Motorola Case Study

Motorola

A Fortune 500 company, Motorola is a leader and an innovator in wireless and broadband communications. Motorola’s consumer products range from cell phones and communications, voice and data networking, home monitoring and control, and home entertainment. The business products include communication servers, broadband solutions, and radios.

Motorola’s founding company was Galvin Manufacturing Corporation in Chicago, which began on September 25, 1928 by Paul and Joseph Galvin. Galvin Manufacturing Corporation’s first product was a 1928 battery eliminator. This device allowed battery-powered radios to run on standard household electric current. In 1930 the first Motorola radio was introduced, this was one of the first commercially successful car radios, and the brand-name Motorola was created. Galvin Manufacturing Corp. sold its first Motorola public stock in 1943 for $8.50 per share. Finally in 1947 Galvin Manufacturing Corp. became Motorola, Inc. The world’s first commercial hand-held cellular phone, the Motorola DynaTAC phone, received approval from the U.S. Federal Communications Commission in 1983. Motorola then worked throughout the 1990’s and 2000’s improving upon their cellular phones, and also developed wireless cable modem Gateway.

Motorola reported on September 21, 2007 that for the fourth straight year – Motorola, Inc. (NYSE:MOT) has been named to the Dow Jones sustainability world Index (DJSI World) and the Dow Jones sustainability North America Index (DJSI North America), recognizing the company’s economic, environmental and social performance.

According to their annual report, Motorola had annual sales of $42.9 billion in 2006; a 22% growth from 2005. This was also the third consecutive year of double–digit revenue growth. Their net income was $3.7 billion or 8.5% of sales. Motorola states that they generated operating cash flow of $3.5 billion, and maintained a strong balance sheet. It appears that the largest expense incurred was in selling, general and administrative expenses (otherwise noted as SG&A). The increase in SG&A expenses was due to increased marketing expenses in the mobile devices segment, to support higher net sales and promote brand awareness. There was also increased selling and sales support expenses, driven by the increase in sales commissions from the increase in sales.

A review of Motorola’s balance sheet shows their largest assets to be Sigma funds at $12.2 billion (similar to a money market fund.) Their second-largest asset is accounts receivables at $7.5 billion. Motorola’s largest liability is the accounts payable at $5.0 billion and also accrued liabilities at $8.7 billion. Motorola is a corporation and publicly trades its stock.

Motorola’s finances were reviewed by an independent auditor, KPMG LLP, 303 East Wacker Drive # 1600, Chicago, IL 60601. The auditor’s statement as found in the annual report and is as follows: In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Motorola, Inc. and subsidiaries as of December 31, 2006 and 2005, and the results of their operations and their cash flows for each of the years in the three year period ended December 31, 2006, in conformity with the U. S. generally accepted accounting principles.

Motorola’s website is easy to navigate, contains information about products and services. There are links for investor relations, where financial information is readily available. The website also contains information about the company’s history, current events, locations, employment opportunities, and technology, including current research. The annual report was easy to read and understand. I especially liked the section on Recent Accounting Pronouncements. I found it very interesting to see what