摩托罗拉公司1961年年报

MOTOROLA ANNUAL REPORT 1961 (M)

A Progress Report... Integrated Circuitry The Cover designs symbolize three basic integrated circuit technologies through which Motorola is gaining leadership identification in the art of solid state electronics. The circular design represents a ferrite logic core. With the addition of wire windings, this multi-aperture device becomes a complete circuit for a digital computer. A star planar transistor—the center design—symbolizes the epitaxial technique of growing crystals on substrates. The rectangular design illustrates the configuration of most integrated circuits of the future. Motorola's work on such integrated circuits involves a synthesis of the sciences of chemistry, physics, metallurgy, mathematics, and electronics. The arts and skills required in semiconductor processing, thin film technology, surface passivation, and electronic ceramics are based upon these sciences. Through the combined efforts of many specialists working in the Motorola research laboratories, substantial advances have been made in the practical production of the integrated circuit equivalents of resistance, capacitance, and inductance. Multiple circuit elements are being produced in semiconductor substrates by means of diffusion, alloying, and epitaxial growth, and upon insulator substrates through the use of vapor deposition and advanced thin film techniques.

TABLE OF CONTENTS

HIGHLIGHTS OF 1961 / 2 PRESIDENT'S LETTER / 3

DIVISIONAL REPORTSCOMMUNICATIONS / 4 CONSUMER PRODUCTS / 6

AUTOMOTIVE PRODUCTS / 8 SEMICONDUCTOR PRODUCTS / 10

MILITARY ELECTRONICS / 12 SOLID STATE SYSTEMS / 14

HEARING AIDS AND HOSPITAL COMMUNICATIONS / 15 INTERNATIONAL / 15

FINANCIAL REPORTTEN YEAR FINANCIAL SUMMARY / 17

STATEMENT OF EARNINGS / 18 BALANCE SHEET / 19

HIGHLIGHTS OF 1961 Business "Dispatcher" two-way mobile radio introduction. Motorola equipment for NASA space vehicles. Record level in foreign sales and licensing income. Electronic alternator and ignition systems for automobiles. Third consecutive Mahogany Association Award for furniture craftsmanship. Application of epitaxial and planar production techniques to semiconductors. "Extender" noise suppression circuit for MOTRAC two-way radio. Modern communications system for Chicago Police Department. All-transistor aircraft flight control system. Divisional status for Solid State Systems.

TO THE SHAREHOLDERS I h e mood and dynamics of Motorola's markets changed dramatically from the early to the latte part of the year. The hesitancy of the consumer to purchase durable goods and the indecisiveness of the commercial and military buyer during most of the first half of 1961, are well known. In contrast, as the year ended the consumer was displaying a confident mood...the industrial market firmed . . . and military programs were expanding. This uneven tempo of business was the biggest single influence on 1961 earnings which declined to $2.36 per share compared with $3.14 in 1960. In addition, special circumstances in the sem conductor market are significant. Competition was intensified by industry overcapacity for many devices, less than anticipated demand in certain areas, and substantial erosion of prices through the year. In spite of this, Motorola's Semiconductor Products Division increased its dollar volume considerably and maintained virtually the same excellent profit it reported in Also noteworthy, sales volume and licensing income from our international operations were up 24%, and earnings more than doubled. The improved momentum in practically all of Motorola's markets—well in evidence as the year ended—promises better volume and particularly better earnings for the Company in 1962.

At the close of 1961, field inventories of consumer goods were moderate, making it possible for distributors and dealers to add to their stocks. Motorola's share of the television and phonograph markets was steadily growing, Automobile sales were continuing at a brisk pace through the winter; car radio volume was up accordingly. Though temporarily slowed early in 1961, the Communications Division continued its uninterrupted year-after-year pattern of sales increases, and confidently predicts further gains in 1962. Unit and dollar volume in the Semiconductor Products Division are mounting though cost and price pressures will make it difficult to maintain last year's fine profit record. We look forward to perhaps a 30% increase in military sales for 1962. More product developments and scientific achievements of significance matured in 1961 than in any other year in our history. The most long range of these are in solid state electronics. Our achievements in molecular structures, integrated circuits, solid state process controls, and a variety of solid state devices have made it appropriate for us to establish a sixth important Motorola division called the Solid State Systems Division. In addition, we announced many other developments with more immediate potential. I call your attention to our balance sheet which for the first time consolidates Motorola Finance Corporation. Much of the long and short term debt is for the purpose of financing the $40,000,00 in notes and contracts owned by the finance company. Two-thirds of last April's $30,000,000 public issue of debentures was for this purpose. In general, markets for all of Motorola's products will be larger and more orderly in 1962. Your company is ready to take advantage of its opportunities, and this is evidence of the achievements and imagination of my associates. For the Board of Directors

'March 13, 1962 President

COMMUNICATIONS DIVISION

Most prominent of the communications products introduced in 1961 are: 1 / the Business "Dispatcher" two-way mobile radio (left)—together with the well-known MOTRAC radio featuring the new "Extender" noise suppression device • 2/the Low Frequency Pocket Radio Pager (right)—smallest yet of Motorola's family of pocket radio products • 3/new closed circuit TV control panel, monitor, and transistorized camera • 4/ all-transistor flight control system • 5/ control center for Motorola-built Chicago police communications network.

