Motorola 2009 Annual Report Download - page 37

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We have lost significant market share in our Mobile Devices businesses and such loss has negatively impacted our
performance and may continue to negatively impact our financial results.
Our share of the worldwide wireless handset market has declined significantly in the last several years. While
we reduced our costs during this period of time, our significantly lower sales volume and the resulting market
share declines have had a negative impact on our results of operations. Although our primary focus is profitable
growth, if our market share of smartphone shipments does not increase our strategy to return our Mobile Devices
business to profitability will be negatively impacted.
Our future financial results may be negatively impacted if we do not execute on our hardware and software
strategy for our Mobile Devices business.
As part of our ongoing effort to improve the product portfolio of our Mobile Devices business, we have been
rationalizing our hardware and software platforms to reduce the complexity of our product platforms and system
architecture. This allows us to lower our costs to produce devices and to enable richer consumer experiences.
Failure to continue to execute these rationalization plans in a timely and effective manner may cause us to be
competitively disadvantaged in many areas, including but not limited to, cost, time to market and the ability to
ramp-up production in a timely fashion with acceptable quality and improved/additional features.
If our operating system strategy is not successful, our Mobile Devices business could be negatively impacted.
We have made a strategic decision to use third-party and/or open source operating systems, such as Google’s
Android operating system in our wireless products. As a result of this, we are at risk due to our dependency on
third parties’ continued development of operating systems and third parties’ software application ecosystem
infrastructures. With respect to Google’s Android operating system, which is a newer operating system for
wireless handsets, in the event that Google’s Android team no longer develops the Android code base and this
development is not taken up by the open source community, this would increase the burden of development on
Motorola. From an overall risk perspective, the industry is currently engaged in an extremely competitive phase
with respect to operating system platforms and software generally. Android is viewed as a competitive platform in
the Linux and smartphone categories. If (i) Android fails to continue to gain operator and/or developer adoption,
or (ii) any updated versions or new releases of Google’s Android operating system are not made available to
Motorola in a timely fashion, Motorola could be competitively disadvantaged and the Company’s financial results
could be negatively impacted.
In our Home and Networks business specifically:
Consolidations in both the cable and telecommunication industries may negatively impact our business.
The cable and telecommunication industries have experienced consolidation and this trend is expected to
continue according to industry estimates. Industry consolidation could result in delays of purchases or in the
selection of new suppliers by the merged companies. This could negatively impact equipment suppliers like
Motorola and our competitors. Due to continuing consolidation within the cable and telecommunications
industries worldwide, a small number of operators own a majority of cable television systems and account for a
significant portion of the capital spending made by cable telecommunications systems operators.
The effects of FCC regulations requiring separation of security functionality from set-tops could negatively impact
our sales of set-tops to cable providers.
Historically, reception of digital television programming from a cable broadband network required a set-top
with security technology. Traditionally, cable service providers leased their set-top to their customer. This security
technology limited the availability of set-tops to those manufactured by a few cable network manufacturers,
including Motorola. In 2007, FCC regulations requiring separation of security functionality from set-tops became
effective. Several major cable operators are working to support full two-way security interface architecture that
allows retail customers access to all programming available on a cable operator’s network without the need for a
set-top box and a few television and video device manufacturers have begun shipping or are developing such
devices. If these manufacturers achieve a meaningful volume of sales it could negatively impact Motorola’s sales
of set-tops.
Item 1B: Unresolved Staff Comments
None.