Q1 2006 Motorola Inc. Earnings Conference Call Presentation

Q1 2006 Earnings Release- April 18, 2006MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office. .

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Motorola Q1 2006 Earnings Release Conference Call

April 18, 2006


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Ed Gams

Corporate Vice Presidentof Investor Relations

Q1 2006 Earnings Release- April 18, 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 such expectations 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 19 through 27 in item 1A of Motorola’s 2005 Annual Report on Form 10-K and in Motorola’s other SEC filings.

This presentation is being made on the afternoon of April 18, 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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David DevonshireChief Financial Officer


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Motorola Inc. Financial ResultsQ1 2006 Q1 2005

Sales $M 10,013$ 8,161$ Up 23%

Operating Margin 8.9% 10.6% Down 1.7 pts

Earnings Per Share 0.27$ 0.28$ Down 4%

Excluding Significant Items

Operating Margin 10.3% 10.6% Down 0.3 pts

Earnings Per Share 0.28$ 0.22$ Up 27%

Q1'06 vs. Q1'05


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Significant Items Discussed in the Earnings Press Release

Q1 2006 Reported EPS * 0.27$ Includes:Gain on Investments Net of Derivative Loss 0.03 Reorganization of Business Charges (0.02) Stock Compensation Expense (0.02)

(0.01)$

Q1 2005 Reported EPS * 0.28$ Includes:Gains on Sales of Investments and Businesses 0.06

* See appendix for reconciliation


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7.48.2

10.0

7.5

8.8

10.4

7.5

9.48.8

10.4

0

2

4

6

8

10

12

Q1 Q2 Q3 Q4

200420052006

Motorola Sales Trend$ Billions

Sales Increased ~23% Q1 2006 vs. 2005

* Midpoint of Guidance


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Revenue Per Employee

4 Quarter Rolling Average

$(000)’s

$472$486

$513

$534

$560

$300

$350

$400

$450

$500

$550

$600

Q1 '05 Q2 '05 Q3 '05 Q4 '05 Q1 '06


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Cash Flow and Debt

Debt to Total Capital Now At 20.4% vs. 20.3% at 12/31/05 *

Q1 Year End ($ in Billions) Q1 2006 ($ in Billions) 2006 2005

Operating Cash Flow 0.7$ Cash/Equiv/Mkt Sec 14.7$ 14.8$

Short Term/ Current Debt (0.5)$ (0.5)$ Free Cash Flow 0.6$

Long Term Debt (3.8)$ (3.8)$

Total Debt (4.3)$ (4.3)$

Net Cash/ (Net Debt) 10.4$ 10.5$

Cash Flow Cash & Debt

* Debt to Total Capital = Debt/ Debt + Stockholders Equity


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Stock Repurchase Update

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

• In Q1: Purchased ~37M Shares, Average Price of $21.99, Cash Used ~$815M

• Inception to Date: Purchased 78.7M Shares, Cash Used ~ $1.7B


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Q2 2006 Guidance

$.30-.32

36%

2.55 Billion

$.02 Per Share

Earnings Per Share(excluding Stock Compensation Expense, any Telsim recovery, impact of Auto business sale, and any further reorganization expenses)

Tax Rate

Shares Outstanding

Stock Compensation Expense

$10.3B-$10.5BSales


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Comments on 2006• Stock Compensation Expense Estimated

Annual Impact of $275M - $300M• Estimated Tax Rate is 36%• Additional Collection of ~$400M Related to

Telsim Expected in Q2• Completion of Automotive Business Sale

Expected in Q2• Further Reorganization Expenses Expected

Related to Global Supply Chain Consolidation and Operating Expense Reduction Initiatives


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mobile devices businessmobile devices business

earnings results


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Mobile Devices Business Results

All-time Motorola record for units!All-time record for Mobile Devices Q1 sales!

All-time record for Mobile Devices Q1 operating earnings!6th consecutive quarter of Y/Y OE% improvement!*

6th consecutive quarter of Q/Q market-share growth!

… and we increased global market share to 21% while sequentially expanding GM%!

* Excluding Reorganization Charges

Q1 earnings release Q1 earnings release -- highlightshighlightsa great start for 2006!


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RAZR continues as world’s best-selling clamshell… Motorola will sell 50 millionth RAZR in Q2!

Ultra-slim SLVR is redefining the “candy bar”MOTOmusic is hot! … 6-million-unit milestone!

3G units are up nearly 400% vs. Q1 2005iDEN is strong! … record Q1 units performance!

GSMA award is opening doors and driving sales across price tiers in High-Growth Markets

… and new launches: 2 GSM, 3 CDMA and 1 iDEN

Q1 earnings release Q1 earnings release -- highlightshighlightswickedly cool products


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year over year Up ~5 ppts

Up ~2 ppts vs. Q4’0521%Market Share Est. – Q1

1.0 ppt 11.0%Operating Margin

Up 61%46.1MUnits Q1

Up 60%$702 Operating Earnings $MUp 45%$6,400Sales $M

Q1’06 vs. Q1’05Q1 2006

mobile devices mobile devices –– Q1Q1


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Source: Motorola, Inc. Shares are calculated on Q1 06 Unit Shipments, includes iDEN.

#1 at top 3 wireless operators#1 at top 3 wireless operators

#1 in sell#1 in sell--through to consumersthrough to consumers

north america north america –– Q1Q1


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#1 at top 2 wireless operators#1 at top 2 wireless operators

#1 in sell#1 in sell--through to consumersthrough to consumers

latin america latin america –– Q1Q1


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strong #2 and growingstrong #2 and growing

up 4 points vs. Q1 2005up 4 points vs. Q1 2005

europe europe –– Q1Q1


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north asia north asia –– Q1Q1


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highhigh--growth markets growth markets –– Q1Q1


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Spectrum of Technologies:

GSM, GPRS, Edge, CDMA 1X, EV-DO, UMTS, Dual-Mode UMA

Array of Colors:

Silver, Black, Pink, Hot Pink, Lavendar Pink, Blue, Gold, & Gun-Metal Grey

Cool Experiences:

Style, Imaging, Music

Q1: RAZR Q1: RAZR –– the “gold standard”the “gold standard”


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SLVR L7 and L6 each outpaced

RAZR’s first 180 days in market!

Q1: SLVR Q1: SLVR –– redefining candy baredefining candy ba


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PEBL U6 units more than

doubled vs. Q4!

Q1: PEBL Q1: PEBL –– thethe precious stoneprecious stone


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We are China’s smart-phone leader.

During Q1, MING joined the Motorola A780 – China’s

best-selling smart phone.

Q1: MING Q1: MING –– thethe smart phonesmart phone


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Final software and hardware are in pre-launch tests

with a leading customer.

Q1: Q Q1: Q –– countdown to launchcountdown to launch


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FM-equipped style – a new Motorola “must have”

for the masses.

“connecting the unconnected”Q1: RDIO Q1: RDIO –– design for the massdesign for the mass


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grow profitably with …wickedly compelling products …

with quality and efficiencyand rich experiences …

mobile devices businessmobile devices businessour commitmentour commitment


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market share – up vs. prior year & Q1 sales – up vs. prior yearoperating profits – up vs. prior yearoperating margin – up vs. prior year

mobile devices businessmobile devices businessQ2 outlookQ2 outlook


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Government & Enterprise Mobility Solutions – Q1

Sales $M 1,539$ Up 2%

Operating Earnings $M 171$ Up 2%

Operating Margin 11.1% Flat -

Excluding Reorganization Charge


Operating Margin 11.6% Up 0.5 pts


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Motorola Announces Agreement to Sell Automotive Electronics Business

Definitive Agreement with Continental AG• Approximately $1 Billion in Cash• Includes: Controls, Sensor, Interior Electronics,

