Q2 2005 Motorola Inc. Earnings Conference Call Presentation

Motorola Q2 2005 Earnings
Release Conference Call

July 19, 2005

Slide - 1
Q2 2005 Earnings Release – July 19, 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 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 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 Earnings Release – July 19, 2005 Slide -- 3

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

Slide - 4
.

David Devonshire
Chief Financial Officer
Executive Vice President
Motorola Inc.

Slide - 5
.

Motorola Inc. Q2 Financial Results

Q2 Q2 Fav (Unfav)
2005 2004 Q2’05/Q2’04

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

Earnings Per Share* $0.38 $0.25 52%

* From Continuing Operations


Significant Items Discussed in the Earnings Press Release
Q2 2005 PBT Tax PAT EPS Impact
Reported EPS $0.38

Includes:
Gain on Sale of Investment $375M ($132M) $243M $0.10
Repayment of Loan Previously Reserved $ 30M ($ 11M) $ 19M $0.01
Restructuring ($ 25M) $ 9M ($ 16M) ($0.01)
Change in 2004 China Tax Rate ($ 43M) $ 43M $0.02
$289M $0.12

Q2 2004 PBT Tax PAT EPS Impact
Reported EPS $0.25

Includes:
Reversal of Tax Reserves ($197M) $197M $0.08
Reversals of Accruals for $ 21M $ 8M $ 13M $0.00
Reorganization of Business Costs
$210M $0.08


Motorola Sales Trend
$ Billions
10
8.8 8.8
8.2
7.5
7.4 7.5
8
6.9

5.9
6 5.2
5.1
2003
2004
2005
4

2

0
Q1 Q2 Q3 Q4


Gross Margin
% of Sales

35% 34.5%

32.7% 32.6%

30%
Q2'04 Q1'05 Q2'05

Research & Development Expenses
$ in Millions
30.4%
$900 32.0%
29.6%
28.7%

$600 24.0%

$300 16.0%

9.9% 9.9% 9.6%

$0 8.0%
Q2'04 Q1'05 Q2'05

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


Selling, General and Administrative Expenses

$ in Millions % NSAD

$1,250 20.0%

$1,000 15.0%
14.5%

12.3%
11.6%
$750 10.0%
Q2'04 Q1'05 Q2'05


Motorola Operating Earnings Trend
% of Sales
15.0%

11.5%
11.1%
10.6% 10.4%
9.2%
10.0% 8.6%
2003
6.7%
2004
5.2%
5.0% 2005
4.6%
5.0%

0.0%
Q1 Q2 Q3 Q4


Cash Flow and Debt
Cash Flow Cash & Debt
Q2 Year-End
($ in Billions)
($ in Billions) Q2 2005 2005 2004

Cash/Equiv/Mkt Sec $12.8 $ 10.7
Operating Cash Flow $1.0

Short Term/Current ($0.7) ($0.7)
Debt
Long Term Debt ($4.6) ($4.6)
Free Cash Flow $0.9

TOTAL DEBT ($5.3) ($5.3)

Net Cash/ (Net Debt) $7.5 $5.4


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


Q3 2005 Guidance

Sales $8.9B-$9.1B

Earnings Per Share $0.27-$0.29


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

Units Q2 33.9M Up 41%

Market Share Est. – Q2 18.1% Up 3.3 ppts

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


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.

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



… 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



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


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



Q2 Units Q2
vs. Q2’04 Units %
> 70
GSM

CDMA

< 30
UMTS

iDEN

RAZR CDMA - Korea
RAZR BLACK
RAZR GSM


grow profitably with …
wickedly compelling products …
quality – on time and every time …
platforms – hardware and software …
and, efficiency – in everything we do.

Networks Business – Q2

Q2 2005 Q2’05 vs. Q2’04
Sales $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

Networks – Q2 Highlights
– VIBO 3G/UMTS, HSDPA Ready
– KDDI Softswitch
– Sprint WiMax Trials
– Unlicensed Mobile Access (UMA) Trials
– GSM/GPRS Expansion Contracts


Government & Enterprise Mobility Solutions – Q2

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


Operating Margin 13.3% Down 0.6 ppts

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

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


Connected Home – Q2

Q2 2005 Q2’05 vs. Q2’04

Sales $M $718 Up 35%


Operating Margin 6.5% Down 0.6 ppts


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


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


Roadmap to 13-15% Operating Margin
Improvement Target
Vs. 2004

1. Supply Chain Efficiencies ~ 2-3%

2. Customer Delight ~ .5%

3. R&D ~ .5%-1.0%

4. G&A ~ .5%

> $1 Billion in Efficiencies / Cost Reductions

Motorola Q&A Participants

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

Greg Brown
Ron Garriques
President, Government & Enterprise
President, Mobile Devices Business
Mobility Solutions

Ed Gams
Senior Vice President
Investor Relations


Use of Non-GAAP Measurements
In 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.


Safe Harbor Statement
A 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

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