q3 2002 earnings release presentation

Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002

SLIDE 1

Motorola Motorola –– Q3 2002 Q3 2002 Earnings Release Earnings Release Conference CallConference Call


SLIDE 2

Ed GamsEd GamsSenior Vice PresidentSenior Vice President

Director of Investor Relations Director of Investor Relations Motorola Inc.Motorola Inc.


SLIDE 3

Safe Harbor StatementSafe Harbor Statement““ A number of forwardA number of forward--looking statements will be made during this conference call. looking statements will be made during this conference call.

ForwardForward--looking statements are any statements that are not historical falooking statements are any statements that are not historical facts. cts. These forwardThese forward--looking statements are based on the current expectations of looking statements are based on the current expectations of Motorola and there can be no assurance that such expectations wiMotorola and there can be no assurance that such expectations will prove to be ll prove to be correct. Because forwardcorrect. Because forward--looking statements involve risks and uncertainties, looking statements involve risks and uncertainties, Motorola’s actual results could differ materially from these staMotorola’s actual results could differ materially from these statements. tements. Information about factors that could cause, and in some cases haInformation about factors that could cause, and in some cases have caused, such ve caused, such differences can be found in yesterday’s earnings press release, differences can be found in yesterday’s earnings press release, on pages Fon pages F--35 35 through Fthrough F--40 of Motorola’s Proxy Statement for the 2002 annual meeting of 40 of Motorola’s Proxy Statement for the 2002 annual meeting of stockholders and in Motorola’s other SEC filings.”stockholders and in Motorola’s other SEC filings.”

This presentation is being made on the morning of October 16, This presentation is being made on the morning of October 16, 2002. The content 2002. The content of this presentation contains timeof this presentation contains time--sensitive information that is accurate only as of sensitive information that is accurate only as of the time hereof. If any portion of this presentation is rebroadthe time hereof. If any portion of this presentation is rebroadcast, retransmitted or cast, retransmitted or redistributed at a later date, Motorola will not be reviewing orredistributed at a later date, Motorola will not be reviewing or updating the updating the material that is contained herein." 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. 2002.respective owners. © Motorola, Inc. 2002.


SLIDE 4

Chris GalvinChris GalvinChief Executive OfficerChief Executive Officer

Chairman of the Board of DirectorsChairman of the Board of DirectorsMotorola Inc.Motorola Inc.


SLIDE 5

!! “Discussion” Closely Tied to Webcast Slides“Discussion” Closely Tied to Webcast Slides

!! More NumbersMore Numbers

!! More Time for Q&A More Time for Q&A

Today’s PresentationToday’s Presentation


SLIDE 6

55--Point Plan for Point Plan for Building Investor ValueBuilding Investor Value

1.1. Continual Strengthening of Management TeamContinual Strengthening of Management Team

2.2. Aggressive Focus on the Balance SheetAggressive Focus on the Balance Sheet

3.3. Lowering BreakLowering Break--Even Sales Level by Reducing SG&A Even Sales Level by Reducing SG&A and Manufacturing Costsand Manufacturing Costs

4.4. Growth through Innovative Products, Software Growth through Innovative Products, Software Applications, Customer RelationshipsApplications, Customer Relationships

5.5. Constant Evaluation of Strategic Options and Constant Evaluation of Strategic Options and Business PortfolioBusiness Portfolio


SLIDE 7

David DevonshireDavid DevonshireChief Financial OfficerChief Financial Officer

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


SLIDE 8

Motorola Inc. Financial ResultsMotorola Inc. Financial Results(Ongoing Operations, Excluding Special Items and Exited Businesses)

$0.02$0.02

2.9%2.9%

$193$193

$6,741$6,741

Q2 2002Q2 2002

% Favorable % Favorable (Unfavorable)(Unfavorable)

$0.06$0.06

4.7%4.7%

$299$299

$6,371$6,371

Q3 2002Q3 2002 Q2 2002Q2 2002Q3 2001Q3 2001Q3 2001Q3 2001

--$0.07$0.07Earnings Per ShareEarnings Per Share

--1.6%1.6%Operating MarginOperating Margin

55%55%>100%>100%--$114$114Operating Earnings $MOperating Earnings $M

(5%)(5%)(12%)(12%)$7,230$7,230Sales $MSales $M

Improved Operating Margin " Higher Gross Margin & Lower SG&A Expense " Every Segment Had Positive Operating Earnings During Q3 2002." Largest Improvement in Operating Earnings from SPS & PCS


SLIDE 9

Gross MarginGross Margin(Ongoing Operations, Excluding Special Items and Exited Businesses)

24%

26%

28%

30%

32%

34%

36%

38%Q

1'01

Q2'

01

Q3'

01

Q4'

01

Q1'

02

Q2'

02

Q3'

02

% of Sales% of Sales

Improved 5 Consecutive Quarters

Q3 2002 Sequential Increase From SPS, PCS and GTSS


SLIDE 10

Form 8Form 8--K/A FiledK/A Filed(Ongoing Operations, Excluding Special Items and Exited Businesses)

