in Pakistan, givingone million subscribers broadband services in a country where previously fewer than 100,000broadband lines were available.
The segment is also leveraging its WiMAX investment to develop its LTE (Long Term Evolution)solution. Vodafone and Verizon have launched a coordinated LTE trial in 2008. Motorola has beenselected as a supplier to support this trial with both infrastructure equipment and handsets. Strongfocus on WiMAX helps the company grow profitably in emerging technologies, including video andwireless broadband.
Strong brand
Motorola has a strong brand image. The company continues to strengthen its brand equity throughvarious marketing campaigns. The company is ranked among the top 100 global brands by globalInterbrand and Millward Brown surveys. Motorola is ranked 77 in the top 100 global brands in 2007,by Interbrand. The company is ranked at 92 in the BRANDZ top 100 Brand Rankings in 2008.
To further enhance its brand image, the company’s is conducting marketing campaigns. In June2008, Motorola was awarded both the Webby Award and the People’s Voice Award for MobileAdvertising in the Interactive Advertising category, at the 12th Annual Webby Awards held in NewYork. Motorola won the awards for a campaign at the new Sky Plaza at Hong Kong InternationalAirport that integrated mobile advertising, out-of-home, TV spots, and Bluetooth technology. Strongbrand image increases the acceptance of the company’s products.
Robust manufacturing capabilities
Motorola has robust manufacturing capabilities through a combination of own-facilities and contractmanufacturers.The wireless handset segment of the company has manufacturing facilities in China,Singapore, and Brazil. The company’s other major facilities are located in Plantation, Florida;Singapore; Beijing and Tianjin, China; Jaguariuna, Brazil; and Basingstoke, England. The companyhas an interest in a joint venture in Hangzhou, China. It also uses several electronics manufacturingsuppliers (EMS) and original design manufacturers (ODM) to lower costs and deliver products thatmeet consumer demands. In 2006, the company’s handsets were mostly manufactured in Asia.
The networks and enterprise segment has design, integration, manufacturing, and distribution centersin Arlington Heights and Schaumburg, Illinois; Chandler and Tempe, Arizona; Fort Worth, Texas;Swindon, England; Arad, Israel; Hangzhou and Tianjin, China; Munich, Taunusstein and Berlin,Germany; and Penang, Malaysia. In addition, this segment utilizes EMS manufacturers, primarily inAsia.
The connected home solutions segment has manufacturing facilities in Taipei, Taiwan and Nogales,Mexico. It also uses contract manufacturers in China for a portion of its cable modem/voice moduleproduction. Motorola’s global manufacturing network combined with its experience in working withEMSs and ODMs enable it to meet customer demand effectively, providing it with a competitiveadvantage.
Motorola’s worldwide market share has dropped to an estimated 14% in 2007, from 22% in 2006,according to industry sources. During the same time, Samsung had a steady increase in its marketshare, reaching an estimated 14.5% in the first quarter of 2007. Nokia has a global market share ofapproximately 38% of the global market volume of 1.14 billion mobile devices units sold in 2007.The company’s position in Western Europe is also weaker than that of its competitors Samsung andNokia.
The demand for Motorola’s wireless handsets slowed substantially in 2007. As a result, mobiledevices net sales were down 33% compared to 2006 and the business incurred an operating lossof $1.2 billion. Unit shipments in 2007 were 159.1 million, a 27% decrease compared to unit shipmentsof 217.4 million in 2006.The decrease in unit shipments resulted from gaps in the segment’s productportfolio, including limited offerings of 3G products and products for the multimedia and mass marketproduct segments, as well as an aging product portfolio. As a result, Motorola lost 8% of its marketshare and estimates its global market share to be approximately 14% for the full year 2007.
In addition, Motorola’s market share in smartphone and WCDMA shipments remains very low at1.4% and 1.8% in 2008. The company offers less than one-third of the 3G terminals offered by itscompetition, and has a limited presence in multiradio devices. Motorola has the weakest 3G portfolio,with only nine devices (accounting for only 5% of total 3G devices across all the vendors and 23%of Motorola’s total portfolio). In addition, Motorola’s current suite of 3G products does not offer thevariety of functionalities that its peers have recently introduced. For example, none of the vendor’s3G devices is WiFi enabled. Losing market share in the mobile phones segment could hamper thefinancial condition of the company as it was the highest contributor to the total revenues in 2007.
Weak profitability
The company’s profitability is following a declining trend in the recent years.The company’s operatingprofit declined from $4,605 million in 2005 to an operating loss of $553 million in 2007.The net profitof the company declined from $4,578 million in 2005 to a net loss of $49 million in 2007. As a result,the company reported a negative operating profit margin and a net profit margin of 1.5% and 0.1%,respectively, in 2007, down from 13.1% and 13%, respectively, in 2005. Continued decline inprofitability would adversely impact the company’s financial performance.
