OTOROL REPOR

I 11

I:•*

CONTENTS

1 Circuitry Evolution2 Special Achievements of 19603 President's Letter

DIVISIONAL REPORT

4 Communications6 Aviation Electronics7 Automotive Products8 Semiconductor Products

10 Consumer Products13 International Operations13 The Dahlberg Company14 Military Electronics15 Solid State Electronics

FINANCIAL REPORT

16 Concerning the Financial Report17 Motorola Inc. and Consolidated Subsidiaries20 Motorola Finance Corporation21 Ten Year Financial Summary23 Directors and Officers

MOTOROLA ANNUAL REPORT 1960

The annual meeting will be held on Monday,

May 1,1961. A notice of the meeting, together with

a form of proxy and a proxy statement, will be

mailed to shareholders on or about April 3, 1961,

at which time proxies will be solicited by the

management.

TRANSFER AGENTS

Harris Trust and Savings Bank111 West Monroe Street, Chicago 90, Illinois

Chemical Corn Exchange Bank30 Broad Street, New York 15, New York

REGISTRARS

Continental Illinois National Bankand Trust Company of Chicago231 South LaSalle Street, Chicago 90, Illinois

Irving Trust CompanyOne Wall Street, New York 15, New York

1950's

1960*s

4i

tSOLID STATE

ELECTRONICS

". . . The activity to which I now make referenceis one which relates to the rise of solid state elec-tronics . . . and to some of the principal changesthat can occur in all of our product areas in thenext five or ten years . . ."

1940's

These comments introduced the subject of thenew solid state art in an address by Robert W.Galvin, President of Motorola, Inc., before theNew York Society of Security Analysts on July28, 1960. Illustrated on this page are the circuitsub-systems which Mr. Galvin showed to the se-curity analysts to demonstrate the evolution inequipment design and manufacture which is tak-ing place in the electronics industry.

Each circuit shown here is an actual size repro-duction. Each performs a similar function . . . thevacuum tube circuit of 1940 vintage . . . the tran-sistorized circuit module—a product of the 1950's. . . the thin film integrated circuit—characterizingthe present research trend toward use of solidblock functional sub-systems.

The thin film integrated circuit above is one ofseveral approaches to the new solid state circuittechnology. This tiny unit is only one-fiftieth partof the volume of the conventional transistorizedmodule (to its left), which it replaces. Althoughthe size reduction is spectacular when comparedto older equivalents, it is reliability improvement,rather than size reduction, which is of dominantimportance to future systems design.

Motorola's research and development programis vigorous and selective. It deals with devices,materials, and processes in the fields of semicon-ductors, epitaxial growth, thin films, diffusion,surface passivation, and electronic ceramics. Thisprovides a broad foundation for continuing leader-ship in the solid state electronics art.

PRESIDENT'S LETTER

SPECIAL ACHIEVEMENTS OF 1960

First fully-transistorized, VHF,

pocket-size transmitter.

Mass-produced, epitaxially-grown transistors.

First large-screen, battery-operated,

transistorized portable television receiver.

Mahogany Association top styling award for

Motorola television and stereo hi-fi units.

Record International Operation sales.

Reinstatement as "Mission and Traffic

Control" manager for the B-70 Bomber.

Creation of the Solid State Controls Department.

Completion of new Administration Building.

To the Shareholders of Motorola, Inc.

A new record was set for Motorola salesand other revenues which totaled $299,-065,922 in 1960, a small increase over1959 in spite of the economic downturnin the last quarter of the year.

Net earnings of $12,633,813 were below1959, and earnings per share outstandingat the end of each year were $3.14 in 1960compared with $3.59 in 1959 (adjusted forthe share distribution in 1960).

The two dominant influences on Motor-ola's business in 1960 were:

1. The downturn in the economy.2. The quality of our diversification.The downturn in the economy reduced

sales of consumer radio, phonograph, andtelevision products of our Consumer Prod-ucts Division substantially during the lasthalf of the year. The degree of downturnwas not anticipated. The division budgetswere purposely geared to a higher volume,resulting in an adverse effect on earningswhich, though reasonable, equaled neitherour 1960 goal nor our 1959 result.

To a lesser extent, the economic forcesalso affected the Communications Divi-sion and the Semiconductor ProductsDivision with minor effect on earnings re-lated to our goals.

Throughout this period our MilitaryElectronics Division operated at consider-ably less volume than in 1959 but withabout the same rate of earnings.

Many elements of the Company per-formed outstandingly. The AutomotiveProducts Division achieved near-recorddeliveries.

The Semiconductor Products Divisionmade another giant stride forward in be-coming an important supplier to hun-dreds of other electronic companies. Overseventy-five per cent of its output is nowsold to customers outside the Company'sother divisions.

Particular success was recorded withpower and mesa transistors using bothgermanium and silicon base material.Further achievements were made withzener diodes. In addition, Motorola is thefirst company outside the Bell System to

market devices mass produced by a revo-lutionary process called epitaxial growth.This major advance improves quality andpromises reduced costs as the result ofincreased production yields.

The Communications Division contin-ued its consistent growth and its leader-ship of the two-way mobile radio business.Important product and marketing ad-vances were also achieved with portableand paging radio products, radio trafficcontrol systems, closed circuit televisionsystems, and others.

The Federal Communications Commis-sion authorized adequate frequencies andrules for the inauguration of private micro-wave radio systems. We believe this offersa significant, though probably not spec-tacular, opportunity for growth which willstep up moderately through the next fiveto ten years.

Our Military Electronics Division closed1960 with a greatly increased backlog,auguring well for the new year from thestandpoint of earnings as well as volume.

Motorola's international business oper-ated at the largest volume of sales, licenseincome, and earnings in its history.

