Motorola 2014 Annual Report Download - page 27

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Item 7: Management’s Discussion and Analysis of Financial Condition and Results of
Operations
The following is a discussion and analysis of our financial position as of December 31, 2014 and 2013 and results of
operations for each of the three years in the period ended December 31, 2014. This commentary should be read in conjunction
with our consolidated financial statements and the notes thereto appearing under “Item 8: Financial Statements and
Supplementary Data.”
Executive Overview
Recent Developments
On April 14, 2014, we entered into a Master Acquisition Agreement (the “Acquisition Agreement”) with Zebra Technologies
Corporation to sell our Enterprise business for $3.5 billion in cash. The transaction closed on October 27, 2014. As a result of the
sale, we have reported the Enterprise business as a discontinued operation in our consolidated financial statements and
footnotes for all periods presented.
Our Business
We are a leading global provider of mission-critical communication infrastructure, devices, accessories, software, and
services. Our products and services help government, public safety and commercial customers improve their operations through
increased effectiveness, efficiency, and safety of their mobile workforces. We serve our customers with a global footprint of sales
in more than 100 countries based on our industry leading innovation and a deep portfolio of products and services.
We conduct our business globally and manage it by two segments:
Products: The Products segment offers an extensive portfolio of infrastructure, devices, accessories, and
software. The primary customers of the Products segment are government, public safety and first-responder agencies,
municipalities, and commercial and industrial customers who operate private communications networks and manage a
mobile workforce. Our Products segment is comprised of Devices and Systems. Devices includes two-way portable and
vehicle mounted radios, accessories, and software features and upgrades. Systems includes the radio network core
and central processing software, base stations, consoles, repeaters, and software applications and features. In 2014,
the segment’s net sales were $3.8 billion, representing 65% of our consolidated net sales.
Services: The Services segment provides a full set of service offerings for government, public safety and
commercial communication networks including: (i) Integration services, (ii) Lifecycle Support services, (iii) Managed
services, (iv) Smart Public Safety Solutions, and (v) iDEN services. Integration services includes implementation,
optimization, and integration of networks, devices, software, and applications. Lifecycle Support services includes
lifecycle planning, software and hardware maintenance, security patches and upgrades, call center support, network
monitoring, and repair services. Managed services includes managing and operating customer systems and devices at
defined services levels. Smart Public Safety Solutions includes software and hardware solutions for our customers'
"Command & Control" centers providing video monitoring support, data analytics, and content management with the
objective of enabling smart policing. iDEN services consists primarily of hardware and software maintenance services
for our legacy iDEN customers. In 2014, the segment’s net sales were $2.1 billion, representing 35% of our
consolidated net sales.
What were our 2014 financial results?
• Net sales were $5.9 billion in 2014 compared to $6.2 billion in 2013.
• We had an operating loss of $1.0 billion in 2014, compared to operating earnings of $947 million in 2013. Included in
the 2014 operating loss was a $1.9 billion pension settlement loss, including related expenses.
• Loss from continuing operations was $697 million, or $(2.84) per diluted common share in 2014, compared to earnings
of $933 million, or $3.45 per diluted common share in 2013.
• Cash used for operating activities was $685 million in 2014, compared to cash provided by operating activities of $555
million in 2013. We contributed $1.3 billion to our pension plans during 2014, compared to $182 million in 2013.
• We provided cash to shareholders through repurchases of $2.5 billion in shares and $318 million in cash dividends
during 2014.
What were the financial results for our two segments in 2014?
• In the Products segment, net sales were $3.8 billion in 2014, a decrease of $302 million, or 7%, compared to $4.1
billion in 2013. On a geographic basis, net sales decreased in North America, Latin America and Asia Pacific and
Middle East ("APME") and increased in Europe and Africa ("EA") compared to 2013. Operating losses were $667
million in 2014, compared to operating earnings of $639 million in 2013. Operating margin decreased in 2014 to
(17.5)% from 15.6% in 2013. Approximately $1.3 billion of pension settlement losses were allocated to the Products
segment in 2014.
• In the Services segment, net sales were $2.1 billion in 2014, a decrease of $44 million, or 2%, compared to $2.1 billion
in 2013. On a geographic basis, net sales decreased in North America, Latin America and APME and increased in EA,
compared to 2013. Operating losses were $339 million in 2014, compared to operating earnings of $308 million in