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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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COMMISSION FILE NUMBER 1-7221
MOTOROLA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-1115800
(State of Incorporation) (I.R.S. Employer Identification No.)
1303 EAST ALGONQUIN ROAD, SCHAUMBURG, ILLINOIS 60196
(Address of principal executive offices)
(847) 576-5000
(Registrant's telephone number)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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Common Stock, $3 Par Value per Share New York Stock Exchange
Chicago Stock Exchange
Rights to Purchase Junior Participating New York Stock Exchange
Preferred Stock, Series B Chicago Stock Exchange
Liquid Yield Option Notes due 2009 New York Stock Exchange
Liquid Yield Option Notes due 2013 New York Stock Exchange
6.68% Trust Originated Preferred Securities New York Stock Exchange
(issued by Motorola Capital Trust I and
guaranteed by Motorola, Inc.)
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of voting and non-voting common equity held
by non-affiliates of the registrant as of January 31, 2001 was approximately
$48.7 billion (based on closing sale price of $22.81 per share as reported for
the New York Stock Exchange-Composite Transactions).
The number of shares of the registrant's Common Stock, $3 par value per
share, outstanding as of January 31, 2001 was 2,192,725,028.
DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENT LOCATION IN FORM 10-K
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Portions of Registrant's Proxy Statement for 2001 Annual Meeting of Stockholders Including Parts I, II, III and IV
Management's Discussion and Analysis and Consolidated Financial Statements
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TABLE OF CONTENTS
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PART I.........................................................................................................1
ITEM 1. BUSINESS..............................................................................................1
General...................................................................................................1
Business Segments.........................................................................................1
Personal Communications Segment.......................................................................1
Global Telecom Solutions Segment......................................................................3
Commercial, Government and Industrial Systems Segment.................................................4
Broadband Communications Segment......................................................................5
Semiconductor Products Segment........................................................................7
Integrated Electronic Systems Segment.................................................................8
Other Products Segment................................................................................9
Other ....................................................................................................9
Financial Information About Segments..................................................................9
Customers.............................................................................................9
Backlog...............................................................................................9
Research and Development.............................................................................10
Patents and Trademarks...............................................................................10
Environmental Quality................................................................................10
Miscellaneous........................................................................................10
Financial Information About Foreign and Domestic Operations and Export Sales.........................11
Business Risk Factors....................................................................................11
ITEM 2. PROPERTIES...........................................................................................16
ITEM 3. LEGAL PROCEEDINGS....................................................................................17
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..................................................19
Executive Officers of the Registrant..........................................................................19
PART II.......................................................................................................21
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS................................21
ITEM 6. SELECTED FINANCIAL DATA..............................................................................21
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS................21
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..........................................................21
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.................21
PART III......................................................................................................22
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT..................................................22
ITEM 11. EXECUTIVE COMPENSATION..............................................................................22
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT......................................22
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS......................................................22
PART IV.......................................................................................................23
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.....................................23
14(a)(1) Financial Statements...........................................................................23
14(a)(2) Financial Statement Schedule and Independent Auditors' Report..................................23
14(a)(3) Exhibits.......................................................................................23
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PART I
Throughout this 10-K report we "incorporate by reference" certain
information in parts of other documents filed with the Securities and Exchange
Commission (the "SEC"). The SEC allows us to disclose important information by
referring to it in that manner. Please refer to such information.
"Motorola" (which may be referred to as "we", "us" or "our") means Motorola,
Inc. or Motorola, Inc. and its subsidiaries, as the context requires. "Motorola"
is a registered trademark of Motorola, Inc.
ITEM 1: BUSINESS
General
Motorola is a global leader in providing integrated communications solutions
and embedded electronic solutions. These include:
o Software-enhanced wireless telephone, two-way radio and messaging
products and systems, as well as networking and Internet-access
products, for consumers, network operators and commercial, government
and industrial customers.
o End-to-end systems for the delivery of interactive digital video, voice
and high-speed data solutions for broadband operators.
o Embedded semiconductor solutions for customers in the networking and
computing, transportation, wireless communications and digital
consumer/home networking markets.
o Embedded electronic systems for automotive, industrial, transportation,
navigation, communications and energy systems markets.
Motorola is a corporation organized under the laws of the State of Delaware
as the successor to an Illinois corporation organized in 1928. Motorola's
principal executive offices are located at 1303 East Algonquin Road, Schaumburg,
Illinois 60196 (telephone number: 847-576-5000).
Business Segments
PERSONAL COMMUNICATIONS SEGMENT
The Personal Communications Sector ("PCS" or the "segment") primarily
designs, manufactures, sells and services wireless subscriber equipment
including wireless telephones, iDEN(R) digital radio telephones, paging and
advanced messaging devices and personal two-way radios, with related software
and accessory products. Products are marketed worldwide through carriers,
distributors, dealers, retailers, and, in certain markets, through licensees.
During 2000, PCS initiated significant actions to realign its businesses and
improve its cost structure. These actions focused on product simplification and
restructuring of the supply chain. Product simplification actions resulted in
the discontinuation of multiple products, primarily analog and first-generation
digital telephones. Supply-chain actions resulted in (i) the downsizing of
several facilities, (ii) the sale of a factory in Dublin, Ireland and (iii)
initiating the exit from a factory in Boynton Beach, Florida, which is expected
to be completed in 2001. In addition, supply agreements and alliances were
formed with major outsourcing companies to improve the cost-competitiveness of
the business. In a continued effort to reduce costs in its wireless handset
business, PCS has announced additional business reorganization actions in 2001.
These actions, which are expected to result in employment reductions of 12,000
positions from December 2000 levels, will affect all aspects of the business,
across all geographies.
Generally, the segment carries reasonable product inventories in
distribution centers to meet customer delivery requirements. During 2001, the
segment experienced a significant inventory build-up because its supply-chain
strategy was based on an unfulfilled expectation of higher sales of wireless
phones. The segment expects inventory levels to decrease during 2001 as it
continues to improve its supply-chain management. Inventory management remains
an area of focus as PCS balances the need to maintain strategic inventory levels
to ensure competitive lead times with the risk of inventory obsolescence due to
rapidly changing technology and customer requirements.
PCS does not permit customers to return merchandise and does not grant
extended payment terms unless necessary to meet unique market conditions.
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The segment experiences intense competition in worldwide markets from
numerous global competitors, including some of the world's largest companies. In
particular, the segment has experienced significant competition in the market
for digital wireless products. Competitive factors in the market for the
segment's products include: technology offered; price; product performance,
quality, features and warranty; consumer design; delivery terms; the quality and
availability of service; company image and strength of brand; relationship with
key customers, and time-to-market.
The segment's backlog amounted to $2.1 billion at December 31, 2000 and $2.8
billion at December 31, 1999. The 2000 order backlog is believed to be generally
firm and 100% of that amount is expected to be shipped in 2001. The
forward-looking estimates of the firmness of such orders is subject to future
events which may cause the percentage of the 2000 backlog actually shipped to
change.
Radio frequencies are required to provide wireless services. The allocation
of frequencies is regulated in the United States and other countries throughout
the world and limited spectrum space is allocated to wireless services. The
growth of the wireless and personal communications industry may be affected if
adequate frequencies are not allocated or, alternatively, if new technologies
are not developed to better utilize the frequencies currently allocated for such
use. Industry growth may also be affected by the cost of new licenses required
to use frequencies. Typically, governments sell these licenses at auctions. Over
the last several years, the cost of these licenses has increased significantly,
particularly for frequencies used in connection with third-generation (3G)
wireless technology. The significant cost for licenses may slow the growth of
the industry if service providers do not purchase new licenses or delay
introducing new technology and upgrading their systems. The segment's results
could be adversely affected if this occurs.
Materials used in the segment's operations are generally second-sourced to
ensure a continuity of supply. Occasionally, shortages or extended delivery
periods have occurred in various component parts, the effects of which have
generally been industry-wide and short in duration. Shortages did occur in the
first half of 2000. These shortages are not expected to occur in 2001. Energy
necessary for the segment's manufacturing facilities consists of electricity,
natural gas and gasoline, all of which are currently in generally adequate
supply. The segment's facilities are highly automated and, therefore, require a
reliable source of electrical power. Labor is generally available in reasonable
proximity to the segment's manufacturing facilities. Difficulties in obtaining
any of the aforementioned items could affect the segment's results.
Patent protection is extremely important to the segment's operations. The
segment has an extensive portfolio of patents relating to its products,
technologies and manufacturing processes. Motorola licenses technologies related
to these patents and receives income from these licenses. Motorola is also
licensed to use certain patents owned by others. The protection of these
licenses is also important to the segment's operations. Reference is made to the
material under the heading "General" for information relating to patents and
trademarks, research and development activities and the seasonality and
volatility of business with respect to this segment.
PCS's headquarters are located in Libertyville, Illinois. Its major
facilities are located in Libertyville and Harvard, Illinois; Boynton Beach and
Plantation, Florida; Easter Inch, Scotland; Flensburg, Germany; Tianjin, China;
Penang, Malaysia; Singapore; Bangalore, India; Chihuahua, Mexico, and
Jaguariuna, Brazil. PCS also has interests in two Korean cellular handset design
and manufacturing firms, cellular joint ventures in Hangzhou and Shanghai,
China, and a manufacturing licensee in China. PCS also uses several original
equipment manufacturing ("OEM") contractors to support its worldwide
manufacturing needs. Additional engineering, software development and
administration offices are located in San Diego, California; Champaign,
Illinois; Ft. Worth, Texas; Tokyo, Japan; Beijing, China, and Seoul, Korea. As
described above, PCS sold its facility in Dublin, Ireland and is ceasing
manufacturing operations at its factory in Boynton Beach, Florida. The segment
has also announced that it expects to cease manufacturing operations at its
Harvard, Illinois facility and sell its Bangalore, India facility by mid-2001.
The Harvard facility will serve as a customer order fulfillment and new product
sourcing center.
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GLOBAL TELECOM SOLUTIONS SEGMENT
The Global Telecom Solutions Sector ("GTSS" or the "segment"), formerly
known as the Network Solutions Sector, primarily designs, manufactures, sells,
installs and services cellular and fixed digital wireless infrastructure
equipment. The satellite communications business, which was also included in
this segment for 1999 and prior, no longer contributes to the segment's results.
GTSS wireless infrastructure products include electronic exchanges (i.e.,
telephone switches), base site controllers and radio base stations for Code
Division Multiple Access (CDMA), Personal Digital Cellular (PDC), Global System
for Mobile Communications (GSM) and integrated digital enhanced network
(iDEN(R)) technologies. Products are marketed worldwide through a direct sales
force, licensees or agents.
The nature of GTSS's business is large, long-term contracts with major
operators. Therefore, the individual loss of any large customer could have a
material adverse affect on the segment's business. In addition, the financial
condition of the major operators and their level of capital spending is
important to the segment's business. Increasingly, network operators are
requiring suppliers, like GTSS, to provide or arrange for long-term financing in
connection with equipment purchases. Financing may cover all or a portion of the
purchase price, as well as working capital, and can be sizable. GTSS may also
assist customers in obtaining financing from banks or other sources. GTSS
expects that the need to provide this financing or arrange financing for its
customers will continue, and may become increasingly important.