In 2007, the company incurred a net loss from continuing operations before income taxes of $390million, compared to earnings from continuing operations before income taxes of $4.6 billion in 2006.The decrease in earnings (loss) from continuing operations before income taxes in 2007 comparedto 2006 is primarily attributed to a $2.8 billion decrease in gross margin, driven by decreases in grossmargin in the mobile devices and home and network mobility segments, partially offset by an increasein gross margin in the enterprise mobility solutions segment. It is also due to a $959 million increasein other charges (income), and $588 million increase in SG&A expenses. It was also impacted by a$323 million increase in R&D expenditures, a $235 million decrease in net interest income, and a$129 million decrease in income classified as other income.
The decrease in gross margin in the mobile devices segment was due to a 9% decrease in ASP,decreased income from intellectual property and technology licensing, a 27% decrease in unitshipments, and a $277 million charge for a legal settlement with Freescale Semiconductor. Thedecrease in gross margin in the home and networks segment was due to continuing competitivepricing pressure in the market for GSM infrastructure equipment, and lower sales of iDEN infrastructureequipment, partially offset by increased sales of digital entertainment devices.
In addition, the company has also witnessed a decline in cash from operating activities in the samepreiod. The company’s cash from operating activities declined from $4,308 million in 2005 to $785million in 2007. Decrease in cash and cash equivalents may negatively impact the company’sinvesting activities. Weak profitability would affect the investors’ confidence in the company.
Customer concentration
The company derives a significant portion of its total revenues from a few customers in all its businesssegments. The mobile devices segment has several large customers worldwide. The largest of thesegment’s end customers (including sales through distributors) are Sprint Nextel, AT&T, Verizon,China Mobile and America Movil. In 2007, aggregate net sales to these five customers representedapproximately 42% of the segment’s net sales.
In addition to selling directly to carriers and operators, Motorola’s mobile devices business also sellsproducts through a variety of third-party distributors and retailers, which account for approximately33% of the segment’s net sales. The largest of these distributors is Brightstar Corporation.
The largest customers of the home and networks mobility segment are Comcast, Verizon, KDDI (aservice provider in Japan), China Mobile and Sprint Nextel. In 2007, aggregate net sales to thesefive customers represented approximately 43% of the segment’s net sales.
The largest of the enterprise mobility solutions segment’s customers are the US Government,Scansource, IBM, Ingram Micro and Wal-Mart. In 2007, aggregate net sales to these five customersrepresented approximately 19% of the segment’s net sales. With such concentration of customersin all its segments, the loss of any of the segment’s largest customers may have an adverse effecton the segment’s business.
Opportunities
Separate mobile devices segment
Motorola started exploring the structural and strategic realignment of its businesses in January 2008to better equip its mobile devices business to recapture global market leadership and to enhanceshareholder value. Later, in March 2008, the company’s Board of Directors commenced a processto create two independent, publicly-traded companies.The creation of the two stand-alone businessesis expected to take the form of a tax-free distribution to Motorola’s shareholders, resulting in
shareholders holding shares of two independent and publicly-traded companies: the mobile devicesbusiness, and the broadband and mobility solutions business. The company expects that theseparation of its businesses would take place in 2009. This move is expected to provide improvedflexibility; more tailored capital structures; and increased management focus on each business.
Strategic acquisition
The company completed five significant acquisitions to expand its core portfolio in 2007. In February2007, Motorola acquired Netopia, a broadband equipment provider for DSL customers, which allowsfor phone, TV and fast Internet connections. The acquisition enables Motorola to address the globalbroadband DSL opportunity. The company acquired Tut Systems, one of the leading developers ofedge routing and video encoders in March 2007. The integration of Tut Systems' solutions withMotorola's digital video delivery solutions will expand Motorola's ability to help service providersdeploy advanced video services over IP, ATM, or RF-based network architectures. In May 2007,the company acquired Modulus Video, a provider of MPEG-4 Advanced Coding compression systemsdesigned for delivery of high-value video content in IP set-top devices for the digital video, broadcastand satellite marketplaces. This acquisition complements Motorola’s acquisitions of Tut Systemsand Netopia in the creation and delivery of an integrated, video delivery system for multiple networkarchitectures.
