Adobe PDF Q4 2005 Motorola Inc. Earnings Conference Call Presentation

Q4 2005 Earnings Release- January 19, 2006MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office. .

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Motorola Q4 2005 Earnings Release Conference Call

January 19, 2006


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Ed Gams

Corporate Vice Presidentof Investor Relations

Q4 Earnings Release- January 19, 2006MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office.

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Safe Harbor StatementA number of forward-looking statements will be made during this presentation. Forward-looking statements are any statements that are not historical facts. These forward-looking statements are based on the current expectations of Motorola and there can be no assurance that suchexpectations will prove to be correct. Because forward-looking statements involve risks and uncertainties, Motorola’s actual results could differ materially from these statements. Information about factors that could cause, and in some cases have caused, such differences can be found on pages 70 through 80 of Motorola’s 2004 Annual Report on Form 10-K and in Motorola’s other SEC filings.

This presentation is being made on the afternoon of January 19, 2006. The content of this presentation contains time-sensitive information that is accurate only as of the time hereof. If any portion of this presentation is rebroadcast, retransmitted or redistributed at a later date, Motorola will not be reviewing or updating the material that is contained herein.

MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office. All other product or service names are the property of their respective owners. © Motorola, Inc. 2006


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Ed Zander

Chief Executive Officer


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The Big Bet …Seamless Mobility


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David DevonshireChief Financial Officer


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Motorola Inc. Financial Results

Q4Q4 Q4 Fav/

2005 2004 (Unfav)

Sales ($M) 10,433$ 8,842$ 18%

Earnings Per Share * 0.47$ 0.28$ 68%

Annual Annual Fav/2005 2004 (Unfav)

Sales ($M) 36,843$ 31,323$ 18%

Earnings Per Share * 1.82$ 0.90$ 102%

* From Continuing Operations

ANNUAL


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Significant Items Discussed in the Earnings Press Release

Excluding Significant Items From Both Years, Our Growth in Earnings Per Share for Q4 is 30%

Q4 2005 Reported EPS From Continuing Operations * 0.47$ Includes:Collection Related to Telsim 0.13 Tax Adjustments 0.02 Loss on Sale of Investment (0.02) Charge For Past Use of Kodak Intellectual Property (0.01)

0.12$

Q4 2004 Reported EPS From Continuing Operations * 0.28$ Includes:Gains on Sales of Investments and Businesses 0.02 Reorganization of Businesses 0.01 Collection of Receivables That Had Been Previously Deemed Uncollectible (Telsim) 0.01 CMS Goodwill Impairment (0.02) In Process R&D Related to Acquisitions (Mesh and Crisnet) (0.01)

0.01$

* See appendix for reconciliation


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Motorola Sales Trend

5.1

7.48.2

5.2

7.5

8.8

5.9

7.5

9.4

6.9

8.8

10.4

0

2

4

6

8

10

12

Q1 Q2 Q3 Q4

200320042005

$ Billions

For the Full Year, Sales Increased 18% ’05 vs. ‘04


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Revenue Per Employee

4 Quarter Rolling Average

$(000)’s

$463$472

$486

$513

$534

$300

$350

$400

$450

$500

$550

Q4 '04 Q1 '05 Q2 '05 Q3 '05 Q4 '05


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Motorola Operating Earnings Trend

4.6%

9.2%10.6%

5.0%

10.4%11.1%

5.2%

8.6%

11.7%

6.7%

11.5%

16.8%

0.0%

5.0%

10.0%

15.0%

20.0%% of Sales

Q1 Q2 Q3 Q4

200320042005

Excluding Significant Items, Q4’05 Operating Margin Was 12.5% vs. 11.8% in Q4’04


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Cash Flow and Debt

•Debt to Total Capital Now At 20.3% vs. 28.4% at 12/31/04

•$500M Received From Telsim Settlement, $410M Additional Anticipated in 2006

Year End Year End ($ in Billions) Q4 2005 ($ in Billions) 2005 2004

Operating Cash Flow 2.1$ Cash/Equiv/Mkt Sec 14.8$ 10.7$

Short Term/ Current Debt (0.5)$ (0.7)$ Free Cash Flow 1.9$

Long Term Debt (3.8)$ (4.6)$

Total Debt (4.3)$ (5.3)$

Net Cash/ (Net Debt) 10.5$ 5.4$

Cash Flow Cash & Debt


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Stock Repurchase Update

• May 19, 2005 Authorized to Purchase $4B over 3 Years

• In Q4 Purchased ~16M Shares, Average Price of $22.40

• Inception to Date Purchased 41.7M Shares, Cash Used ~ $870M


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Q1 2006 Guidance

$.27-.29

36%

2.56 Billion

$.02 Per Share

Earnings Per Share(excluding Stock Option Expense)

Tax Rate

Shares Outstanding

Stock Option Expense

$9.3B-$9.5BSales


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Comments on 2006• Stock Option Expense Estimated Annual

Impact of $250M - $300M• Estimated Tax Rate is 36%• Additional Collection Related to Telsim

Expected in the First Half • Further Improvement in Operating Margin

Versus 2005, Continuing Progress to 13-15% Goal


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Mobile Devices Business Results

All-time Motorola record for units!All-time record for Mobile Devices sales!

