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MOTOROLA, INC.
2009 ANNUAL REPORT

Table of contents

  • Page 1
    2009 ANNUAL REPORT MOTOROLA, INC.

  • Page 2
    ... and high definision video. Today, Mosorola offers a broad porsfolio of sechnologies, solusions and services - including wireless handsess and smarsphones, digisal ensersainmens devices, video dissribusion syssems, swo-way radios, mission crisical solusions, wireless and wireline broadband solusions...

  • Page 3
    ...on our plans to pursue the creation of two independent, publicly traded companies. We expect to complete the separation in the first quarter of 2011, with one company comprised of our Mobile Devices and Home businesses and the other company comprised of our Enterprise Mobility Solutions and Networks...

  • Page 4
    ... financial results and increased long-term shareholder value. Regards, 7JAN201013025805 Greg Brown Co-CEO, Motorola, Inc. CEO, Enterprise Mobility Solutions 7JAN201012561341 and Networks business 7JAN201013030770 Sanjay Jha Co-CEO, Motorola, Inc. CEO, Mobile Devices 7JAN201012570420 and Home...

  • Page 5
    MOTOROLA, INC. 2009 FORM 10-K

  • Page 6

  • Page 7
    ... Employer Identification No.) 1303 East Algonquin Road, Schaumburg, Illinois 60196 (847) 576-5000 (Registrant's telephone number) Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which Registered Common Stock, $.01 Par Value per Share New...

  • Page 8
    ... Financial Disclosure . Item 9A. Controls and Procedures ...Item 9B. Other Information ...of ... PART III ...132 Item 10. Directors, Executive Officers and Corporate Governance ...Item 11. Executive Compensation ...Item 12. Security Ownership of Certain Beneficial Owners and Management and Related...

  • Page 9
    ... property. • The Home and Networks Mobility business designs, manufactures, sells, installs and services: digital video, Internet Protocol video and broadcast network interactive set-tops, end-to-end video distribution systems, broadband access infrastructure platforms, data and voice customer...

  • Page 10
    ... over the next several years. Key drivers of this growth include: (i) consumer desires for feature-rich devices that provide access to mobile Internet, media, social networking, navigation and messaging at anytime and anyplace, (ii) operators drive to increase data ARPU (average revenue per user...

  • Page 11
    ...-market; brand awareness; technology offered; price; product features; performance; quality; delivery and warranty; the quality and availability of service; and relationships with key customers. Payment Terms The segment's customers and distributors buy from us regularly with payment terms that are...

  • Page 12
    ... inventory in manufacturing and distribution centers in order to meet customer delivery requirements in a manner consistent with industry standards. At the end of 2009, the segment had a significantly lower inventory balance than at the end of 2008. The decrease reflects lower sales requirements and...

  • Page 13
    ... and IP video delivery, including HD and digital video recording (''DVR'') (together, ''HD/DVR'') applications. We support the delivery of high-speed data and voice services with head-end and central office equipment, along with data and voice modems and gateways for HFC and DSL networks and optical...

  • Page 14
    ... to upgrade to DOCSIS 3.0 and telecom service providers to deploy very high speed digital subscriber line (''VDSL'') and PON data services. In the wireless networks market, the majority of installed cellular infrastructure systems are based on CDMA, GSM, UMTS and iDEN technologies. We supply systems...

  • Page 15
    ... bonding on our cable modem termination systems (''CMTS'') and cable modems, and deploying our Gigabit PON platform and Very High Speed Digital Subscriber Line (''VDSL'') gateways. In the networks business, the segment provides equipment and services to over 135 GSM, CDMA and iDEN networks globally...

  • Page 16
    ... equipment for broadband networks. Our largest competitor is Cisco. Based on 2009 annual sales, we are the leading provider of digital cable and IPTV set-tops worldwide. Our digital entertainment devices and infrastructure equipment compete with products from a number of different companies...

  • Page 17
    ... of patents relating to its products, systems, technologies and manufacturing processes. The segment seeks to build upon our core enabling technologies, such as digital compression, encryption and conditional access systems, and wireless air-interface technology in order to lead worldwide growth in...

  • Page 18
    ..., manufactures, sells, installs and services analog and digital two-way radios, wireless LAN and security products, voice and data communications products and systems for private networks, wireless broadband systems and endto-end enterprise mobility solutions to a wide range of customers, including...

