Q4 2002 Earnings Release Presentation

Q4 2002 Motorola Earnings Conference Call – Jan. 22, 2003

SLIDE 1

Motorola Motorola –– Q4 2002 Q4 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 January 22, This presentation is being made on the morning of January 22, 2003. The content 2003. 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

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

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

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

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

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

Exceeded Many of Our Exceeded Many of Our Interim Turnaround Interim Turnaround

GoalsGoalsBUTBUT

We Are Not Satisfied We Are Not Satisfied With Profit and GrowthWith Profit and Growth


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

$0.05$0.05--$0.55$0.55$0.08$0.08Earnings Per Share GAAPEarnings Per Share GAAP

$0.06$0.06

$6,371$6,371

Q3 2002Q3 2002

% Favorable % Favorable (Unfavorable)(Unfavorable)

$0.13$0.13

$7,546$7,546

Q4 2002Q4 2002 Q3 Q3 20022002

Q4 Q4 20012001

Q4 2001Q4 2001

--$0.04$0.04Earnings Per Share Earnings Per Share Excluding Special ItemsExcluding Special Items

18%18%3%3%$7,312$7,312Sales $MSales $M

Sales and EPS exceeded expectationsAll Major Segments Had Positive Operating Earnings Excluding Special Items for Second Consecutive Quarter Operating Earnings Excluding Special Items increased $566M from Q4 2001Versus Q4 2001 Largest Improvement in Operating Earnings in SPS, PCS & GTSSVersus Q3 2002 Largest Improvement in Operating Earnings in CGISS & PCS


SLIDE 9

0%

5%

10%

15%

20%

25%

30%

35%

40%

Q1'01 Q2'01 Q3'01 Q4'01 Q1'02 Q2'02 Q3'02 Q4'02

% of Sales% of Sales(Ongoing Operations, Excluding Special Items and Exited Businesses)

Gross Margin Improved 4.2% Points from Q4 2001 to Q4 2002 and 5.3% Points for Full Year 2002 Versus 2001

Sequential Decline in Gross Margin Due Largely to:— Sales Mix Shift Towards PCS Segment Which has Lower Gross Margin Than Corporate Average. — We Focused SPS on Cash Flow By Cutting Back Production. As Expected This Resulted in Unabsorbed Fixed Mfg. Costs Adversely Affecting Gross Margin

Gross MarginGross Margin


SLIDE 10

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%

13.1%

$800

$900

$1,000

$1,100

$1,200

$1,300

$1,400

$1,500

$1,600Q

4'00

Q1'

01

Q2'

01

Q3'

01

Q4'

01

Q1'

02

Q2'

02

Q3'

02

Q4'

02

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%


SLIDE 11

Motorola Work Force TrendMotorola Work Force Trend

150 147136

125 121111

93

020406080

100120140160

Aug-

00

Dec-

00

Mar

-01

Jun-

01

Sep-

01

Dec-

01

Mar

-02

Jun-

02

Sep-

02

Dec-

02

Jun-

03 E

st

Wor

k Fo

rce

(Tho

usan

ds) 107 102 100 97


SLIDE 12

Research & Development ExpensesResearch & Development Expenses(Ongoing Operations, Excluding Special Items and Exited Businesses)

15.5%

14.7%14.2% 14.0%

14.8%

14.0%

15.1%

12.7%

$800

$900

$1,000

$1,100

$1,200Q

1'01

Q2'

01

Q3'

01

Q4'

01

Q1'

02

Q2'

02

Q3'

02

Q4'

02

10.0%

11.0%

12.0%

13.0%

14.0%

15.0%

16.0%$ in Millions$ in Millions % of Sales% of Sales


SLIDE 13

Operating Margin %Operating Margin %(Ongoing Operations, Excluding Special Items and Exited Businesses)

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%Q1

'01

Q2'01

Q3'01

Q4'01

Q1'02

Q2'02

Q3'02

Q4'02

% of Sales% of Sales

Q4 2002 Operating Margin of 7.2%, Highest Operating Margin Since Q3 2000


SLIDE 14

Net Special Items in Q4 2002Net Special Items in Q4 2002

..