1 he Communications Division increased its lead in the two-way radio field despite intense competition in 1961. Sales volume increased and earnings kept pace, aided by the introduction of new products and continued attention to control of costs. Major performer in the product line continues to be the transistorized MOTRAC two-way radio. New products and improved features introduced in 1961 both strengthened the Division's position in the market and provided a broader base for good performance in 1962. The Division's aggressive program of research and development resulted in introduction of two significant mobile two-way radio products this past year. In spring, the "Extender" circuit —an ignition noisesuppression device —was introduced as a built-in optional feature of the premium quality MOTRAC two-way radio. Appreciable improvements in communications range and quality result from this circuit which detects and cancels"noisy" ignition pulses. Early in 1962, the circuit in slightly modif form will be offered in an adapter kit for Motorola mobile units already in use. An entirely new mobile two-way radio, designed primarily for the general business market, was the second significant product development. Called the Motorola"Business D i s p a t c h e r " radio, the new unit in cludes a fully transistorized receiver and power supply economically designed for the smaller business organization. Its features are exclusive to Motorola within its price range. Noteworthy this past year was the completion of a $1.5 million communications network system for the City of Chicago Police Department. The system represents the largest single order for a two-way radio system ever received by the Division. It pro vides Chicago a completely new and modernized police radio network, incorporating new equipment and operational conceptswith broad potential for similar ap-

plication in major cities throughout the U.S. During the latter part of the year, a new pushbutton mobile radio-telephone, combined with Motorola's exclusive transistorized MOTRAC radio unit, was introduced to the independent telephone market. A new remote control closed circuit television console was announced during the year and development of a transistorized camera and monitor was completed. Both will be marketed in early 1962. In the miniature equipment field, a new Motorola "Low Frequency Pager" was introduced. Newtransistortechniques permitted significant advances in miniaturization, reliability, and operating characteristics. Thi new pocket radio pager is smaller and lighter and has a substantially reduced operating cost as compared with previous pagers. To meet demands of hospitals and industry for larger systems, a high capacity, low frequency base station was engineered with a capacity of up to 900 units. The miniature product line also contains the VHF radio paging system and the fully transistorized "Handie-Talkie" Pocket Transmitter and Pocket Receiver. During the year several systems of note were completed—such as a city-wide medical paging system for the San Diego, California, county medical society; and two-way networks for foot patrolmen in Washington, D. C, and other major cities. Motorola radio traffic control systems were installed in Hartford and New Haven, Connecticut, during the year and orders were received for new systems from the City of Tampa, Florida, and the New Jersey Turnpike Authority. The ADF-T-12 all-transistor automatic direction finder, a product of the Division' Aviation Products Department, continues to dominate the market for this type of equipment. The new M-4 all-transistor flight control system—announced during September— already has a reputation as leader in the general aviation "automatic pilot" field.

CONSUMER PRODUCTS DIVISION

Available to Motorola customers is a full line of home entertainment and car radio products. It consists of: 1/television receivers and stereo hi-fi phonographs—featuring the well known Drexel and Heritage furniture designs-2/ clock and table AM and FM radios 3/ portable radios — including the popular pocket-size units • 4/ portable transistorized TV • 5/ FM and AM car radios and tuners. Motorola, for the third consecutive time, has won the Mahogany Association "Grand Award" for outstanding furniture craftsmanship.

1 he consumer, anxious about international tension and the business recession, milled around the market place in early 1961 with his money cautiously banked. As a result, many consumer durables fell short of their prior-year levels. Automobiles, television receivers, phonographs, radios, household appliances, and others, all suffered in varying degrees in the first half-year, The early decline for Motorola consumer products was reversed from mid-year on with sales showing steady improvement during the third and fourth quarters. The comeback was not quite sufficient, however, for the full year to equal 1960, althou the fourth quarter ran at a substantially higher level than in the previous year. Distributor sales volume increased considerably in the last two months, particularl in the major dollar product categories. TV was up 22% over the like period in 1960, and stereo phonograph sales increased 32%. Home radio maintained the same unit volume. Car radio was off somewhat, being unable to meet the surge in demand during this period. This, however, precipitated stepped-up production which will be reflected in wide first quarter increases. A sharp uptrend was generally evident going into 1962. Both sales and earnings in the consumer products area are expected to show satisfactory increases for the year as a whole. During 1961, several television manufacturers marketed color receivers using the early-design 21-inch, 70 degree, round picture tube. This tube is the only one currently available and requires a bulky cabine to house it, Motorola chose not to re-enter the color television market with this approach, convinced that the sales volume would not be adequate for a profitable venture. This proved prudent. The industry color television retail volume for the year was an estimated 170,000 units, less than 3 percent of the some 6,000,000 black and white receivers sold.