In July 2007, Motorola acquired Terayon Communication Systems, a provider of real-time digitalvideo networking applications to cable, satellite and telecommunication service providers worldwide.The acquisition of Terayon and its software-driven application solutions enhances Motorola’s videoinfrastructure and mobility core by providing it with video processing solutions that enable digital adinsertion, motion and graphical overlays, channel branding and channel line-up solutions as well asad insertion delivery technologies. In the following month, Motorola acquired Leapstone Systems,a provider of intelligent multimedia service delivery and content management solutions to networksoperators. Leapstone would contribute its intelligent service delivery and content managementplatform to Motorola, which serves as a new engine for enabling seamless mobility experiencesacross applications, devices and domains.With these acquisitions, Motorola can improve its positionglobally by enhancing its capabilities in video solutions.
New contract wins
Motorola signed multiple contracts worth $431 million with China Mobile Communications Corporation(CMCC) for its GSM network upgrades and expansion in the first half of 2008. Following the $394million contracts over the same period of last year, these multiple contracts strengthen Motorola’spresence in China.
The cooperation will enable China Mobile to expand its network coverage and manage its GSMnetwork even more effectively. Under these agreements, Motorola will supply CMCC with GSMnetwork equipment and a range of services. The expanded GSM networks will then be deployedacross 16 provinces and municipalities within the coverage area of CMCC, namely Beijing, Tianjin,Sichuan, Zhejiang, Henan, Hunan, Guangdong, Yunnan, Fujian, Hubei, Shanxi, Jilin, Liaoning,Jiangxi, Anhui and Guizhou.
Motorola has won a number of significant GSM network expansion contracts over the past few years.Some of the recent major contract wins include expansion contracts with VNPT Group in Viet Nam,Mobily in Saudi Arabia, and Celtel Nigeria in Nigeria. Motorola also won a turnkey contract in March2008 to deploy and manage GSM network for Zain in Saudi Arabia.
As the Chinese telecom industry is going through industry-wide restructuring, China’s telecomoperators are undergoing one of the most critical changes in history. New contract wins in China,the Middle East and Africa would generate incremental revenues for the company.
Research in nanotechnology
Nanotechnology is expected to have a noticeable impact, especially on the communications industry,within the next few years. According to industry reports, products incorporating nanotechnologymight contribute up to $1 trillion to the US economy by 2015. Motorola’s “Nanotechnology forCommunications” research includes nanomaterials, nanoelectronics, nanoenergy, nanostructures,nanomanufacturing and physical and functional characterization. The company’s focus is on thoseareas which help core businesses by improving energy management, improving the displays andsurface durability of products.
In 2004, the company commercialized the i870 phone with a protective coating using antimicrobialsilver zeolite nanoparticles from AgION. In the following year, Motorola introduced its nanoemissivedisplay (NED) prototype, which represented a 5-inch section of a large, flat panel display. Fromenergy storage solutions to improved displays and surfaces, nanotechnology will impact thecommunications industry in the next few years. It also won the Nano 50 Award in, Nano EmissiveDisplay technology in 2006. The company with its ongoing research in nanotechnology is wellpositioned to capture the opportunities in this field.
Threats
Intense competition
Motorola faces intense competition from various large players in its key segments and markets. Thecompany's principal competitors in mobile devices include Nokia, LG, Samsung, Siemens and SonyEricsson.The company’s largest competitor in the digital entertainment devices market for broadbandnetworks in North America is Cisco. Other competitors in North America include ARRIS, Ericsson(which entered the market in 2007 via the acquisition of Tandberg) and Harmonic.
Most of the company’s competitors are large organizations with strong development capabilities andbalance sheets. In the wireless networks market Ericsson is the market leader, followed by theNokia-Siemens joint venture, Alcatel-Lucent, and two vendors with similar market share, Motorolaand Nortel. Huawei, Samsung, NEC and ZTE are also significant competitors. In the governmentand public safety market major competitors include M/A-Com, EADS Telecommunications, Kenwood,
EF Johnson, Cisco and large system integrators. Stiff competition across its operating segmentscould adversely affect the company's market share and profitability.
Environmental, health and safety laws
The company’s operations and the products are subject to a wide range of global environmental,health, and safety laws. Some of these laws relate to the use, disposal, clean up, and exposure tohazardous substances. In the US, laws often require parties to fund remedial studies or actionregardless of fault. Motorola continues to incur disposal cost and has ongoing remediation obligations.Changes to US environmental laws or discovery of additional obligations under these laws couldhave a negative impact on Motorola.
Over the last several years, environmental laws have been focusing on the energy efficiency ofelectronic products and accessories, electronic products and packaging, recycling, and reducing oreliminating certain hazardous substances in electronic products. These laws impact the company’sproducts and make it more expensive to manufacture and sell the product. It may also be difficultto comply with the laws promptly and the company may not have compliant products available inthe quantities requested by customers, impacting sales and profitability. For example, electronicproducts sold into Europe were required to meet stringent chemical restrictions by July 1, 2006 underthe EU RoHS Directive. China is adopting similar requirements, the first of which requires labelingand chemical content disclosure for all electronic products brought into or sold within China afterFebruary 28, 2007. It is expected that these trends would continue.
