Q4 2004 Motorola Inc. Earnings Conference Call Presentation

Motorola Q4 2004 Earnings
Release Conference Call

January 18, 2005

Slide - 1
Q4 2004 Earnings Release – January 18, 2005
MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office.
.

Ed Gams
Senior Vice President
of Investor Relations
Motorola Inc.

Slide - 2
.

Safe Harbor Statement
A number of forward-looking statements will be made during this conference call.
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 76 through 85 of Motorola’s 2003
Annual Report on Form 10-K and in Motorola’s other SEC filings.

This presentation is being made on the afternoon of January 18, 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. 2004

Q4 Earnings Release – January 18, 2005 Slide -- 3

Ed Zander
Chief Executive Officer
Chairman of the Board of Directors
Motorola Inc.

Slide - 4
.

1/18, 2004 Conference Call
Full-Year 2004 Priorities
v
Earnings Improvement

v
Revenue/Market Share

v
New Product Execution

v
Key Customer Relationships

v
Strengthen Brand

Prioritize Key IP Investments/Rationalize Strategy v


David Devonshire
Chief Financial Officer
Executive Vice President
Motorola Inc.

Slide - 6
.

Motorola Inc. Q4 Financial Results

Q4 Q4 Fav (Unfav)
2004 2003 Q4’04/Q4’03

Sales $M $8,842 $6,935 27%

Earnings Per Share $0.28 $0.18 56%
From Continuing
Operations


Motorola Inc. Annual Financial Results

Annual Annual Fav (Unfav)
2004 2003 Q4’04/Q4’03

Sales $M $31,323 $23,155 35%

Gross Margin % 33.6% 32.7% 0.9 ppts.

Earnings Per Share $0.91 $0.39 133%
From Continuing
Operations


Gross Margin From Continuing Operations
% of Sales

35%
33.6%

31.8%

30%
Q4'03 Q4'04


Research & Development Expenses From
Continuing Operations
$ in Millions
31.7%
$900 32.0%
27.5%

24.0%

$700

16.0%

10.1%
9.2%
$500 8.0%
Q4'03 Q4'04

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


Selling, General and Administrative Expenses
From Continuing Operations
$ in Millions % NSAD

$1,250 20.0%

$1,000 15.0%
14.5%

12.4%
$750 10.0%
Q4'03 Q4'04


Operating Margin % From Continuing
Operations
% of Sales
12.0%
GAAP
12% 0.3%
10.2% Excluding
10% Reorg./Goodwill
Impairment
1.6%
7.6%
8%
0.9%
6% 11.7%

8.6%
4%
6.7%
2%
0%
Q4'03 Q3'04 Q4'04


Cash Flow and Debt From Continuing Operations

Cash Flow Cash & Debt
Year-End Year-End
($ in Billions)
($ in Billions) Q4 Annual 2004 2003
2004 2004
Cash/Equiv/Mkt Sec $10.7 $ 7.9
Operating Cash Flow $0.7 $3.1
Per Share $0.29 $1.27
Short Term/Current ($0.7) ($0.9)
Debt
Long Term ($4.6) ($7.2)
Free Cash Flow $0.6 $2.6 Debt/TOPrS
Per Share $0.22 $1.07
TOTAL DEBT ($5.3) ($8.1)

Net Cash/ (Net Debt) $5.4 ($0.1)


Q1 2005 Outlook

Q1 2005
Sales $7.5B-$7.9B

Earnings Per Share $0.17-$0.20
Continuing Operations


Personal Communications Segment – Q4

Q4 2004 Q4’04 vs. Q4’03

Sales $M $4,947 Up 51%

Operating Earnings $M $526 Up 314%

Operating Margin 10.6% Up 6.7 ppts

Units Q4 31.8M Up 42%
Units Full Year 2004 104M Up 39%

Market Share – Q4 16.6% Up 3.2 pts.
Up 2.9 pts vs. Q3’04
Market Share Full Year 2004 15.2% Up 1.6 pts vs. FY’03

Q4 2004: Motorola “Must Haves”

