Motorola 2011 Annual Report Download - page 25

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We have completed a number of large divestitures over the last several years and have ongoing potential liability
associated with those transactions and the businesses we divested.
Over the last several years we have spun-off or sold a number of businesses, including Motorola Mobility and
our Networks business and we may divest other businesses in the future. In most of our divestitures we make
representations and warranties and agree to covenants relating to the business divested. We remain liable for a
period of time for breaches of representations, warranties and covenants and we also indemnify buyers in the event
of such breaches and for other specific risks. In addition, it is not unusual to remain liable for certain pre-closing
liabilities associated with the divested business, such as pension liabilities, taxes, environmental liabilities and
litigation. In certain situations, such as our spin-off transactions, we may retain ongoing risk in the event of a
liquidation or bankruptcy of the company we spun off, even if they assumed certain liabilities because they were
incurred when they were part of the Company. In addition, although we often assign contracts associated with the
divested business to a buyer in a divestiture, often that assignment will be subject to the consent of the contractual
counterparty, which may not be obtained or may be conditioned, resulting in the company remaining liable under
the contract. Even though we establish reserves for any expected ongoing liability associated with divested
businesses, those reserves may not be sufficient if unexpected liabilities arise and this could negatively impact our
financial condition and future results of operations.
Following the sale of our Networks infrastructure assets we retained certain promissory notes and other obligations
relating to vendor financing, but we no longer have a customer/vendor relationship with the borrowers, which may
put us at increased risk for defaults.
Certain of the customers of our former Networks business who purchased large infrastructure systems
requested that their suppliers provide financing in connection with equipment purchases. We retained the
promissory notes and other obligations related to such vendor financing that was consummated up to the closing of
the sale of our Networks business on April 29, 2011. As of December 31, 2011, the outstanding amount was
approximately $130 million. As we no longer have a customer/vendor relationship with the borrowers following the
sale we could be at increased risk of a default by such customers, as they may choose to pay their current vendors
before they pay us. In addition, a majority of this debt is issued by former customers operating in the Middle East
and could be negatively impacted by political unrest in this region. Finally, we retained certain recourse obligations
with respect to a portion of the promissory notes and other obligations which we sold in 2011 in the event those
notes and obligations are uncollectable as a result of the structure of our transaction with NSN.
We may be required to record additional goodwill or other long-lived asset impairment charges, which could result
in an additional significant charge to earnings.
Under generally accepted accounting principles, we review our long-lived assets for impairment when events or
changes in circumstances indicate the carrying value may not be recoverable. Goodwill is tested for impairment at
least annually. Factors that may be considered in assessing whether goodwill or intangible assets may not be
recoverable include a decline in our stock price or market capitalization, reduced estimates of future cash flows and
slower growth rates in our industry. No goodwill or long-lived assets impairment charges were recorded during
2011, 2010 or 2009. Declines in our stock price or reductions in our future cash flow estimates and future operating
results may require us to record significant additional goodwill or other long-lived asset impairment charges in our
financial statements in future periods, which could negatively impact our financial results.
Changes in our operations or sales outside the U.S. markets could result in lost benefits in impacted countries and
increase our cost of doing business.
We have entered into various agreements with non-U.S. governments, agencies or similar organizations under
which we receive certain benefits relating to its operations and/or sales in the jurisdiction. If our circumstances
change, and operations or sales are not at levels originally anticipated, we may be at risk of having to reimburse
benefits already granted, and losing some or all of these benefits and increasing our cost of doing business.
Our success depends in part upon our ability to attract, retain and prepare succession plans for senior management
and key employees.
The performance of our CEO, senior management and other key employees is critical to our success. If we are
unable to retain talented, highly qualified senior management and other key employees or attract them when