Research efforts in the field of solidstate materials and devices continue mostpromisingly. These efforts should, over aperiod, provide new products with whichto further increase both our integrationand diversification in electronics.

During 1961 we expect to improve oursales volume of communications products,semiconductor products, microwaveequipment, hearing aids, hospital com-munications equipment, aviation elec-tronics products, solid state products, andmilitary electronics.

Our automotive products sales willlikely be less with reduced automobilebusiness. Consumer products volume mayapproximate 1960. Total sales and earn-ings should exceed 1960.

The able service of my associates didmuch to preserve a satisfactory record forthe Company in a year when the economywas unfavorable.

March 13, 1961

For the Board of Directors

j .PRESIDENT

COMMUNICATIONS DIVISION

An increase in volume of sales again wasrecorded in communications equipmentfor 1960. Both new users in establishedapplications, and new applications by bus-iness and governments created furtherdemand for independently-licensed radiosystems. Advanced equipment created re-placement demand.

Important to sales this year was theMOTRAC (transistorized mobile two-way radio) line of premium quality, highreliability communications systems. Itsinitial announcement in latter 1958 wasfollowed in 1959 by widespread accept-ance. In 1960 added production capacitywas needed to meet market requirements.

Compact and highly reliable, MOTRAC radio provides complete 2-way communications.

Closed circuit TV provedan effective visual aidfor Motorola-sponsoredservice training programsbegun in 1960. Televisionmonitors enabled detailedinstruction, visible tothe entire class.

Communications Division Vice President Arthur L. Reese compares thenew Handie-Talkie pocket-size transmitter with the larger model it replaced.The new transmitter has a companion pocket receiver (shown center).

Motorola maintenanceagreements are performed

through independently-owned service stations.

These Motorola-supervised stations

provide continual 24-hourservice, and operatethroughout the U.S.

Motorola's introduction this year of thefirst fully-transistorized, VHF pocket-sizetransmitter led to new applications fortwo-way communications. Transistoriza-tion has resulted in a smaller, more reli-able, and lower operating cost package,more convenient to carry on the person.

The transistorized Handie-Talkiepocket transmitter is a complete, self-contained unit including the battery sup-ply, built-in microphone, and antenna.When used with its companion Handie-Talkie receiver, the combination providesa fully transistorized, personal communi-cations system for the man on foot.

Radio Traffic Control Systems

Initial interest in radio as a communica-tions medium to control vehicular trafficadvanced to acceptance of the Motorolapre-timed radio traffic control system. Dur-ing 1960, the initial installations in Wash-ington, D.C., and at Detroit, Michigan,were expanded and additional prototypesystems were implemented in New YorkCity and Los Angeles. Contracts were re-ceived for both complete and exploratoryinstallations from New Haven and Hart-ford, Connecticut. These early installa-tions have had considerable impact on theplanning of many traffic engineering de-partments considering either the Motor-ola pre-timed system, or a traffic actuatedsystem using Motorola radio equipment.

Commercial sales of microwave systemswere improved during 1960, attesting toboth an increased market interest andthe widening acceptance of the Motorolaproduct. New transistorized radio fre-quency and multiplex channeling systemswill be delivered in 1961 to fill ordersplaced in late 1960. Liberalized licensingpolicies adopted by the Federal Communi-cations Commission in 1960 will provideexpanded commercial potential althoughgrowth is expected to be gradual.

Communications (continued)

Motorola closed circuit television ex-perienced moderate growth during theyear but is still in the early developmentalstage. Among installations in 1960 werethose for Chicago Board of Education,Proctor and Gamble, U.S. Navy, MartinCompany, and the Shell Oil Company.

The precision test instruments programwas augmented in 1960 with an exten-sively transistorized, battery-operated,portable DC multimeter.

The popular "in-plant" low-frequencypocket paging system was complementedwith the introduction of a "city-wide"pocket receiver VHF radio paging system.This device permits individual signalingand voice message transmission to any oneof 7,000 pocket receivers on a single two-way radio channel. Some typical installa-tions in 1960 were for Sheraton Hotels,Eastman Kodak, Mt. Sinai Hospital,(New York), and Continental Can Co.

Motorola continues to sell its commu-nications systems exclusively through itsown sales engineering organization. Thisserves to assure comprehensive system de-sign, proper installation and maintenancefor the customer's greatest satisfaction.

Sales and service groups were re-dis-tricted at the end of the year to gain effec-tiveness in use of manpower and facilitiesin reaching market areas. Furthermore,major communications users—governmentagencies, transportation and utility organ-izations—now are serviced through an ex-panded "account executive" program.

With the completion of the new Admin-istration Building and the transfer ofconsumer manufacturing to FranklinPark, the Communications Division will,in time, occupy the former headquartersbuilding adjacent to its present locationon Augusta Boulevard in Chicago.

The principal product lines of the Com-munications Division now consist of two-way mobile and portable radio systems;VHF complex systems designs; microwaveand data processing communications sys-tems; electronic signaling and controldevices; closed circuit TV; digital com-munications; radio traffic light control;radio paging systems; power megaphones;remote alarm indicators; precision testand measurement equipment; "Selcal"selective calling equipment for airlines;communications, navigation, and auto-matic flight control equipment for thegeneral aviation market.

AVIATION ELECTRONICS

Motorola's aviation products group hascompleted its first year as part of theMotorola organization. This segment ofthe Communications Division has respon-sibility for developing and manufacturingaviation products for the non-military air-craft market.

The aviation electronics group suppliesthree basic product lines for lightweight,single and twin engine aircraft: automaticdirection finders; VHF navigation andcommunications systems; and automaticflight control systems. Current plans in-volve transistorization and miniaturiza-tion for increased reliability of products,plus the development of other allied sys-tems within the scope of the general andbusiness aircraft industry.

