3M 2007 Annual Report Download - page 11

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effort for future growth. Track and Trace has a growing array of applications – from tracking packages to managing
medical and legal records.
This segment’s products include certain maintenance-free and reusable respirators, personal protective equipment,
electronic surveillance products, films that protect against counterfeiting, and reflective materials that are widely used on
apparel, footwear and accessories, enhancing visibility in low-light situations. Other products include theft protection
systems for libraries and library patron self-checkout systems; spill-control sorbents; Thinsulate™ Insulation and
Thinsulate™ Lite Loft™ Insulation; 3M™ Scotchtint™ Window Film for buildings; 3M™ Ultra Safety and Security
Window Film for property and personal protection during destructive weather conditions; nonwoven abrasive materials
for floor maintenance and commercial cleaning; floor matting; natural and color-coated mineral granules for asphalt
shingles; and supply chain execution software solutions.
Electro and Communications Business: The Electro and Communications segment serves the electrical, electronics and
communications industries, including electrical utilities; electrical construction, maintenance and repair; original
equipment manufacturer (OEM) electrical and electronics; computers and peripherals; consumer electronics;
telecommunications central office, outside plant and enterprise; as well as aerospace, military, automotive and medical
markets; with products that enable the efficient transmission of electrical power and speed the delivery of information and
ideas. Products include electronic and interconnect solutions, microinterconnect systems, high-performance fluids, high-
temperature and display tapes, telecommunications products, electrical products, and visual systems products.
Major electronic and electrical products include packaging and interconnection devices; high-performance fluids used in
the manufacture of computer chips, and for cooling electronics and lubricating computer hard disk drives; high-
temperature and display tapes; insulating materials, including pressure-sensitive tapes and resins; and related items.
3M™ Flexible Circuits use electronic packaging and interconnection technology, providing more connections in less
space, and are used in ink-jet print cartridges, cell phones and electronic devices. This segment serves the world’s
telecommunications companies with a wide array of products for fiber-optic and copper-based telecommunications
systems for rapid deployment in fixed and wireless networks. The 3M™ Aluminum Conductor Composite Reinforced
(ACCR) electrical power cable, with an aluminum-based metal matrix at its core, increases transmission capacity for
existing power lines. Visual communication products serve the world’s office and education markets with overhead
projectors and transparency films, as well as equipment and materials for electronic and multimedia presentations.
Distribution
3M products are sold through numerous distribution channels, including directly to users and through numerous
wholesalers, retailers, jobbers, distributors and dealers in a wide variety of trades in many countries around the world.
Management believes the confidence of wholesalers, retailers, jobbers, distributors and dealers in 3M and its products –
a confidence developed through long association with skilled marketing and sales representatives – has contributed
significantly to 3M’s position in the marketplace and to its growth. 3M has 157 sales offices worldwide, with nine in the
United States and 148 internationally.
Research and Patents
Research and product development constitutes an important part of 3M’s activities and has been a major driver of 3M’s
sales growth. Research, development and related expenses totaled $1.368 billion in 2007, $1.522 billion in 2006 and
$1.274 billion in 2005. The global branded pharmaceuticals business, which was divested in December 2006 and
January 2007, incurred research, development and related expenses of approximately $120 million in 2006 and $142
million in 2005. The 2006 amount also included a $95 million in-process research and development charge (discussed in
Note 2) and $75 million in restructuring actions (Note 4). Research and development, covering basic scientific research
and the application of scientific advances in the development of new and improved products and their uses, totaled $788
million in 2007, compared to $943 million in 2006, decreasing due to the $95 million for purchased in-process research
and development discussed above and also due to the pharmaceuticals business divestiture. Research and development
expenses totaled $818 million in 2005. Related expenses primarily include technical support provided by 3M to existing
customers who are using 3M products, and the costs of internally developed patents.
The Company’s products are sold around the world under various trademarks that are important to the Company. The
Company also owns, or holds licenses to use, numerous U.S. and foreign patents. The Company’s research and
development activities generate a steady stream of inventions that are covered by new patents. Patents applicable to
specific products extend for varying periods according to the date of patent application filing or patent grant and the legal
term of patents in the various countries where patent protection is obtained. The actual protection afforded by a patent,
which can vary from country to country, depends upon the type of patent, the scope of its coverage and the availability of
legal remedies in the country.
The Company believes that its patents provide an important competitive advantage in many of its businesses. In general,
no single patent or group of related patents is in itself essential to the Company as a whole or to any of the Company’s