Motorola 2008 Annual Report Download - page 12

Extended payment terms beyond 60 days are provided to certain customers on a limited basis. A customer’s
outstanding credit at any point in time is limited to a predetermined amount as established by the Company.
Regulatory Matters
Radio frequencies are required to provide wireless services. The allocation of frequencies is regulated in the
U.S. and other countries, 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 may also be affected by the cost of the 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 and LTE. Other countries have also deregulated portions of their available
spectrum to allow deployment of these and other new technologies. In addition, Mobile WiMAX was approved in
2007 as a global IMT (International Mobile Telecommunications) standard. This action lays the foundation to
further expand mobile WiMAX in key bands, making additional spectrum available globally. Deregulation may
introduce new competition and new opportunities for Motorola and our customers.
In 2008, the Federal Communications Commission (“FCC”) conducted its auction of 700 MHz band
spectrum licenses in the United States. This spectrum can carry large amounts of data across long distances and
penetrate walls easier than higher frequencies, enhancing in-building coverage. The spectrum is being recovered
from television broadcast use as a result of the transition from analog to digital television. The spectrum was
expected to be fully available for mobile operations as of February 17, 2009, however the date of the transition
from analog to digital has been moved to June 12, 2009. This delay is not expected to significantly delay the
deployment of services. However, any additional delays may have a greater impact on service deployment. The
FCC has imposed open-access conditions that prevent the licensee from blocking devices or applications that are
compatible with the network on approximately one-third of the 700 MHz spectrum that was auctioned. These
conditions are intended to help foster innovation in handsets and applications. However, the actual impact of the
new licenses remains unclear.
In January 2009, China’s Ministry of Industry and Information Technology issued licenses for its 3G mobile
data network to the three key operators in China. With the Company’s focus on 3G products and smartphones and
its focus on China as a high-priority market, we believe that we will benefit from the 3G transition in China.
Backlog
The segment’s backlog was $290 million at December 31, 2008, compared to $647 million at December 31,
2007. This decrease in backlog is primarily due to a decline in customer demand, driven by the segment’s limited
product portfolio, as well as the global economic downturn. The 2008 backlog is believed to be generally firm and
100% of that amount is expected to be recognized as revenue in 2009. The forward-looking estimate of the
firmness of such orders is subject to future events that may cause the amount recognized to change.
Intellectual Property Matters
Patent protection is extremely important to the segment’s operations. The segment has an extensive portfolio
of patents relating to its products, technologies and manufacturing processes. The segment licenses certain of its
patents to third parties and generates revenue from these licenses. Motorola is also licensed to use certain patents
owned by others. Royalty and licensing fees vary from year to year and are subject to the terms of the agreements
and sales volumes of the products subject to licenses. The protection of these licenses is also important to the
segment’s operations. Reference is made to the material under the heading “Other Information” for additional
information relating to patents and trademarks and research and development activities with respect to this
segment.
Inventory, Raw Materials, Right of Return and Seasonality
The segment’s practice is to carry reasonable amounts of inventory in manufacturing and distribution centers
in order to meet customer delivery requirements in a manner consistent with industry standards. At the end of
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