Motorola 2005 Annual Report Download - page 19

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12
of its patents to third parties and generates modest revenue from these licenses. Motorola is also licensed to use
certain patents owned by others. Royalty and licensing fees vary from year to year and are subject to the terms of
the agreements and sales volumes of the products subject to licenses. Reference is made to the material under the
heading ""Other Information'' for information relating to patents and trademarks and research and development
activities with respect to this segment.
Inventory, Raw Materials, Right of Return and Seasonality
The segment's practice is to carry reasonable amounts of inventory in order to meet customer delivery
requirements in a manner consistent with industry standards. At the end of 2005, the segment had a slightly higher
inventory balance as compared to the end of 2004, primarily as result of growth in its Wireline Networks and
Embedded Communications Computing businesses.
Availability of materials and components required by the segment is relatively dependable, but fluctuations in
supply and market demand could cause selective shortages and affect results. We currently source certain materials
and components from single vendors. Any material disruption from a single-source vendor may have a material
adverse impact on our results of operations.
Natural gas, electricity and, to a lesser extent, oil are primary sources of energy for the segment's operations,
which are currently in generally adequate supply for the segment's operations. In addition, the cost to operate our
facilities and freight costs are dependent on world oil prices. A substantial increase in worldwide oil prices could
have a negative impact on our results of operations. Labor is generally available in reasonable proximity to the
segment's manufacturing facilities. However, difficulties in obtaining any of these items could affect the segment's
results.
Generally the segment's contracts do not include a right of return other than for standard warranty provisions.
For new product introductions, we may enter into milestone contracts wherein if we do not achieve the milestones,
the product could be returned.
The business does not have seasonal patterns for sales.
Our Facilities/Manufacturing
Our headquarters are located in Arlington Heights, Illinois. Major design centers include Arlington Heights and
Schaumburg, Illinois; Chandler and Tempe, Arizona; Fort Worth, Texas; Tewksbury and Andover, Massachusetts;
Cork, Ireland; Bangalore, India; and Swindon, U.K. We operate major manufacturing facilities in Schaumburg,
Illinois; Fort Worth, Texas; Hangzhou and Tianjin, China; Swindon, U.K.; Munich, Germany and Nogales, Mexico.
A majority of our manufacturing is conducted in China, with nearly 100% of printed circuit board assembly for the
segment performed by third-party manufacturers in China.
Connected Home Solutions Segment
The Connected Home Solutions segment (the ""segment'') designs, manufactures and sells a wide variety of
broadband products, including: (i) digital systems and set-top boxes for cable television, Internet Protocol (""IP'')
video and broadcast networks, (ii) high speed data products, including cable modems and cable modem
termination systems (""CMTS''), and IP-based telephony products, (iii) hybrid fiber coaxial network transmission
systems used by cable television operators, (iv) digital satellite program distribution systems, (v) direct-to-home
(""DTH'') satellite networks and private networks for business communications, and (vi) advanced video
communication products. In 2005, the segment's net sales represented 8% of the Company's consolidated net sales.
Principal Products and Services
The segment is a leading provider of end-to-end networks used for the delivery of video, voice and data
services over hybrid fiber coaxial networks. Within the home, the segment provides interactive digital set-top boxes
and Internet gateways that provide access to entertainment and two-way communications services. Our in-home
products support mobility of content between devices within the home, integrated access to broadcast, Internet and
personal content, and allow access to wireline and wireless services using integrated devices within the home.