Q2 2005 Motorola Inc. Earnings Conference Call Presentation

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Q2 2005 Motorola Inc. Earnings Conference Call Presentation

  1. 1. Motorola Q2 2005 Earnings Release Conference Call July 19, 2005 Slide - 1 Q2 2005 Earnings Release – July 19, 2005 MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office. .
  2. 2. Ed Gams Senior Vice President of Investor Relations Motorola Inc. Slide - 2 Q2 2005 Earnings Release – July 19, 2005 MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office. .
  3. 3. Safe Harbor Statement A number of forward-looking statements will be made during this presentation. Forward-looking statements are any statements that are not historical facts. These forward-looking statements are based on the current expectations of Motorola and there can be no assurance that such expectations will prove to be correct. Because forward-looking statements involve risks and uncertainties, Motorola’s actual results could differ materially from these statements. Information about factors that could cause, and in some cases have caused, such differences can be found on pages 70 through 80 of Motorola’s 2004 Annual Report on Form 10-K and in Motorola’s other SEC filings. This presentation is being made on the afternoon of July 19, 2005. The content of this presentation contains time-sensitive information that is accurate only as of the time hereof. If any portion of this presentation is rebroadcast, retransmitted or redistributed at a later date, Motorola will not be reviewing or updating the material that is contained herein. 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. 2005 Q2 Earnings Release – July 19, 2005 Slide -- 3 MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office.
  4. 4. Ed Zander Chief Executive Officer Chairman of the Board of Directors Motorola Inc. Slide - 4 Q2 2005 Earnings Release – July 19, 2005 MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office. .
  5. 5. David Devonshire Chief Financial Officer Executive Vice President Motorola Inc. Slide - 5 Q2 2005 Earnings Release – July 19, 2005 MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office. .
  6. 6. Motorola Inc. Q2 Financial Results Q2 Q2 Fav (Unfav) 2005 2004 Q2’05/Q2’04 Sales $M $8,825 $7,541 17% Earnings Per Share* $0.38 $0.25 52% * From Continuing Operations Q2 Earnings Release – July 19, 2005 Slide -- 6 MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office.
  7. 7. Significant Items Discussed in the Earnings Press Release Q2 2005 PBT Tax PAT EPS Impact Reported EPS $0.38 Includes: Gain on Sale of Investment $375M ($132M) $243M $0.10 Repayment of Loan Previously Reserved $ 30M ($ 11M) $ 19M $0.01 Restructuring ($ 25M) $ 9M ($ 16M) ($0.01) Change in 2004 China Tax Rate ($ 43M) $ 43M $0.02 $289M $0.12 Q2 2004 PBT Tax PAT EPS Impact Reported EPS $0.25 Includes: Reversal of Tax Reserves ($197M) $197M $0.08 Reversals of Accruals for $ 21M $ 8M $ 13M $0.00 Reorganization of Business Costs $210M $0.08 Q2 Earnings Release – July 19, 2005 Slide -- 7 MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office.
  8. 8. Motorola Sales Trend $ Billions 10 8.8 8.8 8.2 7.5 7.4 7.5 8 6.9 5.9 6 5.2 5.1 2003 2004 2005 4 2 0 Q1 Q2 Q3 Q4 Q2 Earnings Release – July 19, 2005 Slide -- 8 MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office.
  9. 9. Gross Margin % of Sales 35% 34.5% 32.7% 32.6% 30% Q2'04 Q1'05 Q2'05 Q2 Earnings Release – July 19, 2005 Slide -- 9 MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office.
  10. 10. Research & Development Expenses $ in Millions 30.4% $900 32.0% 29.6% 28.7% $600 24.0% $300 16.0% 9.9% 9.9% 9.6% $0 8.0% Q2'04 Q1'05 Q2'05 R&D $ R&D % to Sales R&D % GM Q2 Earnings Release – July 19, 2005 Slide -- 10 MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office.
  11. 11. Selling, General and Administrative Expenses $ in Millions % NSAD $1,250 20.0% $1,000 15.0% 14.5% 12.3% 11.6% $750 10.0% Q2'04 Q1'05 Q2'05 Q2 Earnings Release – July 19, 2005 Slide -- 11 MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office.
  12. 12. Motorola Operating Earnings Trend % of Sales 15.0% 11.5% 11.1% 10.6% 10.4% 9.2% 10.0% 8.6% 2003 6.7% 2004 5.2% 5.0% 2005 4.6% 5.0% 0.0% Q1 Q2 Q3 Q4 Q2 Earnings Release – July 19, 2005 Slide -- 12 MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office.
  13. 13. Cash Flow and Debt Cash Flow Cash & Debt Q2 Year-End ($ in Billions) ($ in Billions) Q2 2005 2005 2004 Cash/Equiv/Mkt Sec $12.8 $ 10.7 Operating Cash Flow $1.0 Short Term/Current ($0.7) ($0.7) Debt Long Term Debt ($4.6) ($4.6) Free Cash Flow $0.9 TOTAL DEBT ($5.3) ($5.3) Net Cash/ (Net Debt) $7.5 $5.4 Q2 Earnings Release – July 19, 2005 Slide -- 13 MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office.
