摩托罗拉公司1954年年度报告

19 5 4

S Motorola I N C O R P O R A T E D

A N N U A L R E P O R T

COLOR MAGIC

BY

Motorola There's excitement in the air! It's color television—the newest and most amazing achievement in education and entertainment media. With all the truly wonderful developments that have issued from American laboratories in recent years, it is understandable if we take it for granted when fantastic dreams are being realized. With cooperation of engineers from most leading electronic companies, color television emerged without much fanfare from the dream-world. And in 1954 Motorola announced the first large-screen color set with simplified circuitry and thus made color TV a practical means to see things as they really are —colorful. This was all net gain because a Motorola color set continues to give a superior view of programs that are telecast in black and white, but—in addition—enables you to see the programs that are telecast in color. An interesting by-product of Motorola's pioneering in color television is that engineering advances in color have contributed to improvements in engineering design of black and white sets. Thus Motorola's pioneering of color sets has given leadership in color and increased strength in the field of black and white television.

A N N U A L R E P O R T

WORLD'S LARGEST EXCLUSIVE TELEVISION

ELECTRONICS MANUFACTURER

HOME RADIOS

Motorola 4545 AUGUSTA BOULEVARD CAR RADIOS

CHICAGO 51, ILLINOIS TWO WAY RADIOS AND CONTROLS

MILITARY ELECTRONICS

Robert W. Galvin Charles E. Green Matthew J. Hickey, Jr. Director, Secretary Director Executive Vice President

Paul V. Galvin George R. MacDonald Daniel E. Noble Frank J. O'Brien Walter B. Scott Director, Director, Vice President for Manufacturing DIRECTORS Director, President Director Vice President in Charge of Communications and Electronics Vice President for Purchasing Consumer Products and Military

Division

AND OFFICERS

OF MOTOROLA

Edward R. Taylor Edwin P. Vanderwicken Elmer H. Wavering Vice President for Marketing Director, Director, Consumer Products and Vice President for Finance and Vice President for Engineering Assistant to the President Treasurer Consumer Products

TRANSFER AGENTS

The annual meeting will be held on Monday, May Chemical Corn Exchange Bank Harris Trust and Savings Bank 165 Broadway, New York 15, New York 115 West Monroe Street, Chicago 90, Illinois 2, 1955. A notice of the meeting, together with a form of proxy and a proxy statement, will be mailed to shareholders on or about April 11, 1955, at which REGISTRARS time proxies will be solicited by the management. Continental Illinois National Bank Irving Trust Company and Trust Company of Chicago One Wall Street, New York 15, New York 231 South La Salle St., Chicago 90, Illinois

•*PWfc

FINANCIAL SU

EARNINGS NET INVESTMENT NET NET WORKING SHAREHOLDERS' • BEFORE TAXES EARNINGS t IN PLANT AND SALES : EARNINGS CAPITAL EQUITY > ON INCOME • PER SHARE 1 ' EQUIPMENT 2 •

•^^^^^ I J 23,201,107 • 993,786 • 656,286 .34 5,862,933 2,464,598 8,733,345

46,679,148 i 4,179,110 • 2,510,410 1.30 7,028,844 warn •M • • • ••• 2,811,211 10,635,345 61,981,442 i 5,755,347 • 3,550,347 1.83 11,088,342 3,148,206

81,803,358 •••••1^ • 5,280,196 2.73 : 14,558,505 m—m 4,071,987 13,085,196 I 8,585,696 • • • • •H 17,165,391 177,104,669 i 27,368,061 • 13,130,246 6.78 20,731,871 5,794,309 ••• •H MM 135,285,086 • • ! • • • • •HHH I 7,240,452 9,005,880 ! 14,020,739 3.74 29,851,003 26,895,638 1 'WKM mmmmmik 168,734,653 15,576,165 \ 7,012,700 3.62 38,007,247 11,429,532 31,920,882

217,964,074 i 15,512,489 5 7,076,335 3.66 38,222,001 14,301,004 •pm • • ^ 41,755,780

205,226,077 • 16,523,889 !, 7,572,024 3.91 38,308,612 16,579,531 •••• 45,929,419

50,598,747 'Earnings per share of common stock based upon the 1,9 hares outstanding at December '. 2 Net investment after deduction of depreciation reserves. 'Thirteen month period ended December 3 1 , 1948. 'Consolidated information including financial data of wholly-owned subsidiaries in 1949 and subsequent years.

