摩托罗拉公司1969年年报

Motorola annual report 1969

financial highlights

1969 1968

(dollar amounts in thousands except per share data)

Sales and other revenues $ 873,224 $ 775,124

Income before taxes 71,843 57,376 % to Sales 8.23% 7.40%

Federal income taxes 38,050 29,115

Earnings 33,793 28,261 Per share of capital stock 5.48 4.61

Capital expenditures 43,294 32,009

Depreciation 22,531 20,071

Working capital 235,377 176,315

Current ratio 2.47 2.08

Shareholders' equity 326,134 238,778

Average shares outstanding 6,164,084 6,133,470

Book value per share 49.03 38.84

Yearend employment 45,000 41,000

Cover: The newest approach to computer memory storage is exemplified by the 8192 bit memory array. These modules are made possible by combining metal oxide semiconductors, beam lead bonding and computer-aided design and testing.

Creativity and Diversification in Electronics

contents

financial highlights 1

about the cover 1

letter to shareholders 4

semiconductor products division 6

communications division 10

consumer products division 14

government electronics division 18

automotive products division 20

control systems division 22

corporate marketing units 22

balance sheet 24

statement of earnings 26

additional paid-in capital 26

source and use of funds 27

notes to financial statements 28

ten year financial summary 29

major facilities 30

major product lines 30

annual meeting 31

directors and officers 32

to our Sales and earnings reached new electronic process control shareholders records in 1969. Total revenues instrumentation. and friends increased almost $100 million or Research and Development 13% to $873,224,220, while earnings increased 19% to $33,792,573 or A wide variety of research and $5.48 per share, compared to $4.61 product engineering and developper share in 1968. These earnings ment programs was actively pursued remained after provision for over in 1969. Total expenditures for $58 million for federal, state and these purposes increased 24% in local taxes on income, property and 1969 and are planned for another payrolls. increase of about 20% in 1970. Corporate Marketing Units Our improving diversification in the growing electronics industry is To further strengthen the company's benefiting us. Among the notable position in several growth fields, operating achievements of our three corporate marketing units various businesses in 1969 are the were formed in 1969. One group following: will seek to identify electronic systems opportunities which will use The semiconductor division existing products and capabilities emerged for the first time as the of any and all of our divisions. largest single segment of our Another group will be responsible business in terms of sales volume for marketing of electronic video and earnings. Sales of this recording (EVR) players. The third division increased in excess of group will market products and 35%, and earnings by an even higher rate over 1968. systems for administration, operational control, communications and The communications division entertainment directly to institucontinued as our second largest tional customers, such as hospitals, business, posting a sales increase hotels and schools. of about 13%. The consumer products division Capital Expenditures increased its share of market in Capital expenditures in 1969 totaled every product line in the face of $43 million, more than half«of which softening market conditions was incurred by the semiconductor throughout the industry. division in expanding and further The government electronics equipping the integrated circuits division improved earnings and facility at Mesa, Arizona and the margins despite slightly reduced Toulouse plant in France. A major billings and major reorganization portion was also incurred by the of its plant facilities. communications division in expandThe automotive products division ing plants in Schaumburg, Illinois established its first wholly owned and Fort Lauderdale, Florida. overseas manufacturing opera- Capital expenditures for 1970 may tion—in England. exceed $55 million. Depreciation in 1969 was $23 million and will The control systems division approximate $25 million in 1970. achieved another substantial increase in sales and obtained a contract for the country's largest installation of intrinsically safe

Financing In November, rights were issued to shareholders to purchase 1 additional share of common stock of the company for each 13 shares held at a price about 19% below the market price at that time. Since all of th proceeds were used to repay h ghcost debt obligations, earnings of the company were not diluted

because of the additional 474,952

shares issued. At the same time, th

net worth of the company was

increased by the proceeds of

approximately $58 million which,

together with earnings retained,

resulted in an improvement in the

company's yearend ratio of debt

(short and long term) to equity to

30% from 56% at the end of 1968,

thus providing a strong foundation

for continued growth. The only

remaining current bank debt is at-

tributable to our foreign operation

Share Distribution and Dividends In February 1970, the board of directors adopted a proposal to be

made to shareholders at the May 4

annual meeting calling for an

increase of authorized shares from

10,000,000 to 20,000,000. Subject

to shareholders' approval, the

company plans to make a share-for-

share distribution on May 25 to shareholders of record May 11.

Also, the directors expressed the intention of raising the quarterly dividend to 15 cents per share in June for shares then outstanding.

This would be equivalent to a 20% increase in the present annual dividend rate.

Management Changes Arthur L. Reese, director and formerly executive vice president, became a staff executive and continues as a director. He has long

served the company importantly as general manager of the communications division and most recently as general manager of the consumer products division. He is succeeded in the latter capacity by Edward P. Reavey, Jr., formerly vice president for marketing of that division.

At the corporate level, William J.

Weisz, was elected executive vice

president and assistant chief

operating officer. He had been

general manager of the communi-

cations division. Thomas J.

Connors, formerly vice president

and director of marketing for the

semiconductor division, was named

vice president of marketing for the

corporation and later given the

additional assignment as general

manager of the control systems

division.

In the communications division, Homer L. Marrs was designated vice president and general manager.

He had been vice president and

director of distribution. John F.

Mitchell, vice president, was named

assistant general manager. Martin

Cooper and Carl E. Lindholm were

each elected vice presidents and

directors of product operations.

In the semiconductor division, John

R. Welty, vice president, was desig nated assistant general manager and Christian G. Goodman was elected vice president and director of marketing for the division; John

C. Haenichen and Patrick J. Lynch were elected vice presidents and directors of operations.

Outlook As 1969 ended, the concerted effort of federal authorities to suppress inflation were adversely affecting certain parts of our business and

resulting in a moderation of the growth rate in others. A cost/price squeeze is a natural concomitant. Our assumptions for planning purposes regarding the general economy include the probability that monetary policy will be eased gradually during this year and that more normal growth rate will thereafter resume.

It is well known that softness has

developed in the automotive and

consumer hardgoods markets and

there is a slowdown in certain

federal government funding. These

factors are, of course, having impa

on the related segments of our

business, particularly in the first

second quarters. However, the

communications equipment and

semiconductor markets have not

been affected in the same degree.

We are concentrating on improving productivity to offset the cost/pri squeeze.