For GTSS, payment terms are particular to individual contracts, some of
which provide for the holdback of certain residual amounts due to Motorola until
system acceptance by the customer. Consistent with industry practices, GTSS
permits returns under normal contract warranty terms. For large initial systems,
related revenue is deferred if the contract provides for a right of return.
Occasional shortages of required purchased components do occur; however, this is
not considered a pervasive issue.
The segment experiences intense competition in worldwide markets from
numerous competitors, ranging in size from some of the world's largest companies
to small, specialized firms. In particular, the segment has experienced
significant competition in the market for digital products. Competitive factors
in the market for the segment's products include: technology offered; price;
availability of vendor financing; product and system performance, product
features, quality, delivery, availability and warranty; the quality and
availability of service; company image; relationship with key customers, and
time-to-market.
The segment's backlog amounted to $2.1 billion at December 31, 2000 and $2.2
billion at December 31, 1999. The 2000 order backlog is believed to be generally
firm and 100% of that amount is expected to be shipped in 2001. The
forward-looking estimates of the firmness of such orders is subject to future
events which may cause the percentage of the 2000 backlog actually shipped to
change.
Radio frequencies are required to provide wireless services. The allocation
of frequencies is regulated in the United States and other countries throughout
the world, and limited spectrum space is allocated to wireless services. The
growth of the wireless and personal communications industry may be affected if
adequate frequencies are not allocated or, alternatively, if new technologies
are not developed to better utilize the frequencies currently allocated for such
use. Industry growth may also be affected by the cost of the new licenses
required to use frequencies. Typically, governments sell these licenses at
auctions. Over the last several years, the cost of these licenses has increased
significantly, particularly for frequencies used in connection with
third-generation (3G) technology. The significant cost for licenses may slow the
growth of the industry if service providers do not purchase new licenses or
delay introducing new technology and upgrading their systems. Such occurrences
might have an effect on the segment's results.
Materials used in the segment's operations are generally second-sourced to
ensure a continuity of supply. Occasional shortages in purchased components do
occur. Energy necessary for the segment's manufacturing facilities consists of
electricity, natural gas and gasoline, all of which are currently in generally
adequate supply. The segment's facilities are highly automated and, therefore,
require a reliable source of electrical power. Labor is generally available in
reasonable proximity to the segment's manufacturing facilities. Difficulties in
obtaining any of the aforementioned items could affect the segment's results.
Patent protection is extremely important to the segment's operations. The
segment has an extensive portfolio of patents relating to its products, systems,
technologies and manufacturing processes. Motorola is also licensed to use
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certain patents owned by others. The protection of these licenses is also
important to the segment's operations. Reference is made to the material under
the heading "General" for information relating to patents and trademarks,
research and development activities and the seasonality and volatility of
business with respect to this segment.
GTSS's headquarters are located in Arlington Heights, Illinois. Major design
centers include Arlington Heights and Schaumburg, Illinois; Chandler, Arizona;
Fort Worth, Texas; Cork, Ireland; Vancouver, British Columbia, and Swindon,
England. GTSS operates manufacturing facilities in Schaumburg, Illinois; Fort
Worth, Texas; Jaguariuna, Brazil; Hangzhou and Tianjin, China, and Swindon,
England. During 2000, GTSS decided to discontinue its wireless local loop and
broadband fixed wireless products and exit the SpectraPoint Wireless joint
venture with Cisco Systems, Inc.
COMMERCIAL, GOVERNMENT AND INDUSTRIAL SYSTEMS SEGMENT
The Commercial, Government and Industrial Systems Sector ("CGISS" or the
"segment") provides integrated information and communications solutions for
commercial, government and industrial customers worldwide. Its Radio Solutions
business primarily designs, manufactures, sells, installs and services analog
and digital two-way radio voice and data communications products and systems to
a wide range of public safety, government, utility, transportation and other
worldwide markets. The Integrated Information Solutions business provides
advanced government electronics and communications solutions primarily for
military and space applications. In recent years, CGISS has expanded its
portfolio and delivers comprehensive end-to-end solutions to public-safety and
large-enterprise customers through the application of converged information and
communications technologies. The business also provides platforms for smart card
products and systems, as well as advanced radio frequency identification (RFID)
technology offerings. CGISS also provides network management services for
two-way radio network customers.
The principal customers for two-way radio products and systems include:
public-safety agencies, such as police and fire; highway maintenance
departments; forestry services; petroleum companies; gas, electric and water
utilities; telephone companies; diverse industrial companies; mining companies;
transportation companies, such as railroads, airlines, taxicab operations and
trucking firms; institutions, such as schools and hospitals, and companies in
the construction, vending machine and service businesses. These products are
also sold and leased to various federal agencies for a variety of uses.
The principal customers for government electronics and communications
solutions include various military and defense departments within the U.S. and
other governments and the National Aeronautics and Space Administration. The
emerging market for integrated information and communications technology
solutions includes public-safety and other municipal agencies and large
commercial enterprises.
Users of two-way radios are regulated by a variety of governmental and other
regulatory agencies throughout the world. In the United States, users of two-way
radios are licensed by the Federal Communication Commission ("FCC"), which has
broad authority to make rules and regulations and prescribe restrictions and
conditions to carry out the provisions of the Communications Act of 1934. The
FCC's authority includes, among other things, the power to classify radio
stations, prescribe the nature of the service to be rendered by each class of
station, assign frequencies to the various classes of stations and regulate the
kinds of equipment that may be used. Regulatory agencies in other countries have
similar types of authority. Motorola has developed products using trunking and
data communications technologies to enhance spectral efficiencies. The growth
and results of the two-way radio communications industry may be affected,
however, by the rules and regulations of the FCC or other regulatory agencies
relating to the allocation of frequencies for land mobile communications users,
especially in urban areas where such frequencies are heavily used. Consequently,
the segment's business and results could be affected by these rules and
regulations.
The products manufactured and marketed by CGISS are sold directly through
(i) its own distribution force, (ii) independent authorized distributors and
dealers, (iii) commercial mobile radio service operators and (iv) independent
commission sales representatives. The direct distribution force also provides
system engineering and installation and other technical and systems management
services to meet customers' particular needs. A customer may choose to install
and maintain the equipment with its own employees, or may obtain installation,
service and parts from a
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network of Motorola-authorized service stations (most of whom are also
authorized dealers) or from other non-Motorola service stations. Subscriber
units are sold directly and through indirect distribution channels.
Leasing and conditional sale arrangements are also made available to
customers. The majority of the leases and conditional sale contracts entered
into by CGISS are sold to several unaffiliated finance companies or banks on
terms, which, in most instances, provide recourse to Motorola with certain
limitations. In addition, a significant number of leases and conditional sale
contracts are sold to a Motorola finance subsidiary. In certain circumstances,
CGISS permits customers to return products in accordance with industry
practices.
CGISS's business includes providing custom products based on assembling
basic units into a large variety of models or combinations. This requires the
stocking of inventories and large varieties of piece parts and replacement
parts, as well as a variety of basic level assemblies in order to meet short
delivery requirements.
This segment experiences widespread, intense competition from numerous
competitors, ranging from some of the world's largest diversified companies to
foreign state-owned telecommunications companies to many small, specialized
firms. In addition, CGISS faces competition from numerous companies whose
principal manufacturing operations are located outside the United States, which
may serve to reduce their manufacturing costs and enhance their brand
recognition in their locale. Competitive factors for CGISS products, systems and
solutions include: price; technology offered; product performance, quality,
delivery and availability, and the quality and availability of service and
systems engineering, with no one factor being dominant. An additional factor is
the availability of vendor financing, as infrastructure customers continue to
look to equipment vendors as an additional source of financing.
This segment's backlog amounted to $2.3 billion at December 31, 2000 and
$2.0 billion at December 31, 1999. The 2000 backlog amount is believed to be
generally firm, and approximately 75% of that amount is expected to be shipped
during 2001. This forward-looking estimate of the firmness of such orders is
subject to future events, which may cause the percentage of the 2000 backlog
actually shipped to change.
Availability of the materials and components required by CGISS is relatively
dependable and certain, but normal fluctuations in market demand and supply
could cause temporary, selective shortages and affect results. Direct sourcing
of materials and components from foreign suppliers is becoming more extensive.
CGISS operates certain offshore subassembly plants, the loss of one or more of
which could constrain its production capabilities and affect results. Natural
gas, electricity and, to a lesser extent, oil are the primary sources of energy.
Current supplies of these forms of energy are generally considered to be
adequate for this segment's U.S. and foreign operations. However, difficulties
in obtaining any of the aforementioned items could affect the segment's results.
Patent protection is very important to the segment's business. Reference is
made to the material under the heading "General" for information relating to
patents and trademarks, research and development activities and volatility with
respect to this segment.
This segment's headquarters are located in Schaumburg, Illinois, with major
manufacturing/assembly facilities in Schaumburg, Illinois; Plantation, Florida;
Scottsdale, Arizona; Arad, Israel; Penang, Malaysia; Berlin, Germany; Tianjin,
China, and Jaguariuna, Brazil. CGISS sold the business operations at its Mount
Pleasant, Iowa facility in the first quarter of 2001.
BROADBAND COMMUNICATIONS SEGMENT
On January 5, 2000, Motorola and General Instrument Corporation completed
their previously announced merger. Following the merger, the Broadband
Communications Sector ("BCS" or the "segment") was formed. The segment designs,
manufactures and sells digital and analog systems and set-top terminals for
wired and wireless cable television networks; high speed data products,
including DOCSIS cable modems, as well as emerging Internet Protocol (IP)-based
telephony products; hybrid fiber/coaxial network transmission systems used by
cable television operators; digital satellite television systems for
programmers; direct-to-home (DTH) satellite networks and private networks for
business communications, and high-definition digital broadcast products for the
cable and broadcast industries.
The segment's products are marketed primarily to cable television operators,
satellite television programmers, and other communications providers worldwide.
Demand for the segment's products will depend primarily on
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capital spending by these communications providers for constructing, rebuilding
or upgrading their communications systems. The amount of capital spending, and
therefore, a majority of the segment's sales and profitability will be affected
by a variety of factors, including: general economic conditions; the continuing
trend of consolidation within the cable industry; the financial condition of
cable television system operators and alternative communications providers,
including their access to financing; technological developments; standardization
efforts that impact the deployment of new equipment, and new legislation and
regulations affecting the equipment sold by the segment.
There is a continuing trend of consolidation within the cable industry
worldwide, where a small number of operators own a majority of cable television
systems and account for a significant portion of the capital spending made by
cable television system operators. The loss of business from a significant
operator could have a material adverse effect on the segment's business. The
segment does not have any material long-term contracts with its customers.
The segment's communications equipment is sold primarily through sales
personnel employed by the segment who are skilled in the technology of these
systems.
The segment's products compete with those of a substantial number of
companies headquartered in the United States and throughout the world, and the
rapid technological changes occurring in the segment's markets are expected to
lead to the entry of new competitors. Competitive factors for BCS products,
systems and solutions include: technology offered; product and system
performance, features, quality, delivery and availability, and price. The
segment believes that it enjoys a strong competitive position because of its
large installed cable television equipment base, its strong relationships with
the major communications systems operators worldwide, its technological
leadership and its new product development capabilities.
