摩托罗拉公司1966年年报

MOTOROLA ANNUAL REPORT 1966

A shareholder visits . . .

CONTENTS

Letter to Shareholders 1966 Challenges and Progress Financial Plans and Controls Balance Sheet Slatement of Earnings Source and Use of Funds Ten Year Financial Summary Consumer Products Division Automotive Products Division The Advancing Technology Communications Division Semiconductor Products Division Government Electronics Division Control Systems Division Directors and Officers

The shareholder with whom you'll become acquainted photographically in this report is Richard L. Joulras of Wilmelte, Illinois. His original interest in becoming a Motorola shareholder was prompted by his observations of the company as a supplier. While serving as the central subject of this report, he gave a great deal of his time and submitted to a variety of inconveniences. We acknowledge our gratitude to him on behalf of all shareholders.

TO OUR SHAREHOLDERS AND FRIENDS

In 1966 the corporation experienced a substantial increase of 32°/o in sales and a nominal advance of 3.5% in earnings. Sales and earnings were at record levels. Sales totaled $682,374,719 compared with $516,973,065 in 1965. Earnings were $32,952,843 or $5.40 per share, compared to $31,838,678 or $5.23 per share in 1965. The sales growth was slightly less than we had anticipated. The ratio of earnings to sales was disappointing. It was a year of unusual circumstances. The report on the following pages reviews the events of the year with particular attention to those which exerted exceptional influence on the affairs of the company. The report is designed to present the facts in pictures and words as seen and heard by a shareholder visiting us and making inquiry in depth. Tape recorded interviews were edited to capsulize the pertinent facts. Edited versions were reviewed by the participants, including the shareholder, to assure accuracy. We hope you find the novel manner in which this report has been prepared to be of interest. For the Board of Directors,

CHAIHMAN OF THE BOARD

PRESIDENT

MARCH 2 1 , 1967

1966 CHALLENGES AND PROGRESS Chairman Galvin and President Wavering

Motorola enjoyed remarkable growth in 1966 by responding to extraordinary market opportunities. The fine acceptance of Motorola's products at the market place was evidenced in the record sales established by all divisions, with the exception of automotive. However, their leadership position as a supplier of stereo tape players nearly offset the reduced volume occasioned by a major customer making more of its own radios. The semiconductor division, while maintaining its position as the country's second largest supplier of semiconductor products with the broadest product line in the industry, attained the number two position in the shipment of integrated circuits during the fourth quarter. The communications division experienced its greatest growth in history and continued its leadership position in the mobile and portable two-way radio communications field. Color television played the major role in the consumer division's record sales, but there was also a substantial volume increase in black and white receivers. PRESIDENT . . . SHAREHOLDER . . . CHAIRMAN

Increased shipments of military and space equipment resulted in a new sales high for the government electronics division. Emphasis on marketing resulted in continued growth for the control systems division. In reaching out to meet these exceptional market demands, we overestimated our ability to solve the materials and labor problems. In-

creases in the cost of materials and, more importantly, the shortages of materials had a significant impact. The shortages necessitated replanning of operations and revised production schedules when almost completed products had to be set aside to wait for a final component. There were labor price increases, but of even more significance were the inefficiencies resulting from the general labor shortage, with the attendant problems of turnover, hiring, training, vacation leaves, and absenteeism. We increased employment during the year by many thousands. We rearranged, acquired and built many facilities. These had to be made ready, set up and equipped. Our 1966 capital expenditures for enlarged and new facilities exceeded $57,000,000. This rapid expansion caused our operating costs to increase substantially, with a resulting tapering off of profits. Mid-third quarter it became apparent that corrective actions were in order. Those we instituted fall under "moderation" and "control," and the objective is to bring our profit margins back into proper proportions. A surprise factor hit the industry in the latter part of the year. It turned out that certain markets were not as large as anticipated. The semiconductor market slacked off in the latter part of the year. The use of semiconductors continued its substantial growth but sales were affected by an inventory adjustment. Color television sales were much better than in 1965, but not as good as expected. H U M A N RELATIONS VP PIPER . . . THOUSANDS We closely analyzed the availability CHANGES IN PLANT OPERATIONS. MORE PEOPLE

of materials and labor, and the modified market potentials in color television and semiconductors, and adjusted our plans accordingly. In total 1966 was a year of considerable progress and a year of splendid preparation. Increased efficiencies in the plants we have brought on stream will contribute to future growth. Our color picture tube plant, here at Franklin Park, started production in February and by year-end was producing at a good volume and at a profit. The Elgin, Illinois, plant started production in February and by the third quarter was producing complete color television receivers. A major facility expansion at Quincy, Illinois, now accommodates production of all black and white television receivers. A plant in Midland, Ontario, was completed in May, and production of car radios reached substantial volume by year-end. The aerospace center in Scottsdale, Arizona, was expanded to handle programs formerly housed in leased facilities. A large integrated circuit research and production facility in Mesa, Arizona, is in process of completion. Construction of the communications division's multi-million dollar plant in Schaumburg, Illinois, nears completion. The financial condition of the company is firm and strong. The internal affairs of the company, the people structure, is eminently strong—attitudes are superb. Our people have been most responsive to the correcCHAIRMAN GALVIN COSTLY NEW EQUIPMENT...

tive actions in which we are engage As a visiting shareholder, you're going to hear this story in a varie of forms in the course of touring our facilities and talking with our management.