On balance within this mixed

environment, we currently can see

the possibility of further increase

in total revenues and earnings for

1970 as a whole but this will depen

on reduced pressure on the

economy during the last half of

the year.

For the Board of Directors,

CHAIRMAN OF THE BOARD

PRESIDENT

March 26,1970

While the semiconductor industry grew by approximately 16 per cent during 1969, Motorola's semiconductor prod-

ucts division sales again grew by more than 35 per cent. Earnings increased over 1968 at a substantially greater rat

In the international marketplace, the gap between Motorola and the industry was even wider. While the industry grew by about 20 per cent in both Europe and the Far East, the division scored a sales increase of more than 60 per cent.

During 1969, as in the past, the divisio

continued to place heavy emphasis on

both increasing worldwide production

capacity, and developing advanced,

highly complex products for the next

generation of electronic equipment.

Early in the year, a small semiconductor operation was established in Tucson, Arizona, where production began early in 1970. At the integrated circuits center in Mesa, Arizona, 134,600 square feet of production area was added during 1969, and another 82,200 square feet is still under construction at the site.

Foreign production capacity was greatly increased during 1969. Semiconductor production facilities, totaling 71,000 square feet, were completed in Nogales and Guadalajara, Mexico, and East Kilbride, Scotland. The Nogales plant was brought into full production during the year. The Guadalajara and East Kilbride plants, presently in limited production, will be in full production early in 1970. In addition, the Seoul, Korea facility was expanded by 5,000 square feet, and material processing capability was added to the Toulouse, France complex. A 30,000 square foot expansion was also begun at the Toulouse plant.

While the market for discrete semiconductors maintained its healthy growth pattern during the year, emphasis in the marketplace continued to shift toward the more complex integrated circuit devices. During the year,

the division again supplied the broadest line of integrated circuits in the indust including not only the standard, high volume families, but also the even more

sophisticated devices made possible by research and development in metal oxide semiconductors (MOS), computer-aided design (CAD), multi-layer metallization, dielectric isolation and beam lead bonding.

In the digital integrated circuit market, significantly increased sales resulted from broadening product lines and utiliz-

ing advanced production techniques.

Ninety-eight completely new digital inte-

grated circuits were introduced, forty

per cent more than in the previous year.

A third of these introductions were in

the increasingly popular transistortransistor logic (TTL) family. As a resul Motorola has become a major supplier of both industry-wide TTL circuit types and complex TTL functions. In addition, a third generation of emitter-coupled logic (ECL) circuits was introduced, establishing a new order of ultra-high speed performance for large computer systems, instrumentation and frequency synthesizers, areas which promise significant growth during the 1970s. The MECL-III family is the first digital integrated circuit series that provides subnanosecond (less than a billionth of a second) speeds. ..

In linear integrated circuits, sales grew at twice the rate of the industry. Twenty-five devices were introduced, representing new "building blocks" for the systems designer and enabling manufacturers to produce better, less expensive and more efficient designs for instrumentation, computers, communications and entertainment products. By yearend, the division became one of the largest suppliers of linear integrate circuits in the industry.

With linear circuits on the threshold of a dramatic growth period, plans are being readied to introduce more than 40 new linear devices during the coming

year. Many of these products will feature new capabilities, such as high current, high voltage, thin-film compatibility, an radiation resistance. Semiconductor memories will play an important role in the next generation of computers. Along with individual monolithic integrated circuit memories containing smaller storage capacity, a series of highly complex, sub-system memory modules is also being developed. These new modules are being made possible through an advanced product manufacturing system which combines the MOS and beam lead technologies with computer-aided design and testing techniques. The first of thes announced for introduction is an 8,192 bit random access read-write memory (shown on front cover), larger and faster than any memory module presently available. Five more complex modules

1. Computer-aided design of ntegrated circuits reduces design and production time for custom and LSI circuits

2,4. Beam lead bonding solves many critical and time consuming bonding operations.

3. Functional circuits (small scale integration) and advanced plastic encapsulated devices open rge segments of consumer market by lowering production costs

5. Computer-operated step nd repeat camera, with precision of 0.0001 inch, photographically reduces integrated circuit designs for mask production.

will be introduced during the first quarter of 1970.

The coupling of advanced product

technologies with well-known volume production flexibility is resulting in t development of a variety of state-ofthe-art devices.

Multilayer metallization, which increase yields by reducing the die size on the wafer, made possible a 14-bit time division demultiplexer built on a single chip. This circuit is being used in the Boeing 747. In addition to a number of standard circuits, 25-gate and 112-gate TTL arrays were also produced with this technique.

The latest beam lead bonding methods, which increase reliability and performance, are being used to mass produce TTL circuits and linear circuit chips. This technique produces circuits of an extremely high order of reliability, as required by the government and aerospace markets.

Dielectric isolation processes are being

used in devices requiring radiation

resistance. Beside their superior per-

formance in radiation environments,

these devices will find broader appli-

cations in other new markets which require high voltage and high current capability. The division has already achieved a leadership role in this young but promising technology.

The computer is being used as a vital

tool in the design of complex circuits.

Computer-aided design (CAD) helps the

designer in specifying product and

analyzing proposed circuits through

logic simulation, circuit analysis and

the determination of component and

interconnect placement. After the design

is complete, the computer controls the

drafting function, and generates test

programs. CAD is playing an important role in the development of MOS capability, since most MOS devices require custom design. Using this advanced design technique, the division

expects further penetration in this expanding market during the coming year. Discrete devices during 1969 accounted

for more than 65 per cent of the dollar

volume of the total semiconductor industry. In this high volume market, divisional sales continued to strengthen Motorola's leadership in the discrete fi results in part from continuing research production refinements, and the introduction of a constant stream of new products. The development of new markets in the appliance field for zener diodes, silicon signal transistors and silicon power transistors is also adding impetus to this growth, as is the rapidl growing demand for plastic encapsulated devices in the entertainment market.

Optoelectronics is an example of the division's continuing investment in discrete devices. A major industry breakthrough in materials processing during 1969 permitted the introduction of visible red light emitting devices which can be used as indicator lights, in numeric readouts and card readers,

opening a potentially huge market. Next

year will see the introduction of a

number of additional optoelectronic

components and a complete alpha-

numeric readout using light emitters.

