Motorola 2006 Annual Report Download - page 31

23
Changes in government policies and laws or economic conditions may adversely affect our financial results.
Our results may be affected by changes in trade, monetary and fiscal policies, laws and regulations, or other
activities of U.S. and non-U.S. governments, agencies and similar organizations. Our results may also be affected by
social and economic conditions, which impact our operations, including in emerging markets in Asia, India, Latin
America and Eastern Europe, and in markets subject to ongoing political hostilities and war, including the Middle
East.
In addition, there are currently few laws or regulations that apply directly to access to, or commerce on, the
Internet. We could be adversely affected by any such regulation in any country where we operate. The adoption of
such measures could decrease demand for our products and at the same time increase the cost of selling such
products.
Consolidations in both the cable and telecommunication industries may adversely impact our business.
The cable and telecommunication industries have experienced consolidation, and this trend is expected to
continue according to industry estimates. Industry consolidation could result in delays of purchases or in the
selection of new suppliers by the merged companies to equipment suppliers such as Motorola and our competitors.
Due to continuing consolidation within the cable industry worldwide, a small number of operators own a
majority of cable television systems and account for a significant portion of the capital spending made by cable
television system operators. Net sales to the Connected Home Solutions segment's largest customer, Comcast
represented approximately 29% of the Connected Home Solutions segment's total net sales in 2006.
Regulatory changes impacting our cable products may adversely impact our business.
Currently, reception of digital television programming from the cable broadband network requires a set-top
box with certain technology. This security technology has limited the availability of set-top boxes to those
manufactured by a few cable network manufacturers, including Motorola. The FCC has enacted regulations
requiring separation of security functionality from set-top boxes to increase competition and encourage the sale of
set-top boxes in the retail market by July 1, 2007. Traditionally, cable service providers sold or leased the set-top
box to their customer. If the retail market develops for set-top boxes and televisions capable of accepting the
security modules, sales of our set-top boxes may be negatively impacted. In addition, we risk lost sales if
competitors bring set-top boxes with separable security to market before we do.
We rely on complex information technology systems and networks to operate our business. Any significant system
or network disruption could have a material adverse impact on our operations, sales and operating results.
We rely on the efficient and uninterrupted operation of complex information technology systems and
networks. All information technology systems are potentially vulnerable to damage or interruption from a variety of
sources, including but not limited to computer viruses, security breach, energy blackouts, natural disasters,
terrorism, war and telecommunication failures. There also may be system or network disruptions if new or
upgraded business management systems are defective or are not installed properly. We have implemented various
measures to manage our risks related to system and network disruptions, but a system failure or security breach
could negatively impact our operations and financial results. In addition, we may incur additional costs to remedy
the damages caused by these disruptions or security breaches.
Our share price has been and may continue to be volatile.
Our share price has been volatile due, in part, to generally volatile securities markets, and the volatility in the
telecommunications and technology companies' securities markets in particular. Factors other than our financial
results that may affect our share price include, but are not limited to, market expectations of our performance,
capital spending plans of our customers, and the level of perceived growth in the industries in which we participate.
The level of returns on pension and retirement plan assets could affect our earnings in future periods.
The funding obligations for our pension plans are impacted by the performance of the financial markets,
particularly the equity markets, and interest rates. Funding obligations are determined under government regulations
and are measured each year based on the value of assets and liabilities on a specific date. If the financial markets
do not provide the long-term returns that are expected under the governmental funding calculations we could be