Analyst Conference Summary

conference date: July 19, 2007 (5 A.M. Pacific Time)
for quarter ending: June 30, 2007 (2nd quarter)

Forward-looking statements

Overview: As expected from earlier warning, a bad quarter with net losses.

Basic data:

Revenues were $8.7 billion, down 7.5% sequentially from $9.4 billion and down 19% from year-earlier.

GAAP EPS loss of $0.02 per share versus a gain of $0.08 in Q1 2007 and a gain of $0.54 per share year-earlier.

Guidance:

Q3 EPS expected flat to slightly up from Q2 if special items are excluded. Does not expect Mobile Devices business to have full-year profitability, but expects improved financial results in 2nd half of 2007.

Conference Highlights:

Revenues and EPS well below guidance given in April, but in line with recent warning.

Product portfolio began to be refreshed late in Q2. Gross margin improved 1.5% from Q1. Saw some order pick up towards end of quarter and a variety of new 3G devices are shipping or will be soon. Reductions in force totaling 7500 are expected to be completed by end of year. Should lead to $1 billion in savings in 2008.

Mobile device shipments fell short of expectations at 35.5 million units. The mobile Devices segment had revenues of $4.3 billion, down 40% compared to year-earlier. Sales were particularly bad outside the Americas. Global market share was about 13.5%.

Home & Network Mobility sales were $2.6 billion, up 9% from year-earlier. Demand was strong for HD DVR and IPTV devices and WiMax. 4.2 million devices were sold in quarter, mix was favorable for margins. Acquisitions in progress for video capabilities. 2nd half will be soft due to FCC mandate. WiMax still in investment mode.

Enterprise Mobility Solutions sales were $1.9 billion, up 42% from year earlier partly due to acquisition of Symbol in January 2007. Continued strength in government and public safety. 63% of business was in North America. Expanding vertical presense. Demand for mobile computers remains strong. Expects solid results in Q3.

GAAP EPS loss of $0.02 included charges of $0.04 for restructuring and litigation.

Operating loss was $158 million (loss of $32 million excluding special items). SG&A expense was $1.3 billion. R&D $1.1 billion. Interest income was $32 million.

Cash and equivalents ended at $4.3 billion. Cash flow was negative, included dividend payout and stock repurchases. Inventory was reduced by $300 million compared to Q1.

Q&A:

Mobile Device design investment? In 2005-2006 added engineering investments. Are not cutting into signicant R&D programs. Focussed on overlap in acquisitions. Looking for lower cost but richer experience 3G products.

Cellular wireless infrastructure? CDMA and IDN are performing to expectations, GSM challenging. Continuing to invest in WiMax, but don't see it as a short term rescue, expects contribution in 2008-2009 timeframe.

Mobile WiMax timing? Rolling out Expedience portfolio. 2 dozen trials globally, about 50% of all trials worldwide.

Regional handset mix? Market share drop was greatest in EMEA and Asia. Remain market leader in North America, but down slightly sequentially.

Channel inventory position? Made progress in Q2, particularly in India and China. Remains elevated in certain markets, notably SE Asia. Working on marketing programs that enable sell through in Q3.

New Product effects? Did not have much new product in Q1 and Q2, but will in Q3.

Q3 guidance seems light? Last couple of quarters have been challenging. So making prudent guidance for Q3.

Handset business Q3? Does not want to give specific guidance.

ASP issue for cell phones? Went after profitable growth, so ASPs up over $1 sequentially, but lost market share. Especially selective in low end market.

Products for Christmas season? Not pre-announcing products anymore, will have some new product for Q3 and Q4.

Acquisitions? Have done some small ones, could do more, but focussing on internal improvements.

Symbian strategy? Europe is 3G marketplace, where we have been challenged. Z8 is compelling product. Symbian lets us enter into an attractive tier. Rationalizes software architecture.

U.S. market competition with Sony, Apple, etc.? Have some work to do with 3G in US, you will see some stuff in 2nd half of year.

Home & Network Mobility prospects? While 2nd half expected to be soft, expects this to expand rapidly in next several years.

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