Telematics• Subject to Customary Closing and Regulatory

Conditions• Great Fit for Customers, Employees• Sharpens Motorola’s Strategic Focus on

Seamless Mobility


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Q1 - Government Market ActivityUnited States

• New York City• Pierce County, Washington • King County, Washington• San Diego • State of New Hampshire

Latin America• Military Police/State of Sao Paulo, Brazil

Europe• O2 Airwave – London Underground

Asia• Completed Command & Control

Communications System for Hong Kong Police


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Q1 – Mesh and Enterprise Market ActivityMOTOMESH 4.9 GHz Solution

• Delaware County, PA• Thomasville, GA• Port Orange, FL• Ohio (multi-agency project)

Q1: Enterprise Activity• Wireless Valley Acquisition Gaining Traction• Focus on Next-Generation Technologies

• Fixed Mobile Convergence• Began Shipping Commercial-off-the-Shelf

Mobile Computing Device (HC700-L) and Building out Mobile Computing Channel


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Government & Enterprise Mobility Solutions Q2 Outlook

Sales

Operating Earnings

Operating Margin

Up Slightly vs. Prior Year




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Networks – Q1

Sales $M 1,431$ Down 14%

Operating Earnings $M 132$ Down 44%

Operating Margin 9.2% Down 4.9 pts





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Q1 - Networks Market Activity• Earthlink/Google to use Canopy for San Francisco Metro Wi Fi

• Canopy Network for the Indian State of Rajasthan

• IP Core Network Solution for Vistream for MVNOs in Germany

• Continued to Strengthen Leadership in the Push-to-Talk Over Cellular with Recent Contracts:

-Vodafone (Spain) -Public Telecommunications Corp (Yemen)

• 5-Year Access Network Deal with MTC Namibia Encompassing GSM, GPRS, EDGE and Canopy


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Networks – New Initiatives/ Future Revenue• CDMA 1X EV-DO Rev A

• MOTOwi4 WiMAX Solutions

• Canopy

• Softswitch: Push to Everything

• FTTP

• M-Wallet

• Services: GAMA Architecture


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Networks Q2 Outlook

Sales

Operating Earnings

Operating Margin

Flat vs. Prior Year, Up vs. Q1

Down vs. Prior Year, Up vs. Q1

Down vs. Prior Year, Up vs. Q1


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Motorola Combines GEMS & Networks Businesses Into One Segment

The Networks & Enterprise Segment• Strengthen Our Position in End-to-End Network Infrastructure

Solutions to Private, Public and Enterprise Customers• Leverage Key Current and Next-Generation

Technologies• Improve Cost Structure• Seamless Inside


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Connected Home – Q1Q1 2006

Sales $M 710$ Up 7%





Operating Margin 8.2% Up 5.3 pts

Q1'06 vs. Q1'05


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Connected Home – Q1 Highlights▪ Shipped Over 2 Million Digital Entertainment Devices, 38% Increase over Q105, Record for a Single Quarter

▪ Completed Acquisition of Kreatel Communications, Leading Developer of IPTV Based Set-Tops

▪ Shipped Quarterly Record of ~ 630K Voice Modems; Total Modem Shipments Were 2.6 Million

▪ Introduced a Residential Seamless Mobility Gateway Allowing Consumers to Use the Same Mobile Device and Phone Number Inside and Outside of the Home

▪ Starhub (Singapore) to Upgrade Hybrid Fiber Coaxial Cable Network to DOCSIS® 3.0-Compatible Leveraging Motorola’s Channel Bonding Technology


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Delivering Seamless Video and Voice Solutions Today!

