Motorola 2009 Annual Report Download - page 44

36 MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
the improvement in cash flow from operations in 2009 were: (i) a $1.3 billion decrease in net inventory,
(ii) a $960 million decrease in other current assets, and (iii) income from continuing operations (adjusted
for non-cash items) of $892 million, partially offset by a $2.6 billion decrease in accounts payable and
accrued liabilities.
What were the financial results for our three operating business segments in 2009?
•In Our Mobile Devices Business: Net sales were $7.1 billion in 2009, a decrease of 41% compared to net
sales of $12.1 billion in 2008. The decrease in net sales was primarily driven by a 45% decrease in unit
shipments, partially offset by an 8% increase in average selling price (‘‘ASP’’). On a product technology
basis, net sales decreased substantially for GSM, CDMA and 3G technologies, partially offset by an
increase in net sales for iDEN technology. On a geographic basis, net sales decreased substantially in Latin
America, the Europe, Middle East and Africa region (‘‘EMEA’’) and Asia and, to a lesser extent, decreased
in North America.
The segment incurred an operating loss of $1.1 billion in 2009, an improvement of 51% compared to an
operating loss of $2.2 billion in 2008. The decrease in the operating loss was primarily due to: (i) lower
selling, general and administrative (‘‘SG&A’’) expenses, primarily due to lower marketing expenses and
savings from cost-reduction initiatives, (ii) lower research and development (‘‘R&D’’) expenditures,
reflecting savings from cost-reduction initiatives, (iii) lower excess inventory and other related charges in
2009 than in 2008, when the charges included a $370 million charge due to a decision to consolidate
software and silicon platforms, and (iv) the absence in 2009 of a comparable $150 million charge in 2008
related to settlement of a purchase commitment, partially offset by a decrease in gross margin, driven by
the 41% decrease in net sales.
•In Our Home and Networks Mobility Business: Net sales were $8.0 billion, a decrease of 21% compared
to net sales of $10.1 billion in 2008. The decrease in net sales reflects a 22% decrease in net sales in the
networks business and a 21% decrease in net sales in the home business. On a geographic basis, net sales
decreased in all regions.
Operating earnings were $558 million in 2009, a decrease of 39% compared to operating earnings of
$918 million in 2008. The decrease in operating earnings was primarily due to a decrease in gross margin,
driven by the 21% decrease in net sales, partially offset by a favorable product mix. Also contributing to
the decrease in operating earnings was: (i) a $75 million charge related to a legal settlement, and
(ii) $39 million of charges related to a facility impairment. These factors were partially offset by decreases
in both R&D and SG&A expenses, reflecting savings from cost-reduction initiatives.
•In Our Enterprise Mobility Solutions Business: Net sales were $7.0 billion in 2009, a decrease of 13%
compared to net sales of $8.1 billion in 2008. On a geographic basis, net sales decreased in North
America, EMEA and Latin America, partially offset by increased net sales in Asia.
Operating earnings were $1.1 billion in 2009, a decrease of 29% compared to operating earnings of
$1.5 billion in 2008. The decrease in operating earnings was primarily due to a decrease in gross margin,
driven by the 13% decrease in net sales and an unfavorable product mix. Also contributing to the decrease
in operating earnings was an increase in reorganization of business charges, relating primarily to higher
employee severance costs. These factors were partially offset by decreased SG&A and R&D expenditures,
primarily related to savings from cost-reduction initiatives.
What were our major challenges and accomplishments in 2009?
•In Our Mobile Devices Business: 2009 was a year of significant change in the Mobile Devices business,
including transitioning the product portfolio, restructuring the business and implementing operational
improvements. From a portfolio perspective, the Mobile Devices business made significant progress on its
3G smartphone strategy by reducing the number of software platforms across the product portfolio, using
Android, a Google-developed, royalty-free operating system platform for smartphones, and reducing the
number of feature phone devices in the portfolio. During this period of change, Mobile Devices increased
its focus in priority markets, including North America and Latin America, and parts of Asia, including
China. Demand for Mobile Devices’ wireless handsets declined in 2009 primarily due to limited product
offerings in feature phones and smartphones as the Company implemented its strategy to transition its