All-time record for Mobile Devices operating earnings!

… and we increased market-share again,driven by wickedly cool and compelling products

and rich experiences!


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Wickedly Cool ProductsRAZR is world’s best-selling clamshell handset

Ultra-slim SLVR is redefining the “candy bar”Our “Thin Platform” is hot! … 12.9M units in Q4!

UMTS units are up by 87% vs. Q3Another record iDEN performance!

GSMA award driving sales across price tiers in world’s High-Growth Markets

26 new launches: 13 GSM, 6 CDMA, 3 UMTS, 4 iDEN


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Market Share Momentum19% global share: the clear #2 and gaining!

#1 in North America

#1 in Latin American

#2 in Europe

#2 in North Asia

#3 in High-Growth Markets


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Up 3.1 pptsUp 0.4 pts vs. Q3’05

19.0%Market Share Est. – Q4

Down 0.5 pts 10.1% *Operating Margin

Up 40%44.7MUnits

Up 25%$663 Operating Earnings $MUp 30%$6,537Sales $M

Q4’05 vs. Q4’04Q4 2005

* Excluding Significant Items, Q4 Operating Margin Was 11.0% vs. 10.2% in Q4’04


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Up 0.1 pt 10.2% *Operating Margin

Up 40%146.0MUnits

Up 27%$2,198 Operating Earnings $MUp 25%$21,455Sales $M

2005 vs. 20042005

* Excluding Significant Items, 2005 Operating Margin Was 10.7% vs. 9.9% in 2004


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Source: Motorola, Inc. Shares are calculated on Q4 05 Unit Shipments, includes iDEN.

• #1 at 3 of top 4 wireless operators!• Strong market-share leadership • Units up 8% vs. Q4’04• Launched RAZR for EV-DO in Americas – ahead of plan• Focus: Drive new icons, expand CDMA, strengthen brand


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• #1 in Venezuela, Argentina and Brazil!• Market-share leadership• Units up 29% vs. Q4’04• Delivered strength across price tiers – from C115 to RAZR• Focus: Grow brand and share across price tiers


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• Best quarter ever for sales and units; RAZR is best-selling device in Europe

• Market share up 5 ppts vs. Q4‘04• Units up 60% vs. Q4‘04• Launched V3x for UMTS networks across Europe• Focus: Build brand and share across price tiers


… and growing!


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• RAZR is a hit across region; A780 is #1 smartphone in China!• Market share up 4.7 ppts vs. Q4’04• Units up 90% vs. Q4‘04• Expanded distribution channels throughout China• Focus: Grow brand and share across price tiers


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• RAZR, SLVR and GSMA driving sales

• Market share up more than 4 ppts vs. Q4‘04

• Units up 103% vs. Q4’04

• Expanded distribution channels throughout India

• Focus: Growth and expansion through GSMA awards


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GSM, Edge, CDMA 1X, EV-DO, UMTSSILVER, BLACK, PINK, BLUE & GOLD


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“Connecting the unconnected”


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Get more music – up to 500 mp3 tracks – even faster!

Get your music in stereo!

And go wireless – discreetly!


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imagingsearching messaging


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The new standard for QWERTY

Productivity: video, still images, voice, data, email and more – and all on Microsoft Windows Mobile 5.0

Only 11.5mm!