  • Page 19
    ...benefits from mobilizing their applications and workforces are driving adoption in these markets. Our Strategy The segment's strategy is to maintain our global leadership positions in the markets we serve through the continued delivery of mobile products, services and systems that meet our customers...

  • Page 20
    ...increased competition. Key competitive factors include: technology offered; price; availability of vendor financing; product and system performance; product features, quality, availability and warranty; the quality and availability of service; company reputation; relationship with key customers; and...

  • Page 21
    ... Union, providing a harmonized plan in that area and potential opportunities for new commercial mobile broadband services and equipment sales going forward. A number of other countries around the world have also indicated their intention to pursue the availability of digital dividend spectrum. Some...

  • Page 22
    ...order to meet delivery and warranty requirements. To the extent suppliers' product life cycles are shorter than the segment's, stocking of lifetime buy inventories is required to meet long-term warranty and contractual requirements. In addition, replacement parts are stocked for delivery on customer...

  • Page 23
    ... products. Technical data and product application ideas are exchanged among Motorola's business segments on a regular basis. Management believes, looking forward, that Motorola's commitment to R&D programs should allow each of its segments to remain competitive. R&D expenditures relating to new...

  • Page 24
    ... for Members of the Motorola, Inc. Board of Directors • Motorola Code of Business Conduct, which is applicable to all Motorola employees, including the principal executive officers, the principal financial officer and the controller (principal accounting officer) • Audit and Legal Committee...

  • Page 25
    ... and make purchases from Motorola. The inability of these customers to obtain sufficient credit to finance purchases of our products and/or meet their payment obligations to us could have, and in some cases has had, a negative impact on our financial results. In addition, if global economic...

  • Page 26
    ... result of global economic conditions, it could result in a reduction or interruption in supplies or an increase in the price of supplies and negatively impact our financial results. In addition, credit constraints at key suppliers have resulted in accelerated payment of accounts payable by Motorola...

  • Page 27
    ... bonds could be limited: Commercial contracts with Motorola's customers often require performance bonds, bid bonds, standby letters of credit and surety bonds (collectively, referred to as ''Performance Bonds'') to be issued on behalf of the Company by banks and insurance companies. As a split rated...

  • Page 28
    ... new products, such as: advanced wireless handsets, including smartphones; WiMAX, LTE and other advanced technologies for wireless broadband networks; products for transmission of telephony and high-speed data over hybrid fiber coaxial cable systems; integrated digital radios; and integrated public...

  • Page 29
    ... in 2008 and 2009. Our customers and suppliers are located throughout the world and, as a result, we face risks that other companies that are not global may not face. Our customers and suppliers are located throughout the world and more than half of our net sales are made to customers outside...

  • Page 30
    ... components we purchase from other manufacturers or suppliers. Often these issues are identified prior to the shipment of the products and may cause delays in shipping products to customers, or even the cancellation of orders by customers. Sometimes, we discover quality issues in the products after...

  • Page 31
    ...values in the overall market and the impact of the macroenvironment on the Company's near-term forecasts. The intangible asset impairments resulted from a change in a technology platform strategy. Further declines in the Company's stock price or reductions in the Company's future cash flow estimates...

  • Page 32
    ... developed software-related intellectual property as a result of either our use of open-source software code or the use of third-party software that contains open-source code. Because our products are comprised of complex technology, much of which we acquire from suppliers through the purchase of...

  • Page 33
    ... impact our business. Motorola faces the possibility of substantial copyright levies from collecting societies in numerous countries for the sale of products that might be used for the private copying of copyright protected works such as mobile phones, memory cards and set top boxes. The collecting...

  • Page 34
    ... of key employees of the acquired businesses; (v) the risk of diverting the attention of senior management from our operations; (vi) the risks of entering new markets in which we have limited experience; (vii) risks associated with integrating financial reporting and internal control systems; (viii...

  • Page 35
    ... multi-year system contracts with large customers. This exposes us to risks, including: (i) the technological risks of such contracts, especially when the contracts involve new technology, and (ii) financial risks under these contracts, including the estimates inherent in projecting costs associated...