From reports I've read, the consume products demand in this country in 1968 is going to be enormous. Will you have most of your 7966 problems solved by then? We'll have them solved in 1967. A plus factor here which may not have been apparent is that for the first

ODUCTION ON STREAM .

time in many years we'll have ample and adequate facilities. How do you look at 1967 for the electronics industry? The industry is going to do more business in all its segments—consumer, industrial and government. As a consequence, we see Motorola doing more business in 1967. Do you look forward to any European expansion programs? We have acquired land at Toulouse, France, to erect our semiconductor operation. We will break ground there soon, and by the end of the year or the first part of next year, plant should be completed. Will you manufacture only semiconductors over there? That plant will be exclusively for semiconductors. We do anticipate that we will have a market expansion in some of the other areas of our international business — notably automotive. Do you have any other expansion programs planned? None that we haven't announced. This will be a year of finishing up expansions which we've put in the works. We're going to start our Exec utive Institute this year. That will require a building expansion—we'll lease some space for that. In future years we'll have to build a new head quarters building because the consumer and automotive divisions will take over here. Will you retain most of the earnings to pay off the expansion? Yes, we think so. We'll keep about the same dividend policy and use the money to pay our bills.

FINANCIAL PLANS AND CONTROLS Executive Vice President Vanderwicken

Each of Motorola's six operating divisions has its own management system and controls which are monitored and unified by five activities at the corporate level. We have a constant and accurate inflow of information related to the week or month at hand, and estimated performance out to 1971, depending on where we want to focus our attention. Long-term objectives and short-term goals, based on articulated strengths and weaknesses, are formulated each year by our division managers covering return on investment, organization, technology, management capability and succession, policies, facilities and people. After discussion of these with corporate staff executives, each manager is free to conduct the division's affairs knowing he has corporate support. Five-year plans are prepared each CONTROLLER HUBENY (RIGHT) . . . year by each division forecasting sales, costs and profits by product category, and the resulting employment, facility and financing requirements. These plans are reviewed by the board of directors to determine whether they correspond with the over-all objectives of the board. Budgets are prepared each year by each division to outline in detail the annual plan of operations. These require approval by corporate executives. Then each month the corporate financial executives review with each division its budget performance, progress on goals and objectives, turnover of assets, and other details.

Comprehensive monthly financial reports are submitted to division managers and directors summarizing CHIEF FINANCIAL OFFICER VANDERWICKEN... INFORMATION PROCESSING . . .

the month's and year-to-date results. Briefing room reports, including narratives and graphs, are submitted each week by the division managers covering their sales, operating problems, receivable and inventory turnover, factory productivity and quality indices, field quality problems and any significant developments. The graphs are posted on the walls of the briefing room to permit a quick progress review.

How do you look at 1967? The last half of 1966 was a disappointment. As we faced up to the problems of the economy and of our business, we moderated our plans. While the first half of 1967 may show unfavorable comparisons with 1966, it is our hope the last half will turn out favorably on a comparative basis. This naturally is dependent on the course of the economy. Do you anticipate further progress or a leveling out of the things you started in 7966? We expect to continue our growth in 1967, but at a more moderate pace than in 1966. We're seeking a more profitable growth rate, rather than growth simply for growth's sake.

PLANNING VP HICKEY (LEFT) . . . OPERATIONS REVIEW MEETING

CONSOLIDATED BALANCE SHEET as of 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 government contracts, le Inventories, at the lower of cost (first-in, first-out) or mar Other current assets TOTAL CURRENT ASSETS

PLANT AND EQUIPMENT, at Cost Land Buildings Machinery and equipment Accumulated depreciation NET PLANT AND EQUIPMENT Sundry assets, net

NOTES TO FINANCIAL STATEMENTS

Long-term debt at December 31 consisted of the following: 1966 1965 43/4% debentures due April 1, 1986 (less $500,000 debentures held in treasury for 1967 sinking fund payment) $29,500,000 $30,000,000

Revolving credit notes 30,000,000 —

Notes payable 33/4%, due $500,000 annually to 1972 3,000,000 4,500,000 478%, due $500,000 annually to 1976 5,000,000 5,500,000 Real estate mortgages 314,452 632,218

67,814,452 40,632,218 Less current maturities, included in current liabilities 1,070,880 2,317,766 Noncurrent portion of long-term debt $66,743,572 $38,314,452

31

1966 1965

$21,993,844 $ 9,311,856 5,763,058 21,059,960

Under the terms of a revolving credit, the company has the option of converting the notes to a five year term loan on or prior to February 1,1969; no reduction is contemplated during 1967. The agreement contains provisions restricting, among other things, the payment of cash dividends which are not to

exceed $10,000,000 plus earnings (as defined) after December

31,1965. It also requires the company to maintain consolidated

working capital of not less than $75,000,000. At December 31, 1966, $38,000,000 of retained earnings was available for dividend payments.