TO THE SHAREHOLDERS OF

Motorola Millions of Dollars SALES

250

SALES AND EARNINGS I take pleasure in reporting that earnings of the company increased in 1954 over 1953. Our sales were the second best in our history. They totalled $205,226,000, compared to $217,964,000 for 1953. At the same time important gains in several directions, and with long-term significance, were recorded. Consolidated earnings, before provision for taxes, were $16,524,000 in 1954 compared with $15,512,000 in 1953, up 7%. Net earnings of $7,572,000 or $3.91 per share of common stock in 1954 compares with $7,076,000 or $3.66 per share in 1953. 45 46 47 48 49 50 51 52 53 54 BLACK AND WHITE TELEVISION The year 1954 was the second best year for the industry in terms of unit production of black and white television sets which totalled 7,347,000. There was a greater proportion of lower-priced table models sold and, since the price structure was generally lower, the dollar value of production was under 1953. Industry inventories were generally maintained in balance and there were some 1,850,000 units in dealer, distributor and manufacturer inventories at the year-end, which we regard as a conservative amount. We introduced a highly competitive television line at mid-year and thereafter achieved a higher proportion of industry sales than the year before. September sales were the largest for any month in the history of Motorola. Replacement sales and sales of a second set to the same owner are an increasing source of business. It is estimated that 63% of sets sold in New York

AFTE8 INCOME TAXES

Bated on 1,935.131 common thor*t eufttandins at Dae. 3 1 , 1954.

45 46 47 48 49 50 51

• Exeew Profit* Tax Year*

in 1954 were in replacement of old, small-screen sets in which the picture gradually deteriorates as compared with modern sets. This high rate of replacement should naturally extend to other communities as they reach a comparable television age. Although an additional 70 new telecasting stations were in operation in 1954 which brought the total up to 426 at year-end, the effect of new stations on set sales is a waning one because there are few markets not now served by at least one station.

COLOR TELEVISION At the July convention of our distributors we introduced three models of color television with 205 square inches of picture screen and priced below $1000. We felt our advances in simplifying the electronic circuitry, and the availability of a large screen picture tube, justified this move. However, it was apparent that the growth of color television would be much slower than black and white because of its cost and because many people could continue to enjoy their monochrome sets. But as more programs are telecast in color, more people will be exposed to its intriguing advantages. More sets purchased should induce more color programs and, as sales volume rises, costs should gradually decline and thus accelerate this reciprocal operation of more programs — more sets. However, I expect this to occur quite gradually. Color television, in addition to the engineering involved, required the setting up of new production lines, the development of many trained service men in the field and a special merchandising program. Substantial costs were incurred for these purposes and valuable experience was gained. The first dealer showing was on September 30 and by the end of the year color television had been introduced in 65 markets. There are now 237 television stations capable of transmitting network color programs. Fifteen stations are equipped with color film scanners and there should be at least 30 by the end of 1955.

MILITARY ELECTRONICS Billings for military electronic equipment and laboratory services reached a peace-time high in 1954 and amounted to about 2 5 % of total sales. This comprised many types of complex equipment principally in the fields of radar, guided missiles, weapons fusing and communications. The Motorola Phoenix Research Laboratory was doubled in size late in 1953, and now employs a staff of more than eight hundred. To fulfill the requirements of electronic weapons systems design, a new laboratory has been established in Riverside, California, where an attractive building was completed and staffed with an experienced team of able scientists and engineers. The Motorola Riverside laboratory equipment includes the necessary analog computer facility required for dynamic systems analysis. Our expanding military research facilities will continue to implement Motorola's leadership in new electronic art and qualify us, by contributions to the art, for a full share of militarv electronics production. In addition to the two western laboratories, two other military electronic development laboratories are located in Chicago. The choice of location and field of interest provides a wide range of opportunities for qualified scientists and engineers who become a part of the diverse Motorola creative effort. '•K * The military electronic mass production activity continues to operate efficiently in a separate facility in Chicago.

COMMUNICATIONS & ELECTRONICS Motorola continues to be a principal manufacturer of two-way mobile radio communications equipment. An important share of the market is also achieved in microwave relay equipment, including black-and-white and color television relay equipment, portable radio communication units and telemetering, power line carrier, supervisory control, coupling networks and remote control devices. The sales of this division continued the consistent record of annual growth through 1954.

Important advances were achieved in Motorola's pilot production of audio, radio frequency and power output transistors. Specialized transistor design for high temperature operation, and new circuitry developments, have opened the way for significant applications to military and civilian electronic products. Motorola's first transistorized product to be announced is a narrow-band power line carrier system for telemetering and remote switching. The second device, a transistorized radio paging unit, is undergoing field tests. During 1954 the division introduced a new line of marine two-way radio equipment, a mobile microwave color TV relay, an airborne radio selective calling system, a new mobile selective calling system, and completed the release of universal two-way radio mobile equipment for operation on either six or twelve volt batteries. The rearrangement of the division's physical facilities was completed during the year to satisfy the demands for expanding operations.

AUTO RADIO This division is subdivided into radios sold to automobile manufacturers and auto radios sold to consumers through our distributor-dealer outlets. During the year the Ford Motor Co. increased the proportion of its radio purchases from Motorola with respect to 1955 models and we now supply over half of Ford division requirements. We also supply about half of Chrysler Corporation requirements and all of American Motors Corporation and International Harvester truck division requirements. While the aggregate of these sales declined considerably in 1954 under 1953, the current rate of operations is very high. Partially as a result of an excessive inventory position at the beginning of the year, our sales of auto radios to our distributors also declined in 1954 despite an increase in the latter part of the year. To augment our specialized facilities for producing auto radios, we acquired in late 1954 an additional plant in Arcade, New York, for the purpose of producing tuners for auto radios. This plant was in full operation at the first of this year and will aid in maintaining our traditional leadership in this business.

At the auto radio tuner plant recently acquired In Arcade, New York.

New research laboratory completed during this year at Riverside, California.

The military research and development laboratory at Phoenix, Arizona.

HOME RADIOS AND PHONOGRAPHS Industry sales of home radio sets declined about 27% in 1954, portable radios 10% and clock radios 1%. Motorola sales in these particular products were also disappointing. K [ NET WORTH, WORKING CAPITAL

AND INVESTMENT IN PLANT AND A new group of high fidelity phonographs was introduced at midyear which makes available at modest prices high quality performance with an audio range EQUIPMENT of 30 to 18,000 cycles. These units have met with favorable market acceptance. MILLIONS OF DOLLARS 50- FINANCES On December 31, 1954 the consolidated working capital of the company was $38,309,000. All categories of receivables were lower than a year ago in relation to current sales rates, except receivables from the government. Inventories were generally at a lower ratio to sales than existed a year earlier. Current assets were 204% of current liabilities at the 1954 year-end compared with 216% the year before. Shareholders' equity increased to $50,599,000 up $4,669,000 for the year. Long term debt was reduced $840,000 and fixed assets (net of depreciation) PLANT & increased $2,278,000. Additions to fixed assets included the new laboratory EQUIPMENT (NET) j and its equipment at Riverside, modernization of the Chicago headquarters of the Communications division, the expansion of the Phoenix laboratory, acquisition of the radio tuner plant in Arcade, equipment for production and testing of color television and a substantial amount of other laboratory and production equipment. Dividends of $1.50 per common share were paid in 1954. At the close of the year there were 4,381 Motorola stockholders. Directors, officers and their immediate families owned directly or beneficially 573,951 shares of Motorola stock out of the 1,935,131 shares outstanding.

THE FUTURE We expect 1955 to be a good year although a very competitive one. Barring an international war or a major strike in any of the important industries in this country, we see the prospects for the best year in the history of our business. We are targeting for a sales volume of $225,000,000 for the year. It is our hope to increase our earnings per share in 1955. Our military billings for 1955 will be less than in 1954, but our billings in all remaining divisions of our business will be greater in 1955 than 1954. Our color television business will continue to be modest in volume compared to our black and white. We do not expect a measurable increase in color television until late 1956 or early 1957. It will be predicated on a much lower cost color tube and an increase in the quantity and regularity of color programming. Being in the dynamic industry that we are and progressively planning for growth in the future, we are naturally entertaining expansion plans — some of which very likely will be put in motion during 1955. Because of the extremely competitive conditions in our industry, it behooves us to be ever alert to all facility improvement requirements to keep ourselves in a truly competitive position. To this end, we are moving progressively into mechanization and the use of automation in many of our facilities. As of now, we are making all of our home sets with plated circuits and the use of our latest automation equipment. We contemplate the introduction of car radio production into plated circuits and automation in 1955.

March 15, 1955 For the Board of Directors

Motorola, N C. AND SUBSIDIARIES, CONSOLIDATED Bi

December 31,

ASSETS 1953 LIABILITIES

Cash Current maturities of long-term debt, and short-term borrowings of subsidiaries Accounts receivable: Accounts payable—trade United States Government Accrued taxes Other trade accounts (less reserve for bad debts — Reserves for service and product warranties 1954, $743,128; 1953, $381,058) Other current liabilities Other current receivables TOTAL CURRENT LIABILITIES Long-term debt, less current maturities above: Costs recoverable under United States Government contracts, less progress billings 3%% note, due November 1, 1966, with annual prepay- 9,288,036 ment requirements of $500,000 Inventories—at the lower of cost or market 22,519,019 Real estate mortgages: Parent, due March 1, 1 956 Prepaid expenses 426,581 Subsidiaries, principally maturing after 1 965 TOTAL CURRENT ASSETS Total liabilities

Other assets SHAREHOLDERS' EQUITY

I Capital stock, $3.00 par value —authorized, 3,000,000 Plant, equipment and leasehold improvements (less reserve shares; issued and outstanding, 1,935,131 shares for depreciation—1954, $3,806,341; Capital surplus 1953, $2,994,834) Retained earnings Total shareholders' equity Patents and trademarks—less amortization

LANCE SHEETS AS OF E C E 31, 1954 AND 1953

December 31,

1954 1953

N O T E S T O F I N A N C I A L S T A T E M E N T S

A—All of the company's subsidiaries are wholly owned and all are included in the consolidated financial state- ments. The accounts of Canadian subsidiaries are included in terms of United States funds, at appropriate rates of exchange; the amounts pertaining to Canadian companies are relatively inconsequential. 7,752,518 9,450,270 1,011,504 B—The company's business under United States Government contracts is subject to price renegotiation, in 12,676,721 accordance with federal statute. The company's renegotiation status has been reviewed by the Government for the years 1950, 1951 and 1952, and no refund was required. It is believed that no excessive profits were realized $33,083,993 in 1953 and 1954 which would be required to be refunded under general price renegotiation.

C—In connection with the financing of sales of products to consumers in the ordinary course of business the companies are contingently liable on discounted, secured notes receivable and have an obligation to re- purchase products under certain circumstances. It is believed that these obligations will have no material effect on the business of the companies.

D—The Retained Earnings account at December 31, 1954 is the balance after transfer therefrom in prior years of $2,945,385 to capital surplus and $5,034,625 to the capital stock account, in connection with stock dividends, share distributions and increase in the par value of capital stock. Capital surplus consists of S6,073,121 of $ 5,805,393 paid-in capital and the above-mentioned transfer from the Retained Earnings account. 9,018,506 31,105,520 E—Under terms of the 3%% note agreement, retained earnings of the parent company in the amount of approximately $9,596,000 were available on December 31, 1954 for the payment of cash dividends or acquisi- tions of the company's stock.

$94,531,084 $86,871,213

STATEMENT OF CONSOLIDATED INCOME AND RETAINED EARNINGS AUDITORS' REPORT

Year Ended December 31, BAUMANN, FlNNEY & CO. 19 5 4 19S3 Certified Public Accountants 208 SOUTH LA SALLE STREET Sales $205,226,077 $217,964,074 CHICAGO 4, ILLINOIS 1,595,724 1,125,164 Other income February 21, 1955.

$206,821,801 $219,089,238 To the Board of Directors and Total income Stockholders of Motorola, Inc.