$203 $203 NET SPECIAL ITEM – PRETAX

($24)($24)Gains on Sales of InvestmentsGains on Sales of Investments($95)($95)Reduction of Reserves No Longer NecessaryReduction of Reserves No Longer Necessary

$98$98Debt Redemption Charges (net)Debt Redemption Charges (net)$74$74Investment/Fixed Asset/Goodwill Investment/Fixed Asset/Goodwill

Impairments/OtherImpairments/Other

$125 $125 NET SPECIAL ITEM – AFTER TAX(($78)$78)INCOME TAXESINCOME TAXES

$150$150Additional Reserve for Restructuring ActionsAdditional Reserve for Restructuring ActionsImpactImpact$ millions$ millions

•• Reductions to Reserves Previously Established Through SpecialReductions to Reserves Previously Established Through Special Item Charges Item Charges Have Been Have Been and Will Consistently be Reflected as a Special Item and Not Incand Will Consistently be Reflected as a Special Item and Not Included in Normal Operating luded in Normal Operating Results.Results.

•• Complete Reconciliation and Disclosure Provided in our Press RComplete Reconciliation and Disclosure Provided in our Press Release, and Quarterly and elease, and Quarterly and Annual SEC FilingsAnnual SEC Filings


SLIDE 15

Cash FlowCash Flow

$0.7$0.7

($1.3)($1.3)

$2.0$2.0

($0.8) ($0.8)

$2.8$2.8

20012001

$0.3$0.3

($0.2)($0.2)

$0.5$0.5

($0.1)($0.1)

$0.6$0.6

Q4 Q4 20022002

$0.7$0.7

($0.6)($0.6)

$1.3$1.3

($1.0)($1.0)

$2.3$2.3

Annual Annual 20022002

($0.1)($0.1)Cash for Restructuring/OtherCash for Restructuring/Other

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 without Operating Cash Flow without Restructuring/Other Restructuring/Other

Emphasis on Cash Continues With Positive Operating and Emphasis on Cash Continues With Positive Operating and Positive Free Cash Flow Each Quarter of the Last Two YearsPositive Free Cash Flow Each Quarter of the Last Two Years


SLIDE 16

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

22.0% 22.7% 22.5% 21.8%20.3%

18.9% 17.7% 17.4% 17.4%

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

Institutionalizing Continuous ImprovementInstitutionalizing Continuous ImprovementCash Benefit in 2001/2002 of Approximately $1.4BCash Benefit in 2001/2002 of Approximately $1.4B

(% to Sales)(% to Sales)

Long TermLong TermTarget of 12%Target of 12%


SLIDE 17

Total Debt Down $400M in 2002, Net Debt Down $800MDecline in Long Term Debt due Largely to Shift of $825M PURS to Current MaturitiesPURS ($825M) scheduled to be Retired 2/03/03Net Debt Ratio Improved by Approximately 2 Percentage Points During 2002

Cash and DebtCash and Debt$ in Billions

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/Current DebtShort Term/Current Debt$4.3$4.3$6.1$6.1Long 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. 2000Dec. 2002Dec. 2002

16.7%16.7%NET DEBT/ NET NET DEBT/ NET DEBT+EQUITYDEBT+EQUITY

$2.3$2.3NET DEBTNET DEBT($6.6)($6.6)Cash & Cash EquivalentsCash & Cash Equivalents$8.8$8.8TOTAL DEBTTOTAL DEBT


SLIDE 18

Low Level of Debt Maturities*Low Level of Debt Maturities*2003/2004/20052003/2004/2005

Strong Position to Meet Debt Maturities With $6.6B in CashStrong Position to Meet Debt Maturities With $6.6B in Cash

$0.0

$0.5

$1.0

$1.5

Debt Maturitiesin 2003

2004 2005

* Debt Maturities(Excluding CommercialPaper of $0.5B)

PURS - $825MScheduled To BeRepurchased in Feb.2003

~$0.4~$0.5

~$1.0

$ in Billions


SLIDE 19

2003 Operating & Free Cash Flow Forecast2003 Operating & Free Cash Flow Forecast

~$1.0 B ~$1.0 B Capital Expenditures:Capital Expenditures:

~$1.6 B ~$1.6 B OPERATING CASH OPERATING CASH FLOWFLOW

~$0.2B~$0.2BPension Contribution:Pension Contribution:

~$0.7B ~$0.7B Cash for Restructuring:Cash for Restructuring:

~$0.6 B~$0.6 BFREE CASH FLOWFREE CASH FLOW

Continue to Reduce Ratio to SalesContinue to Reduce Ratio to SalesNeutral to Slightly Positive Cash EffectNeutral to Slightly Positive Cash Effect

Working Capital:Working Capital:

~$1.6B~$1.6BDepreciation:Depreciation:

~$925M (EPS of $0.40)~$925M (EPS of $0.40)Earnings:Earnings:


SLIDE 20

Mike ZafirovskiMike ZafirovskiPresident andPresident and

Chief Operating OfficerChief Operating OfficerMotorola Inc.Motorola Inc.


SLIDE 21

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 Reflected in Operating ResultImpact of Restructuring/Rebuilding Reflected in Operating ResultssCommitment to Earnings And Balance Sheet ImprovementCommitment to Earnings And Balance Sheet Improvement—— Eight Consecutive Quarters of Positive Operating Cash FlowEight Consecutive Quarters of Positive Operating Cash Flow—— Q4 2002 Operating Earnings On a GAAP Basis Q4 2002 Operating Earnings On a GAAP Basis

—— 5 out of 6 Major Segments Had Positive Operating Earnings5 out of 6 Major Segments Had Positive Operating Earnings—— All 6 Major Segments Improved from Q4 2001All 6 Major Segments Improved from Q4 2001

—— Q4 2002 Operating Earnings Excluding Special Items Q4 2002 Operating Earnings Excluding Special Items —— All 6 Major Segments had Positive Operating Earnings for 2All 6 Major Segments had Positive Operating Earnings for 2ndnd

Quarter in a RowQuarter in a Row—— 4 of 6 Segments Increased Operating Earnings from Q4 20014 of 6 Segments Increased Operating Earnings from Q4 2001

—— Q1 2003 Operating Earnings on GAAP Basis Versus Q1 2002Q1 2003 Operating Earnings on GAAP Basis Versus Q1 2002—— 5 of 6 Major Segments Guiding to Higher Operating Earnings5 of 6 Major Segments Guiding to Higher Operating Earnings

KeyKey TakeawaysTakeaways


SLIDE 22

Segment Segment Updates & GuidanceUpdates & Guidance


SLIDE 23

Personal Communications SegmentPersonal Communications Segment(Ongoing Operations, Excluding Special Items)

• Q4 2002 Operating Earnings Highest Since 1997• 2002 Earnings Improvements Driven By:

• Improved Customer Relationship• Compelling Mix of Products Across All Technologies• Manufacturing, Platform Design and Supply Chain Efficiencies• Reductions in Operating Expenses as a % of Sales

8.5%8.5%$224$224

$2,631$2,631

$2,481$2,481Q3 2002Q3 2002


9.1%9.1%$301$301

$3,293$3,293

$2,142$2,142Q4 2002Q4 2002 Q3 2002Q3 2002Q4 2001Q4 2001Q4 2001Q4 2001

7.0%7.0%Operating MarginOperating Margin34%34%45%45%$208$208Operating Earnings $MOperating Earnings $M

25%25%11%11%$2,975$2,975Sales $MSales $M

(14%)(14%)(3%)(3%)$2,202$2,202Orders $MOrders $M


SLIDE 24

Personal Communications SegmentPersonal Communications SegmentUnits and Market ShareUnits and Market Share

Up 1 Up 1 PointPoint

12%12%

GrowthGrowth

~17%~17%

17.5 17.5 MillionMillion

Q4 2001Q4 2001

~19%~19%


Q4 2002Q4 2002

~16.5%~16.5%


20012001

~17.5%~17.5%


20022002

27%27%Unit Unit ShipmentsShipments

Up 2 Up 2 PointsPoints

Market Market ShareShare

Growth Growth


SLIDE 25

Personal Communications SegmentPersonal Communications SegmentTrends Trends -- Estimated Market ShareEstimated Market Share

~28%~28%UpUpUpUpLatin AmericaLatin America~15%~15%UpUpDownDownAsiaAsia

~10%~10%UpUpFlatFlatEurope, Mideast, Europe, Mideast, AfricaAfrica

UpUp

UpUp

Q4 2002 Market Share Compared

to Q3 2002

2002 Annual Market Share Trend

Q4 2002 Market Share Compared

to Q4 2001

UpUp

UpUp ~29%~29%North AmericaNorth America

~18%~18%WorldwideWorldwide

Continue to Focus on Improving Market Share in Every RegionContinue to Focus on Improving Market Share in Every RegionQ4 2002 Market Share Performance Highest Since Q2 1999Q4 2002 Market Share Performance Highest Since Q2 1999


SLIDE 26

Personal Communications SegmentPersonal Communications SegmentUnit Shipments by TechnologyUnit Shipments by Technology

Up 7% Up 7% Up 11%Up 11%GSM Unit ShipmentsGSM Unit Shipments

Up 23%Up 23%Up 51%Up 51%CDMA Unit ShipmentsCDMA Unit Shipments

Up 69%Up 69%Up 146%Up 146%TDMA Unit ShipmentsTDMA Unit Shipments

Up 5%Up 5%Down 12%Down 12%iDEN Unit ShipmentsiDEN Unit Shipments

Annual 2002 Change Annual 2002 Change from Annual 2001from Annual 2001

Q4 2002 Change from Q4 2002 Change from Q4 2001Q4 2001

iDEN Decline in Unit Shipments a Result of Nextel Inventory Adjustments Resulting from Adoption of our Direct Fulfillment Program


SLIDE 27

Q4 2002 High Volume ProductsQ4 2002 High Volume Products

i95cl

V60i

120

C33X Series T720

V66i


SLIDE 28

Down 3% from Q3 2002 Down 11% from Q4 2001

Down 5% from 2001 Flat to Down 5%

Q4 2002Q4 2002

Annual 2002Annual 2002

• ASP Without iDEN Flat Q4 2002 from Q3 2002• ASP Decline versus Q4 2001 Due to Higher Mix of Entry Level Products• Rebates Adequately Provided For In Q4 Operating Earnings

Annual 2003 EstimateAnnual 2003 Estimate

Personal Communications Segment Personal Communications Segment Average Selling PriceAverage Selling Price


SLIDE 29

2002 Industry Handset Forecast2002 Industry Handset ForecastSell Through UnitsSell Through Units

Q4 2002~115 Million

Annual 2002~400 Million


SLIDE 30

2003 Industry Handset Forecast2003 Industry Handset ForecastSell Through UnitsSell Through Units

Q1 200390 Million – 95 Million

Annual 2003430 Million – 440 Million


SLIDE 31

388cColorPDA

C350Color

T725EDGEColor

A835UMTSColor

Integrated Video Camera

New Products For 2003New Products For 2003

E365 - Color Integrated Camera

A380Color

V600ColorIntegrated Camera

V295ColorIntegrated Camera


SLIDE 32

Personal Communications Segment Personal Communications Segment Q1 2003 ForecastQ1 2003 Forecast

Down SubstantiallyDown SubstantiallyUpUpSalesSales

Compared to Compared to Q4 2002Q4 2002


LowerLowerHigherHigherOperating Margin % Operating Margin % (Q1 2003 Based on GAAP (Q1 2003 Based on GAAP results Versus Prior Periods results Versus Prior Periods Results Excluding Special Results Excluding Special Items) Items)

• Expect Normal Seasonality in Q1 versus Holiday Driven Sales in Q4

• 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. • The terms Flat, Slightly, Substantially and Very Substantially are Only Used in Forecasting Sales on this Slide


SLIDE 33

Semiconductor Products SegmentSemiconductor Products Segment(Ongoing Operations, Excluding Special Items)

1.1%1.1%$13$13

$1,223$1,223

$1,258$1,258Q3 2002Q3 2002


0.7%0.7%$9$9

$1,286$1,286

$1,189$1,189Q4 2002Q4 2002 Q3 2002Q3 2002Q4 2001Q4 2001Q4 2001Q4 2001

(25.3%)(25.3%)Operating MarginOperating Margin(31%)(31%)>100%>100%($284)($284)Operating Earnings $MOperating Earnings $M

5%5%15%15%$1,123$1,123Sales $MSales $M

(5%)(5%)17%17%$1,012$1,012Orders $MOrders $M

Operating Earnings Improvement Versus Q4 2001 Driven By Higher Gross Margin and Much Lower Operating Expenses

Operating Earnings Flat Versus Q3 2002 Driven By Lower Gross Margin Offsetby Lower Operating Expenses. Lower Gross Margin Due to Our Decision to Scale Back Production and Generate Cash.