Under the Employee Share Option Plan adopted in 1960,

options have been granted to key employees to purchase Motorola, Inc. shares. Authority to grant options terminated in 1965. The options become exercisable two years after date of grant; they expire at the end of ten years if granted prior

LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Notes payable Current maturities of long-term debt Accounts payable Accrued compensation Federal income taxes, less United States Treasury obligations of

Other (including withheld) taxes Contribution to employees' profit sharing fund Product and service warranties Other TOTAL CURRENT LIABILITIES LONG-TERM DEBT (note 1)

SHAREHOLDERS' EQUITY

Capital stock, $3.00 par value (note 2) Authorized: 10,000,000 shares

Outstanding: 1966, 6,104,263 shares; 1965, 6,088,868 share

Additional paid-in capital (note 2) Retained earnings (note 1)

TOTAL SHAREHOLDERS' EQUITY

January 1, 1964, and five years if granted thereafter, and are contingent upon continued employment by the company or its subsidiaries.

During 1966 options on 15,395 shares were exercised; the excess ($698,050) of the option price over the par value of the capital stock issued was credited to additional paid-in capital At the year end 94,415 shares were under option, at an aggregate option price of $5,586,832, of which 65,165 shares were currently exercisable, in the total amount of $3,134,688.

The company is sharing in National Video Corporation's profit from the sale of color television tubes for a three year period ending in. November, 1968. Per share earnings for 1966 include 49* earned from the cooperative color tube development program.

1966 1965

18,312,789 18,266,604

16,781,521 16,083,471 157,503,963 130,652,207

192,598,273 165,002,282 $392,912,958 $279,261,479

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

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

YEARS ENDED DECEMBER 31 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, net of investment credit of $1,793,000 in $923,000 in 1965

EARNINGS (per share outstanding at end of year: 1966, $5.40; 1965, $5.23) Retained earnings at beginning of year

DEDUCTCash dividends declared—$1.00 per share Three-for-two share distribution—par value of 2,019,251 shares transferred to capital stock

TOTAL DEDUCTIONS

Retained earnings at end of year (note 1) See accompanying notes to financial statements.

PEAT, MARWICK, MITCHELL & CO. CERTIFIED PUBLIC ACCOUNTANTS, CHICAGO, ILLINOIS

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, 1966 and the related statement of earnings and retained earnings and the statement of source and use of funds for the year then ended. Our examina-

tion was made in accordance with generally accepted auditing

standards, and accordingly included such tests of the accounting

records and such other auditing procedures as we considered necessary in the circumstances. It was not practicable to confir accounts receivable from United States government departments

10

te 3) 32,952,843 31,838,678 130,652,207 110,939,315 163,605,050 142,777,993

6,101,087 6,068,033

— 6,057,753 12,125,786 6,101,087 $130,652,207 $157,503,963

or agencies by communication with them but we satisfied our-

selves 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, 1966 and the results of their operatio for the year then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year. Also, in our opinion, the accompanying

statement of consolidated source and use of funds for the year

ended December 31, 1966 presents fairly the information shown therein. PEAT, MARWICK, MITCHELL & CO. February 28,1967

STATEMENT OF CONSOLIDATED SOURCE AND USE OF FUNDS Motorola, Inc. and Subsidiaries

YEARS ENDED DECEMBER 31

SOURCE OF FUNDS Earnings Depreciation Increase (decrease) in long-term debt. Proceeds from exercise of share options. Total

USE OF FUNDS

Additions to plant and equipment, net. . Cash dividends Increase (decrease) in sundry assets. . . Increase in working capital Total

TEN YEAR FINANCIAL SUMMARY 1957 1958

SALES AND OTHER $228,431,385 218,909,968 REVENUES

INCOME BEFORE $ 15 756 431 15,171,013 INCOME TAXES ' '

EARNINGS $ 7,824,431 7,356,213

EARNINGS 1.27 PER SHARE*

WORKING $ 56 425 36 59,585,830 CAP.TAL ' ' °

NET INVESTMENT $ 27 167 597 27,615,287 IN PLANT AND ' ' EQUIPMENT

SHAREHOLDERS. $ ^ ^ 71,533,020

' Earnings per share are based on the number of share Earnings per share shown above for 7962 do not incl

1966

$32,952,843 13,859,021 28,429,120 744,235 75,985,219

59,995,652 6,101,087 (255,382) 10,143,862 $75,985,219

1961 1962 1963 1964 1965

98,219,845 346,881,779 377,852,809 419,066,694 516,973,065

19,900,308 26,514,514 27,126,526 38,926,724 57,838,678

9,517,308 13,206,514 12,926,526 20,666,724 31,838,678

1.57 2.02 2.14 3.41 5.23

95,078,616 96,804,189 92,358,852 107,625,939 118,014,680

48,427,446 54,783,818 67,283,543 67,836,835 81,082,588

02,655,506 111,835,713 120,735,367 137,533,422 165,002,282

respective years, adjusted for share distributions. gain from sale of finance subsidiary.