$161,730,316 $170,709,414 We have examined the consolidated Manufacturing and other costs of sales balance sheet of Motorola, Inc. and its 23,187,253 28,070,626 subsidiaries as of December 31, 1954, and the related statement of income and Selling, service and administrative expenses retained earnings for the year then ended. 1,405,941 1,125,964 Depreciation and amortization of leasehold improvements.. Our examination was made in accor- 2,910,467 2,914,095 dance with generally accepted auditing Contribution to employees' profit-sharing fund standards, and accordingly included such 1,063,935 756,650 tests of the accounting records and such Interest and other expenses other auditing procedures as we considered necessary in the circumstances. It was Total costs and other expenses $190,297,912 $203,576,749 not practicable to attempt to obtain confirmations of certain receivables from the United States Government, but we Net income before provision for taxes on income $ 16,523,889 $ 15,512,489 satisfied ourselves as to their substantial accuracy by means of other auditing Provision for federal, state and Canadian income t a x e s . . . 8,951,865 8,436,154 procedures. In our opinion, the accompanying balance sheet and related statement of Earnings..(per common share — 1 9 5 4 , $ 3 . 9 1 ; 1953, $3.66) $ 7,572,024 $ 7,076,335 income and retained earnings, as footnoted, present fairly the consolidated financial Retained earnings, beginning of year 31,105,520 26,931,881 condition of Motorola, Inc. and its subsidiaries on December 31, 1954 and the consolidated results of their operations Total $ 38,677,544 $ 34,008,216 for the year then ended, in conformity with generally accepted accounting principles applied on a basis consistent Deduct cash dividends declared—$1.50 per share 2,902,696 2,902,696 with that of the preceding year.

Retained earnings, end of year $ 35,774,848 $ 31,105,520

See the accompanying notes to financial statements.

G I N E E R I N G

has been a dynamic, impelling force throughout Motorola's history. A combination of imaginative thinking and a practical understanding of what the customer requires . . . well trained scientists and engineers . . . hard work . . . enthusiasm— these have resulted in one solid success after another. And in this past year of 1954 Motorola laboratories moved forward to a new high.

Perhaps the most spectacular single contribution, in a year of achievement, w a s Motorola's pioneering in the field of . . .

CO LO TELEVISIO

Just a brief year ago, color television was a Then with the advent of a satisfactory large long way from the homes of America. At best, screen color tube, Motorola's engineers began to turn is was a costly experiment. The practical the experimental into a salable product. First came consumer product seemed years away. revolutionary new circuitry that greatly reduced the Briefly, the problem was fourfold. The number of components and permitted the number of picture screen size was too small; the price tubes to be cut from forty-four to twenty-nine. much too high; service was unavailable; and Next, a remarkable new design of the "yoke," there were few programs to watch. In the latter which controls light deflection from the electron case the networks promised increasing color guns, was developed. This and new convergence programming . . . but, the other obstacles circuits served to eliminate color fringing. A new seemed steep indeed. corona discharge regulator and a stabilized tuner to avoid station drift were added.

i

B LAC K A WHITE T E LEVISIO

These developments helped bring the price In 1954 no less than thirteen major improvements were made in the field of a high quality Motorola color set within of monochrome TV by Motorola engineers. Among the most noteworthy the range of consumer buying power. advances was Motorola's gammatrol circuit which results in more uniform Finally, with a comprehensive Motorola picture reproduction when selecting or switching channels, and maintains color service training program, color television better fidelity of contrast with scene changes. Other improvements became a practical reality. included a modified intercarrier sound system for clearer sound reception in fringe areas, a new cascode tuner with much improved interference Thus was born a new entertainment partnership. rejection and an advanced framelock circuit for picture For even as Motorola's engineers were stabilization in noisy areas. pushing forward on color TV, they were also applying their findings toward improved . . . Keeping pace w i t h Motorola's strides in television were several developments in . . .

RADIO *)

Typical of the engineering progress made in the still improving radio art, were Motorola developments in plated circuitry. Motorola engineers created a "universal" plated circuit chassis which is interchangeable among different radio models. Its design brings new economies and longer life to the home and portable radio. A new approach to chassis design simplified the production of small radios. Also a product of the design table was a new iron core directional antenna for portable radio, one of the largest and most versatile in the industry. The portable line was further improved by the inclusion of an exceptionally powerful and long-life 90 volt battery to mark the first time in the industry that small portables have been so powered. ®* K Along with these improvements in the long-established field of radio there were others in the comparatively new medium of . . .