In addition, the company is anticipating increased consumer demand for the voluntary reduction orelimination of certain hazardous constituents from wireless handsets. Compliance with existing orfuture environmental, health, and safety laws could subject the company to future costs and liabilities.It may impact production capabilities, limit the company’s ability to sell, expand or acquire facilitiesand impact its financial performance.
Credit ratings
Three independent credit rating agencies, Fitch Investors Service (Fitch), Moody’s Investor Services(Moody’s), and Standard & Poor’s (S&P), assign ratings to the company’s short-term and long-termdebt. In February 2008, Fitch placed all debt on rating watch negative. In January 2008, Moody’splaced long-term debt on review for possible downgrade. S&P downgraded long-term debt to BBB(credit watch negative) from A- (negative outlook); placed A-2 commercial paper on credit watchnegative) in January 2008.
Motorola’s debt ratings are considered “investment grade.” In case the company’s credit ratingswere to decline two levels from the current Fitch and S&P ratings, the company’s long-term debtwould no longer be considered investment grade and financial flexibility would be reduced and costof borrowing would increase.
A statement by Greg Brown, President and Chief Executive Officer of Motorola is given below. Thestatement has been taken from the company’s 2007 annual report.
Motorola has a strong global brand, talented people and a proven record of creating disruptivetechnologies and innovative products that advance the way the world connects. We help meet theneeds of consumers, businesses and governments around the world. As we enter Motorola’s 80thyear, my goal as the new CEO is to build on our strong foundation, to renew and strengthen thecompany and to create increased value for our shareholders.
To achieve this, we are committed to growing the value of our businesses, being our customers’most valued partner, and creating a winning culture focused on execution.
Looking ahead, we will continue to implement our strategic plans and pursue opportunities forincreased profitability across all of our businesses while never losing sight of our customers, qualityand innovation.
2007 Overview
During 2007, our Mobile Devices business faced significant challenges. We recognize thesechallenges and have worked hard to accelerate the business’ recovery.We are committed to improvingour operational and financial performance in Mobile Devices and have already taken steps in thatdirection. While our product portfolio enhancement efforts are underway, they will take more timeto complete. During this transition, we will maintain a significant focus on cost, cash and drivingprofitability improvement.
As for Home and Networks Mobility and Enterprise Mobility Solutions, each of these businessesdelivered solid results, finished with strong momentum and maintained category leadership positionsin growing markets.
In Home & Networks Mobility, we are focused on both delivering personalized media experiencesto consumers at home and on-the-go and enabling service providers to operate their networks moreefficiently and profitably. Our investments in the home enable us to continue capitalizing on strongunderlying demand for high-definition and video-on-demand services, as well as the convergenceof services and applications across delivery platforms.
Our Enterprise Mobility Solutions business delivers exciting new technologies to an expanding mobileworkforce and provides an innovative product offering to government and public safety customers.In 2007, we successfully completed the integration of Symbol Technologies, which has enabled usto help our enterprise customers reduce costs, increase worker productivity and enhance their
mobility experience. Our mission-critical communications solutions continue to address top-priorityhomeland security and public safety concerns for customers around the world.
Additionally, we remain focused on our environmental footprint and supporting our communities asa responsible corporate citizen. We also encourage employees to volunteer in the community andconducted our second annual global day of service, during which over 11,000 employees gave theirtime, talent and energy to 300 non-profit organizations in 47 countries.
2008 Outlook
On March 26, 2008, we announced the commencement of a process to create two independent,publicly traded companies: one comprised of our Mobile Devices business and the other, Broadband& Mobility Solutions, which includes Motorola’s Enterprise Mobility, Government and Public Safety,and Home and Networks businesses. Creating two industry-leading companies will provide improvedflexibility, more tailored capital structures, and increased management focus — as well as moretargeted investment opportunities for you, our stockholders.
Our management team and Board of Directors, together with independent advisors, have beenreviewing opportunities to enhance stockholder value for quite a while. This decision followed ourJanuary 31, 2008 announcement to evaluate the structural and strategic realignment of ourbusinesses.
Based on current plans, the creation of the two stand-alone businesses is expected to take the formof a tax-free distribution to Motorola’s shareholders, subject to further financial, tax and legal analysis,resulting in shareholders holding shares of two independent and publicly traded companies. Weexpect that this separation, if consummated, would take place in 2009.
I am confident that through the innovation of our people, combined with dedication to our customersand shareholders, we can provide a path for growth and improved profitability and position Motorolafor future success.
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