To encourage the industry to modernize color television, Motorola's engineers designed and built a working prototype, 23inch, 90 degree, rectangular color tube. This tube made possible a cabinet of the same size and attractive design as current black and white receivers. The set was demonstrated throughout the country and the tube technology was offered to the entire industry in an effort to attract a tub manufacturer to produce it. At year end, however, no major manufacturer had agreed to make the tube, although the possibility still exists in 1962. The Company continues to believe that color will become an important product and a source of greater enjoyment for viewers. Motorola also took a strong stand against "gimmick" merchandising methods such as the "Instant Dividend Plan" sale of television receivers and stereo phonographs through grocery stores. Motorola completed in 1961 its third year of association with the Drexel Furniture Company and Heritage Furniture, Inc., winning increased recognition for excellence of furniture styling and quality. In th latter part of the year, during the Chicago Furniture Market, the Division held a privat showing of 14 unique and original furniture creations incorporating Motorola radio, stereo hi-fi, and television units. These unusual designs, featuring Drexel and Heritage styling and called the "DesignerDecorator Series," include furniture pieces such as coffee tables, serving carts, breakfronts, and hanging wall decks—each housing Motorola radios, TV's, or stereo phonographs. During the summer, the Company discontinued its display space in Chicago's Merchandise Mart. Negotiations were completed at year-end to open a new salon on the ground level of the well-known Palmer House in Chicago. It will front on State Street a few doors south of Madison—considered oneoftheworld's busiest sidewalks.

AUTOMOTIVE PRODUCTS DIVISION

Diversification into new product areas, and production of fully-transistorized car radios were two of the major milestones in 1961 for the automotive group. New product developments were: 1/the transistorized ignition system; and 2/the all-electronic alternator system with voltage regulator. A miniature tuner 3/ (right), has replaced all othertype tuners in Motorola auto radios such as the all-transistor radio shown (left) • 4/ Long lines of alternators move along conveyors at the recently expanded Arcade, N.Y., production facility.

Sales volume of the Automotive Products Division decreased substantially in the firs six months because of reduced output in the automobile industry. With the introduction of 1962 models, however, sales returned to a favorable level. Increases are anticipated for 1962 both in car radios and in the significant new automotive products announced during the past year. In its more than 30 years in the car radi business, Motorola's automotive group has been involved almost exclusively with designing and building radiosforautomobiles. Announcements in 1961 of new electronic devices to be manufactured for the modern auto marked a noteworthy transition in product diversification for both the Company and the Automotive Products Division. In September, Motorola introduced an all-electronic alternator system to replace the DC generator and voltage regulator in the automobile. The system, using transistors and diodes exclusively, is designed for maintenance-free operation and extended life. It enables the battery to charg while the motor is idling even with the high electrical current demand of many accessories in operation. The alternator extends battery life from 25% to 50%, and has particular application in service vehicles which can become costly overhead when inoperable. The system is specially suited to such vehicles as taxi cabs, delivery trucks, farm equipment, and patrol cars which operate for long periods at low speeds and are continually stopping and starting. A second electronic device, a transistorized ignition system, was announced in November. The system completely eliminates the breaker points and condenser in the distributor. It replaces them with a small magnetic pick-up system which will last the lifetime of the car and does not require the maintenance or adjustment of present ignition devices. The alternator and ignition systems were

made possible through advances in the transistor and diode art accomplished by Motorola's semiconductor group in Phoenix. The Automotive Products Division is now offering a unique reverberation system for automobile radios. It is the first massproduced reverberation system designed for passenger cars, making available "concert hall" radio performance while driving. The complete transistorization of car radios has become economically practical and the Division has now converted to mass-production of an all-transistor auto radio. The automotive industry is headed for fully transistorized car radios in virtu ally all 1963 models. In 1961, Motorola supplied all-transistor radios both for the Lincoln-Continental and the Ford "Thunderbird" models. These have been continued in the 1962 models. Ford Motor Company initiated a change during the year to complete transistorization for most of the 1962 model radios manufactured by Motorola. The "Rambler" car radio is now completely transistorized, as well as radios produced for the Renault Motor Company. The Automotive Products Division continued to supply radios to Ford, Chrysler, and American Motors in 1961. The total radio requirements were supplied for Ford's "Thunderbird," "Galaxy," "Continental," "Meteor," and "Comet"; American Motors' "Rambler"; Dodge's "Lancer," and Plymouth's "Valiant"; Renault (U.S. sold); and International Harvester. Automotive Products Division business for the first time became international upo negotiation of a joint venture agreement with a large automotive parts manufacturer in France. A newly formed company will produce Motorola electronic alternator systems for the European market. In addition, samples of the Division's automotive products have been submitted to countries in other parts of the world in prospect of tablishing similar joint venture agreements.