SLIDE 34

1816

119 8

0

5

10

15

20

25

Dec. 2000 Dec. 2001 Sept. 2002 Dec. 2002 March 2003Estimate

Wafer Fab ConsolidationsSemiconductor Products SegmentSemiconductor Products Segment


SLIDE 35

SPS SPS –– Other DevelopmentsOther DevelopmentsTCL Mobile Communications, China’s Largest Locally TCL Mobile Communications, China’s Largest Locally

Headquartered Handset Manufacturer, Became 10Headquartered Handset Manufacturer, Became 10thth

Merchant Market Customer to Adopt Motorola’s Wireless Merchant Market Customer to Adopt Motorola’s Wireless Chipset ArchitectureChipset Architecture

Cost Reduction Actions Will Continue to be Cost Reduction Actions Will Continue to be Implemented in 1Implemented in 1stst Half 2003. Half 2003. Breakeven Sales Expected Breakeven Sales Expected to be Reduced to Approximately $4.8to be Reduced to Approximately $4.8--$4.9B by Mid$4.9B by Mid--2003.2003.

SPS Capex in 2002 of $220M, 2003 Capex Forecasted SPS Capex in 2002 of $220M, 2003 Capex Forecasted to be Approximately $350Mto be Approximately $350M

Worldwide Semiconductor Industry Growth in 2003 Worldwide Semiconductor Industry Growth in 2003 Forecasted to Be Approximately 10%Forecasted to Be Approximately 10%


SLIDE 36

Semiconductor Products Segment Semiconductor Products Segment Q1 2003 ForecastQ1 2003 Forecast

DownDownUpUpSalesSales



Small Loss in Q1 2003 Small Loss in Q1 2003 Compared to Small Compared to Small Positive Operating Positive Operating

Earnings in Q4 2002Earnings in Q4 2002

Small Loss Small Loss Compared to Compared to Large LossLarge Loss

Operating Margin % Operating Margin % (Q1 2003 Based on GAAP (Q1 2003 Based on GAAP results Versus Prior Periods results Versus Prior Periods Results Excluding Special Results Excluding Special Items) Items)


Effect of Lower Sales in Q1 2003 Versus Q4 2002 Expected to BePartially Offset By Improved Gross Margin


SLIDE 37

Global Telecom Solutions SegmentGlobal Telecom Solutions Segment(Ongoing Operations, Excluding Special Items)

0.5%0.5%$5$5

$1,014$1,014

$880$880Q3 2002Q3 2002


0.2%0.2%$3$3

$1,220$1,220

$1,091$1,091Q4 2002Q4 2002 Q3 2002Q3 2002Q4 2001Q4 2001Q4 2001Q4 2001

(8.0%)(8.0%)Operating MarginOperating Margin(40%)(40%)>100%>100%($109)($109)Operating Earnings $MOperating Earnings $M

20%20%(11%)(11%)$1,365$1,365Sales $MSales $M

24%24%(3%)(3%)$1,120$1,120Orders $MOrders $M

Operating Earnings Improvement Versus Q4 2001 Driven By Higher Gross Margin and Much Lower Operating Expenses.

Operating Earnings Flat Versus Q3 2002 On Higher Sales Due to:Lower Gross Margin Resulting From Different Mix of Technologies

Shipped & Lower Prices Partially Offset by Lower Operating Expenses.


SLIDE 38

GTSS GTSS –– Other DevelopmentsOther DevelopmentsGTSS Signed Contracts Totaling $446M For Deployment of GTSS Signed Contracts Totaling $446M For Deployment of

CDMA 1X System For China UnicomCDMA 1X System For China Unicom

Largest Award of Any Single Infrastructure VendorLargest Award of Any Single Infrastructure Vendor

Much of Equipment Shipped in Q4 2002Much of Equipment Shipped in Q4 2002

Delivered Phase 1 of iDEN Nationwide Direct Connect to Delivered Phase 1 of iDEN Nationwide Direct Connect to Nextel. Nextel.

Wireless Infrastructure Industry Revenue Expected to Wireless Infrastructure Industry Revenue Expected to Decline 6Decline 6--12% in 200312% in 2003

Cost Reduction Activities will Continue To Be Implemented Cost Reduction Activities will Continue To Be Implemented in 1in 1stst Half of 2003. Breakeven Sales Expected to be Reduced Half of 2003. Breakeven Sales Expected to be Reduced to Approximately $4.0B by Midto Approximately $4.0B by Mid--2003.2003.


