Motorola 2008 Annual Report Download - page 47

•2008 Global Handset Market Share Estimated at 8%, based on Annual Handset Shipments of 100.1 Million
Units: We estimate our share of the global handset market in 2008 was approximately 8%, a decrease of
approximately 6 percentage points versus 2007. We shipped 100.1 million handsets in 2008, a 37% decrease
compared to shipments of 159.1 million handsets in 2007. We estimate our market share in the fourth quarter
of 2008 was approximately 6%, a decrease of approximately 6 percentage points versus the fourth quarter of
2007. We shipped 19.2 million handsets in the fourth quarter of 2008, a 53% decrease compared to
shipments of 40.9 million handsets in the fourth quarter of 2007.
•Digital Entertainment Device Shipments were 18.0 Million: We shipped 18.0 million digital entertainment
devices in 2008, an increase of 19% compared to shipments of 15.1 million units in 2007.
•Operating Cash Flow of $242 Million: We generated operating cash flow of $242 million in 2008,
compared to operating cash flow of $785 million in 2007.
What were the financial results for our three operating business segments in 2008?
•In Our Mobile Devices Business: Net sales were $12.1 billion in 2008, a decrease of 36% compared to
net sales of $19.0 billion in 2007. On a geographic basis, net sales decreased substantially in North
America, the Europe, Middle East and Africa region (“EMEA”), and Asia and, to a lesser extent, decreased
in Latin America. The decrease in net sales was primarily driven by a 37% decrease in unit shipments.
The segment incurred an operating loss of $2.2 billion in 2008, compared to an operating loss of
$1.2 billion in 2007. The increase in the operating loss was primarily due to a decrease in gross margin,
driven by: (i) the 36% decrease in net sales, (ii) excess inventory and other related charges of $370 million
in 2008 due to a decision to consolidate software and silicon platforms, and (iii) a $150 million charge in
2008 related to the settlement of a purchase commitment, partially offset by: (i) the absence in 2008 of a
$277 million charge for a legal settlement in 2007, and (ii) savings from supply chain cost-reduction
initiatives. The decrease in gross margin was partially offset by decreases in: (i) selling, general and
administrative (“SG&A”) expenses, primarily due to lower marketing expenses and savings from cost-
reduction initiatives, and (ii) research and development (“R&D”) expenditures, reflecting savings from cost-
reduction initiatives.
•In Our Home and Networks Mobility Business: Net sales were $10.1 billion in 2008, an increase of 1%
compared to net sales of $10.0 billion in 2007. On a geographic basis, net sales increased in Latin America
and Asia, and decreased in North America and EMEA. The increase in net sales primarily reflects a 16%
increase in net sales by the home business, partially offset by an 11% decrease in net sales by the networks
business.
Operating earnings were $918 million, an increase of 29% compared to operating earnings of
$709 million in 2007. The increase in operating earnings was primarily due to: (i) decreases in both SG&A
and R&D expenditures, primarily related to savings from cost-reduction initiatives, and (ii) a decrease in
reorganization of business charges, relating primarily to lower employee severance costs. These factors were
partially offset by a decrease in gross margin, primarily due to: (i) an unfavorable product mix, and (ii) the
absence of net sales by embedded communication computing group (“ECC”) that was divested at the end of
2007.
•In Our Enterprise Mobility Solutions Business: Net sales were $8.1 billion in 2008, an increase of 5%
compared to net sales of $7.7 billion in 2007. On a geographic basis, net sales increased in EMEA, Asia and
Latin America and decreased in North America. The increase in net sales reflects an 8% increase in net sales
to the government and public safety market, partially offset by a 2% decrease in net sales to the commercial
enterprise market.
Operating earnings were $1.5 billion, an increase of 23% compared to operating earnings of
$1.2 billion in 2007. The increase in operating earnings was primarily due to an increase in gross margin,
driven by: (i) the 5% increase in net sales, (ii) a favorable product mix, (iii) the absence in 2008 of an
inventory-related charge in connection with the acquisition of Symbol Technologies, Inc. (“Symbol”) during
the first quarter of 2007, and (iv) a decrease in SG&A expenses, primarily related to savings from cost-
reduction initiatives. The increase in gross margin was partially offset by increased R&D expenditures,
primarily due to developmental engineering expenditures for new product development and investment in
next-generation technologies.
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MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS