Motorola 2005 Annual Report Download - page 20

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The segment's broadband networks include products used to transport programming by broadcasters and
programmers, products used at the cable operator's and telephone carrier's headends (central office) and products
used at the cable operator's outside transmission plant. These products include digital encoders, multiplexers,
satellite receivers/transcoders, content encryption and access control systems, cable modem termination systems
(""CMTS''), amplifiers, taps, passives and optoelectronics.
Our interactive digital set-top boxes for the end customer's home 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-definition television (""HD'').
Our interactive digital set-top boxes 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 65% of the segment's revenue in 2005 and
is expected to account for a substantial portion of the segment's revenues for the foreseeable future.
Our cable modems deliver high-speed Internet access to subscribers over cable networks. These products also
include wireless networking devices with high-speed Internet access for a complete home, small office or small-to-
medium enterprise communications system. Our products also include voice gateways and cable modems with
embedded voice gateways to enable voice communications over IP using broadband networks.
Our products are marketed primarily to cable television operators, satellite television programmers, telephone
carriers and other communications providers worldwide and are sold primarily by our skilled sales personnel. 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 primarily cable modems, cordless telephones and advanced digital set-
top boxes.
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 profitability, are affected by a variety of factors, including: (i) general economic conditions,
(ii) the continuing trend of consolidation within the cable and telecommunications industries, (iii) the financial
condition of cable television system operators and alternative communications providers, including their access to
financing, (iv) the rate of digital penetration, (v) technological developments, (vi) standardization efforts that
impact the deployment of new equipment, and (vii) new legislation and regulations affecting the equipment sold by
the segment. In 2005, 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
HD/DVR applications.
Our Strategy
Our strategy is to be the global leader in broadband connected home solutions and services, enabling
customers to be seamlessly informed, connected and entertained. We continue to focus on our strategy to innovate
and enhance our end-to-end network portfolio, provide for convergence of services and applications across delivery
platforms within the home and develop new services that leverage our platforms. We are focused on accelerating
the rate of digital penetration by broadband operators in North America through the introduction of an enhanced
suite of digital set-top boxes, including more cost-effective products designed to increase the number of set-top
boxes per household, as well as higher-end products for advanced services, including supporting the growing HD
and DVR markets. During 2005, we shipped the first digital set-top boxes capable of supporting integrated
exchange of stored content among devices in a consumer's home.
We also continue to focus on growing our business in regions outside of North America, including the
development of digital video products compliant with technology required in these regions. During 2005, the
segment launched digital video in Chile with VTR, provided interactive digital terrestrial receivers for use in Italy
and provided end-to-end equipment to support the launch of the first digital cable system in Hungary. We have
also expanded our relationship with Cablevision in Mexico, adding DVRs to their service portfolio.