Motorola 2006 Annual Report Download - page 22

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14
Our Facilities/Manufacturing
Our headquarters are located in Horsham, Pennsylvania. We have several offices throughout North America,
Europe, Latin America and Asia, and we operate manufacturing facilities in Taipei, Taiwan and Nogales, Mexico.
We also use contract manufacturers, primarily in China, for a portion of our cable modem/voice module
production in order to enhance our ability to lower our costs and deliver products that meet consumer demand.
The amount of this activity has increased slightly throughout 2006 and is projected to increase further in future
years.
Other Information
2006 Change in Organizational Structure. Effective as of the second quarter of 2006, the automotive
electronics business was presented as a discontinued operation and the segments were realigned into three operating
business groups: (i) Mobile Devices, (ii) Networks and Enterprise, and (iii) Connected Home Solutions.
Financial Information About Segments. The response to this section of Item 1 incorporates by reference
Note 11, ""Information by Segment and Geographic Region,'' of Part II, Item 8: Financial Statements and
Supplementary Data of this document.
Customers. Motorola has several large customers, the loss of one or more of which could have a material
adverse effect on the Company. Motorola's largest end customers (including sales through distributors) are Sprint
Nextel, China Mobile, Verizon, Cingular and T-Mobile. No single customer accounted for more than 10% of the
Company's net sales in 2006.
Approximately 1% of Motorola's net sales in 2006 were to 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, reviews aspects of its government contracting operations,
and, where appropriate, takes corrective actions and makes voluntary disclosures to the U.S. Government. These
audits and investigations could adversely affect Motorola's ability to obtain new business from the
U.S. Government.
Backlog. Motorola's aggregate backlog position for all Motorola segments, as of the end of the last two
fiscal years was approximately as follows:
December 31, 2006ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $6.6 billion
December 31, 2005ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $7.5 billion
Except as previously discussed in this Item 1, the orders supporting the 2006 backlog amounts shown in the
foregoing table are believed to be generally firm, and approximately 90% of the backlog on hand at December 31,
2006 is expected to be recognized as revenue in 2007. The forward-looking estimate of the firmness of such orders
is subject to future events that may cause the amount recognized to change.
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 (""R&D'') 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 R&D 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.
R&D expenditures relating to new product development or product improvement were $4.1 billion in 2006,
compared to $3.6 billion in 2005 and $3.3 billion in 2004. R&D expenditures increased 14% in 2006 as compared
to 2005, after increasing 9% in 2005 as compared to 2004. Motorola continues to believe that a strong commitment