Operators are Becoming Engaged

The Motorola Experience – MOTO ME

The Connected Home Belongs to Motorola

Connected Home – Q1 Highlights


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Connected Home – Q2 Outlook

Up vs. Prior Year

Up vs. Prior Year

Up vs. Prior Year

Sales

Operating Earnings

Operating Margin


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Q1 2006 SummaryMarket ShareRevenue Profit Cash Flow Balance Sheet Cost Structure Innovation Outlook

√√√√√√√√√√√√√√√√


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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 Business

Ron GarriquesRon GarriquesPresident, Mobile Devices Business

Greg BrownGreg BrownPresident, Networks and Enterprise

Business

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 April 18, 2006 (which is attached to 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

Q1 2006 PBT (Inc)/Exp

Q1 2006 Tax Inc/(Exp)

Q1 2006 PAT (Inc)/Exp EPS impact

Gains on sales of investments, net of derivative loss (118) (45) (73) 0.03 Reorganization of business charges 71 15 56 (0.02) Stock compensation expense 70 23 47 (0.02) TOTAL IMPACT 23$ (7)$ 30$ (0.01)

Q1 2005 PBT (Inc)/Exp

Q1 2005 Tax Inc/(Exp)

Q1 2005 PAT (Inc)/Exp EPS impact

Gains on sales of investments (234) (89) (145) 0.06 TOTAL IMPACT (234)$ (89)$ (145)$ 0.06$

Q1 2005

Q1 2006


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OE Reconciliation of Significant Items

Net Sales 10,013$

Operating earnings 894$ Operating earnings as a percentage of net sales 8.9%

Operating earnings 894$ Less: Significant items discussed 141Operating earnings excluding significant items discussed 1,035$ Operating earnings as a percentage of net sales 10.3%

Net Sales 8,161$

Operating earnings 865$ Operating earnings as a percentage of net sales 10.6%

Operating earnings 865$

Less: Significant items discussed 0Operating earnings excluding significant items discussed 865$ Operating earnings as a percentage of net sales 10.6%

Q1 2006

Q1 2005


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OE Reconciliation By Segment of Significant Items From Continuing Operations

TOTAL Mobile Devices GEMS Networks Conn.Home Other/Elims

Net Sales 10,013$ 6,400$ 1,539$ 1,431$ 710$ (67)$

Operating earnings 894 702 171 132 15 (126) Operating earnings as a percentage of net sales 8.9% 11.0% 11.1% 9.2% 2.1% 188.1%

Operating earnings 894 702 171 132 15 (126)

Less: Significant items discussed 141 (1) 8 21 43 70Operating earnings excluding significant items discussed 1,035$ 701$ 179$ 153$ 58$ (56)$ Operating earnings as a percentage of net sales 10.3% 11.0% 11.6% 10.7% 8.2% 83.6%

TOTAL Mobile Devices GEMS Networks Conn.Home Other/Elims

Net Sales 8,161$ 4,414$ 1,503$ 1,657$ 662$ (75)$

Operating earnings 865 440 167 234 19 5 Operating earnings as a percentage of net sales 10.6% 10.0% 11.1% 14.1% 2.9% -6.7%

Operating earnings 865 440 167 234 19 5 Less: Significant items discussed 0 0 0 0 0 0

Operating earnings excluding significant items discussed 865$ 440$ 167$ 234$ 19$ 5$ Operating earnings as a percentage of net sales 10.6% 10.0% 11.1% 14.1% 2.9% -6.7%

Q1 2006

Q1 2005


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Reconciliation of Revenue Per Headcount2004 2005 Q1 '05 Q2 '05 Q3 '05 Q4 '05 Q1 '06

Headcount 67,641 68,971 67,952 68,568 68,777 68,971 69,142 Rolling 12 Months of Sales 31,323 36,843 32,043 33,326 35,252 36,843 38,698 *Revenue / HC (In 000's) 463 534 472 486 513 534 560

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


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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 such expectations 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 19 through 27 in item 1A of Motorola’s 2005 Annual Report on Form 10-K and in Motorola’s other SEC filings.

This presentation is being made on the afternoon of April 18, 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

Q1 2006 Motorola Inc. Earnings Conference Call Presentation

Economy & Finance

Transcript of Q1 2006 Motorola Inc. Earnings Conference Call Presentation