" No Change to Sales, Total Expenses or Earnings

" Filed to Conform 2001 to 2002 Reporting / 2000-OK

" Largely a Reclass of Depreciation From Cost of Sales to SG&A

($158)($158)

849849

5,4665,466

$7,230$7,230

April 2002 8April 2002 8--K K Filing Filing

Q3 2001Q3 2001

($158)($158)

10541054

5,2615,261

$7,230$7,230

October 15 October 15 Adjusted 8Adjusted 8--K K

Q3 2001Q3 2001

$0$0

205205

(205)(205)

$0$0

Variance Variance

Cost of SalesCost of Sales

Q3 2001 ImpactQ3 2001 Impact

($ in Millions)($ in Millions)

Net EarningsNet Earnings

SG&ASG&A

SalesSales


SLIDE 11

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

$ in Millions$ in Millions

14.2%

15.7% 15.9%

14.6%15.1%

17.3%16.7%

15.8%

$800

$900

$1,000

$1,100

$1,200

$1,300

$1,400

$1,500

$1,600

Q4

'00

Q1

'01

Q2

'01

Q3

'01

Q4

'01

Q1

'02

Q2

'02

Q3

'02

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

• SG&A declined 28% from Q4 2000 to Q3 2002

• Q2 2002 SG&A impacted by receivable write-offs for Worldcom and Adelphia


SLIDE 12

Motorola Work Force TrendMotorola Work Force Trend

150 147136

125 121111

93

0

20

40

60

80

100

120

140

160A

ug-0

0

Dec

-00

Mar

-01

Jun-

01

Sep

-01

Dec

-01

Mar

-02

Jun-

02

Sep

-02

Jun-

03 E

st

Wo

rk F

orc

e (

Th

ou

sand

s) 107102 100


SLIDE 13

Research & Development ExpendituresResearch & Development Expenditures(Ongoing Operations, Excluding Special Items and Exited Businesses)

15.5%

14.7%14.2% 14.0%

14.8%

14.0%

15.1%

$800

$900

$1,000

$1,100

$1,200Q

1'01

Q2'

01

Q3'

01

Q4'

01

Q1'

02

Q2'

02

Q3'

02

10.0%

11.0%

12.0%

13.0%

14.0%

15.0%

16.0%$ in Millions$ in Millions

2002 Annual R&D ~ $3.8B2002 Annual R&D ~ $3.8B

% of Sales% of Sales


SLIDE 14

OrdersOrders(Ongoing Operations, Excluding Exited Businesses)

-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%

Q1'0

1

Q2'0

1

Q3'0

1

Q4'0

1

Q1'0

2

Q2'0

2

Q3'0

2

• Greater Than Expected Industry Contraction

• Infrastructure• Broadband

• Industries with Slowing Growth• Personal Communications• Semiconductors

• Strong Order Trend in CGISS

• Expect Q4 2002 orders to show growth over Q4 2001

Order % change versus previous year quarterOrder % change versus previous year quarter


SLIDE 15

$ in Billions Cash and DebtCash and Debt

18.4%18.4%

$3.1$3.1

($6.2)($6.2)

$9.2$9.2

$1.2$1.2

$7.2$7.2

$0.9$0.9

Dec 2001Dec 2001

$6.4$6.4$1.5$1.5Short Term DebtShort Term Debt

$4.3$4.3$6.2$6.2Long Term DebtLong Term Debt

$0.0$0.0$1.2$1.2Long Term Debt Linked Long Term Debt Linked to Equity Unitsto Equity Units

27.4%27.4%

$7.0$7.0

($3.7)($3.7)

$10.7$10.7

Dec. 2000Dec. 2000Sept. 2002Sept. 2002

18.3%18.3%NET DEBT/ NET NET DEBT/ NET DEBT+EQUITYDEBT+EQUITY

$2.5$2.5NET DEBTNET DEBT

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

$8.9$8.9TOTAL DEBTTOTAL DEBT

" Moved $3.0 B to U.S. during Q3, Cost of Approximately $50 Million Cash Tax

" Domestic Cash Increased to $4.2B

" Intend to Reduce Gross Debt Over Next Twelve Months


SLIDE 16

Working CapitalWorking CapitalAccounts Receivable + Inventory Accounts Receivable + Inventory -- Accounts PayableAccounts Payable

24.2%20.3%

18.0% 17.6% 16.7% 16.0% 16.1%17.5%

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 02Est

!! Institutionalizing Continuous ImprovementInstitutionalizing Continuous Improvement!! Inventory Up in Q3 2002 in Anticipation of Q4 Sales GrowthInventory Up in Q3 2002 in Anticipation of Q4 Sales Growth!! Cash Benefit in 2001 and 2002 Approximately $2BCash Benefit in 2001 and 2002 Approximately $2B

(% to Sales)(% to Sales)

Long TermLong TermTarget of 12%Target of 12%


SLIDE 17

Cash FlowCash Flow

$0.7$0.7

($1.3)($1.3)

