Motorola 2005 Annual Report Download - page 47

40 MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
‚In Connected Home Solutions: Net sales increased $551 million, or 25%, to $2.8 billion and operating
earnings increased by 27% to $185 million, primarily driven by increases in both ASP and unit shipments of
digital set-top boxes. The segment experienced an increase in net sales in the North America, Latin America
and Asia regions, which was partially offset by a slight decrease in net sales in the EMEA region. Net sales
of digital set-top boxes increased 34%, driven by a product-mix shift towards higher-end products,
particularly HD/DVR set-top boxes. The segment continued to be the worldwide leader in market share
for digital cable set-top boxes. Net sales of cable modems increased 9%, primarily due to an increase in
cable modem unit shipments, which was partially offset by the decline in ASP for cable modems. The
segment retained its leading worldwide market share in cable modems.
What were our other major accomplishments in 2005?
In 2005, we were focused first and foremost on increasing profitable sales and growing market share. We
realigned our structure to better enable our vision of seamless mobility, now serving our customers through four
business units: Mobile Devices, Government and Enterprise Mobility Solutions, Networks and Connected Home
Solutions.
‚Mobile Devices: During 2005, Motorola expanded its global market share in mobile handsets to
approximately 18%. The Company is a strong, profitable and growing #2. For example, during the year,
Motorola grew unit shipments faster than the market and faster than all competitors. Motorola ended 2005
as the market-share leader in North America and Latin America, as the clear #2 in Europe, as the new #2
in North Asia, and as the rapidly growing #3 in the world's high-growth markets. In India, the Company
announced a new distribution partnership with Bharti to expand and extend Motorola's reach to consumers.
Around the world, Motorola is driving profitable and sustainable growth through a strategy that focuses on
design and the ""re-invention'' of each of the six primary handset form factors: clamshell, candy bar, PDA,
QWERTY, slider and rotator.
Motorola launched this strategy at the end of 2004 with MOTORAZR, using the innovative clamshell
design to strengthen the brand, and transformed 2005 into the ""Year of the RAZR''. RAZR is available
worldwide across the leading mobile-interface technologies: GSM, GPRS, UMTS, CDMA 1X, EV-DO and
Dual-Mode UMA. Additionally, Motorola built consumer excitement and demand for MOTORAZR with
an expanding series of highly sought after fashionable colors from silver to black, blue, three shades of pink
and the exclusive Dolce & Gabbana gold edition. Since its launch, Motorola has sold more than 23 million
RAZRs.
Motorola expanded the ultra-thin platform in 2005 to include an additional clamshell Ì the fashionable
Motorola PEBL U6 and the game-changing candy-bar design known as SLVR. In addition to great design,
Motorola is delivering compelling mobile experiences from mobile music and mobile imaging to mobile
search and hands-free/wire-free seamless mobility. For example, during 2005, Motorola launched ""mobile
music 1.0'' with Motorola ROKR E1 Ì the world's first iTunes-enabled mobile handset. The Company also
created a new category of wireless wearables Ì joining forces with brands such as Burton for a Bluetooth-
enabled, mobile music winter-sports jacket and with Oakley to create a new category of wireless, Bluetooth-
enabled eyewear with MOTORAZR sunglasses.
Additionally, Motorola is expanding to markets that have previously been underserved. In February
2005, the GSM Association (""GSMA'') named Motorola as its partner in the GSMA's drive to ""Connect the
Unconnected'' with the Emerging Market Handset program. The program focuses on enabling economic and
social development by providing affordable, high-quality access to mobile communications in such markets
as India, the Philippines, Indonesia and Africa. By the end of 2006, Motorola and the GSMA expect to have
connected more than 20 million people for whom wireless communications had previously been only an
unaffordable and unattainable dream.
‚Government and Enterprise Mobility Solutions: The Government and Enterprise Mobility Solutions
business once again delivered solid results in 2005, solidifying its leadership in the markets it serves.
Motorola remains the market leader in embedded telematics systems and is #1 in mission-critical wireless
communications systems and two-way radio systems. In 2005, we introduced our first entry into the
commercial, off-the-shelf rugged handheld mobile computing market.
‚Networks: At our Networks business, Motorola maintained momentum in 2005 by delivering outstanding
technologies and services for wireless and wireline carriers. The Networks business deployed push-to-