adobe pdf q1 2003 earnings release presentation

Q1 EARNINGS RELEASE – April 16, 2003

SLIDE 1

Motorola Motorola Q1 2003 Q1 2003 Earnings Earnings Release Release

Conference Conference CallCall


SLIDE 2

Ed GamsEd GamsSenior Vice PresidentSenior Vice President

Director of Investor Relations Director of Investor Relations

Motorola Inc.Motorola Inc.

Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 3

Safe Harbor StatementSafe Harbor StatementA number of forwardA number of forward--looking statements will be made during this conference looking statements will be made during this conference call. Forwardcall. Forward--looking statements are any statements that are not historical looking statements are any statements that are not historical facts. These forwardfacts. These forward--looking statements are based on the current expectations looking statements are based on the current expectations of Motorola and there can be no assurance that such expectationsof Motorola and there can be no assurance that such expectations will prove will prove to be correct. Because forwardto be correct. Because forward--looking statements involve risks and looking statements involve risks and uncertainties, Motorola’s actual results could differ materiallyuncertainties, Motorola’s actual results could differ materially from these from these statements. Information about factors that could cause, and in sstatements. Information about factors that could cause, and in some cases ome cases have caused, such differences can be found in yesterday’s earninhave caused, such differences can be found in yesterday’s earnings press gs press release, on pages Frelease, on pages F--33 through F33 through F--40 of Motorola’s Proxy Statement for the 40 of Motorola’s Proxy Statement for the 2003 annual meeting of stockholders and in Motorola’s other SEC 2003 annual meeting of stockholders and in Motorola’s other SEC filings. filings.

This presentation is being made on the morning of April 16, 20This presentation is being made on the morning of April 16, 2003. The content 03. The content of this presentation contains timeof this presentation contains time--sensitive information that is accurate only sensitive information that is accurate only as of the time hereof. If any portion of this presentation is ras of the time hereof. If any portion of this presentation is rebroadcast, ebroadcast, retransmitted or redistributed at a later date, Motorola will noretransmitted or redistributed at a later date, Motorola will not be reviewing or t be reviewing or updating the material that is contained herein.updating the material that is contained herein.

MOTOROLA and the Stylized M Logo are registered in the US PateMOTOROLA and the Stylized M Logo are registered in the US Patent & nt & Trademark Office. All other product or service names are the proTrademark Office. All other product or service names are the property of their perty of their respective owners. © Motorola, Inc. 2003respective owners. © Motorola, Inc. 2003


SLIDE 4

Chris GalvinChris GalvinChief Executive OfficerChief Executive Officer

Chairman of the Board of DirectorsChairman of the Board of Directors



55--Point Plan for ImprovingPoint Plan for ImprovingMotorola’s Financial Performance Motorola’s Financial Performance

1.1. Persistent Enhancement of the Management Team Persistent Enhancement of the Management Team and Work Environmentand Work Environment

2.2. Aggressive Focus on Strengthening the Balance Aggressive Focus on Strengthening the Balance Sheet and CashSheet and Cash

3.3. Relentless Pursuit of Cost Competitiveness, Quality Relentless Pursuit of Cost Competitiveness, Quality and Customer Satisfaction and Customer Satisfaction

4.4. Growth through Profitable Innovative Products, Growth through Profitable Innovative Products, Systems, Software and Customer Relationships Systems, Software and Customer Relationships

5.5. Continuous Reassessment and Improvement of our Continuous Reassessment and Improvement of our Business Strategies and PortfolioBusiness Strategies and Portfolio


SLIDE 6

David DevonshireDavid DevonshireChief Financial OfficerChief Financial Officer

Executive Vice President,Executive Vice President,Motorola Inc. Motorola Inc.


Motorola Inc. Financial ResultsMotorola Inc. Financial Results

+$0.09+$0.09($0.08)($0.08)$0.01$0.01Earnings Per Share Excluding Earnings Per Share Excluding Special ItemsSpecial Items

$0.07$0.07

$6,043$6,043

Q1 2003Q1 2003Favorable Favorable

(Unfavorable)(Unfavorable)Q1 2002Q1 2002

+$0.27+$0.27($0.20)($0.20)Earnings Per Share GAAPEarnings Per Share GAAP

(2%)(2%)$6,181$6,181Sales $MSales $M

! EPS Met Expectations, Sales Slightly Below Expectations

! EPS Excluding Special Items Improved $0.09, Despite 2% Sales Decline

! GAAP Results Reflect Gain on Sale of 25 Million Nextel Shares


Gross MarginGross Margin(Ongoing Operations Excluding Special Items)

25%

30%

35%

40%

Q1'01 Q3'01 Q1'02 Q3'02 Q1'03

% of Sales% of Sales

27.2%

30.1%

32.7%

25%

30%

35%

40%

Q1'01 Q1'02 Q1'03


MultiMulti--Year Trend of Year Trend of 11stst Quarter Gross Quarter Gross

MarginMargin

! Gross Margin Improved 2.6% Points vs. Q1 2002 and 5.5% Points vs. Q1 2001

! Improvement Reflects Continuing Success of Restructuring/Cost Reduction

! Largest Improvement versus Q1 2002 in SPS and GTSS


Selling, General and Administrative ExpensesSelling, General and Administrative Expenses(Ongoing Operations Excluding Special Items)

$0

$500

$1,000

$1,500

$2,000

Q1'01 Q3'01 Q1'02 Q3'02 Q1'03

$ in Millions$ in Millions

14.8%

18.1%15.4%

$0

$500

$1,000

$1,500

$2,000

Q1'01 Q1'02 Q1'03

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

! Very Tight Budgetary Control on Discretionary First Quarter Spending

SG&A Improved 3.3% Points from Q1 2002

! Improvement Reflects Continuing Success of Restructuring/Cost Reduction

! Lower G&A Partially Offset by Higher Selling/Advertising

$ in Millions$ in MillionsMultiMulti--Year Trend ofYear Trend of11stst Quarter SG&AQuarter SG&A

!


