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Item 7: Management’s Discussion and Analysis of Financial Condition and Results of
Operations
The following is a discussion and analysis of our financial position and results of operations for each of the
three years in the period ended December 31, 2008. This commentary should be read in conjunction with our
consolidated financial statements and the notes thereto appearing under “Item 8: Financial Statements and
Supplementary Data.”
Executive Overview
What businesses are we in?
Motorola reports financial results for the following three operating business segments:
• The Mobile Devices segment designs, manufactures, sells and services wireless handsets with integrated
software and accessory products, and licenses intellectual property. The segment’s net sales in 2008 were
$12.1 billion, representing 40% of the Company’s consolidated net sales.
• The Home and Networks Mobility segment designs, manufactures, sells, installs and services: (i) digital
video, Internet Protocol video and broadcast network interactive set-tops, end-to-end video delivery systems,
broadband access infrastructure platforms, and associated data and voice customer premise equipment to
cable television and telecom service providers (collectively, referred to as the “home business”), and
(ii) wireless access systems, including cellular infrastructure systems and wireless broadband systems, to
wireless service providers (collectively, referred to as the “network business”). The segment’s net sales in
2008 were $10.1 billion, representing 33% of the Company’s consolidated net sales.
• The Enterprise Mobility Solutions segment designs, manufactures, sells, installs and services analog and
digital two-way radio, voice and data communications products and systems for private networks, wireless
broadband systems and end-to-end enterprise mobility solutions to a wide range of enterprise markets,
including government and public safety agencies (which, together with all sales to distributors of two-way
communication products, are referred to as the “government and public safety market”), as well as retail,
energy and utilities, transportation, manufacturing, healthcare and other commercial customers (which,
collectively, are referred to as the “commercial enterprise market”). The segment’s net sales in 2008 were
$8.1 billion, representing 27% of the Company’s consolidated net sales.
What were our 2008 financial results?
•Net Sales were $30.1 Billion: Our net sales were $30.1 billion in 2008, down 18% compared to net sales
of $36.6 billion in 2007. Net sales decreased 36% in the Mobile Devices segment, increased 1% in the
Home and Networks Mobility segment and increased 5% in the Enterprise Mobility Solutions segment.
•Operating Loss of $2.4 Billion: We incurred an operating loss of $2.4 billion in 2008, compared to an
operating loss of $553 million in 2007. Operating margin was (7.9)% of net sales in 2008, compared to
(1.5)% of net sales in 2007. Contributing to the operating loss were: (i) $1.8 billion of goodwill and other
asset impairment charges, (ii) $393 million of net charges for reorganization and separation-related
transaction costs, (iii) excess inventory and other related charges of $370 million due to a decision to
consolidate software and silicon platforms in the Mobile Devices segment, and (iv) a $150 million charge
related to the settlement of a purchase commitment.
•Loss from Continuing Operations of $4.2 Billion, or $1.87 per Share: We incurred a loss from continuing
operations of $4.2 billion, or $1.87 per diluted common share, in 2008, compared to a loss from continuing
operations of $105 million, or $0.05 per diluted common share, in 2007. Contributing to the loss from
continuing operations in 2008 were: (i) a $2.4 billion operating loss, (ii) a $2.1 billion reserve related to our
deferred tax asset valuation allowance, (iii) $365 million of other-than-temporary investment impairment
charges, (iv) $186 million of impairment charges on Sigma Fund investments, and (v) $101 million of
temporary unrealized losses of Sigma Fund investments, partially offset by: (i) the tax benefit resulting from
our operating loss, and (ii) a $237 million curtailment gain associated with the decision to freeze benefit
accruals in the U.S. pension plans.
38 MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS