Motorola 2010 Annual Report Download - page 21

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attacks, increased global conflicts and the escalation of existing conflicts has created worldwide uncertainties that
have negatively impacted, and may continue to negatively impact, demand for certain of our products.
We continue to face a number of risks related to current global economic conditions, including adverse credit
conditions, low economic growth, risk of sovereign defaults and high levels of unemployment.
Global economic conditions and financial markets continue to be challenging to the government and enterprise
communications market, as many economies and financial markets remain in a recession resulting from a number of
factors, including adverse credit conditions, low economic growth rates, risk of sovereign defaults, particularly in
certain European countries, continuing high rates of unemployment, reduced corporate capital spending and other
factors. Economic growth in the U.S. and many other countries has remained very low and the length of time these
adverse economic conditions may persist are unknown. These global economic conditions have impacted and could
continue to impact our business in a number of ways, including:
•Potential Deferment or Cancellation of Purchases and Orders by Customers: Uncertainty about current and
future global economic conditions may cause, and in some cases has caused businesses and governments to
defer or cancel purchases in response to tighter credit and decreased cash availability and declining consumer
confidence. If future demand for our products declines due to global economic conditions, it will negatively
impact our financial results.
•Customers’ Inability to Obtain Financing to Make Purchases from Motorola Solutions and/or Maintain
Their Business: Some of our customers require substantial financing, including public financing or
government grants, in order to fund their operations and make purchases from us. The inability of these
customers to obtain sufficient credit or other funds to finance purchases of our products and/or meet their
payment obligations to us could have, and in some cases has had, a negative impact on our financial results.
In addition, if global economic conditions result in insolvencies for our customers, it will negatively impact
our financial results.
•Requests by Customers for Vendor Financing by Motorola Solutions: Certain of the Company’s customers,
particularly, but not limited to, those who purchase large infrastructure systems, request that their suppliers
provide financing in connection with equipment purchases. In response to limited availability of financing
from banks and other lenders, these types of requests have increased in volume and scope. Motorola
Solutions, particularly in its Networks business, has continued to provide financing in light of these requests
and a continuation of the credit market dislocation could force us to choose between further increasing our
level of vendor financing or potentially losing sales to these customers.
•Negative Impact from Increased Financial Pressures on Third-Party Dealers, Distributors and Retailers: We
make sales in certain regions through third-party dealers, distributors and retailers. Although many of these
third parties have significant operations and maintain access to available credit, others are smaller and more
likely to be impacted by the significant decrease in available credit that resulted from the financial crisis and
continues today. If credit pressures or other financial difficulties result in insolvency for important third
parties and we are unable to successfully transition end-customers to purchase our products from other third
parties or from us directly, it may cause, and in some cases has caused, a negative impact on our financial
results.
•Negative Impact from Increased Financial Pressures on Key Suppliers: Our ability to meet customers’
demands depends, in part, on our ability to obtain timely and adequate delivery of quality materials, parts
and components from our suppliers. Certain of our components are available only from a single source or
limited sources. If certain single-source or limited-source suppliers were to become capacity constrained or
insolvent, it could result in a reduction or interruption in supplies or an increase in the price of supplies and
negatively impact our financial results. In addition, credit constraints at single-source suppliers have resulted
in accelerated payment of accounts payable by us, impacting our cash flow. If this trend continues, it will
negatively impact our cash flow.
•Increased Risk of Financial Counterparty Failures Could Negatively Impact our Financial Position: The
Company uses derivative financial instruments to reduce its overall exposure to the effects of currency
fluctuations on cash flows. The Company is exposed to credit loss in the event of nonperformance by the
counterparties to these derivative financial instruments. Although the contracts are distributed among several