E1000
Motorola V3 / Razr
V710
3G/UMTS
CDMA


Q4 2004: Sampling of New Handsets

MPx220 –
C980 A1000
C975 V980
V975
GSM and
3G/UMTS 3G/UMTS
3G/UMTS 3G/UMTS
3G/UMTS
Windows
Mobile OS

MPx – WiFi and
Windows Mobile OS

i833
iDEN
Baby
i265
Phat
iDEN

Q4 2004: Sampling of New Handsets

A630 - GSM
V620 V550 V551
A668
GSM GSM Edge
GSM

C381p
PoC - GSM
V260 - CDMA V510 - CDMA C215 - CDMA
V265 - CDMA


Personal Communications Segment – Q4
• #1 in North America, Now # 3 in Europe
• Shipped 20 New Handsets in Q4
• 50% Cameras, 70% Color
• 55% Increase in Java/Linux Handsets vs. Q3
• 1.7M UMTS/3G Handsets; 3M in 2004
• Low Channel Inventory
• Push-To-Talk Leadership
• MotoPro For Windows Mobile Users


Slide - 21
.

Mobile Device Summary


Global Telecom Solutions Segment

Q4 2004 Q4’04 vs. Q4’03

Sales $M $1,389 Up 2%
Up 24%, FY ‘04

Operating Earnings $M $281 104%


Market Share Up For FY 2004


Global Telecom Solutions Segment – Q4

Three-Year Extension of Supply Agreement With
n
Nextel.
Executed Next Generation IP Based PTT
n
Development Contract With Nextel.
Extended Infrastructure Agreement With Sprint -
n
Upgrade To EV-DO.
China Unicom – CDMA2000 1X Expansion.
n

New Contracts With Push-to-Talk Over Cellular -
n
Now Have 23 Contracts in 27 Countries.
Slide - 24
.

New “Networks” Organization

• Next Generation IP Networks
• Wireless and Fiber Broadband Access
• Standards Based Cellular Infrastructure
• Embedded Communication Infrastructure
Computing Platform
• Application and Content-Managed Services


Commercial Govt. and Industrial Solutions Segment

Q4 2004 Q4’04 vs. Q4’03

Sales $M $1,280 Up 3%

Operating Earnings $M $207 (14%)

Operating Margin 16.2% (3.2 ppts)


Commercial, Government, and Industrial Segment – Q4

• U.S. Postal Service Award - $294M
• Austrian Ministry Interior Award, Country-Wide TETRA
Network
• Statewide Awards - New Jersey, Wyoming, and North
Dakota
• York County, SC Award For High-Speed Private Data
System
• New Softswitch Technology, MOTOBRIDGE IP, To Be
Deployed By State of Florida
• MeshNetworks, Inc. and CRISNET Acquisitions

Slide - 27
.

New “Government and Enterprise Mobility
Solutions” Organization

• Government
• Enterprise
• Automotive

Slide - 28
.

Integrated Electronic Systems Segment

Q4 2004 Q4’04 vs. Q4’03

Sales $M $703 Up 5%

Operating Earnings $M $42 (33%)

Operating Margin 6.0% (3.9 ppts)

• Received $1.1B in Multi-Year Awards – NA, Asia, Europe
• Force Integration Complete - #1 in Embedded
Communication Computing Market


Broadband Communications Segment

Q4 2004 Q4’04 vs. Q4’03
Sales $M $691 Up 25%

Operating Earnings (Loss) $M $47 Profit vs. Loss



Broadband Communications Segment – Q4

• HD/DVR Units Up 29% Versus Q3’04
• Shipped 1.6M Digital Entertainment Devices –
Best Quarter in 3 Years
• CMTS Revenue Up 65% Sequentially
• Taiwan Broadband Communications Contract
• New Verizon Contract To Provide Digital Voice
Network Infrastructure and Premise Equipment
In Support of Their FTTP Network
• Acquired Ucentric Systems, a Leading Provider
of Home Media Networking Software


New “Connected Home” Organization

• Cable
• Video Over Fiber
• Next Generation STB’s
• Connected Home Solution
– Media Gateway
– Home Monitoring
– Home Security


Connected Home Solutions

Home Monitoring and Control

HD/DVR Dual Tuner Set-top

Motorola Ojo
Personal Video Phone


New Organizational Structure
Motorola

Product Functional
Competencies /
Businesses Leadership
Thought Leadership
Finance
Technology
Mobile Devices

