Q2 2006 Motorola Inc. Earnings Conference Call Presentation

Q2 2006 Earnings Release- July 19, 2006MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office. .

Slide - 1

Motorola Q2 2006 Earnings Release Conference Call

July 19, 2006


Slide - 2

Ed Gams

Corporate Vice Presidentof Investor Relations

Q2 2006 Earnings Release- July 19, 2006MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office.

Slide -- 3

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 July 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


Slide - 4

Ed Zander

Chief Executive Officer


Slide -- 5

Motorola Highlights Q2 2006• Record Sales of $10.9B, 29% Increase YoY• Gross Margin Percent Up QoQ• Net Earnings Up 48%• EPS of $.55, Up 49 %• Mobile Device – Record Units, Sales and Operating

Earnings, QoQ Increase in Market Share, Operating Margin Up QoQ to 11.2%

• Networks & Enterprise –Increased Sales, Operating Earnings and Operating Margin QoQ

• Connected Home – Increased Sales, Operating Earnings & Operating Margin, YoY and QoQ


Slide - 6

David Devonshire

Chief Financial Officer


Slide -- 7

Motorola Inc. Financial ResultsQ2 2006

Sales $M 10,876$ Up 29%

Operating Earnings $M 1,522$ Up 59%

Operating Margin 14.0% Up 2.6 pts

Earnings Per Share- Continuing Operations 0.54$ Up 46%Earnings Per Share 0.55$ Up 49%

Excluding Significant Items

Operating Earnings $M 1,209$ Up 25%

Operating Margin 11.1% Down 0.4 pts

YoY

Up .8 pts QoQ


Slide -- 8

Significant Items Discussed in the Earnings Press Release EPS Impact

Q2 2006 *Includes:Stock Compensation Expense (0.02)$ Reorganization of Business Charges (0.01) Tax Benefits 0.11 Telsim Settlement 0.10 Gain on Investments, Including Derivative Gain 0.03

0.21$

Q2 2005 *Includes:Reorganization of Business Charges (0.01)$ Tax Benefits 0.02 Gain on Investments, Including Derivative Gain 0.10 Repayment of Loan Previously Reserved 0.01

0.12$

* See appendix for reconciliation


Slide -- 9

Cash Flow and DebtQ2 Year End

($ in Billions) First Half 2006 ($ in Billions) 2006 2005

Operating Cash Flow 1.2$ Cash/Equiv/Mkt Sec 14.4$ 14.8$

CapEx (0.2)$ Short Term/ Current Debt (0.5)$ (0.5)$

Free Cash Flow 1.0$ Long Term Debt (3.8)$ (3.8)$

Total Debt (4.3)$ (4.3)$

Net Cash/ (Net Debt) 10.1$ 10.5$

Cash Flow Cash & Debt


Slide -- 10

Stock Repurchase Update• May 19, 2005 Authorized to Purchase $4B of Stock

over 3 Years

• In Q2: Purchased ~38.9M Shares, Average Price of $21.49, Cash Used $838M

• Inception to End of Q2: Purchased 118M Shares, Cash Used ~ $2.5B


Slide -- 11

Q3 2006 Outlook

$.02 Per ShareStock Compensation Expense

$10.9-$11.1BSales

Gain From Sale of Automotive Electronics Business

Reorganization Expenses Expected In Q3 From Cost Reduction Activities In Networks & Enterprise Segment


Slide -- 12

All-time Motorola Record For Units!All-time Record For Mobile Devices Sales!

All-time Record For Mobile Devices Operating Earnings!10th Consecutive Quarter Of Y/Y OE% Improvement!*7th Consecutive Quarter Of Q/Q Market-share Growth!

… And We Increased Global Market Share To 22%

* Excluding Reorganization Charges

Mobile Device Q2 HighlightsMobile Device Q2 Highlights


Slide -- 13

Demand For RAZR Is Stronger Than Ever!SLVR Is Joining Project Red And Bono In Fight Against

AIDSQ Is Hot And It’s Re-defining QWERTY!

MOTOmusic Is In A Groove … Nearly 10 Million Units!

3G Units Up 55% Vs. Q1iDEN Is Strong! … Record Q2 Units Performance!Mass Market Is Winning In High-growth Markets

… And 11 New Launches: 5 GSM, 4 CDMA & 2 iDEN

Mobile Device Q2 HighlightsMobile Device Q2 Highlights


Slide -- 14

Mobile Device Q2 HighlightsMobile Device Q2 Highlights22% Global Share: The Clear #2 And

Gaining!#1 In North America

#1 In Latin America

#2 In North Asia

#2 In High-growth Markets

#2 In Europe


Slide -- 15

year over year

Mobile Devices Mobile Devices –– Q2Q2

Up 1.3 pts QoQ

Q2 2006

Sales $M 7,140$ Up 46%

Operating Earnings $M 799$ Up 62%





Units (M) 51.9 Up 53%

Market Share 22% Up 4.3 pts

YoY

Est-Q2


Slide -- 26

grow market share profitably with …

wickedly compelling products …

with quality and efficiency.

and rich experiences …


Slide -- 27

Expect Market To Grow By > 15% For FY2006Expect H2’06 To Have Normal Seasonality

Compared To H1’06 …And Expect That Mobile Devices WillContinue To Grow Sequential Share

And Expand YoY OE%


Slide -- 28

Uniquely positioned

Networks & Enterprise SegmentLeverage Public, Private, Enterprise Markets and Technologies

High-growth areas: 4G wireless broadband, Interoperability, Enterprise Mobility and Services

$11 billion-plus business Solid, Double Digit Operating Margin

Right investmentsRight time

Building early leadership

Next-generation technology leaders:Clearwire Corporation, NextNet Wireless, Orthogon Systems, Wireless Valley, Mesh Networks


Slide -- 29

Networks & Enterprise- Q2Q2 2006

Sales $M 2,903$ Up 3% Up 15%

Operating Earnings $M 386$ Down 22% Up 29%

Operating Margin 13.3% Down 4.2 pts Up 1.4 pts


Operating Earnings $M 423$ Down 15% Up 32%

Operating Margin 14.6% Down 3.0 pts Up 1.9 pts

YoY QoQ


Slide -- 30

Motorola - Leading in 4GStrong Leader In 4G Wireless Broadband

Uniquely Positioned To Capture Large ShareComplete Solution Suite: Backhaul, Fixed Access, Mesh, Broadband-over-powerline, WiMAX

Added Strength: NextNet Wireless & Clearwire

Positions MOT As Global Supplier Of WiMAXExpands Wireless Broadband Portfolio Helps Accelerate Deployment Of 802.16e

Pakistan: Nationwide Network DeploymentWorld’s Largest 802.16e NetworkProjected 1 Million SubscribersResidential, Corporate Voice, Internet Access, Public Hotspots


Slide -- 31

# 1 Position WorldwideLeadership Position In Public Safety VoiceExtending Leadership To Public Safety Data

Portugal: Nationwide Public Safety System

Voice And Data Communications53,000 Users - Police, Fire, Ambulance

Shanghai: Government Radio NetworkSingle, Unified Platform50,000 Users/Four Government Agencies

Government Networks - #1 Worldwide


Slide -- 32

Enterprise – Continued MomentumGrowing core enterprise system business

Multimillion $ New York State Electric & Gas winStrong double digit YTD growth in Enterprise systems orders

Launching new productsQHC700 shippingMOTOPRO™ Mobility Suite

Building out ecosystemMicrosoft unified communications partnership

MOTO Q HC700


Slide -- 34

Connected Home *- Q2

* Now Includes The Wireline Business

Q2 2006

Sales $M 803$ Up 8%



YoY


Slide -- 35

• Quarterly Record Of ~2.4 Million Digital Entertainment Devices, Including ~680k With Digital Video Recorders

• Quarterly Record Of ~900k Voice-enabled Modems; ~2.6 Million Modems Overall

• Introduced Motorola Follow Me TV Solution, Enabling Seamless Movement Of Multimedia Content Within The Home And To Mobile Devices

• Introduced New DSL Wireless Gateway - Integrates Voice, Data, And Home Networking Functionality Into A Single Device

• Announced World’s First Commercial Implementation Of PacketcableMultimedia™ In End-to-end Solution With Starhub Of Singapore

Connected Home- Q2 Highlights


Slide -- 36

Q3Broadband Connected Home Market• Service Provider Capex Likely to Experience Normal Seasonal Decline QoQ

Motorola Connected Home Solutions• Sales Down Slightly QoQ In Line With Market Seasonality• Sales and Operating Margin Up YoY

2006Broadband Connected Home Market• Mid/High Single Digit Growth

Motorola Connected Home Solutions• Maintain/Grow Share and Improve Operating Margin


Slide -- 37

Chief Executive OfficerEd ZanderEd ZanderMotorola 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


Slide -- 38

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 July 19, 2006 (which had this afternoon’s earnings press release attached), (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.