  • Page 36
    ... mobile handset market contracted in 2009 compared to 2008 and further declines in this worldwide market could negatively impact transition plans for our Mobile Devices business. In 2009, worldwide wireless handset industry unit shipments declined by approximately 6%. This is the first annual...

  • Page 37
    ... of digital television programming from a cable broadband network required a set-top with security technology. Traditionally, cable service providers leased their set-top to their customer. This security technology limited the availability of set-tops to those manufactured by a few cable network...

  • Page 38
    ... of the Employment Retirement Income Security Act (''ERISA''). The complaint alleged that the defendants had improperly permitted participants in the Motorola 401(k) Plan (the ''Plan'') to purchase or hold shares of common stock of Motorola because the price of Motorola's stock was artificially...

  • Page 39
    ...a number of changes to its internal procedures. An amended complaint was filed on December 14, 2007. On January 27, 2009, Motorola's motion to dismiss the amended complaint was granted in part and denied in part. St. Lucie County Fire District Firefighters' Pension Trust Fund Securities Class Action...

  • Page 40
    ...2009; Corporate Vice President, Human Resources, Global Rewards and HR Shared Services from July 2008 to October 2009; Vice President, Global Compensation, Benefits & HR Technology, Campbell Soup Company from June 2006 to July 2008; Vice President of HR Rewards & Operations, TIAA-CREF from June 2005...

  • Page 41
    33 PART II Item 5: Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Motorola's common stock is listed on the New York and Chicago Stock Exchanges. The number of stockholders of record of Motorola common stock on January 31, 2010 was 73,085...

  • Page 42
    ...in millions) Dividends paid per share Balance Sheet Total assets Long-term debt Total debt Total stockholders' equity Other Data Capital expenditures % of sales Research and development expenditures % of sales Year-end employment (in thousands) 2009 Years Ended December 31 2008 2007 2006 $ 30,146 21...

  • Page 43
    ...sells, installs and services: (i) digital video, Internet Protocol video and broadcast network interactive set-tops (''digital entertainment devices''), end-to-end video distribution systems, broadband access infrastructure platforms, and associated data and voice customer premise equipment to cable...

  • Page 44
    ... in priority markets, including North America and Latin America, and parts of Asia, including China. Demand for Mobile Devices' wireless handsets declined in 2009 primarily due to limited product offerings in feature phones and smartphones as the Company implemented its strategy to transition its

  • Page 45
    ... of content management and delivery systems, specializing in video-on-demand for IPTV. As anticipated, the networks business experienced a decline in sales for all 2G and 3G technologies in 2009 compared to 2008. Motorola continued its investments and leadership in next-generation wireless broadband...

  • Page 46
    .... In the advanced data capture portfolio, we announced the MT2000 series of rugged, hand-held bar code scanners that incorporate the benefits of a mobile computer, an industry first. These products have all received very positive customer response. Looking Forward During 2009, challenging economic...

  • Page 47
    ...'s Mobile Devices and Home businesses and the other public company will be comprised of the Company's Enterprise Mobility Solutions and Networks businesses. The Company intends to effect the separation through a tax-free pro rata stock dividend of shares in the new company to Motorola shareholders...

  • Page 48
    ... Motorola's outstanding public market debt at the time of separation. Following the separation, both entities will use the Motorola brand. The Mobile Devices and Home business is expected to own the Motorola brand and license it royalty free to the Enterprise Mobility Solutions and Networks business...

  • Page 49
    ... 21% decrease in net sales, partially offset by a favorable product mix. The increase in gross margin as a percentage of net sales in 2009 compared to 2008 was primarily driven by increases in gross margin percentage in the Mobile Devices and Home and Networks Mobility segments, partially offset by...

  • Page 50
    ... equivalents and Sigma Fund balances in 2009 compared to 2008. This decline in interest income was slightly offset by a decrease in interest expense, primarily driven by a decrease in the Company's level of outstanding debt during 2009. Gains on Sales of Investments and Businesses Gains on sales of...

  • Page 51
    ... quarter of 2009, the Company completed the sales of: (i) Good Technology, and (ii) the Company's former biometrics business unit, which included its Printrak trademark. After taxes, the Company had earnings from discontinued operations of $60 million, or $0.03 per diluted share, in 2009, all of...