New Facility in Culver City

In the fall of 1960, the activity was movedinto a new, 55,000 square foot building inCulver City, California, a suburb of LosAngeles.

Motorola aviation electronics products aid the pilot invarious phases of flight, from take-off to landing. TheMotorola VHF communications system is used to ob-tain ground clearance and maintain radio contact. Theauto-pilot, coupled with the VHF navigation system,holds the craft on course, maintains a constant alti-tude, navigates the airways, and executes an instru-ment landing system approach to within 50 feet of therunway. The Motorola ADF (Automatic DirectionFinder) acts as a homing device, a secondarynavigation aid, and a low-frequency radio receiver.

Experimental radiodesigns for future carmodels are built and testedin the automotive modelshop many months inadvance of car production.This assures high qualityand functional reliabilityupon delivery.

AUTOMOTIVE PRODUCTS DIVISION

Contract radio sales volume followed thetrend of the auto business for the year andachieved a sales total second only to theautomobile boom year of 1955.

Motorola's Automotive Products Divi-sion continued to supply car radios toFord, Chrysler, and American Motors.

In addition to the general car line, autoradio requirements were met for the Ford"Thunderbird," "Falcon," and "Comet;"the Chrysler "Valiant" and "Lancer;"American Motors "Rambler" and "Ameri-can;" and the Dodge "Dart."

Motorola also was awarded the contractfor the 1961 Lincoln "Continental," basedon a high-reliability program which war-rants the receiver for two years or 24,000miles—the same as the vehicle warranty.

A push-button miniature tuner was de-veloped for all Motorola car radios whichreplaces various previous types of tuners.This standardization changeover wasmade to keep pace with the smaller sizerequirements of transistorized car radios.

The miniature tuner provides the samequality as the larger tuners but results ina smaller package enabling greater lati-tude in styling, shipping, and instrumentpanel design. The push-button tuner canalso be adapted into a manual tuner forbroader market coverage.

Motorola tuners are manufactured inArcade, New York, the final radio assem-bly being done in Quincy, Illinois. Plantexpansion was completed in both theselocations during the year—a 30,000 squarefoot addition in Arcade, and an 85,000square foot addition in Quincy.

The Automotive Products Divisioncompleted its move to the new Adminis-tration Building in Franklin Park, Illinois,where all of its administration and engi-neering activities are now centered. Thenew quarters will provide greatly in-creased office and engineering space,including a 14-car garage for car radiotesting and experimental development ofvarious electronic automotive devices.

Motorola engineersdeveloped a miniature

tuner to meet smaller sizerequirements of transis-

torized car radios.Elmer H. Wavering,

Automotive ProductsDivision Executive Vice

President, compares oldand new.

MESA TRANSISTORS

a Group*-13 Typ«9

GENERAL. PURPOSEMILLIWATT TRANSISTORS

1 3roup-94 Types

RECTIFIERS

6 Group*-172 Typ««

ZENER DIODES

B Groupa-S070 Typ»s

t# H

Motorola's Semiconductor Products Division added breadth and depth to its product linein 1960, having successfully completed five major families of semiconductor devices.These families include 2,400 different types of transistors, rectifiers, and zener diodes.

SEMICONDUCTOR PRODUCTS DIVISION

M otorola's Semiconductor Products Divi-sion set records in sales and earnings for1960. Sales were more than double thoseof the previous year. In addition, a highlyqualified nationwide sales and servicingnetwork was established. Through the ef-forts of this organization, the Division'ssales to customers, other than Motoroladivisions, have grown to more than 75%of total sales.

Extensive Line of Semiconductor Devices

Expansion to achieve a well-rounded lineof semiconductor devices was the singlemost important task realized.

Two years ago, Motorola was a specialtyproducer of transistors. Only one product—a three ampere power transistor—was inproduction. A milliwatt driver transistorwas in pilot production. All other deviceswere in development stages.

At this time, Motorola has both breadthand depth in its line of semiconductorproducts, having in production five majorfamilies of semiconductor devices, consist-ing of 2,400 different types.

New product announcements during theyear 1960 evidenced the Division's prog-ress in broadening its line of devices. Prom-inent among product innovations was the"low silhouette" TO-36 "Doorknob" in-dustrial power transistor. This device, re-quiring 30% less headroom than similardevices, rounded out the most completeline of germanium power transistors in the

Construction scheduled for completion in April, 1961, will add 307,000 square feet toMotorola's Semiconductor Products Division in Phoenix. Last year's 129,000 square footaddition stands completed at the far right. Including the original semiconductor building(center) erected in 1956, overall facility area will total approximately 534,000 square feet.

industry, and is the highest-power tran-sistor of this type presently available.

The general purpose audio line was ex-panded during the year to include highvoltage units and "high beta at high cur-rent" devices in milliwatt dissipationrange. Another significant offering in 1960was the first silicon transistor produced byMotorola—an ultra-high-speed siliconmesa switch. The Division's rectifier linealso was expanded to include a glass pack-age series and a high-power industrialrectifier. The zener diode line was ex-panded to include quarter watt and halfwatt devices, and additional temperaturecompensated reference diodes. The auto-motive rectifier became the highest vol-ume device in production, with deliveriesreaching several million units.

An achievement which Motorola con-siders the most significant of the year inthe semiconductor industry was the de-velopment and production by the Semi-conductor Products Division of epitaxi-ally grown germanium and silicon mesatransistors. With this engineering break-through, Motorola perfected an outstand-ing technique for the construction oftransistors. During 1961, all Motorolapremium mesa transistor production willbe converted to this process which, in ad-dition to producing superior transistors,will increase the yield and substantiallyreduce material costs.

