Motorola 2006 Annual Report Download - page 30

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We may provide financing and financial guarantees to our customers, some of which may be for significant
amounts.
The competitive environment in which we operate may require us to provide long-term customer financing to a
customer in order to win a contract. Customer financing arrangements may include all or a portion of the purchase
price for our products and services. In some circumstances, these loans can be very large. We may also assist
customers in obtaining financing from banks and other sources and may also provide financial guarantees on behalf
of our customers. Our success, particularly in our infrastructure businesses, may be dependent, in part, upon our
ability to provide customer financing on competitive terms and on our customers' creditworthiness.
We also provide revolving, short-term financing to certain customers and distributors that purchase our
equipment. Our success may be dependent, in part, on our ability to provide this financing. Our financial results
could be negatively impacted if our customers or distributors fail to repay this revolving, short-term debt and/or
our sales to such customers or distributors could be reduced in the event of real or perceived issues about the
credit quality of the customer or distributor.
When we lend our customers money in connection with the sale of our equipment, we are at risk of not being
repaid.
While we have generally been able to place a portion of our customer financings with third-party lenders, a
portion of these financings are supported directly by us. There can be higher risks of default associated with some
of these financings, particularly when provided to start-up operations such as local network providers, customers in
developing countries, or customers in specific financing-intensive areas of the industry (such as 3G wireless
operators). Should customers fail to meet their obligations on new or existing loans, losses could be incurred and
such losses could negatively impact our financial results.
Our large system contracts for infrastructure equipment and the resulting reliance on large customers may
negatively impact our business.
We are exposed to risks due to large system contracts for infrastructure equipment and the resulting reliance
on large customers. These include: (1) the technological risks of such contracts, especially when the contracts
involve new technology, and (2) financial risks under these contracts, including the estimates inherent in projecting
costs associated with large contracts and the related impact on operating results. We are also facing increasing
competition from traditional system integrators and the defense industry as system contracts become larger and
more complicated. Political developments can impact the nature and timing of these large contracts.
It is important that we are able to obtain many different types of insurance, and if we are not able to obtain
insurance we are forced to retain the risk.
The Company has many types of insurance coverage and also self-insures for some risks and obligations. The
insurance market was disrupted after the events of September 11, 2001 and the 2005 hurricanes. While the cost and
availability of most insurance has stabilized, there are still certain types and levels of insurance that remain
unavailable. Natural disasters and certain risks arising from securities claims and public liability are potential self-
insured events that could negatively impact our financial performance.
Government regulation of radio frequencies may limit the growth of the wireless communications industry or
reduce barriers to entry for new competitors.
Radio frequencies are required to provide wireless services. The allocation of frequencies is regulated in the
U.S. and other countries throughout the world and limited spectrum space is allocated to wireless services. The
growth of the wireless and personal communications industry may be affected if adequate frequencies are not
allocated or, alternatively, if new technologies are not developed to better utilize the frequencies currently allocated
for such use. Industry growth has been and may continue to be affected by the cost of new licenses required to use
frequencies and any related frequency relocation costs.
The U.S. leads the world in spectrum deregulation, allowing new wireless communications technologies to be
developed and offered for sale. Examples include wireless local area network systems, such as WiFi, and wide area
network systems, such as WiMAX. Other countries have also deregulated portions of the available spectrum to
allow these and other technologies, which can be offered without spectrum license costs. Deregulation may
introduce new competition and new opportunities for Motorola and our customers.