$2.0$2.0

($0.8) ($0.8)

$2.8$2.8

20012001

$0.0$0.0

($0.1)($0.1)

$0.1$0.1

($0.2)($0.2)

$0.3$0.3

Q3 Q3 20022002

$0.4$0.4

($0.4)($0.4)

$0.8$0.8

($0.9)($0.9)

$1.7$1.7

2002 2002 YTDYTD

$0.0$0.0

($0.8)($0.8)

$0.8$0.8

($1.3)($1.3)

$2.1$2.1

2002 2002 FCSTFCST

($0.1)($0.1)Cash for RestructuringCash for Restructuring

20002000($ in Billions)($ in Billions)

($5.3)($5.3)Free Cash FlowFree Cash Flow

($4.1)($4.1)Capital ExpendituresCapital Expenditures

($1.2)($1.2)Operating Cash FlowOperating Cash Flow

($1.1) ($1.1) Operating Cash Flow Operating Cash Flow without Restructuringwithout Restructuring

""Emphasis on Cash ContinuesEmphasis on Cash Continues""Positive Operating Cash Flow for Seventh Consecutive QuarterPositive Operating Cash Flow for Seventh Consecutive Quarter


SLIDE 18

Elements of 2003 Cash FlowElements of 2003 Cash Flow

Continue to Reduce Ratio to SalesContinue to Reduce Ratio to SalesWorking Capital:Working Capital:

Approximately $1.7BApproximately $1.7BDepreciation:Depreciation:

Approximately $0.15B to $0.2BApproximately $0.15B to $0.2BPension Contribution:Pension Contribution:

Approximately $0.6B vs. $1.3B in 2002Approximately $0.6B vs. $1.3B in 2002Cash Needed for Restructuring:Cash Needed for Restructuring:

Approximately $1.0 B Approximately $1.0 B Capital Expenditures:Capital Expenditures:

Higher EPSHigher EPSEarnings:Earnings:

Expect Positive Operating and Free Cash Flow in 2003Expect Positive Operating and Free Cash Flow in 2003


SLIDE 19

Low Level of Long Term Debt MaturitiesLow Level of Long Term Debt Maturities2003/2004/20052003/2004/2005

"" Strong Position to Meet Debt MaturitiesStrong Position to Meet Debt Maturities"" Expect Continued Positive Free Cash Flow in 2003Expect Continued Positive Free Cash Flow in 2003"" Current Cash Balance $6.4B, $4.2 B in U.S.Current Cash Balance $6.4B, $4.2 B in U.S.

$0.0

$0.5

$1.0

$1.5

$2.0

Debt Maturitiesin 2003



2005 Maturities (2025 NotePuttable in 2005)

2004 Maturities

2003 Maturities

PURS - Can be Put toCompany Each February

Short Term Debt

~$0.4~$0.5

~$1.6

$ in Billions


SLIDE 20

Net Special Items in Q3 2002Net Special Items in Q3 2002

($2) ($2) NET SPECIAL ITEM (Pretax)

(122)(122)Reduction of Reserves No Longer NecessaryReduction of Reserves No Longer Necessary

(37)(37)Gain on Sales of InvestmentsGain on Sales of Investments

$157$157Special ChargesSpecial Charges

$Millions$Millions

Reductions to Reserves Previously Established Through Special ItReductions to Reserves Previously Established Through Special Item em Charges Charges Have Been and Will Consistently be Reflected as a Special Item Have Been and Will Consistently be Reflected as a Special Item and not Included in Normal Operating Results.and not Included in Normal Operating Results.

Complete Reconciliation and Disclosure Provided in our Press RelComplete Reconciliation and Disclosure Provided in our Press Release, ease, and Quarterly and Annual SEC Filings.and Quarterly and Annual SEC Filings.


SLIDE 21

!! Net Special Items of Approx. $200M Net Special Items of Approx. $200M

!! No Change from Estimate Provided on Q2 2002 No Change from Estimate Provided on Q2 2002 Earnings Release Conference CallEarnings Release Conference Call

!! $0.06 Per Share Charge in Q4 2002$0.06 Per Share Charge in Q4 2002

!! Restructuring Charges Substantially CompleteRestructuring Charges Substantially Complete

Q4 2002 Net Special Items Q4 2002 Net Special Items


SLIDE 22

Mike ZafirovskiMike ZafirovskiPresident andPresident and

Chief Operating OfficerChief Operating OfficerMotorola Inc.Motorola Inc.