Research activities in surface passiva-

tion being carried on by the Division fore-cast additional major product advancesfor 1961. This new approach envisionssemiconductors which are protectedthrough surface passivation techniquesagainst contaminants which degrade op-eration of the device. In fact, some surfacepassivated transistors improve with use,showing refined electrical characteristicswhen functioning in equipment.

Motorola's "Meg-A-Life" program ofcomponent reliability assurance was fur-ther expanded during 1960 with the in-clusion of a series of 34 industrial powertransistors. Under the "Meg-A-Life"program, each production lot is subjectedto complete electrical, mechanical, envi-ronmental, and life tests identical to thoserequired for military use, yet are availableto industrial customers. All tests representthe most adverse conditions under whichthe device would be used, and provide evi-dence of its extreme reliability.

Further Expansion and Facilities

The increase in activities of the Semi-conductor Products Division in recentyears necessitated a 129,000 square footenlargement of the original Phoenix facil-ity. This was completed in the summer of1959. To meet new requirements, furtherproduction expansion was undertakenearly in 1960, and when completed duringmid-1961 will bring the semiconductor fa-cilities to a total of 534,000 square feet.

Dr. C. Lester Hogan (L), VicePresident in charge of theSemiconductor Products Divi-sion, discusses yield of medi-um-power rect i f iers withProduct Manager John Welty.

One of Motorola's topachievements of 1960 wasthe mass productionof epitaxially growngermanium and silicontransistors. Here, atechnician inspects wafersundergoing the epitaxialgrowth process.

CONSUMER PRODUCTS DIVISION

Motorola-Heritage "Cantonesian" stereo high fidelity console.

Motorola introducedand marketed in 1960 the firstlarge-screen, transistorizedportable TV, the 19P1. Itoperates both indoors andoutdoors on regularhouse current or on aself-contained energy cell.

The "Projection", a contemporary-styled television console by Motorola-Drexel.

Consumer products sales volume de-creased modestly for 1960 compared withthe prior year but was higher than any ofthe previous five years.

There were two major factors affectingMotorola's consumer products perform-ance in 1960: first, the down-trend in thegeneral economy that affected most con-sumer durable goods; and secondly, thehighly competitive condition that pre-vailed in the television industry causedby some manufacturers pricing TV setsunreasonably low, ostensibly to makeroom for the newly-introduced 19 and 23-inch models. Motorola refrained from thisunwarranted price-cutting. Instead, thecompany chose to reduce inventories inan orderly manner as an aid to distribu-tors and dealers as well.

Upgrading the quality of merchandisewas a prime objective for 1960 and con-tinues this year. Facts revealed by Elec-tronic Industry Association figures showthat the average Motorola factory TV sell-ing price is 11% higher than the industryas a whole. This indicates further progressin gaining consumer acceptance of the in-creasing quality and value built into theMotorola product, and the styling attrac-tion of Motorola's higher priced models.

Another acknowledgment of Motor-ola's superior quality image is the consist-ently high percentage of industry salesMotorola has achieved in the higher pricecategories of stereophonic equipment . . .32% in portable stereo over $150; 20%in stereo consoles over $300.

The association of Motorola with thequality styling of the Drexel FurnitureCompany and Heritage Furniture, Inc.continued to contribute to Motorola'sleadership in appearance design. TheMotorola-Heritage "Laureate" won tophonors in the Mahogany Association com-petition, the second consecutive time, for

the finest designed instrument in the elec-tronic entertainment category. TheMotorola-Drexel "Triune" stereo and tel-evision units won the Certificate of Ex-ceptional Merit in the same competition.

A major breakthrough in televisionengineering in 1960 was the first large-screen, transistorized portable TV. Theset, having a 19-inch screen, can be playedboth outdoors and indoors on a self-con-tained energy cell or on regular house linevoltage. The introduction of this receivermarks the practical beginning of a gradual 11

Rigid quality-controlstandards must be met

in each phase of production.Here, Frank O'Brien (L)

Vice President, Purchasing,nd Walter Scott, Vice President,

Manufacturing, watchthe focus and picture

tube inspection.

Edward R. Taylor, Executive Vice President, Consumer ProductsDivision, demonstrates to distributors the new Motorola transistor-powered FM-900 car radio at a meeting introducing new product lines.

An extensive selection of home radios was available to Motorola cus-tomers in 1960. The line featured a variety of AM/FM sets, clock-radio,table models, regular portables, and the popular miniature receivers.

Consumer Products (continued)

evolution in television from vacuum tubesto transistors.

"Harbinger" Series of Console TV's

Another "first" was the "Harbinger" se-ries of 19-inch console TV's. High-style,slim-line cabinet designs especially suitedfor the smaller living room or family room,yet having 19-inch tube size were featuredin the series. Five console models, eachhaving identical chassis, were presentedin three basic design categories—a con-temporary lowboy, a swivel console, and aDanish upright.

A "Vibrasonic" reverberation systemwas added to those Motorola stereo in-struments introduced last year havingthree separate amplifiers and speaker sys-tems. The "Vibrasonic" system adapts theinitial sound reproduction to closely simu-late conditions found in a concert hall.

Motorola maintained its strong positionin home radio during 1960 despite inten-sified competition of low-cost importedmodels. Portable radio unit volume wasthe highest in company history. Table andclock radio sales were off slightly from theall-time high of 1959.

The trend in portable radio continuedtoward small, pocket-size sets. Motorola'slong experience with this type set gavethe company a selling advantage which,in large measure, accounted for the recordperformance this year in portable radio.

Motorola-brand car radio enjoyed itssecond best sales year in 1960, only a fewpercentage points behind record 1959.

The FM-900, the first American mademass-produced FM car radio, was mar-keted in March and attained sales for theremaining nine months 60% higher thanhad been projected for a full year.

