Data Center College of t he Philippines

Brgy. Ubbog - Lipcan Bangued, Abra

CASE ANALYSIS

In Partial Fulfillment of the Subject

Risk Management

PREPARED TO:

MRS. EUNIS C. TUBAÑA, DBA

PROFESSOR

PREPARED BY:

ROBERT JOHN V. UMANGAY

BSBA-3
 Data Center College of t he Philippines
Brgy. Ubbog - Lipcan Bangued, Abra

I. BRIEF HISTORY

Motorola, Inc., American manufacturer and one of the

historic brands of wireless communications and electronic
systems. In 2011 it split into two companies: Motorola Mobility
and Motorola Solutions. Its headquarters are located in
Schaumburg, Illinois.
The company was founded in 1928 in Chicago by brothers
Paul and Joseph Galvin as the Galvin Manufacturing Corporation.
Its first product was the “battery eliminator,” a device that
connected direct-current, battery-powered radios to the
alternating current then found in almost two-thirds of U.S.
households. In 1930 the company began selling a low-cost
automobile radio, called the Motorola, that became the most
popular new-car option, as well as a successful aftermarket kit.
In 1937 the company diversified into home tabletop radios and
introduced the first car radio to offer push-button dialing.
During the Great Depression, Galvin Manufacturing cut its
workforce by two-thirds and saw its revenues drop by more than
one-third. To sustain the company during the later years of the
Depression, the Galvin brothers, who opposed unions, took on work
from other companies, such as the Philco Corporation in 1938,
whose workers were on strike. In defense of these actions, the
Galvins claimed that their starting wage of 40 to 60 cents per
hour surpassed the industry average of 25 to 35 cents per hour.
In 1940 the company introduced a pair of two-way radio
communications products for the police and military. The first
was an AM-band police radio system adopted later that year in
Bowling Green, Kentucky; the second was the Handie-Talkie, an AM-
band, handheld device with a long antenna that ultimately was
used by soldiers during World War II. Both AM-based systems were
quickly superseded by FM technologies. The most notable
replacement occurred in 1943, when Galvin Manufacturing invented
the FM Walkie-Talkie. This device was carried by battlefield
soldiers in special backpacks and could communicate over longer
distances and with far less static interference than its AM-based
predecessor. The two-way radio saw action on all fronts during
the war and is credited as being a decisive factor in many Allied
victories in the field.
In 1943 the company sold stock to the public for the first
time, and in 1947 it changed its name to Motorola, Inc., which
was by then a well-known brand name. The next year Motorola
extended its role in the U.S. consumer market by introducing the
first television set for under $200, the Golden View. Its seven-
inch round picture tube helped Motorola to secure 10 percent of
the U.S. television market by 1954. In 1953 the company, like
other television makers, created its own program, the Motorola TV
Hour, to boost interest in the new medium. Robert Galvin, Paul
Galvin’s son and a vice president of the company, hosted the
 Data Center College of t he Philippines
Brgy. Ubbog - Lipcan Bangued, Abra

weekly drama series. Motorola’s consumer product line branched

into high-fidelity phonographs in the mid-1950s.

After licensing the design for transistors from Bell

Laboratories in 1952, Motorola began experimenting with them to
replace its large, heavy, and expensive radio power supplies. By
1956 the company began to sell hybrid radios with both vacuum
tubes and transistors—its first successful foray into electronic
products. That same year the company began to sell its
transistors to other manufacturers and established its
Semiconductor Products Division in Phoenix, Arizona. By 1962 the
company had more than 4,000 different electronic components on
the market. One of the largest early markets was for automobiles,
whose manufacturers used electronic components to build
alternators, which replaced generators in most cars sold in the
1960s. Together with the Ford Motor Company and the Radio
Corporation of America (RCA), Motorola developed the eight-track
tape player for cars in 1965.
 Data Center College of t he Philippines
Brgy. Ubbog - Lipcan Bangued, Abra

