Motorola 2005 Annual Report Download - page 49

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42 MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Years Ended December 31
(Dollars in millions, except per share
amounts)
2005 % of sales
2004 % of sales 2003 % of sales
Net sales $36,843 $31,323 $23,155
Costs of sales 25,066 68.0% 20,969 66.9% 15,652 67.6%
Gross margin 11,777 32.0% 10,354 33.1% 7,503 32.4%
Selling, general and administrative expenses 3,859 10.5% 3,714 11.9% 3,285 14.1%
Research and development expenditures 3,680 10.0% 3,412 10.9% 2,979 12.9%
Other charges(income) (458) (1.2)% 96 0.3% (34) (0.1)%
Operating earnings 4,696 12.7% 3,132 10.0% 1,273 5.5%
Other income (expense):
Interest income (expense), net 71 0.2% (199) (0.6)% (294) (1.3)%
Gains on sales of investments and businesses,
net 1,861 5.1% 460 1.5% 539 2.3%
Other (108) (0.3)% (141) (0.5)% (142) (0.6)%
Earnings from continuing operations before
income taxes 6,520 17.7% 3,252 10.4% 1,376 5.9%
Income tax expense 1,921 5.2% 1,061 3.4% 448 1.9%
Earnings from continuing operations 4,599 12.5% 2,191 7.0% 928 4.0%
Loss from discontinued operations, net of tax (21) (0.1)% (659) (2.1)% (35) (0.1)%
Net earnings $ 4,578 12.4% $ 1,532 4.9% $ 893 3.9%
Earnings (loss) per diluted common share:
Continuing operations $ 1.82 $ 0.90 $ 0.39
Discontinued operations (0.01) (0.26) (0.01)
$ 1.81 $ 0.64 $ 0.38
Geographic market sales measured by the locale of the end customer as a percent of total net sales for 2005,
2004 and 2003 are as follows:
Geographic Market Sales by Locale of End Customer
2005
2004 2003
United States 46% 47% 56%
Europe 19% 19% 13%
Latin America 10% 9% 8%
Asia, excluding China 9% 10% 10%
China 8% 10% 9%
Other Markets 8% 5% 4%
100% 100% 100%
Results of OperationsÌ2005 Compared to 2004
Net Sales
Net sales were $36.8 billion in 2005, up 18% from $31.3 billion in 2004. Net sales increased in all four of the
Company's segments in 2005 compared to 2004. The overall increase in net sales reflected: (i) a $4.3 billion
increase in net sales by the Mobile Devices segment, driven by a 40% increase in unit shipments, reflecting strong
demand for GSM handsets and consumers' desire for the segment's compelling products that combine innovative
style and leading technology, (ii) a $551 million increase in net sales by the Connected Home Solutions segment,
primarily driven by increases in both average selling price (""ASP'') and unit shipments of digital set-top boxes,
(iii) a $369 million increase in net sales by the Government and Enterprise Mobility Solutions segment, reflecting
increased sales to the segment's government and enterprise markets, partially offset by a decrease in sales to the