In 1969 Motorola also introduced discrete "functional circuits," which, i complexity, lie between discrete devices and integrated circuits. Containing a limited number of transistors and

passive components, these devices

create a variety of inexpensive partial

circuits for the mammoth consumer

products industry. These circuits cost

less than the equivalent discrete com-

ponents, and are built, packaged and

tested as easily as a single component.

Seven "functional circuits" were intro-

duced during the year and ten more are

scheduled for 1970.

The continual probing at the limits of the semiconductor art, and the steady introduction of new and improved devices are helping to insure a major

role for Motorola in tomorrow's semiconductor market, which promises a steady growth in size, complexity and

competitiveness.

The semiconductor market will continue to grow during 1970 although at a slower rate than in 1969. While discre component sales for the industry are expected to level during the year, the division again anticipates both increased sales and share of market.

Integrated circuits will continue to account for a greater share of the tot semiconductor business, increasing by about 25 per cent over 1969 in total factory sales. It is expected that Motorola's growth in this market will outpace the industry.

In spite of the cooling economy, sever semiconductor markets have the potential for significant growth this year through increased penetration. These include the military-aerospace, consumer, computer and industrial markets

1. Electrical probes test individual light emitting diode on wafer.

2. Computer controlled probes perform electrical inspections of individual, dielectrically isolated integrated circuits while still on silicon wafer. * r ~

3. Multi-layer metallization process increases yield by reducing die size, thus aiding custom circuit design and production of LSI circuits.

,2

The year 1969 completed a decade of steady growth for the division's communications systems, which include mobile, portable, industrial systems and component product groupings. Technological advances, market expansion and customer confidence in Motorola products has kept the division in its leading position.

Sales volume during the year reached a

new high with increases in all product

activities. New order input ran well

ahead of plan and resulted in a sub-

stantial increase in open order backlog

compared to the same time last year.

Earnings also set new highs and outpaced sales growth during the year. Improved profits, despite continued increases in costs, resulted from the increased volume and significant improvements in operating efficiencies.

Domestically, the division carried on an extensive expansion program during the year. A new manufacturing facility was opened in Fort Lauderdale, Florida. To accommodate the rapid growth of operations there, a 250,000 square foot facility is now being planned to replace the leased site. At the Schaumburg, Illinois headquarters site, a 317,000

square foot addition is being added to

the present 750,000 square foot facility

A reorganization of international operations during 1969 placed new emphasis on the division's plans to broaden these operations dramatically during the 1970's. Majority control of Canadian Motorola Electronics Ltd. was acquired, and a new wholly owned subsidiary became operational in Wiesbaden,

Germany.

The division now has worldwide distribution of products and services in 91 countries. Included are seven subsidiaries or joint ventures in Brazil, Argentina, Mexico, Canada, Israel, South Africa and Germany. These seven manufacturing operations provide direct distribution in those countries.

Research and development remains the foundation upon which the division retains its position in the industry. Th development and manufacture of many component products for internal use has led to a natural progression into th business of supplying original equipment manufacturers. For example, a distinct line of crystal products has been developed. This family of com-

ponents includes a series of precision

quartz crystals, precision oscillators,

temperature-controlled crystal oscil-

lators, precision crystal filters and

monolithic crystal filters. Extensive

research is being conducted into the processing of synthetic quartz, from growing to final packaging. Also being supplied to customers are a series of reed devices, plug-in tone modules and printed circuit boards.

Technical advances through fabrication of other components and the use of modern computer-aided design techniques allowed the division to develop many exceptionally improved product lines during 1969. The quality, reliabil and simplified maintenance designed into these new products have received acclaim from our customers.

Foremost in design achievement was

the development of a new line of hand-

held, two-way portable radios with a size reduction of 50 per cent ahd weight reduction of 40 per cent over the previous model line. A significant 250 per cent increase in rf power output distinguishes the HT-220 "HandieTalkie" portable radio as the smallest and lightest 5-watt unit in the industry

Division engineers designed two mono-

lithic integrated circuits to replace 51 previously used components to achieve the dramatic 50 per cent size reduction. The development of a smaller, lighter, rechargeable nickel-cadmium energy cell, in addition to the fewer component parts, enabled the 40 per cent weight reduction.

1. Advanced design products and systems result from continuous research and development of microelectronic devices.

2. Computer-aided design techniques allow simplification of design to achieve better reliability, easier maintenance and greater cost savings.

3. Sales and market specialists provide technical expertise in the development of customized communication systems to solve customer problems.

4. Simplified flow-type design reduces costs and makes solid state two-way radio economically feasible for all users.

5. Portable two-way radio exemplifies monolithic integrated circuit developments and high density packaging techniques.

11

Reaching further still into high density component design, the division developed a short range mini-unit that is 23 per cent smaller and 28 per cent lighter than the previously described model line. Weighing only 15 ounces, the 17 cubic inch HT-100 "Handie-Talkie" portable radio utilizes the latest in integrated circuitry. A single, doublesided circuit board was designed to fit around the speaker and holds all components of the separate transmitter and receiver sections.

The second major design achievement

was the development of a top perform-

ance, all solid state, mobile radio manu

factured at a significant cost savings.

Designated the "MOCOM 70" radio, the

new unit features a simplified design fo

better reliability and easier mainte-

nance. Using computer-aided design

techniques, the receiver and transmitter

circuitry was laid out in a flow type of

design on a single layer circuit board.

The elimination of other circuit boards and the resultant decrease of materials reduced costs and made solid state radio economically feasible for every type of two-way mobile radio user. Due to the increasing variety and number of customers, the division is placing greater emphasis on organizing specialized market/sales teams to better service customer groups. With over 400 types of customers, it becomes essential to have specialists who are familiar with specific businesses and related operational problems, and who are capable of developing solutions to these problems. These market teams, in alliance with their customers, provide the division with the technical expertis necessary to design new and better uses of communication systems.

12

In 1969 over 50 new communication systems were introduced in response to the needs of the market. Some of these were: a disaster radio network for area hospitals; a 12-channel improved mobile telephone system with automatic channel selection and dial operation; base station control units and repeaters in the 450 MHz and 960 MHz bands; an all solid state 6 GHz rf micro wave with full 600-channel capability and a 2 GHz version with 300-channel capability; a high capacity paging encoder expandable to 870 calls; an alarm

reporting system for monitoring remote

functions; radio switches capable of

controlling up to 16 different remote

functions; several closed circuit tele-

vision accessories for automatic lens

adjustment, high-temperature camera

protection and automatic video sequen-

tial scanning of up to 10 cameras from

a single monitor; and several special

precision instruments such as the

television frequency stabilizer system.