The segment's backlog amounted to $1.0 billion at December 31, 2000 and $784
million at December 31, 1999. The 2000 order backlog is believed to be firm and
100% of that amount is expected to be shipped in 2001. The forward-looking
estimates of the firmness of such orders is subject to future events, which may
cause the percentage of the 2000 backlog actually shipped to change.
The sources of raw materials come primarily from large multinational
corporations supplying the electronics and telecommunications industries. In
general, the segment has access to several sources of supply for each component
in its major products; however the segment does source components that are
currently available only from single sources. The segment has in effect
inventory controls and other policies intended to minimize the effect of any
interruption in the supply of components. The segment currently sole sources
certain parts from Broadcom Corporation for its digital set top terminals and
DOCSIS cable modems. Any material disruption in supply from Broadcom for certain
products would have a material adverse impact on the segment's operations.
Electricity is the primary source of energy required for our foreign
manufacturing operations. These operations do not have significant risk relating
to the availability of this energy source; however, possible shortages in the
supply of electricity would affect the segment's operations.
The segment seeks to build upon its core enabling technologies, digital
compression, encryption and conditional access and control, in order to lead the
transition of the worldwide market for broadband communications networks. The
segment's policy is to protect its proprietary position by, among other methods,
filing U.S. and foreign patent applications to protect technology and
improvements that the segment considers important to the development of its
business. Although the segment's management believes that its patents provide a
competitive advantage, the segment will also rely on its proprietary knowledge
and ongoing technological innovation to develop and maintain its competitive
position, and will periodically seek to include its proprietary technologies in
certain patent pools that support the implementation of standards. The segment
participates as a founder of MPEG LA to allow for broad deployment of MPEG-2
compliant systems. The segment has also licensed its digital technology,
including DigiCipher(R) II/MPEG-2, to other equipment suppliers. The segment has
also entered into other license agreements, both as licensor and licensee,
covering certain products and processes with various companies. These license
agreements require the payment of certain royalties that are not expected to be
material to the segment's financial results.
BCS's headquarters are located in Horsham, Pennsylvania, with major research
and development offices in San Diego, California; Mansfield, Massachusetts, and
Arlington Heights, Illinois. BCS operates manufacturing facilities in Taipei,
Taiwan; Nogales, Mexico; Singapore; Bad Salzdetfurth and Nuremberg, Germany, and
Fort Worth, Texas. BCS has several sales offices throughout North America,
Europe, Latin America and the Asia Pacific regions.
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SEMICONDUCTOR PRODUCTS SEGMENT
The Semiconductor Products Sector ("SPS" or the "segment") designs, produces
and sells integrated semiconductor and software solutions for customers serving
the networking and computing, transportation, wireless communication and digital
consumer/home networking markets.
Semiconductors control and amplify electrical signals and are used in a
broad range of electronic products, including consumer electronic products,
computers, communications equipment, solid-state ignition systems and other
automotive electronic products, major home appliances, industrial controls,
robotics, aircraft, space vehicles and automatic controls.
SPS sells its products worldwide to original equipment manufacturers
("OEMs") and a network of industrial distributors through its own sales force,
agents and distributors. Products manufactured by SPS are also supplied to other
operating units of Motorola. Other businesses of Motorola collectively
constitute the segment's largest customer and the volume of purchases by these
businesses has affected, and could continue to affect, SPS's results.
In general, merchandise sold to customers is warranted for the longer of (i)
the product warranty period of the distributor or (ii) three years. The segment
and its results are affected by the cyclical nature of the semiconductor
industry. Available capacity, cyclical customer demands, new product
introductions and aggressive pricing has and could continue to impact its
business and results. The segment's capacity for certain products has been
increased to meet current market demand. In addition, the segment supplements
its internal manufacturing capacity with joint venture manufacturing facilities
and purchases of products from outside vendors.
The semiconductor industry is subject to rapid changes in technology. This
requires a high level of capital spending and an extensive research, development
and design program to maintain state-of-the-art technology. Accordingly, SPS
maintains an extensive research and development program in advanced
semiconductor technology and a significant portion of Motorola's capital
expenditures have historically been, and are expected to continue to be, for
semiconductor facilities.
SPS experiences intense competition from numerous competitors ranging from
large companies offering a full range of products to small companies
specializing in certain segments of the market. The competitive environment also
is changing as a result of increased alliances between competitors. The segment
competes in many semiconductor markets, including the telecommunications,
personal computer/work station, industrial, transportation, consumer, computer
and distributor markets. Important factors in competition include: price;
technology offered; product features, quality, availability and warranty; the
quality and availability of service; time-to-market, and company image. The
ability to develop new products to meet customer requirements and to meet
customer delivery schedules are also competitive factors.
The segment's backlog amounted to $1.6 billion at December 31, 2000 and $1.7
billion at December 31, 1999. Orders may be and are placed by customers for
delivery up to 12 months in the future but, for purposes of calculating backlog,
only the next 13 weeks requirements are reported. In the semiconductor industry,
backlog quantities and shipment schedules under outstanding purchase orders are
frequently revised to reflect changes in customer needs. Binding agreements
calling for the sale of specific quantities at specific prices are, typically,
contractually subject to price or quantity revisions and are, as a matter of
industry practice, rarely formally enforced. Therefore, the segment believes
that most of its order backlog is cancelable. For these reasons, the amount of
backlog as of any particular date may not be an accurate indicator of future
results.
The segment is not currently experiencing any shortages in obtaining raw
materials. A significant portion of certain materials and parts used by SPS is
supplied from a single country. With respect to these and other materials, the
segment is constantly evaluating additional sources of supply to minimize the
risk of obtaining materials from only a few sources. Electricity, oil and
natural gas are used extensively in the segment's operations. All of these
energy sources are available in adequate quantities for current needs.
Electricity and oil are the primary energy sources for the segment's foreign
operations, and, presently, there are no shortages of these sources; although
the reliability of electrical power has been a problem from time to time at
certain facilities outside of the U.S. Difficulties in obtaining any of the
aforementioned items could affect SPS's results.
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Patent protection is very important to SPS's operations. In addition,
Motorola is licensed to use certain patents owned by others. The protection of
these licenses is also important to SPS's operations. Reference is made to the
material under the heading "General" for information relating to patents and
trademarks, research and development activities and seasonality of business with
respect to this industry segment.
The Semiconductor Products segment's headquarters are located in Austin,
Texas. Its major facilities are located in Austin, Texas; Chandler, Mesa and
Tempe, Arizona; Tianjin, China; Toulouse, France; Munich, Germany; Kwai Chung
and Tai Po, Hong Kong; Sendai and Tokyo, Japan; Tel Aviv, Israel; Kuala Lumpur,
Malaysia; Singapore, and East Kilbride and South Queensferry, Scotland. SPS is
consolidating its production network into fewer integrated "anchor" sites for
economies of scale and improved efficiency.
INTEGRATED ELECTRONIC SYSTEMS SEGMENT
The Integrated Electronic Systems Sector ("IESS" or the "segment") designs,
manufactures and sells automotive and industrial electronics systems and
solutions, portable energy storage products and systems, multi-function embedded
board and computer system products, and telematics products and solutions. The
segment is being reported as a separate segment for the first time in 2000. It
was previously part of the "Other Products" segment.
The Automotive and Industrial Electronics Group ("AIEG") uses its
high-quality application and engineering expertise to design and sell custom
electronic solutions for original equipment manufacturers ("OEMs"), including
foreign and domestic automobile manufacturers, heavy vehicle manufacturers, farm
equipment manufacturers and industrial customers.
The Energy Systems Group ("ESG") delivers complete portable energy system
solutions for many of today's leading brand-name mobile phones, notebooks, palm
computers, and other portable electronic products. A significant portion of ESG
sales is to other industry segments within Motorola, primarily the wireless
telephone business.
The Motorola Computer Group ("MCG") specializes in embedded computing
technology that is integrated by OEMs into a wide variety of products,
including: products and solutions utilized in telecommunications
infrastructures; CAT scanners and MRI medical systems; flight simulators, and
semiconductor manufacturing equipment.
The Telematics Communications Group ("TCG") provides automotive customers
with integrated wireless phones and a variety of wireless Internet systems,
including navigation and driver safety, and hands-free Internet access.
A significant part of the segment's business is dependent upon other
Motorola businesses, collectively, and three external customers. Each of these
key customers is served by more than one group within the segment, and with
multiple product offerings within the groups. The loss of a significant portion
of these customers' business could have a material adverse effect upon the
segment. The sale of the electronic ballast business, Motorola Lighting, Inc.,
was completed in the first quarter of 2000.
Demand for the products of AIEG and TCG is linked to automobile sales in the
United States and other countries. Demand for ESG products is substantially
linked to the sales of other industry segments within Motorola. Demand for MCG
products is linked to demands for manufacturing systems, imaging, and
telecommunications products in the United States and other countries. The
segment experiences competition from numerous global competitors, including
automobile manufacturers' internal or affiliated electronic control suppliers.
Competitive factors in the sale of IESS products include: price; product
quality, performance and delivery; supply integrity; quality reputation;
responsiveness, and design and manufacturing technology. An additional factor
for MCG products is the availability of software. In certain circumstances, IESS
permits customers to return products in accordance with industry practices.
The segment's backlog amounted to $407 million at December 31, 2000 and $356
million at December 31, 1999. The 2000 backlog for the segment is believed to be
generally firm, and approximately 100% of that amount is expected to be shipped
during 2001. This forward looking estimate of the firmness of such orders is
subject to future events that may cause the percentage of the 2000 backlog
actually shipped to change.
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All materials used by IESS in its operations have good availability at this
time. The segment uses electricity and gas in its operations, which are
currently adequate in supply. However, difficulties in obtaining any of the
aforementioned items could affect the results for IESS.
Patent protection is important to the segment's business. Reference is made
to the material under the heading "General" for information relating to patents
and trademarks and research and development activities with respect to this
segment.
The segment's headquarters are located in Northbrook, Illinois. It also has
major facilities located in Tempe, Arizona; Elk Grove, Illinois; Elma, New York;
Seguin, Texas; Tianjin, China; Angers, France, and Penang, Malaysia. The segment
sold its electronic ballast manufacturing facility in Lake Zurich, Illinois and
sold its facility in Dublin, Ireland. It is in the process of closing its
manufacturing facilities in Lawrenceville, Georgia; Harvard, Illinois, and
Stotfold, England.
OTHER PRODUCTS SEGMENT
The Other Products segment is comprised primarily of: (i) the Personal
Networks Group, which focuses on the development of servers, applications and
internet solutions; (ii) the Network Management Group, which holds and manages
investments in wireless network operators; (iii) other corporate programs, and
(iv) Next Level Communications, Inc., a publicly-traded subsidiary in which
Motorola has a controlling interest as a result of the merger with General
Instrument.
Other
Financial Information About Segments. The response to this section of Item 1
incorporates by reference Note 9, "Information by Segment and Geographic
Region," of the Notes to Consolidated Financial Statements contained in the
appendix to Motorola's Proxy Statement for the 2001 annual meeting of
stockholders.
