Motorola 2009 Annual Report Download - page 49

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MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations—2009 Compared to 2008
Net Sales
Net sales were $22.0 billion in 2009, down 27% compared to net sales of $30.1 billion in 2008. The
decrease in net sales reflects: (i) a $5.0 billion, or 41%, decrease in net sales in the Mobile Devices segment, (ii) a
$2.1 billion, or 21%, decrease in net sales in the Home and Networks Mobility segment, and (iii) a $1.1 billion,
or 13%, decrease in net sales in the Enterprise Mobility Solutions segment. The 41% decrease in net sales in the
Mobile Devices segment was primarily driven by a 45% decrease in unit shipments, partially offset by an 8%
increase in ASP. The 21% decrease in net sales in the Home and Networks Mobility segment reflects a 22%
decrease in net sales in the networks business and a 21% decrease in net sales in the home business. The 13%
decrease in net sales in the Enterprise Mobility Solutions segment reflects a 21% decrease in net sales to the
commercial enterprise market and a 10% decrease in net sales to the government and public safety market.
Gross Margin
Gross margin was $7.1 billion, or 32.0% of net sales, in 2009, compared to $8.4 billion, or 27.8% of net
sales, in 2008. Gross margin decreased in all segments. The decrease in gross margin in the Mobile Devices
segment was primarily driven by the 41% decrease in net sales, partially offset by: (i) 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 (ii) the absence in 2009 of a comparable $150 million charge in
2008 related to settlement of a purchase commitment. The decrease in gross margin in the Enterprise Mobility
Solutions segment was primarily driven by the 13% decrease in net sales and an unfavorable product mix. The
decrease in gross margin in the Home and Networks Mobility segment was primarily driven by the 21% decrease
in net sales, partially offset by a favorable product mix.
The increase in gross margin as a percentage of net sales in 2009 compared to 2008 was primarily driven by
increases in gross margin percentage in the Mobile Devices and Home and Networks Mobility segments, partially
offset by a decrease in gross margin percentage in the Enterprise Mobility Solutions segment. The Company’s
overall gross margin as a percentage of net sales can be impacted by the proportion of overall net sales generated
by its various businesses. In 2009, the proportion of overall sales by our Mobile Devices business was smaller
than in previous years. Since Mobile Devices has the lowest gross margin percentage of the Company’s businesses,
this positively impacted overall gross margin percentage in 2009.
Selling, General and Administrative Expenses
Selling, general and administrative (‘‘SG&A’’) expenses decreased 22% to $3.4 billion, or 15.3% of net sales,
in 2009, compared to $4.3 billion, or 14.4% of net sales, in 2008. SG&A expenses decreased in all segments.
The decrease in SG&A expenses in the Mobile Devices segment was primarily driven by lower marketing
expenses and savings from cost-reduction initiatives. The decreases in SG&A expenses in the Enterprise Mobility
Solutions and Home and Networks Mobility segments were primarily due to savings from cost-reduction
initiatives. SG&A expenses as a percentage of net sales increased in the Enterprise Mobility Solutions and Home
and Networks Mobility segments and decreased in the Mobile Devices segment.
Research and Development Expenditures
Research and development (‘‘R&D’’) expenditures decreased 23% to $3.2 billion, or 14.4% of net sales, in
2009, compared to $4.1 billion, or 13.6% of net sales, in 2008. R&D expenditures decreased in all segments,
primarily due to savings from cost-reduction initiatives. R&D expenditures as a percentage of net sales increased
in all segments. The Company participates in very competitive industries with constant changes in technology
and, accordingly, the Company continues to believe that a strong commitment to R&D is required to drive
long-term growth.
Other Charges
The Company recorded net charges of $641 million in Other charges in 2009, compared to net charges of
$2.3 billion in 2008. The net charges in 2009 included: (i) $278 million of charges relating to the amortization of
intangibles, (ii) $258 million of net reorganization of business charges included in Other charges, (iii) $42 million
of costs related to the proposed separation of the Company into two independent, publicly traded companies,
(iv) $39 million of charges related to a facility impairment, and (v) $24 million of charges related to an
environmental reserve. The net charges in 2008 included: (i) $1.8 billion of goodwill and other asset impairment