7

I GH F I D E LI TY CAR RADIO

Here, Motorola's engineers developed and designed . . . advanced, too, under the impetus of Motorola engineering. a 20 watt amplifier with a special 5-layer output During 1954, revolutionary "Volumatic Control" became available transformer. This very significant contribution on all Motorola car radios. This device prevents "signal fade" and enabled the production and sale of high fidelity automatically holds volume at a pre-set level when passing through equipment with a full audio range of 30 to 18,000 viaducts, over bridges or between tall buildings. In addition, each car cycles at a price below $200. Previously, such radio model is now available for either 6 or 12 volt electrical systems. equipment would normally retail at $500 or more. Advances were also made in car radio design to simplify Another development in the field of high fidelity installation and maintenance, reduce size with full sensitivity, involved the design of the speaker housing to and increase shock resistance. prevent acoustical feed-back.

Not so generally k n o w n , but no less important than the strides in consumer goods, have been the successes in . . .

COMMUNICATIONS AND ELECTRONICS The pioneering of Motorola's C & E Division has been the cornerstone for many of electronics' outstanding achievements. Research in this division has paved the way for many consumer products.

The tiniest development of '54 and yet one of the most significant was Motorola's work and research into the field of the . . .

TRANSISTOR This tiny, extremely dependable device may replace the vacuum tube in most applications. The transistor is fashioned from a speck of germanium or silicon and a few connection wires. It provides the advantages of low power consumption, mechanical sturdiness, long life and small size. These qualities assure the use of transistors in military and civilian products once the problems of low cost mass production are overcome. An example of the transistor's advantages in use are found in Motorola's recently announced

TRANSISTORIZED NARROW BAND POWER LINE CARRIER SYSTEM In effect, the Motorola power line carrier is "radio over wire" and is used in conjunction with electric power lines to meet the increasing communications needs of expanding utilities. With this equipment each 500 cycle channel can also be used for teleprinting, telemetering, load control, and supervisory control. This application of the transistor provides a new high standard of reliability for power line equipment.

Other recent industrial developments, already in use, include

TWO-WAY RADIO improvements such as new marine ship-to-ship and ship-to-shore communications. Also in this field Motorola pioneered new universal 2-way auto equipment which may be used interchangeably MICROWAVE with 6 or 12 volt electrical systems. developments included a mobile color TV relay Perhaps the most significant two-way contribu- which makes it possible to originate color broad- tion was the development of equipment for the casts outside a studio. In microwave relay com- UHF 450-470 megacycle frequency range, which munications the development of a dual frequency includes the "citizens" band. This equipment ex- diversity system results in improved reliability for pands the usable spectrum for mobile radio appli- defense, industrial and telephone trunkline appli- cations and widens the potential equipment market. cations.

SELCAL MILITARY is the name for still another C & E product. With These devices include new aids in radar . . . guided it a commercial pilot need no longer listen to all missiles that seek and destroy enemy planes with the messages being transmitted to catch those in- an almost unerring precision ... electronic plotting tended for him. Selcal automatically selects the devices for spotting a plane's course . . . and over proper message for the right aircraft, a significant 16 other major contributions to the armed forces. safety device to reduce pilot fatigue. Less friendly to aircraft are some of the develop- ments for the . . .

Still more and more advances are coming from the laboratories of Motorola. These products, now in the research stage, w i l l be the standard items of . . .

TOMORROW!

The ceaseless pioneering and studies of Motorola engineers are insuring a position of leadership tomorrow. The research of today pays off in next year's achievements. In every branch of research, Motorola engineers are profiting from each other's efforts. Progress in one area helps in another. The whole is building a progressive force that will maintain a strong growth trend for Motorola.

QUALITY IS ENGINEERED INTO EVERY MOTOROLA PRODUCT Samples of the current line of radio, television and high-fidelity sets.

OVER 2 5 YEARS

OF LEADERSHIP IN

ELECTRONICS EXCLUSIVELY

Motorola CHICAGO 51, ILLINOIS