Customers. Motorola is not dependent for a material part of its overall
business upon a single or a very few customers. Approximately 2.0% of Motorola's
total sales and revenues in 2000 were received from various branches and
agencies, including the armed services, of the U.S. Government. All contracts
with the U.S. Government are subject to cancellation at the convenience of the
Government.
Government contractors, including Motorola, are routinely subjected to
numerous audits and investigations, which may be either civil or criminal in
nature. The consequences of these audits and investigations may include
administrative action to suspend business dealings with the contractor and to
exclude it from receiving new business. In addition, Motorola, like other
contractors, is internally reviewing aspects of its government contracting
operations, and, where appropriate, taking corrective actions and making
voluntary disclosures to the Government. These audits and investigations could
adversely affect Motorola and its results.
Backlog. Motorola's aggregate backlog position, including the backlog
position of subsidiaries through which some of its business units operate, as of
the end of the last two fiscal years, was approximately as follows:
December 31, 2000................................................. $9.62 billion
December 31, 1999................................................. $9.92 billion
Except as previously discussed in this Item 1, the orders supporting the
2000 backlog amounts shown in the foregoing table are believed to be generally
firm, and approximately 94% of orders on hand at December 31, 2000 are expected
to be shipped during 2001. However, this is a forward-looking estimate of the
amount expected to be shipped, and future events may cause the percentage
actually shipped to change.
Motorola recognizes revenue at the time of shipment, and accruals are
established for price protection, returns and cooperative marketing programs
with distributors. For long-term contracts, Motorola uses the
percentage-of-completion method to recognize revenues and costs. For contracts
involving new technologies, revenues and profits or parts thereof are deferred
until technological feasibility is established, customer acceptance is obtained
and other contract-specific terms have been completed.
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Research and Development. Motorola's business segments participate in very
competitive industries with constant changes in technology. Throughout its
history, Motorola has relied, and continues to rely, primarily on its research
and development programs for the development of new products, and on its
production engineering capabilities for the improvement of existing products.
Technical data and product application ideas are exchanged among Motorola's
business segments on a regular basis. Management believes, looking forward, that
Motorola's commitment to research and development programs, both to improve
existing products and services and to develop new products and services,
together with its utilization of state-of-the-art technology, should allow each
of its segments to remain competitive.
Research and development expenditures relating to new product development or
product improvement, other than customer-sponsored contracts, were approximately
$4.44 billion in 2000, $3.56 billion in 1999 and $3.12 billion in 1998. In
addition, research funded under customer-sponsored contracts amounted to
approximately $110 million in 2000, $218 million in 1999 and $516 million in
1998. Over the past three years, Motorola has increased its research and
development expenditures (particularly in the Global Telecom Solutions segment)
because it continues to believe that a strong commitment to research and
development is required for long-term growth. However, in the short-term,
Motorola expects research and development expenditures in 2001 to be lower than
in 2000.
Approximately 21,000 professional employees were engaged in such research
activities (including customer-sponsored contracts) during 2000.
Patents and Trademarks. As of December 31, 2000, Motorola owned
approximately 11,300 utility and design patents in the United States and 11,800
patents in foreign countries. These foreign patents are mostly counterparts of
Motorola's U.S. patents, but an increasing number result from research conducted
outside the United States and are originally filed in the country of origin.
During 2000, Motorola was granted 1,265 U.S. utility and design patents. Many of
the patents owned by Motorola are used in its operations or licensed for use by
others, and Motorola is licensed to use certain patents owned by others. In some
instances, certain of the patents licensed by Motorola to others have generated
meaningful amounts of income to Motorola.
Motorola has obtained registration of the "MOTOROLA" and "Stylized M Logo"
trademarks and has adopted and made application for the "INTELLIGENCE
EVERYWHERE" trademark throughout the world to designate its products and
services across all businesses of the company. Worldwide recognition of these
marks has resulted in their categorization as "famous" marks. These marks are
valuable corporate assets. Certain other trademarks and service marks of
Motorola are registered in relevant markets. Motorola's increasing focus on
marketing products directly to consumers is reflected in an increasing emphasis
on brand equity creation and protection. In the consumer brand arena, four
separate target categories have been designated by the ACCOMPLI(TM),
TALKABOUT(R), TIMEPORT(TM) and V.SERIES(TM) brands. Global registration and
support for these new brands is an ongoing priority. The DIGITAL DNA(TM) brand
remains a strong and highly visible presence in the semiconductor branding
strategy.
Environmental Quality. Motorola operations are from time to time the
subjects of investigations, conferences, discussions and negotiations with
various federal, state and local environmental agencies with respect to the
discharge or cleanup of hazardous waste and compliance by those operations with
environmental laws and regulations. The balance of the response to this section
of Item 1 incorporates by reference the information contained under the caption
"Environmental and Legal" in Note 8, "Commitments and Contingencies" of the
Notes to Consolidated Financial Statements contained in the appendix to
Motorola's Proxy Statement for the 2001 annual meeting of stockholders.
Miscellaneous. At December 31, 2000, there were approximately 147,000
employees of Motorola and its subsidiaries. The business of Motorola and its
industry segments has certain seasonal characteristics: the Semiconductor
Products segment has tended to have stronger, seasonally-adjusted sales in the
first half of the year; and sales of products, such as wireless telephones and
pagers, in consumer markets tend to increase in the fourth quarter. An increase
or decrease in large system orders in our infrastructure businesses could cause
volatility in orders, revenues and profits recognized in any particular period.
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Financial Information About Foreign and Domestic Operations and Export
Sales.
Domestic export sales to third parties were $1.91 billion, $2.58 billion and
$3.24 billion for the years ended December 31, 2000, 1999 and 1998,
respectively. Domestic export sales to affiliates and subsidiaries, which are
eliminated in consolidation, were $7.28 billion, $6.72 billion and $5.06 billion
for the years ended December 31, 2000, 1999 and 1998, respectively.
The remainder of the response to this section of Item 1 incorporates by
reference Note 8, "Commitments and Contingencies" of the Notes to Consolidated
Financial Statements and the "2000 Compared to 1999" and "1999 Compared to 1998"
sections of "Management's Discussion and Analysis of Financial Condition and
Results of Operations" contained in the appendix to Motorola's Proxy Statement
for the 2001 annual meeting of stockholders.
Business Risk Factors. Except for historical matters, the matters discussed
in this Form 10-K are forward-looking statements that involve risks and
uncertainties. Forward-looking statements include, but are not limited to,
statements under the following headings: (i) "Personal Communications Segment,"
about planned exits from manufacturing facilities, expected employment
reductions, expected shipments during 2001, future inventory levels, the
allocation and regulation of frequencies, the impact of the significant cost for
3G licenses, component shortages, and the availability of supplies and labor;
(ii) "Global Telecom Solutions Segment," about the impact from the loss of key
customers, expected shipments during 2001, the need for increased vendor
financing, the allocation and regulation of frequencies, the impact of the
significant cost for 3G licenses, and the availability of supplies and labor;
(iii) "Commercial, Government and Industrial Systems Segment," about the
allocation and regulation of frequencies, expected shipments during 2001, and
the availability of supplies; (iv) "Broadband Communications Segment," about the
impact from the loss of key customers, expected shipments during 2001, and the
availability of supplies; (v) "Semiconductor Products Segment," about the impact
from the loss of key customers, the impact of available capacity, cyclical
customer demands, new product introductions and aggressive pricing, capital
expenditures, expected shipments during 2001, backlog and the availability of
supplies; (vi) "Integrated Electronic Systems Segment," about the impact from
the loss of key customers, expected shipments during 2001, and the availability
of supplies; (vii) "General," about expected shipments during 2001, seasonality
of business, large system orders and competitiveness through research and
development and utilization of technology; (viii) "Item 2: Properties," about
the completion of facilities currently being constructed and plans to sell or
shut down currently operating facilities; and (ix) "Item 3: Legal Proceedings,"
about the ultimate disposition of pending legal matters.
Motorola wishes to caution the reader that the following important business
risks and factors, and those business risks and factors described elsewhere in
this report or Motorola's other Securities and Exchange Commission filings,
could cause Motorola's actual results to differ materially from those stated in
the forward-looking statements.
Impact of the Slowing Economy
o The overall economy is in the midst of a sharp slowdown that
began in the latter stages of 2000. The length and severity of
this slowdown could have a significant impact on Motorola's
near-term financial results. The success of ongoing changes in
fiscal, monetary and regulatory policies worldwide will
influence the severity of this impact. If these changes do not
occur, or are not successful in spurring overall economic
recovery, Motorola's business will be negatively impacted as
Motorola's customers buy fewer products and services from
Motorola.
Uncertainty of Current Economic Conditions
o Current conditions in the domestic and global economies are
extremely uncertain. As a result, it is difficult to estimate
the level of growth for the economy as a whole. It is even
more difficult to estimate growth in various parts of the
economy, including the markets in which Motorola participates.
Because all components of Motorola's budgeting and forecasting
are dependent upon estimates of growth in the markets it
serves, the prevailing economic uncertainty renders estimates
of future income and expenditures even more difficult than
usual to make. The future direction of the overall domestic
and global economies will have a significant impact on
Motorola's overall performance.
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Impact of Cost-Reduction Efforts
o During the second half of 2000, Motorola implemented plans to
discontinue unprofitable product lines, exit unprofitable
businesses and consolidate manufacturing operations as part of
its overall strategic initiative to reduce costs and simplify
its product portfolio. The impact of these cost-reduction
efforts on Motorola's profitability will be influenced by:
o Motorola's ability to successfully complete its
ongoing efforts.
o The possibility that these efforts may not generate
the level of cost savings Motorola expects or enable
Motorola to effectively compete and return to
profitability.
Since these cost-reduction efforts involve many aspects of
Motorola's business, they could adversely impact productivity
to an extent Motorola does not anticipate. Even if Motorola
successfully completes its efforts and generates the
anticipated cost savings, there may be other factors that
adversely impact Motorola's profitability.
Increasing Cost of Licenses to Use Radio Frequencies
o Radio frequencies are required to provide wireless services.
The allocation of frequencies is regulated in the United
States and other countries throughout the world and limited
spectrum space is allocated to wireless services. The growth
of the wireless and personal communications industry may be
affected if adequate frequencies are not allocated or,
alternatively, if new technologies are not developed to better
utilize the frequencies currently allocated for such use.
Industry growth may also be affected by the cost of new
licenses required to use frequencies. Typically, governments
sell these licenses at auctions. Over the last several years,
the cost of these licenses has increased significantly,
particularly for frequencies used in connection with
third-generation (3G) technology. The significant cost for
licenses may slow the growth of the industry if service
providers do not purchase new licenses or delay introducing
new technology and upgrading their systems. Motorola's results
could be adversely affected if this occurs.
Component Shortages
o Motorola's ability to meet customer demands depends, in part,
on our ability to obtain timely and adequate delivery of parts
and components from our suppliers and internal manufacturing
capacity. We have experienced component shortages in the past,
including components for wireless telephones, that have
adversely affected our operations. Although we work closely
with our suppliers to avoid these types of shortages, there
can be no assurances that we will not continue to encounter
these problems in the future. A reduction or interruption in
component supply or a significant increase in the price of one
or more components could have a material adverse effect on
Motorola.
