Q3 2002 Earnings Release Presentation

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Q3 2002 Earnings Release Presentation

  1. 1. Motorola – Q3 2002 Earnings Release Conference Call Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 1
  2. 2. Ed Gams Senior Vice President Director of Investor Relations Motorola Inc. Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 2
  3. 3. Safe Harbor Statement “ A number of forward-looking statements will be made during this conference call. 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 yesterday’s earnings 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.” This presentation is being made on the morning of October 16, 2002. 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.quot; 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. Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 3
  4. 4. Chris Galvin Chief Executive Officer Chairman of the Board of Directors Motorola Inc. Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 4
  5. 5. Today’s Presentation “Discussion” Closely Tied to Webcast Slides ! More Numbers ! More Time for Q&A ! Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 5
  6. 6. 5-Point Plan for Building Investor Value 1. Continual Strengthening of Management Team 2. Aggressive Focus on the Balance Sheet 3. Lowering Break-Even Sales Level by Reducing SG&A and Manufacturing Costs 4. Growth through Innovative Products, Software Applications, Customer Relationships 5. Constant Evaluation of Strategic Options and Business Portfolio Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 6
  7. 7. David Devonshire Chief Financial Officer Executive Vice President, Motorola Inc. Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 7
  8. 8. Motorola Inc. Financial Results (Ongoing Operations, Excluding Special Items and Exited Businesses) % Favorable (Unfavorable) Q3 2002 Q3 2001 Q2 2002 Q3 2001 Q2 2002 Sales $M $6,371 $7,230 $6,741 (12%) (5%) Operating Earnings $M $299 -$114 $193 >100% 55% Operating Margin 4.7% -1.6% 2.9% Earnings Per Share $0.06 -$0.07 $0.02 Improved Operating Margin quot; Higher Gross Margin & Lower SG&A Expense quot; Every Segment Had Positive Operating Earnings During Q3 2002. quot; Largest Improvement in Operating Earnings from SPS & PCS Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 8
  9. 9. Gross Margin (Ongoing Operations, Excluding Special Items and Exited Businesses) % of Sales 38% Q3 2002 Sequential Increase 36% From SPS, PCS and GTSS 34% 32% 30% 28% Improved 5 Consecutive Quarters 26% 24% Q1'01 Q2'01 Q3'01 Q4'01 Q1'02 Q2'02 Q3'02 Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 9
  10. 10. Form 8-K/A Filed (Ongoing Operations, Excluding Special Items and Exited Businesses) quot; No Change to Sales, Total Expenses or Earnings quot; Filed to Conform 2001 to 2002 Reporting / 2000-OK quot; Largely a Reclass of Depreciation From Cost of Sales to SG&A Q3 2001 Impact April 2002 8-K October 15 Filing Adjusted 8-K Variance ($ in Millions) Q3 2001 Q3 2001 Sales $7,230 $7,230 $0 Cost of Sales 5,466 5,261 (205) SG&A 849 1054 205 Net Earnings ($158) ($158) $0 Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 10
  11. 11. Selling, General and Administrative Expenses (Ongoing Operations, Excluding Special Items and Exited Businesses) $ in Millions 17.3% $1,600 18.0% 16.7% 15.7% 15.9% 15.8% $1,500 15.1% 16.0% 14.6% • SG&A declined 14.2% $1,400 28% from Q4 2000 14.0% to Q3 2002 $1,300 $1,200 12.0% • Q2 2002 SG&A impacted by $1,100 10.0% receivable write- $1,000 offs for Worldcom 8.0% and Adelphia $900 $800 6.0% Q4'00 Q1'01 Q2'01 Q3'01 Q4'01 Q1'02 Q2'02 Q3'02 Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 11
  12. 12. Motorola Work Force Trend 160 150 147 136 140 125 121 120 111 107 Work Force (Thousands) 102 100 100 93 80 60 40 20 0 Aug-00 Mar-01 Jun-01 Mar-02 Jun-02 Jun-03 Est Dec-00 Sep-01 Dec-01 Sep-02 Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 12
  13. 13. Research & Development Expenditures (Ongoing Operations, Excluding Special Items and Exited Businesses) $ in Millions % of Sales 15.5% $1,200 16.0% 15.1% 14.8% 14.7% 15.0% 14.2% 14.0% 14.0% $1,100 14.0% $1,000 13.0% 12.0% $900 11.0% $800 10.0% Q1'01 Q2'01 Q3'01 Q4'01 Q1'02 Q2'02 Q3'02 2002 Annual R&D ~ $3.8B Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 13
  14. 14. Orders (Ongoing Operations, Excluding Exited Businesses) Order % change versus previous year quarter • Greater Than Expected Industry 0% Contraction Q1'01 Q2'01 Q3'01 Q4'01 Q1'02 Q2'02 Q3'02 • Infrastructure -5% • Broadband -10% • Industries with Slowing Growth • Personal Communications -15% • Semiconductors -20% • Strong Order Trend in CGISS -25% • Expect Q4 2002 orders to show growth over Q4 2001 -30% -35% Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 14
  15. 15. $ in Billions Cash and Debt Sept. 2002 Dec 2001 Dec. 2000 Short Term Debt $1.5 $0.9 $6.4 Long Term Debt $6.2 $7.2 $4.3 Long Term Debt Linked $1.2 $1.2 $0.0 to Equity Units TOTAL DEBT $8.9 $9.2 $10.7 Cash & Cash Equivalents ($6.4) ($6.2) ($3.7) NET DEBT $2.5 $3.1 $7.0 NET DEBT/ NET 18.3% 18.4% 27.4% DEBT+EQUITY quot; Moved $3.0 B to U.S. during Q3, Cost of Approximately $50 Million Cash Tax quot; Domestic Cash Increased to $4.2B quot; Intend to Reduce Gross Debt Over Next Twelve Months Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 15
  16. 16. Working Capital Accounts Receivable + Inventory - Accounts Payable (% to Sales) 25.0% 24.2% 20.3% 18.0% 17.6% 16.7% 16.0% 16.1% 17.5% 20.0% 15.0% Long Term 10.0% Target of 12% Q4 00 Q1 01 Q2 01 Q3 01 Q4 01 Q1 02 Q2 02 Q3 02 Q4 02 Est Institutionalizing Continuous Improvement ! Inventory Up in Q3 2002 in Anticipation of Q4 Sales Growth ! Cash Benefit in 2001 and 2002 Approximately $2B ! Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 16
  17. 17. Cash Flow ($ in Billions) Q3 2002 2002 2002 YTD FCST 2001 2000 Operating Cash Flow $0.3 $1.7 $2.1 $2.8 ($1.1) without Restructuring Cash for Restructuring ($0.2) ($0.9) ($1.3) ($0.8) ($0.1) Operating Cash Flow $0.1 $0.8 $0.8 $2.0 ($1.2) Capital Expenditures ($0.1) ($0.4) ($0.8) ($1.3) ($4.1) Free Cash Flow $0.0 $0.4 $0.0 $0.7 ($5.3) quot;Emphasis on Cash Continues quot;Positive Operating Cash Flow for Seventh Consecutive Quarter Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 17
  18. 18. Elements of 2003 Cash Flow Earnings: Higher EPS Depreciation: Approximately $1.7B Working Capital: Continue to Reduce Ratio to Sales Cash Needed for Restructuring: Approximately $0.6B vs. $1.3B in 2002 Capital Expenditures: Approximately $1.0 B Pension Contribution: Approximately $0.15B to $0.2B Expect Positive Operating and Free Cash Flow in 2003 Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 18
  19. 19. Low Level of Long Term Debt Maturities 2003/2004/2005 $ in Billions $2.0 ~$1.6 2005 Maturities (2025 Note Puttable in 2005) $1.5 2004 Maturities $1.0 2003 Maturities ~$0.5 ~$0.4 $0.5 PURS - Can be Put to Company Each February Short Term Debt $0.0 Debt Maturities Debt Maturities Debt Maturities in 2003 in 2004 in 2005 quot; Strong Position to Meet Debt Maturities quot; Expect Continued Positive Free Cash Flow in 2003 quot; Current Cash Balance $6.4B, $4.2 B in U.S. Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 19
  20. 20. Net Special Items in Q3 2002 $Millions Special Charges $157 Gain on Sales of Investments (37) Reduction of Reserves No Longer Necessary (122) ($2) NET SPECIAL ITEM (Pretax) Reductions to Reserves Previously Established Through Special Item Charges Have Been and Will Consistently be Reflected as a Special Item and not Included in Normal Operating Results. Complete Reconciliation and Disclosure Provided in our Press Release, and Quarterly and Annual SEC Filings. Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 20
