Motorola 2007 Annual Report Download - page 29

The future direction of the overall domestic and global economies will have a significant impact on our overall
performance. The potential for future terrorist attacks, increased global conflicts and the escalation of existing
conflicts and public health issues has created worldwide uncertainties that have negatively impacted, and may
continue to negatively impact, demand for certain of our products.
Our future operating results depend on our ability to purchase a sufficient amount of materials, parts and
components to meet the demands of our customers.
Our ability to meet customers’ demands depends, in part, on our ability to obtain timely and adequate
delivery of quality materials, parts and components from our suppliers. We have experienced shortages in the past
that have adversely affected our operations. Although we work closely with our suppliers to avoid these types of
shortages, there can be no assurances that we will not encounter these problems in the future. Furthermore, certain
of our components are available only from a single source or limited sources. We may not be able to diversify
sources in a timely manner. A reduction or interruption in supplies or a significant increase in the price of supplies
could have a material adverse effect on our businesses.
Our success is dependent, in part, upon our ability to form successful strategic alliances. If these arrangements do
not develop as expected, our business may be adversely impacted.
We currently partner with industry leaders to meet customer product and service requirements and to develop
innovative advances in design and technology. Some of our partnerships allow us to supplement internal
manufacturing capacity and share the cost of developing next-generation technologies. Other partnerships allow us
to offer more services and features to our customers. If such arrangements do not develop as expected, our
business could be adversely impacted.
We rely on third-party distributors, representatives and retailers to sell certain of our products.
In addition to our own sales force, we offer our products through a variety of third-party distributors,
representatives and retailers. Certain of our distributors or representatives may also market other products that
compete with our products. The loss, termination or failure of one or more of our distributors or representatives to
effectively promote our products, or changes in the financial or business condition of these distributors,
representatives or retailers, could affect our ability to bring its products to market.
We face many risks relating to intellectual property rights.
Our business will be harmed if: (i) we, our customers and/or our suppliers are found to have infringed
intellectual property rights of third parties, (ii) if the intellectual property indemnities in our supplier agreements
are inadequate to cover damages and losses due to infringement of third-party intellectual property rights by
supplier products, (iii) if we are required to provide broad intellectual property indemnities to our customers, or
(iv) if our intellectual property protection is inadequate to protect our proprietary rights.
Because our products are comprised of complex technology, much of which we acquire from suppliers through
the purchase of components or licensing of software, we are often involved in or impacted by litigation regarding
patent and other intellectual property rights. Third parties have asserted, and in the future may assert, intellectual
property infringement claims against us and against our customers and suppliers. Defending claims may be
expensive and divert the time and efforts of our management and employees. If we do not succeed in any such
litigation, we could be required to expend significant resources to pay damages, develop non-infringing intellectual
property or to obtain licenses to the intellectual property that is the subject of such litigation. However, we cannot
be certain that any such licenses, if available at all, will be available to us on commercially reasonable terms. In
some cases, we might be forced to stop delivering certain products if we or our customer or supplier are subject to
a final injunction.
We attempt to negotiate favorable intellectual property indemnities with our suppliers for infringement of
third-party intellectual property rights, but there is no assurance that we will be successful in our negotiations or
that a supplier’s indemnity will cover all damages and losses suffered by Motorola and our customers due to the
infringing products or that a supplier may choose to accept a license or modify or replace its products with non-
infringing products which would otherwise mitigate such damages and losses. Further, Motorola may not be able
to participate in intellectual property litigation involving a supplier and may not be able to influence any ultimate
resolution or outcome that may adversely impact Motorola’s sales if a court enters an injunction that enjoins the
supplier’s products or if the International Trade Commission issues an exclusionary order that blocks Motorola
products from importation into the U.S.
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