Financial Flexibility
o Motorola expects that from time to time outstanding commercial
paper balances may be replaced with short-or long-term
borrowings. Although Motorola believes that it can continue to
access the capital markets in 2001 on acceptable terms and
conditions, its flexibility with regard to long-term financing
activity could be limited by: (1) the significant amount of
long-term financing completed by Motorola in late 2000 and
early 2001, (2) Motorola's current level of short-term debt,
and (3) Motorola's credit ratings. In addition, many of the
factors that affect Motorola's ability to access the capital
markets, such as the liquidity of the overall capital markets
and the current state of the economy, are outside of
Motorola's control. There can be no assurances that Motorola
will continue to have access to the capital markets on
favorable terms.
Ability to Draw Under Credit Facilities
o Motorola views its existing one-year and five-year revolving
domestic credit agreements and multi-draw term loan agreement
as sources of available liquidity. These agreements contain
various conditions, covenants and representations with which
Motorola must be in compliance in order to borrow funds. There
can be no assurance that Motorola will be in compliance with
these conditions, covenants and representations at such time
as it may desire to borrow under these credit agreements or
renew them.
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Rapid Technological Change
o The markets for Motorola's products are characterized by
rapidly changing technologies, frequent new product
introductions, short product life cycles and evolving industry
standards. Motorola's success is expected to depend, in
substantial part, on the timely and successful introduction of
new products and upgrades of current products to comply with
emerging industry standards and to address competing
technological and product developments carried out by
Motorola's competitors. The development of new,
technologically advanced products is a complex and uncertain
process requiring high levels of innovation, as well as the
accurate anticipation of technological and market trends.
Strategic Acquisitions and the Integration of New Businesses
o In order to position itself to take advantage of growth
opportunities, Motorola has made, and may continue to make,
strategic acquisitions that involve significant risks and
uncertainties. These risks and uncertainties include: (1) the
difficulty in integrating newly-acquired businesses and
operations in an efficient and effective manner, (2) the
challenges in achieving strategic objectives, cost savings and
other benefits expected from acquisitions, (3) the risk that
Motorola's markets do not evolve as anticipated and that the
technologies acquired do not prove to be those needed to be
successful in those markets, (4) the potential loss of key
employees of the acquired businesses, (5) the risk of
diverting the attention of senior management from the
operations of Motorola, and (6) the risks of entering new
markets in which Motorola has limited experience.
Strategic Alliances
o Motorola's success is, in part, dependent upon its ability to
effectively partner with other industry leaders to meet
customer product and service requirements, particularly in its
communications businesses.
Fluctuations in the Fair Values of Portfolio Investments
o Motorola maintains portfolio holdings of various issuers and
types. These securities are generally classified as
available-for-sale and, consequently, are recorded on the
balance sheet at fair value. Part of this portfolio includes
minority equity investments in several publicly-traded
companies. Since the majority of these securities represent
investments in technology companies, the fair market values of
these securities are subject to significant price volatility
and, in general, suffered a decline in market value during
2000 that has continued in 2001. In addition, the realizable
value of these securities is subject to market and other
conditions. Motorola has also invested in numerous privately
held companies, many of which can still be considered in the
startup or developmental stages. These investments are
inherently risky as the market for the technologies or
products they have under development are typically in the
early stages and may never materialize. Motorola could lose
its entire investment in these companies.
Recruitment and Retention of Employees
o Competition for technical personnel in high-technology
industries is intense. Motorola believes that its future
success depends in large part on its continued ability to
hire, assimilate and retain qualified engineers and highly
skilled personnel needed to compete in its extremely
competitive markets and develop successful new products. To
date, Motorola is no assurance that it will continue to be
successful in the future.
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Changes in Government Policy or Economic Conditions
o Motorola's results may be affected by changes in trade,
monetary and fiscal policies, laws and regulations, or other
activities of U.S. and non-U.S. governments, agencies and
similar organizations. Motorola's results may also be affected
by social and economic conditions, which impact Motorola's
operations, including in emerging markets in Asia and Latin
America.
Uncertainties of the Internet
o There are currently very few laws or regulations that apply
directly to access to, or commerce on, the Internet. Motorola
could be adversely affected by any such regulation in any
country where it operates. The adoption of such measures could
decrease demand for Motorola's products and at the same time
increase the cost of selling such products.
Outcome of Litigation; Protection of Patents
o Motorola's results may be affected by the outcome of pending
and future litigation and the protection and validity of
patents and other intellectual property rights. Patent and
other intellectual property rights of Motorola are important
competitive tools and many generate income under license
agreements. There can be no assurances as to the favorable
outcome of litigation or that intellectual property rights
will not be challenged, invalidated or circumvented in one or
more countries.
Development of New Products and Technologies
o The risks related to Motorola's significant investment in
developing and introducing new products, such as: (1) advanced
digital wireless telephones, (2) CDMA and other technologies
for third-generation (3G) wireless networks, (3) products for
transmission of telephony and high-speed data over hybrid
fiber coaxial cable systems, (4) integrated digital radios,
and (5) advanced semiconductor products. These risks include:
(i) difficulties and delays in the development, production,
testing and marketing of products, (ii) customer acceptance of
products, particularly as Motorola's focus on the consumer
market increases, (iii) the development of industry standards,
(iv) the significant amount of resources Motorola must devote
to the development of new technology, and (v) the ability to
differentiate its products and compete with other companies in
the same markets.
Transition to Newer Digital Technologies
o Motorola's success, in part, will be affected by the ability
of its wireless telephone business to continue its transition
to newer digital technologies and successfully compete in that
business and retain or gain market share. Motorola faces
intense competition in these markets from both established
companies and new entrants. Product life cycles can be short
and new products are expensive to develop and bring to market.
Risks Related to the Iridium(R) System
o Motorola's results could be adversely affected by unexpected
liabilities or expenses, including unfavorable outcomes to any
currently pending or future litigation, related to the Iridium
project.
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Demand for Customer Financing
o The competitive environment in which Motorola operates
requires Motorola and many of its principal competitors to
provide significant amounts of medium-term and long-term
customer financing. Customer financing arrangements may
include all or a portion of the purchase price for Motorola's
products and services, as well as working capital. Motorola
may also assist customers in obtaining financing from banks
and other sources. The success of Motorola, particularly its
infrastructure businesses, may be dependent, in part, upon the
ability of Motorola to provide customer financing on
competitive terms.
Customer Credit Risk
o While Motorola has generally been able to place a portion of
its customer financings with third-party lenders, a portion of
these financings are supported directly by Motorola. There can
be higher risks associated with some of these financings,
particularly when provided to start-up operations such as
local network providers, to customers in developing countries,
or to customers in specific financing-intensive areas of the
industry (such as 3G wireless operators which are in the early
stages of development). Should customers fail to meet their
obligations, losses could be incurred and such losses could
have an adverse effect on Motorola. Motorola has various
programs in place to monitor and mitigate customer credit
risk, however, there can be no assurance that such measures
will reduce Motorola's exposure to its customers' credit risk.
Risks from Large System Contracts
o Motorola is exposed to risks related to the trend towards
increasingly large system contracts for infrastructure
equipment and the resulting reliance on large customers. These
include: (1) the technological risks of such contracts,
especially when the contracts involve new technology, and (2)
the financial risks to Motorola under these contracts,
including the estimates inherent in projecting costs
associated with large contracts.
Growth in the Cable Industry
o The cable industry is a major customer of Motorola's Broadband
Communications Segment. The ability of that segment to
continue its growth is dependent, in part, on continued growth
in the cable industry and that industry's ability to compete
with other entertainment providers.
Impact of Consolidations in the Telecommunications and Cable Industries
o The telecommunications and cable industries have experienced
significant consolidation of industry participants and this
trend is expected to continue. Motorola and one or more of its
competitors may each supply products to the companies that
have merged or will merge. This consolidation could result in
delays in purchasing decisions by the merged companies and/or
Motorola playing a lesser role in the supply of communications
products to the merged companies.
Recovery from Semiconductor Market Recession
o Motorola's results will be impacted by the current recession
in the semiconductor market and Motorola's participation in
any recovery. The semiconductor business has restructured
itself to participate in some of the semiconductor markets
with the best growth potential. There can be no assurances
that this strategy will be successful.
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Ability to Compete in Semiconductor Market
o Motorola's success in dependent, in part, on the ability of
Motorola's semiconductor business to compete in the highly
competitive semiconductor market. Factors that could adversely
affect Motorola's ability to compete include: production
inefficiencies and higher costs related to underutilized
facilities, including both wholly-owned and joint venture
facilities; shortage of manufacturing capacity for some
products; competitive factors, such as rival chip
architectures, mix of products, acceptance of new products and
price pressures; risk of inventory obsolescence due to shifts
in market demand; the continued growth of embedded
technologies and systems and Motorola's ability to compete in
that market; and the effect of orders from Motorola's
equipment businesses.
Success and Impact of Increased Use of Foundry Manufacturing Capacity
o The ability of Motorola's semiconductor business to increase
its utilization of foundry manufacturing capacity and the
impact of such efforts on capital expenditures, production
costs and ability to satisfy delivery requirements.
Additional Risk Factors Included In Proxy Statement
Certain portions of Motorola's Proxy Statement for the 2001 annual meeting
of stockholders with Management's Discussion and Analysis and Consolidated
Financial Statements are incorporated by reference into this Form 10-K. There
are additional important factors included therein, including those on pages
[F-29 through F-33] of the appendix to Motorola's Proxy Statement for the 2001
annual meeting of stockholders.
(R) Reg. U.S. Patent & Trademark Office.
MOTOROLA, Stylized M Logo, iDEN, ACCOMPLI, TALKABOUT, TIMEPORT, V.SERIES,
DIGITAL DNA and INTELLIGENCE EVERYWHERE are trademarks or registered trademarks
of Motorola, Inc.
Iridium(R) is a registered trademark and service mark of Iridium LLC.
ITEM 2: PROPERTIES
Motorola's principal executive offices are located at 1303 East Algonquin
Road, Schaumburg, Illinois 60196. Its other major facilities in the United
States are located in Arlington Heights, Elk Grove, Harvard, Libertyville,
Northbrook and Schaumburg, Illinois; Elma, New York; Chandler, Scottsdale, Mesa
and Tempe, Arizona; Boynton Beach and Plantation, Florida; Horsham,
Pennsylvania; Austin, Ft. Worth and Seguin, Texas; Mansfield, Massachusetts, and
San Diego, California. Motorola also operates manufacturing facilities and sales
offices in many other countries. (See "Item 1: Business" for information
regarding the location of the principal manufacturing facilities for each
industry segment.) Motorola owns 95 facilities (manufacturing, sales, service
and office), 57 of which are located in North America and 38 of which are
located in other countries. Motorola leases 571 such facilities, 359 of which
are located in North America and 212 of which are located in other countries.
Through acquisitions and mergers with various businesses throughout 2000,
Motorola acquired 61 additional sites, which are included in the preceding
totals. In 2000, development of sites located in Deer Park, Illinois, and
Markham, Ontario were begun. Construction and occupancy of a PCS design center
in Champaign, Illinois was accomplished in 2000.
Motorola generally considers the productive capacity of the plants operated
by each of its industry segments adequate and sufficient for the requirements of
each business group.
