Motorola 2014 Annual Report Download - page 28

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2013. Operating margin decreased in 2014 to (16.3)% from 14.5% in 2013. Approximately $584 million of pension
settlement losses were allocated to the Services segment in 2014.
What were our major accomplishments in 2014?
2014 was a transformational year both structurally and financially. In addition to selling our Enterprise business for $3.5
billion, we restructured our operations and financial profile to become a more focused, streamlined business. We had pockets of
growth in 2014, most notably in EA, while the North America downturn during the first half of the year pressured overall top-line
growth. North America ended 2014 with growth driven by record fourth quarter sales and backlog. Finally, our overall financial
profile improved with a lower structural cost base, growing backlog position, significantly lower share count and a material
reduction in our pension obligations, reducing volatility.
Structural highlights
• Sold our Enterprise business for $3.5 billion, enabling us to focus on the core government and public safety mission-critical
communications business and associated expansion opportunities;
• De-risked our U.S. Pension plan by significantly reducing the total liability of the plan and cutting the number of participants
by approximately half, with the effect of reducing expected future contributions and volatility;
• Reduced operating expenses by more than $200 million as compared to 2013, including reorganizing our R&D and SG&A
functions. This reorganization both reduced costs and enabled efficiencies that shifted more investment into key areas such
as Services and Public Safety LTE solutions; and
• Returned approximately $2.9 billion in capital to shareholders through share repurchases and dividends.
Business highlights
• Ended 2014 with a record backlog position of $5.8 billion, up 6% compared to 2013;
• Services backlog up over $250 million versus 2013, including:
Significant growth in multi-year software & hardware maintenance contracts;
Significant growth in managed services orders and pipeline opportunities; and
Won six public safety accounts for our Smart Public Safety Solutions.
• Awarded largest public safety LTE system in the world for $175 million;
• North America ended 2014 with record fourth quarter sales and orders; and
• EA grew sales 5% year-over-year on a difficult comparison.
Looking Forward
Entering 2015, we believe we are well-positioned to compete in both our core markets and adjacent growth areas. We
have a broad, compelling product and services portfolio specifically tailored for our mission-critical communications customer
base that spans many layers of governments, public safety, and first responders, as well as commercial and industrial customers
in a number of key verticals. As we add new products, features, and software upgrades, we ensure our solutions are
interoperable and backward-compatible, enabling customers to confidently invest for their future needs while allowing them to
utilize their prior investment in our technology.
Our backlog position has improved as compared to last year, and we believe the funding environment of our largest
government customers and the economics surrounding our commercial customers appears to be relatively healthy, although we
are experiencing some challenges relating to currency fluctuations, particularly in Europe and Asia.
We expect our core business serving existing private network customers to continue to provide opportunity for growth into
new systems, as there are thousands of old, analog systems still being used today that require upgrades for customers to
experience full voice, data and video capabilities. These systems are typically converted from analog into new digital systems,
and are upgraded for reasons that include: spectrum-efficiency mandates, capacity constraints, coverage expansion, or new
feature upgrades. We will continue to offer devices and systems that meet our customers' specific needs for private mission-
critical communications around the world.
Supplementing our traditional core business is our Services business, which has been a focus area for us in recent years.
As communication networks have become increasingly complex, software-centric, and data-driven, we have shifted our offerings
to align with this technology trend, and our customers have shown interest in these offerings. Thus, we expect to continue to see
growing demand for our Managed services, Lifecycle Support services offerings, and Smart Public Safety Solutions. These
services offerings help customers manage, support, and upgrade their networks as well as utilize features, applications, and
data in new ways including predictive policing, proactive support, or smarter response strategies. We expect our overall revenue
mix to continue to shift towards services overtime.
Another key technology trend complementing our existing business is the use of broadband LTE by our customers. We
have been proactively investing in next generation public safety broadband solutions for years, as we believe public safety LTE
solutions are the next generation tool for our public safety first-responder customers. We believe our expertise in both public and
private networks makes us uniquely qualified to provide these LTE solutions to this customer base. We have won the three