Motorola 2006 Annual Report Download - page 28

20
We may not continue to have access to the capital markets to obtain long-term and short-term financing on
acceptable terms and conditions, particularly if our credit ratings are downgraded.
From time to time we access the long-term and short-term capital markets to obtain financing. Although we
believe that we can continue to access the capital markets in 2007 on acceptable terms and conditions, our access
and the availability of acceptable terms and conditions are impacted by many factors, including: (i) our credit
ratings; (ii) the liquidity of the overall capital markets; and (iii) the current state of the economy, including the
telecommunications industry. There can be no assurances that we will continue to have access to the capital
markets on terms acceptable to the Company.
The Company's debt ratings are considered ""investment grade''. If our credit ratings were to decline three
levels from the current rating, we would no longer be considered investment grade and our financial flexibility
would be reduced and our cost of borrowing would increase. Some of the factors that impact our credit ratings,
including the overall economic health of the telecommunications industry, are outside of our control. There can be
no assurances that our current credit ratings will continue.
Our commercial paper is rated ""A-1/P-2/F-1.'' Although we continue to issue commercial paper, there can be
no assurances that we will continue to have access to the commercial paper markets on terms acceptable to the
Company.
We may not be able to borrow funds under our credit facility if we are not able to meet the conditions to
borrowing in our facility.
We view our existing five-year revolving domestic credit facility as a source of available liquidity. This facility
contains various conditions, covenants and representations with which we must be in compliance in order to
borrow funds. We have never borrowed under this facility or previous domestic revolving credit facilities. However,
if we wish to borrow under this facility in the future, there can be no assurance that we will be in compliance with
these conditions, covenants and representations.
We may continue to make strategic acquisitions of other companies or businesses and these acquisitions introduce
significant risks and uncertainties, including risks related to integrating the acquired businesses and achieving
benefits from the acquisitions.
In order to position ourselves to take advantage of growth opportunities, we have made, and may continue to
make, strategic acquisitions that involve significant risks and uncertainties. These risks and uncertainties include:
(1) the difficulty in integrating newly-acquired businesses and operations in an efficient and effective manner;
(2) the challenges in achieving strategic objectives, cost savings and other benefits from acquisitions; (3) the risk
that our markets do not evolve as anticipated and that the technologies acquired do not prove to be those needed
to be successful in those markets; (4) the potential loss of key employees of the acquired businesses; (5) the risk
of diverting the attention of senior management from our operations; (6) the risks of entering new markets in
which we have limited experience; (7) risks associated with integrating financial reporting and internal control
systems; (8) difficulties in expanding information technology systems and other business processes to accommodate
the acquired businesses; and (9) future impairments of goodwill of an acquired business.
In 2006 and early 2007, we made several strategic acquisitions. In January 2007, we acquired Symbol
Technologies, Inc. (""Symbol''). Symbol, which is now a wholly-owned subsidiary of Motorola, is being integrated
with Motorola and will form the core of Motorola's enterprise mobility business within our Networks and
Enterprise segment. As a result of the acquisition, approximately 5,200 employees joined Motorola. In light of the
size of this transaction, some of the risks described above may be more significant.
Acquisition candidates in the industries in which we participate may carry higher relative valuations (based on
their earnings) than we do. This is particularly evident in software and services businesses. Acquiring a business that
has a higher valuation than Motorola may be dilutive to our earnings, especially when the acquired business has
little or no revenue. In addition, we may not pursue opportunities that are highly dilutive to near-term earnings and
have, in the past, foregone certain of these acquisitions.
Key employees of acquired businesses may receive substantial value in connection with a transaction in the
form of change-in-control agreements, acceleration of stock options and the lifting of restrictions on other equity-
based compensation rights. To retain such employees and integrate the acquired business, we may offer additional
retention incentives, but it may still be difficult to retain certain key employees.