As part of Motorola's overall strategy to reduce operating costs and
improve the financial performance of the corporation, a number of businesses and
facilities have either been sold or are currently for sale. Manufacturing
facilities in Lake Zurich, Illinois and San Jose, Costa Rica, as well as two
start-up facilities in Jaguariuna, Brazil, were sold during 2000. Motorola's
Dublin, Ireland facility and the business operations at its Mt. Pleasant, Iowa
facility have been sold in 2001 in connection with outsourcing of a portion of
Motorola's manufacturing operations.
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19
Facilities in Irvine, California and South Queensferry, Scotland are currently
up for sale and the Bangalore, India facility is expected to be sold by
mid-2001. Motorola is in the process of closing manufacturing facilities in
Lawrenceville, Georgia and Stotfold, England and is ceasing manufacturing
operations at its facilities in Boynton Beach, Florida and Harvard, Illinois.
The Harvard facility will serve as a customer order fulfillment and new product
sourcing center.
The extent of utilization of such manufacturing facilities varies from plant
to plant and from time to time during the year.
ITEM 3: LEGAL PROCEEDINGS
Motorola is currently a named defendant in seven cases arising out of
alleged groundwater, soil and air pollution in Phoenix and Scottsdale, Arizona.
McIntire et al. v. Motorola remains pending in the U.S. District Court for the
District of Arizona, while Baker et al. v. Motorola et al., Lofgren et al. v.
Motorola et al., Bentancourt et al. v. Motorola et al., Ford et al. v. Motorola
et al., Wilkins et al. v. Motorola et al. and Dawson et al. v. Motorola, et al.
are pending in the Arizona Superior Court, Maricopa County. The McIntire
lawsuit, filed on December 20, 1991, involves approximately 920 plaintiffs who
allege that the operations of Motorola at several facilities in Phoenix and
Scottsdale, Arizona have caused property damage and health problems by
contaminating the soil, groundwater and air in the area surrounding those
facilities. The Baker lawsuit, filed on February 11, 1992, is a class action,
involving six representative individual named plaintiffs, alleging that Motorola
and a number of other defendants contaminated the soil, air and groundwater in
the Phoenix/Scottsdale area, diminishing property values and exposing members of
the class to possible adverse health effects. On August 24, 1994, the Baker
court certified two classes, a property damage class and a medical monitoring
class. Motorola is now the sole remaining defendant in the property claims in
Scottsdale and East Phoenix. On January 22, 2001, the jury trial began in the
Scottsdale case (relating to property claims in South Scottsdale), and is
expected to continue until May 2001.
The Lofgren, Bentancourt, Ford, Wilkins and Dawson lawsuits, filed on April
6, 1993, July 16, 1993, June 10, 1994, July 19, 1995 and August 7, 1997,
respectively, were consolidated. The consolidated cases involved more than 200
plaintiffs, alleging that Motorola and a number of other defendants contaminated
the soil, air and groundwater in the Phoenix/Scottsdale area, causing health
problems. On June 1, 1998, the Lofgren court ruled inadmissible proffered
testimony from each of the plaintiffs' medical causation experts and granted
summary judgment on those personal injury claims in favor of Motorola and the
other remaining defendants. An appeal is expected after the court formally
enters final judgment.
All seven pending lawsuits described above seek compensatory and punitive
damages. The McIntire complaint includes personal injury and property damage
claims and seeks injunctive relief. The Baker complaint seeks damages for
medical monitoring and alleges claims for property, business and economic loss
and seeks declaratory and injunctive relief. The consolidated Lofgren cases
involve claims for personal injury.
Motorola and several of its officers and directors are named defendants in a
consolidated class action, Kaufman, et al. v Motorola, Inc., et al., for alleged
violations of Sections 10(b) and 20(a) of the Securities Exchange Act and SEC
Rule 10b-5. The case was filed on May 19, 1995 and is pending in the U.S.
District Court for the Northern District of Illinois. Plaintiffs claim that
Motorola and the individual defendants inflated the price of Motorola stock by
failing to timely disclose a buildup of cellular phone inventory with its
distributors. The parties have reached a settlement agreement and expect to have
the case formally dismissed with prejudice.
Motorola has been a defendant in several cases arising out of its
manufacture and sale of portable cellular telephones. Jerald P. Busse, et al. v.
Motorola, Inc. et al., filed on October 26, 1995 in the Circuit Court of Cook
County, Illinois, Chancery Division, is a purported class action alleging that
defendants have failed to adequately warn consumers of the alleged dangers of
cellular telephones and challenging ongoing safety studies as invasions of
privacy. In July 2000, the Court ruled that the case was appropriate for class
certification. Plaintiffs' class notice was published in February 2001. Kane, et
al., v. Motorola, Inc., et al., filed on December 13, 1993 in the Circuit Court
of Cook County, Illinois, alleges that plaintiffs' brain cancer was caused or
aggravated by a prototype communication device. On May 11, 2000, the Court
entered summary judgment in Motorola's favor holding that there was no evidence
to support plaintiffs' theory of causation. On July 24, 2000, plaintiffs filed a
notice of appeal
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of the summary judgment decision and other orders entered by the trial judge.
Medica et al., v. Motorola, Inc., et al., filed September 7, 1999, alleges that
use of a Motorola cellular phone caused plaintiff Phil Medica's malignant brain
tumor. On August 1, 2000, Christopher and Frances Newman filed a suit captioned
Newman et al., v. Motorola, Inc., et al., against Motorola and several other
defendants in the Circuit Court for Baltimore City, Maryland, alleging that
Christopher Newman's cellular phone usage caused his brain cancer. The
defendants removed the case to Federal District Court. The plaintiffs have
amended their complaint several times and have a motion for leave to file a
third amended complaint pending. On May 26, 2000, a purported class action suit,
Naquin, et al., v. Nokia Mobile Phones, et al., was commenced against Motorola
and several other cellular phone manufacturers and carriers in the Civil
District Court for the Parish of Orleans, State of Louisiana, claiming that the
failure to incorporate a remote headset into cellular phones rendered the phones
defective. The defendants have removed the case to Federal District Court.
Silber, et al. v. Motorola, Inc., et al., filed on August 1, 1995 in the
Supreme Court of The State of New York, County of Suffolk, which was transferred
from the County of New York, is an action wherein it is alleged that a traffic
accident was caused by the use of a cellular phone. On April 27, 1999, Motorola
obtained summary judgment on plaintiffs' claims. In February 2001, the Court of
Appeals of the State of New York denied the petition for leave to appeal thereby
terminating all avenues for relief.
Motorola has been named as one of several defendants in putative class
action securities lawsuits pending in the District of Columbia arising out of
alleged misrepresentations or omissions regarding the Iridium satellite
communications business. On March 15, 2001, the federal district court judge
consolidated the various securities cases under Freeland v. Iridium World
Communications, Inc., et al., originally filed on April 22, 1999, and appointed
lead plaintiffs and lead plaintiffs' counsel.
Motorola is also a defendant in two lawsuits relating to Iridium filed by
The Chase Manhattan Bank. The Chase Manhattan Bank v. Motorola was filed in New
York state court on June 9, 2000. In that lawsuit, plaintiff alleges that
Motorola breached its commitment to provide a $300 million loan guarantee
relating to Iridium's debt and seeks payment of the disputed guarantee. Also, on
June 9, 2000, Chase filed a lawsuit in the District of Delaware against Motorola
and seventeen other parties captioned The Chase Manhattan Bank v. Iridium Africa
Corp., et al. In that lawsuit, Chase alleges that Motorola and other investors
in Iridium LLC are obligated to pay Chase certain amounts allegedly due under
the Iridium LLC Agreement as a Reserve Capital Call.
A committee of unsecured creditors of Iridium has, over objections by
Motorola and Iridium, been granted leave by the bankruptcy court to file a
complaint on Iridium's behalf against Motorola. Although to date no complaint
has been filed by this committee, in March 2001, the Bankruptcy Court approved a
settlement between the committee and Iridium's secured creditors that allows for
the creation of a litigation fund to be used in pursuit of such proposed claims
against Motorola.
The information contained under the caption "Environmental and Legal" in
Note 8, "Commitments and Contingencies," of the Notes to Consolidated Financial
Statements contained in the appendix to Motorola's Proxy Statement for the 2001
annual meeting of stockholders is incorporated herein by reference.
Motorola is a defendant in various other suits, claims and investigations
which arise in the normal course of business. In the opinion of management, the
ultimate disposition of these matters, including those matters described above
in this Item 3, will not have a material adverse effect on the consolidated
financial position, liquidity or results of operations of Motorola.
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ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
Following are the persons who were the executive officers of Motorola as of
February 28, 2001, their ages as of January 1, 2001, their current titles and
positions they have held during the last five years:
Christopher B. Galvin; age 50; Chairman of the Board and Chief Executive Officer
since June 1999; Chief Executive Officer from January 1997 to June 1999;
President and Chief Operating Officer from December 1993 to January 1997.
Robert W. Galvin; age 78; Chairman of the Executive Committee of the Board since
January 1990.
Robert L. Growney; age 58; President and Chief Operating Officer since January
1997; Executive Vice President and President and General Manager, Messaging,
Information and Media Sector from January 1994 to January 1997.
Keith J. Bane; age 61; Executive Vice President and President, Global Strategy
and Corporate Development since August 1999; Executive Vice President and
President, Americas Region from March 1997 to August 1999; Executive Vice
President and Chief Corporate Staff Officer from February 1995 to March 1997.
Robert L. Barnett; age 60; Executive Vice President and President, Commercial,
Government and Industrial Systems Sector since July 1998; Executive Vice
President and President, Land Mobile Products Sector from March 1997 to July
1998; Senior Vice President and President, Land Mobile Products Sector from
March 1996 to March 1997; Corporate Vice President and General Manager, iDEN
Group, Land Mobile Products Sector from May 1995 to March 1996.
Edward Breen; age 44; Executive Vice President and President, Networks Sector
since January 2001; Executive Vice President and President, Broadband
Communications Sector from January 2000 to January 2001; Chairman of the Board,
President and Chief Executive Officer of General Instrument Corporation from
December 1997 to January 2000; President, Broadband Networks Group of General
Instrument Corporation from February 1996 to October 1997.
Glenn A. Gienko; age 48; Executive Vice President and Motorola Director of Human
Resources since May 1996; Senior Vice President and Director of Human Resources
from June 1995 to May 1996.
Joseph M. Guglielmi; age 59; Executive Vice President and President, Global
Customer Solutions Operations since January 2001; Executive Vice President and
President, Integrated Electronics Systems Sector ("IESS") from December 1998 to
January 2001; Senior Vice President and President, IESS from October 1998 to
December 1998; Senior Vice President and Office of the President, IESS from
August 1998 to October 1998; Corporate Vice President and Office of the
President, IESS from July 1998 to August 1998; Corporate Vice President and
General Manager, Motorola Computer Group from September 1995 to July 1998;
Chairman and Chief Executive Officer of Taligent, Inc., a software development
company, from March 1992 to August 1995; Corporate Vice President, International
Business Machines from April 1987 to February 1992.
Bo Hedfors; age 56; Executive Vice President and President, Global Telecom
Solutions Sector since February 1999; Senior Vice President and President,
Network Solutions Sector ("NSS") from December 1998 to February 1999; Corporate
Vice President and President, NSS from September 1998 to December 1998;
President and Chief Executive Officer of Ericsson Inc., the U.S. subsidiary of
Telefon AB LM Ericsson, from 1994 to August 1998.