CONSUMER PRODUCTS DIVISION Executive Vice President Reese

ACCELERATED PRODUCTION . . . EXPANDED FACILITIES

MARKETING VP HERKES . . . SOLID STATE TV FINAL INSPECTION . . . COLOR TV BLACK AND WHITE TV .

12

The division enjoyed record sales. Color television provided the main sales thrust, but we also experienced substantial sales of black and white

receivers, recording an increase in

volume in this product category whereas the total industry suffered a decline.

Our radio and phonograph business contributed importantly to division sales and enhanced our position as a major full line producer of home entertainment products.

Late in the year we introduced an 8-track stereo tape player for automobiles which promises to be an important new product. We began shipments of FM stereo car radios to round out our product assortment, and to keep the Motorola brand in the front rank of the auto entertainment field. The products introduced during the year continued to reflect the increasing utilization of solid state circuit Several black and white television models are now completely solid state, except for a high voltage recti fier tube and the picture tube. The year produced many severe challenges as we attempted to meet the booming demand for our products while building, expanding and relocating production facilities. The divi sion added 1,028,658 square feet to its total plant capacity.

In February our Elgin, Illinois, plant

took on its first employee. By the

third quarter this plant was producing complete color television receivers in addition to many components supporting other consumer manufacturing operations.

In January we began to transfer black and white television production from Franklin Park to Quincy, Illinois. The latter plant was under a major expan-

sion program at the time. All black

and white receivers are now being manufactured in Quincy, while the Franklin Park plant is almost entirely taken up with color receivers.

In September ground was broken for a plant in Pontiac, Illinois. This will be in operation about April and will serve as a feeder plant to suppor

the Franklin Park color television operation. Meantime, we have leased a building in Pontiac to start production and to train a nucleus of manpower. Added to the complexity of expanding production facilities was the diff cult task of seeking out, hiring and training thousands of new employees during a period of critical labor shor age. Serious material shortages also hampered production during much of the year, with color picture tubes being a controlling factor. However, corrective actions have been taken to resolve these problems. There will be a major improvement in the efficiency and effectiveness of our manufacturing facilities in 1967. We plan a continuing increase in color television volume in 1967. Black and white sales will maintain a high level but still will reflect a reduced industry volume from 1966. Sales in-

creases are forecast in all other elec

tronic entertainment products.

How is the labor market in Pontiac? We researched the area very thoroughly in order to identify labor

potential to support our plant. Pontiac can support this activity and a expansion very well.

How large will the plant be?

The plant will be 135,000 square fee

With these additional manufacturing facilities, what do you project the sales could be increased to?

Using 1965 as a base, because we did not have these additional facilities then, we now have the capacity for a sales volume double that of 1965.

AUTOMOTIVE PRODUCTS DIVISION Vice President Kusisto

GENERAL MANAGER KUSISTO . . . ALTERNATORS NEW PRODUCTS . . . DYNAMOMETER LAB .

14

The division had a good year. Car radios, 8-track stereo tape players, alternators and new products all con tributed to near record sales. Our 8-track stereo tape player program continued to expand, with deliveries to Ford, American Motors,

and Volkswagen-U.S., as well as

others. We firmly established ourselves as the major supplier of the 8-track system to the automotive and home entertainment industries.

During the year and on a continuing

basis, an extensive engineering de-

velopment program was instituted to

add features to the tape player, to

design for future automotive safety

program requirements, and to im-

prove product performance and reli-

ability, while reducing costs.

We expanded our alternator prod-

uct line with the introduction of tw

major models. Our excellent line has

resulted in a greater penetration of

the entire noncaptive market.

We introduced a new capacitor discharge ignition system to the aftermarket. Two major marine engine manufacturers have contracted for this system. We have development programs with several engine manufacturers involving a new concept in a reliable electronic ignition syst

To adequately support these and

future programs, we established a new dynamometer laboratory test facility which includes both engine and chassis dynamometers.

The division also introduced lines o transistorized tachometers and solid state elapsed time indicators. Construction of a plant in Midland, Ontario, was completed in May of

1966. In June production of car radios began and reached substantial volume by year-end. The decision to build this manufacturing facility was a direct result of the trade agreement between this country and Canada. This plant now produces car radios

for Chrysler and American Motors.