  14. 14. Stock Repurchase Update • Authorized to Purchase $4B over 3 Years • Purchased 9.2M Shares in Q2 at an Average Price of $17.86/Share • Program announced on May 19th – Purchases Occurred During Last 6 Weeks of the Quarter • Expect To Be in the Market For All of Q3 and To Purchase a Larger Number of Shares Than in Q2 Q2 Earnings Release – July 19, 2005 Slide -- 14 MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office.
  15. 15. Q3 2005 Guidance Sales $8.9B-$9.1B Earnings Per Share $0.27-$0.29 Q2 Earnings Release – July 19, 2005 Slide -- 15 MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office.
  16. 16. Q2 Earnings Release – July 19, 2005 Slide -- 16 MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office.
  17. 17. Mobile Device Business – Q2 Q2 2005 Q2’05 vs. Q2’04 Sales $M $4,901 Up 24% Operating Earnings $M $498 Up 26% Operating Margin 10.2% Up 0.2 ppts Units Q2 33.9M Up 41% Market Share Est. – Q2 18.1% Up 3.3 ppts Q2’05 Operating Earnings Include a $9M Charge for Restructuring Q2 Earnings Release – July 19, 2005 Slide -- 17 MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office.
  18. 18. Q2 Earnings Release – July 19, 2005 Slide -- 18 MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office.
  19. 19. North America • #1 at 3 of top 5 wireless operators • ~ 36% share – up more than 10 ppts from Q2‘04 • Units up 10% vs. Q1‘05 and 44% vs. Q2‘04 • Focus: Expand CDMA and strengthen brand Source: Motorola, Inc. Shares are calculated on 2Q05 Unit Shipments. Q2 Earnings Release – July 19, 2005 Slide -- 19 MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office.
  20. 20. Latin America • #1 in Venezuela, Argentina and Brazil • ~ 33% Share • Units Up ~ 50% vs. Q1‘05 and Q2‘04 • Leadership in Push to Talk over Cellular • Focus: Grow Brand and Share Source: Motorola, Inc. Shares are calculated on 2Q05 Unit Shipments. Q2 Earnings Release – July 19, 2005 Slide -- 20 MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office.
  21. 21. … and growing! Europe • Best Q2 for Units and Sales. • ~ 14% Share – Up >1 ppt vs. Q1‘05 and >2 ppts vs. Q2‘04 • Units Up 6% vs. Q1‘05 and 43% vs. Q2‘04 • RAZR the Clear Winner • Focus: Build Brand and Share Source: Motorola, Inc. Shares are calculated on 2Q05 Unit Shipments. Q2 Earnings Release – July 19, 2005 Slide -- 21 MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office.
  22. 22. North Asia • Market Share Flat to Slightly Down • CDMA RAZR a Hit in Korea • UMTS M1000 Launched in Japan With DoCoMo • Focus: • Renew China With New Products and Marketing • Build the Brand in Japan Source: Motorola, Inc. Shares are calculated on 2Q05 Unit Shipments. Q2 Earnings Release – July 19, 2005 Slide -- 22 MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office.
  23. 23. High-Growth Markets • ~ 9% Share – Up 2.5 ppts vs.Q1‘05 and 2 ppts vs. Q2‘04 • Units Up 57% vs. Q1‘05 and 74% vs. Q2‘04 • C115 and RAZR are Hot • Focus: Continued Profitable Market-Share Growth Source: Motorola, Inc. Shares are calculated on 2Q05 Unit Shipments. Q2 Earnings Release – July 19, 2005 Slide -- 23 MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office.
  24. 24. Q2 Units Q2 vs. Q2’04 Units % > 70 GSM CDMA < 30 UMTS iDEN Q2 Earnings Release – July 19, 2005 Slide -- 24 MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office.
  25. 25. RAZR CDMA - Korea RAZR BLACK RAZR GSM Q2 Earnings Release – July 19, 2005 Slide -- 25 MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office.
  26. 26. Q2 Earnings Release – July 19, 2005 Slide -- 26 MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office.
  27. 27. grow profitably with … wickedly compelling products … quality – on time and every time … platforms – hardware and software … and, efficiency – in everything we do. Q2 Earnings Release – July 19, 2005 Slide -- 27 MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office.
  28. 28. Networks Business – Q2 Q2 2005 Q2’05 vs. Q2’04 Sales $M $1,616 Up 3% Operating Earnings $M $263 Up 57% Operating Margin 16.3% Up 5.6 ppts Q2’05 Operating Earnings Includes $2M Income from a Reversal of Restructuring Reserves Q2 Earnings Release – July 19, 2005 Slide -- 28 MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office.
  29. 29. Networks – Q2 Highlights – VIBO 3G/UMTS, HSDPA Ready – KDDI Softswitch – Sprint WiMax Trials – Unlicensed Mobile Access (UMA) Trials – GSM/GPRS Expansion Contracts Q2 Earnings Release – July 19, 2005 Slide -- 29 MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office.
  30. 30. Government & Enterprise Mobility Solutions – Q2 Q2 2005 Q2’05 vs. Q2’04 Sales $M $1,658 Up 7% Operating Earnings $M $221 Up 3% Operating Margin 13.3% Down 0.6 ppts Q2’05 Operating Earnings Include a $15M Charge for Restructuring Q2 Earnings Release – July 19, 2005 Slide -- 30 MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office.
  31. 31. Government & Enterprise Mobility Solutions – Q2 Highlights Government/Public Safety • Continuing Leadership in Mission Critical Solutions • Mesh Networks – 30+ New Customers Enterprise • Field Network Contracts - Hydro Quebec – Canada - Shanghai Rail - China • Introduced Broadband Over Powerline Solution Automotive • Return to Profitability – Operational Improvements in Process Q2 Earnings Release – July 19, 2005 Slide -- 31 MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office.
  32. 32. Connected Home – Q2 Q2 2005 Q2’05 vs. Q2’04 Sales $M $718 Up 35% Operating Earnings $M $47 Up 24% Operating Margin 6.5% Down 0.6 ppts Q2 Earnings Release – July 19, 2005 Slide -- 32 MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office.
  33. 33. Connected Home – Q2 Highlights • Shipped 2.0M Digital Set-Top Devices and 2.1M DOCSIS Modems • HD/DVR Set-Tops • Industry Firsts • All-Digital HD/Dual Tuner/DVR • Set-Top With Embedded Multimedia Over Coaxial Cable • Ojo Video Phone Retail Availability • Verizon Video Services Set-Top Deployment Update Q2 Earnings Release – July 19, 2005 Slide -- 33 MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office.
  34. 34. 2005 Priorities Q2 Scorecard • Execution + • Improve Financial Performance + • Customer “Delight’/Quality In Progress • Market Share/Thought Leadership + • “WOW” Products/End-to End Solutions + • Organizational Efficiency In Progress • Refine and Execute On Strategic Direction In Progress Q2 Earnings Release – July 19, 2005 Slide -- 34 MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office.
  35. 35. Roadmap to 13-15% Operating Margin Improvement Target Vs. 2004 1. Supply Chain Efficiencies ~ 2-3% 2. Customer Delight ~ .5% 3. R&D ~ .5%-1.0% 4. G&A ~ .5% > $1 Billion in Efficiencies / Cost Reductions Q2 Earnings Release – July 19, 2005 Slide -- 35 MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office.
  36. 36. Motorola Q&A Participants David Devonshire Ed Zander Executive Vice President Chief Executive Officer Chief Financial Officer Chairman of the Board of Directors Greg Brown Ron Garriques Executive Vice President Executive Vice President President, Government & Enterprise President, Mobile Devices Business Mobility Solutions Ed Gams Senior Vice President Investor Relations Q2 Earnings Release – July 19, 2005 Slide -- 36 MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office.
  37. 37. Use of Non-GAAP Measurements In addition to the GAAP results provided during this conference call, Motorola has presented certain non-GAAP measurements. Motorola has provided these non-GAAP measurements as a measure to help investors better understand its core operating performance, enhance comparisons of Motorola’s core operating performance from period to period and to allow better comparisons of Motorola’s operating performance to that of its competitors. Among other things, the Company’s management uses these operating results, excluding the identified items, to evaluate the performance of its businesses and to evaluate results relative to incentive compensation targets. Management uses operating results excluding these items because they believe this measure enables them to make better period-to-period evaluations of the financial performance of its core business operations. There are inherent limitations in the use of operating results excluding these items because the company's GAAP results do include the impact of these items. The non-GAAP measures are intended only as a supplement to the comparable GAAP measures and the company compensates for the limitations inherent in the use of non-GAAP measures by using GAAP measures in conjunction with the non- GAAP measures. As a result, investors should consider these non-GAAP measures in addition to, and not in substitution for, or as superior to, measures of financial performance prepared in accordance with GAAP. Details of the these 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 July 19, 2005 (which attached this afternoon’s earnings press release), (ii) within the text of the slides that accompany this webcast, or (iii) on the company’s website. Each of these items can be found on Motorola’s website at www.motorola.com/investor. Q2 Earnings Release – July 19, 2005 Slide -- 37 MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office.
  38. 38. Safe Harbor Statement A number of forward-looking statements will be made during this presentation. Forward-looking statements are any statements that are not historical facts. These forward-looking statements are based on the current expectations of Motorola and there can be no assurance that such expectations will prove to be correct. Because forward-looking statements involve risks and uncertainties, Motorola’s actual results could differ materially from these statements. Information about factors that could cause, and in some cases have caused, such differences can be found in this afternoon's earnings press release, on pages 70 through 80 of Motorola’s 2004 Annual Report on Form 10-K and in Motorola’s other SEC filings. This presentation is being made on the afternoon of July 19, 2005. The content of this presentation contains time-sensitive information that is accurate only as of the time hereof. If any portion of this presentation is rebroadcast, retransmitted or redistributed at a later date, Motorola will not be reviewing or updating the material that is contained herein. 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. 2005 Q2 Earnings Release – July 19, 2005 Slide -- 38 MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office.

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