Motorola Work Force TrendMotorola Work Force Trend150 147

136125121

111 107102100 97 94 90

0

20

40

60

80

100

120

140

160

Aug-00

Dec-00

Mar-01

Jun-01

Sep-01

Dec-01

Mar-02

Jun-02

Sep-02

Dec-02

Mar-03

Dec-03Est

Wo

rk F

orc

e(T

ho

usa

nds)

! New Estimate of Approximately 90,000 By or Before End of 2003! Further Decrease Driven By:

! Announced Outsourcing of Portions of IT and HR! Attrition! Selective Work Force Reductions


Research & Development ExpensesResearch & Development Expenses(Ongoing Operations Excluding Special Items)

$0

$500

$1,000

$1,500

$2,000

Q1'01 Q3'01 Q1'02 Q3'02 Q1'03

$ in Millions$ in Millions

15.7%14.7%15.1%

$0

$500

$1,000

$1,500

$2,000

Q1'01 Q1'02 Q1'03

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%$ in Millions$ in Millions

MultiMulti--Year Trend ofYear Trend of11stst Quarter Quarter

R&DR&D

R&D Spending Remains Relatively Stable


Operating Margin %Operating Margin %(Ongoing Operations, Excluding Special Items)

-4%

-2%

0%

2%

4%

6%

8%

Q1'01 Q3'01 Q1'02 Q3'02 Q1'03


2.2%

-2.7%-3.4%-4%

-2%

0%

2%

4%

6%

8%

! Considering Seasonality of Q1, Operating Margin Continues to Trend Upward

! Operating Margin Improved 4.9% Points Vs. Q1 2002, & 5.6% Points Vs. Q1 2001

! Operating Earnings Excl. Special Items Increased $300M from Q1 2002

! Largest Improvement from Q1 2002 in SPS and GTSS


Q1’01 Q1’02

Q1’03

MultiMulti--Year Trend ofYear Trend of11stst Quarter Quarter

Operating MarginOperating Margin


Net Special Items in Q1 2003Net Special Items in Q1 2003

$43$43Restructuring / Employee Separation / Exit CostRestructuring / Employee Separation / Exit Cost

$62 $62 Fixed Asset Impairments Fixed Asset Impairments

($59)($59)Iridium Iridium –– Reduction of Reserves No Longer NecessaryReduction of Reserves No Longer Necessary

$47$47Investment ImpairmentsInvestment Impairments

($225) = $0.06 EPS ($225) = $0.06 EPS NET SPECIAL ITEM – PRETAX

($39)($39)Restructuring Reserves No Longer NecessaryRestructuring Reserves No Longer Necessary

($279)($279)Gains on Sales of InvestmentsGains on Sales of Investments

Pretax ImpactPretax Impact$ millions$ millions

..

!! Net Special Items for 2003 Are Expected to be Approximately $Net Special Items for 2003 Are Expected to be Approximately $0. The 0. The Company Expects to Have Special Item Charges During 2003 RelatedCompany Expects to Have Special Item Charges During 2003 Related to:to:

"" Acquisition Related Charges Associated with Winphoria/Next LevelAcquisition Related Charges Associated with Winphoria/Next Level"" The Initiation of Additional Actions to Improve Cost CompetitiThe Initiation of Additional Actions to Improve Cost Competitivenessveness

!! Reductions to Reserves Previously Established Through SpecialReductions to Reserves Previously Established Through Special Item Charges Item Charges Have Been Consistently Reflected as a Special ItemHave Been Consistently Reflected as a Special Item. .


Cash FlowCash Flow

$0.7$0.7

($0.6)($0.6)

$1.3$1.3

($1.1) ($1.1)

$2.4$2.4

Annual Annual 20022002

$0.4$0.4

($0.1)($0.1)

$0.5$0.5

($0.2)($0.2)

$0.7$0.7

Q1 Q1 20032003

$0.6$0.6

($1.0)($1.0)

$1.6$1.6

($0.8)($0.8)

$2.4$2.4

Fcst Fcst Annual Annual 20032003

Cash for Restructuring/OtherCash for Restructuring/Other

($ in Billions)($ in Billions)

Free Cash FlowFree Cash Flow

Capital ExpendituresCapital Expenditures

Operating Cash FlowOperating Cash Flow

Operating Cash Flow without Operating Cash Flow without Restructuring/Other Restructuring/Other

!! Ninth Consecutive Quarter of Positive Operating Cash FlowNinth Consecutive Quarter of Positive Operating Cash Flow!! Expect Annual Depreciation of Approximately $1.6BExpect Annual Depreciation of Approximately $1.6B!! Expect Cash Contribution to Pension Fund of Approximately $200Expect Cash Contribution to Pension Fund of Approximately $200MM!! Expect Neutral/Slightly Positive Working Capital Impact to CasExpect Neutral/Slightly Positive Working Capital Impact to Cash Flow h Flow


