Motorola 2010 Annual Report Download - page 62

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54
approximately 6% in 2009, unit shipments by the segment decreased by a significantly higher percentage than the
overall market decline.
In 2009, ASP increased approximately 8% compared to 2008. The overall increase in ASP was driven primarily
by changes in the product tier and geographic mix of sales, particularly in the fourth quarter of 2009 when the
segment shipped approximately two million Android-powered smartphones. By comparison, ASP was flat in 2008.
ASP is impacted by numerous factors, including product mix, geographic mix, market conditions and competitive
product offerings, and ASP trends often vary over time.
Home Segment
In 2010, the segment’s net sales represented 19% of the Company’s consolidated net sales, compared to 21% in
2009 and 19% in 2008.
Years Ended December 31 Percent Change
(Dollars in millions) 2010 2009 2008 2010—2009 2009—2008
Segment net sales $3,641 $3,904 $4,912 (7)% 21%
Operating earnings 152 16 340 *** 95%
*** Percentage change not meaningful.
Segment Results—2010 Compared to 2009
In 2010, the segment’s net sales were $3.6 billion, a decrease of 7% compared to net sales of $3.9 billion in
2009. The 7% decrease in net sales in the Home segment is primarily attributable to a 12% decrease in net sales
from set-top boxes, reflecting: (i) a 5% decrease in shipments of set-top boxes, and (ii) lower ASPs. The decrease in
net sales from set-top boxes was partially offset by higher net sales from video and access infrastructure equipment.
Shipments of standard definition (“SD”) set-top units decreased significantly, primarily due to lower shipments
to large telecommunication and cable operators in North America as a result of lower demand. The decrease in unit
shipments of SD set-tops was partially offset by an increase in HD and HD/digital video recorder together,
(“HD/DVR”) set-top unit shipments due to increased demand for HD and DVR capabilities.
On a geographic basis, net sales decreased in North America, Asia and EMEA and increased in Latin America.
Net sales in North America continued to comprise a significant portion of the segment’s business, accounting for
approximately 75% of the segment’s net sales in 2010, compared to approximately 78% in 2009.
The segment had operating earnings of $152 million in 2010, compared to operating earnings of $16 million in
2009. The increase in operating earnings was primarily due to (i) a decrease in R&D expenditures, reflecting savings
from cost-reduction initiatives, (ii) an increase in gross margin, driven by a favorable product margin mix across
product lines, and (iii) a $75 million non-recurring charge to settle a legal matter during 2009. As a percentage of
net revenues in 2010 as compared to 2009, gross margin and SG&A expenses increased while R&D expenditures
decreased.
Segment Results—2009 Compared to 2008
In 2009, the segment’s net sales were $3.9 billion, a decrease of 21% compared to net sales of $4.9 billion in
2008. The 21% decrease in net sales in the Home business was primarily driven by: (i) an 18% decrease in
shipments of set-top boxes, primarily due to lower shipments to large cable and telecommunications operators in
North America as a result of macroeconomic conditions, and (ii) a lower ASP due to an unfavorable shift in product
mix.
Net sales from SD set-top boxes and HD set-top boxes decreased significantly, primarily due to lower
shipments to large telecommunication and cable operators in North America as a result of lower demand. The
decrease in unit shipments of SD and HD set-top boxes was partially offset by (i) an increase in HD/DVR unit
shipments due to increased demand for DVR capabilities, and (ii) an increase in IP based set-top boxes.
On a geographic basis, the 21% decrease in net sales was primarily driven by lower net sales in North America
and Latin America, and higher net sales in EMEA and Asia. Net sales in North America accounted for
approximately 78% of the segment’s total net sales in 2009, compared to approximately 81% of the segment’s total
net sales in 2008.