SLIDE 39

Global Telecom Solutions Segment Global Telecom Solutions Segment Q1 2003 ForecastQ1 2003 Forecast

Down Very SubstantiallyDown Very SubstantiallyDownDownSalesSales



Small Loss in Q1 2003 Small Loss in Q1 2003 Compared to Breakeven Compared to Breakeven

in Q4 2002in Q4 2002

Smaller LossSmaller LossOperating Margin % Operating Margin % (Q1 2003 Based on GAAP results (Q1 2003 Based on GAAP results versus Prior Periods Results versus Prior Periods Results Excluding Special Items) Excluding Special Items)


Sequential Sales Decline Versus Q4 2002 (Due in Large Part to Lower Shipments to China Unicom) Will Lower Gross Margin Which Will Only Partially Be Offset By Lower Operating Expenses

Smaller Loss Versus Q1 2002 Despite Lower Sales Due to Improved Gross Margin and Much Lower Operating Expenses


SLIDE 40

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

8.8%8.8%$77$77

$874$874

$987$987Q3 2002Q3 2002


14.5%14.5%$170$170

$1,170$1,170

$1,081$1,081Q4 2002Q4 2002 Q3 2002Q3 2002Q4 2001Q4 2001Q4 2001Q4 2001

15.1%15.1%Operating MarginOperating Margin>100%>100%(6%)(6%)$181$181Operating Earnings $MOperating Earnings $M

34%34%(2%)(2%)$1,198$1,198Sales $MSales $M

10%10%(5%)(5%)$1,141$1,141Orders $MOrders $M

Q4 2002 Results Showed Normal Seasonal Strength Versus Q3 2002Q4 2002 Orders Slightly Lower Than Q4 2001 Due to Large System

Procurement Delays By Governmental Customers in North America asHomeland Security Programs Still Being Finalized


SLIDE 41

CGISS CGISS –– Other DevelopmentsOther DevelopmentsCGISS Received Prestigious 2002 Malcolm Baldrige National CGISS Received Prestigious 2002 Malcolm Baldrige National

Quality Award For Operational Excellence and Quality Quality Award For Operational Excellence and Quality AchievementAchievement

Homeland Security Update Homeland Security Update ––U.S. Department of Homeland Security Established in Q4 U.S. Department of Homeland Security Established in Q4 Clearer View of Homeland Security Opportunity Should Clearer View of Homeland Security Opportunity Should

Be Available As 2003 UnfoldsBe Available As 2003 Unfolds

Greg Brown Joined Motorola from Micromuse to be Greg Brown Joined Motorola from Micromuse to be President and CEO of CGISS.President and CEO of CGISS.

2003 Two2003 Two--Way Radio Industry Growth Forecasted to be 5Way Radio Industry Growth Forecasted to be 5--8%8%


SLIDE 42

Commercial Govt. and Industrial System Segment Commercial Govt. and Industrial System Segment Q1 2003 ForecastQ1 2003 Forecast

Down Very SubstantiallyDown Very SubstantiallyUp SlightlyUp SlightlySalesSales



LowerLowerHigherHigherOperating Margin % Operating Margin % (Q1 2003 Based on GAAP results (Q1 2003 Based on GAAP results Versus Prior Periods Results Versus Prior Periods Results Excluding Special Items) Excluding Special Items)


Versus Q1 2002 Expect Higher Sales and Lower Operating ExpensesShould Contribute to Higher Operating Margin

Versus Q4 2002 Expect Normal Seasonal Sales Decline Will Cause Operating Margin to be Lower


SLIDE 43

Broadband Communications SegmentBroadband Communications Segment(Ongoing Operations, Excluding Special Items)

14.4%14.4%$75$75

$519$519

$385$385Q3 2002Q3 2002


13.3%13.3%$65$65

$489$489

$353$353Q4 2002Q4 2002 Q3 2002Q3 2002Q4 2001Q4 2001Q4 2001Q4 2001

13.5%13.5%Operating MarginOperating Margin(13%)(13%)(17%)(17%)$78$78Operating Earnings $MOperating Earnings $M

(6%)(6%)(16%)(16%)$579$579Sales $MSales $M

(8%)(8%)(33%)(33%)$525$525Orders $MOrders $M

Sales and Orders Down Versus Last Year and Q3 2002 as Cable Service Providers Reduce Capital Expenditures and Shorten Order Cycle Time

Excellent Cost Controls Have Allowed BCS to Maintain Double Digit Operating Margin Despite Sales Decline


SLIDE 44

Broadband Communications SegmentBroadband Communications Segment

Maintaining Market Share in Set-Top Boxes

Continue to Have Market Share That is Greater Than 2X Our Nearest Competitor in Cable Modems

Up Up ~100K~100K

Up Up ~100K~100K

Cable Modem Cable Modem Unit Shipments Unit Shipments ~1.1 Million~1.1 Million

Down Down ~100K~100K

Down Down ~300K~300K

Set Top Box Set Top Box Unit Shipments Unit Shipments ~1.2 Million~1.2 Million

Change Change From From

Q3 2002Q3 2002

Change Change From From

Q4 2001Q4 2001


SLIDE 45

BCS BCS –– Other DevelopmentsOther DevelopmentsMotorola BCS Remains Strong #1 in Overall Cable Motorola BCS Remains Strong #1 in Overall Cable

Equipment Market Share Equipment Market Share

BCS Continues to Have Broadband Technology BCS Continues to Have Broadband Technology Leadership as Recently Demonstrated at Broadband Plus Leadership as Recently Demonstrated at Broadband Plus Show and Consumer Electronics ShowShow and Consumer Electronics Show

Broadband Equipment Industry Revenue Expected to Broadband Equipment Industry Revenue Expected to decline 10% in 2003 as Cable Operators Reduce Capital decline 10% in 2003 as Cable Operators Reduce Capital Expenditures AgainExpenditures Again


SLIDE 46

Broadband Communications Segment Broadband Communications Segment Q1 2003 ForecastQ1 2003 Forecast

DownDownDown Down SubstantiallySubstantially

SalesSales



LowerLowerLowerLowerOperating Margin % Operating Margin % (Q1 2003 Based on GAAP results (Q1 2003 Based on GAAP results Versus Prior Periods Results Versus Prior Periods Results Excluding Special Items) Excluding Special Items)


Sales Decline Driven by Lower Capital Spending From Cable OperatorsOperating Margin Decline Results from Decrease in Sales Partially Offset

by Lower Operating Expenses


SLIDE 47

Integrated Electronic Systems SegmentIntegrated Electronic Systems Segment(Ongoing Operations, Excluding Special Items)

5.2%5.2%$28$28

$544$544

$562$562Q3 2002Q3 2002


5.6%5.6%$32$32

$570$570

$558$558Q4 2002Q4 2002 Q3 2002Q3 2002Q4 2001Q4 2001Q4 2001Q4 2001

(5.0%)(5.0%)Operating MarginOperating Margin14%14%>100%>100%($27)($27)Operating Earnings $MOperating Earnings $M

5%5%6%6%$540$540Sales $MSales $M

(1%)(1%)15%15%$483$483Orders $MOrders $M

Versus Q3 2002 Showed Consistent ResultsVersus Q4 2001 Operating Earnings Improved From:

Higher SalesHigher Gross MarginLower Operating Expenses


SLIDE 48

IESS IESS –– Other DevelopmentsOther DevelopmentsDennis Carey Joined Motorola from Home Depot to Dennis Carey Joined Motorola from Home Depot to

be President and CEO of IESSbe President and CEO of IESS

2002 Revenue Dynamics2002 Revenue Dynamics

Very Substantial Growth in Automotive ElectronicsVery Substantial Growth in Automotive Electronics

Slight Decline in Energy SystemsSlight Decline in Energy Systems

Very Substantial Decline in Motorola Computer Very Substantial Decline in Motorola Computer Group as Telecom Market Weakness Has ContinuedGroup as Telecom Market Weakness Has Continued

Automotive, Energy Systems and Motorola Computer Automotive, Energy Systems and Motorola Computer Group All Improved Operating Earnings in 2002Group All Improved Operating Earnings in 2002


SLIDE 49

Integrated Electronic Systems Segment Integrated Electronic Systems Segment Q1 2003 ForecastQ1 2003 Forecast

DownDownUp SlightlyUp SlightlySalesSales



LowerLowerHigherHigherOperating Margin % Operating Margin % (Q1 2003 Based on GAAP (Q1 2003 Based on GAAP results Versus Prior Periods results Versus Prior Periods Results Excluding Special Items) Results Excluding Special Items)