In the international area, S.E.V.Motorola S.A. in France continued to expand its production of alternator systems to meet the increasing needs of the European market. Our associ-

ate in Mexico, Corporacion Nacional

Distribuidora, substantially increased

its share of both alternator and car

radio business with the major car

manufacturers. A joint-venture com-

pany, Motorola South Africa, com-

menced production of alternators.

Our licensees in South America are

capturing greater shares of the origi-

nal equipment car radio business.

Currently we have a number of excel-

lent licensing candidates in the Euro-

pean and Far Fastern market areas.

The combination of new products, deeper penetration of existing markets and a broadening of our international operations will contribute to growth in the years ahead.

Do you manufacture any aircraf

alternators?

There are a number of our alternators being adapted to aircraft but we're not specifically aiming at that market and for good reason. It's a highly specialized program in which we could invest substantial engineering effort and in return get very limited sales and profits. We aim at a product with which we can obtain an excel-

lent unit multiplier—we look for volume against which we build our profit base. Do you expect the stereo tape playe sales volume to surpass that of car radios?

We thought in the last quarter of

1966 that this would occur in 1967. However, we ran into some problems. Although we received Underwriters Laboratory approval on the synchronous motor which drives the tape deck, each of our customers

must get UL approval for each of

their models which utilize the deck

This is primarily because the cabin

tends to affect the environment and

temperature in which the deck and

the other components operate. So

this has caused a delay in terms of

absorption at the market place. But

I can foresee the time within the

reasonable future when tape player

sales volume could equal or exceed

that of our car radios.

THE ADVANCING TECHNOLOGY Vice Chairman Noble

While the technological progress in the last twenty years has been extremely fast, the rate of change in the next twenty-year period will be characterized by substantial additional acceleration. The most significant achievements in the next few years will evolve from the continuing development of computer technology, or, to be more generic, from the development of new and versatile information processing systems. The words "information processing" i d e n t i f y , to a primary degree, Motorola's broad interests in the electronic field. All of our products, including color television receivers, process control equipment, computer-logic controlled systems, and communications systems, as well as integrated circuits, are related to information processing. There will be a proliferation of new products which, using other terminology, are also identified as automatic control, automation and brain extension systems. The key to the future rapid growth of information processing technology is the continuing refinement of integrated circuit design and production. As industry discovers new approaches which will make possible the design of increasingly complex and sophisticated integrated and other solid state circuits, which can be produced economically, the information processing technology is destined to make essential contributions to the progress of all industry. We must develop equipment to speed up our procedure for assimilating new information. The rising flood of newly generated technical information is threatening to inun-

16

date our libraries, swamp our teaching systems, and frustrate our attempts at administrative control. Unless we introduce step-function improvements in our information handling methods, we are destined to stagnate at some low level of equilibrium related to the saturation of our processing systems. Our present libraries, which are in

effect primitive artificial memory sys

tems, must give way to electronic

libraries with means, not only for

storing the information in solid state

memory systems of prodigious ca-

pacity, But also with provisions for

programming the search for viable

relationships and for the high-speed

reproduction and display of the se-

lected information. The library of th

future must be more than a storage

and retrieval system; it must be an

information processing center, with

instant access to the total active st

of human knowledge. The electronic

library will become the ultimate in

teaching machine design.

Practical electronic teaching ma-

chines must be developed and put

into use promptly. It is easy to con

clude intuitively that a programmed

electronic teaching system, which

will permit instant feedback of cor-

rections and answers to questions,

will increase teaching efficiency. Th

child's brain is an unprogrammed

computer which must be taught the

procedures for logical thinking, and

must be supplied with disciplined

related information to use as raw

material for t h i n k i n g . Elect

teaching systems will provide an ef-

ficient means for accomplishing this

basic preparation, and free the

teachers for the job of developing value judgment, the ability to formulate questions, and the techniques fo organizing and synthesizing information into patterns of understanding and new creative combinations. The development of adequate teaching machines will not be easy, but it is both possible and inevitable.

One new approach to equipment

design, which will accelerate the

creation of adequate information

processing systems, makes use of

computers programmed to help the

engineer with the job of designing

circuits. By the use of computer pro-

grammed design procedures, it is

possible, for example, to reduce the

time required to design an integrated

circuit and related masks, from two

weeks to a single day. Cut-and-try

procedures are rendered obsolescent

by the new techniques. The same

basic technology which will revolu-

tionize teaching systems, library sys

tems, and design procedures, will

also revolutionize administrative

structures in all organizations, wher

the rising complexity and the slow-

ness of response have made the

rapid exercise of value judgment

impossible.