Legal
Strategy / Business
Networks
Development
Human Resources
Government and
Enterprise Mobile
Corporate Marketing
Solutions

Supply Chain
Connected Home
Solutions
Information Technology

Quality / Customer Satisfaction

2005 Priorities
• Execution
• Improve Financial Performance
• Customer “Delight’/Quality
• Market Share/Thought Leadership
• “WOW” Products/End-to End Solutions
• Organizational Efficiency
• Refine and Execute On Strategic Direction


Motorola Q&A Participants

David Devonshire
Ed Zander
Chief Executive Officer Executive Vice President
Chairman of the Board of Directors Chief Financial Officer

Ed Gams
Ron Garriques
Senior Vice President
Executive Vice President
Investor Relations
President, Mobile Devices Business


Use of Non-GAAP Measurements
In addition to the GAAP results provided during this conference call, non-GAAP measurements, which
present operating earnings on a basis excluding charges relating to the separation of Freescale
Semiconductor, Inc, goodwill impairment, and severance charges have been provided.

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 18, 2005
(which attached this afternoon’s earnings press release), and (ii) within the text of the slides that
accompany this webcast. Each of these items can be found on Motorola’s website at
www.motorola.com/investor


Safe Harbor Statement
During this call we have made a number of forward-looking statements that
are based on current expectations and involve risks and uncertainties. Such
forward-looking statements include, but are not limited to, our comments and
answers relating to the following topics: (1) expectations for Motorola sales
and earnings per share for Q1 2005; (2) expectations for sales, profitability,
operating earnings, operating margin and market share for each of
Motorola’s segments; (3) the timing, sales impact and pricing of new
products; and (4) potential benefits from Motorola’s process optimization
activities.

Motorola’s actual results could differ materially from those stated in the
forward looking statements and information about factors that could cause
such differences can be found in this afternoon's press release, on pages 76
through 85 in Motorola’s 2003 Annual Report on Form 10-K and in
Motorola’s other SEC filings.


Reconciliation of Non-GAAP items discussed during this call
Full Year 2004 earnings from continuing operations, excluding items highlighted in quarterly
earnings press releases:

Q4 2004 PBT Tax PAT EPS Impact
Gain on Sale of Investments $ 93 $ 36 $ 57
Goodwill Impairment $ (58) $ - $ (58)
Reorg Reversals $ 28 $ 10 $ 18
Loan Reserve Reversals $ 23 $ 9 $ 14
IPR&D $ (17) $ - $ (17)
$ 14 $ 0.006

Q3, 2004 PBT Tax PAT EPS Impact
Gain on Sale of Investments $ 195 $ 73 $ 122
Debt Retirement Fees $ (81) $ (31) $ (50)
Goodwill Impairment $ (67) $ - $ (67)
Reorg Charges $ (55) $ (20) $ (35)
Tax Audit Settlement $ - $ (39) $ 39
$ 9 $ 0.004

Tax Benefit $ - $ (197) $ 197
Reorg Reversals* $ 21 $ 9 $ 12
Loan Reserve Reversals $ 21 $ 8 $ 13
Deferred Gain $ 20 $ 8 $ 12
Recovery of Impaired Invst $ 20 $ 20
IPR&D $ (15) $ (15)
$ 239 $ 0.099

Gain on Sale of Investments* $ 130 $ 50 $ 80
Reorg Reversals* $ 12 $ 4 $ 8
$ 88 $ 0.036

Total EPS Impact $ 0.14
Reported EPS $ 0.91
EPS Excluding Highlighted Items $ 0.77

* Indicated items have been adjusted to exclude portions attributable to Freescale Semiconductor, Inc.

Full Year 2003 earnings from continuing operations, excluding special items

$ 0.38
2003 Full Year Net Earnings Per Share
$ 0.25
2003 Full Year Net Earnings Per Share Excluding Special Items
$ (0.02)
2003 Full Year Special Items Per Share Attributable to Freescale Semiconductor, Inc.
$ 0.27


Q4 2004 Motorola Inc. Earnings Conference Call Presentation

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