Warranty on all Motorola-brand carradios was extended to one full year onboth parts and labor. This is, at present,the most encompassing warranty programin the industry. The company also intro-duced in 1960 the first all-transistor carradios priced at the same level as thestandard car radio line.

Motorola's new Administration Build-ing in Franklin Park, Illinois, is now head-quarters for the Consumer ProductsDivision. The building consolidates in asingle location all the departments com-prising the division in the Chicago area,with an obvious increase in efficiency. Thebuilding also serves as evidence of thecompany's confidence in the future.

Thomas P. Collier, in charge of international opera-tions, visits Motorola's London car radio licensee. Withhim are R. M. Papelian (L), Director-Founder of WorldRadio, Ltd.,and A. A.Fearn (R), Engineering Director.

MOTOROLAINTERNATIONALOPERATIONSPolitical unrest and the consequent eco-nomic chaos in certain countries of LatinAmerica, Africa, and the Far East, had anadverse effect on direct exports of bothconsumer and communications products.These conditions, however, were not en-tirely unanticipated. Major efforts wereconcentrated by Motorola's Internationalgroup in opening new markets to offset theloss of sales in troubled areas.

As a result, the total number of Motor-ola distributors in the overseas marketsincreased from 80 to 119, with export salesup 23% over the previous year.

In 1960, two wholly-owned and sepa-rate international subsidiaries wereformed. Motorola International, S. A. wasorganized in Switzerland, with its baseoffice in Zurich. The second—MotorolaOverseas Corporation—is a domestic com-pany with responsibility for handling di-rect export sales of all products manufac-tured by Motorola, Inc.

Arrangements with other companies formanufacturing have been completed inMexico and Canada, and negotiations areunderway in other countries. Income fromlicensees in foreign countries showed anincrease during the year of more than20% over 1959.

THE

DAHLBERG

COMPANY

The Dahlberg Company, a Minneapolis,Minnesota, subsidiary manufacturinghearing aids and hospital communicationssystems, completed its first year of asso-ciation with Motorola during 1960.

Progress during the year in the hospitalcommunications section was marked bycooperation with the Motorola Communi-cations organization. In certain areas,sales and marketing activities werecombined and all installation and mainte-nance responsibilities for hospital com-munications equipment were assigned asfunctions of the Motorola service organi-zation. In addition, the product lineidentity, "Motorola/Dahlberg HospitalCommunications Systems", was estab-lished and nationally advertised.

A newly designed, complete hospitalcommunications system, the first newproduct line developed as a joint effortby the Motorola/Dahlberg organization,was introduced in September. The systemfeatures a custom-designed "Televiewer",a transistorized audio-visual nurse callunit, and a VHF radio paging system. Theequipment provides swift communicationsfor both the patient and the hospital staff,as well as the convenience of bedside radioand TV control.

Product highlight of 1960 for the hear-ing aid section was the "Clarifier", an eye-glass hearing aid which contains all thecircuitry components forward of the ear.The "Clarifier" has established a new de-sign standard for the hearing aid industry.

Extension of the product line to in-clude audiometers is underway to furtherstrengthen the company's position in themedical and hospital markets.

Complete communicationsfor patient and hospital staff.

BUSINESSWEEK -S6£

Contract backlog for the Military Elec-tronics Division increased considerablyduring the last half of 1960 to a pointwhere it is now higher than it has beenfor more than three years. This backlogwill increase research and manufacturingactivities for the next few years.

Increased emphasis has been placed bythis Division on aerospace electronics sys-tems, an area in which Motorola is receiv-ing growing recognition for its competence.

Military electronics activity is dividedamong six facilities—two at the ChicagoCenter, two at Western Center in Scotts-dale, Arizona, and two at the SystemsResearch Lab in Riverside, California.

Major development programs conduct-ed in the Chicago Center during 1960 in-cluded a mobile, VHF, single-sideband ra-dio "Communication Central" system forthe Army; a transistorized single-sidebandhigh frequency radio system for the Navy;a high-speed solid state electronic tele-printer; and a transistorized radar relaysystem for the Air Force. Additional pro-duction awards were received for sono-buoys, and an advanced electronic systemfor the Navy A3J aircraft.

At the Western Center, management'sconfidence in the B-70 "Valkyrie" Bomberprogram was rewarded when the Air Forceand North American Aviation reinstatedMotorola as systems manager for the"Mission and Traffic Control" sub-system.The award of this important program per-

Motorola's diversified participation in today'selectronics art was the subject of a BUSINESSWEEK review during 1960. The cover of theissue pictured Daniel E. Noble, Executive VicePresident in charge of Motorola's Military,Semiconductor, and Communications divisionsin front of the Phoenix Military headquarters.

MILITARY ELECTRONICS DIVISION

mits the Division to expand further itsweapons system management capabilities.

Also noteworthy was an award to designand produce ground checkout equipmentfor the "Skybolt" missile. This program,together with a study program concern-ing ground support equipment for the AirForce done in cooperation with a majorair frame manufacturer, are significant inthe Division's efforts to obtain a largershare of this important defense business.

Significant follow-on contracts were re-ceived during 1960 for the airborne andground support electronics of the Strate-gic Air Command's B-58 bomber, and anadvanced guidance head for the Navy'sair-to-air "Sidewinder" missile.

Increasing emphasis on the aerospacemarket is reflected in the many new andcontinuing assignments related to this na-tion's key missile and space projects. Pro-grams in which the Division participatesinclude the Polaris, Quail, Bomarc, Persh-ing, Scout, and Minuteman missile pro-grams; the Saturn rocket program; Sub-roc; Explorer; Project Mercury; PioneerV; Juno II; Vega/Agena/Centaur; Echo;Tiros; Thor/Able/Star; and Vanguard.

