Analyst Conference Summary

conference date: January 23, 2008 @ 5:00 AM PT Pacific Time
for quarter ending: December 31, 2007 (4th quarter)

Forward-looking statements

Overview: Still recovering from slump earlier in year. Still having problems with competing in cell phone market.

Basic data:

Revenues were $9.65 billion, up 9.5% sequentially from $8.8 billion but down 18% from $11.79 billion in the year-earlier quarter (Q4 2006).

Net earnings (from continuing operations) were $100 million, up 67% sequentially from $60 million, but down 84% from $623 million year-earlier.

EPS (from continuing operations) was $0.05, more than doubling the $0.02 of Q3 but down over 75% from $0.21 in the year-earlier quarter.

Guidance:

Expects continuing operations EPS loss of $0.05 to $0.07 due to seasonal sequential trends.

Conference Highlights:

EPS including discontinued operations was $0.04. Non-GAAP EPS was $0.14.

"Mobile Devices remains challenged; sales declined 38% versus prior-year quarter... the recovery in Mobile Devices will take longer than expected." Competitive landscape has intensified. But other mobility product divisions had strong results.

Working aggressively to continue to reduce costs by $500 million. But previously announced workforce reductions are complete.

Operating cash flow was $470 million. 33.7 million shares were repurchased for a total of $557 million. Gross cash $8.4 billion end-of-quarter.

Mobile Devices segment revenues were $4.8 billion, a 38% y/y decline despite announcing 9 new phones in quarter. 41 million units were sold. Asia and EMEA geographic regions remain challenging. Working on more cost-competitive silicon and software. (See phones available for U.S. market)

Home and Networks Mobility segment revenues were $2.7 billion, up 11% y/y. Expanding WiMAX footprint.

Enterprise Mobility segment revenues were $2.1 billion, up 35% y/y. Government & Public Safety market was flat. 60% of sales in North America. Symbol integration is complete and has done very well, so Symbol results will no longer be announced.

Cost of sales was $7.11 billion. Gross margin was $2.54 billion. Selling, general and administrative expense was $1.27 billion; R&D $1.11 billion; other charges $101 million; amortization $88 million, for a operating loss of $19 million. Other income was $52 million, earnings from continuing operations $33 million, and an income tax benefit of $78 million put earnings in the black.

Q&A:

Q1 cell phone ASPs v. margin? We have no guidance on ASPs. But in addition to typical seasonal trends we expect to see declines in both units and revenues. We expect to lose market share. Seasonal typically is a 10 to 15% decline in cell phones; we expect a greater decline.

Is that because of end markets? Demand for some of our newer products has slowed. The competitive landscape has intensified, particularly in low and 3G.

Overall market demand? We are not seeing a decrease; this is Motorola specific. But Western Europe and U.S. not as robust demand as Asia.

Was there a drop off in December? Slow demand Thanksgiving and through Christmas selling season.

Why so many suppliers of UMTS silicon? We are please with new Qualcomm agreement, which will allow us to have lower cost devices, which will see in production in late 2008. Still using Freescale and TI.

Operating expenses in 2008? Mobile devices is where most cost cutting will come, plus corporate G&A (general and administrative) expense.

Recovering lost market share? We are strong in design, but need software and user interface improvements. We are still hiring in software and product management.

Freescale settlement agreement is confidential. The agreement increased our flexibility.

How can you go after growth areas like India without the scale of a Nokia? We need to broadly refresh the product line. We have a reasonably strong go to market presense in India and China, and are augmenting that. The right products will increase our scale.

Products we recently announced won't ship until late in Q1, so increase in revenues will be in Q2.

Sprint iden ongoing customer decline? We are working closely with Sprint. Their declines are integrated into our guidance.

Fixed cost for plant versus declining units? Yes, that is true, it impacts margins. We are looking at how to optimize our manufacturing facilities.

CDMA in North America, Broadcom v. Qualcomm dispute. We have not seen any impact in our CDMA phone sales but are monitoring the situation.

Enterprise Mobility, you've done well despite competitors' problems? Symbol integration has been really powerful. We are delivering great solutions.

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