Motorola 2011 Annual Report Download - page 18

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offering of managed services involves the integration of multiple services, multiple vendors and multiple
technologies. Such expansion will bring us into contact with new regulatory requirements and restrictions with
which we will have to comply. This may increase the costs and delay or limit the range of new services which we
will be able to offer.
The managed services business is one characterized by large subcontracting arrangements and we may not be
able to obtain adequate indemnities or other protections from our subcontractors to adequately mitigate our risk to
our customers.
We do not currently carry professional liability insurance, as such insurance is expensive to obtain for the
amount of coverage typically requested by certain customers and we are therefore self insured for potential claims
resulting from the managed services we provide.
A portion of our business is dependent upon U.S. Government contracts and grants, which are highly regulated and
subject to oversight audits by U.S. Government representatives and subject to cancellations. Such audits could result
in adverse findings and negatively impact our business.
Our government business is subject to specific procurement regulations with numerous compliance
requirements. These requirements, although customary in U.S. Government contracting, increase our performance
and compliance costs. These costs may increase in the future, thereby reducing our margins, which could have an
adverse effect on our financial condition. Failure to comply with these regulations could lead to suspension or
debarment from U.S. Government contracting or subcontracting for a period of time, and the inability to receive
future grants. Among the causes for debarment are violations of various laws, including those related to
procurement integrity, export control, U.S. Government security regulations, employment practices, protection of
the environment, accuracy of records, proper recording of costs, foreign corruption and the False Claims Act.
Generally, U.S. Government contracts and grants are subject to oversight audits by U.S. Government
representatives. Such audits could result in adjustments to our contracts or grants. Any costs found to be improperly
allocated to a specific contract or grant may not be allowed, and such costs already reimbursed may have to be
refunded. Future audits and adjustments, if required, may materially reduce our revenues or profits upon
completion and final negotiation of audits. Negative audit findings could also result in investigations, termination of
a contract or grant, forfeiture of profits or reimbursements, suspension of payments, fines and suspension or
prohibition from doing business with the U.S. Government. All contracts with the U.S. Government are subject to
cancellation at the convenience of the U.S. Government.
In addition, contacts with government officials and participation in political activities are areas that are tightly
controlled by federal, state and local laws. Failure to comply with these laws could cost us opportunities to seek
certain government sales opportunities or even result in fines, prosecution, or debarment.
We derive a portion of our revenue from government customers who award business through competitive bidding
which can involve significant upfront costs and risks. This effort may not result in awards of business or we may fail
to accurately estimate the costs to fulfill contracts awarded to us, which could have adverse consequences on our
future profitability.
Many government customers, including most U.S. government customers, award business through a
competitive bidding process, which results in greater competition and increased pricing pressure. The competitive
bidding process involves significant cost and managerial time to prepare bids for contracts that may not be awarded
to us. Even if we are awarded contracts, we may fail to accurately estimate the resources and costs required to fulfill
a contract, which could negatively impact the profitability of any contract award to us. In addition, following a
contract award, we have experienced and may continue to experience significant expense or delay, contract
modification or contract rescission as a result of customer delay or our competitors protesting or challenging
contracts awarded to us in competitive bidding.
Government regulation of radio frequencies may limit the growth of public safety broadband systems or reduce
barriers to entry for new competitors.
Radio frequencies are required to provide wireless services. The allocation of frequencies is regulated in the U.S.
and other countries and limited spectrum space is allocated to wireless services and specifically to public safety
users. The growth of public safety broadband communications systems may be affected: (i) by regulations relating to