Average Working Capital / Sales RatioAverage Working Capital / Sales RatioAccounts Receivable + Inventory Accounts Receivable + Inventory -- Accounts PayableAccounts Payable

21.6%22.7% 22.3% 21.9%

19.9%18.4% 17.4% 17.0% 17.0% 17.1%

10.0%

15.0%

20.0%

25.0%

Q4 00 Q1 01 Q2 01 Q3 01 Q4 01 Q1 02 Q2 02 Q3 02 Q4'02 Q1'03

## Accounts Receivable Performance Remains GoodAccounts Receivable Performance Remains Good## Inventory Performance Continues to Need ImprovementInventory Performance Continues to Need Improvement

% to Sales% to Sales

Long TermLong TermTarget of 12%Target of 12%4 Quarter Rolling Average4 Quarter Rolling Average


Cash and DebtCash and Debt$ in Billions

16.7%16.7%

$2.3$2.3

($6.6)($6.6)

$8.8$8.8

$1.2$1.2

$6.0$6.0

$1.6$1.6

Dec. 2002Dec. 2002

$0.9$0.9$0.8$0.8Short Term/Current DebtShort Term/Current Debt

$7.2$7.2$6.0$6.0Long Term DebtLong Term Debt

$1.2$1.2$1.2$1.2Long Term Debt Linked to Long Term Debt Linked to Equity UnitsEquity Units

18.4%18.4%

$3.1$3.1

($6.2)($6.2)

$9.2$9.2

Dec 2001Dec 2001Mar. 2003Mar. 2003

12.3%12.3%NET DEBT/ NET NET DEBT/ NET DEBT+EQUITYDEBT+EQUITY

$1.6$1.6NET DEBTNET DEBT

($6.4)($6.4)Cash & Cash EquivalentsCash & Cash Equivalents

$8.0$8.0TOTAL DEBTTOTAL DEBT

! Total Debt Down $800M in Q1 2003, Net Debt Down $700M! PURS ($825M) Retired February 2003! Net Debt Ratio Improved by Over 4 Percentage Points Compared To Dec. 2002


Low Level of Debt Maturities Low Level of Debt Maturities (Excludes Commercial Paper)(Excludes Commercial Paper)

2003/2004/20052003/2004/2005

Strong Position to Meet Debt Maturities With $6.4B in CashStrong Position to Meet Debt Maturities With $6.4B in Cash

$0.0

$0.5

$1.0

$1.5

Q2/Q3/Q4 2003 2004 2005

~$0.4~$0.5

~$0.2

$ in Billions


SLIDE 18

Mike ZafirovskiMike ZafirovskiPresident andPresident and

Chief Operating OfficerChief Operating Officer



## Commitment to Continued Earnings And Balance Commitment to Continued Earnings And Balance Sheet ImprovementSheet Improvement

―― Conservatively Managing Cost Structure Conservatively Managing Cost Structure

―― Continued Focus on Positive Cash Flow Continued Focus on Positive Cash Flow

―― Drive Continuous ImprovementDrive Continuous Improvement

## Return to GrowthReturn to Growth

## Accelerate Addressing Opportunities and Fixing Accelerate Addressing Opportunities and Fixing Strategic IssuesStrategic Issues

Motorola Objectives for 2003Motorola Objectives for 2003

90% of Employee Bonuses Based on AchievingOperating Earnings and Cash Flow Goals


Performance of Motorola’s 6 Major SectorsPerformance of Motorola’s 6 Major Sectors

Number of SectorsNumber of Sectors

66

55

55

Q1 2003Q1 2003ActualActual

2003 Annual 2003 Annual EstimateEstimate

Q2 2003Q2 2003EstimateEstimate

6655Positive Operating Cash FlowPositive Operating Cash Flow

6655Positive Operating EarningsPositive Operating Earnings

(Excluding Special Items)(Excluding Special Items)

554/54/5Operating EarningsOperating Earnings

Year Over Year ImprovementYear Over Year Improvement


Continued Improvement in a Tough Environment


SLIDE 21

Segment Segment Updates & GuidanceUpdates & Guidance


Personal Communications SegmentPersonal Communications Segment( Excluding Special Items)

4.4%4.4%

$108$108

$2,447$2,447

$2,495$2,495



--4.4%4.4%Operating MarginOperating Margin

2%2%$106$106Operating Earnings $MOperating Earnings $M

2%2%$2,406$2,406Sales $MSales $M

(6%)(6%)$2,644$2,644Orders $MOrders $M

! Excluding Discontinued Paging Business from Q1 2002:! Sales Up 4%, Orders down 2%, Operating Earnings up 11%

! Sales & Orders Near Parity in Q1 Now That New Order Process In Place! Higher Gross Margin Offset By Investment in R&D, Selling/Advertising

! Internet Software Content Group Integrated Into PCS

! Positive Operating Cash Flow During Q1 2003 and In 4 of Last 5 Quarters


Personal Communications SegmentPersonal Communications SegmentUnits and Market ShareUnits and Market Share

~16%~16%

14.2 Million14.2 Million

Q1 2002Q1 2002

~19%~19%

16.7 Million16.7 Million

Q1 2003Q1 2003

18%18%Unit ShipmentsUnit Shipments

Up 3 PointsUp 3 PointsMarket ShareMarket Share

Growth Growth


Personal Communications SegmentPersonal Communications SegmentQ1 2003 Estimated SellQ1 2003 Estimated Sell--In Market ShareIn Market Share

DownDownDownDownAsiaAsia

Up SlightlyUp SlightlyUp SlightlyUp SlightlyEuropeEurope

Down SlightlyDown SlightlyUp StronglyUp StronglyLatin AmericaLatin America

Up SlightlyUp Slightly

UpUp

Comparedto Q4 2002

Comparedto Q1 2002

UpUp

Up StronglyUp StronglyNorth AmericaNorth America

WorldwideWorldwide

!! Became a Clear #1 in Both U.S. and CanadaBecame a Clear #1 in Both U.S. and Canada!! Share is Down In China, But We Remain # 1 by More than 5 % PoShare is Down In China, But We Remain # 1 by More than 5 % Pointsints!! Local Companies in China Continue to Gain ShareLocal Companies in China Continue to Gain Share!! Modest Share Gain in EuropeModest Share Gain in Europe!! Latin America Share More than Double Q102, Modest Decline froLatin America Share More than Double Q102, Modest Decline from Q402m Q402


China Market ActionsChina Market Actions!Strong New Product Portfolio

" Recently Accelerated Launch Dates$ 3 New Products Launched In Q1$ 2 More In Q2$ 9 More In Q3

! Supporting New Product Launches with Digital Content and Personalization Features! Increasing R&D Resources Focused on China Market! Strengthening Distribution

" Aligning Support Around Distributors AND Operators" Extending Distribution Coverage of Smaller Cities" Initiatives to Work Directly with Large Retailers" Closer Collaboration with Operators


Personal Communications SegmentPersonal Communications SegmentUnit Shipments by TechnologyUnit Shipments by Technology

Down 5%Down 5%GSM Unit ShipmentsGSM Unit Shipments

Up 58%Up 58%CDMA Unit ShipmentsCDMA Unit Shipments

Up 315%Up 315%TDMA Unit ShipmentsTDMA Unit Shipments

Down 7%Down 7%iDEN Unit ShipmentsiDEN Unit Shipments

Q1 2003 Change from Q1 2003 Change from Q1 2002Q1 2002

! CDMA/TDMA Growth Driven By Americas

! GSM Weakness in Asia Partially Offset by Strength in Americas

! iDEN Decline From Ongoing Shift to Direct Fulfillment Program With Nextel


NEW NEW CCOOLLOORR PHONES SHIPPING IN Q1PHONES SHIPPING IN Q1

A388c PDA

GSM(Shipping in Asia)

C350

GSM(Shipping in Asia

and Europe)


E380V295Integrated Camera

E365

Camera

T725EDGE

V600Integrated Camera

A760

PDA

NEW NEW CCOOLLOORR GSM PHONES SHIPPING IN 3GSM PHONES SHIPPING IN 3rdrd QUARTERQUARTER

E390IntegratedCamera, 3D Audio

Integrated Java+Linux


E310(Q3 2003)

NEW NEW CCOOLLOORR CDMA PHONES SHIPPING IN 2CDMA PHONES SHIPPING IN 2NDND HALFHALF

… and More Than 10 to Come in the

Second Half of 2003. Most Will Be Announced

During Q2V810Integrated

Camera(Q4 2003)


Personal Communications Segment Personal Communications Segment Average Selling PriceAverage Selling Price

Down 5% from Q4 2002 Down 12% from Q1 2002

Q1 2003Q1 2003

ASP Decline Primarily Due To Higher Mix of Entry Level Products

Down ~5%Annual 2003 EstimateAnnual 2003 Estimate

ASP’s Expected to Increase Slightly in Second Half of 2003 as a Higher Percentage of Color, Camera and Other Feature Rich Phones Ship


Handset Industry PerspectiveHandset Industry Perspective

Q1 2003 Sell-Through Estimate~90 to 93 Million Units

Global Industry in Channel Inventory! Industry Inventory Was Reduced by Approximately 4 to 5 Million Units in Q1! Industry Inventory in the Channel is Approximately 9 Weeks! Highest Weeks of Industry Inventory in Asia at 11 to 12 Weeks

! China Higher than Elsewhere in Asia

Motorola in Channel Inventory! Motorola Global Channel Inventory Approximately 7 Weeks ! Within Historical Industry Norm of 6 to 8 Weeks! Motorola Channel Inventory in Asia is Within Normal Range of 6-8 Weeks


2003 Industry Handset Forecast2003 Industry Handset ForecastSellSell--Through UnitsThrough Units

Q2 2003~98 Million to 103 Million

Annual 2003~430 Million


Personal Communications Segment Personal Communications Segment Q2 2003 ForecastQ2 2003 Forecast

UpUpUp SlightlyUp SlightlySalesSales

Compared to Compared to Q1 2003Q1 2003


HigherHigherUp SlightlyUp SlightlyOperating Margin % Operating Margin % (Excluding Special Items) (Excluding Special Items)

! Expect Competitive Environment in China to be Comparable to Q1 2003

! China Market Channel Inventory, While Down Approx. 1 Million Units Still is Too High

• GAAP Operating Margin % is Expected to be Higher in Q2 2003 Compared to Q2 2002 and Higher Compared to Q1 2003. Special Items Excluded Above are Described Further in the Company's Q1 2003 Earnings Press Release.• The terms Flat, Slightly, Substantially and Very Substantially are Only Used in Forecasting Sales on this Slide • Flat Indicates a Variance of 0.5% or Less, Slight or Slightly Indicates a Variance of up to 5%, Substantial or Substantially Indicates a Variance From 15% up to 25%. Very Substantial or Very Substantially Indicates a Variance of 25% or More.


Semiconductor Products SegmentSemiconductor Products Segment( Excluding Special Items)

(6.4%)(6.4%)

($74)($74)

$1,151$1,151

$1,104$1,104



13.7 % Points13.7 % Points(20.1%)(20.1%)Operating MarginOperating Margin

67%67%($227)($227)Operating Earnings $MOperating Earnings $M

2%2%$1,127$1,127Sales $MSales $M

(16%)(16%)$1,319$1,319Orders $MOrders $M

! Order Decline is Indicative of Ongoing Weakness in Served Markets ! Book to Bill Ratio of 0.96! Lower Operating Loss Driven by:

! Higher Gross Margin, Lower Operating Expenses! Sales Up Substantially in Wireless, Up in Transportation and Down Substantially in Networking/Computing.! Positive Operating Cash Flow During Q1 2003 and In 4 of Last 5 Quarters


SLIDE 35

SPS SPS –– Other DevelopmentsOther Developments

## Announced 11th Merchant Market Chipset CustomerAnnounced 11th Merchant Market Chipset Customer

## Motorola Wafer Fab. In Scotland Closing by End of Motorola Wafer Fab. In Scotland Closing by End of April 2003. Wafer Fabs Will then Total 8April 2003. Wafer Fabs Will then Total 8

## Cost Reduction Activities will Continue To Be Cost Reduction Activities will Continue To Be Implemented in 1st Half 2003. Breakeven Sales Implemented in 1st Half 2003. Breakeven Sales Expected To Be Reduced to Approximately $5.0 Billion.Expected To Be Reduced to Approximately $5.0 Billion.

## Capex Expected to be $350M in 2003Capex Expected to be $350M in 2003

## We Now Forecast Our Served Semiconductor We Now Forecast Our Served Semiconductor Markets to Grow Approximately 5Markets to Grow Approximately 5--10% in 200310% in 2003


Semiconductor Products Segment Semiconductor Products Segment Q2 2003 ForecastQ2 2003 Forecast

Up SlightlyUp SlightlyDownDownSalesSales



Smaller LossSmaller LossSmaller LossSmaller LossOperating Margin % Operating Margin % (Excluding Special Items) (Excluding Special Items)

Compared to Q1 2003

! Sales Expected to be Up in Transportation, Flat in Wireless & Networking

! Operating Margin Expected to Improve Due to Leverage on Higher Sales

• GAAP Operating Margin % is Expected to be a Smaller Loss in Q2 2003 Compared to Q2 2002 and Compared to Q1 2003. Special Items Excluded Above are Described Further in the Company's Q1 2003 Earnings Press Release.• The terms Flat, Slightly, Substantially and Very Substantially are Only Used in Forecasting Sales on this Slide • Flat Indicates a Variance of 0.5% or Less, Slight or Slightly Indicates a Variance of up to 5%, Substantial or Substantially Indicates a Variance From 15% up to 25%. Very Substantial or Very Substantially Indicates a Variance of 25% or More.


Global Telecom Solutions SegmentGlobal Telecom Solutions Segment( Excluding Special Items)

2.4%2.4%

$23$23

$952$952

$935$935



7.1 % Points7.1 % Points(4.7%)(4.7%)Operating MarginOperating Margin

>100%>100%($51)($51)Operating Earnings $MOperating Earnings $M

(12%)(12%)$1,085$1,085Sales $MSales $M

(28%)(28%)$1,293$1,293Orders $MOrders $M

! Decline in Orders and Sales Indicative of Industry Condition! Profitability Driven by Strong Execution:

! Higher Gross Margin & Lower Operating Expenses! Four Consecutive Quarters with Positive Operating Earnings! Positive Operating Cash Flow During Q1 2003 and In 4 of Last 5 Quarters


SLIDE 38

GTSS GTSS –– Other DevelopmentsOther Developments

## Breakeven Sales Now Reduced to Slightly Below $4.0B.Breakeven Sales Now Reduced to Slightly Below $4.0B.

## Announced Acquisition of WinphoriaAnnounced Acquisition of Winphoria

## Adds Next Generation PacketAdds Next Generation Packet--based Switching to based Switching to Wireless Networking Solutions PortfolioWireless Networking Solutions Portfolio

## Adding SoftAdding Soft--Switch, to Supplement Existing Outsourced Switch, to Supplement Existing Outsourced Circuit Switch Portfolio, Addresses LongCircuit Switch Portfolio, Addresses Long--Standing Need Standing Need for Core Switching Offering from GTSSfor Core Switching Offering from GTSS

## Wireless Infrastructure Industry Revenue Expected to Wireless Infrastructure Industry Revenue Expected to Decline 6Decline 6--12% in 2003. 12% in 2003.