SLIDE 23

!! Continued Progress in a Very Tough EnvironmentContinued Progress in a Very Tough Environment—— “5 Point Plan” Focus In All We Do“5 Point Plan” Focus In All We Do

!! Impact of Restructuring/Rebuilding Initiatives Impact of Restructuring/Rebuilding Initiatives Increasingly Reflected in Operating ResultsIncreasingly Reflected in Operating Results

!! Reduced Visibility For Outlook in Key Market Reduced Visibility For Outlook in Key Market Segments Segments –– Particularly in Last 30 Days Particularly in Last 30 Days

!! Commitment to Earnings And Balance Sheet Commitment to Earnings And Balance Sheet Improvement, Regardless of External Environment Improvement, Regardless of External Environment

KeyKey TakeawaysTakeaways


SLIDE 24

Operating Philosophy/ExpectationsOperating Philosophy/Expectations

!! Continuing to “Operationalize” the 5 Point PlanContinuing to “Operationalize” the 5 Point Plan

—— Customers, Competitiveness and Balance Customers, Competitiveness and Balance Sheet ObsessionSheet Obsession

!! “Winning Tribes” Expectation For Each Sector“Winning Tribes” Expectation For Each Sector

!! “Lean, Enabling, Activist” Corporate Role“Lean, Enabling, Activist” Corporate Role

!! Pursuit of Few, Big Initiatives Across MotorolaPursuit of Few, Big Initiatives Across Motorola

!! Short Short ANDAND Long Term FocusLong Term Focus

!! Prompt/Decisive ActionsPrompt/Decisive Actions


SLIDE 25

The Operations Philosophy Starts With…The Operations Philosophy Starts With…

People FirstPeople First

Leaders ExhibitingLeaders ExhibitingEEnvision, nvision, EEnergize, nergize, EEdge, dge, EExecution,xecution,

and Always and Always EEthicsthics

and Always and Always EEarningsarnings


SLIDE 26

Segment Segment Updates & GuidanceUpdates & Guidance


SLIDE 27

Personal Communications SectorPersonal Communications Sector(Ongoing Operations, Excluding Special Items)

6.5%6.5%

$172$172

$2,622$2,622

$2,548$2,548

Q2 2002Q2 2002


8.5%8.5%

$224$224

$2,631$2,631

$2,481$2,481

Q3 2002Q3 2002 Q2 2002Q2 2002Q3 2001Q3 2001Q3 2001Q3 2001

1.9%1.9%Operating MarginOperating Margin

30%30%>100%>100%$51$51Operating Earnings $MOperating Earnings $M

FlatFlat(2%)(2%)$2,693$2,693Sales $MSales $M

(3%)(3%)(16%)(16%)$2,962$2,962Orders $MOrders $M

"" Orders Impacted By More Efficient Backlog /Supply Chain ProcesOrders Impacted By More Efficient Backlog /Supply Chain Processs

"" Flat Q3 2002 Sales Reflects Flat Q3 2002 Sales Reflects ""Lower than Expected TAMLower than Expected TAM""T720 & C330 DelaysT720 & C330 Delays

"" Op. Margin Improvement from Higher Gross Margin & Lower SG&A %Op. Margin Improvement from Higher Gross Margin & Lower SG&A %


SLIDE 28

Personal Communications SectorPersonal Communications SectorUnit Shipments by TechnologyUnit Shipments by Technology

C330C330V66, V60, V66, V60, T191, V70 T191, V70

T720T720V60, 120cV60, 120c

C331C331V60t, 120t, V60t, 120t, 190t 190t

i95cli95cli95cl, i90ci95cl, i90c

Major New Major New Products Products

shipping inshipping inQ3 2002Q3 2002

High Volume High Volume Products Products

Shipping in Shipping in Q3 2002

Up 5%Up 5%Down 4%Down 4%GSM Unit GSM Unit ShipmentsShipments

Up 12%Up 12%Up 4%Up 4%CDMA Unit CDMA Unit ShipmentsShipments

Up 34%Up 34%Up 131%Up 131%TDMA Unit TDMA Unit ShipmentsShipments

Up 10%Up 10%Up 23%Up 23%iDEN Unit iDEN Unit ShipmentsShipments

YTD 2002 YTD 2002 Change from Change from

YTD 2001YTD 2001

Q3 2002 Q3 2002 Change from Change from

Q3 2001Q3 2001 Q3 2002


SLIDE 29

Personal Communications SectorPersonal Communications SectorUnits and Market ShareUnits and Market Share

6%6%

GrowthGrowth

17%17%

15.8 15.8 MillionMillion

Q3 Q3 20012001

18%18%


Q3 Q3 20022002

16%16%


Sept. Sept. 2001 2001 YTDYTD

18%18%


Sept. Sept. 20022002YTDYTD

8%8%Unit Unit ShipmentsShipments

Market Market ShareShare

Growth Growth

"" Continued Strong Performance Americas RegionsContinued Strong Performance Americas Regions

"" #1 Brand in Several U.S. Handset Surveys #1 Brand in Several U.S. Handset Surveys

"" European European -- Weak End Market Conditions, Small Share LossWeak End Market Conditions, Small Share Loss

"" Asia Asia –– Mix Shift Towards Entry Level ProductsMix Shift Towards Entry Level Products

"" Widened Leadership Position in ChinaWidened Leadership Position in China


SLIDE 30

Personal Communications SectorPersonal Communications SectorAverage Selling Price Change Q3 2002Average Selling Price Change Q3 2002

For Q4 2002 and Next Year We Expect New Features For Q4 2002 and Next Year We Expect New Features Such as Color Screens, EMS, MMS and Imaging to Keep Such as Color Screens, EMS, MMS and Imaging to Keep

Price Declines at Modest Levels.Price Declines at Modest Levels.