SLIDE 50

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 Reflected in Operating ResultImpact of Restructuring/Rebuilding Reflected in Operating ResultssCommitment to Earnings And Balance Sheet ImprovementCommitment to Earnings And Balance Sheet Improvement—— Eight Consecutive Quarters of Positive Operating Cash FlowEight Consecutive Quarters of Positive Operating Cash Flow—— Q4 2002 Operating Earnings On a GAAP Basis Q4 2002 Operating Earnings On a GAAP Basis

—— 5 out of 6 Major Segments Had Positive Operating Earnings5 out of 6 Major Segments Had Positive Operating Earnings—— All 6 Major Segments Improved from Q4 2001All 6 Major Segments Improved from Q4 2001

—— Q4 2002 Operating Earnings Excluding Special Items Q4 2002 Operating Earnings Excluding Special Items —— All 6 Major Segments had Positive Operating Earnings for 2All 6 Major Segments had Positive Operating Earnings for 2ndnd

Quarter in a RowQuarter in a Row—— 4 of 6 Segments Increased Operating Earnings from Q4 20014 of 6 Segments Increased Operating Earnings from Q4 2001

—— Q1 2003 Operating Earnings on GAAP Basis Versus Q1 2002Q1 2003 Operating Earnings on GAAP Basis Versus Q1 2002—— 5 of 6 Major Segments Guiding to Higher Operating Earnings5 of 6 Major Segments Guiding to Higher Operating Earnings

KeyKey TakeawaysTakeaways


SLIDE 51

Guidance UpdateGuidance Update

David DevonshireDavid DevonshireChief Financial OfficerChief Financial Officer

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


SLIDE 52

Q1 2003 GuidanceQ1 2003 Guidance

Versus Q1 2002 Very Substantial Improvement in Operating Earnings on Flat to Slightly Higher Sales Due to Beneficial Results of Restructuring Driving Higher Gross Margin and Lower Operating Expenses

Entire Reason For Sequential Decline in EPS is Gross Margin Impact of Sequential Decline in Sales, Partially Offset By Lower Operating Expenses

$0.08$0.08($0.20)($0.20)BreakevenBreakeven--$0.02$0.02Earnings Per ShareEarnings Per Share

$0.13$0.13

$7.5B$7.5B

Q4 Q4 20022002


BreakevenBreakeven--$0.02$0.02

$6.0B$6.0B--$6.2B$6.2B

Q1 Q1 20032003

Q4 Q4 20022002

Q1 Q1 20022002

Q1 Q1 20022002

($0.08)($0.08)Earnings Per ShareEarnings Per Share

(17%(17%--20%)20%)0%0%--3%3%$6.0B$6.0BSalesSales

(on a GAAP Basis)

(Excluding Special Items)


SLIDE 53

Annual 2003 GuidanceAnnual 2003 Guidance

$0.40$0.40

$27.5B$27.5B

PreviousPreviousGuidanceGuidance

($1.78)($1.78)

$29.9B$29.9B20012001

$0.40$0.40

$27.5B$27.5B20032003

2002 2002 ActualActual

($1.09)($1.09)Earnings Per Share Earnings Per Share (On a GAAP Basis)(On a GAAP Basis)

$26.6B$26.6BSalesSales

No Change from Previous GuidanceSales Growth Expected in PCS, CGISS, SPS and IESSSales Decline Expected in GTSS and BCSExpect Positive Operating Earnings and Positive Operating Cash Flow in

Each Business SegmentEarnings Leverage Potential When Served Markets Improve


SLIDE 54

Chris GalvinChris GalvinChief Executive OfficerChief Executive Officer

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


SLIDE 55

20032003

NEXT PHASE OF NEXT PHASE OF MOTOROLA’S MOTOROLA’S

POSITIVE RENEWALPOSITIVE RENEWAL


SLIDE 56

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 DevonshireSenior Vice PresidentSenior Vice President

Director of Investor Relations

David DevonshireExecutive Vice PresidentExecutive Vice President

Chief Financial Officer Director of Investor RelationsChief Financial Officer


SLIDE 57

Safe Harbor StatementSafe 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 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) plans to reduce debt; (5) expectations for Motorola’s operating cash flow and free cash flow during 2003; (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) worldwide semiconductor industry growth; (16) the implementation and effectiveness of our “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-35 through F-40 of Motorola’s Proxy Statement for the 2002 annual meeting of stockholders and in Motorola’s other SEC filings.

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. 2002


SLIDE 58

Economy & Finance

Q4 2002 Earnings Release Presentation