SEMICONDUCTOR PRODUCTS DIVISION

MICRO-PHOTO

ACTUAL SIZE

The success of Motorola's semiconductor business in 1961 was due for the most part to eight particular types of devices. These are illustrated on this page. Actual size photographs indicate the tiny dimensions, and microscopic photos show the minute circuit function areas not visible to the eye: 1 / epitaxial star planar transistor • 2/ germanium epitaxial mesa transistor • 3/ silicon epitaxial mesa transistor • 4/ power transistors • 5/ general purpose milliwatt transistor • 6/ integrated "flip-flop" circuit (diagram and actual size) • 7/ zener diode • 8/ automotive silicon rectifier.

ACTUAL SIZE 10

ACTUAL SIZE ACTUAL SIZE

iiixpansion, research advances, and addition of new products marked another year of progress for Motorola's Semiconductor Products Division. Dollar sales increased over 40% in spite of the chaotic price competition within the industry. Increased volume offset price reductions, and earnings were maintained at about the favorable level of the previous year. In May, 1961, the Division expanded its research and production facilities with the opening of a 315,000 square foot addition. This more than doubled its previous operating area, and the facility now has a total of some 536,000 feet. During 1961, the Division concentrated on the engineering improvement and production expansion of its broad line of semiconductor products which now includes some 4,000 different types. The Division effected major engineering and process improvements in the germanium mesa transistor line, resulting in significant reductions of cost and increases in reliabilit These improvements are being incorporated into the production techniques used in making all Motorola mesa transistors. Motorola's accomplishment in developing and implementing practical production methods of epitaxial crystal growth has made possible a universal line of highspeed switching transistors. The line litera blankets the major spectrum of computer applications. The epitaxial technique has also enabled the Division to introduce new germanium amplifier transistors which compete in the high-frequency communications market. The Division introduced the new epitaxial star planar silicon transistor which represents the ultimate in design for maximum operating performance, frequency range, and reliability. It permits a combination of electrical parameters not before possible in a single device. The star planar incorporates in one transistor all of the latest semiconductor technologies, providing

Motorola the capability to advance integrated circuit activity. All silicon mesa transistor production lines were converted to the epitaxial process during the year. The Semiconductor Products Division strengthened its position in the industrial and military markets with the addition of a new power transistor design. This provides superior power capability over competitive types. With the inclusion of the devices used in automotive products, Motorola has the most complete line of power transistors currently available. For the expanding automotive market, Motorola's early development of a low-cost silicon rectifier resulted in the capture of a major part of the volume in this device. The silicon rectifier has made the electronic alternator an economic replacement for the automobile DC generator. Expansion of the zener diode line to include new devices has established the Division as the leading supplier, having the most complete line in the industry. Two years of research effort in microminiature solid-state technology, coupled with new advances in the epitaxial technique (considered vital for the fabrication of integrated circuits) qualified the Divisi for a $1.5 million Air Force contract for accelerated research and development in this new art. This work—undertaken in cooperation with the continued research in this field by the Solid State Systems Division—is expected to result in maintaining a leading position in the revolutionary technology of integrated circuitry. Motorola has developed several practical integrated circuit devices which will be introduced early in 1962 for both military and industrial applications. The devices are unique in that they can be used to replace conventional circuits in existing equipment without requiring complete redesign of equipment to conform to the special requirements of integrated circuits.

MILITARY ELECTRONICS DIVISION

A montage of representative "end-uses" of Motorola Military products: (bottom to top) 1/Dafa Acquisition and Telemetry System: relays in-flight information from "X-15" manned space probe. 2/ Space Guidance, Command & Control Systems: command functions system for Mercury capsule; guidance and command functions system for Ranger space craft. 3/ Tactical Communications Control and Sensor Equipment: advanced single-sideband communications system for Army; command and control digital data link used in Navy's anti-submarine warfare system; advanced reconnaissance sensors (APS-94); drone-mounted sidelooking radar. 4/ Expanding Proprietary Product Line:

(a) electronic teleprinter; (b) family of command receivers and long-range radar transponders; (c) sonobuoys—undersea warfare equipment.

oales of the Military Electronics Division maintained about the same level as the previous year although the Division reported a major improvement in operating results. The backlog of military contracts rose substantially, establishing a six-year high at the close of 1961. Current major programs conducted by the Military Electronics Division are serving the armed forces, the National Aeronautical and Space Administration (NASA), the Federal Aviation Agency (FAA), and many prime industrial contractors. Proprietary product development has assumed an important role at each of the Military centers in Chicago, Illinois; Phoenix, Arizona; and Riverside, California. Emphasis on the generation of these new devices has resulted in contracts with improved long-range production potential. Prominent among the proprietary products is a family of Motorola "Command Receivers"—used or scheduled for use in more second generation missiles than any similar competitive receiver—and an expanded line of radar transponders used in tracking long-range missiles and spacecraft. Design-approval models of the Army's AN/USC-3"Communications System" were delivered in late 1961 for field evaluation. The p r o d u c t i o n pace on this m u l t million dollar contract will be stepped up during 1962. The research and development phases of the Motorola-designed APS-94 "Side-Looking Radar" have been completed, and assembly has started on production models of this highly advanced reconnaissance equipment. The data acquisition and relaying equipmentused in picking up in-flightinformation from the "X-15" manned space probe vehicle was installed on the first half of t test range near Edwards Air Force Base. Designed by the Riverside Systems .Research Laboratory and employing microwave relaying unitssupplied bytheChicago Military Center, this first segment of the

complex data transfer system was accepted as operational by the Air Force and will be used jointly with NASA. Construction of the second half of the system is continuing into 1962. A new, fully-transistorized microwave product line consisting of RF and multiplex equipment was entering into production at the Chicago Center at year's end. The Chicago Center delivered to the Navy the first prototypes of an all-solid-state radar indicator. Production quantities of these units will be supplied during 1962. Other important programs performed during 1961 included the digital data link s u p p l i e d for the Navy's DASH drone helicopter; a substantial contract for Motorola-designed teleprinter units for use by the Strategic Air Command; and continuing large-volume production of Sonobuoys (under-sea detection devices). A long-range planning group has been established to study and monitor Air Force and NASA needs for aerospace systems extending into the 1970's. Prominent among the space programs in which Motorola is now participating are the "Mercury," "Saturn," "Ranger," "Mariner," "Advent," and "Midas" programs. In the missile area, Motorola equipment is found on nearly all present and proposed missile systems including "Atlas," "Minuteman," "Pershing," "Polaris," "Bomarc," " Q u a i l , " "Sidewinder," and many others. Indicative of the Company-wide emphasis on solid state integrated circuit implementation are the many advanced programs and techniques within the Military Electronics Division. A formal program is now in progress to assure earliest possible application of available integrated solid state devices to military systems and equipment. This program is closely coordinated with the Solid State Systems and Semiconductor Products divisions to place Motorola in position to aid the country's leadership in advanced military equipment and systems.

SOLID STATE SYSTEMS DIVISION I n order to acknowledge the increasing emphasis Motorola is placing on the program and mission of the Solid State Electronics and Controls department in the field of industrial products as well as in military solid state research, the department has been advanced to divisional status under the leadership of Dr. H. W. Welch. The primary mission of the new Solid State Systems Division is the application of solid state materials, devices, integrated c cuits, and techniques to existing equipment and systems—and to develop new product applications of electronics. The Division is organized into three groups designated "Controls Department," "Electronics Department," and "Research Department." Industrial control system development, production, and sales activities will be carried on by the Controls Department. The first group of new products—designed for remote supervisory control of water, power, oil, and gas distribution systems—is engi-

neered and in production. The first units

were placed in the hands of customers in

late 1961. A complete line of process con-

trol equipment will be released in 1962, and other solid state control applications are undergoing study and development.

The Electronics Department of the Di-

vision has on the market a complete line of electromagnetic devices for application in microwave communications and radar systems. Solid state instrumentation for contro applications—from refrigeration to space satellites—is under development. The Research Department will continue its exploration in the fields of electronic ceramics, thin film technology, and solid state device application. Special attention will be given to integrated solid state electronics in an effort to provide unique and advanced features in new products developed by other Motorola divisions.

Among the initial products developed and manufactured by Motorola's new Solid State Sys-

tems Division: 1 / (a) thin film voltage digitizer; (b) positive

perature coefficient thermistors

(c) multiaperature magnetic cores; (d) thin film magnetoresistive element; • 2/ "Telememory" supervisory control console; • 3/ a family of microwave

devices • 4/ liquid level digiti

NTERNATIONAL OPERATIONS r o r the third consecutive year, sales and earnings from Motorola products sold overseas have set new marks. Recorded was an all-time high with an increase in sales over the previous year of about 24%, and a substantial improvement in earnings. An intensified licensing program, initiat in the latter part of 1958, is now producing results. Progress was made in 1961 in establishing manufacturing arrangements in France, Argentina, Brazil, and Mexico. Manufacturing arrangements in Canada also were strengthened and expanded. Assembly facilities were established in Chile, Uruguay, and Colombia. Total income from overseas licensing during 1961 surpassed any previous year. Motorola currently is placing emphasis on developing production facilities outside

HEARING AIDS AND OSPITAL COMMUNICATIONS Indicative of the gradual changes taking place within the Company's hearing aid and hospital communications department is the new trademark establishing identification between the Dahlberg hearing aid group and Motorola. The trademark now appearing on all products and sales literature reads: "Motorola/Dahlberg Hearing Aids." The Mark IV, a unique and efficient behin the-ear hearing aid introduced this year, strengthened the Motorola/Dahlberg line of quality instruments. Notable expansion also took place in the sales department in antici pation of increased market activity in 1962. The hospital communications department fortified its marketing position in

this country through licensing and joint venture manufacturing arrangements. An international managementand organization base has been established to provide a firm planning and marketing structure for this purpose, A high percentage of international opera tions is in the sale of communications products. This trend is expected to continue and major attention is being directed at this market area. Increased emphasis was given to the export sales of automotive and aviation products. Considerable attention also was directed during the year to engineering suitable consumer and communications products to meet the diverse needs of the major world markets. By the end of 1962 th should be visible progress in this program

1961 by expanding and strengthening the product line. Additions included: a miniaturized low-frequency pocket radio pager; a low-priced hospital TV set; an inter-communications system; a doctor's register system; and a manual nurse-call system. These new products, added to the existing line of Motorola/Dahlberg hospital products, place the Company in the position of producing the most complete hospital communications line in the industry. Sales responsibility for hospital communications systems was transferred during the year to Motorola's Communications Division for purposes of maximum market coverage, systems engineering, and service.

FINANCIAL REPORT

The annual meeting will be held on Monday, May 7,1962. A notice of the meeting, together with a form of proxy and a proxy statement, will be mailed to shareholders on or about April 9,1962, at which time proxies will be solicited by the management.

TRANSFER AGENTSHarris Trust and Savings Bank Chemical Bank New York Trust Company 111 W. Monroe St., Chicago 90, Illinois 165 Broadway, New York 15, New York

REGISTRARSContinental Illinois National Bank and Irving Trust Company Trust Company of Chicago 1 Wall St., New York 15, New York 231 S.LaSalle St., Chicago 90, Illinois 16

TEN YEAR FINANCIAL SUMMARY

AND OTHER

REVENUESt

$15,576,165 15,512,489 16,523,889 18,740,426 16,936,334 15,756,431 15,171,013 27,756,237 26,548,813

INCOME BEFORE

INCOME TAXES t

EARNINGS

EARNINGS

PER SHARE*

38,222,001 38,308,612 42,892,165 73,790,019 95,078,616

WORKING

CAPITAL t

27,615,287 33,436,676 44,594,599 NET INVESTMENT

IN PLANT AND

EQUIPMENT

56,186,590 61,305,080 66,172,446 71,533,020 83,338,386 97,166,850 102,655,506

SHAREHOLDERS'

EQUITY

f Restated to include Motorola Finance Corporation, a wholly-owned subsidiary, organized in 1956 and not consolidated prior to 1961. * Earnings per share are based on the number of shares outstanding at the end of the respective years, adjusted for subsequent share distributions.

Motorola, Inc. and Subsidiaries STATEMENT OF CONSOLIDATED EARNINGS AND RETAINED EARNINGS

Years ended December 31 1961 1960

Sales and other revenues $298,219,845 $301,049,185

Manufacturing and other costs of sales 214,871,908 218,874,056

Selling, service, and administrative expenses 52,409,790 43,649,804

Depreciation of plant and equipment 5,276,286 4,475,463

Contribution to employees' profit sharing fund 2,624,174 4,610,393

Interest and amortization of debenture expense 3,137,379 2,890,656

Total costs and other expenses 278,319,537 274,500,372

Income before federal income taxes 19,900,308 26,548,813

Federal income taxes 10,383,000 13,915,000

Earnings (per share outstanding at end of year: 1961, $2.36; 1960, $3.14) 9,517,308 12,633,813

Retained earnings at beginning of year 71,242,879 68,429,207

Total 80,760,187 81,063,020

Cash dividends declared (per share: 1961, $1.00; 1960, $.9375) 4,028,652 3,777,163

Share-for-share d i s t r i b u t i o n — p a r value of 2,014,326 shares, transferred to capital stock account 6,042,978

Total deductions 4,028,652 9,820,141

Retained earnings at end of year (note 6) $ 76,731,535 $ 71,242,879

See accompanying notes to financial statements.

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, 1961 and the related statement of earnings and retained earnings for the year then ended. Our examination was made in accordance with generally accepted auditing standards, and accordingly included 18 such tests of the accounting records and such other auditing procedures 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 satisfied ourselves as to such accounts by means of other auditing procedures. In our opinion, the accompanying consolidated balance sheet and statement of consolidated earnings and retained earnings present fairly the financial position of Motorola, Inc. and subsidiaries at December 31, 1961 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. Chicago. Illinois. February 21. 1962 PEAT. MARWICK, MITCHELL & CO.

Motorola, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31

ASSETS

Current assets:

Cash

Receivables: Accounts: United States government

Other

Notes and contracts: Lease and conditional sales contracts—net (note 2)

Other

Allowance for doubtful accounts

Costs recoverable under United States government contracts, less progress billings

Inventories, at the lower of average cost or market

Other current assets

Total current as

Plant and equipment—less depreciation (note 3)

Sundry assets

Patents, debenture expense, and other deferred items—less amortization

See accompanying notes to financial statements.

Notes to Financial Statements

1/The 1961 consolidated financial statements include the accounts of Motorola, Inc. and all subsidiaries. Motorola Finance Corporation, whol owned but previously not consolidated, has been consolidated in 1961

because the subsidiary's operations are now financed wholly by Motorola Inc.; the 1960 financial statements included herein have been restated for comparison. Such restatement had no effect on 1960 net earnings or. retained earnings. Foreign subsidiaries previously not consolidated are consolidated in 1961, with no material effect upon net earnings.

1961 1960

$ 8,794,244 $ 13,402,720

7,773,137 8,085,819

47,714,344 44,179,507

32,725,036 23,952,381

8,011,781 6,977,559

(1,801,559) (1,817,000)

8,440,774 5,921,763

39,958,980 37,746,611

2,865,560 2,555,633

154,482,297 141,004,993

48,427,446 44,594,599

3,648,892 3,949,880

1,242,955 1,642,169

$207,801,590 $191,191,641

2/The lease and conditional sales contracts include amounts one year (1961, $27,120,000; 1960, $19,690,000) and are net finance charges (1961, $7,900,455; 1960, $5,884,863).

3/The companies' investment in plant and equipment at Decem 1961 and 1960 was as follows: 1961 Land—at cost $ 3,395,726 Buildings—at cost, less depreciation (1961, $8,902,050; 1960, $6,906,679) 28,569,406

Machinery and equipment—at cost, less depreciation (1961, $12,555,411; 1960, $10,881,098) 14,451,480

Dies, tools, and leasehold improvements— at cost, less amortization 2,010,834

Total $48,427,446

LIABILITIES

Current liabilities:

Notes payable to banks and others

Current maturities of long-term debt

Accounts payable—trade

Accrued taxes

Contribution to employees' profit sharing fund

Pro**duct and service warranties

Other

Total current liabilities

Long-term debt (note 4)

Shareholders' equity: Capital stock, $3.00 par value. Authorized, 6,000,000 shares; outstanding, 4,028,652 shares (net of 1,610 treasury shares) (note 5)

Additional paid-in capita!

Retained earnings (note 6)

Total shareholders' equity

4/Long-term debt at December 31, 1961and 1960 consisted of the following: 1961 1960 4 % % debentures due April 1, 1986 (with annual sinking fund requirements commencing in 1967) $30,000,000 $ —

Notes payable: 3%%, due $1,000,000 annually to 1965, $1,500,000 in 1966, and $500,000 annually thereafter t o 1972 8,500,000 9,500,000 4%% due $500,000 annually 1963-1976 7,000,000 7,000,000 4 % % , due 1963-1965 — 10,000,000 Real estate mortgages 1,306,825 1,369,833 46,806,825 27,869,8 Less current maturities, included in current liabilities 1,064,422 1,060,01

Noncurrent portion of long-term debt $45,742,403 $26,809,81

1961 1960

20,500,000 34,350,000

1,064,422 1,060,016

14,085,533 9,547,165

9,033,724 8,399,919

2,624,174 4,610,393

969,649 915,328

11,126,179 8,332,153

59,403,681 67,214,974

45,742,403 26,809,817

12,085,956 12,085,956

13,838,015 13,838,015

76,731,535 71,242,879

102,655,506 97,166,850

$207,801,590 $191,191,641

5/Under the Employee Share Option Plan adopted in 1960, options may be granted to key employees to purchase Motorola, Inc. shares at not less than 95% of market value at date of grant. During 1961 options for the purchase of 7,300 shares were granted and options for 600 shares were terminated, leaving outstanding at December 31, 1961 options for 43,000 shares at a price of $73.25 per share and 7,300 shares at a price of $83, per share. An additional 149,700 shares are reserved for options which

may be granted by the Board of Directors until May 2, 1965. The options granted may be exercised two years after the date of grant; they expire at the end of ten years, and are contingent upon continued employment by the company and its subsidiaries. 6/At December 31, 1961 approximately $15,500,000 of retained earnings was free from dividend restrictions contained in the debenture and note agreements. 7/The companies are obligated under repurchase and other agreements, principally in connection with the financing of sales of products to con sumers, and are defendants in suits and claims, none of which it is believed will have any material effect on the business of the companies.

DIRECTORS AND OFFICERS

ROBERT W. GALVIN DIRECTOR, PRESIDENT

MATHEW J. HICKEY, JR.

