Motorola 2006 Annual Report Download - page 45

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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
provider of OFDM-based non-line-of-sight (""NLOS'') wireless broadband infrastructure equipment. Also,
Motorola sold its automotive electronics business to German automotive supplier Continental AG for
approximately $900 million.
The Networks and Enterprise business faced challenges during 2006, as sales of iDEN and GSM
infrastructure declined compared to 2005. The business also continued to invest in next-generation
technologies that did not, nor were expected to, contribute meaningful sales or earnings to the business in
2006.
‚In Our Connected Home Solutions Business: The Connected Home Solutions business is the world's
leading provider of digital video set-top boxes and cable modems, with sales of $3.3 billion in 2006.
Motorola shipped over 10 million digital set-tops this year and almost one-third of these shipments were
high-definition TV (""HDTV'') capable. Motorola shipped over 10 million data modems, of which
3.7 million were voice-over-IP (""VoIP'') capable. The fourth quarter saw Motorola ship its 50 millionth
digital entertainment device, a significant milestone that underscored the Company's heritage of delivering
innovations for the digital cable connected home.
The segment expanded its next-generation digital video portfolio, completing several significant
acquisitions, including: (i) Kreatel Communications AB, a leading developer of innovative IP-based digital
set-top boxes and software, (ii) Broadbus Technologies, Inc., a provider of technology solutions for
television on demand, and (iii) Vertasent LLC, a software developer for managing technology elements for
switched digital video networks. In early 2007, the Connected Home Solutions business completed the
acquisition of Netopia, Inc., a broadband equipment provider for DSL customers, which allows for phone,
TV and fast Internet connections. The business also announced its intention to acquire Tut Systems, Inc., a
leading developer of edge routing and video encoders. With these acquisitions, Motorola now has enhanced
capabilities in its end-to-end, switched digital video solution and a leadership position in the IP-based set-
top box market.
Looking Forward
Although our Networks and Enterprise and Connected Home Solutions businesses ended 2006 with strong
momentum, our Mobile Devices business faced major challenges during the latter part of 2006, causing its fourth-
quarter profitability to fall significantly short of our expectations. We intend to improve the profitability of this
business and we are taking the necessary actions to make that happen. As we enter 2007, we remain confident in
the strength of each of our core markets. With our continued dedication to quality and our unrelenting focus on
innovation, we are committed to executing on our strategic plan and pursuing profitable sales growth across all of
our businesses. We believe that a balanced focus on profitability and growth will drive shareholder value.
Our vision of seamless mobility continues to drive everything we do. We are dedicated to building simple and
seamless connections to people, information and entertainment. We will do this by continuing to revolutionize
wireless networks and broadband communications Ì bringing cutting-edge technologies into everyday life and
empowering the mobile consumer to go anywhere and do anything without sacrificing complete connectivity. We
strive to design and deliver new ""must have'' products, ""must do'' experiences and powerful networks that enable
mobility, along with a full complement of support services. We will continue executing on this vision by extending
it around the world and unveiling new technology platforms and products that break down the boundaries of
traditional communication and improve life.
As we continue to expand the geographies that our products and services reach, it remains important that we
embrace the unique needs and customs of our local markets. Vast segments of the world's population, many of
whom are yet to make a phone call or connect to the Internet, represent a tremendous opportunity for Motorola
to extend our brand. As our world becomes increasingly interlinked, Motorola is focused on connecting ""the next
billion'' mobile phone users. Globalization has made, and will continue to make, country-specific knowledge, talent
and leadership indispensable. We have worked to develop specific expertise that allows us to understand the
technology needs of each market, rather than a ""one-size-fits-all'' solution. We are building a strong and efficient
footprint in the developing world, and we expect that this will generate financial benefits for Motorola and make a
profound and lasting impact on those who were previously unable to ""connect.''
Going forward we are very focused on improving Motorola's operating margin percentage. Much of this focus
will center on our Mobile Devices business, which accounts for nearly two-thirds of our sales and generated much
lower than expected operating margins in the fourth quarter of 2006. Over the last three years, the focus on market