II. FINANCIAL ASPECT

INCOME STATEMENT

Years ended December

31

% of % of % of
(Dollars in millions, except per share amounts) 2022 Sales ** 2021 Sales **
2020 Sales **
Net sales from products $ 5,368 $ 4,606 $ 4,087

Net sales from services 3,744 3,565 3,327

Net sales 9,112 8,171 7,414

Costs of product sales 2,595 48.3 % 2,104 45.7 % 1,872 45.8 %

Costs of services sales 2,288 61.1 % 2,027 56.9 % 1,934 58.1 %

Costs of sales 4,883 53.6 % 4,131 50.6 % 3,806 51.3 %

Gross margin 4,229 46.4 % 4,040 49.4 % 3,608 48.7 %

Selling, general and administrative expenses 1,450 15.9 % 1,353 16.6 % 1,293 17.4 %

Research and development expenditures 779 8.5 % 734 9.0 % 686 9.3 %

Other charges 339 3.7 % 286 3.5 % 246 3.3 %

Operating earnings 1,661 18.2 % 1,667 20.4 % 1,383 18.7 %

Other income (expense):

Interest expense, net (226) (2.5)% (208) (2.5)% (220) (3.0)%

Gains (losses) on sales of investments and

businesses, net 3 —% 1 —% (2) —%
Other, net 77 0.8 % 92 1.1 % 13 0.2 %

Total other expense (146) (1.6)% (115) (1.4)% (209) (2.8)%

Net earnings before income taxes 1,515 16.6 % 1,552 19.0 % 1,174 15.8 %

Income tax expense 148 1.6 % 302 3.7 % 221 3.0 %

Net earnings 1,367 15.0 % 1,250 15.3 % 953 12.9 %

Less: Earnings attributable to noncontrolling

interests 4 —% 5 0.1 % 4 0.1 %
Net earnings* $ 1,363 15.0 % $ 1,245 15.2 % $ 949 12.8 %
Earnings per diluted common share* $ 7.93 $ 7.17 $ 5.45
 Data Center College of t he Philippines
Brgy. Ubbog - Lipcan Bangued, Abra

BALANCE SHEET

2023 2022 2022 2022

Period Ending: 01/04 31/12 01/10 02/07

Total Current Assets 4826 5255 4707 4411

Cash and Short Term Investments 1022 1325 822 717
Cash - - - -
Cash & Equivalents 1022 1325 822 717
Short Term Investments - - - -
Total Receivables, Net 2368 2539 2401 2329
Accounts Receivables - Trade, Net 2364 2492 2401 2329
Total Inventory 1082 1055 1157 1071
Prepaid Expenses - - - -
Other Current Assets, Total 354 336 327 294
Total Assets 12353 12814 11625 11672
Property/Plant/Equipment, Total - Net 1399 1412 1204 1405
Property/Plant/Equipment, Total -
3164 3249 3020 3260
Gross
Accumulated Depreciation, Total -1765 -1837 -1816 -1855
Goodwill, Net 3287 3312 2851 2873
Intangibles, Net 1302 1342 1177 1255
Long Term Investments 73 78 79 94
Note Receivable - Long Term 4 47 - -
Other Long Term Assets, Total 274 249 499 512
Other Assets, Total 260 18 191 158
Total Current Liabilities 3966 4560 3768 3801
Accounts Payable 857 1207 1047 1073
Payable/Accrued - - - -
Accrued Expenses 710 860 786 754
Notes Payable/Short Term Debt - - - -
Current Port. of LT Debt/Capital
109 119 78 96
Leases
Other Current liabilities, Total 2290 2374 1857 1878
Total Liabilities 12104 12683 12019 12102
Total Long Term Debt 6014 6013 6012 6011
Long Term Debt 6014 6013 6012 6011
Capital Lease Obligations - - - -
Deferred Income Tax 74 73 129 140
Minority Interest 15 15 14 13
Other Liabilities, Total 2035 2022 2096 2137
Total Equity 249 131 -394 -430
Redeemable Preferred Stock, Total - - - -
Preferred Stock - Non-Redeemable,
- - - -
Net
 Data Center College of t he Philippines
Brgy. Ubbog - Lipcan Bangued, Abra