  21. 21. Q4 2002 Net Special Items Net Special Items of Approx. $200M ! No Change from Estimate Provided on Q2 2002 ! Earnings Release Conference Call $0.06 Per Share Charge in Q4 2002 ! Restructuring Charges Substantially Complete ! Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 21
  22. 22. Mike Zafirovski President and Chief Operating Officer Motorola Inc. Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 22
  23. 23. Key Takeaways Continued Progress in a Very Tough Environment ! — “5 Point Plan” Focus In All We Do Impact of Restructuring/Rebuilding Initiatives ! Increasingly Reflected in Operating Results Reduced Visibility For Outlook in Key Market ! Segments – Particularly in Last 30 Days Commitment to Earnings And Balance Sheet ! Improvement, Regardless of External Environment Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 23
  24. 24. Operating Philosophy/Expectations Continuing to “Operationalize” the 5 Point Plan ! Customers, Competitiveness and Balance — Sheet Obsession “Winning Tribes” Expectation For Each Sector ! “Lean, Enabling, Activist” Corporate Role ! Pursuit of Few, Big Initiatives Across Motorola ! Short AND Long Term Focus ! Prompt/Decisive Actions ! Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 24
  25. 25. The Operations Philosophy Starts With… People First Leaders Exhibiting Envision, Energize, Edge, Execution, and Always Ethics and Always Earnings Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 25
  26. 26. Segment Updates & Guidance Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 26
  27. 27. Personal Communications Sector (Ongoing Operations, Excluding Special Items) % Favorable (Unfavorable) Q3 2002 Q3 2001 Q2 2002 Q3 2001 Q2 2002 Orders $M $2,481 $2,962 $2,548 (16%) (3%) Sales $M $2,631 $2,693 $2,622 (2%) Flat Operating Earnings $M $224 $51 $172 >100% 30% Operating Margin 8.5% 1.9% 6.5% quot; Orders Impacted By More Efficient Backlog /Supply Chain Process quot; Flat Q3 2002 Sales Reflects quot;Lower than Expected TAM quot;T720 & C330 Delays quot; Op. Margin Improvement from Higher Gross Margin & Lower SG&A % Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 27
  28. 28. Personal Communications Sector Unit Shipments by Technology High Volume Major New Q3 2002 YTD 2002 Products Products Change from Change from Shipping in shipping in Q3 2001 YTD 2001 Q3 2002 Q3 2002 CDMA Unit Up 4% Up 12% V60, 120c T720 Shipments V66, V60, C330 GSM Unit Down 4% Up 5% T191, V70 Shipments TDMA Unit Up 131% Up 34% V60t, 120t, C331 Shipments 190t iDEN Unit Up 23% Up 10% i95cl, i90c i95cl Shipments Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 28
  29. 29. Personal Communications Sector Units and Market Share Sept. Sept. Q3 Q3 Growth 2002 2001 Growth 2002 2001 YTD YTD Unit 17.0 15.8 8% 47.9 45.2 6% Shipments Million Million Million Million Market 18% 17% 18% 16% Share quot; Continued Strong Performance Americas Regions quot; #1 Brand in Several U.S. Handset Surveys quot; European - Weak End Market Conditions, Small Share Loss quot; Asia – Mix Shift Towards Entry Level Products quot; Widened Leadership Position in China Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 29
  30. 30. Personal Communications Sector Average Selling Price Change Q3 2002 Down 8% from Q3 2001 Down 2% from Q2 2002 For Q4 2002 and Next Year We Expect New Features Such as Color Screens, EMS, MMS and Imaging to Keep Price Declines at Modest Levels. Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 30
  31. 31. C330 Series V70 E360 T720 A388 i95cl V60i V66i Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 31
  32. 32. Industry Handset Forecast Sell In Units Sell Through Units 390 Million 400 Million quot; Industry Forecast Reduced 10 Million Units Due to Weaker Demand in Europe and Slightly Weaker Demand in Asia. quot; Expect Normal Seasonality in Q4 2002, Up Approx. 20% Sequentially Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 32
  33. 33. PCS – Other Developments quot; Tom Lynch Off to A Strong Start quot; Ron Garriques to Lead PCS European Operations quot; iDEN i95cl – Strong Demand, Growth in Data Applications, Improved Nextel Economics quot; T720 and C330 series Off to Promising Start quot; UMTS - Close Coordination With Hutchinson quot; 4th Pass Acquisition Strengthens Java Capabilities Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 33
  34. 34. Personal Communications Sector Q4 2002 Forecast (Ongoing Operations, Excluding Special Items) Compared to Compared to Q4 2001 Q3 2002 Sales Up Up Operating Up Up 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 Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 34
  35. 35. Semiconductor Products Sector (Ongoing Operations, Excluding Special Items) % Favorable (Unfavorable) Q3 2002 Q3 2001 Q2 2002 Q3 2001 Q2 2002 Orders $M $1,258 $1,106 $1,310 14% (4%) Sales $M $1,223 $1,080 $1,216 13% Flat Operating Earnings $M $13 -$311 -$79 >100% >100% Operating Margin 1.1% -28.8% -6.5% quot; Returned to Profitability With Higher Gross Margin and Lower SG&A quot; Breakeven Sales Level Has Been Reduced to $5.0B quot; Softer Industry Demand Patterns in September Impacted Sales & Orders Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 35
  36. 36. Semiconductor Products Sector Book-to-Bill Ratio quot;Overall Book-To-Bill of 1.03 1.20 quot;Book-to-Bill by End Market —Wireless/Broadband 1.10 Approximately 1.15 —Transportation and 1.00 Q1’00 Q2'00 Q3'00 Q4'00 Q1'01 Q2'01 Q3'01 Q4'01 Q1'02 Q2'02 Q3'02 Standard Products Approximately 1.00 0.90 —Networking & Computing Approximately 0.85 0.80 0.70 Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 36
  37. 37. Semiconductor Products Sector Wafer Fab Consolidations 25 20 18 16 15 11 9 8 10 5 0 Dec. 2000 Dec. 2001 Sept. 2002 Dec. 2002 March 2003 Estimate Estimate Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 37
  38. 38. SPS – Other Developments quot; Major Announcements — Announced 3 More Customers, Now Totaling 9, for i250/i300 Wireless Platform — Integration Between Microsoft’s Window® CE Software and Motorola’s DragonBall Processor — The SymphonyTM Digital Radio Chipset — A New Line of Low-cost Microcontrollers Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 38
  39. 39. Semiconductor Products Sector Q4 2002 Forecast (Ongoing Operations, Excluding Special Items) Compared to Compared to Q4 2001 Q3 2002 Up Flat to Up Sales Slight Profit in Flat Operating Q4 2002 vs. Margin % Loss in Q4 2001 • 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 Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 39
  40. 40. Global Telecom Solutions Sector (Ongoing Operations, Excluding Special Items) % Favorable (Unfavorable) Q3 2002 Q3 2001 Q2 2002 Q3 2001 Q2 2002 Orders $M $880 $1,567 $1,067 (44%) (18%) Sales $M $1,014 $1,759 $1,239 (42%) (18%) Operating Earnings $M $5 $28 $32 (82%) (84%) Operating Margin 0.5% 1.6% 2.6% quot; Remained Modestly Profitable As a Result of Continued Cost Reductions quot; Sales Down Significantly in All Regions from Q3 2001 quot; Industry Demand Patterns Weakened as the Quarter Progressed. Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 40
  41. 41. GTSS – Other Developments quot; Met all Milestones in UMTS Radio Access Network Contract for Hutchinson Australia. quot; CDMA 1X 3G Deployments Continue to See Success Around the Globe quot; With the iDEN Technology Made the First Push-To- Talk Nationwide Roaming Call Between our Labs In Illinois and Nextel’s Lab in Virginia. quot; During Q3 Announced a Marketing Agreement With Winphoria for Packet-Based Softswitch Solutions. Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 41
  42. 42. Global Telecom Solutions Sector Q4 2002 Forecast (Ongoing Operations, Excluding Special Items) Compared to Compared to Q4 2001 Q3 2002 Down Up Sales Smaller Loss Slight Loss in Operating Q4 2002 Margin % Slight Profit in Q3 2002 • 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 Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 42