The slow people-paper administra-

tive systems in use today are rap-

idly becoming obsolescent. In every

large industrial organization, the

continual expansion of the admin-

istrative systems must eventually

transform the managers, from dy-

namic directors of destiny, to spe-

cialists in autopsy. Only through the

use of high-speed processing to

make possible fast reaction time to

management questions and direc-

tives, can the manager's control be restored. Only through the development of electronic information processing administrative systems, can we hope to achieve the speed-ofreaction necessary for such control. The use of brain extension systems is essential to the continuing progress of the new scientific revolutio An effective man-machine symbiosis

must create new approaches to

thinking and new organizational ad-

ministrative structures. Obviously,

electronic information processing

patterns are fundamental to the de-

sign needs for systems which will

avoid processing saturation.

Aside from administration, how will

these systems benefit industry?

While effective processing proce-

dures are basic to administrative

systems design, they are also impor-

tantly related to automation, to

traffic control, to chemical process

ing and to manufacturing procedures

of all kinds. In addition, the appli

tion of electronics to systems affec

ing our daily lives is amazingly

widespread, and this rising trend

more than justifies the statement

that the use of electronic equipment

and subsystems is generic both to

modern industry operations and to

the evolving patterns of our scien-

tific culture as a whole.

Is Motorola moving toward these

newer areas?

The continuing growth of the elec-

tronics industry is as inevitable as

is essential to the growth of all in

dustry. Motorola will continue to

move in the broad, expanding main-

stream of electronic industry growth

COMMUNICATIONS DIVISION Vice President Weisz

„ '7 „ ff-

GENERAL MANAGER WEISZ . . . WE RESPONDED

SALES VP MARRS . . . COMMUNITY RADIO WATCH . . HOSPITAL COMMUNICATIONS . . .

18

The division established record sales and earnings for 1966. However, our profit ratio was lessened somewhat because of certain inefficiencies and a public responsibility to respond to some unusual demands. As a result of the increased activity in Vietnam, we delivered substantial amounts of equipment on short notice. We put this business ahead of our normal business. We also felt a responsibility to respond to other emergency situations. This was an unusual year in the way of disasters —floods, hurricanes, riots, forest fires, and in one case the largest manhunt in a city's history. We were

called upon by police, fire fighting

and other public service agencies to deliver equipment with twenty-four hour notice or less.

These priority orders on top of our

normally planned increase of pro-

duction presented problems at a

time when the economy boom had

created materials and labor

shortages. The division plays an increasingly

important role in the area of public services. Our products help people in the protection of their lives and property, in industry, in transportation, in health care.

Products ranging from two-way radio to complete communications

systems for hospitals, from closed

circuit television to precision instr

ments affect the lives of everyone,

either directly or indirectly. The po liceman in his radio equipped car, the radio dispatched fuel oil truck, the doctor on instant call anywhere in the city through his paging re-

ceiver, each serves the public faster and less expensively through the use of Motorola products. We have instituted a public service program throughout the United States called Community Radio Watch. This program invites the participation of the American public, individuals and businesses, in an all out effort at the community level to support the police in their efforts t protect life and property. Sponsored by Motorola, it is run by the local city government. Personnel who drive two-way radio equipped vehicles of any kind are being enlisted in a program to report suspicious acts to their radio dispatcher, who

relays the reports to the police. We

think this program will increase police effectiveness without additional manpower or cost, greatly help to

prevent loss of life and property, an

reduce the crime rate. It has been

enthusiastically received and is in

the process of being implemented

by hundreds of U.S. cities.

We continued to enjoy excellent

growth in our international operations. Currently our products are manufactured in six countries outside the U.S. and, through local busi nessmen, we distribute U.S.-made products in all the other free countries of the world.

Construction of our multi-million

dollar plant in Schaumburg, Illinois,

is well underway and will be ready

for initial occupancy in early 1967.

When do you anticipate you will start production in Schaumburg? Our first operation is now scheduled

for March of 1967. We will begin to consolidate into the Schaumburg plant many of our dispersed faciliti in the Chicago area. Do you think your labor market out there will be able to support your proposed buildup? Yes, from the studies we have made and experts have done for us, the northwest suburban area is a longterm growth area. We took all these factors into account when we formulated our plan to expand in Schaumburg on a gradual basis. Our Augusta Boulevard facility, of course, will continue in full operation.

Do you anticipate continued growth

for the division?

The demands for our products parallel the increased demands of the public for services and the need for cost reduction in industry. Assuming

that the general U.S. economy con-

tinues its growth and that the Fed-

eral Communications Commission

allocates sufficient frequencies for

private land mobile radio, we should

continue ours.

SEMICONDUCTOR PRODUCTS DIVISION Vice President Hogan

COMPUTER CONTROLLED OPERATIONS . PLASTIC-ENCAPSULATION . . .