The Systems Research Laboratory inRiverside has completed and delivered forevaluation to the Federal Aviation Agen-cy, a device called a Pilot Warning Indi-cator. The purpose of the PWI is to pro-vide a pilot with range and bearing of anyaircraft in his vicinity.

A major portion of the engineering anddevelopment effort at Riverside is devotedto electronic warfare. The laboratory alsohas engineered and is installing a micro-wave data transfer system in a flight testrange for use in the Air Force X-15 andDyna Soar manned-space programs.

John F. Byrne, Manager of theMotorola Riverside Systems Re-search Laboratory, with a newlydeveloped Pilot Warning Indi-cator. The device alerts the pilotin flight to aircraft in his vicinity.

Irving S. Koss, Chicago CenterManager, checks the newAN/MRC-66 CommunicationCentral system developed for theU.S. Army Signal Corps.

William S. Wheeler (R), Vice President, Military Electronics Division, discusses Motorola'sfunction as "Mission and Traffic Control" system manager of the B-70 trisonic global bomb-er. With him is Joseph A. Chambers, Vice President of the division's Western Center.

SOLID STATE

ELECTRONICS DEPARTMENT

Expansion of materials, devices, and inte-grated circuitry capabilities at Motorola'sSolid State Electronics Department inPhoenix is proceeding under the directionof some of the country's finest creativescientists and engineers.

This initial solid state work has beendirected toward military requirementswhere the urgent need for greatly in-creased reliability has stimulated govern-ment funding. The work already has re-sulted in applications in equipment usedin deep space satellite tracking, radioastronomy, and special radars.

Motorola's integrated solid state cir-cuitry research is yielding an entirely newfamily of "two-dimensional" modules —minute, lightweight, low in power con-sumption—widely recognized in the art asthe most promising sources of reliabilityimprovement.

The Solid State Department is produc-ing microwave ferrite materials, and de-vices such as isolators, circulators, para-metric and tunnel diode amplifiers, as wellas specialized multi-aperture ferrite logiccores for advanced designs of voltage dig-itizers, binary counters, and shift registers.

The Solid State Controls Departmentwas established during the year for thedevelopment of a full line of controls forpublic utilities and the petro-chemical in-dustry. The department already has someof these systems in operation, and othersunder development, covering a wide rangeof applications including data link remotecontrol, telemetering, process control, andtelememory systems. The use of solidstate materials and highly sophisticatedtechniques is providing this new equip-ment with a versatility and reliability notpossible in past designs.

MCONCERNING THE FINANCIAL REPORT

Edwin P. Vanderwicken, Vice President, Finance

A principal objective of the Company isto increase the return on assets employedin the business. The equation

Profit• x -

Sales

Sales Assets at Work

Return on

Assets at Work

is applied in each of our divisions, andeach has a goal it seeks to achieve. In ad-dition to added sales volume, we seek tocontrol the cost-price relationship and toimprove the turnover of our assets. Ourbasic objective is thus to increase the pro-ductivity of dollars in the form of expenseand in the form of assets used in the busi-ness. Progress to this end was made in 1960.

Because the sales increase of $74 millionin 1959 resulted in added requirements forworking capital, and also because of con-tinued high plant and equipment require-ments in 1960, it was deemed desirable inMarch of 1960 to effect a $10 million, five-year term loan with our principal banks.This would have enabled the Company tobe free of current bank debt at the year-end were it not for the effects of the re-cession on our balance sheet.

In July, 1960, the Company made a100% stock distribution, and the dividendon the newly outstanding shares has beenat the rate of $1.00 per year, representinga one-third increase over the previous rate.A conservative policy was continued in thelight of the capital needs referred to.

At year-end, working capital totaled$66,161,511 compared with $57,061,939the previous year, and our current ratiowas 2.70 to 1 compared with 2.18 to 1 theprevious year.

On December 31,1960, our stockholderstotaled 7,017.

16

MOTOROLA /A/O. Years endedDecember 31,

AND CONSOLIDATED SUBSIDIARIES i960 and 1959

Statement of Consolidated Earnings and Retained Earnings

I 9 6 0

Sales and other revenues

Net earnings of Motorola Finance Corporation—subsid-iary not consolidated

Total income

Manufacturing and other costs of sales

"Selling, service, and administrative expenses

Depreciation of plant and equipment

Contribution to employees' profit sharing fund

Interest expense

Total costs and other expenses

Income before federal income taxes

Federal income taxes

Earnings (per share outstanding at end of year: 1960,$3.14; 1959, $3.59, adjusted for share distribution).. . .

Retained earnings at beginning of year

Total

Deduct:Cash dividends declared (per share: 1960, $.9375; 1959,

$.75, adjusted for share distribution)

Share-for-share distribution—par value of 2,014,326shares transferred to capital stock account

Total deductions

Retained earnings at end of year (note 2)

See accompanying notes to consolidated financial statements.

$299,065,992

353,449

299,419,441

218,874,056

43,492,510

4,475,463

4,610,393

1,790,206

273,242,628

26,176,813

13,543,000

12,633,813

68,429,207

81,063,020

3,777,163

6,042,978

9,820,141

$ 71,242,879

1

$291,543,290

333,668

291,876,958

215,241,106

38,924,768

3,696,916

5,147,133

1,460,798

264,470,721

27,406,237

13,235,000

14,171,237

57,175,667

71,346,904

2,917,697

2,917,697

$ 68,429,207

ACCOUNTANTS' REPORTThe Board of Directors and

Shareholders of Motorola, Inc.:We have examined the balance sheet of Motorola, Inc.and consolidated subsidiaries as of December 31, 1960and the related statement of consolidated earnings andretained earnings for the year then ended, and the balancesheet of Motorola Finance Corporation as of December31, 1960. Our examination was made in accordance withgenerally accepted auditing standards, and accordinglyincluded such tests of the accounting records and suchother auditing procedures as we considered necessary inthe circumstances. It was not practicable to confirm ac-counts receivable from United States Government de-

partments or agencies by communication with them butwe satisfied ourselves as to such accounts by means ofother auditing procedures.