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grow profitably with …

wickedly compelling products …

with quality and efficiency.

and rich experiences …


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on a year-over-year basis …• increased sales

• increased units and market share• and continued Op Margin expansion

and on a sequential basis …• less than normal seasonality


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Government & Enterprise Mobility Solutions – Q4

* Excluding Significant Items in Q4 2004 Operating Margin Improved 3.3 pts

*

Q4 2005

Sales $M 1,816$ Up 8%

Operating Earnings $M 314$ Up 41%

Operating Margin 17.3% Up 4.1 pts

Q4'05 vs. Q4'04


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Government Markets - Global Emphasis on Interoperability

United States• State of Indiana • Fresno County (CA)• Laredo, Texas• Nassau County (FL)• Colorado Springs• Petersburg (VA)• Ann Arundel County (MD)

Asia Pacific• Korea Government Radio Network

- 140 agencies on single communications platform

Europe• O2 Airwave Ambulance Fleet


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Product Leadership & InnovationFirst Pocket PDA for TETRA

• 1st PDA to Operate on TETRA Networks• Meets Rugged Public Safety Requirements• Delivers Mission Critical Data Applications to

First Responders on the Move:- Individual Records- Vehicle Records- Crime Reports- Accident Reports

Strong Mesh Momentum• 34 New Orders; 10 New Customers• Shipment of New 4.9 GHz MOTOMESH

Multi-radio Broadband Network


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Q4 – Enterprise & Automotive Activity

Enterprise• Acquired Wireless Valley Communications

- Leading Provider of Software Solutions for Effective Design & Management of Wireless Networks

• HC700-L - First Entry Into the Commercial-off-the-Shelf, Rugged, Handheld Mobile Computing Market

Automotive• More Than $1 billion in New Lifetime Sales Awards• Strong Sales in Automotive Aftermarket Accessories

Q1 Guidance: Sales Up, Operating Earnings Up Versus Prior Year


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Networks Business Q4

Down 2.7 pts

Down 18%

Down 4%

Q4’05/Q4’04

15.1%

225

1,494

Q4 2005

Sales $M

Operating Margin

Operating Earnings $M

* Excluding Significant Items in Q4 2004 Operating Margin Decrease was 2.3 pts

*

A1


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Q4’05 Networks – Other Developments

– CDMA2000 EV-DO award from VIVO in Brazil

– 4 New FTTP Awards - Bulloch Telephone, ComSouth, PBT Telecom and ATMC

– VIBO in Taiwan UMTS Island-Wide Launch

– Canopy Macedonia Nationwide Network Announced on January 16

– Earthlink Metro WiFi Canopy Agreement for Philadelphia, Anaheim, and Other Cities Announced Today

Q1 Guidance: Sales and Operating Earnings Down Versus Prior Year


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Connected Home – Q4

Up 2.5 pts

Up 40%

Up 1%

Q4’05 vs. Q4’04

8.9%Operating Margin

$60Operating Earnings $M

$675Sales $M

Q4 2005


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Connected Home – Q4 Highlights• Shipped ~ 1.4M Set-Tops, Including ~ 700K HD/DVR Enabled

• Chile’s Largest Operator, VTR, Selected Motorola Digital Video Platform

• Began Shipping QIP Set-Tops – First With Built-in Home Media Networking

• Verizon Expands FiOS TV Deployments in Markets in Texas, Virginia, and Florida Using Motorola Digital Video Technology

• Expanded IP Voice Portfolio- Announced Plans for a Joint Development Collaboration with Juniper Networks- Acquired Advanced RF Technology from Broadband Innovations-Shipped ~500K Voice Modems

• In January, Announced Acquisition of Kreatel to Expand IP Video Position

Guidance For Q4 - ?????Q1 Guidance: Sales Flat and Operating Earnings Up Versus Prior Year


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2006 Priorities

“WOW” Products/End-to End Solutions

Strengthen Financial Performance

Customer “Delight”

Market Share/Thought Leadership

Supply Chain Efficiency

Refine and Execute On Strategic Direction


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Chief Executive OfficerEd ZanderEd Zander

Motorola Q&A Participants

David DevonshireDavid Devonshire

Dan MoloneyDan Moloney

Chief Financial Officer

President, Connected Home

Ron GarriquesRon GarriquesPresident, Mobile Devices Business

Greg BrownGreg BrownPresident, Government & Enterprise

Mobility Solutions

Ed GamsEd GamsVice President, Investor Relations


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Use of Non-GAAP MeasurementsIn addition to the GAAP results provided during this conference call, Motorola has presented certain

non-GAAP measurements. Motorola has provided these non-GAAP measurements as a measure to help investors better understand its core operating performance, enhance comparisons of Motorola’s core operating performance from period to period and to allow better comparisons of Motorola’s operating performance to that of its competitors. Among other things, the Company’s management uses these operating results, excluding the identified items, to evaluate the performance of its businesses and to evaluate results relative to incentive compensation targets. Management uses operating results excluding these items because they believe this measure enables them to make better period-to-period evaluations of the financial performance of its core business operations. There are inherent limitations in the use of operating results excluding these items because the company's GAAP results do include the impact of these items. The non-GAAP measures are intended only as a supplement to the comparable GAAP measures and the company compensates for the limitations inherent in the use of non-GAAP measures by using GAAP measures in conjunction with the non-GAAP measures. As a result, investors should consider these non-GAAP measures in addition to, and not in substitution for, or as superior to, measures of financial performance prepared in accordance with GAAP.

