Motorola 2004 Annual Report Download - page 22

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Broadband Communications Segment
The Broadband Communications segment (""BCS'' or the ""segment'') designs, manufactures and sells a wide
variety of broadband products, including: (i) digital systems and set-top terminals for cable television and broadcast
networks, (ii) high speed data products, including cable modems and cable modem termination systems
(""CMTS''), as well as Internet Protocol (""IP'')-based telephony products, (iii) access network technology,
including hybrid Ñber coaxial network transmission systems and Ñber-to-the-premise (""FTTP'') transmission
systems, used by cable television operators, (iv) digital satellite television systems; (v) direct-to-home (""DTH'')
satellite networks and private networks for business communications, and (vi) high-speed data, video and voice
broadband systems over existing phone lines. In 2004, BCS net sales represented 7% of the Company's consolidated
net sales.
Principal Products and Services
The segment is a leading provider of end-to-end networks used in the cable television industry for the delivery
of video, voice and data services over hybrid Ñber coaxial networks. These broadband networks include products
used to transport programming by broadcasters, products used at the cable operator's headend (central oÇce) and
products used at the cable operator's outside transmission plant. We also sell a suite of interactive digital set-top
terminals for the end customer's home that enable advanced interactive entertainment and informational services,
including video-on-demand (""VOD''), digital video recording (""DVR''), Internet access, e-mail, e-commerce, chat
rooms, pay-per view, and decoding and processing of high deÑnition television (""HDTV'') to be transmitted over
networks using our technology and other IP services. Our interactive digital set-top terminals also deliver advanced
interactive services focused on digital video broadcast-compliant (""DVB-compliant'') markets around the world.
We also provide digital system control equipment, encoders, access control equipment and a wide range of digital
satellite receivers. Our digital business (set top boxes and video infrastructure equipment) accounted for
approximately 60% of our revenue in 2004 and is expected to account for a substantial portion of our revenues for
the foreseeable future.
Our Surfboard» family of cable modems delivers high-speed Internet access to subscribers over cable networks.
These Surfboard» products also include wireless networking devices with high-speed Internet access for a complete
home, small oÇce or small-to-medium enterprise communications system.
To complete the end-to-end broadband network system, we design and manufacture a diverse family of
broadband infrastructure access applications for broadband services including video, voice, and data
communications. These products include CMTS, headend products, ampliÑers, taps, passives and optoelectronics.
Our products are marketed primarily to cable television operators, satellite television programmers, and other
communications providers worldwide and are sold primarily by our sales personnel who are skilled in the
technology of these systems. We have also expanded our traditional distribution channels by selling directly to
consumers in a variety of retail markets. Through retail, we market and sell cable modems, cordless telephones,
home networking products and advanced digital set-top terminals. We have also expanded our product solutions
for speciÑc applications, including home and family monitoring.
Our Industry
Demand for our products depends primarily on: (i) capital spending by providers of broadband services for
constructing, rebuilding or upgrading their communications systems, and (ii) the marketing of advanced
communications services by those providers. The amount of spending by these providers, and therefore a majority
of our sales and proÑtability, are aÅected by a variety of factors, including: (i) general economic conditions;
(ii) the continuing trend of consolidation within the cable and telecommunications industries; (iii) the Ñnancial
condition of cable television system operators and alternative communications providers, including their access to
Ñnancing; (iv) the rate of digital penetration; (v) technological developments; (vi) standardization eÅorts that
impact the deployment of new equipment; and (vii) new legislation and regulations aÅecting the equipment sold by
the segment. In 2004, our customers increased their spending on our products, primarily due to the increase in
digital video and data subscribers and the deployment of advanced video platforms by cable operators for
HDTV/DVR applications.