Down 8% from Q3 2001

Down 2% from Q2 2002


SLIDE 31

T720T720

C330C330SeriesSeries

E360E360

i95cli95cl

V70V70

A388A388

V60iV60i V66iV66i


SLIDE 32

Industry Handset ForecastIndustry Handset Forecast

Sell In Units Sell Through Units390 Million 400 Million

" Industry Forecast Reduced 10 Million Units Due to Weaker Demandin Europe and Slightly Weaker Demand in Asia.

" Expect Normal Seasonality in Q4 2002, Up Approx. 20% Sequentially


SLIDE 33

PCS PCS –– Other DevelopmentsOther Developments

"" Tom Lynch Off to A Strong StartTom Lynch Off to A Strong Start

"" Ron Garriques to Lead PCS European OperationsRon Garriques to Lead PCS European Operations

"" iDEN i95cl iDEN i95cl –– Strong Demand, Growth in Data Strong Demand, Growth in Data Applications, Improved Nextel EconomicsApplications, Improved Nextel Economics

"" T720 and C330 series Off to Promising StartT720 and C330 series Off to Promising Start

"" UMTS UMTS -- Close Coordination With HutchinsonClose Coordination With Hutchinson

"" 44thth Pass Acquisition Strengthens Java CapabilitiesPass Acquisition Strengthens Java Capabilities


SLIDE 34

Personal Communications SectorPersonal Communications SectorQ4 2002 ForecastQ4 2002 Forecast

(Ongoing Operations, Excluding Special Items)

UpUpUpUpSalesSales

Compared to Compared to Q3 2002Q3 2002


UpUpUpUpOperating Operating Margin %Margin %

• Significantly Indicates a Change of Greater than 25%• Very Significantly Indicates a Change of Greater than 50%

•The Terms Significantly and Very Significantly are only used in forecasting Sales on This Slide


SLIDE 35

Semiconductor Products SectorSemiconductor Products Sector(Ongoing Operations, Excluding Special Items)

--6.5%6.5%

--$79$79

$1,216$1,216

$1,310$1,310

Q2 2002Q2 2002


1.1%1.1%

$13$13

$1,223$1,223

$1,258$1,258

Q3 2002Q3 2002 Q2 2002Q2 2002Q3 2001Q3 2001Q3 2001Q3 2001


>100%>100%>100%>100%--$311$311Operating Earnings $MOperating Earnings $M

FlatFlat13%13%$1,080$1,080Sales $MSales $M

(4%)(4%)14%14%$1,106$1,106Orders $MOrders $M

" Returned to Profitability With Higher Gross Margin and Lower SG&A

" Breakeven Sales Level Has Been Reduced to $5.0B

" Softer Industry Demand Patterns in September Impacted Sales & Orders


SLIDE 36

Semiconductor Products Sector Semiconductor Products Sector BookBook--toto--Bill RatioBill Ratio

"Overall Book-To-Bill of 1.03

"Book-to-Bill by End Market—Wireless/Broadband Approximately 1.15

—Transportation and Standard Products Approximately 1.00

—Networking & Computing Approximately 0.85

0.70

0.80

0.90

1.00

1.10

1.20

Q1’0

0

Q2'0

0

Q3'0

0

Q4'0

0

Q1'0

1

Q2'0

1

Q3'0

1

Q4'0

1

Q1'0

2

Q2'0

2

Q3'0

2


SLIDE 37

Semiconductor Products SectorSemiconductor Products Sector

1816

119 8

0

5

10

15

20

25

Dec. 2000 Dec. 2001 Sept. 2002 Dec. 2002Estimate

March 2003Estimate

Wafer Fab Consolidations


SLIDE 38

SPS SPS –– Other DevelopmentsOther Developments

"" Major AnnouncementsMajor Announcements

—— Announced 3 More Customers, Now Totaling 9, for Announced 3 More Customers, Now Totaling 9, for i250/i300 Wireless Platform i250/i300 Wireless Platform

—— Integration Between Microsoft’s WindowIntegration Between Microsoft’s Window®® CE Software CE Software and Motorola’s DragonBall Processor and Motorola’s DragonBall Processor

—— The SymphonyThe SymphonyTMTM Digital Radio ChipsetDigital Radio Chipset

—— A New Line of LowA New Line of Low--cost Microcontrollerscost Microcontrollers


SLIDE 39

Semiconductor Products Sector Semiconductor Products Sector Q4 2002 ForecastQ4 2002 Forecast


Flat to UpFlat to UpUpUpSalesSales



FlatFlatSlight Profit in Slight Profit in Q4 2002 vs. Q4 2002 vs.