Details of the these items and reconciliations of the non-GAAP measurements provided during this call to GAAP measurements can be found: (i) in the Form 8-K filed by Motorola on January 19, 2006 (which attached this afternoon’s earnings press release), (ii) within the text of the slides that accompany this webcast, or (iii) on the company’s website. Each of these items can be found on Motorola’s website at www.motorola.com/investor.


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Significant Items Discussed- Quarter

Q4 2005 PBT (Inc)/Exp

Q4 2005 Tax Inc/(Exp)

Q4 2005 PAT (Inc)/Exp EPS impact

Collection related to Telsim (504)$ (181)$ (323)$ 0.13$ Loss on sale of investment 77 29 48 (0.02) Charge for past use of Kodak IP 57 22 35 (0.01) Tax adjustments - 68 (68) 0.02 TOTAL IMPACT (370)$ (62)$ (308)$ 0.12$

Q4 2004 PBT (Inc)/Exp

Q4 2004 Tax Inc/(Exp)

Q4 2004 PAT (Inc)/Exp EPS impact

Gains on sales of investments and businesses (93) (36) (57) 0.02 Reorganization of business (28) (10) (18) 0.01 Collection of receivables that had been previosuly deemed uncollectible (Telsim) (23) (9) (14) 0.01 CMS Goodwill Impairment 58$ -$ 58$ (0.02)$ IPR&D charges related to acquisitions (Mesh and Crisnet) 17 - 17 (0.01) TOTAL IMPACT (69)$ (54)$ (15)$ 0.01$

Q4 2005

Q4 2004


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OE Reconciliation of Significant Items- Quarter

Net Sales 10,433$

Operating earnings 1,749$ Operating earnings as a percentage of net sales 16.8%

Operating earnings 1,749$

Less: Significant items discussed (447)

Operating earnings excluding significant items discussed 1,302$ Operating earnings as a percentage of net sales 12.5%

Net Sales 8,842$

Operating earnings 1,018$ Operating earnings as a percentage of net sales 11.5%

Operating earnings 1,018$

Less: Significant items discussed 24


Q4 2005

Q4 2004


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OE Reconciliation By Segment of Significant Items From Continuing Operations-Quarter

TOTAL Mobile Devices Networks GEMS Conn.Home Other/Elims

Net Sales 10,433$ 6,537$ 1,494$ 1,816$ 675$ (89)$

Operating earnings 1,749 663 225 314 60 487 Operating earnings as a percentage of net sales 16.8% 10.1% 15.1% 17.3% 8.9% -547.2%

Operating earnings 1,749 663 225 314 60 487

Less: Significant items discussed (447) 57 0 0 0 (504)

Operating earnings excluding significant items discussed 1,302$ 720$ 225$ 314$ 60$ (17)$ Operating earnings as a percentage of net sales 12.5% 11.0% 15.1% 17.3% 8.9% 19.1%


Net Sales 8,842$ 5,017$ 1,549$ 1,676$ 669$ (69)$

Operating earnings 1,018 532 275 222 43 (54) Operating earnings as a percentage of net sales 11.5% 10.6% 17.8% 13.2% 6.4% 78.3%

Operating earnings 1,018 532 275 222 43 (54)

Less: Significant items discussed 24 (18) (6) 13 0 35

Operating earnings excluding significant items discussed 1,042$ 514$ 269$ 235$ 43$ (19)$ Operating earnings as a percentage of net sales 11.8% 10.2% 17.4% 14.0% 6.4% 27.5%

Q4 2005

Q4 2004


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Significant Items Discussed- Annual

2005 PBT (Inc)/Exp

2005 Tax Inc/(Exp)

2005 PAT (Inc)/Exp

Reorganization of Business 116$ 29$ 87$ Collection related to Telsim (504) (181) (323) Charge for past use of Kodak IP 57 22 35 Gains on sales of investments and businesses (1,803) (676) (1,127) Sprint/Nextel derivative (52) (19) (33) Debt retirement Costs 137 52 85 Other - Repayment of previously-reserved loan (Iridium) (30) (11) (19) Tax adjustments - 443 (443) TOTAL IMPACT (2,079)$ (342)$ (1,738)$