20

The division achieved record sales Our plastic-encapsulation technique, Until recently our sales were limit and earnings for 1966. We main- for example, enables an automatic to technical leadership items—detained our position as the country's machine to index and handle as vices they couldn't build but which second largest supplier of semicon- many as 100 devices at a time, rather were needed for the manufacture of ductor products, with a growth rate than one at a time. In one electrical equipment. With our new producsubstantially greater than that of the testing operation, we have been able tion technology, we now can comindustry, despite increasingly intense to cut our direct labor cost by a pete with the Japanese prices. We competition in product and price factor of ten. recently took a look at the Far Eas categories. market place and we're anticipating Our facilities for this low-cost, We now have the broadest product plastic-encapsulation process were a multi-million dollar business in line in the industry, cataloging nearly expanded to produce several million 1967. We'll be hiring salesmen and 14,000 semiconductor types in 18 units per week of integrated circuits, appointing distributors in Hong product categories. Further product small- and large-signal transistors, Kong, Taiwan, Korea and other diversification will be limited to thyristors and other products. places. We are considering the conareas in which large potential mar- struction of a factory in the Far E A European Service Center in Ge- as we have done in France. kets are developing. neva, Switzerland, was established to This last year we established our- service our overseas sales effort with Do you feel your technological imselves in a dominant position in in- quicker delivery and better applica- provements in manufacturing have tegrated circuitry—number two. So tions assistance. We also expanded been as great as the new products we now have the same position in other international sales operations. you're creating? this product area as we do in the Yes, we are very proud of it. We fe Arrangements were completed for semiconductor field as a whole. We we have attained a leadership posithe construction of a facility in Touincreased our integrated circuit line tion, not only in terms of technollouse, France, which will manufacto the point where every major fam- ogy and the kinds of devices we ture semiconductors to serve the ily of integrated logic circuits was can offer, but also in production European market. We'll be able to available as an off-the-shelf item. techniques. move in production equipment in Linear integrated circuit leadership early 1968. was achieved with the introduction of state-of-the-art amplifier circuits which received widespread recogni- How is the European market? tion in the industry. It has been growing very rapidly. Integrated circuitry will enjoy excel- Our sales have just about doubled lent growth in the years ahead. To each year. We feel if we have an prepare ourselves for our role in it operation in France capable of servwe are nearing completion of a ing the Common Market our total 300,000 square foot research and sales in Europe will increase substanproduction facility in Mesa, Arizona. tially, not just for products produced there but also for products imported We invested a large amount of time from Phoenix. After you are estaband engineering talent in production lished as a competent supplier, you techniques for all product families. tend to get more and more business. Special emphasis was placed on increasing production efficiency Are you doing anything in the Far through increased mechanization. East?

GOVERNMENT ELECTRONICS DIVISION Vice President Chambers

CENTER MANAGER Wl NTER . . . TELEPRINTERS

FLIGHT TEST FACILITY . . .

ASST GEN MGR & VP JONES . . . INTEGRATED I CIRCUITRY

GENERAL MANAGER CHAMBERS . . . FUZES SPACE P R O G R A M S . . . INTERNATIONAL BUSINESS .

22

The division was challenged during the year by the escalation in Vietnam and by the buildup of the Gemini and Apollo programs. In responding, we achieved new highs in sales and profits.

During the year we changed the name of our division and one of our plants to more accurately identify our activities. Because of our heavy involvement in space work, we chose Government Electronics for the division and Aerospace Center for our facility in Scottsdale, Arizo The aerospace center was specially designed for the development and production of ultrareliable electron-

ics equipment for critical space and

defense programs. This year we

added 188,000 square feet to accom-

modate programs that were operat-

ing in numerous leased facilities.

An integrated circuit facility was in cluded to expedite the application of integrated circuits to our systems

and equipment designs. The semi-

conductor products division lends

its capabilities, thus giving us a di

tinct competitive advantage in this

important and growing field.

The record of perfect performance

for Motorola's space equipment was maintained throughout the Gemini program.

We continued to expand our par-

ticipation in the Apollo program. We

delivered two-way communication S-band transponders and "up data links" for the spacecraft, and digita test command systems for prelaunch checkout. We also developed a helmet mounted antenna for moon probing astronauts.

The division received numerous other space contracts. One of note was from Jet Propulsion Laboratories for the development of the computer and subsystems for Mariner 69.

We were very active during 1966 in

the development and production of classified weaponry and electronic devices for our fighting forces in Vietnam and elsewhere. A department was established to handle some $20 million of fuze orders from the U.S. Army. A plant was leased in Elk Grove, Illinois, for t development and production of special bomb and rocket fuzes.

We continued the development,

production and installation of air-

borne surveillance equipment and

data transfer systems. Much of this

equipment is installed in military a

craft and tested at our own flight t facility in Mesa, Arizona.

Numerous other military contracts

were received for troposcatter com-

munications systems, electronic tele

printers, bathythermograph transmit-

ters, UHF communications systems,

radar intercept calculators, and for

research and development of other

specialized equipment.

Production commenced on additional models in our microwave communications product line, in-

cluding the MR-30 transmitter/

receiver and the MC-30 multiplex.

During the year we established a subsidiary corporation, Motorola Military and Aerospace Electronics Inc., to better handle our growing international business. We now have 31 offices in 30 countries.

