Motorola 2008 Annual Report Download - page 31

Android is viewed as a competitive platform in the Linux and smartphone categories. If Android fails to gain
operator and/or developer adoption, the Company’s financial results could be negatively impacted.
We have taken, and continue to take, cost-reduction actions. Our ability to complete these actions and the impact
of such actions on our business may be limited by a variety of factors. The cost-reduction actions, in turn, may
expose us to additional production risk and have an adverse effect on our sales, profitability and ability to attract
and retain employees.
We have been reducing costs and simplifying our product portfolios in all of our businesses, with sizable
reductions in our Mobile Devices business. We have discontinued product lines, exited businesses, consolidated
manufacturing operations, increased manufacturing with third parties, reduced our employee population and
changed our compensation and benefit programs.
The impact of these cost-reduction actions on our sales and profitability may be influenced by many factors
including, but not limited to: (i) our ability to successfully complete these ongoing efforts; (ii) our ability to
generate the level of cost savings we expect or that are necessary to enable us to effectively compete; (iii) delays in
implementation of anticipated workforce reductions in highly-regulated locations outside the United States,
particularly in Europe and Asia; (iv) decline in employee morale and the potential inability to meet operational
targets due to the loss of employees; (v) our ability to retain or recruit key employees, particularly as a result of
recent actions to suspend the Company’s 401(k) contributions to employee accounts, permanently freeze all future
benefit accruals under U.S. pension plans and eliminate merit increase programs in the U.S. and many other
markets; (vi) the adequacy of our manufacturing capacity, including capacity provided by third parties; and
(vii) the performance of other parties under contract manufacturing arrangements on which we rely for the
manufacture of certain products, parts and components.
All of our businesses have consolidated or exited certain facilities and our products are manufactured in fewer
facilities than in the past. While we have business continuity and risk management plans in place in case capacity
is significantly reduced or eliminated at a given facility, the reduced number of alternative facilities could cause the
duration of any manufacturing disruption to be longer. As a result, we could have difficulties fulfilling our orders
and our sales and profits could decline.
The demand for our products depends, in part, on the continued growth of the industries in which we participate.
A market decline in any one of these industries could have an adverse effect on our business.
The rate at which the portions of the telecommunications industry in which we participate continue to grow is
critical to our ability to improve our overall financial performance and we could be negatively impacted by a
slowdown. Our business was very negatively impacted by the economic slowdown and the corresponding reduction in
capital spending by the telecommunications industry from 2001 to 2003, and we are forecasting declines and slower
growth in 2009 for the industries we compete in.
Our customers and suppliers are located throughout the world and, as a result, we face risks that other companies
that are not global may not face.
Our customers and suppliers are located throughout the world and more than half of our net sales are made
to customers outside the U.S. In addition, we have many manufacturing, administrative and sales facilities outside
the U.S. and more than half of our employees are employed outside the U.S. Most of our suppliers’ operations are
outside the U.S., and most of our products are manufactured outside the U.S.
As with all companies that have sizeable sales and operations outside the U.S., we are exposed to risks that
could negatively impact sales or profitability, including but not limited to: (i) tariffs, trade barriers and trade
disputes, customs classifications and certifications, including but not limited to changes in classifications or errors
or omissions related to such classifications and certifications; (ii) changes in U.S. and non-U.S. rules related to
trade, environmental, health and safety, technical standards & consumer protection; (iii) longer payment cycles;
(iv) tax issues, such as tax law changes, variations in tax laws from country to country and as compared to the
U.S., obligations under tax incentive agreements, and difficulties in repatriating cash generated or held abroad in a
tax-efficient manner; (v) currency fluctuations, particularly in the Chinese renminbi, Euro, Brazilian real, Taiwan
dollar and Japanese yen; (vi) foreign exchange regulations, which may limit the Company’s ability to convert or
repatriate foreign currency; (vii) challenges in collecting accounts receivable; (viii) cultural and language
differences; (ix) employment regulations and local labor conditions; (x) difficulties protecting IP in foreign
countries; (xi) instability in economic or political conditions, including inflation, recession and actual or
anticipated military or political conflicts; (xii) natural disasters; (xiii) public health issues or outbreaks;
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