In our opinion, the accompanying financial statementspresent fairly (a) the financial position of Motorola, Inc.and consolidated subsidiaries at December 31, 1960 andthe results of their operations for the year then endedand (b) the financial position of Motorola Finance Cor-poration at December 31, 1960, all in conformity withgenerally accepted accounting principles applied on abasis consistent with that of the preceding year.

Chicago, IllinoisFebruary 23, 1961

PEAT, MARWICK, MITCHELL & Co. 17

MOTOROLA INC.AND CONSOLIDATED SUBSIDIARIES

Balance Sheets as of December 31, 1960 and 1959

ASSETS 1 9 6 0 1 9 5 9

Current Assets:

Cash

Accounts and notes receivable:United States Government

Other trade receivables (less allowance for doubtfulaccounts: 1960, $1,817,000; 1959, $1,280,000)., .

Other

Costs recoverable under United States Government con-tracts, less progress billings

Inventories, at the lower of average cost or market....

Prepaid expenses

Total current assets

Investment in Motorola Finance Corporation, subsidiary notconsolidated (see accompanying balance sheet)

Other assets

Plant and equipment—less depreciation (note 1)

Patents, trademarks, and other items—less amortization ...

See accompanying notes to consolidated financial statements.

18

NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(1) The companies' investment in plant and equipment atDecember 31, 1960 and 1959 was as follows:

1960 1959Land—at costBuildings—at cost, less deprecia-

tion (1960, $6,906,679; 1959,$5,126,978)

Machinery and equipment—at cost,lessdepreciation(1960,$10,881,098;1959, $8,743,004) 12,856,592 10,117,611

Dies, tools, and leasehold improve-ments—at cost, less amortization 1,862,216 1,469,400

$44,594,599 $33,436,676

$ 3,416,284 $ 2,902,444

26,459,507 18,947,221

$ 8,678,462

8,085,819

42,439,833

925,006

5,921,763

37,746,611

1,322,741

105,120,235

7,628,508

3,949,880

44,594,599

1,642,169

$162,935,391

mi

ii

(2) Long-term debt at December 31, 1960 and 1959 consistedof the following:Notes payable: 1960 1959

3H%, due $1,000,000 annuallyto 1965, $1,500,000 in 1966, and$500,000 annually thereafter to1972 $ 9,500,000 $10,500,000

iH%, due $500,000 annually1963 to 1976 7,000,000 7,000,000

A%%, due $2,000,000 in 1963 and1964 and $6,000,000 in 1965. . 10,000,000 —

Real estate mortgages 1,369,833 1,435,90827,869,833 18,935,908

Less current maturities, included incurrent liabilities 1,060,016 1,061,758

$26,809,817 $17,874,150

L I A B I L I T I E S 1 9 5 9

Current liabilities:

Notes payable to banks

Current maturities of long-term debt

Accounts payable—trade

Accrued taxes

Contribution to employees' profit sharing f und . . . .

Product and service warranties

Other

Total current liabilities

g-term debt (note 2)

Shareholders' equity:

Capital stock, $3.00 par value (note 3):Authorized: 1960, 6,000,000 shares; 1959, 3,000,000

shares.Outstanding: 1960, 4,028,652 shares (net of 1,610

treasury shares); 1959,1,975,131 shares

Additional paid-in capital (note 5)

Retained earnings (note 2)

Total shareholders' equity

At December 31, 1960 approximately $18,000,000 of retainedearnings was free from dividend restrictions contained in thelong-term notes payable agreements.(3) Options for the purchase of 45,800 shares of capital stockhave been granted to employees under the company's employeeshare option plan adopted during 1960; options for 2,200 shareswere terminated, leaving options for 43,600 shares outstanding.These options become exercisable in 1962, at a price of $73.25per share (95% of market value at date of grant of option) andexpire in 1970. An additional 156,400 shares are reserved foroptions which may be granted by the Board of Directors untilMay 2, 1965.(4) In connection with the financing of sales of products to con-

$ 6,350,000

1,060,016

9,547,165

8,177,549

4,610,393

915,328

8,298,273

38,958,724

26,809,817

12,085,956

13,838,015

71,242,879

97,166,850

$ 12,150,000

1,061,758

9,530,791

11,566,558

5,147,133

590,000

8,504,784

48,551,024

17,874,150

5,925,393

8,983,786

68,429,207

83,338,386

$149,763,560

Burners, Motorola, Inc. and consolidated subsidiaries are obli-gated under repurchase and other agreements with MotorolaFinance Corporation and other financing agencies. It is believedthat these obligations will have no material effect on the busi-ness of the companies.

(5) During 1960 the company purchased certain assets pertain-ing to aviation radio, navigation, and flight control products ofLear, Incorporated, under an agreement entered into in Novem-ber, 1959, and issued 39,195 shares (prior to share-for-sharedistribution) in payment therefor. The shares were issued atan amount representing market value at date of the agreement,and the excess of market value over par value ($4,854,229)was credited to additional paid-in capital.