Global Telecom Solutions Segment Global Telecom Solutions Segment Q2 2003 ForecastQ2 2003 Forecast

UpUpDown SubstantiallyDown SubstantiallySalesSales



FlatFlatFlatFlatOperating Margin % Operating Margin % (Excluding Special Items) (Excluding Special Items)

! Financial Performance is Stabilizing on a Sequential Basis

• GAAP Operating Margin % is Expected to be a Smaller Loss in Q2 2003 Compared to Q2 2002 and a Loss Compared to a Profit in Q1 2003. Special Items Excluded Above are Described Further in the Company's Q1 2003 Earnings Press Release.• The terms Flat, Slightly, Substantially and Very Substantially are Only Used in Forecasting Sales on this Slide • Flat Indicates a Variance of 0.5% or Less, Slight or Slightly Indicates a Variance of up to 5%, Substantial or Substantially Indicates a Variance From 15% up to 25%. Very Substantial or Very Substantially Indicates a Variance of 25% or More.


Commercial Govt. and Industrial System SegmentCommercial Govt. and Industrial System Segment( Excluding Special Items)

8.0%8.0%

$69$69

$863$863

$905$905



1.8% Points1.8% Points6.2%6.2%Operating MarginOperating Margin


8%8%$802$802Sales $MSales $M

3%3%$877$877Orders $MOrders $M

! Orders, Sales, Operating Earnings, Operating Margin All Increased! Increase in Operating Earnings Driven by:

! Sales Growth Driven by Strength in North America! Higher Gross Margin

! Positive Operating Cash Flow During Q1 2003 and In 4 of Last 5 Quarters


SLIDE 41

CGISS CGISS –– Other DevelopmentsOther Developments

## U.S. Federal Government Business ImprovingU.S. Federal Government Business Improving

## U.S. State and Local Government Business Still WeakU.S. State and Local Government Business Still Weak

## International Business Improving International Business Improving –– Q1 Tetra ContractsQ1 Tetra Contracts−− Hong Kong Hong Kong

−− Taiwan Taiwan −− UK UK −− VenezuelaVenezuela−− Mainland China Mainland China −− Singapore Singapore

!! 2003 Two2003 Two--Way Radio Industry Growth Forecasted to be Way Radio Industry Growth Forecasted to be 22--8%8%


Commercial Govt. and Industrial System SegmentCommercial Govt. and Industrial System SegmentQ2 2003 ForecastQ2 2003 Forecast

UpUpUp SlightlyUp SlightlySalesSales



HigherHigherHigherHigherOperating Margin % Operating Margin % (Excluding Special Items) (Excluding Special Items)

• GAAP Operating Margin % is Expected to be a Profit in Q2 2003 Compared to a Loss in Q2 2002 and a Higher Profit in Q2 2003 Compared to Q1 2003. Special Items Excluded Above are Described Further in the Company's Q1 2003 Earnings Press Release.• The terms Flat, Slightly, Substantially and Very Substantially are Only Used in Forecasting Sales on this Slide • Flat Indicates a Variance of 0.5% or Less, Slight or Slightly Indicates a Variance of up to 5%, Substantial or Substantially Indicates a Variance From 15% up to 25%. Very Substantial or Very Substantially Indicates a Variance of 25% or More.


Integrated Electronic Systems SegmentIntegrated Electronic Systems Segment( Excluding Special Items)

4.4%4.4%

$23$23

$521$521

$529$529

Q1 2003Q1 2003% Favorable % Favorable (Unfavorable)(Unfavorable)Q1 2002Q1 2002

0.1 % Points0.1 % Points4.3%4.3%Operating MarginOperating Margin


2%2%$509$509Sales $MSales $M

(7%)(7%)$570$570Orders $MOrders $M

! Sales, Operating Earnings and Operating Margin Slightly Higher

! Sales Growth in Automotive, Largely Offset By Declines in Other Groups

! Operating Cash Flow Slightly Positive During Q1 2003 and Positive In 4 of Last 5 Quarters


Integrated Electronic Systems Segment Integrated Electronic Systems Segment Q2 2003 ForecastQ2 2003 Forecast

Up SlightlyUp SlightlyDown SlightlyDown SlightlySalesSales



HigherHigherSlightly HigherSlightly HigherOperating Margin % Operating Margin % (Excluding Special Items) (Excluding Special Items)

! Continued Strong Performance in Automotive Compared to Q2 2002

! Compared to Q1 2003 Sales Expected to be Up Slightly in Energyand Motorola Computer Group and Flat in Automotive

• GAAP Operating Margin % is Expected to be a Profit in Q2 2003 Compared to a Loss in Q2 2002 and a Higher Profit in Q2 2003 Compared to Q1 2003. Special Items Excluded Above are Described Further in the Company's Q1 2003 Earnings Press Release.• The terms Flat, Slightly, Substantially and Very Substantially are Only Used in Forecasting Sales on this Slide • Flat Indicates a Variance of 0.5% or Less, Slight or Slightly Indicates a Variance of up to 5%, Substantial or Substantially Indicates a Variance From 15% up to 25%. Very Substantial or Very Substantially Indicates a Variance of 25% or More.


Broadband Communications SegmentBroadband Communications Segment( Excluding Special Items)

6.4%6.4%

$26$26

$405$405

$343$343

Q1 2003Q1 2003% Favorable % Favorable (Unfavorable)(Unfavorable)Q1 2002Q1 2002

--2.6 % Points2.6 % Points9.0%9.0%Operating MarginOperating Margin

(45%)(45%)$47$47Operating Earnings $MOperating Earnings $M

(23%)(23%)$525$525Sales $MSales $M

(36%)(36%)$537$537Orders $MOrders $M

! Sales Decline Driven by Lower Capital Expenditures by Cable Operators

! Operating Margin Decline Due to Decrease in Sales Partially Offset by Lower Operating Expenses.

