Q2 2005 Motorola Inc. Earnings Conference Call Presentation

Q2 2005 Earnings Release – July 19, 2005MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office. .

Slide - 1

Motorola Q2 2005 Earnings Release Conference Call

July 19, 2005


Slide - 2

Ed GamsSenior Vice Presidentof Investor Relations

Motorola Inc.

Q2 Earnings Release – July 19, 2005MOTOROLA 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 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 July 19, 2005. 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. 2005


Slide - 4

Ed ZanderChief Executive Officer

Chairman of the Board of DirectorsMotorola Inc.


Slide - 5

David DevonshireChief Financial Officer

Executive Vice PresidentMotorola Inc.


Slide -- 6

Motorola Inc. Q2 Financial Results

Q2 2005

Q2 2004

Fav (Unfav)Q2’05/Q2’04

Sales $M $8,825 $7,541 17%

Earnings Per Share* $0.38 $0.25 52%

* From Continuing Operations


Slide -- 7

Significant Items Discussed in the Earnings Press Release

Q2 2005 PBT Tax PAT EPS ImpactReported EPS $0.38

Includes:Gain on Sale of Investment $375M ($132M) $243M $0.10Repayment of Loan Previously Reserved $ 30M ($ 11M) $ 19M $0.01Restructuring ($ 25M) $ 9M ($ 16M) ($0.01)Change in 2004 China Tax Rate ($ 43M) $ 43M $0.02

$289M $0.12

Q2 2004 PBT Tax PAT EPS ImpactReported EPS $0.25

Includes:Reversal of Tax Reserves ($197M) $197M $0.08Reversals of Accruals for $ 21M $ 8M $ 13M $0.00Reorganization of Business Costs

$210M $0.08


Slide -- 8

Motorola Sales Trend$ Billions

5.1

7.48.2

5.2

7.5

8.8

5.9

7.56.9

8.8

0

2

4

6

8

10

Q1 Q2 Q3 Q4

200320042005


Slide -- 9

Gross Margin% of Sales

34.5%

32.7% 32.6%

30%

35%

Q2'04 Q1'05 Q2'05


Slide -- 10

Research & Development Expenses

$ in Millions30.4% 29.6%

9.6%9.9%9.9%

28.7%

$0

$300

$600

$900

Q2'04 Q1'05 Q2'058.0%

16.0%

24.0%

32.0%

R&D $ R&D % to Sales R&D % GM

Selling, General and Administrative Expenses

$ in Millions

14.5%

12.3% 11.6%$750

$1,000

$1,250

Q2'04 Q1'05 Q2'0510.0%

15.0%

20.0%% NSAD


Slide -- 11


Slide -- 12

Motorola Operating Earnings Trend

4.6%

9.2%10.6%

5.0%

10.4%11.1%

5.2%

8.6%

6.7%

11.5%

0.0%

5.0%

10.0%

15.0%% of Sales

Q1 Q2 Q3 Q4

200320042005

Cash Flow and DebtCash Flow

($ in Billions) Q2 2005

$1.0

$0.9

Operating Cash Flow

Free Cash Flow

Q22005

Year-End 2004

Cash/Equiv/Mkt Sec $12.8

($0.7)

($4.6)

($5.3)

Net Cash/ (Net Debt) $7.5 $5.4

$ 10.7

Short Term/Current Debt

($0.7)

Long Term Debt ($4.6)

TOTAL DEBT ($5.3)

Cash & Debt ($ in Billions)


Slide -- 13


Slide -- 14

Stock Repurchase Update

• Authorized to Purchase $4B over 3 Years• Purchased 9.2M Shares in Q2 at an Average Price of

$17.86/Share• Program announced on May 19th – Purchases Occurred

During Last 6 Weeks of the Quarter• Expect To Be in the Market For All of Q3 and To Purchase a

Larger Number of Shares Than in Q2


Slide -- 15

Q3 2005 Guidance

$8.9B-$9.1B

Earnings Per Share $0.27-$0.29

Sales


Slide -- 16

Mobile Device Business – Q2

Q2 2005 Q2’05 vs. Q2’04

Sales $M $4,901 Up 24%

Operating Earnings $M $498 Up 26%

Operating Margin 10.2% Up 0.2 ppts

Market Share Est. – Q2 18.1% Up 3.3 ppts

Units Q2 33.9M Up 41%

Q2’05 Operating Earnings Include a $9M Charge for Restructuring


Slide -- 17


Slide -- 18


Slide -- 19

North America• #1 at 3 of top 5 wireless operators• ~ 36% share – up more than 10 ppts from Q2‘04• Units up 10% vs. Q1‘05 and 44% vs. Q2‘04• Focus: Expand CDMA and strengthen brand

Source: Motorola, Inc. Shares are calculated on 2Q05 Unit Shipments.


Slide -- 20

Latin America• #1 in Venezuela, Argentina and Brazil• ~ 33% Share• Units Up ~ 50% vs. Q1‘05 and Q2‘04• Leadership in Push to Talk over Cellular• Focus: Grow Brand and Share



Slide -- 21

… and growing!Europe• Best Q2 for Units and Sales.• ~ 14% Share – Up >1 ppt vs. Q1‘05 and >2 ppts vs.

Q2‘04• Units Up 6% vs. Q1‘05 and 43% vs. Q2‘04• RAZR the Clear Winner• Focus: Build Brand and Share



Slide -- 22

North Asia• Market Share Flat to Slightly Down• CDMA RAZR a Hit in Korea• UMTS M1000 Launched in Japan With DoCoMo• Focus:

• Renew China With New Products and Marketing• Build the Brand in Japan



Slide -- 23

High-Growth Markets• ~ 9% Share – Up 2.5 ppts vs.Q1‘05 and 2 ppts vs.

Q2‘04

• Units Up 57% vs. Q1‘05 and 74% vs. Q2‘04

• C115 and RAZR are Hot

• Focus: Continued Profitable Market-Share Growth



Slide -- 24

GSM

Q2 Units vs. Q2’04

Q2 Units %

> 70

< 30

CDMA

UMTS

iDEN


Slide -- 25

RAZR CDMA - KoreaRAZR BLACK

RAZR GSM


Slide -- 26


Slide -- 27

grow profitably with …wickedly compelling products …quality – on time and every time …platforms – hardware and software …

and, efficiency – in everything we do.


Slide -- 28

Networks Business – Q2

Q2 2005 Q2’05 vs. Q2’04Sales $M $1,616 Up 3%


Operating Margin 16.3% Up 5.6 ppts

Q2’05 Operating Earnings Includes $2M Income from a Reversal of Restructuring Reserves


Slide -- 29

Networks – Q2 Highlights

– VIBO 3G/UMTS, HSDPA Ready

– KDDI Softswitch

– Sprint WiMax Trials

– Unlicensed Mobile Access (UMA) Trials

– GSM/GPRS Expansion Contracts


Slide -- 30

Government & Enterprise Mobility Solutions – Q2

Q2 2005 Q2’05 vs. Q2’04Sales $M $1,658 Up 7%


Operating Margin 13.3% Down 0.6 ppts

Q2’05 Operating Earnings Include a $15M Charge for Restructuring


Slide -- 31

Government & Enterprise Mobility Solutions – Q2 Highlights

Government/Public Safety• Continuing Leadership in Mission Critical Solutions• Mesh Networks – 30+ New Customers

Enterprise• Field Network Contracts

- Hydro Quebec – Canada- Shanghai Rail - China

• Introduced Broadband Over Powerline Solution

Automotive• Return to Profitability – Operational Improvements in Process


Slide -- 32

Connected Home – Q2

Q2 2005 Q2’05 vs. Q2’04

Sales $M $718 Up 35%

Up 24%

Down 0.6 ppts

Operating Earnings $M $47

Operating Margin 6.5%

Connected Home – Q2 Highlights• Shipped 2.0M Digital Set-Top Devices and 2.1M DOCSIS Modems• HD/DVR Set-Tops• Industry Firsts

• All-Digital HD/Dual Tuner/DVR• Set-Top With Embedded Multimedia Over Coaxial Cable

• Ojo Video Phone Retail Availability• Verizon Video Services Set-Top Deployment Update


Slide -- 33


Slide -- 34

2005 Priorities

Q2 Scorecard

• Execution +

• Improve Financial Performance +

• Customer “Delight’/Quality In Progress

• Market Share/Thought Leadership +

• “WOW” Products/End-to End Solutions +

• Organizational Efficiency In Progress

• Refine and Execute On Strategic Direction In Progress


Slide -- 35

Roadmap to 13-15% Operating Margin

Improvement TargetVs. 2004

1. Supply Chain Efficiencies

2. Customer Delight

3. R&D

4. G&A

~ 2-3%

~ .5%

~ .5%-1.0%

~ .5%

> $1 Billion in Efficiencies / Cost Reductions


Slide -- 36

Motorola Q&A Participants

Chief Executive OfficerChairman of the Board of Directors

Ed Ed ZanderZander David DevonshireDavid DevonshireExecutive Vice President

Chief Financial Officer

Ron Ron GarriquesGarriquesExecutive Vice President

President, Mobile Devices Business

Greg BrownGreg BrownExecutive Vice President

President, Government & Enterprise Mobility Solutions

Ed GamsEd GamsSenior Vice President

Investor Relations


Slide -- 37

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, 2005 (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.


Slide -- 38

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 in this afternoon's earnings 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 July 19, 2005. 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. 2005

Q2 2005 Motorola Inc. Earnings Conference Call Presentation

Economy & Finance

Transcript of Q2 2005 Motorola Inc. Earnings Conference Call Presentation