Loss in Q4 2001Loss in Q4 2001

Operating Operating Margin %Margin %




SLIDE 40

Global Telecom Solutions SectorGlobal Telecom Solutions Sector(Ongoing Operations, Excluding Special Items)

2.6%2.6%

$32$32

$1,239$1,239

$1,067$1,067

Q2 2002Q2 2002


0.5%0.5%

$5$5

$1,014$1,014

$880$880

Q3 2002Q3 2002 Q2 2002Q2 2002Q3 2001Q3 2001Q3 2001Q3 2001


(84%)(84%)(82%)(82%)$28$28Operating Earnings $MOperating Earnings $M

(18%)(18%)(42%)(42%)$1,759$1,759Sales $MSales $M

(18%)(18%)(44%)(44%)$1,567$1,567Orders $MOrders $M

" Remained Modestly Profitable As a Result of Continued Cost Reductions

" Sales Down Significantly in All Regions from Q3 2001

" Industry Demand Patterns Weakened as the Quarter Progressed.


SLIDE 41

GTSS GTSS –– Other DevelopmentsOther Developments

"" Met all Milestones in UMTS Radio Access Network Met all Milestones in UMTS Radio Access Network Contract for Hutchinson Australia.Contract for Hutchinson Australia.

"" CDMA 1X 3G Deployments Continue to See CDMA 1X 3G Deployments Continue to See Success Around the GlobeSuccess Around the Globe

"" With the iDEN Technology Made the First PushWith the iDEN Technology Made the First Push--ToTo--Talk Nationwide Roaming Call Between our Labs In Talk Nationwide Roaming Call Between our Labs In Illinois and Nextel’s Lab in Virginia.Illinois and Nextel’s Lab in Virginia.

"" During Q3 Announced a Marketing Agreement With During Q3 Announced a Marketing Agreement With Winphoria for PacketWinphoria for Packet--Based Softswitch Solutions.Based Softswitch Solutions.


SLIDE 42

Global Telecom Solutions Sector Global Telecom Solutions Sector Q4 2002 ForecastQ4 2002 Forecast


UpUpDownDownSalesSales



Slight Loss in Slight Loss in Q4 2002 Q4 2002

Slight Profit in Slight Profit in Q3 2002 Q3 2002

Smaller LossSmaller LossOperating Operating Margin %Margin %




SLIDE 43

Commercial Govt. and Industrial System SegmentCommercial Govt. and Industrial System Segment(Ongoing Operations, Excluding Special Items and Exited Businesses)

7.1%7.1%

$63$63

$886$886

$847$847

Q2 2002Q2 2002


8.8%8.8%

$77$77

$874$874

$987$987

Q3 2002Q3 2002 Q2 2002Q2 2002Q3 2001Q3 2001Q3 2001Q3 2001


22%22%17%17%$66$66Operating Earnings $MOperating Earnings $M

(1%)(1%)(1%)(1%)$886$886Sales $MSales $M

17%17%10%10%$898$898Orders $MOrders $M

" Largest Order Increase in North America

" Sequential Operating Margin Improvement From Lower SG&A.


SLIDE 44

CGISS CGISS –– Other DevelopmentsOther Developments

"" Introduced FireGround Communications SystemIntroduced FireGround Communications System

"" Mobile Solution Tailored for Firefighters use at Mobile Solution Tailored for Firefighters use at Fire ScenesFire Scenes

"" Introduced the industry’s lightest TETRA handsetIntroduced the industry’s lightest TETRA handset


SLIDE 45

Commercial Govt. and Industrial System Segment Commercial Govt. and Industrial System Segment Q4 2002 ForecastQ4 2002 Forecast


Up SignificantlyUp SignificantlyDownDownSalesSales



UpUpDownDownOperating Operating Margin %Margin %




SLIDE 46

Broadband Communications SectorBroadband Communications Sector(Ongoing Operations, Excluding Special Items)

11.0%11.0%

$61$61

$554$554

$420$420

Q2 2002Q2 2002


14.4%14.4%

$75$75

$519$519

$385$385

Q3 2002Q3 2002 Q2 2002Q2 2002Q3 2001Q3 2001Q3 2001Q3 2001


23%23%(34%)(34%)$113$113Operating Earnings $MOperating Earnings $M

(6%)(6%)(19%)(19%)$637$637Sales $MSales $M

(8%)(8%)(40%)(40%)$647$647Orders $MOrders $M

" Maintained Mid-Teens Operating Margin Despite Sales Decline

" Carrier Capital Expenditure Pressure and Shorter Order Cycle Time

" Q2 2002 Operating Margin negatively impacted by Adelphia write-off


SLIDE 47

Broadband Communications SectorBroadband Communications Sector

" Maintaining Market Share in Set-Top Boxes

" Continue to Have Market Share that is 2X our Nearest Competitor in Cable Modems.