  43. 43. Commercial Govt. and Industrial System Segment (Ongoing Operations, Excluding Special Items and Exited Businesses) % Favorable (Unfavorable) Q3 2002 Q3 2001 Q2 2002 Q3 2001 Q2 2002 Orders $M $987 $898 $847 10% 17% Sales $M $874 $886 $886 (1%) (1%) Operating Earnings $M $77 $66 $63 17% 22% Operating Margin 8.8% 7.5% 7.1% quot; Largest Order Increase in North America quot; Sequential Operating Margin Improvement From Lower SG&A. Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 43
  44. 44. CGISS – Other Developments quot; Introduced FireGround Communications System quot; Mobile Solution Tailored for Firefighters use at Fire Scenes quot; Introduced the industry’s lightest TETRA handset Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 44
  45. 45. Commercial Govt. and Industrial System Segment Q4 2002 Forecast (Ongoing Operations, Excluding Special Items) Compared to Compared to Q4 2001 Q3 2002 Down Up Significantly Sales Down Up Operating 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 Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 45
  46. 46. Broadband Communications Sector (Ongoing Operations, Excluding Special Items) % Favorable (Unfavorable) Q3 2002 Q3 2001 Q2 2002 Q3 2001 Q2 2002 Orders $M $385 $647 $420 (40%) (8%) Sales $M $519 $637 $554 (19%) (6%) Operating Earnings $M $75 $113 $61 (34%) 23% Operating Margin 14.4% 17.4% 11.0% quot; Maintained Mid-Teens Operating Margin Despite Sales Decline quot; Carrier Capital Expenditure Pressure and Shorter Order Cycle Time quot; Q2 2002 Operating Margin negatively impacted by Adelphia write-off Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 46
  47. 47. Broadband Communications Sector Change Change From From quot; Maintaining Market Share Q3 2001 Q2 2002 in Set-Top Boxes Set Top Box Down 15% Down 11% Unit Shipments quot; Continue to Have Market ~1.3 Million Share that is 2X our Nearest Cable Modem Up 20% Up 20% Competitor in Cable Modems. Unit Shipments ~1.0 Million Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 47
  48. 48. BCS – Other Developments quot; Achieved Additional CableLabs Certifications — Industry Lead with 35 Approved Products quot;Market Success in Spain — Chosen As a Key Technology Provider to Spain’s Leading Broadband Services Provider – ONO — Selected by Telecable for Advanced Voice and Data Network Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 48
  49. 49. Broadband Communications Segment Q4 2002 Forecast (Ongoing Operations, Excluding Special Items) Compared to Compared to Q4 2001 Q3 2002 Down Down Sales Down Down Operating 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 Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 49
  50. 50. Integrated Electronic Systems Sector (Ongoing Operations, Excluding Special Items) % Favorable (Unfavorable) Q3 2002 Q3 2001 Q2 2002 Q3 2001 Q2 2002 Orders $M $562 $545 $562 3% Flat Sales $M $544 $513 $566 6% (4%) Operating Earnings $M $28 -$11 $31 >100% (10%) Operating Margin 5.2% -2.1% 5.5% quot; Consistent Results quot; Automotive Sales Growth vs. Q3 2001 quot; Telecom Market Weakness Continues to Impact Motorola Computer Group Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 50
  51. 51. IESS – Other Developments quot; Announced a New Single Chip GPS Device for In- Vehicle GPS Systems. quot; Reinforced Continued Leadership in Global Position System (GPS) Industry by Shipping Five Millionth GPS Receiver quot; The Portable Energy Business Continues to Expand Business in the Notebook PC Market Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 51
  52. 52. Integrated Electronic Systems Sector Q4 2002 Forecast (Ongoing Operations, Excluding Special Items) Compared to Compared to Q4 2001 Q3 2002 Flat Flat Sales Profit in Flat Operating Q4 2002 vs. Margin % Loss in Q4 2001 • 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 Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 52
  53. 53. Additional Corporate Drivers for 2003 quot; Digital 6 Sigma (COPQ, Customer Satisfaction, Growth) quot; R&D / Engineering Productivity to Drive Growth quot; Indirect Materials and Services Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 53
  54. 54. Guidance Update Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 54
  55. 55. Q4 2002 Guidance Previous Q4 Q3 Q4 2002 Guidance 2001 2002 Sales $7.1B $7.5B $7.3B $6.4B Earnings Per Share $0.10 $0.14 ($0.04) $0.06 (Excluding Net Special Items) Net Special Items Pretax $0.2B $0.2B $1.7B $0.0B quot; Lowered Revenue and Earnings Guidance Driven By Slowing Industry Demand, Particularly in Infrastructure, Broadband and Semiconductor Businesses. quot; Net Special Items Per Prior Guidance at End of Q2 2002 quot; Solid Earnings Improvement in a “Tough Environment” Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 55
  56. 56. Annual 2003 Guidance Previous 2002 2003 Guidance Fcst 2001 Sales $27.5B $29B $26.3B $29.3B Earnings Per Share $0.40 $0.45 $0.10 ($0.31) (Excluding Net Special Items) Restructuring Status Substantially Substantially ($3.9B) ($2.7B) Complete Complete quot; Somewhat Slower Economic Growth now Expected in 2003 (GDP +2%) quot; Sales Growth Expected in PCS, CGISS, SPS and IESS quot; Sales Decline Expected in GTSS and BCS quot; Expect Improved Profitability in a Tough Environment vs. 2002 quot; Earnings Leverage Potential When Served Markets Improve Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 56
  57. 57. Chris Galvin Chief Executive Officer Chairman of the Board of Directors Motorola,Inc. Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 57
  58. 58. Key Takeaways Continued Progress in a Very Tough Environment ! — “5 Point Plan” Focus In All We Do Impact of Restructuring/Rebuilding Initiatives ! Increasingly Reflected in Operating Results Reduced Visibility For Outlook in Key Market ! Segments – Particularly in Last 30 Days Commitment to Earnings And Balance Sheet ! Improvement, Regardless of External Environment Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 58
  59. 59. Motorola Q&A Participants Mike Zafirovski Chris Galvin Chief Executive Officer President Chairman of the Board of Directors Chief Operating Officer Ed Gams David Devonshire Senior Vice President Executive Vice President Director of Investor Relations Chief Financial Officer Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 59
  60. 60. Safe 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 Q4 2002 and full year 2003; (2) the amount and timing of charges to be taken in connection with our restructuring actions; (3) the expected timing for completion of our restructuring actions, including the reduction of our employee population and the closing of facilities; (4) the impact of our restructuring actions on our financial performance, including cost savings; (5) plans to repatriate cash and reduce debt; (6) research and development expenses; (7) capital expenditures; (8) depreciation expense; (9) working capital plans; (10) cash flows; (11) expectations for segment sales, profitability, orders, cash flow, operating earnings, operating margin and market share; (12) trends in average selling prices; (13) the timing, sales impact and pricing of new products; (14) order and backlog positions over the next several quarters, including the impact of new business models on these number; (15) projected worldwide industry shipments of wireless handsets; (16) worldwide semiconductor industry growth; (17) the implementation and effectiveness of our “asset-light” semiconductor business model; and (18) worldwide wireless infrastructure industry growth. 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. Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 60
  61. 61. Q3 2002 Motorola Earnings Conference Call – Oct. 16, 2002 SLIDE 61

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