Motorola 2008 Annual Report Download - page 55

Selling, General and Administrative Expenses
SG&A expenses increased 13% to $5.1 billion, or 13.9% of net sales, in 2007, compared to $4.5 billion, or
10.5% of net sales, in 2006. In 2007 compared to 2006, SG&A expenses increased in the Enterprise Mobility
Solutions and Home and Networks Mobility segments and decreased in the Mobile Devices segment. The increases
in the Enterprise Mobility Solutions and Home and Networks Mobility segments were primarily due to expenses
from recently acquired businesses, partially offset by savings from cost-reduction initiatives. The decrease in the
Mobile Devices segment was primarily due to lower marketing expenses and savings from cost-reduction
initiatives, partially offset by increased expenditures on information technology upgrades. SG&A expenses as a
percentage of net sales increased in the Mobile Devices and Enterprise Mobility Solutions segments and decreased
in the Home and Networks Mobility segment.
Research and Development Expenditures
R&D expenditures increased 8% to $4.4 billion, or 12.1% of net sales, in 2007, compared to $4.1 billion, or
9.5% of net sales, in 2006. In 2007 compared to 2006, R&D expenditures increased in the Mobile Devices and
Enterprise Mobility Solutions segments and decreased in the Home and Networks Mobility segment. The increase
in the Mobile Devices segment was primarily due to developmental engineering expenditures for new product
development and investment in next-generation technologies, partially offset by savings from cost-reduction
initiatives. The increase in the Enterprise Mobility Solutions segment was primarily due to R&D expenditures
incurred by recently acquired businesses, partially offset by savings from cost-reduction initiatives. The decrease in
the Home and Networks Mobility segment was primarily due to savings from cost-reduction initiatives, partially
offset by expenditures by recently acquired businesses and continued investment in digital entertainment devices
and WiMAX. R&D expenditures as a percentage of net sales increased in the Mobile Devices segment and
decreased in the Enterprise Mobility Solutions and Home and Networks Mobility segments.
Other Charges (Income)
The Company recorded net charges of $984 million in Other charges (income) in 2007, compared to net
charges of $25 million in 2006. The net charges in 2007 include: (i) $369 million of charges relating to the
amortization of intangibles, (ii) $290 million of net reorganization of business charges, (iii) $140 million of charges
for legal settlements and related insurance matters, (iv) $96 million of acquisition-related in-process research and
development charges (“IPR&D”) relating to 2007 acquisitions, and (v) $89 million for asset impairment charges.
The net charges in 2006 included: (i) $172 million of net reorganization of business charges, (ii) $100 million of
charges relating to the amortization of intangibles, (iii) an $88 million charitable contribution to the Motorola
Foundation of appreciated equity holdings in a third party, (iv) $50 million of legal reserves, and (v) $33 million of
acquisition-related IPR&D charges relating to 2006 acquisitions, partially offset by $418 million of income for
payments relating to the Telsim collection settlement.
Net Interest Income
Net interest income was $91 million in 2007, compared to net interest income of $326 million in 2006. Net
interest income in 2007 included interest income of $456 million, partially offset by interest expense of
$365 million. Net interest income in 2006 included interest income of $661 million, partially offset by interest
expense of $335 million. The decrease in net interest income was primarily attributed to lower interest income due
to the decrease in average cash, cash equivalents and Sigma Fund balances during 2007 compared to 2006,
partially offset by higher interest rates.
Gains on Sales of Investments and Businesses
Gains on sales of investments and businesses were $50 million in 2007, compared to gains of $41 million in
2006. In 2007, the net gain primarily reflected a gain of $34 million from the sale of the Company’s embedded
communications computing group. In 2006, the net gain primarily reflected a gain of $141 million on the sale of
the Company’s remaining shares in Telus Corporation, partially offset by a loss of $126 million on the sale of the
Company’s remaining shares in Sprint Nextel Corporation (“Sprint Nextel”).
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MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS