motorola annual report 1964
TRANSCRIPT
MOTOROLA ANNUAL REPORT 1964
J.
Directorsand Officers
BOARD OF DIRECTORS
ROBERT W. GALVIN
MATTHEW J. HICKEY, JR.
DANIEL E. NOBLE
ARTHUR L. REESE
WALTER B. SCOTT
EDWARD R. TAYLOR
EDWIN P. VANDERWICKEN
ELMER H. WAVERING
OFFICERS
ROBERT W. GALVINChairman of the Board
ELMER H. WAVERINGPresident
DANIEL E. NOBLECroup Executive Vice President.
Communications. Semiconductor,Military Electronics, and Solid State
Systems Divisions
ARTHUR L REESEExecutive Vice President.
Communications and Solid StateSystems Divisions
WALTER B. SCOTTVice President,
Consumer and Automotive Production
EDWIN P. VANDERWICKENVice President for Finance.
Treasurer and Secretary
FRANKLIN C. BREWSTERVice President and General Manager,
Automotive Products Division
ALLEN H. CENTERVice President, Public Relations
JOSEPH A. CHAMBERSVice President and General Manager,
Military Electronics Division
JOHN I. DAVISVice President.
Consumer Products Engineering
SYLVESTER R. HERKESVice President and General Manager.
Consumer Products Division
C. LESTER HOGANVice President and General Manager,
Semiconductor Products Division
JOHN A. HUBENYController
OSCAR P. KUSISTOVice President.
Automotive Products Division
HOMER L MARRSVice President, Communications Sales
KENNETH M. PIPERVice President, Human Relations
WILLIAM J. WEISZVice President and
Assistant General Manager,Communications Division
Table of Contents
Directors and Officers inside Front cover
Highlights of 1964 2
Letter to Shareholders 2
Balance Sheet 4
Statement of Earnings 6
Ten Year Financial Summary 7
Consumer Products Division 9
Communications Division 11
Semiconductor Products Division 13
Military Electronics Division 15
Automotive Products Division
Solid State Systems Division
International Operations
Special Report:Human Relations at Motorola
17
18
19
20
Highlights of 1964 To The Shareholders
SALES AT ALL-TIME HIGH OF $419 MILLION,TOPPING 1963 RECORD YEAR OF $378
MILLION BY 11 PERCENT
EARNINGS AT RECORD $5.12 PER SHARE,BETTERING THE $3.21 OF 1963
BY 60 PERCENT
BOARD DECLARES 50 PERCENT INCREASEIN QUARTERLY CASH DIVIDEND,
PLANS A 50 PERCENT STOCK DIVIDEND
COLOR TV VOLUME HELPS BOOSTCONSUMER PRODUCTS DIVISION
TO RECORD SALES YEAR
INDUSTRY'S FIRST ALL-TRANSISTORMOBILE TWO-WAY RADIO
GOES TO MARKET
SALES AND EARNINGS OFSEMICONDUCTOR PRODUCTS DIVISION
UP SUBSTANTIALLY
MOTOROLA FIRST TO DELIVERQUALIFIED EQUIPMENT FOR GEMINI
TWO-MAN ORBITAL FLIGHT PROGRAM
ALTERNATOR SALES INCREASEWITH EXPANDED PRODUCT LINE
SOLID-STATE SYSTEM DEVELOPED FORPETROLEUM COMPANIES TO COUNT GALLONS
OF GASOLINE DISPENSED FROM SERVICESTATIONS
SALES OVERSEAS AT RECORD HIGH
In 1964 Motorola achieved its fin-est record. Sales of $419,066,694 were11% over 1963 sales of $377,852,809.Earnings of $20,666,724, or $5.12 pershare, were 60% above the $3.21 pershare reported last year.
It should be noted that 180 of the1964 share earnings represent anadjustment in tax reserves, providedin prior years, as a result of thechange in tax laws in 1964 relatingto the 7% investment credit.
As it enters a new year, the com-pany finds itself involved in a widearray of interesting new challenges.
Emphasis is placed here on chal-lenge for three reasons. The first isto provide shareholders an insightinto the current problems of the busi-ness as well as the achievements ofthe past year. The second is to assureshareholders that their managementis not complacent about the currentresults, however favorable. The thirdis to observe that challenges can bethe forerunners to future opportuni-ties and growth just as past chal-lenges have been converted into1964's results.
The principal challenge in our con-sumer products division is to consoli-date our market position in colortelevision. Motorola's strategy offlanking its established competitionwith the exclusive and early devel-opment of a 23-inch rectangular shortneck color television tube, made byNational Video Corporation and mar-keted in premium quality receivers,was a spectacular success. That strat-egy and product moved the companyfrom virtually no position early inthe year to a position among the topfour in color television by year's end.
In 1965, a greater variety of re-ceivers employing the Motorola tube
must be readied and introduced, withadditional retailers enrolled in themarketing of them. A second sourceof supply for the Motorola-designedtube must be provided adjacent toour television set factory to augmentthe fine services of our present andcontinuing tube supplier. Our prob-lems in the accomplishment of thisare many but our expectations arehigh.
The automotive division, which hasenjoyed an expansive automotivemarket, faces two problems of note.The Ford Motor Company is an im-portant customer for Motorola orig-inal equipment car radios. A fewyears ago, Ford bought Philco Cor-poration and Philco is a source ofsupply for Ford car radios. Motorolacontinues, however, to serve the FordMotor Company with a great zeal toretain an important part of that vol-ume. It is our hope, with innovativeproduct and superior service, that wewill continue to merit a supplier re-lationship with this fine customer.
The second matter of note concernsthe effects of an agreement concludedbetween the federal governments ofCanada and the United States aimedat correcting Canada's balance ofpayments problem, specifically in theautomotive markets. Because one ofthe objectives of this new agreementwas to help the Canadians exportmore automotive components fromCanada back to American car manu-facturers, Motorola may find it nec-essary to establish another factory inCanada, one of whose purposes willbe the manufacture of certain of ourautomotive products for sale to ourU.S. auto customers. We intend toremain alert to these and other con-ditions in the interest of our impor-tant automotive division business.
The communications division again
enjoyed healthy growth in 1964. Theprincipal products of the division aretwo-way portable and mobile radios.Because of superior product and sys-tems service, Motorola has earnedthe majority of this market in com-petition with such giants as GeneralElectric and RCA as well as otherable electronics suppliers. Our big-gest task in this business is to assistthe Federal Communications Com-mission in finding a solution to theshortage of frequencies available forthis radio service which is importantto public health and safety as well asindustrial efficiency. Together withthe others in the industry, we havelaunched an exhaustive analysis ofthe frequency spectrum problem. Weare working intimately with theskilled staff of the Commission in aneffort to find an intelligent proposalwhich the Commission could endorsein order to eventually make morefrequencies available for this essen-tial communications service. In themeantime, the needs for communica-tion grow and the market for two-way radio products and otherspecialty products of the division im-prove.
Motorola's newest business chal-lenge is our entry into the controlsindustry with our solid state systemsdivision. The many controls markets,which we feel represent a good po-tential, require extensive technicalexpenditures and complex produc-tion and marketing talents. We be-lieve we have chosen four basicproduct areas which offer substantialpromise and which, we are confident,will lead us to other attractive prod-ucts as well. Although we cannot seea profit in this business in 1965, webelieve realistically that the pros-pects will be rewarding in the yearsbeyond.
Our semiconductor division oper-ates in a fiercely competitive compo-nents market but, because of uniqueproduct and services, has enjoyed in-creased sales and good earnings inthe transistor, diode and rectifiermarkets. The immediate problem re-quiring special attention is the mas-tery of the integrated circuit segmentof this business. Large expendituresin the last couple of years have pro-vided this division with an extensivefund of technical skills and products.This year and next we must learn toconvert these into a profitable busi-ness. This may prove to be the mostcomplex marketing situation thecompany has ever faced, but we feelthat meeting that challenge will re-sult in important rewards.
The restrictions on military spend-ing announced by the federalgovernment are having their impacton the nature of competition in mili-tary business. Our military electron-ics division is having to learn to workwith a larger proportion of fixed-price contracts and to engage in in-creasingly sophisticated technologies.Headlined by products that will servesuch well publicized projects asMariner, Gemini and Apollo, Motor-ola's military /space business shouldincrease in both volume and earningsin the year ahead.
The year 1965 should bring to thecompany a further gain in sales vol-ume and earnings. It is to this objec-tive that our management associatesand fellow employees, who haveachieved so well in 1964, dedicatethemselves in the year ahead.
FOR THE BOARD OF DIRECTORS
PRESIDENT 'CHAIRMAN OF THE BOARD
MARCH 15, 1965
Motorola, Inc. and Subsidiaries
ASSETS
Current assets
Cash
Short-term investments, at cost
Accounts receivable
United States government
Other
Allowance for doubtful accounts
Costs recoverable under United States governmentcontracts, less progress billings
Inventories, at the lower of average cost or market
Other current assets
Total current assets
Plant and equipment—less depreciation (note 1)
Sundry assets, net
as of December 311964 1963
$ 7,922,825
7,027,114
13,528,545
66,798,241
(2,473,803)
5,403,575
60,280,741
2,656,833
161,144,071
67,836,835
3,099,867
$232,080,773
5 7,876,905
4,766,123
12,803,501
59,888,040
(2,478,099)
5,839,035
49,348,825
2,452,083
140,496,413
67,283,543
3,697,458
$211,477,414
NOTES TO FINANCIAL STATEMENTS
1 . The companies' investment in plant and equipment at31,1964 and 1963 was as follows:
1964
Land—at cost $ 3,488,342Buildings—at cost, less depreciation(1964, $16,179,559; 1963, $13,719,523) 39,698,127
Machinery and equipment—at cost, lessdepreciation (1964, $22,250,963;1963, $18,718,554)
Dies, tools, and leasehold improvements—at cost, less amortization
December
1963
$ 3,127,574
39,950,000
2. Long-term debt at December 31, 1964following:
4%% debentures due April 1, 1986(with annual sinking fund require-ments commencing in 1967)
Notes payable:3%%, due $1,000,000 in 1965,$1,500,000 in 1966, and $500,000annually thereafter to 1972
4%%, due $500,000 annually,
and 1963 consisted of the
1964 1963
$30,000,000 $30,000,000
5,500,000 6,500,000
22,260,707
2,389,659
$67,836,835
21,662,502
2,543,467
$67,283,543
1965-1976
Real estate mortgages
Less current maturities, includedin current liabilities
Noncurrent portion of long-term debt
6,000,000
1,103,15042,603,150
1,573,931
$41,029,219
6,500,000
1,175,08044,175,080
1,570,594
$42,604,486
Consolidated Balance Sheet
as of December 31
LIABILITIES
Current liabilities
Current maturities of long-term debt
Accounts payable—trade
Accrued compensation
Federal income taxes, less United States Treasuryobligations of $13,191,650 in 1964and $9,450,950 in 1963
Other taxes
Contribution to employees' profit sharing fund
Product and service warranties
Other
Total current liabilitiesLong-term debt (note 2)
Shareholders' equity
Capital stock, $3.00 par value.Authorized, 6,000,000 shares.Outstanding: 1964, 4,035,822 shares; 1963,4,026,872 shares (net of 3,410 treasury shares) (note 3)
Additional paid-in capital (note 3)
Retained earnings (note 2)
Total shareholders' equity
1964
$ 1,573,931
19,251,327
4,081,544
897,102
3,807,201
6,947,697
2,079,931
14,879,399
53,518,132
41,029,219
12,107,466
14,486,641
110,939,315
137,533,422
$232,080,773
1963
$ 1,570,594
20,360,029
4,644,611
4,109,097
4,210,417
1,237,257
12,005,556
48,137,561
42,604,486
12,080,616
13,844,820
94,809,931
120,735,367
$211,477,414
At December 31, 1964 approximately $42,000,000 of retained earn-ings was free from dividend restrictions contained in the deben-ture and note agreements.
3. Under the Employee Share Option Plan adopted in 1960, optionshave been granted to key employees to purchase Motorola, Inc.shares at not less than 95% of market value at date of grant ifgranted prior to January 1, 1964 and at 100% of market ifgranted thereafter. The options become exercisable two yearsafter date of grant; they expire at the end of ten years if grantedprior to January 1, 1964 and five years if granted thereafter, andare contingent upon continued employment by the company orits subsidiaries.
During 1964 an option to purchase 200 shares was granted, optionson 3,300 shares were terminated, and options on 8,950 shares wereexercised; the excess ($641,821) of the option price over the parvalue of the capital stock issued was credited to additional paid-in capital. At the year end 78,030 shares were under option, atan aggregate option price of $5,640,900, of which 44,230 shareswere currently exercisable, in the total amount of $3,331,675; an
additional 113,000 shares were reserved for options which may begranted until May 2, 1965.
4. The Internal Revenue Act of 1964 eliminated the requirement thatthe cost of qualified facilities be reduced by the amount of theinvestment credit for purposes of computing depreciation. There-fore, the investment credit for 1964 ($549,000) and the portion ofprior years' credit which was deferred ($723,000)have been appliedas a reduction of 1964 federal income tax expense.
5. The companies are obligated under repurchase and other agree-ments, principally in connection with the financing of sales ofproducts to consumers, and are defendants in suits and claims,which it is believed will have no material effect on the businessof the companies.
Statement of Consolidated Earningsand Retained Earnings
SALES AND OTHER REVENUES
Manufacturing and other costs of sales
Selling, service, and administrative expenses
Depreciation of plant and equipment
Contribution to employees' profit sharing fund
Interest and amortization of debenture expense
Total costs and other expenses
Income before federal income taxes
Federal income taxes (note 4)
EARNINGS
(per share outstanding at end of year: 1964, $5.12; 1963, $3.21)
Retained earnings at beginning of year
Total
Cash dividends declared (per share: 1964, $1,125; 1963, $1.00)
Retained earnings at end of year (note 2)
See accompanying notes to financial statements.
Years ended December 311964
$419,066,694
294,060,184
67,875,746
9,235,479
6,947,697
2,020,864
380,139,970
38,926,724
18,260,000
20,666,724
94,809,931
115,476,655
4,537,340
$110,939,315
1963
$377,852,809
275,720,213
60,406,904
8,150,707
4,210,417
2,238,042
350,726,283
27,126,526
14,200,000
12,926,526
85,910,277
98,836,803
4,026,872
$ 94,809,931
ACCOUNTANTS' REPORT
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, 1964 and the relatedstatement of earnings and retained earnings for the year thenended. Our examination was made in accordance with generallyaccepted auditing standards, and accordingly included such testsof the accounting records and such other auditing procedures aswe considered necessary in the circumstances. It was not practi-cable to confirm accounts receivable from United States govern-ment departments or agencies by communication with them butwe satisfied ourselves as to such accounts by means of otherauditing procedures.
6
In our opinion, the accompanying consolidated balance sheetand statement of consolidated earnings and retained earnings pre-sent fairly the financial position of Motorola, Inc. and subsidiariesat December 31, 1964 and the results of their operations for theyear then ended, in conformity with generally accepted account-ing principles applied on a basis consistent with that of the pre-ceding year.
PEAT, MARWICK, MITCHELL & CO.
Chicago, Illinois, February 22,1965
Ten Year Financial Summary
SALESAND OTHERREVENUES
INCOME BEFOREINCOMETAXES
EARNINGS
EARNINGSPER SHARE*
WORKINGCAPITAL
NET INVESTMENTIN PLANT ANDEQUIPMENT
SHAREHOLDERS'EQUITY
1955
$228,428,063
$18,740,426
$8,490,539
$2.19
$42,892,165
$19,179,992
$56,186,590
1956
229,266,055
16,936,334
7,966,817
2.06
54,936,569
25,388,866
61,305,080
1957
228,431,385
15,756,431
7,824,431
2.02
56,425,360
27,167,597
66,172,446
1958
218,909,968
15,171,013
7,356,213
1.90
59,585,830
27,615,287
71,533,020
1959
293,081,127
27,756,237
14,171,237
3.59
63,336,998
33,436,676
83,338,386
1960
301,049,185
26,548,813
12,633,813
3.14
73,790,019
44,594,599
97,166,850
1961
298,219,845
19,900,308
9,517,308
2.36
95,078,616
48,427,446
102,655,506
1962
346,881,779
26,514,514
13,206,514
3.03
96,804,189
54,783,818
111,835,713
1963
377,852,809
27,126,526
12,926,526
3.21
92,358,852
67,283,543
120,735,367
1964
419,066,694
38,926,724
20,666,724
5.12
107,625,939
67,836,835
137,533,422
*Earnings per share are based on the number of shares outstanding at theend of the respective years, adjusted for share distributions.
Earnings per share shown above for 1962 do not include 25c ofnonrecurring capital gain from sale of finance subsidiary.
wt '-m
f 4
f"%
Record sales were achieved by theconsumer products division in 1964.
Color television sparked the salessurge. The output of rectangular col-or tube television sets started slowlyat the beginning of the year, but byAugust had gained accelerating mo-mentum. Considering the late re-entry into the color TV market, basedupon a planned program of returningonly with new products offering ob-vious consumer benefits, the divisionsecured an impressive share of mar-ket in this product category. The23-inch Motorola rectangular colortelevision tube has set a new stan-dard in the industry to which all com-petitors are urgently trying to adapttheir programs.
The success of the persistent andpainstaking rectangular color tubedevelopment program is already leg-endary as a technological achieve-ment, and also as an achievement incooperation. Motorola developed thetube and invited National VideoCorporation to cooperate in its pro-duction. Bringing forth such a sophis-ticated and difficult product requiredan unusual devotion of the staffs ofboth companies to the cause of ad-vancing the art of design and pro-duction of tubes.
It seems highly appropriate tosalute in this report a sizeable anddedicated group of Motorola engi-neers who worked tirelessly, nightand day, to get this effort into motionand the color tube production staff ofNational Video Corporation who socapably responded to the challenge.
In January of 1965, Motorola an-nounced plans to enter the businessof producing rectangular color tele-
Consumer ProductsDivision
vision tubes by 1966 as a necessarysecond source of supply to supple-ment the output of National VideoCorporation and to enable NationalVideo Corporation to meet the re-quirements of its other customers forthis unique tube.
Black and white television con-tinues, of course, to be a major cate-gory. The outstanding new productin 1964 was the 12-inch "Cadet" blackand white portable television re-ceiver, an instantaneous "hit" withits unusual styling, featuring thehandle mounted on the side for con-venient carrying. Completing thenovel styling, the monopole antennais mounted in the handle, allowinguse in such places as book shelves.
New designs of home and portableradios and stereo phonographs addedluster to the Motorola line of con-sumer products.
An interesting consumer benefit isfound in the 1965 car radio line. Itis Motorola's LUMALERT warning sig-nal for the forgetful motorist whoaccidentally leaves headlights on,draining the battery. This transistor-ized tone signal sounds an alarmthrough the radio when the head-lights are on and the ignition isturned off. The signal is silencedwhen the headlights are turned offor a silencer switch is turned.
S. R. Herkes was appointed gen-eral manager of the consumer prod-ucts division during the past year.Preparing for the increased salesprojected for the division, a reorgan-
ization was instituted in severaldepartments. The consumer engi-neering department was streamlinedto more clearly define responsibilitiesof various groups and it was strength-ened at the management level.
The purchasing department wasgiven a new structure for purposesof strengthening this important sup-port function and the marketingdepartment was re-grouped with par-ticular emphasis on product planning.
Reinforcement of the division'smarketing program was achieved inanother direction late in the year. ANational Distributor Council was or-ganized to provide closer lines ofcommunication and contr ibutetoward a more efficient total market-ing effort between the consumerproducts division and its more than90 wholesale distributors across thenation. This liaison body consists of10 members, each heading up a re-gional group. Each Motorola dis-tributor principal is entitled tomembership on one of the geograph-ically oriented regional groups. Ideasand experiences will be passedthrough the regional group to thenational council which will meet onregularly scheduled occasions withthe top management of the divisionand with top executives of thecorporation.
Looking ahead, a record of some10 million television receiver sales isprojected for the industry during1965 to be sold by wholesalers, ofwhich over two million are expectedto be color sets, including additionalsizes of color television tubes.
Stereophonic High Fidelity PhonographsBlack and White Console TelevisionColor TelevisionBlack and White Portable TelevisionAM and AM/FM Clock RadiosAM, FM and AM/FM Car RadiosAM and AM I FM Table RadiosAM and AM/FM Portable Radios
M MOTOROLA
",,,, I
QQCDDCOBDDO
The communications division setanother new sales record in 1964.
It further improved its leading po-sition in the two-way radio industrybased upon superior engineering,quality production, low cost, andeffective marketing.
The company's technical pre-emi-nence in the two-way radio field wasagain manifested by the introductionof the industry's first full-poweredall-transistor mobile radiophone. Theunit is called the MOTRAN series radioand is an extension of Motorola'sMOTRAC radio line, the most popularmobile radio in the industry since itwas introduced five years ago.
All tubes and relays in the newMOTRAN radio have been replaced bysolid state components. It marks thefirst time that the critical transmitterportion of a mobile unit of this typehas been transistorized. The radiooperates on low and high band VHFfrequencies and ties into existing ornew two-way radio networks.
During 1964 the division took amajor step in pioneering anothertwo-way radio product with the in-troduction of a standard line of com-munications control consoles. Theseconsoles provide fast, flexible controlof two-way radio networks, rangingfrom relatively small systems to veryelaborate, intricate networks. Pri-mary customers were in the police,utility, municipal, forestry-conserva-tion and highway maintenance fields.
Sales of the division's portable two-way radio line increased sharply in1964. The equipment is finding in-teresting application as a valuableaddition to mobile systems to contactmen on foot. A policeman walking abeat or overseeing a subway station
(Pictured Left to Right by Rows)
Mobile and Portable Two-way Radio
Pushbutton Car TelephoneRadio PagingClosed Circuit Television
Hospital CommunicationsPortable Crane Control
Remote Alarm and Function Reporting
(Other products)Radio Traffic ControlSpecialized Communication Centers and
SystemsPrecision Test and Measurement Equipment
CommunicationsDivision
can be in immediate contact withsquad cars, for example.
In another engineering achieve-ment, the division developed the firstsingle-piece, fully-transistorized por-table two-way radio operating onUltra High Frequencies (UHF). Thisradio, taken together with similarall-transistor radiophones for VHFchannel operation and a second seriesof lightweight "Handie-Talkie" units,gives Motorola an increasingly diver-sified line of portable equipmentto meet virtually any customer need.
Among the major contracts fortwo-way and portable radio networksreceived or completed were: an ex-tensive system for MontgomeryCounty, Maryland; a state-wide netfor the New York Conservation De-partment; an order for an additional1,000 MOTRAC radios for Common-wealth Edison Company; and a sub-way communications system for theNew York Transit Authority. Majorcontracts for MOTRAC radios with theLouisville and Nashville Railroadand the New York Central Railroadheaded an excellent sales year in therailroad market.
Sales of radio paging systems con-tinued at a good level. The systemsare widely used in manufacturingplants and large office buildings toimmediately contact key personnel,especially in emergencies. Introducedwere several accessory products, add-ing benefits and flexibility to thesystem concept.
The division's car telephone line(IMTS Radio) has grown into animportant program.
Increasing market acceptance ofMotorola's total communicationsconcept led to an improvement insales of the hospital line. Full-linesystems were ordered by major hos-pitals throughout the country includ-ing the Greater Baltimore MedicalCenter; Scripps Hospital in La Jolla,California; St. Joseph's Hospital,Tampa, Florida; Southeast Commu-nity Hospital, Washington, D. C;
and Mercy Hospital, Cedar Rapids,Iowa. The Greater Baltimore Medi-cal Center system features a uniquebedside control console which en-ables the patient to operate the radioand television set, contact a nurseand even adjust the draperies, read-ing and room lights.
Several new products were addedto the comprehensive hospital com-munications line. One was a push-button dial intercom system for fastcontact between departments withina hospital. Another was an x-raysubtraction system that serves as adiagnostic tool by providing pinpointviewing of the desired area of thex-ray. The division also began mar-keting a compact, portable closed-circuit television system enablingclose-up views of surgical proceduresfor training programs.
Increasing interest in its majormarkets—industry and government—keynoted the year for the closed-circuit television product line andMotorola further enhanced its imageas the quality equipment manufac-turer. CCTV installations in 1964covered a broad range of uses includ-ing Atomic processes, the LincolnTunnel in New York and the SanFrancisco opera. The largest portionof sales was in the industrial fieldwhere the company is establishingitself as a leader, especially in the ap-plication of TV to security systems.Its unique gate-watch package, forexample, providing both video andtwo-way voice communications, isserving various industries.
Several significant advances weremade in the division's family of sig-naling products. The growing impor-tance of the radio traffic controlconcept was evidenced in contractsto build systems for the city of Pitts-burgh, city of Toledo, and for OrangeCounty, California. Several existingsystems were expanded.
A wholly new concept in operatingoverhead cranes was unveiled withthe development of a portable radioremote control system that saveson manpower while providing flexi-bility by putting the man who con-trols the crane on the ground insteadof in the cab.
11
The development and introductionof new products highlighted anotherrise in sales for the semiconductorproducts division. The dollar salesincrease was more than 30 percent.
Many products representing tech-nical breakthroughs were intro-duced. Success of these products,along with increased sales of estab-lished lines and improved efficiency,enabled the division to achieve sub-stantially improved earnings.
New products are the basic nutri-ent for the successful semiconductormanufacturer and during 1964 thedivision introduced more than 100new device types. One was a highvoltage transistor which permits thedesign of high-speed switching andamplifying circuits at line voltages(such as the 120 volts found in thehome). These new high voltage tran-sistors were made possible by theexclusive Motorola "annular" tran-sistor fabrication process which thedivision announced in 1963. This pro-cess uses special surface control tech-niques to provide protection againstcontamination. Devices capable ofhandling up to 300 volts, to createnew applications, have been devel-oped for introduction early in 1965.
Devices using the "annular" pro-cess helped make it possible for thecompany to increase its share of thesilicon transistor market by some300 percent. The principal applica-tion of these devices is in computers—both military and industrial. Thus,Motorola became a major manufac-turer of silicon transistors with
SemiconductorProducts Division
nearly a third of the total U. S.market. This increased share ofmarket was gained in spite of intensecompetition.
Also introduced was a new, low-level silicon switching transistor,trademarked as the "O-pf" transis-tor, which has capacitance (electri-cal storage properties) so low thatother circuit values become the speedlimiting considerations. This new de-vice makes it possible for low powercircuits, such as those used in spacesatellites, to operate some 50 to 100times faster than ever before.
A new series of low-cost siliconpower transistors which offer powerand frequency performance superiorto those now available was developedto open a new and important seg-ment of the semiconductor marketto Motorola. These transistors areused in power supply portions ofelectronic equipment.
Microwave devices—such as volt-age-variable capacitors and high-fre-quency, high-power varactor diodes—became new product lines for thedivision. These units complement ex-isting amplifier transistor lines andmake it possible for Motorola tomarket semiconductors for all stagesin transmitter and receiver designs.
In the field of integrated circuitsthe division has put into varyingstages of production families of in-tegrated logic circuits in all major
forms of logic system design pres-ently in use. MECL circuits, Mo-torola's special integrated circuitdesign, have been engineered intotheir first computer. Broad industryacceptance is expected for this logicfamily.
Also made available were linear(amplifier) integrated circuits. Manywere the first of their type to be de-veloped. The circuits are the resultof Motorola's "compatible" processin which the successful marriage ofthe two major technologies of "thin-film" and "semiconductor" fabrica-tion processes was achieved.
One of the industry trends givengreat attention by the division lastyear was the "high reliability" con-cept. To provide impetus towardeconomical standardization, the divi-sion developed the Motorola Meg-A-Life II high reliability program. Thisnew program was carefully con-structed to answer a wide variety ofcustomer demands met in day-to-dayoperations. It offers a high degree ofdevice reliability at low cost as wellas much shorter delivery time.
In the past the division has con-centrated its product developmentand marketing efforts on the moresophisticated, high value, high per-formance industrial/military typedevices. Today consumer product ap-plications offer a major market op-portunity. An entire family of newplastic encapsulated high-perform-ance silicon transistors has been de-veloped for introduction in mid-1965to serve this market.
(Pictured Left to Right by Rows)
Silicon and Germanium Switching TransistorsPower Transistors"O-pf" Silicon Switching TransistorsSwitching and Amplifier Power Transistors
Zener DiodesZener DiodesSilicon Controlled RectifiersReference Amplifiers
Power VaractorsMolded Diode AssembliesFast Recovery RectifiersSilicon Rectifiers
Integrated CircuitsSame Integrated Circuit under microscopeIntegrated Circuit-microscope viewPackaging techniques for Integrated Circuits
(Other products)
Multiple DevicesVoltage Variable CapacitorsSilicon and Germanium R. F. TransistorsGate Controlled SwitchesMilliwatt TransistorsSilicon Reference DiodesRectifier Stacks and Assemblies
13
Motorola's role in protecting ournation and thrusting it forward inspace exploration was enhanced dur-ing 1964 through several major con-tributions.
The activities of the division addedup to a considerable improvement inprofits, while sales dropped slightlydue mainly to market changes. Theannounced cutbacks in defensespending are affecting the divisiononly indirectly because they do notfall into Motorola's primary areas ofinterest. They have, however, in-creased competition from companiesseriously affected who are seekingnew fields.
Motorola's exceptional experiencein aerospace electronics resulted ina marked business increase in thisdramatic area in 1964.
One of the most exciting spaceprograms is the Apollo manned lunarexploration. In 1964, Motorola re-ceived a number of additional con-tracts under this program, which isdesigned to land American astro-nauts on the moon. These includeda contract to build the transceiverfor the Lunar Excursion Module(LEM). During the critical moonmission, the Apollo spacecraft willcarry three astronauts into a lunarorbit. Two will then transfer to theLEM, which will separate from theApollo and descend to the moon'ssurface. While exploring the moon,the two space men will remain incontact with the earth through theMotorola transceiver on the LEM
(Pictured Left to Right by Rows)
Range Instrumentation Product LineMilitary Microwave Radio Equipment
Missile Guidance SystemsSpacecraft Tracking Systems (Deep Space
Instrumentation Facility trackingequipment shown)
Aerospace Telecommunications (Apollo andLunar Excursion Module Equipmentshown)
Tactical Communications Systems(AN/USC-3(V) Mobile RadioCommunications System shown)
Field Replaceable Spare Modules (Lower Left)
(Representative of other products)
Radar and Radar Data Relay SystemsNavigation SystemsAntenna SystemsSurveillance SystemsAnti-submarine Warfare EquipmentDigital Data Systems
Military ElectronicsDivision
and the transponder on the Apollocommand module. The Motorolacommunications equipment also willrelay to earth such astronaut biolog-ical data as pulse, heart beat and res-piration, and will transmit signalsback to earth that will permit re-creation on earth of television pic-tures of the lunar mission.
Motorola equipment also is pro-viding a key communications link be-tween earth and space in the Geminiprogram, now underway, which willput two men in orbit to perform theimportant rendezvous and dockingmaneuvers, preliminary to the Apolloexploration. By delivering the digitalcommand system early in 1964, Mo-torola became the first major con-tractor to supply qualified equipmentfor the two-man orbital project.
The Mariner/Mars spacecraft,launched on its historic mission latein the year, is providing space sci-entists and engineers with interplan-etary data between earth and Marswith the aid of communicationsequipment built by Motorola. Atyear's end (midnight December 31),the Mariner spacecraft was traveling7,491 miles per hour, 5,751,807 milesfrom earth, and the Motorola equip-ment was helping to maintain perfectcommunication.
The division has played a part invirtually every space program under-taken by this country. Last summer,the Ranger VII was launched on ahighly successful photographic mis-sion to the moon. A crucial midcoursemaneuver, some 115,000 miles fromearth, was accomplished by signalscommanding the move, received bya Motorola transponder.
Motorola also is intimately in-volved in the all-important job oftracking spacecraft and missiles sentinto space. The company was se-lected by the California Institute ofTechnology, Jet Propulsion Labora-tory/NASA to supply sophisticatedequipment for the Deep Space Instru-mentation Facility (DSIF) whichwill provide the capability for a world-wide deep space tracking network.
A major contract was awardedMotorola late in the year to build a
test model for a high accuracy sys-tem based on a new concept devel-oped by NASA's Marshall SpaceFlight Center for measuring positionand velocity of spacecraft. The newsystem is known as Airborne Rang-ing Orbital Determination (AROD).It will employ advanced integratedcircuit designs that will allow thetracking equipment to be installedon board the spacecraft instead of inlarge ground tracking complexes.
Motorola's extensive experience inbuilding electronic equipment for thevarious space programs over the pastdecade has enabled the company tobecome the leader in supplying com-mand receivers, decoders, transpond-ers and other range instrumentationproducts for non-space applications.
The work of Motorola's militaryelectronics division was far fromconfined to space efforts in 1964.Major military programs represent-ing all branches of the armed serviceswere also conducted.
For example, a production pro-gram was completed on the AN/APS-94 Airborne Radar System, whichprovides new airborne radar map-ping capability.
In 1964 the Sidewinder air-to-airmissile program passed Navy opera-tional evaluation and was condition-ally released to the fleet. Volumeproduction of this equipment wasin progress at year's end.
The Army put Motorola's AN/USC-3 (V) Mobile Radio Communi-cations System through rigoroustroop tests.
The Air Force Flight Test CenterData Acquisition and Transmissionsystem moved nearer completion.This microwave system is used to ob-tain flight data from such advancedprograms as the X-15 and B-70.
Motorola's MP-7 portable micro-wave package was successfully dem-onstrated to key military represent-atives in Washington, D.C. and plansare underway for a vigorous market-ing effort in 1965.
During the year, Joseph C. Cham-bers, vice president, was namedgeneral manager of the military elec-tronics division. Replacing Chambersas manager of the western centerwas J. Paul Jones. Norman L. Winterremains as manager of the division'sChicago center.
15
Sales of the division set a record asa result both of increased car radioand electronic alternator volume.
Radio sales reflected the recordvolume of eight million cars.Motorola continued to supply radiosto Ford Motor Company, ChryslerCorporation, American Motors Cor-poration, Renault, Inc. (U.S. dis-tribution) , Checker Motors Corpora-tion and the truck division of Inter-national Harvester Company. Inaddition to the regular broadcastband receivers, American Motorswas also supplied combination AM/FM radios.
Motorola improved its position asa leader in designing and manufac-turing radios for import cars witha number of new customers in 1964.Radios were delivered to Volks-wagen, units were produced for theAustin-Healey and MG models ofBritish Motors Corporation/Hambro,Inc., and late in the year, the divi-sion began building units for Stand-ard Triumph Motor Company, Inc.cars sold in this country. The cus-tom-designed radios carry the carmanufacturer's name and are soldthrough their distributors.
The company moved forward inthe truck radio field during 1964 aswell. In addition to InternationalHarvester, the division suppliedunits to The White Motor Companyand Mack Trucks, Inc. The radiosfeature rugged construction towithstand truck vibration.
Significant progress was made inbroadening the division's electronicalternator line and diversifying themarkets for this system. The com-pany's manufacturing facility atArcade, New York, was fully uti-lized, and plans to accommodate
Automotive ProductsDivision
further growth are being considered.Motorola continued to supply al-
ternator systems as original equip-ment to American Motors Corpora-tion, Kaiser Jeep Corporation andChecker Motors Corporation.
Noteworthy headway was made incapturing a substantial portion ofthe industrial aftermarket for alter-nator systems, aided by several newmodels. These new models providedthe base for several major and doz-ens of smaller original equipmentcontracts. Among the larger con-tracts were Deere and Company,Waukesha Motor Company, Onan—division of Studebaker Industries,Inc., Thermo-King Corporation andWest Coast Machinery, Inc., for useon U.S. Post Office vehicles.
The marine alternator line was ex-panded to parallel the emphasis onthis important market. A 70-amperemachine was added to the 35-ampunit to cover large boat applica-tions. A new all-transistor voltageregulator permits operation at 24,30 or 32 volts. The additions resultedin a number of marine contracts forthese systems.
Motorola became the only com-pany to build an electronic alterna-tor system listed by the Yacht SafetyBureau, a professional marine or-ganization that conducts extensivetesting on products to insure safeand reliable operation of boatingequipment. A Motorola alternatorsystem producing 50 amperes passedthe rigorous testing program andwas given the Bureau label. Thecompany later received a contract
from Chris Craft Company to supplythe Bureau-listed systems.
To take advantage of the sales op-portunity created by its diversifiedproduct line, the division further ex-panded its after-market distribution.Industrial and marine markets wereemphasized. Altogether, the alterna-tor and transistor ignition systemsare being sold through approxi-mately 5,000 outlets.
Operations abroad were steppedup during the year as well. S.E.V./Motorola S. A. in France establishedafter-market distribution for alter-nator systems throughout the com-mon market countries. It expandedthe supply of alternators as originalequipment to Renault of France,Volvo-Penta of Sweden, and BMWof Germany.
In May, S.E.V/Motorola S.A. be-gan assembling diodes for use in itsown alternators and selling the com-ponents to other alternator manufac-turers in Europe. Alternators arenow being produced in the 70,000square foot Blois, France facilitywhich has a capability of producing2,000 units per day.
Corporacion Nacional Distribui-dora is assembling alternator sys-tems for the major car manufactur-ers of Mexico, through a licensingarrangement.
Mid-way through the year, Frank-lin C. Brewster was elected a vicepresident of the corporation andnamed general manager of the auto-motive products division, succeedingElmer H. Wavering, upon his elec-tion as president of Motorola. OscarP. Kusisto was elected a vice presi-dent of Motorola Inc.
Car RadiosElectronic Alternator SystemsYacht Safety Bureau-listed Alternator
Systems
(Other products)
Transistor ignition Systems
17
The challenging job of buildingmarkets and sales for revolutionarynew products, applying the art ofelectronics to the controls industry,moved ahead significantly.
Three major advances were made:1) greater market penetration; 2)important product developments;and 3) an expansion of the sales andservice force. They apply to all threeof the division's product lines—su-pervisory control systems, data sys-tems and process control systems.
The number of customers at theend of 1964 was five times greaterthan at the beginning of the year. Amajor percentage of the division'sbusiness came from the highly-inte-grated petroleum and gas industrywhich the division seeks to serve withan integrated system of controls.
Some of the customers served areAmerican Oil Company, Cities Ser-vice Oil Company, Gulf Oil Corpora-tion, Humble Oil and RefiningCompany, Mountain Fuel SupplyCompany, Natural Gas PipelineCompany of America, Northern Illi-nois Gas Company, Panhandle East-ern Pipe Line Company, Phillips
Solid StateSystems Division
Petroleum Company, Pure Oil Com-pany, Shell Oil Company and Sin-clair Oil Corporation.
There were many other interestingapplications.
IBM contracted for a process con-trol system—the first of its type—toautomatically control pressure, tem-perature and other functions in con-nection with the manufacture of its360 computer product line.
A process control system was in-stalled at the world's largest furfuralextraction plant, in Tulsa, Oklahoma,by Sunray-DX Company.
A data system contract was re-ceived for installation at the world'slargest bulk terminal, operated atLinden, New Jersey by Humble Oil.Sinclair Oil is installing a data sys-tem in the LP gas field.
In the area of product develop-ment, the division introduced a sig-nificantly new system concept andmade refinements on existing linesthat provide added customer benefits.
The new system enables petroleumcompanies automatically and rapidlyto contact service stations to deter-mine the amount of gasoline beingdispensed at each one. With this in-formation immediately available, theoil company can plan and evaluatemarketing programs; see daily andhourly results of price adjustmentsand changes in traffic flow; more effi-ciently dispatch trucks for delivery;and automate accounting procedures.
In another product development,the division introduced a new mod-ular design approach for its super-visory control system. Each functionof the system is handled by a singleconsolidated unit containing all cir-cuitry required to do the job.
The division strengthened its salesand service organization by settingup offices in several more cities andby adding representatives in majorcities already covered.
(Pictured Left to Right)
Supervisory Control SystemsService Station Data SystemsBulk Terminal Data SystemsProcess Control Systems
Motorola's wholly-owned interna-tional marketing subsidiary, Motor-ola Overseas Corporation, achieveda new record in world-wide sales in1964. The diversified product lines offive Motorola operating divisions arerepresented by this company.
Communications equipment playedan important part in the successfulsales year. An extensive network wasinstalled by the Puerto Rico police,providing an integrated island-widesystem linking two-way radio, tele-phone, teletype, data processing, ra-dio control and alarm functions.
Newly-introduced, fully-transistor-ized MOTRAN mobile radios wereordered for the US/AID program inVietnam. Large quantities of mobileradios were also supplied PakistanInternational Airways and the Pan-amanian National Guard. Radios arenow seeing service in Alaska, usedby the Strategic Air Command.
Motorola MOTRAC radios are beingbuilt in Mexico for the first time, andBusiness "Dispatcher" radios andConsolette base stations are now
InternationalOperations
being assembled in Argentina.Canadian Motorola Electronics
Company, in which Motorola Inc. hasa minority interest, expanded itsmanufacturing facilities in 1964while recording the highest sales vol-ume in its history. Production ofportable two-way radiophones wasbegun. The Canadian National Rail-way installed a Motorola two-wayradio system during the year.
A challenging communications as-signment was met through a micro-wave radio system installed in 1964to span two long over-water hopslinking Puerto Rico, the VirginIslands and St. Croix. The systemprovides a reservations service net-work for Caribair Airlines.
The overseas licensing program,coupled with high-quality local pro-duction of Motorola-designed prod-ucts, also achieved impressive salesgains for the consumer products line.
Better than half of Argentina'soriginal equipment car radio require-ments were handled by Motorola's as-sociated company. Car radio sales bythe Motorola licensees in both Mex-ico and Venezuela increased in 1964as well. Television volume was up.Argentina imported a considerablequantity of Motorola's popular 12-inch "Cadet" portable TV sets.
Sales of automotive products in-creased during 1964. Gains in elec-tronic alternator system sales wererecorded by Motorola's internationaldistributor network and assembly ofkits was initiated in Venezuela underlicense.
In the military products area, note-worthy advances were made in thesale of aerospace instrumentationequipment.
Motorola's solid-state bulk termi-nal loading system was introduced tothe European market through tradefairs at Zurich and London. Orderswere received from England, Swedenand the Netherlands.
19
Motorola's human relations pro-gram is based on recognition of theindividual employee for his contribu-tion to the effectiveness and effi-ciency of the company.
The development of his talents andabilities through company-sponsorededucation programs; his participa-tion in the profits of the company;and his enjoyment of other employeebenefits, are all focused on increasinghis tenure and productivity.
Motorola has found profit sharingto be an important means for creat-ing effective team effort. Its basicphilosophy develops a community ofinterest as well as a personal interestin the success of the company inwhich each employee shares in atangible and significant way.
Paul Galvin, Motorola's founder,believed in the principle that "peoplecome first," which was the basis forestablishment of the Employee Sav-ings and Profit Sharing Plan in 1947.Today the fund totals $79,870,719and an employee with 17 years ofservice has a vested account value of$26,470. It is estimated that by theplan's 25th anniversary in 1972, typi-cal charter members will have ac-count values in excess of $50,000.
The success of the profit sharingplan has had a positive effect onother areas of employee relations.Because of the company's willing-ness to share with employees, theemployees have further trusted man-agement's judgment in fair wage,salary and fringe benefit administra-tion. This relationship of trust isevidenced in the fact that Motorolais now one of the three largest com-panies in the country with no collec-tive bargaining agreement.
Motorola maintains an extensive
A Special Report:Human Relations
At Motorola
recruiting program in order to findthe best qualified candidates for eachavailable position. Great care is takenin the selection of engineers, scien-tists and future business managersfrom college campuses across thenation, and in the selection of thebest qualified people in the skilledand hourly-pay categories.
During 1964 Motorola continued todefend its right to use race-free testsin the selection of employees. For 20months, the Illinois Fair Employ-ment Practices Commission retainedjurisdiction of the case and in Feb-ruary of this year the company ap-pealed the Commission's decisionbefore a court of law. It is believedthat at one step or another thecourts will vindicate Motorola's po-sition that employees can be selectedon a merit basis without regard torace, color or religion.
A training and management devel-opment program for professionalpersonnel is maintained with the as-sistance of educators from the finecolleges and universities in the Chi-cago and Phoenix areas. This pro-gram has aided a policy of promotionand growth from within the com-pany.
The employee benefit program, inaddition to profit sharing, includesa liberal participating insuranceprogram of life, hospital and majormedical coverage. A pension plansupplements the profit sharing planin order to provide personnel whoseparticipation in the profit sharing
plan is limited, with retirement in-come more equitably related to theirworking income.
Great emphasis has been placed oninternal company communications,so that employees are continuallyaware of the progress of the com-pany. An annual film "report" onthe developments in each of theoperating divisions of the companyis seen by all employees. Manage-ment newsletters, bulletin boardsand an unusual house publicationkeep employees in geographicallydispersed facilities up to date on thelatest company news.
More than one out of four employ-ees has now been with Motorola forover ten years—an unusual recordof job tenure, considering the rapidgrowth of our employee population.Employee turn-over rates in all ofour facilities are below those ofother employers in the same cities.
Employee-operated credit unionsaid employees in purchases of con-sumer and capital goods according tothe employees' income capacities andhome ownership loans are availablefrom the profit sharing plan.
Extensive recreation programs ab-sorb a good part of the social lifeof many employees and their fami-lies.
All of the facets of the human rela-tions program are continually re-viewed to insure that they satisfyexisting needs. Management person-nel are reminded frequently of theprecept that "people come first." Asa result, Motorola is a good place towork and it is free of the frustrationand conflict which is all too commonin industry all over the world.
20
ANNUAL MEETING
The annual meeting will beheld on Monday, May 3, 1965.
A notice of the meeting,together with a form of proxy
and a proxy statement,will be mailed to shareholders
on or about April 2, 1965,at which time proxies will
be solicited by management.
TRANSFER AGENTS
Harris Trust and Savings Bank111 W. Monroe St., Chicago 90, Illinois
Chemical Bank New YorkTrust Company
165 Broadway, New York 15, New York
REGISTRARS
Continental Illinois National Bank andTrust Company of Chicago
231 S. La Salle St., Chicago 90, Illinois
Irving Trust Company1 Wall St., New York 15, New York
MOTOROLA INC.9401 WEST GRAND AVENUE,FRANKLIN PARK, ILLINOIS
MAJOR FACILITIES LOCATED AT:Chicago, Franklin Park
and Quincy, IllinoisPhoenix and Scottsdale, Arizona
Arcade, New York.
MOTOROLA