Is your primary concern with research and development? Yes, we're very heavily scientifical oriented. About half of our total population is comprised of engineers

and technical people.

Does the government give you a project and then tell you to find th solution? Nearly all our work is of that kind. Their contract will state a problem, the limits as to how to go about it and what kind of solution they expect. Study contracts are often followed by development and production programs, and in some cases by

installation and testing programs—

such as our radar surveillance

equipment.

// the Vietnam situation should come

to a halt, would this affect your bu

ness very much? No. It would affect the mix of thing

we are doing but not our total busi-

ness. With a change in the Vietnam

situation, the President could make

funds available to implement many

of NASA's approved plans which

have been t e m p o r a r i l y shel

We're involved in those plans, so

some of our work could be switched right over. Our contingency plans dovetail with the government's.

CONTROL SYSTEMS DIVISION General Manager lack

placed with any supplier for industrial automation equipment. Product development is a continuous process. In 1966 we introduced an "off-the-shelf" 10-command supervisory control system for electric and water utilities, pipelines and in plant applications. This provides low-cost monitoring and controlling of up to ten status points. We introduced the industry's first intrinsically safe instrumentation equipment. In explosive environments, this not only ensures greater safety for employees and facilities, but greatly reduces the cost of insta INTRINSICALLY SAFE EQUIPMENT . . . ZACK lation by eliminating cast metal, air tight housing, and accompanying heavy conduit. We received an award from the chemical processing industry for this design concept.

Has this division reached a profit position yet? No. In 1965 we invested heavily in product development. In 1966 the marketing of these products received particular emphasis. We expect that the benefits which accrue from the successes of these two The division enjoyed its best year. programs will improve our position considerably during 1967. Of significant note were the variety, DATA SYSTEMS FOR SELF-SERVICE. volume and rate of orders received. How do you market your products? Our three product lines—supervis- Our products are marketed directly ory control systems, data systems, by factory-trained and strategically and process control systems—expe- deployed sales engineers. We have rienced increased sales volume and selected men with considerable exdeeper market penetration. We are perience and control systems emnow acknowledged as a major sup- pathy in the fields in which we have plier to the chemical, petroleum, major potential—petroleum, chemtransportation, distribution and ical, steel, etc. These men have been power industries. This is confirmed thoroughly trained in the application by some of the largest orders ever of our products to these fields. PROCESS CONTROL SYSTEMS . . .

24

ANNUAL MEETING The annual meeting will be held on Monday, May 1, 1967. A notice of the meeting, together with a form of proxy and a proxy statement,

will be mailed to shareholders on or about April 1, 1967 at which time proxies wil be solicited by management.

TRANSFER AGENTS Harris Trust and Savings Bank W. Monroe St., Chicago, Illinois 6069

mical Bank New York Trust Company Broadway, New York, New York 10015

REGISTRARS

ontinental Illinois National Bank and Trust Company of Chicago S. LaSalle St., Chicago, Illinois 606

Irving Trust Company 1 Wall St., New York, New York 10015

AJOR FACILITIES LOCATED ATChicago, Franklin Park, Quincy, Elgin, and Schaumburg, Illinois nix, Scottsdale, and Mesa, Arizona Arcade, New York

Midland, Ontario

DIRECTORS AND OFFICERS

BOARD OF DIRECTORS ROBERT W. GALVIN

MATTHEW J. HICKEY, JR. C. LESTER H O G A N

DANIEL E. NOBLE

ARTHUR L. REESE WALTER B. SCOTT

EDWIN P. VANDERWICKEN ELMER H. WAVERING

OFFICERS

ROBERT W . GALVIN Chairman of the Board

ELMER H. WAVERING President

DANIEL E. NOBLE Vice Chairman of the Board Group Executive, Technical Division

C. LESTER H O G A N Vice President and General Manager Semiconductor Products Division

ARTHUR L. REESE Executive Vice President and Genera Consumer Products Division WALTER B. SCOTT Vice President Consumer and Automotive Production

EDWIN P. VANDERWICKEN Executive Vice President, Finance a

ALLEN H. CENTER Vice President, Public Relations

JOSEPH A. CHAMBERS Vice President and General Manager Government Electronics Division

SYLVESTER R. HERKES Vice President, Marketing Consumer Products Division

JOHN T. HICKEY Vice President, Planning

JOHN A. HUBENY Vice President and Controller

J. PAUL JONES Vice President and Assistant Genera Government Electronics Division

OSCAR P. KUSISTO Vice President and General Manager Automotive Products Division

HOMER L. MARRS Vice President, Communications Sale

KENNETH M. PIPER Vice President, Human Relations

ROGER C. SMITH

LEWIS D. SPENCER Vice President and General Attorney

WILLIAM J. WEISZ Vice President and General Manager Communications Division

MOTOROLA MOTOROLA, INC., 9401 W. GRAND AVENUE, FRANKLIN PARK, ILL. 60131

. . . end of tour