Common Stock, Total 2 2 2 2

Additional Paid-In Capital 1386 1306 1239 1110
Retained Earnings (Accumulated
1333 1343 989 936
Deficit)
Treasury Stock - Common - - - -
ESOP Debt Guarantee - - - -
Unrealized Gain (Loss) - - - -
Other Equity, Total -2472 -2520 -2624 -2478
Total Liabilities & Shareholders' Equity 12353 12814 11625 11672
Total Common Shares Outstanding 167.7 167.5 167.5 166.9
Total Preferred Shares Outstanding - - - -

III. RISK IDENTIFICATION

The collapse of CAP was caused by a number of factors,
the most important of which were the deregulation of fees for
private colleges and universities in 1992, the Asian financial
crisis in 1997, and the implementation of new rules that measured
 Data Center College of t he Philippines
Brgy. Ubbog - Lipcan Bangued, Abra

the value of CAP's finances and found it severely lacking,

hastening its demise.

The average annual growth in education costs prior to

1992 was only about 10 to 15 percent. However, the Department of
Education (then known as the Department of Education Culture and
Sports) released DO 16 the same year, effectively allowing
schools to create their own tuition policies subject to
consultations. The average tuition increased by as much as 275%
between 1990 and 1995. According to a 2015 study written by
undergraduate business administration students at Xavier
University-Ateneo de Cagayan, tuition climbed by an additional
26% from 1996 to 2000.

Due to this development, other educational pre-need

organizations modified their products; rather than committing to
paying all fees, regardless of how big they were, the companies
would only provide fixed value plans, or ones with a pre-
determined sum at the plan's maturity.

To keep its reputation as the provider of the best

plans on the market, CAP chose a different path and continued to
sell its traditional educational plans. Although the firm
initially succeeded in gaining more clients, it may have turned
out to be a costly miscalculation in the end.

IV. RISK RESPONSE

The CAP has a good vision, especially for its clients,

but they cannot fulfill their commitments if they only use
tactics rather than plans. The error of CAP is that they continue
 Data Center College of t he Philippines
Brgy. Ubbog - Lipcan Bangued, Abra

to operate in the same manner, which is no longer completely

appropriate when tuition expenses rise.
Due to this development, other educational pre-need
companies changed their products, instead of promising to cover
the entire amount. If the CAP operates similarly to other
educational pre-need programs, it will continue to exist.
To increase their capital/money, the CAP should invest in a firm
that provides a high ROI in order to benefit. In order for them
to meet their contractual duties to their clients. Investing is
the finest approach to make money and a wonderful way to enhance
your earnings.

V. BUSINESS CONTINUITY PLAN

If the CAP wishes to recover from their failure, they

must become more financially aware. They should think about
everything before making a decision. They should plan first and
then implement the plan in every step they make. Doing something
 Data Center College of t he Philippines
Brgy. Ubbog - Lipcan Bangued, Abra

without preparation is similar to taking a risk with no backup

plans.
I advise CAP that if they want to succeed after their
bankruptcy, they should avoid prior mistakes like continuing in
the same operations even when tuition costs have doubled and
impressing clients while the firm is quickly falling. Improving
is better than impressing since in the business world, you will
not thrive in the long run if your focus is simply for the short
term. In order for them to stand again they need to
find investors to contribute as an additional capital. Then make
profit from the capital by doing investments. In order to
maintain the business while paying their obligations to their
clients, they need to find more ways to multiply their money.
Some options include starting a business to supplement your
income. Companies that accept investments in order to roll the
capital and gain profit from it. Money without investment is
risky, but investing money is a safer conduct to earn.