Carl F. Koenemann; age 62; Executive Vice President and Chief Financial Officer
since December 1991.
Ferdinand C. Kuznik; age 59; Executive Vice President and President, Motorola
Europe, Middle East and Africa since July 1999; Executive Vice President and
President, Personal Communications Sector, Communications Enterprise from July
1998 to July 1999; Executive Vice President and President, Cellular Subscriber
Sector from August 1997 to July 1998; Senior Vice President and General Manager,
Radio Network Solutions Group, Land Mobile Products Sector from 1994 to August
1997.
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A. Peter Lawson; age 54; Executive Vice President, General Counsel and Secretary
since May 1998; Senior Vice President, General Counsel and Secretary from
November 1996 to May 1998; Senior Vice President and General Counsel from March
1996 to November 1996; Senior Vice President and Assistant General Counsel from
November 1994 to March 1996.
Thomas J. Lynch; age 46; Executive Vice President and President, Integrated
Electronic Systems Sector since January 2001; Chairman and Acting Chief
Executive Officer of Aerocast.com, Inc. (a Motorola majority-owned joint
venture), since January 2000; Senior Vice President and General Manager,
Satellite & Broadcast Network Systems, Broadband Communications Sector from
February 2000 to January 2001; Senior Vice President and General Manager,
Satellite & Broadcast Network Systems, General Instrument Corporation from May
1998 to February 2000; Vice President and General Manager, Transmission Network
Systems, General Instrument Corporation from August 1995 to May 1998.
Dennis A. Roberson; age 52; Senior Vice President and Chief Technology Office
since February 1999; Corporate Vice President and Chief Technology Officer from
August 1998 to February 1999; Vice President and Chief Technology Officer from
April 1998 to August 1998; Senior Vice President and Chief Technical Officer of
NCR Corporation from January 1997 to April 1998; Vice President, Computer
Products and Systems of AT&T from May 1994 to January 1997.
David E. Robinson; age 41; Executive Vice President and President, Broadband
Communications Sector since January 2001; Senior Vice President and General
Manager, Digital Network Systems, Broadband Communications Sector from January
2000 to January 2001; Senior Vice President and General Manager, Digital Network
Systems, General Instrument Corporation from April 1998 to January 2000; Vice
President and General Manager, Digital Network Systems, General Instrument
Corporation (and its predecessor) from November 1995 to April 1998.
Fred (Theodore) A. Shlapak; age 57; Executive Vice President and President,
Semiconductor Products Sector ("SPS") since September 2000; Senior Vice
President and Assistant to the President, SPS from December 1998 to September
2000; Senior Vice President and General Manager, SPS Wireless Subscriber Systems
Group from June 1997 to December 1998; Senior Vice President and General
Manager, SPS Communications and Consumer Technologies Group from May 1996 to
June 1997.
C. D. Tam; age 56; Executive Vice President and President, Asia Pacific Region
since January 1, 1999; Senior Vice President and General Manager of the
Transportation Systems Group, Semiconductor Products Sector from January 1997 to
December 1998; Senior Vice President and General Manager, Asia Pacific
Semiconductor Group, Semiconductor Products Sector from January 1991 to December
1996.
Mike S. Zafirovski; age 47; Executive Vice President and President, Personal
Communications Sector since June 2000; President and Chief Executive Officer of
GE Lighting, General Electric Company from July 1999 to May 2000; President of
GE Lighting, Europe, Middle East and Africa, General Electric Company from April
1996 to June 1999.
The above executive officers will serve as officers of Motorola until the
regular meeting of the Board of Directors in May 2001 or until their respective
successors shall have been elected. Christopher B. Galvin is a son of Robert W.
Galvin. There is no family relationship between any of the other executive
officers listed above.
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PART II
ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Motorola's common stock is listed on the New York, Chicago, London and Tokyo
Stock Exchanges. The remainder of the response to this Item incorporates by
reference Note 13, "Quarterly and Other Financial Data" of Notes to Consolidated
Financial Statements contained on page F-63 in the appendix to Motorola's Proxy
Statement for the 2001 annual meeting of stockholders.
During 2000, Motorola issued an aggregate of 11,493,243 shares of common
stock (for an aggregate sales price of approximately $95 million) to 7 holders
of warrants issued by General Instrument corporation ("GI") prior to the merger
of Motorola and GI, which consummated on January 5, 2000. Warrants issued by GI
for an aggregate of an additional 35,570,082 shares of Motorola common stock
remained outstanding as of December 31, 2000. Motorola has filed a Registration
Statement on Form S-3 (File No. 333-36320) covering the resale of all such
shares of common stock by the holders thereof. The issuances of these shares to
the warrant holders were deemed exempt from registration under the Securities
Act of 1933, as amended, by virtue of Section 4(2) thereof, as transactions not
involving a public offering.
ITEM 6: SELECTED FINANCIAL DATA
The response to this Item incorporates by reference the information under
the caption "Five Year Financial Summary" contained on page F-64 in the appendix
to Motorola's Proxy Statement for the 2001 annual meeting of stockholders.
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The response to this Item incorporates by reference the information under
the caption "Management's Discussion and Analysis of Financial Condition and
Results of Operations" contained on pages F-1 through F-33 in the appendix to
Motorola's Proxy Statement for the 2001 annual meeting of stockholders.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this Item incorporates by reference the information under
the captions "Management's Responsibility For Financial Statements,"
"Independent Auditors' Report," "Consolidated Statements of Operations,"
"Consolidated Balance Sheets," "Consolidated Statements of Stockholders'
Equity," "Consolidated Statements of Cash Flows," "Notes to Consolidated
Financial Statements," and "Five-Year Financial Summary" of Motorola's
Consolidated Financial Statements contained on pages F-35 through F-64 in the
appendix to Motorola's Proxy Statement for the 2001 annual meeting of
stockholders.
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The response to this Item required by Item 401 of Regulation S-K, with
respect to directors, incorporates by reference the information under the
caption "Nominees" on pages 2 through 4 of Motorola's Proxy Statement for the
2001 annual meeting of stockholders and, with respect to executive officers, is
contained in Part I hereof under the caption "Executive Officers of the
Registrant". The response to this Item required by Item 405 of Regulation S-K
incorporates by reference the information under the caption "Section 16(a)
Beneficial Ownership Reporting Compliance" on page 19 of Motorola's Proxy
Statement for the 2001 annual meeting of stockholders.
ITEM 11: EXECUTIVE COMPENSATION
The response to this Item incorporates by reference the information under
the caption "Director Compensation and Related Transactions" on pages 6 and 7 of
Motorola's Proxy Statement for the 2001 annual meeting of stockholders and
"Summary Compensation Table," "Stock Option Grants in 2000," "Aggregated Option
Exercises in 2000 and 2000 Year-End Option Values," "Long-Term Incentive Plans -
Awards in 2000," "Retirement Plans," and "Termination of Employment and Change
in Control Arrangements; Consulting Arrangement with Retiring Executive Officer"
on pages 10 through 13 of Motorola's Proxy Statement for the 2001 annual meeting
of stockholders.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The response to this Item incorporates by reference the information under
the caption "Ownership of Securities" on pages 8 and 9 of Motorola's Proxy
Statement for the 2001 annual meeting of stockholders.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The response to this Item incorporates by reference the relevant information
under the caption "Director Compensation and Related Transactions" on pages 6
and 7 of Motorola's Proxy Statement for the 2001 annual meeting of stockholders.
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PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
See Part II, Item 8 hereof.
2. Financial Statement Schedule and Auditors' Report
Title Schedule
Valuation and Qualifying Accounts......................................................II
All schedules omitted are inapplicable or the information required is
shown in the Consolidated Financial Statements or notes thereto. The
auditors' report of KPMG LLP with respect to the Financial Statement
Schedule is located at page 20.
3. Exhibits
Exhibits required to be attached by Item 601 of Regulation S-K are
listed in the Exhibit Index attached hereto, which is incorporated
herein by this reference. Following is a list of management contracts
and compensatory plans and arrangements required to be filed as
exhibits to this form by Item 14(c) hereof:
Motorola Performance Excellence Equals Rewards Plan ("PE=R")
Motorola Long Range Incentive Plan of 1994
Motorola Long Range Incentive Plan of 2000
Share Option Plan of 1982
Share Option Plan of 1991
Share Option Plan of 1996
Motorola Elected Officers Supplementary Retirement Plan
Executive Health Plan
Accidental Death and Dismemberment Insurance for PE=R Participants
Arrangement for Directors' Fees
Deferred Compensation Plan
Motorola Non-Employee Directors Stock Plan
Officers' Group Life Insurance Policy
Form of Termination Agreement
Policy Protecting Salary and Medical Benefits
Insurance Policy for Non-Employee Directors
Motorola Incentive Plan of 1998
Consultant Agreement with Gary L. Tooker
Consultant Agreement with Frederick T. Tucker
Motorola Omnibus Incentive Plan of 2000
Form of Motorola, Inc. Award Document - Terms and Conditions Related to
Employee Nonqualified Stock Options
(b) Reports on Form 8-K.
On November 7, 2000, Motorola filed an amendment on Form 8-K/A to a
Form 8-K dated March 23, 2000.
(c) Exhibits:
See Item 14(a)3 above.
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INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Motorola, Inc.
Under date of January 10, 2001, except as to Note 4, which is as of January
31, 2001, we reported on the consolidated balance sheets of Motorola, Inc. and
subsidiaries as of December 31, 2000 and 1999, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
years in the three-year period ended December 31, 2000, as contained in the 2000
proxy statement to stockholders. These consolidated financial statements and our
report thereon are incorporated by reference in the annual report on Form 10-K
for the year ended December 31, 2000. In connection with our audits of the
aforementioned consolidated financial statements, we also audited the related
financial statement schedule as listed in Part IV, Item 14(a)2. The financial
statement schedule is the responsibility of Motorola's management. Our
responsibility is to express an opinion on the financial statement schedule
based on our audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
KPMG LLP
Chicago, Illinois
January 10, 2001, except as to Note 4,
which is as of January 31, 2001
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SCHEDULE II
MOTOROLA, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED DECEMBER 31, 2000
(IN MILLIONS)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- -------- -------- -------- --------
Additions
---------------------------
Balance at Charged to Charged Balance at
beginning costs & to other end of
of period expenses accounts(6) Deductions period
---------- ---------- ----------- ---------- ----------
2000
Reorganization of Businesses .......... $ 40 $1,483 $ -- $1,249(1) $ 274
Allowance for Doubtful Accounts ....... $ 295 $ 87 $ -- $ 139(2) $ 243
Allowance for Losses on Commercial
Receivables .......................... $ 292 $ 113 $ (128) $ 44 $ 233
Product and Service Warranties ........ $ 379 $ 265 $ -- $ 276(3) $ 368
Customer Reserves ..................... $ 410 $ 324 $ -- $ 472(4) $ 262
Iridium Reserves ...................... $1,955 $ -- $ -- $1,426(5) $ 529
1999
Reorganization of Businesses .......... $ 666 $ -- $ (232) $ 394(1) $ 40
Allowance for Doubtful Accounts ....... $ 224 $ 200 $ -- $ 129(2) $ 295
Allowance for Losses on Commercial
Receivables .......................... $ 167 $ 125 $ -- $ -- $ 292
Product and Service Warranties ........ $ 382 $ 282 $ -- $ 285(3) $ 379
Customer Reserves ..................... $ 422 $ 500 $ -- $ 512(4) $ 410
Iridium Reserves ...................... $ 649 $2,069 $ -- $ 763(5) $1,955
1998
Reorganization of Businesses .......... $ 159 $1,980 $ (22) $1,451(1) $ 666
Allowance for Doubtful Accounts ....... $ 177 $ 140 $ -- $ 93(2) $ 224
Allowance for Losses on Commercial
Receivables .......................... $ -- $ 167 $ -- $ -- $ 167
Product and Service Warranties ........ $ 379 $ 267 $ -- $ 264(3) $ 382
Customer Reserves ..................... $ 602 $ 306 $ -- $ 486(4) $ 422
Iridium Reserves ...................... $ 554 $ 95 $ -- $ -- $ 649
------ ------ ------ ------ ------
(1) Reversal into income
(2) Accrual usage
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CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Motorola, Inc.