2004 PBT (Inc)/Exp

2004 Tax Inc/(Exp)

2004 PAT (Inc)/Exp

Reorganization of Business (6)$ (1)$ (5)$ Collection of receivables that had been previously deemed uncollectible (Telsim) (44) (17) (27) IPR&D charges related to acquisitions 32 - 32 Goodwill impairment (CMS) 125 - 125 Gains on sales of investments and businesses (418) (160) (258) Reversal of reserves relating to the previous sale of a business (CPD) (20) (8) (12) Partial recovery of a previously impaired investment (Callahan) (20) (8) (12) Charges related to debt retirement and cancellation of interest rate swaps 81 31 50 Tax adjustments - (236) 236 TOTAL IMPACT (272)$ (399)$ 127$

2004 YTD

2005 YTD


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OE Reconciliation of Significant Items- Annual

Net Sales 36,843$

Operating earnings 4,696 Operating earnings as a percentage of net sales 12.7%

Operating earnings 4,696

Less: Significant items discussed (331)


Net Sales 31,323$

Operating earnings 3,132 Operating earnings as a percentage of net sales 10.0%

Operating earnings 3,132 Less: Significant items discussed 106


2005 YTD

2004 YTD


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OE Reconciliation By Segment of Significant Items From Continuing Operations-Annual


Net Sales 36,843$ 21,455$ 6,332$ 6,597$ 2,765$ (306)$

Operating earnings 4,696 2,198 990 882 185 441 Operating earnings as a percentage of net sales 12.7% 10.2% 15.6% 13.4% 6.7% -144.1%

Operating earnings 4,696 2,198 990 882 185 441 Less: Significant items discussed (331) 88 3 67 4 (493)

Operating earnings excluding significant items discussed 4,365$ 2,286$ 993$ 949$ 189$ (52)$ Operating earnings as a percentage of net sales 11.8% 10.7% 15.7% 14.4% 6.8% 17.0%


Net Sales 31,323$ 17,108$ 6,026$ 6,228$ 2,214$ (253)$

Operating earnings 3,132 1,728 718 842 146 (302) Operating earnings as a percentage of net sales 10.0% 10.1% 11.9% 13.5% 6.6% 119.4%

Operating earnings 3,132 1,728 718 842 146 (302) Less: Significant items discussed 106 (26) 15 26 (4) 95

Operating earnings excluding significant items discussed 3,238$ 1,702$ 733$ 868$ 142$ (207)$ Operating earnings as a percentage of net sales 10.3% 9.9% 12.2% 13.9% 6.4% 81.8%

2005 YTD

2004 YTD


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Reconciliation of Revenue Per Headcount2003 2004 Q1 '05 Q2 '05 Q3 '05 Q4 '05

Headcount 65,639 67,641 67,952 68,568 68,777 68,971 Rolling 12 Months of Sales 23,155 31,323 32,043 33,326 35,252 36,842 *Revenue / HC (In 000's) 353 463 472 486 513 534

* Revenue Per Head = Rolling 12 Months of Sales / Qtr Ending Headcount


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Safe Harbor StatementDuring this call we have made a number of forward-looking statements. Forward-looking statements are any statements that are not historical facts. These forward-looking statements are based on the current expectations of Motorola and there can be no assurance that such expectations will prove to be correct. Such forward-looking statements include, but are not limited to, our comments and answers relating to the following topics: (1) guidance for Motorola’s sales and earnings per share for the first quarter of 2006; (2) Motorola’s expected effective tax rate and shares outstanding in the first quarter of 2006; (3) expectations regarding the volume and impact of our stock repurchase program; (4) Motorola’s expected stock option expense in 2006; (5) expected gains from the sale of investments in 2006; (6) future sales, profitability, operating earnings, operating margin and market share for each of Motorola’s segments; (7) expectations for Motorola’s future operating margin and various factors in its improvement, (8) expected timing for the announcement, launch and shipment ofnew products; (9) the sales impact and pricing of new products; and (10) the size of the worldwide handset and infrastructure markets in 2006. Because forward-looking statements involve risks and uncertainties, Motorola’s actual results could differ materially from those stated in the forward looking statements. Information about factors that could cause such differences can be found in this afternoon's press release, on pages 70 through 80 of Motorola’s 2004 Annual Report on Form 10-K and in Motorola’s other SEC filings.

This presentation is being made on the afternoon of January 19, 2006. The content of this presentation contains time-sensitive information that is accurate only as of the time hereof. If any portion of this presentation is rebroadcast, retransmitted or redistributed at a later date, Motorola will not be reviewing or updating the material that is contained herein.

MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office. All other product or service names are the property of their respective owners. © Motorola, Inc. 2006

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Adobe PDF Q4 2005 Motorola Inc. Earnings Conference Call Presentation