Up 20%Up 20%Up 20%Up 20%Cable Modem Cable Modem Unit Shipments Unit Shipments ~1.0 Million~1.0 Million

Down 11%Down 11%Down 15%Down 15%Set Top Box Set Top Box Unit Shipments Unit Shipments ~1.3 Million~1.3 Million

Change Change From From

Q2 2002Q2 2002

Change Change From From

Q3 2001Q3 2001


SLIDE 48

BCS BCS –– Other DevelopmentsOther Developments

"" Achieved Additional CableLabs CertificationsAchieved Additional CableLabs Certifications—— Industry Lead with 35 Approved ProductsIndustry Lead with 35 Approved Products

""Market Success in Spain Market Success in Spain —— Chosen As a Key Technology Provider to SpainChosen As a Key Technology Provider to Spain’’s s Leading Broadband Services Provider Leading Broadband Services Provider –– ONOONO—— Selected by Telecable for Advanced Voice and Selected by Telecable for Advanced Voice and Data NetworkData Network


SLIDE 49

Broadband Communications Segment Broadband Communications Segment Q4 2002 ForecastQ4 2002 Forecast


DownDownDownDownSalesSales



DownDownDownDownOperating Operating Margin %Margin %




SLIDE 50

Integrated Electronic Systems SectorIntegrated Electronic Systems Sector(Ongoing Operations, Excluding Special Items)

5.5%5.5%

$31$31

$566$566

$562$562

Q2 2002Q2 2002


5.2%5.2%

$28$28

$544$544

$562$562

Q3 2002Q3 2002 Q2 2002Q2 2002Q3 2001Q3 2001Q3 2001Q3 2001


(10%)(10%)>100%>100%--$11$11Operating Earnings $MOperating Earnings $M

(4%)(4%)6%6%$513$513Sales $MSales $M

FlatFlat3%3%$545$545Orders $MOrders $M

" Consistent Results

" Automotive Sales Growth vs. Q3 2001

" Telecom Market Weakness Continues to Impact Motorola Computer Group


SLIDE 51

IESS IESS –– Other DevelopmentsOther Developments

"" Announced a New Single Chip GPS Device for InAnnounced a New Single Chip GPS Device for In--Vehicle GPS Systems.Vehicle GPS Systems.

"" Reinforced Continued Leadership in Global Reinforced Continued Leadership in Global Position System (GPS) Industry by Shipping Five Position System (GPS) Industry by Shipping Five Millionth GPS ReceiverMillionth GPS Receiver

"" The Portable Energy Business Continues to The Portable Energy Business Continues to Expand Business in the Notebook PC MarketExpand Business in the Notebook PC Market


SLIDE 52

Integrated Electronic Systems Sector Integrated Electronic Systems Sector Q4 2002 ForecastQ4 2002 Forecast


FlatFlatFlatFlatSalesSales



FlatFlatProfit in Profit in Q4 2002 vs. Q4 2002 vs.

Loss in Q4 2001Loss in Q4 2001

Operating Operating Margin %Margin %




SLIDE 53

Additional Corporate Drivers for 2003Additional Corporate Drivers for 2003

"" Digital 6 Sigma (COPQ, Customer Satisfaction, Digital 6 Sigma (COPQ, Customer Satisfaction, Growth)Growth)

"" R&D / Engineering Productivity to Drive GrowthR&D / Engineering Productivity to Drive Growth

"" Indirect Materials and ServicesIndirect Materials and Services


SLIDE 54

Guidance UpdateGuidance Update


SLIDE 55

Q4 2002 GuidanceQ4 2002 Guidance

$0.2B$0.2B

$0.14$0.14

$7.5B$7.5B

PreviousPreviousGuidanceGuidance

$0.0B$0.0B

$0.06$0.06

$6.4B$6.4B

Q3 Q3 20022002

$0.2B$0.2B

$0.10$0.10

$7.1B$7.1BQ4 2002Q4 2002

Q4 Q4 20012001

$1.7B $1.7B Net Special Items PretaxNet Special Items Pretax

($0.04)($0.04)Earnings Per Share Earnings Per Share (Excluding Net Special Items)(Excluding Net Special Items)

$7.3B$7.3BSalesSales

" Lowered Revenue and Earnings Guidance Driven By Slowing Industry Demand, Particularly in Infrastructure, Broadband and Semiconductor Businesses.

" Net Special Items Per Prior Guidance at End of Q2 2002

" Solid Earnings Improvement in a “Tough Environment”


SLIDE 56

Annual 2003 GuidanceAnnual 2003 Guidance

Substantially Substantially CompleteComplete

$0.45$0.45

$29B$29B

PreviousPreviousGuidanceGuidance

($2.7B)($2.7B)

($0.31)($0.31)

$29.3B$29.3B20012001

Substantially Substantially CompleteComplete

$0.40$0.40

$27.5B$27.5B20032003

2002 2002 FcstFcst

($3.9B) ($3.9B) Restructuring Status Restructuring Status

$0.10$0.10Earnings Per Share Earnings Per Share (Excluding Net Special (Excluding Net Special Items)Items)

$26.3B$26.3BSalesSales

" Somewhat Slower Economic Growth now Expected in 2003 (GDP +2%)" Sales Growth Expected in PCS, CGISS, SPS and IESS" Sales Decline Expected in GTSS and BCS" Expect Improved Profitability in a Tough Environment vs. 2002" Earnings Leverage Potential When Served Markets Improve


SLIDE 57

Chris GalvinChris GalvinChief Executive OfficerChief Executive Officer

Chairman of the Board of DirectorsChairman of the Board of DirectorsMotorola,Inc.Motorola,Inc.


