Motorola 2009 Annual Report Download - page 29

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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
the suspension of the Company’s 401(k) contributions to employee accounts, the permanent freeze of all future
benefit accruals under U.S. pension plans and the elimination of 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 a negative impact on our business.
The growth rate in the portions of the telecommunications industry in which we participate 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 continuing economic slowdown and the corresponding reduction in
capital spending by the telecommunications industry in 2008 and 2009.
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) import/export regulations, 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 and 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, Japanese yen and Korean won; (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; (xiv) changes in laws or regulations that negatively impact benefits being
received by the Company; and (xv) the impact of each of the foregoing on our outsourcing and procurement
arrangements and (xvi) litigation in foreign court systems and foreign administrative proceedings.
Many of our products that are manufactured outside the U.S. are manufactured in Asia (primarily China)
and Latin America (primarily Mexico and Brazil). If manufacturing in these regions is disrupted, our overall
capacity could be significantly reduced and sales or profitability could be negatively impacted. Furthermore, the
legal system in China is still developing and this and other legal systems around the world are subject to change.
Accordingly, our operations and orders for products in China could be negatively impacted by changes to, or
interpretation of, Chinese law.