We consent to incorporation by reference in the registration statements on
Form S-8 (Nos. 33-59285, 333-03681, 333-12817, 333-51847, 333-65941, 333-82681,
333-94547, 333-88735, 333-36309, 333-37114 and 333-53120) of Motorola, Inc. of
our reports dated January 10, 2001, except as to Note 4, which is as of January
31, 2001, with respect to the consolidated balance sheets of Motorola, Inc. and
subsidiaries as of December 31, 2000 and 1999, and the related consolidated
statements of operations, stockholders' equity, and cash flows and the related
financial statement schedule for each of the years in the three-year period
ended December 31, 2000, which reports appear in or are incorporated by
reference in the annual report on Form 10-K of Motorola, Inc. for the year ended
December 31, 2000.
KPMG LLP
Chicago, Illinois
March 30, 2001
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SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, MOTOROLA, INC. HAS DULY CAUSED THIS AMENDED REPORT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
MOTOROLA, INC.
By: /s/ Christopher B. Galvin
--------------------------------
Christopher B. Galvin
Chairman of the Board and
Chief Executive Officer
March 9, 2001
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
AMENDED REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF
MOTOROLA, INC. AND IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Christopher B. Galvin Chairman of the Board and 3/9/01
- ----------------------------- Chief Executive Officer
Christopher B. Galvin (Principal Executive Officer)
/s/ Carl F. Koenemann Executive Vice President 3/9/01
- ----------------------------- and Chief Financial Officer
Carl F. Koenemann (Principal Financial Officer)
/s/ Anthony M. Knapp Senior Vice President 3/9/01
- ----------------------------- and Controller
Anthony M. Knapp Principal Accounting Officer)
/s/ Francesco Caio Director 3/9/01
- -----------------------------
Francesco Caio
/s/ Ronnie C. Chan Director 3/9/01
- -----------------------------
Ronnie C. Chan
/s/ H. Laurance Fuller Director 3/9/01
- -----------------------------
H. Laurance Fuller
/s/ Robert W. Galvin Director 3/9/01
- -----------------------------
Robert W. Galvin
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30
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Robert L. Growney Director 3/9/01
- --------------------------
Robert L. Growney
/s/ Anne P. Jones Director 3/9/01
- --------------------------
Anne P. Jones
/s/ Judy C. Lewent Director 3/9/01
- --------------------------
Judy C. Lewent
/s/ Dr. Walter E. Massey Director 3/9/01
- --------------------------
Dr. Walter E. Massey
/s/ Nicholas Negroponte Director 3/9/01
- --------------------------
Nicholas Negroponte
/s/ John E. Pepper, Jr. Director 3/9/01
- --------------------------
John E. Pepper, Jr.
/s/ Samuel C. Scott III Director 3/9/01
- --------------------------
Samuel C. Scott III
/s/ Gary L. Tooker Director 3/9/01
- --------------------------
Gary L. Tooker
/s/ B. Kenneth West Director 3/9/01
- --------------------------
B. Kenneth West
/s/ Dr. John A. White Director 3/9/01
- --------------------------
Dr. John A. White
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EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
3.1 Restated Certificate of Incorporation of Motorola, Inc., as
amended through May 3, 2000 (incorporated by reference to
Exhibit 3(i)(b) to Motorola's Quarterly Report on Form 10-Q
for the fiscal quarter ended April 1, 2000).
3.2 Certificate of Designations, Preferences and Rights of Junior
Participating Preferred Stock, Series B (incorporated by
reference to Exhibit 3.3 to Motorola's Registration Statement
on Form S-3 dated January 20, 1999 (Registration No.
333-70827)).
*3.3 By-Laws of Motorola, Inc., as amended through March 9, 2001.
4.1 Rights Agreement dated November 5, 1998 between Motorola,
Inc., and Harris Trust and Savings Bank, as Rights Agent
(incorporated by reference to Exhibit 1.1 to Amendment No. 1
to Motorola's Registration Statement on Form 8-A/A dated March
16, 1999).
4.2(a) Senior Indenture, dated as of May 1, 1995, between Harris
Trust and Savings Bank and Motorola, Inc. (incorporated by
reference to Exhibit 4(d) of the Registrant's Registration
Statement on Form S-3 dated September 25, 1995 (File No.
33-62911)).
*4.2(b) Instrument of Resignation, Appointment and Acceptance, dated
as of January 22, 2001, among Motorola, Inc., Bank One Trust
Company, N.A. and BNY Midwest Trust Company (as successor in
interest to Harris Trust and Savings Bank).
Instruments defining the rights of holders of long-term debt
of the registrant and of all subsidiaries for which
consolidated or unconsolidated financial statements are
required to be filed are being omitted pursuant to paragraph
(4)(iii)(A) of Item 601 of Regulation S-K. Registrant agrees
to furnish a copy of any such instrument to the Commission
upon request.
*10.1 Motorola Performance Excellence Equals Rewards ("PE=R"), as
amended, effective on January 1, 2000.
10.2(a) Motorola Long Range Incentive Plan of 1994, as amended through
February 4, 1998 (incorporated by reference to Exhibit 10.2 to
Motorola's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 27, 1998).
10.2(b) Motorola Long Range Incentive Plan of 2000 (incorporated by
reference to Exhibit 10.2 to Motorola's Quarterly Report on
Form 10-Q for the fiscal quarter ended September 30, 2000).
10.3 Share Option Plan of 1982, as amended through March 24, 1992
(incorporated by reference to Exhibit 10.3 to Motorola's
Annual Report on Form 10-K for the fiscal year ended December
31, 1990, Exhibit 10.2(a) to Motorola's Annual Report on Form
10-K for the fiscal year ended December 31, 1991 and Exhibit
10.3 to Motorola's Annual Report on Form 10-K for the fiscal
year ended December 31, 1992).
10.4 Share Option Plan of 1991, as amended through August 7, 1995
(incorporated by reference to Exhibit 10.4 to Motorola's
Annual Report on Form 10-K for the fiscal year ended December
31, 1993 and Exhibit 10.4 to Motorola's Report on Form 10-K
for the fiscal year ended December 31, 1995).
10.5 Resolutions Amending Sections 8 and 10(2) of the Share Option
Plan of 1982, and Resolutions Amending Sections 7 and 9(b) of
the Share Option Plan of 1991, effective August 15, 1996
(incorporated by reference to Exhibit 10.5 to Motorola's
Annual Report on Form 10-K for the fiscal year ended December
31, 1996).
10.6 Share Option Plan of 1996, as amended through May 7, 1997
(incorporated by reference to Exhibit 10 to Motorola's
Quarterly Report on Form 10-Q for the fiscal quarter ended
June 28, 1997).
*10.7 Motorola Elected Officers Supplementary Retirement Plan, as
amended through May 1, 2000.
10.8 Executive Health Plan (incorporated by reference to Exhibit
10.8 to Motorola's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996).
10.9 Accidental death and dismemberment insurance for PE=R
participants (incorporated by reference to Exhibit
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10.7 to Motorola's Annual Report on Form 10-K for the fiscal
year ended December 31, 1990).
10.10 Arrangement for directors' fees and retirement plan for
non-employee directors (description incorporated by reference
from pages 6 and 7 of Motorola's Proxy Statement for the 2001
annual meeting of stockholders).
*10.11 Motorola Management Deferred Compensation Plan, effective as
of January 1, 2001.
10.12 Motorola Non-Employee Directors Stock Plan, as amended and
restated on February 4, 1998 (incorporated by reference to
Exhibit 10.12 to Motorola's Quarterly Report on Form 10-Q for
the fiscal quarter ended June 27, 1998).
10.13 Officers' Group Life Insurance Policy (incorporated by
reference to Exhibit 10.10 to Motorola's Annual Report on Form
10-K for the fiscal year ended December 31, 1990).
10.14 Form of Termination Agreement in respect of a change in
control (incorporated by reference to Exhibit 10.15 to
Motorola's Annual Report on Form 10-K for the fiscal year
ended December 31, 1989).
10.15 Policy protecting salary and medical benefits of employees in
the event of an unsolicited change in control (incorporated by
reference to Exhibit 10.16 to Motorola's Annual Report on Form
10-K for the fiscal year ended December 31, 1990).
10.16 Insurance policy covering non-employee Directors (incorporated
by reference to the description on pages 6 and 7 of Motorola's
Proxy Statement for the 2001 annual meeting of stockholders
and to Exhibit 10.16 to Motorola's Annual Report on Form 10-K
for the fiscal year ended December 31, 1989).
10.17 Motorola Incentive Plan of 1998, as amended through May 2,
2000 (incorporated by reference to Exhibit 10.1 to Motorola's
Quarterly Report on Form 10-Q for the fiscal quarter ended
July 1, 2000).
10.18 Consultant Agreement dated September 30, 1999 between
Motorola, Inc. and Gary L. Tooker (incorporated by reference
to Exhibit 10 to Motorola's Quarterly Report on Form 10-Q for
the fiscal quarter ended October 2, 1999).
*10.19 Consultant Agreement dated February 15, 2001 between Motorola,
Inc. and Frederick T. Tucker.
10.20 Agreement and Plan of Merger dated September 14, 1999 between
Motorola, Inc., Lucerne Acquisition Corp. and General
Instrument Corporation (incorporated by reference to Exhibit
2.1 to Amendment No. 2 to Motorola's Registration Statement on
Form S-4 dated November 29, 1999).
10.21(a) Motorola Omnibus Incentive Plan of 2000, as amended through
June 2, 2000 (incorporated by reference to Exhibit 10.1 to
Motorola's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 2000).
*10.21(b) Form of Motorola, Inc. Award Document - Terms and Conditions
Related to Employee Nonqualified Stock Options, as of March
2001, relating to the Motorola Omnibus Incentive Plan of 2000.
*12 Statement regarding Computation of Ratio of Earnings to Fixed
Charges.
*21 Subsidiaries of Motorola.
23 Consent of KPMG LLP. See page 21 of the Annual Report on Form
10-K of which this Exhibit Index is a part.
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* Filed herewith
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