Motorola 2008 Annual Report Download - page 27

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. Our success depends, 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 our competitors. The research and
development of new, technologically-advanced products is a complex and uncertain process requiring high levels of
innovation and investment, as well as the accurate anticipation of technology and market trends. We may focus
our resources on technologies that do not become widely accepted or are not commercially viable. In addition, our
products may contain defects or errors that are detected only after deployment. If our products are not competitive
or do not work properly, our business will suffer.
Our results are subject to risks related to our significant investment in developing and introducing new
products, such as: advanced wireless handsets, including smartphones; WiMAX, LTE and other advanced
technologies for wireless broadband networks; products for transmission of telephony and high-speed data over
hybrid fiber coaxial cable systems; integrated digital radios; and integrated public safety systems. These risks
include: (i) difficulties and delays in the development, production, testing and marketing of products; (ii) customer
acceptance of products; (iii) the development of, approval and compliance with industry standards; (iv) the
significant amount of resources we must devote to the development of new technology; and (v) the ability to
differentiate our products and compete with other companies in the same markets.
We face a number of risks related to the ongoing financial crisis and severe tightening in the global credit markets.
The ongoing global financial crisis affecting the banking system and financial markets has resulted in a severe
tightening in the worldwide credit markets, a low level of liquidity in many financial markets and extreme
volatility in credit and equity markets. This financial crisis has impacted, and could continue to impact, Motorola’s
business in a number of ways, including:
•Potential Deferment or Cancellation of Purchases and Orders by Customers: Uncertainty about current
and future global economic conditions may cause, and in some cases has caused, consumers, businesses and
governments to defer or cancel purchases in response to tighter credit, decreased cash availability and
declining consumer confidence. If future demand for our products declines, it will adversely impact our
financial results.
•Customers’ Inability to Obtain Financing to Make Purchases from Motorola and/or Maintain Their
Business: Some of our customers require substantial financing in order to fund their operations and make
purchases from Motorola. The inability of these customers to obtain sufficient credit to finance purchases of
our products and/or meet their payment obligations to us could have, and in some cases has had, an adverse
impact on our financial results. In addition, if the financial crisis results in insolvencies for our customers, it
will adversely impact our financial results.
•Increased Requests by Customers for Vendor Financing by Motorola: Certain of the Company’s customers,
particularly, but not limited to, those who purchase large infrastructure systems, request that their suppliers
provide financing in connection with equipment purchases. In response to the recent tightening in the credit
markets, these types of requests continue to increase in volume and scope. Motorola has increased its
commitments to provide financing in light of these requests and a continuation of the current credit crisis
could force Motorola to choose between further increasing its level of vendor financing or potentially losing
sales to these customers.
•Negative Impact from Increased Financial Pressures on Third-Party Dealers, Distributors and Retailers: A
number of our businesses make sales in certain regions through third-party dealers, distributors and
retailers. Although many of these third parties have significant operations and maintain access to available
credit, others are smaller and more likely to be impacted by the significant decrease in available credit that
has resulted from the current financial crisis. If credit pressures or other financial difficulties result in
insolvency for important third parties and Motorola is unable to successfully transition end-customers to
purchase our products from other third parties or from us directly, it will adversely impact our financial
results.
•Negative Impact from Increased Financial Pressures on Key Suppliers: Our ability to meet customers’
demands depends, in part, on our ability to obtain timely and adequate delivery of quality materials, parts
and components from our suppliers. Certain of our components are available only from a single source or
limited sources. If certain key suppliers were to become capacity constrained or insolvent as a result of the
financial crisis, it could result in a reduction or interruption in supplies or an increase in the price of
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