Two-way radio is playing an increasingly large part in our everyday life. Today, many mobile radio users are faced with severe overcrowding due to the limited number of radio frequencies allocated. For many years, Motorola has led an aggressive technological effort to derive more use out of the available spectrum. This effort has increased the number of channels in the frequency spectrum by four to one. Now, the Federal Communications Commission is considering proposals to allocate more frequencies to two-way radio users and to permit them to share or use exclusively frequencies currently allocated to TV broadcasting. None of these proposals will significantly affect the tel vision viewing public but will permit continued growth in the two-way radio, public-service oriented market area.

In the 1970's, the division will continu to develop its technical capabilities an looks forward to even greater gains in strengthening its domestic and inter-

national position. The forecast for is for continued increase in both s and earnings. The current open orde backlog and new market and product programs hold promise for new sales growth. Continued improvements in operating efficiencies coupled with additional volume should again gene improved earnings.

1.An additional 317,000 square feet under construction at the Schaumburg, Illinois headquarters.

2. Technological advances in visual communication products keep the division ahead of market needs.

3. Motorola-trained technicians perform system maintenance on-site or at service centers throughout the country.

4. Extensive research is being conducted in the processing of synthetic quartz for frequency oscillators and filters.

13

With a severe fall-off in consumer buying, particularly during the critical fourth quarter affecting the entire indus

try, forecasted sales and profit goals of the division were not achieved. However., division performance during 1969 resulted in market penetration gains in every product category as measured by Electronic Industries Association data. This gain in the face of a general

industry decline reaffirms the validity o

the division's broadened marketing

philosophy and lays the foundation for

improved performance in 1970.

Quasar Color TV best exemplifies the division's strategy of concentrating marketing effort behind products with unique and demonstrable advantages. Supported by increased investment in research and development and greater

utilization of the technical capabilities

of other divisions, this strategy is bein

expanded into other product lines. Such

products are introduced first into the

upper price ranges. Once consumer demand has forged a solid sales base, models with similar advantages but at lower price points will be introduced, contributing to a growing market share.

Exemplifying this "layering-on" concept

of product introduction was the an-

nouncement of Quasar II — a second

generation "works in a drawer" line.

These lower priced consoles and table

models were designed to compete in

the color market's fastest growing seg-

ment. Development of Quasar portables

advanced during the year to open additional 1970 marketing opportunities. The decision to eliminate the manufacture of tube type color TV in favor of a virtually all Quasar color TV line confirms Motorola's substantial competitive lead in the application of solid state technology.

Advertising concentrated on translating Quasar TV benefits into language that creates consumer buying. The phrase "works in a drawer" is now the best known feature in color TV according to

independent research. The Quasar TV campaign was chosen by retailers as the year's best in a major trade maga-

zine survey. Coordinated use of the "works in a drawer" concept in advertising, display, training and selling resulted in a substantial increase in t division's share of retail color TV sal over $600.

In other product lines, technical devel

opment was aimed at new or growing

markets. The division's first cassette

tape players were introduced in midyear

with successful results and further additions are planned. In December, the forerunner of a complete line of stereo components was announced to compete profitably in the fastest growing segment of stereo sales.

The reliability and serviceability conc

of Quasar color TV was brought into

two important screen sizes of black and

white TV through the application of

replaceable solid state mini-circuits.

Division efforts in automotive sound products were directed to the car tape player line and to FM/AM auto radios. The personal electronic product group neared completion of development work

for a new and specialized series of

radios and portable phonographs which

will take maximum advantage of the

semiconductor division's integrated

circuit capability. This use of the lat

state-of-the-art technology will help

combat growing foreign product

strength.

STRATEGY

troduction: rge screen consoles

1967 1968

Phase I — introduce and d ket for product with demo ence in upper price range

Layer on small screen

Layer on large screen portables Layer on m lower priced y consoles & table models

1969 1970 1971

Phase II — add products with simil fer- differences, at lower price points pete in growing segments of market

Increased Quasar share of

market

972

1. Strategy of "layering o n " concept as applied to Quasar color TV.

2. Future "Concept 90" digital clock radio undergoes audio frequency response check.

3. Audio component undergoes rigid test and analysis before unit is mass produced.

4. Computers assist in circuit design and analysis, as well as in operations.

15

In 1969 research was launched into every possible home use of an electronic video recording player. The division also began a significant exploration of a video display product program. This involved closed-circuit TV monitors and chassis used for computer input/output devices, a market with an estimated 30 per cent annual growth rate.

Recognizing the need for lower costs and improved flexibility to compete in the face of a declining economy, major steps were taken toward standardization of chassis and parts and their assembly techniques. A new vendor shipping release system was established to reduce both material costs and the procurement time cycle. To further improve direct and indirect cost/ productivity relationships, a management consulting firm, working with internal departments, has launched a division-wide program to increase employee efficiency.

Better inventory control was another primary cost reduction goal. Coupled with increased market penetration, the result shows the division's factory plus distributor inventory of major product categories declining steadily as a share of the industry total. This trend has con tinued over several months, including the period of greatest sales decline.

To meet growing foreign competition,

construction started during the year on

an efficient, cost oriented manufacturing

facility in Taiwan. A study to better utilize existing production facilities ma possible consolidation opportunities that will result in the phasing out of the Elgin, Illinois plant during 1970. Elgin personnel will be given an opportunity to indicate preferences for accepting employment at other Motorola plants.

In 1969, the division continued its dedication to marketing through independent distributors and it strengthened their market potential by expanding some sales territories. The division's own

16

sales force was regrouped under three zone managers for better field supervision. High priority was given to strengthening and increasing dealer outlets primarily in metropolitan area The resulting improvement in better and broader consumer exposure of color TV is reflected in the significa gain in urban market share realized by the division. Further improvement is expected in 1970.

Effort to improve consumer satisfactio centered on safety, reliability and serviceability of products, on more comprehensive warranties encompassing labor costs and on improved product use literature. The program of post-sale phone calls to Quasar TV purchasers was continued in 1969. An expanded field training program was designed to keep service technicians abreast of advancing technology. A consulting firm was engaged to find additional ways for Motorola to better serve the consumer and to improve communications between the company and its customers.

For 1970 the plans and budgets recognize the possibility of declining consumer demand for some products but are capable of rapid adjustment should the market climate improve. With a solid foundation, based on gains in every product category, management regards the coming year as an oppor-

tunity to register further important

improvements in the performance of

this division.

/ •

1. Quasar has the "works in a drawer'' for greater reliability and ease of service.

2. The application of replaceable solid state mini-circuits was extended to the black and white television line.

3. The character generatorand video monitor fit into a number of total systems, such as flight information, inventory control, computer shopping and push-button banking.

17

Consolidation of the division's operations in Scottsdale, Arizona was completed in 1969 with the closing of the Chicago Center. Earnings and margins were up in 1969 over 1968. Total sales, however, were down, primarily due to the transfer of commercial microwave product lines to the communications

division and the completion of a number

of high volume production contracts

at the Chicago Center.

The outlook for the government's military and space budgets, over the near term, is for reduced funding. In preparing to meet our growth objectives in this more highly competitive business

environment, significant organizational

changes were decided upon near

year's end.

The division's 1970 structure will be comprised of three operations: communications, radar, and tactical electronics. Each of these operations will include its own engineering, marketing and program management departments

with an operations support group to

provide the broader services required.

Shorter communication lines between operations groups and top management are essential for quick, effective response to the accelerated forces of change in the government marketplace and on technological fronts.

In response to anticipated shifts in government spending from Vietnam related programs to strategic programs, the division emphasized technology developments in the electronic countermeasure and missile guidance areas. Efforts resulted in contracts for equipment to protect strategic aircraft by generating "smart noise" to deceive enemy missiles. Development of all solid state, phased array, dual frequency antenna techniques has put the division in a prime position for several new missile guidance programs.

Continuing the division's strategy to be at the forefront of the state-of-the-art

a diversity of business areas, the division's experience on both manned and unmanned space programs coupled with in-house advanced techniques developments resulted in the award of four subsystems for the Mariner/Mars 7 program.

The division sales of "keep the peace"

type products which should receive

continued funding following a cease

fire in Vietnam, were considerably enhanced through development of both advanced display and range gated filte techniques for applications to moving target indication radars.

The trend toward digital communica-

tions is expected to accelerate at an

unprecedented rate in the next few

years. Motorola is already well on its way toward establishing itself as one the leaders in the design of state-ofart digital communications systems requiring extremely high data rate technology.

These and other programs are expected

to form a base for the division's

continued technological leadership.

1. Electronic countermeasures equipment, designed to extend the useful life of B-52 bombers by protecting them from enemy missiles, was produced in only three months from concept to test program.

2. Radio assembly and support equipment for Mariner/Mars 71 mission. Radio will provide four communication links to the spacecraft for command, control, ranging, and telemetry.

3. Developmental model of advanced missile guidance system features a single circular phased-array antenna operating two radars simultaneously. The system successfully implements advanced solid state techniques at super high frequency (30 GHz) in both transmitter and receiver.

4. A new range positioning system, with ranges up to 50 miles, is ideally suited for geophysical exploration, hydrographic projects, and other activities.

5. The flight command subsystem for Mariner/Mars 71 mission will receive commands from the Motorola on-board radio, then process and relay them to other subsystems to operate various equipment.

19

The division achieved the second highest sales in history, only slightly lower than the record breaking year of 1968. The dock strike which affected Volkswagen shipments, the American Motors strike, and the Chrysler shutdown particularly affected our volume. Earnings were adversely affected by this reduced volume and by international startup costs.

Industry estimates for 1970 car sales are cautiously estimated at a level slightly lower than 1969. However, there are several offsetting factors. First, import should increase to over one million units

in 1970. This is significant to Motorola

since many of the car importers buy

radios and other equipment from inde-

pendent suppliers. Volkswagen, for

instance, currently sells over 50 per cen of all imported cars and Motorola is the sole supplier of AM and AM/FM radios and tape players for the Volkswagen Distributors of America and Canada through 1970. Motorola has also been awarded 100 per cent of the radio requirements for the Capri which Ford intends to import beginning in 1970. Second, the division's diversification into other product categories, particularly the growing tape player market, has added stability to its operations. Th division produces tape decks for home units as well as automobiles. While the car radio continues as the division's major product line, its relative share of total dollar sales is declining as tape players, alternators, ignition systems, tachometers and hour meters have expanded and increased the division's product lines.

Third, the original equipment manufacturer customer list now exceeds 400. This adds to stability in that growing sales in some areas will offset declinin sales in others.

Increasing competition from major Japanese manufacturers is anticipated and we have accelerated our offshore manufacturing activities to counteract this competition. The division's joint venture company in Japan, AlpsMotorola, manufactures car radios and tape players for sale in the United States, Japan, and other world markets.

A new manufacturing facility will be in

operation in early 1970. This is the thi

major expansion of Alps-Motorola in

less than three years. Sales and profits

are expected to increase in 1970.

The division is making strides toward tuner and circuit component miniaturization and other design improvements to make products smaller and more economical. Safety standards increasingly require that all instrument panel components be minimum in size. We have demonstrated a pushbutton AM/FM/multiplex car radio which is almost two-thirds smaller than contemporary equivalent designs. We are researching completely electronic tuning techniques which will allow further size reduction. The trend toward FM multiplex continues as the consumer demands stereo sound in radio as well as tapes. The division currently supplies FM and FM multiplex radios to Chrysler, American Motors, Volkswagen, and others. The tape market continues to grow at a phenomenal rate. Stereo tape in 1970 is expected to account for 35 per cent of all U.S. recorded music sales. Industry estimates indicate retail sales of prerecorded 8-track cartridges at about $300 million in 1969 and sales in 1970 a expected to exceed $425 million. Factory installation rates for the 8-track tape player in 1970 cars are expected to rise somewhat over the 1969 rate of approximately 5 per cent as consumer awareness increases. Industry-wide auto installa-

tions for 1969, including aftermarket sales, are estimated at about 3,000,000 8-track units. New product innovations such as smaller cartridges and players, fast forward, automatic track and individual song selection techniques and more sophisticated, easier to operate home recorders, are under development. The division will continue as sole supplier of 8-track tape players to For and American Motors through 1971 and currently is a source to other car manufacturers, including Chrysler, Volkswagen and Volvo. In addition to the auto market, the division is active in the growing recreational vehicle and truck markets. Private label sales to national retail accounts are expanding. The division has demonstrated a Quad-8 sound system which is fully compatible with existing 8-track cartridges. The technique provides the ability to repro duce sound from four independent sound sources. This system adds a new dimension in sound reproduction — spatial presence — the sensation of total presence and the re-creation of live artistry. We are continually adding new alterna-

tors to our product line to meet higher output demands as well as meet special environmental operating conditions such as high humidity, dust, temperature, etc. The Arcade, New York, plant

which manufactures our alternator products is being expanded by one third

to accommodate increased sales.

The international automotive market is vast and relatively untapped. More than one half of the world's 200 million car trucks, and buses are outside North

America. A high percentage of these

vehicles do not have radios or tape players. The evolution from generators to alternators is in its early stages i many areas of the world. Much of the market is non-captive. Many of our U.S. customers have foreign affiliates and are anxious for support from Motorola. This market is ideally suited to our capabilities. Our joint venture company in France,

S.E.V. Motorola, is one of the largest alternator producers in the Common Market. The division has substantially

increased its equity in the company in order to provide capitalization in anticipation of significantly expandin volume. Sales are rapidly increasing accompanied by continuing improve-

ment in profit margins.

We are refining, miniaturizing, and

expanding innovative features in our existing stable of products. New product ideas are under development, such as brushless alternators which will ha

a much greater life and reliability th

conventional alternators. The division also working on new product concepts related to solving the problems of pol tion, safety, and serviceability.

1. Motorola developed and duced the original 8-track tape ayer introduced by Ford in 1965 continues as its sole supplier.

2. Motorola-developed mini-8raok cartridge, and private-labe player manufactured by Alps-Motorola.

3. Major product lines are car radios and tape players and combination units, electronic instrumentation, solid sta ignition systems and alternator charging systems.

4. Developmental pushbutton

AM/FM/multiplex car radio is -third the size of contemporary units, yet incorporates more features

2

The division's established line of Veritrak process control instrumentation continued to penetrate the process controls industry in 1969. Major new contracts included a multimillion dollar installation at Humble Oil Company's Bayway, New Jersey refinery, the country's largest installation of

intrinsically safe electronic process

control equipment. It was selected to

replace earlier pneumatic type

instrumentation.

Also during 1969, the division moved further into the field of information

Education and Training Products This organization will market electronic vide recording (EVR) players and programs. The primary emphasis will be in the industrial training, education, health c and hotel/motel (travel) markets.

In addition to players and television receivers, the unit will distribute program material in the EVR cartridge format for the various markets, thus providing a complete package.

EVR, a development of the Columbia

Broadcasting System, is a unique method

of viewing film-in-a-cartridge through a standard home television receiver. Motorola is the exclusive manufacturer and marketer of EVR and will manufacture the players at its Quincy, Illinois facility.

Institutional Electronics This unit will

market products and systems for

administration, operational control,

communications and entertainment

directly to institutional customers.

Motorola's electronic management and

entertainment systems capabilities are

extensive and include systems planning,

equipment, installation, maintenance

and financing. The unit will provide a significant distribution capability to institutional

processing. While the total U.S. market for information systems continues to grow, the market for data communication terminals will expand at a substantiall higher rate presenting increased opportunities for the division's data reader and data processor products.

Overseas, the wholly owned subsidiary

based in the United Kingdom registered

notable progress in foreign markets

highlighted with a million dollar order

from British Petroleum-Chemical Ltd. for a new ethylene plant installation o Veritrak equipment.

markets for standard products of all Motorola divisions as well as maintain a specialized line of products for its selected markets. These markets include hotel, motel, hospital, nursing home, educational and multiple dwelling fields.

Applied Systems Unit This marketing unit was formed to seek out and pursue potential business opportunities which will use the technological capabilities and off-the-shelf products available

from the company's six operating

divisions and the other marketing units

The unit, with representation In each division, will apply the advanced systems approach to solving problems. For example the Motorola Environmental Telemetry System, installed for the Arm Corps of Engineers to provide early

flood and hurricane warning in five New

England states, uses products from four

divisions. The same system, by

changing the sensor, could be used for

many other uses, such as air or water

pollution monitoring, radiation

monitoring, water resources manage-

ment, oil field monitoring and

meteorological applications.

consolidated balance sheet as of December 31 Motorola, Inc. and Subsidiaries

ASSETS 1969

Current Assets Cash $ 20,847,431 Short-term investments, at cost (approximating market) 19,704,128 Accounts receivable United States government 12,622,759 Other 154,776,917 Allowance for doubtful accounts (4,400,000) Costs recoverable under United States government contracts, less progress billings 7,304,837 Inventories, at the lower of cost (first-in, first-out) or market 154,104,247 Future income tax benefits (note 2) 18,666,697 Other current assets 11,818,896 TOTAL CURRENT ASSETS 395,445,912 Plant and Equipment, at Cost Land 10,707,899 Buildings 125,275,424 Machinery and equipment 131,707,531 Accumulated depreciation (note 3) (100,191,330) NET PLANT AND EQUIPMENT 167,499,524 Sundry assets, net 13,563,935

$ 576,509,371

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

24

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities Notes payable Current maturities of long-term debt Accounts payable Accrued compensation Federal income taxes Other (including withheld) taxes Contribution to employees' profit sharing fund Product and service warranties Accrued expenses and other TOTAL CURRENT LIABILITIES

Long-Term Debt (note 4)

Shareholders' Equity Capital stock, $3.00 par value (notes 5 and 7) Authorized: 10,000,000 shares Outstanding: 1969, 6,651,953 shares; 1968, Additional paid-in capital Retained earnings (notes 1 and 4) TOTAL SHAREHOLDERS' EQUITY

1969 1968

90,306,090 96,601,294

19,955,859 18,445,113 86,336,418 28,002,604 219,842,193 192,330,354 326,134,470 238,778,071

$ 576,509,371 $498,350,249

consolidated earnings and retained earnings Motorola, Inc. and Subsidiaries

Years Ended December 31 1969

Sales and other revenues $ 873,224,220 Manufacturing and other costs of sales 591,598,814 Selling, service and administrative expenses 161,887,398 Depreciation of plant and equipment (note 3) 22,530,618 Contribution to employees' profit sharing funds 14,149,215 Interest and amortization of debenture expense 11,215,602 TOTAL COSTS AND OTHER EXPENSES 801,381,647 Income before federal income taxes 71,842,573 Federal income taxes, net of investment credit of $1,065,000 in 1969; $1,157,000 in 1968 38,050,000 Earnings (per share (average) outstanding during the year: 1969, $5.48; 1968, $4.61) 33,792,573 Retained earnings at beginning of year 192,330,354 226,122,927 Less cash dividends declared—$1.00 per share 6,280,734

Retained earnings at end of year (notes 1 and 4) $ 219,842,193

consolidated additional paid-in capital 1969

Balance at beginning of year $ 28,002,604 Excess of proceeds over the par value of shares issued under share option plans (note 5) 2,048,679 Excess of net proceeds over the par value of 474, 952 shares issued under rights offering 56,285,135 Excess of market value over the par value of shares issued in acquisition of a subsidiary's stock — Proceeds from sale of convertible debentures attributable to conversion feature —

Balance at end of year $ 86,336,418 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

26

consolidated source and use of funds Motorola, Inc. and Subsidiaries

Years Ended December 31

Source of Funds

Earnings Depreciation Increase in long-term debt Additional -capital

TOTAL

Use of Funds

Additions to plant and equipment (and tooling), net Cash dividends Decrease in long-term debt Increase in sundry assets Increase in working capital

TOTAL

Peat, Marwick, Mitchell & Co. Certified Public Accountants 111 West Monroe Street Chicago, Illinois 60603

The Board of Directors and Shareholders of Motorola, Inc.: We have examined the consolidated balance sheet of Motorola, Inc. and subsidiaries as of December 31, 1969 and the related statements of earnings and retained earnings and additional paid-in capital and the statement of source and use of funds for the year then ended. Our examination was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedure as we considered necessary in the circumstances. It was not practicable to confirm accounts receivable from United States government departments or agencies by communication with them but we

1969 1968

$ 33,792,573 $ 28,261,196 22,530,618 20,071,002 — 31,521,814 59,844,560 10,367,309

' 116,167,751 90,221,321

44,448,436 28,689,921 6,280,734 6,136,815 6,295,204 — 80,947 10,288,141 59,062,430 45,106,444

$ 116,167,751 $ 90,221,321

satisfied ourselves as to such accounts by means of other auditing

procedures.

In our opinion, the accompanying consolidated balance sheet and statements of consolidated earnings and retained earnings and additional paid-in capital present fairly the financial position o Motorola, Inc. and subsidiaries at December 31, 1969 and the results of their operations for the year then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year. Also, in our opinion, accompanying statement of consolidated source and use of funds for the year ended December 31, 1969 presents fairly the information shown therein.

PEAT, MARWICK, MITCHELL & CO. February 17, 1970

notes to financial statements as of December 31 Motorola, Inc. and Subsidiaries

1 The consolidated financial statements include the accounts of the Company and all majority owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The accounts of foreign operations have been translated at appropriate rates of exchange. At December 31, 1969 net assets

outside of the United States and Canada aggregated $43,000,000 (in-

cluding $26,300,000 net current assets) before deducting $30,000,000

of 4 1 /2% convertible debentures guaranteed by Motorola, Inc. and

included in consolidated long-term debt (see note 4).

2 Future income tax benefits should result from the deduction from taxable income of reserves which have been provided on the books of the companies but are not yet allowable as deductions in determining income taxes currently payable. 3 Depreciation of plant and equipment is provided on the basis of the estimated useful lives generally by the declining balance method for items acquired subsequent to December 31, 1953 and by the straight-line method for items acquired prior to that date. 4 Long-term debt at December 31 consisted of the following:

1969 1968

1 4 /2% convertible guaranteed debentures due July 1, 1983 $30,000,000 $30,000,000 3 4 A% debentures due April 1, 1986

(less $500,000 debentures held in

treasury for sinking fund payment).. 28,000,000 28,500,000 Revolving credit notes (prevailing prime rate plus 1A %) 22,500,000 30,000,000

3 3 A% and 4 % % notes due in annual installments to 1976 5,000,000 6,000,000

Notes payable (foreign, generally at

prevailing prime rates) due in in-

stallments to 1974 6,177,970 3,061,224

Other 40,070 79,491

91,718,040 97,640,715

Less current maturities, included in current liabilities 1,411,950 1,039,421 Net long-term debt $90,306,090 $96,601,294

In July, 1968, a subsidiary formed for the purpose of financing forei operations of Motorola, Inc. and its subsidiaries issued $30,000,000 of 41/2% convertible guaranteed debentures due in 1983. The debentures are convertible into common stock of Motorola, Inc. at the rate of 6.25 shares of common stock for each $1,000 principal amount, subject to adjustment in certain events (see note 7), and are guar-

28

nteed as to the payment of principal and interest by Motorola, Inc. he debentures are redeemable at various dates at redemption prices educing from 1041/2% to 100% of the principal amount thereof. Under the terms of the revolving credit, the Company has the option

of converting the notes to a five year term loan on or prior to Febru

1, 1971 at the then prevailing prime commercial rates of interest plu 1 A%; it is the Company's intention to maintain the availability of t

revolving credit during 1970.

Various loan agreements contain covenants in respect of cash dividends and working capital. Under the most restrictive of these the Company must maintain consolidated working capital of $75,000,000; at December 31, 1969, $113,000,000 of retained earnings was not restricted as to dividend payments. At December 31, 1969, there were 43,850 shares of capital stock reserved for granting of employee stock options. An additional 300,000 shares have been authorized by the Board of Directors for grants beginning February 1, 1970 subject to shareholders' approval. Options may be granted at not less than market value, are exerciseable one year from date of grant, and expire at the end of five years

During 1969 options to purchase 94,950 shares were granted, options

on 7,250 shares were terminated, and options on 28,630 shares were exercised. The excess ($2,048,679) of the option price over the par value of shares issued was credited to additional paid-in capital. At

year end 282,045 shares were under option at an aggregate price of

$30,794,092, of which 187,995 shares were currently exerciseable in the amount of $20,142,929. See note 7.

An Executive Incentive Plan provides that certain of the companies may reserve up to 4% of their annual consolidated net earnings (as defined) for the payment of cash incentive awards. Awards are payable generally in equal annual installments over a period of five yea

and are generally subject to the recipients' continued employment.

Reserves of $2,375,738 (3.33% of defined earnings) were provided

in 1969 for such awards. Awards of $1,079,900 ($264,920 paid in cash) were made during 1969.

On February 4, 1970 the Board of Directors, subject to shareholders' approval, proposed an amendment to the Articles of Incorporation to increase the authorized shares of the Company from 10,000,000 shares to 20,000,000 shares. If approved, the Board intends to authorize a share for share distribution in May, 1970. References to the number of shares in notes 4 and 5 are based on shares authorized and outstanding at December 31, 1969.

The companies are obligated under repurchase and other agreements principally in connection with the financing of sales of products to consumers, and are defendants in suits and claims, which it is believed will have no material effect on the business of the companies.

ten year financial summary Motorola, Inc. and Subsidiaries

1960 1961 1962 1963 1964 1965 1966 1967 1968 1969

Net Investment in Plant & 44,594,599 48,427,446 54,783,818 67,283,543 67,836,835 81,082,588 127,219,219 136,962,787 145,581,706 167,499,524 Equipment

• Earnings per share are based on average shares in a significant dilution of earnings per share. outstanding during the respective years, adjusted Earnings per share shown above tor 1962 do not for share distributions. include 17t of non-recurring capital gain from sale The conversion of 4%% debentures and the exer- of finance subsidiary. cise of outstanding stock options would not result

29

Chicago, Franklin Park, Quincy, Elk G Pontiac, and Schaumburg, Illinois Phoenix, Scottsdale, Mesa, Tempe, and Tucson, Arizona Fort Lauderdale, Florida Arcade, New York Midland and Toronto, Canada

Semiconductor Products Division Digital and linear integrated circuit Silicon and germanium power transisto

Plastic encapsulated transistors

Silicon annular transistors

Field effect transistors

RF small signal and power transistors

Thyristors

Silicon rectifiers

Zener and tuning diodes

Varactors Optoelectronic devices Multiple and special devices

Communications Division

Mobile and portable FM two-way radio

communications systems

Radio paging systems Communications control centers Visual communications systems Signaling and remote control systems Car telephone systems Microwave communications systems Precision instruments Component products

Consumer Products Division Quasar color television Monochrome television Home and portable radios Portable tape players

Stotfold, England Toulouse, France Wiesbaden, Germany Seoul, Korea Guadalajara and Nogales, Mexico East Kilbride, Scotland

Auto sound products Stereophonic high fidelity phonographs

Government Electronics Division

Aerospace communications systems

Range instrumentation equipment

Missile guidance systems

Electronic ordnance devices

Tactical radar and communications syst

Spacecraft tracking systems

Undersea electronic systems

Automotive Products Division Car radios Tape players

Alternator charging systems

Electronic instrumentation

Solid state ignition systems

Control Systems Division Information systems Process control systems and instrument Supervisory control systems Industrial automation systems

Corporate Marketing Units Electronic video recording (EVR) playe and systems Institutional electronic management an entertainment systems Environmental telemetry systems

Annual Meeting The annual meeting will be held on Monday, May 4,1970. A notice of the meeting, together with a form of proxy and a proxy statement, will be mailed to shareholders on or about April 6, 1970, at which time proxies will be solicited by management.

Transfer Agents Harris Trust and Savings Bank, 111 W. Monroe St., Chicago, Illinois 60690 Chemical Bank, 20 Pine Street, New York, New York 10015

Registrars Continental Illinois National Bank and Trust Company of Chicago, 231 S. LaSalle St., Chicago, Illinois 60690 Irving Trust Company, 1 Wall St., New York, New York 10015

o a. o

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o O O 2

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directors and officers

BOARD OF DIRECTORS OFFICERS ROBERT N. SWIFT Vice President and Director of Distribution ROBERT W. GALVIN ROBERT W. GALVIN Chairman of the Board and Chief Executive Officer Consumer Products Division OSCAR P. KUSISTO EDWARD P. REAVEY, JR. ELMER H. WAVERING Vice President and General Manager STEPHEN L. LEVY President and Chief Operating Officer HERBERT D. DEBORDE ARTHUR C. NIELSEN, JR. Vice President and Manager, DANIEL E. NOBLE Operations and Engineering Support DANIEL E. NOBLE Vice Chairman of the Board and Chief Technical Officer Government Electronics Division ARTHUR L. REESE WILLIAM J. WEISZ J. PAUL JONES Executive Vice President and Vice President and General Manager ELMER H. SCHULZ Assistant Chief Operating Officer RALPH W. ELSNER WALTER B. SCOTT EDWIN P. VANDERWICKEN Vice President and Assistant Executive Vice President, Finance General Manager and Secretary EDWIN P. VANDERWICKEN Automotive Products Division Semiconductor Products Division ELMER H. WAVERING OSCAR P. KUSISTO STEPHEN L. LEVY Vice President and General Manager WILLIAM J. WEISZ Vice President and General Manager JOHN R. WELTY Control Systems Division KENNETH V. ZWIENER Vice President and Assistant THOMAS J. CONNORS General Manager General Manager CHRISTIAN J. GOODMAN, JR. Vice President and Director Corporate of Marketing ALLEN H. CENTER Vice President, Public Relations JACK C. HAENICHEN Vice President and Director THOMAS J . CONNORS of Operations, Services and Engineering Vice President, Marketing PATRICK D. LYNCH JOHN T. HICKEY Vice President and Director Vice President, Planning of Discrete Products Operations JOHN A. HUBENY Vice President and Controller Communications Division HOMER L. MARRS KENNETH M. PIPER Vice President and General Manager Vice President, Human Relations WALTER B. SCOTT JOHN F. MITCHELL Vice President and Assistant Vice President, Assistant to the P General Manager ROGER C. SMITH Vice President and Treasurer MARTIN COOPER Vice President and Director LEWIS D. SPENCER of Product Operations Vice President and General Attorne CARL E. LINDHOLM JAMES A. TORRENCE Vice President and Director Vice President and Manager, of Product Operations Color Tube Plant

32

MOTOROLA Motorola Inc., 9401 West Grand Avenue, Franklin Park, Illinois 60131