GU2 Name: Qin Lifei SCN: 085447041 Date: 30/12/2009
b) Lower sales of iDEN infrastructure equipment, partially offset by increased
sales of digital entertainment devices
c) The increase in gross margin in the Enterprise Mobility Solutions segment
was primarily due to the 43% increase in net sales, driven by net sales from the Symbol business acquired in January 2007, as well as higher net sales in the government and public safety market due to strong demand in North America. 2007-2008 .The decrease in gross margin reflects lower gross margin in the Mobile Devices and Home and Networks Mobility segments, partially offset by increased gross margin in the Enterprise Mobility Solutions segment.
1) The decrease in gross margin in the Mobile Devices segment was primarily
driven by:
a) The 36% decrease in net sales
b) Excess inventory and other related charges recorded in 2008 of ＄370
million due to a decision to consolidate software and silicon platforms c) A ＄150 million charge recorded in 2008 related to the settlement of a
purchase commitment
2) The decrease in gross margin in the Home and Networks Mobility segment was
primarily due to:
a) An unfavorable product mix,
b) The absence of net sales by ECC that was divested at the end of 2007
3) The increase in gross margin in the Enterprise Mobility Solutions segment was
primarily driven by:
a) The 5% increase in net sales b) A favorable product mix
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GU2 Name: Qin Lifei SCN: 085447041 Date: 30/12/2009
c) The absence in 2008 of an inventory-related charge in connection with the
acquisition of Symbol during the first quarter of 2007.
The Gross margin of Motorola during 2006 to 2008 was also show decline trend. In 2007 it down 22% compared to Net sales in 2006, in 2008 they down 16%.
It is not a good mark. This was mainly due to: the decrease Gross margin both in Mobile Devices segment and Home and Networks Mobility segment. The mainly reason for Mobile Devices segment was they had decreased income from intellectual property and technology licensing; for Home and Networks Mobility segment they face a big problem of decrease in Net sales. 3.1.3
Net profit before tax
Motorola’s Net profit before tax is show in following table:
Net profit before tax
The Net profit before tax during 2006 to 2008 of Motorola’s also showed decrease trend: it dropped to $－2.6 billion in 2008 from $－0.39 billion in 2007 compare $4.6 billion in 2006.
The extremely bad trend of Motorola reflected their drop profitability; it will have negative influence to its shareholders. Profit maximization is every company's goal, if the company can’t make profit any more then it will face risk, even close down.
Following are the reasons for it: 2006-2007 The Net profit before tax was $6412 of net sales in 2007, compare $4610, of net sales in 2006. The decrease reflects the increase in the company’s other charges and decline of interest income.
2006 $4610 2007 $－390 2008 $－2637 17/36
GU2 Name: Qin Lifei SCN: 085447041 Date: 30/12/2009
?
The company recorded net charges of $984 million in other charges in 2007, compare to net charges of $25 million in 2006. 1) The net charges in 2007 include:
a) $369 million of charges relating to the amortization of intangibles b) $290 million of net reorganization of business charges
c) $140 million of charges for legal settlements and related insurance matters d) $96 million of acquisition-related in-process research and development
charges relating to 2007 acquisitions e) $89 million for asset impairment charges
2) The net charges in 2006 included:
a) $172 million of net reorganization of business charges
b) $100 million of charges relating to the amortization of intangibles c) An $88 million charitable contribution to the Motorola Foundation of
appreciated equity holdings in a third party d) $50 million of legal reserves,
e) $33 million of acquisition-related IPR&D charges relating to 2006
acquisitions, partially offset by $418 million of income for payment relating to the Telsim collection settlement.
Net interest income was $91million in 2007, compared to net interest income of $326 million in 2006.
Net interest income in 2007 included interest income of $456 million, partially offset by interest expense of $356 million.
Net interest in 2006 included interest income of $661million, partially offset by interest expense of $335 million.
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GU2 Name: Qin Lifei SCN: 085447041 Date: 30/12/2009
2007-2008 The Net profit before tax was $3112 of net sales in 2008, compare $6412 of net sales in 2007. The decrease reflects the increase in the company’s other charges and decline of interest income. ?
The company recorded net charges of $2.3 billion in other charges in 2008, compared to net charges of $1.0 billion in 2007. 1) The net charges in 2008 include:
a) $1.8 billion of goodwill and other asset impairment charges
b) $318 million of charges relating to the amortization of intangible assets c) $248 million of net rec\\organization of business charges included in Other
charges
d) $59 million of transaction costs related to the proposed separation of the
Company into two independent, publicly traded companies, partially offset by a $48 million gain on sale of property, plant and equipment.
2) The net charges in 2007 included:
a) $369 million of charges relating to the amortization of intangibles b) $290 million of net reorganization of business charges included in Other
charges
c) $140 million of charges for legal settlements and related insurance matters,
$96 million of acquisition-related in-process research and development charges relating to 2007 acquisitions d) $89 million of asset impairment charges ?
Net interest income was $48 million in 2008, compared to net interest income of $91 million in2007
The decrease in net interest income is primarily attributed to lower interest income due to the decrease in average cash, cash equivalent and Sigma Fund balances in 2008 compared to 2007 and the significant decrease in short-term interest rates. This decrease was partially offset by a decrease in interest expense in 2008 due to the
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GU2 Name: Qin Lifei SCN: 085447041 Date: 30/12/2009
reversal of $89 million of interest accruals that are no longer needed as a result of the effective settlement of certain tax audits.
The Net profit before tax of Motorola during 2006 to 2008 was decline either. In 2007 it down 28% compared to Net sales in 2006, in 2008 they down 31%. It is not a good mark. This was caused by: increase in the company’s other charges and decline of interest income.
3.2 Conventional profitability ratios analysis
Three percentages will be use to calculate Motorola's and Nokia’s profitability ratios during 2006 to 2007: Gross Profit Percentage, Net profit percentage and Return on capital employed percentage. In this part Ratio value trend will be use to determine Motorola’s ability of use the existing resources to making profit, and that will help shareholders of Motorola do better investment decision.
Motorola’s profitability ratios during 2006 to 2008 are showing below: Gross profit percentage (Gross Profit／Turnover×100) Net profit percentage(Net profit before tax／Turnover×100) Return on capital employed percentage(Net profit before tax／Ordinary shareholders equity×100) 3.2.1
Gross profit percentage
27% －3% －28% 2006 30% 11% 2007 27% －1% 2008 28% －9% Motorola Gross profit percentage during 2006 to 2008 had presented a decrease trend in general. In 2006 the percentage is 30%, next year, in 2007 it was turn to 27%; at last in 2008 it has a slow increase to 28% but still less than the percentage in 2006.
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