DIRECTOR

DANIEL E. NOBLE DIRECTOR, EXECUTIVE VICE PRESIDENT, COMMUNICATIONS, SEMICONDUCTOR, MILITARY ELECTRONICS, A N D SOLID STATE SYSTEMS DIVISIONS

FRANK J. O'BRIEN DIRECTOR, VICE PRESIDENT, PURCHASING

ARTHUR L. REESE DIRECTOR, VICE PRESIDENT A N D GENER COMMUNICATIONS DIVISION

WALTER B. SCOTT DIRECTOR, VICE PRESIDENT, CONSUMER A N D AUTOMOTIVE PRODUCTION

EDWARD R. TAYLOR DIRECTOR, EXECUTIVE VICE PRESIDENT. CONSUMER PRODUCTS DIVISION

EDWIN P. VANDERWICKEN

DIRECTOR, VICE PRESIDENT FOR FINANCE TREASURER, AND SECRETARY

ELMER H. WAVERING DIRECTOR, EXECUTIVE VICE PRESIDENT, AUTOMOTIVE PRODUCTS DIVISION

MOTOROLA

M A J O R F A C I L I T I E S L MINNEAPOLIS, MINNESOTA

ALEX ARNOLD VICE PRESIDENT, CONTROLLER

ALLEN H. CENTER VICE PRESIDENT, PUBLIC RELATIONS

JOSEPH A. CHAMBERS VICE PRESIDENT A N D MANAGER, WESTER MILITARY ELECTRONICS DIVISION

JOHN I. DAVIS VICE PRESIDENT, CONSUMER PRODUCTS ENGINEERING

SYLVESTER R. HERKES VICE PRESIDENT, CONSUMER PRODUCTS MARKETING

C. LESTER HOGAN VICE PRESIDENT AND GENERAL MANAGER. SEMICONDUCTOR PRODUCTS DIVISION

HOMER L. MARRS VICE PRESIDENT, COMMUNICATIONS SALES

KENNETH M. PIPER VICE PRESIDENT, HUMAN RELATIONS

WILLIAM J. WEISZ

VICE PRESIDENT, COMMUNICATIONS PRODUCTS

WILLIAM S. WHEELER VICE PRESIDENT A N D GENERAL MANAGER MILITARY ELECTRONICS DIVISION

Grand Avenue, Franklin Park, Illinoi

YORK • C H I C A G O , F R LE, A R I Z O N A • C U L V

• AUTOMOTIVE PRODUCTS • CAR RADIOS • PUSHBUTTON TRANSMISSION CONTROLS • ALTERNATOR SYSTEMS • TRANSISTORIZED IGNITION SYSTEMS

COMMUNICATIONS PRODUCTS • TWO-WAY R A D I O - M O 8 I L E , PORTABLE A N D BASE STATION EQUIPMENT, PUSHBUTTON MOBILE RADIO-TELEPHONE, ANTENNAS, TOWERS, ACCESSORIES

AND PARTS, CONTRACT MAINTENANCE AND INSTALLATION SERVICE • • AUTOMATIC CAPACITANCE SWITCHING FOR ELECTRIC UTILITIES • ELECTRONIC SIGNALING DEVICES

CLOSED CIRCUIT TELEVISION EQUIPMENT • MICROWAVE RELAY SYSTEMS • RADIO TRAFFIC LIGHT CONTROL • RADIO PAGING SYSTEMS • POWER MEGAPHONES • PRECISION TEST

AND MEASUREMENT EOUIPMENT • " S E L C A L " SELECTIVE CALLING EQUIPMENT FOR AIRLINES • AIRCRAFT VHF NAVIGATION A N D COMMUNICATIONS EQUIPMENT • AIRCRAFT AUTOMATIC

DIRECTION FINDERS • AUTOMATIC FLIGHT CONTROL SYSTEMS CONSUMER PRODUCTS ' TELEVISION RECEIVERS • STEREOPHONIC HIGH FIDELITY PHONOGRAPHS • AM AND AM-FM TABLE

RADIOS • CLOCK AND PORTABLE RADIOS • A M A N D FM CAR RADIOS • ALTERNATOR SYSTEMS, ANTENNAS, ACCESSORIES. A N D PARTS DAHLBERG PRODUCTS • HEARING AIDS • HOSPITAL

COMMUNICATIONS SYSTEMS MILITARY ELECTRONICS PRODUCTS ' RADAR • COMMUNICATIONS SYSTEMS ' MISSILE GUIDANCE SYSTEMS • INDICATORS A N D DISPLAY SYSTEMS ' ANTI-

SUBMARINE WARFARE EOUIPMENT • DATA LINK SYSTEMS • NAVIGATION EOUIPMENT • TELEMETERING SYSTEMS • DRONE CONTROL SYSTEMS • GROUND SUPPORT, TRAINING, AND TEST

EQUIPMENT • ELECTRONIC COUNTERMEASURE SYSTEMS • FLIGHT SAFETY EQUIPMENT SEMICONDUCTOR PRODUCTS • POWER TRANSISTORS • MESA TRANSISTORS • GENERAL PURPOSE

TRANSISTORS • INDUSTRIAL AUDIO TRANSISTORS • INDUSTRIAL SWITCHING TRANSISTORS • RECTIFIERS • ZENER DIODES SOLID S T A T E PRODUCTS • PROCESS MEASUREMENT AND

CONTROL SYSTEMS ' REMOTE SUPERVISORY CONTROL SYSTEMS • ANALOG A N D DIGITAL INSTRUMENTATION • ELECTROMAGNETIC DEVICES • INTEGRATED ELECTRONIC SUB-ASSEMBLIES.