SLIDE 58

!! Continued Progress in a Very Tough EnvironmentContinued Progress in a Very Tough Environment—— “5 Point Plan” Focus In All We Do“5 Point Plan” Focus In All We Do

!! Impact of Restructuring/Rebuilding Initiatives Impact of Restructuring/Rebuilding Initiatives Increasingly Reflected in Operating ResultsIncreasingly Reflected in Operating Results

!! Reduced Visibility For Outlook in Key Market Reduced Visibility For Outlook in Key Market Segments Segments –– Particularly in Last 30 Days Particularly in Last 30 Days

!! Commitment to Earnings And Balance Sheet Commitment to Earnings And Balance Sheet Improvement, Regardless of External Environment Improvement, Regardless of External Environment

KeyKey TakeawaysTakeaways


SLIDE 59

Motorola Q&A ParticipantsMotorola Q&A Participants

Chief Executive OfficerChief Executive OfficerChairman of the Board of DirectorsChairman of the Board of Directors

Chris GalvinChris Galvin Mike ZafirovskiMike ZafirovskiPresident President

Chief Operating OfficerChief 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


SLIDE 60

Safe Harbor StatementSafe Harbor Statement““ During this call we have made a number of forwardDuring this call we have made a number of forward--looking statements that are based on current looking statements that are based on current

expectations and involve risks and uncertainties. Such forwardexpectations and involve risks and uncertainties. Such forward--looking statements include, but are looking statements include, but are not limited to, our comments and answers relating to the followinot limited to, our comments and answers relating to the following topics: (1) expectations for ng topics: (1) expectations for Motorola sales and earnings per share for Q4 2002 and full year Motorola sales and earnings per share for Q4 2002 and full year 2003; (2) the amount and timing 2003; (2) the amount and timing of charges to be taken in connection with our restructuring actiof charges to be taken in connection with our restructuring actions; (3) the expected timing for ons; (3) the expected timing for completion of our restructuring actions, including the reductioncompletion of our restructuring actions, including the reduction of our employee population and the of our employee population and the closing of facilities; (4) the impact of our restructuring acticlosing of facilities; (4) the impact of our restructuring actions on our financial performance, ons on our financial performance, including cost savings; (5) plans to repatriate cash and reduce including cost savings; (5) plans to repatriate cash and reduce debt; (6) research and development debt; (6) research and development expenses; (7) capital expenditures; (8) depreciation expense; (9expenses; (7) capital expenditures; (8) depreciation expense; (9) working capital plans; (10) cash ) working capital plans; (10) cash flows; (11) expectations for segment sales, profitability, orderflows; (11) expectations for segment sales, profitability, orders, cash flow, operating earnings, s, cash flow, operating earnings, operating margin and market share; (12) trends in average sellinoperating margin and market share; (12) trends in average selling prices; (13) the timing, sales g prices; (13) the timing, sales impact and pricing of new products; (14) order and backlog positimpact and pricing of new products; (14) order and backlog positions over the next several ions over the next several quarters, including the impact of new business models on these nquarters, including the impact of new business models on these number; (15) projected worldwide umber; (15) projected worldwide industry shipments of wireless handsets; (16) worldwide semicondindustry shipments of wireless handsets; (16) worldwide semiconductor industry growth; (17) the uctor industry growth; (17) the implementation and effectiveness of our implementation and effectiveness of our ““assetasset--lightlight”” semiconductor business model; and (18) semiconductor business model; and (18) worldwide wireless infrastructure industry growth.worldwide wireless infrastructure industry growth.

MotorolaMotorola’’s actual results could differ materially from those stated in ths actual results could differ materially from those stated in the forward looking statements e forward looking statements and information about factors that could cause such differences and information about factors that could cause such differences can be found in yesterdaycan be found in yesterday’’s press s press release, on pages Frelease, on pages F--35 through F35 through F--40 of Motorola40 of Motorola’’s Proxy Statement for the 2002 annual meeting s Proxy Statement for the 2002 annual meeting of stockholders and in Motorolaof stockholders and in Motorola’’s other SEC filings.s other SEC filings.

MOTOROLA and the Stylized M Logo are registered in the US PatentMOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office. All other & Trademark Office. All other product or service names are the property of their respective owproduct or service names are the property of their respective owners. © Motorola, Inc. 2002.ners. © Motorola, Inc. 2002.


SLIDE 61

q3 2002 earnings release presentation

Economy & Finance

motorola q3

motorola earnings conference

earnings releaseconference

positive operating earnings

q3 2001q2

operating margin4

special items

exited businesses