Motorola 2005 Annual Report Download - page 45

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38 MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 and results of operations for each of the
three years in the period ended December 31, 2005. This commentary should be read in conjunction with our
consolidated financial statements and the notes thereto which appear beginning under ""Item 8: Financial Statements
and Supplementary Data.''
Executive Overview
What businesses are we in?
Motorola reports financial results for the following four operating business segments:
‚ The Mobile Devices segment designs, manufactures, sells and services wireless handsets, with integrated
software and accessory products. The segment's net sales in 2005 were $21.5 billion, representing 58% of
the Company's consolidated net sales.*
‚ The Government and Enterprise Mobility Solutions segment designs, manufactures, sells, installs and
services analog and digital two-way radio, voice and data communications products and systems to a wide
range of public safety, government, utility, transportation and other worldwide markets, and participates in
the expanding market for integrated information management, mobile and biometric applications and
services. The segment also designs, manufactures and sells automotive electronics systems, as well as
telematics systems that enable communication and advanced safety features for automobiles. The segment's
net sales in 2005 were $6.6 billion, representing 18% of the Company's consolidated net sales.*
‚ The Networks segment designs, manufactures, sells, installs and services: (i) cellular infrastructure systems,
including hardware and software, (ii) fiber-to-the-premise (""FTTP'') and fiber-to-the-node (""FTTN'')
transmission systems supporting high-speed data, video and voice, and (iii) wireless broadband systems. In
addition, the segment designs, manufactures, and sells embedded communications computing platforms.
The segment's net sales in 2005 were $6.3 billion, representing 17% of the Company's consolidated net
sales.*
‚ The Connected Home Solutions segment designs, manufactures and sells a wide variety of broadband
products, including: (i) digital systems and set-top boxes for cable television, Internet Protocol (""IP'')
video and broadcast networks, (ii) high speed data products, including cable modems and cable modem
termination systems (""CMTS'') and IP-based telephony products, (iii) hybrid fiber coaxial network
transmission systems used by cable television operators, (iv) digital satellite program distribution systems,
(v) direct-to-home (""DTH'') satellite networks and private networks for business communications, and
(vi) advanced video communications products. The segment's net sales in 2005 were $2.8 billion,
representing 8% of the Company's consolidated net sales.*
What were our 2005 financial highlights?
‚Net Sales Increased 18%: Our net sales were $36.8 billion in 2005, up 18% from $31.3 billion in 2004.
Sales increased in all four of our operating segments.
‚Operating Earnings Increased 50%: We generated operating earnings of $4.7 billion in 2005, an increase
of 50% compared to operating earnings of $3.1 billion in 2004. Operating margin increased to 12.7% in
2005, compared to 10.0% in 2004.
‚Earnings From Continuing Operations Increased by 110%: We generated earnings from continuing
operations of $4.6 billion in 2005, an increase of 110% compared to earnings from continuing operations of
$2.2 billion in 2004.
* When discussing the net sales of each of our four segments, we express the segment's net sales as a percentage of the Company's
consolidated net sales. Because certain of our segments sell products to other Motorola businesses, our intracompany sales were eliminated
as part of the consolidation process in 2005. As a result, the percentages of consolidated net sales for each of our business segments sums to
greater than 100% of the Company's consolidated net sales.