! Positive Operating Cash Flow During Q1 2003 and In Last 5 Quarters

! Remains Technology and Market Share Leader in Cable Equipment


SLIDE 46

BCS BCS –– Other DevelopmentsOther Developments

## Shipped 1.1 Million Set Top Boxes During Q1 2003, Down 300K frShipped 1.1 Million Set Top Boxes During Q1 2003, Down 300K from Q102om Q102

## Shipped 1.0 Million Cable Modems During Q1 2003, Up 400K from Shipped 1.0 Million Cable Modems During Q1 2003, Up 400K from Q102Q102

## Still Investing in Brand Advertising and R&D for BroadbandStill Investing in Brand Advertising and R&D for Broadband

## Expanded Motorola’s Presence in the Consumer Market, LaunchingExpanded Motorola’s Presence in the Consumer Market, Launching the the Broadband “Connected Home” StrategyBroadband “Connected Home” Strategy

## Significant Win from MTV for Their MultiSignificant Win from MTV for Their Multi--network Conversion from Analog to network Conversion from Analog to DigitalDigital

# Two Major Technology Wins in Mexico� Cablevisión Monterrey -Infrastructure & Digital Set-tops

� Multioperadora de Sistemas -Motorola IP Technology for the Delivery of High-Speed Data

!! Broadband Equipment Industry Revenue Expected to decline 10%Broadband Equipment Industry Revenue Expected to decline 10%--15% in 15% in 2003 as Cable Operators Continue To Reduce Capital Expenditures2003 as Cable Operators Continue To Reduce Capital Expenditures


Broadband Communications Segment Broadband Communications Segment Q2 2003 ForecastQ2 2003 Forecast

Flat to Up SlightlyFlat to Up SlightlyDown Very Down Very SubstantiallySubstantially

SalesSales



FlatFlatLowerLowerOperating Margin % Operating Margin % (Excluding Special Items) (Excluding Special Items)

! Sales Decline Compared to Prior Year Driven by Lower Capital Spending from Cable Operators, Product Mix and Reduced ASPs

! Operating Margins Compared to prior Year Impacted by Lower Sales and ASP Reductions, Partially Offset by Lower Operating Expenses

• GAAP Operating Margin % is Expected to be Lower in Q2 2003 Compared to Q2 2002 and Lower Compared to Q1 2003. Special Items Excluded Above are Described Further in the Company's Q1 2003 Earnings Press Release.• The terms Flat, Slightly, Substantially and Very Substantially are Only Used in Forecasting Sales on this Slide • Flat Indicates a Variance of 0.5% or Less, Slight or Slightly Indicates a Variance of up to 5%, Substantial or SubstantiallyIndicates a Variance From 15% up to 25%. Very Substantial or Very Substantially Indicates a Variance of 25% or More.


## Commitment to Continued Earnings And Balance Commitment to Continued Earnings And Balance Sheet ImprovementSheet Improvement

―― Conservatively Managing Cost Structure Conservatively Managing Cost Structure

―― Continued Focus on Positive Cash Flow Continued Focus on Positive Cash Flow

―― Drive Continuous ImprovementDrive Continuous Improvement

## Return to GrowthReturn to Growth

## Accelerate Addressing Opportunities and Fixing Accelerate Addressing Opportunities and Fixing Strategic IssuesStrategic Issues

Motorola Objectives for 2003Motorola Objectives for 2003

90% of Employee Bonuses Based on AchievingOperating Earnings and Cash Flow Goals


Motorola, Inc.Motorola, Inc.Driving the Next Step Change in our Cost CompetitivenessDriving the Next Step Change in our Cost Competitiveness

Phase IPhase IMostly Restructuring ActionsMostly Restructuring Actions

• Staff Reductions• Facility Closures

• Outsourcing

Approximately $4B Cost Reductions

2001/2002

Phase IIPhase IIDigital Six SigmaDigital Six Sigma

•Cost of Poor Quality•Sourcing Effectiveness

• New Product Intro./ Eng. Effectiveness

Targeting $3 BCost Reductions

2003/2004


SLIDE 50

Guidance UpdateGuidance Update

David DevonshireDavid DevonshireChief Financial OfficerChief Financial Officer

Executive Vice President,Executive Vice President,Motorola Inc. Motorola Inc.


Q2 2003 GuidanceQ2 2003 Guidance

$0.02 $0.02 --$0.04$0.04$0.01 $0.01 --$0.03$0.03$0.01$0.01$0.02$0.02$0.03 $0.03 --$0.05$0.05Earnings Per ShareEarnings Per Share

$0.07$0.07

$6.0B$6.0B

Q1 Q1 20032003

Favorable (Unfavorable)Favorable (Unfavorable)

$0.01$0.01--$0.03$0.03

$6.4B$6.4B--$6.6B$6.6B

Q2 2003Q2 2003 Q1 2003Q1 2003Q2 2002Q2 2002Q2 Q2 20022002

($0.04)($0.04)--($0.06)($0.06)$1.03 $1.03 --$1.05$1.05($1.02)($1.02)Earnings Per ShareEarnings Per Share

6%6%--9%9%(4%)(4%)--(7%)(7%)$6.9B$6.9BSalesSales

(on a GAAP Basis)(on a GAAP Basis)


! Versus Q2 2002 Improvement in Operating Earnings On Sales Decline of 4-7% Due to Beneficial Results of Restructuring and Cost Reductions! Expect Special Items Charge of Approx. $0.02 Per Share Consisting Mostly of:

" Acquisition Related Charges for Winphoria/Next Level Transactions" Charges For Additional Cost Reduction Actions Which Could Not Be Recorded in Q1 2003


! Sales Guidance Lowered Slightly Due to Slow Pace of Economic Recovery which Slightly Reduced our Industry Forecasts for Handsets, Semiconductors and Broadband! Sales Growth Expected in PCS, CGISS, SPS and IESS ! Expect Positive Operating Earnings and Positive Operating Cash Flow in

Each of our Six Major Business Segments! Earnings Leverage Potential When Served Markets Improve

Annual 2003 GuidanceAnnual 2003 Guidance

~$0.40~$0.40

~$0.40~$0.40

~$28.0B~$28.0B

PreviousPreviousGuidanceGuidance

($1.78)($1.78)

($0.33)($0.33)

$30.5B$30.5B

20012001

$0.35 to $0.40$0.35 to $0.40Equal To Or Greater Equal To Or Greater Than EPS Excluding Than EPS Excluding

Special ItemsSpecial Items

$0.35 to $0.40$0.35 to $0.40

$27.5 to $28.0B$27.5 to $28.0B

20032003 20022002

($1.09)($1.09)

Earnings Per Share Earnings Per Share

$0.12$0.12Earnings Per Share Earnings Per Share

$27.3B$27.3BSalesSales

(Excluding Special Items)

(GAAP)(GAAP)


Estimated Quarterly EPSEstimated Quarterly EPS

-$0.15

-$0.10

-$0.05

$0.00

$0.05

$0.10

$0.15

$0.20

$0.25

Q1 Q2 EST Q3 EST Q4 EST

2002 2003 Lower End of Range 2003 Upper End of Range

(Excluding Special Items)

2nd Half Increase in EPS and Operating Margin Driven By:! Continued Implementation of Margin Improvement Programs in PCS

(Platform Strategy, Supply Chain Savings and Q3/Q4 2003 New Products)! Volume Leverage Expected To Return SPS to Profitability in 2nd Half of 2003! Impact of Additional Cost Reduction Actions To Be Implemented in 2003! Normal Seasonal Q4 Operating Margin Improvements In PCS and CGISS


SLIDE 54

Chris GalvinChris GalvinChief Executive OfficerChief Executive Officer

Chairman of the Board of DirectorsChairman of the Board of Directors

Motorola,Inc.Motorola,Inc.


Motorola Q&A ParticipantsMotorola Q&A Participants

Mike ZafirovskiMike ZafirovskiChris GalvinChris GalvinChief Executive OfficerChief Executive Officer

Chairman of the Board of DirectorsPresident President

Chief Operating OfficerChairman of the Board of Directors Chief Operating Officer

Ed GamsEd GamsDavid DevonshireDavid DevonshireSenior Vice PresidentSenior Vice President

Director of Investor RelationsExecutive Vice PresidentExecutive Vice President

Chief Financial Officer Director of Investor RelationsChief Financial Officer


Use of NonUse of Non--GAAP MeasurementsGAAP Measurements

In addition to the GAAP results provided during this conference call, non-GAAP measurements, which present operating results on a basis excluding special items, have been provided. Management, as well as certain investors, use these results of

operations, excluding special items, to measure Motorola's current and future financial performance. The non-GAAP measurements do not replace the presentation

of Motorola's GAAP financial results. These measurements provide supplemental information to assist investors in analyzing Motorola's financial position and results of

operations. Motorola has chosen to provide this information to investors to enable them to perform meaningful comparisons of past, present and future operating results

and as a means to emphasize the results of core on-going operations. Details of the special 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 8, 2003, (ii) in the Form 8-K filed by Motorola on April 15, 2003 (which attached yesterday’s earnings press release, and (iii) 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

http://www.motorola.com/investor

http://www.motorola.com/investor


Safe Harbor StatementSafe Harbor StatementDuring 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 Q2 2003 and full year 2003; (2) the expected timing for completion of our restructuring actions, including the reduction of our employee population and the closing of facilities; (3) the impact of our restructuring actions on our financial performance, including cost savings; (4) expectations for Motorola’s operating cash flow and free cash flow during 2003; (5) selling, general and administrative expenses; (6) research and development expenses; (7) capital expenditures; (8) depreciation expense; (9) working capital plans; (10) expectations for sales, profitability, orders, cash flow, operating earnings, operating margin and market share for each of Motorola’s segments; (11) trends in average selling prices; (12) the timing, sales impact and pricing of new products; (13) order and backlog positions over the next several quarters, including the impact of new business models on these numbers; (14) projected worldwide industry shipments of wireless handsets; (15) the future direction of Chinese markets; (16) worldwide semiconductor industry growth; (16) the continued implementation and effectiveness of the “asset-light” semiconductor business model; (17) worldwide wireless infrastructure industry growth; (18) growth in the worldwide two-way radio industry; (19) timing and impact of governmental spending on homeland security, and (20) projected broadband equipment industry revenue.

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 yesterday’s press release, on pages F-33 through F-40 of Motorola’s Proxy Statement for the 2003 annual meeting of stockholders and in Motorola’s other SEC filings.

adobe pdf q1 2003 earnings release presentation

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