19

MOTOROLA FINANCE CORPORATION

Balance Sheets as of December 31, 1960 and 1959

ASSETS 1 9 6 0 1 9 5 9

Cash

Receivables:

Lease and conditional sales contracts (including install-ments maturing beyond one year: 1960, $19,690,000;1959, $12,915,000)

Notes receivable, distributors—maturing within oneyear

Total

Less unearned income on lease and conditional salescontracts

Net

Other assets

L I A B I L I T I E SCurrent liabilities:

Notes payable to banks

Accrued taxes

Other

Total current liabilities

Subordinated notes payable to Motorola, Inc

Shareholder's equity:Capital stock, $1.00 par value. Authorized and outstand-

ing , 20,000 shares

Additional paid-in capital

Retained earnings (earnings since inception, March 7,1956)

Total shareholder's equity

Total subordinated notes and share-holder's equity

Note—All receivables of Motorola Finance Corporation are covered by the repurchase andother agreements mentioned in note 4 of notes to consolidated financial statements.

$ 4,724,258

29,837,244

6,627,56236,464,806

5,884,86330,579,943

657,88335,962,084

28,000,000222,370

P 111,20628,333,576

4,500,000

1 *1 20,000

1,980,0001,128,5083,128,508

7,628,508$35,962,084

• 1

11

11

11

$ 4,160,881

*

20,210,058

7,842,62628,052,684

3,794,67524,258,009

359,72728,778,617

Li22,000,000

235,296^ 268,262

22,503,5583,500,000

B 20,000-1,980,000

775,0592,775,059

6,275,059$28,778,617

20

TEN YEAR FINANCIAL SUMMARY

YEAR

1951

SALES ANDOTHER REVENUES

$135,844,529

INCOME BEFOREINCOME TAXES

$14,020,739

EARNINGS

$ 7,240,452

"I1952 169,191,047 15,576,165 7,012,700

1953

1954

219,089,238

206,821,801

15,512,489

16,523,889

7,076,335

7,572,024

1956

228,428,063

228,982,853

18,740,426

16,887,834

8,490,539

7,966,817

1957 227,687,391 15,597,031 7,824,431

1958

1959

217,863,339

291,543,290

14,931,213

27,406,237

7,356,213

14,171,237

1960 299,065,992 26,176,813

310

290

270

250

230

210

190

170

150

130

30

28

« 26

Zl 24a 22u_O 20

ON

MIL

L

12,633,813

S

OF

DO

LLA

RS

MIL

LIO

N

1951 52 53 54 55 56 57 58 59 60 1951 52 53 54 55 56 57 58 59 60 1951 52 53 54 55 56 57 58 59 60

•Earnings per share are based on the number of shares outstanding at the end of the respective years, adjusted for subsequent share distributions.

21

EARNINGSPER SHARE*

$2.06

1.81

1.83

WORKINGCAPITAL

$29,851,003

38,007,247

38,222,001

NET INVESTMENT INPLANT AND EQUIPMENT

$ 9,005,880

11,429,532

14,301,004

SHAREHOLDERS'EQUITY

$31,920,882

41,755,780

45,929,419

1.96

2.19

38,308,612

42,892,165

16,579,531

19,179,992

50,598,747

56,186,590

2.06

2.02

1.90

50,882,200

52,215,832

54,644,439

25,388,866

27,167,597

27,615,287

61,305,080

66,172,446

71,533,020

3.59

3.14

57,061,939

66,161,511

33,436,676

44,594,599

83,338,386

97,166,850

3.60

3.40

3.20

3.00

£ 2.80

^ 2.60OQ 2.40

2.20

2.00

1.80

70

65

60

55

50

45

40

35

30

25

44

36

32

28

24

20

16

12

100

90COOC on

MIL

LIO

NS

O

F D

OLL

A

1951 52 53 54 55 56 57 58 59 60 1951 52 53 54 55 56 57 58 59 60 1951 52 53 54 55 56 57 58 59 60 1951 52 53 54 55 56 57 58 59 60

22

34

32CO

g 30g 2SQ 26u_O 24

£ ao3 20

£ 18

16

TAXES PAID

1951 52 53 54 55 56 57 58 59 60

EXPANSION OVER PAST 10 YEARS

o - 34

gS 31

£ £ 28

i < 25is" »

ss 16

g5 I3

C5 in

-1 O

g= '1951 52 53 54 55 56 57 58 59 60

Litho in U.S.A.

ROBERT W. GALVIN Director, President

DIRECTORS AND OFFICERS OF MOTOROLA

DANIEL E. NOBLE

EDWARD R. TAYLOR

Director, ExecutiveVice President,Communications,Semiconductor, andMilitary ElectronicsDivisions

Director, ExecutiveVice President,Consumer ProductsDivision

ELMER H. WAVERING Director, ExecutiveVice President,Automotive ProductsDivision

MATTHEW J.HICKEY, Jr. Director

FRANK J. O'BRIEN Director,Vice President,Purchasing

ARTHUR L. REESE Director,Vice President,CommunicationsDivision

WALTER B. SCOTT Director,Vice President,Consumer andAutomotive Production

EDWIN P. VANDERW1CKEN Director,Vice President forFinance, Treasurer,and Secretary

ALEX ARNOLD Vice President,Controller

ALLEN H. CENTER Vice President,Public Relations

JOSEPH A. CHAMBERS Vice President,Western Center,Military Electronics Division

JOHN I. DAVIS Vice President,Consumer ProductsEngineering

MOTOROLA INC.9401 West Grand Avenue, Franklin Park, Illinois

SYLVESTER R. HERKES Vice President,Consumer ProductsMarketing

MAJOR FACILITIES LOCATED IN:

Arcade, New York • Chicago, Illinois • Franklin Park, Illinois • Quincy, Illinois

Minneapolis, Minnesota • Phoenix, Arizona • Culver City, California • Riverside, California

' C. LESTER HOGAN Vice President,Semiconductor ProductsDivision

WILLIAM S. WHEELER Vice President,Military ElectronicsDivision