Motorola 2010 Annual Report Download - page 43

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Operating earnings were $949 million in 2010, compared to operating earnings of $736 million in 2009. The
increase in operating earnings was primarily due to an increase in gross margin and gross margin percentage,
driven by a favorable product mix. Additionally, the segment had lower expenditures as a result of cost-
reduction activities, specifically R&D.
•In the Mobile Devices Business: Net sales were $7.8 billion in 2010, an increase of 9% compared to net sales
of $7.1 billion in 2009. On a geographic basis, net sales increased in North America, Asia and the Europe,
Middle East and Africa region (“EMEA”), partially offset by decreased net sales in Latin America. The
segment incurred an operating loss of $76 million in 2010, compared to an operating loss of $1.2 billion in
2009.
•In the Home Business: Net sales were $3.6 billion in 2010, a decrease of 7% compared to net sales of
$3.9 billion in 2009. On a geographic basis, net sales decreased in North America, Asia and EMEA and
increased in Latin America. The segment had operating earnings of $152 million in 2010, compared to
operating earnings of $16 million in 2009.
What were our major challenges and accomplishments in 2010?
•In our Enterprise Mobility Solutions Business: In 2010, sales in the Enterprise Mobility Solutions business
were higher than in 2009. This was primarily due to improved demand within the retail markets served,
resulting from improved economic conditions. Enterprise Mobility Solutions improved operating margin and
generated improved operating cash flow. Additionally, the Enterprise Mobility Solutions business has
historically worked to rebalance its portfolio, shedding low margin and non-core businesses. In 2010, the
segment divested its Israeli-based wireless networks operator.
During the year, the segment was able to overcome worldwide supply shortages and increased lead times to
meet demand for our product. Despite the budget challenges facing many of the U.S. governmental
customers, demand for our products and solutions by customers in the government and public safety market
increased as compared to 2009. In 2010, the segment’s continued commitment to quality, enhancements to
our comprehensive portfolio, and a strong customer base contributed to higher sales to our U.S.
governmental customers.
As a result of our continued strong commitment to R&D, the year brought many new enhancements to our
product portfolio. We expanded our APX™family of products with additional mobile and portable radios,
including radios designed for extreme situations and single-band users and the first encrypted mission-critical
Bluetooth earpiece, enabling secure communications when paired with our APX portable radios. We also
introduced the industry’s first TETRA wideband data capable mobile radio and the world’s smallest single
unit data capable base station, offering a cost-effective solution for expanding coverage. We expanded our
mobile computing portfolio with the MC65, a compact, rugged enterprise mobile computer with integrated
GPS and data capture. The segment introduced the smallest and lightest enterprise mobile computing device
in our mobile computing platform, the ES400. The ES400 features a customizable user interface, integrated
voice and data capabilities, as well as mobile computing and scanning functionality. We were awarded the
first phase of a 700 MHz LTE network for public safety across multiple counties in the San Francisco Bay
area. This agreement represents a first step in deploying a unified state-of-the-art private mission-critical
broadband multimedia network.
•In the Mobile Devices Business: The wireless handset market grew in 2010 and remained intensely
competitive. The growth in the market was driven primarily by increasing demand for smartphones. To
address this segment of the handset market, the segment focused on enhancing its smartphone portfolio.
During the year, the segment launched 23 smartphones in markets around the world and shipped
13.7 million smartphones compared to two million in 2009. In addition, the segment launched a number of
feature phones, including those based on the iDEN technology, and introduced several voice-centric devices
to meet specific market requirements, primarily in emerging markets. However, the segment continued to
face challenges as it transitioned its product portfolio. From a financial perspective, the Mobile Devices’ sales
grew in 2010 compared to 2009, the first year of annual sales growth since 2006. The segment also
significantly reduced its operating loss compared to 2009 by shifting its overall product mix to higher margin
smartphones from lower margin feature phones, improving supply chain efficiency, and reducing operating
expenses.