Motorola 2012 Annual Report Download - page 24

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need to develop an alternate or additional brand. Motorola Mobility was acquired by Google in May 2012, which results in
Google having effective control over the Motorola Marks.
In the event either Motorola Mobility or Google is acquired, the acquiring entity would gain control of the Motorola
Marks. In addition, neither Motorola Mobility nor Google are prohibited from selling the Motorola Marks. In the event of a
liquidation of Motorola Mobility or the then owner of the Motorola Marks, it is possible that a bankruptcy court would permit
the Motorola Marks to be assigned to a third-party. While our right to use the Motorola Marks under our license should
continue in our specified field of use in such situations, it is possible that we could be party to a license arrangement with a
third-party whose interests are incompatible with ours, thereby potentially making the license arrangement difficult to
administer, and increasing the costs and risks associated with sharing the Motorola Marks. In addition, there is a risk that, in the
event of a bankruptcy of Motorola Mobility or the then owner of the Motorola Marks, Motorola Mobility, the then owner or its
bankruptcy trustee may attempt to reject the license, or a bankruptcy court may refuse to uphold the license or certain of its
terms. Such a loss could negatively affect our business, results of operations and financial condition.
We may continue to make strategic acquisitions of other companies or businesses and these acquisitions introduce significant
risks and uncertainties, including risks related to integrating the acquired businesses and achieving benefits from the
acquisitions.
In order to position ourselves to take advantage of growth opportunities or to meet other strategic needs such as product
or technology gaps, we have made, and expect to continue to make, strategic acquisitions that involve significant risks and
uncertainties, such as the acquisition of Psion PLC. These risks and uncertainties include: (i) the difficulty in integrating newly-
acquired businesses and operations in an efficient and effective manner; (ii) the challenges in achieving strategic objectives,
cost savings and other benefits from acquisitions; (iii) the risk that our markets do not evolve as anticipated and that the
technologies acquired do not prove to be those needed to be successful in those markets; (iv) the potential loss of key
employees of the acquired businesses; (v) the risk of diverting the attention of senior management from our operations; (vi) the
risks of entering new markets in which we have limited experience; (vii) risks associated with integrating financial reporting
and internal control systems; (viii) difficulties in expanding information technology systems and other business processes to
accommodate the acquired businesses; and (ix) future impairments of goodwill of an acquired business. In particular, failure to
achieve targeted cost and revenue synergies could negatively impact our business performance.
Certain acquisition candidates in the industries in which we participate may carry higher relative valuations (based on
earnings multiples) than we do. This is particularly evident in software and services businesses. Acquiring a business that has a
higher valuation than Motorola Solutions may be dilutive to our earnings, especially if the acquired business has little or no
revenue. In addition, we may not pursue opportunities that are highly dilutive to near-term earnings.
Key employees of acquired businesses may receive substantial value in connection with a transaction in the form of
change-in-control agreements, acceleration of stock options and the lifting of restrictions on other equity-based compensation
rights. To retain such employees and integrate the acquired business, we may offer additional retention incentives, but it may
still be difficult to retain certain key employees.
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. We may complete future divestitures with similar risks.
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 connection with many of our divestitures we 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 risk for pre-closing liabilities 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 and a third-party may not have consented to the assumption. 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. In addition, 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. 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.
As part of our transformation efforts over the last several years we have outsourced portions of certain business operations like
IT, manufacturing, repair and distribution and may outsource additional business operations which limits our control over
these business operations and exposes us to additional risk as a result of the actions of our outsource partners.
As we outsource more of our business operations we are not able to directly control these activities. Our outsource
partners may not prioritize our business over that of their other customers and they may not meet our desired level of service,
cost reductions or other metrics. In some cases their actions may result in our being found to be in violation of laws or