Slide -- 39

OE Reconciliation By Segment of Significant Items From Continuing

Operations- QuarterTOTAL Mobile Devices N&E Conn.Home Other/Elims

Net Sales 10,876$ 7,140$ 2,903$ 803$ 30$

Operating earnings 1,522 799 386 56 281 Operating earnings as a percentage of net sales 14.0% 11.2% 13.3% 7.0% 936.7%

Operating earnings 1,522 799 386 56 281

Less: Significant items discussed (313) 0 37 0 (350)

Operating earnings excluding significant items discussed 1,209$ 799$ 423$ 56$ (69)$ Operating earnings as a percentage of net sales 11.1% 11.2% 14.6% 7.0% -230.0%

TOTAL Mobile Devices N&E Conn.Home Other/Elims

Net Sales 8,408$ 4,902$ 2,825$ 743$ (62)$

Operating earnings 958 493 494 33 (62) Operating earnings as a percentage of net sales 11.4% 10.1% 17.5% 4.4% 100.0%

Operating earnings 958 493 494 33 (62)

Less: Significant items discussed 13 9 2 0 2

Operating earnings excluding significant items discussed 971$ 502$ 496$ 33$ (60)$ Operating earnings as a percentage of net sales 11.5% 10.2% 17.6% 4.4% 96.8%

Q2 2006

Q2 2005


Slide -- 40

Significant Items Discussed- Quarter

Significant Item Statement LineQ2 2006 PBT

(Inc)/ExpQ2 2006 Tax

Inc/(Exp)Q2 2006 PAT

(Inc)/Exp EPS impact

Stock compensation expense Cost of sales, R&D and SG&A 60 18 42 (0.02)$ Reorganization of businesses charges Other charges (income) 37 14 23 (0.01)$ Net repatriation tax benefit Income tax expense - 68 (68) 0.03$ Profits permanently reinvested Income tax expense - 67 (67) 0.03$ Foreign entity valuation reserve adjustment Income tax expense - 73 (73) 0.03$ China tax settlement Income tax expense - 44 (44) 0.02$ Telsim Settlement Other charges (income) (410) (147) (263) 0.10$

Gain on investments, including derivative gain Other income (expense) - Other and Gains on sales of investments and businesses (110) (42) (68) 0.03$

Total Continuing Operations Impact (423)$ 95$ (518)$ 0.21$

Significant Item Statement LineQ2 2005 PBT

(Inc)/ExpQ2 2005 Tax

Inc/(Exp)Q2 2005 PAT

(Inc)/Exp EPS impact

Reorganization of businesses charges Cost of sales and Other charges (income) 13$ 5$ 9$ (0.01)$ Gains on sales of investments Gains on sales of investments and businesses (376) (132) (244) 0.10 Repayment of previously-reserved loan (Iridium) Other income (expense) - Other (30) (11) (19) 0.01 Tax adjustments Income tax expense - 42 (42) 0.02 Total Continuing Operations Impact (393)$ (96)$ (296)$ 0.12$

Q2 2006

Q2 2005


Slide -- 41

TOTAL Mobile Devices N&E Conn.Home Other/Elims

Net Sales 9,608$ 6,403$ 2,520$ 732$ (47)$

Operating earnings 849 699 299 (11) (138) Operating earnings as a percentage of net sales 8.8% 10.9% 11.9% -1.5% 293.6%

Operating earnings 849 699 299 (11) (138)

Less: Significant items discussed 141 (1) 21 51 70

Operating earnings excluding significant items discussed 990$ 698$ 320$ 40$ (68)$ Operating earnings as a percentage of net sales 10.3% 10.9% 12.7% 5.5% 144.7%

Q1 2006

OE Reconciliation By Segment of Significant Items From Continuing Operations- Q1 2006


Slide -- 42

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 July 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

Q2 2006 Motorola Inc. Earnings Conference Call Presentation

Economy & Finance

Transcript of Q2 2006 Motorola Inc. Earnings Conference Call Presentation