  • Page 52
    ... for new product development and investment in next-generation technologies. R&D expenditures as a percentage of net sales increased in the Mobile Devices and Enterprise Mobility Solutions segments and decreased in the Home and Networks Mobility segment. Other Charges The Company recorded net...

  • Page 53
    ... based on estimates prepared at the time a restructuring plan is approved by management. Exit costs consist of future minimum lease payments on vacated facilities and other contractual terminations. At each reporting date, the Company evaluates its accruals for employee separation and exit costs to...

  • Page 54
    ... long-term, sustainable profitability by driving efficiencies and reducing operating costs. All three of the Company's business segments, as well as corporate functions, are impacted by these plans, with the majority of the impact in the Mobile Devices segment. The employees affected are located in...

  • Page 55
    ... in 2009, and (ii) approximately 1,200 employees who will begin receiving payments in 2010. 2008 Charges During 2008, the Company committed to implement various productivity improvement plans aimed at achieving long-term, sustainable profitability by driving efficiencies and reducing operating costs...

  • Page 56
    ... of the employees affected were located in North America and Europe. The Company recorded net reorganization of business charges of $394 million, including $104 million of charges in Costs of sales and $290 million of charges under Other charges (income) in the Company's consolidated statements of...

  • Page 57
    ... 31, 2008, net accounts receivable at December 31, 2009 were higher for the Mobile Devices and Enterprise Mobility Solutions segments and lower for the Home and Network Mobility segment. The Company's businesses sell their products in a variety of markets throughout the world and payment terms can...

  • Page 58
    ...customer spending requirements. Accounts Payable: The Company's accounts payable were $2.4 billion at December 31, 2009, compared to $3.2 billion at December 31, 2008. Accounts payable decreased in all segments. The Company buys products in a variety of markets throughout the world and payment terms...

  • Page 59
    ...assets related to digital cable set-top products of Zhejiang Dahua Digital Technology Co., LTD. and Hangzhou Image Silicon, known collectively as Dahua Digital (part of the Home and Networks Mobility segment), (iii) completed the acquisition of Soundbuzz Pte. Ltd. (part of the Mobile Devices segment...

  • Page 60
    ... Sigma Fund balances (current and non-current) and short-term investments, the Company views its investments as an additional source of liquidity. The majority of these securities are available-for-sale and cost-method investments in technology companies. The fair market values of these securities...

  • Page 61
    ... 2008, the Company paid an aggregate of $138 million, including transaction costs, to repurchase 9.0 million shares of the Company's common stock at an average price of $15.32, all of which shares were repurchased during the first quarter. Through actions taken in July 2006 and March 2007, the Board...

  • Page 62
    ...$668 million. Rental expense, net of sublease income, was $153 million in 2009, $181 million in 2008 and $231 million in 2007. Purchase Obligations: The Company has entered into agreements for the purchase of inventory, license of software, promotional activities, and research and development, which...

  • Page 63
    ... Company outsources certain corporate functions, such as benefit administration and information technology-related services. These contracts are expected to expire in 2013. At December 31, 2009, the total remaining payments under these contracts are approximately $728 million over the remaining life...

  • Page 64
    ... under the insurance policies. The Company's total credit exposure, less insurance coverage, to outstanding accounts receivables that have been sold was $27 million at December 31, 2009, compared to $23 million at December 31, 2008. Adequate Internal Funding Resources The Company believes that...

  • Page 65
    ... statements. Net sales and operating results for the Company's three operating business segments for 2009, 2008 and 2007 are presented below. Mobile Devices Segment The Mobile Devices segment designs, manufactures, sells and services wireless handsets, including smartphones, with integrated software...

  • Page 66
    ... units in 2008. The overall decrease reflects decreased unit shipments of products for GSM, CDMA and 3G technologies, partially offset by an increase in unit shipments of products for iDEN technology. For the full year 2009, unit shipments decreased substantially in Latin America, EMEA and Asia and...

  • Page 67
    ..., manufactures, sells, installs and services: (i) digital video, Internet Protocol video and broadcast network interactive set-tops, end-to-end video distribution systems, broadband access infrastructure platforms, and associated data and voice customer premise equipment to cable television and...

  • Page 68
    ...The reduction in purchases was also driven by the introduction of low-end digital adapters by Motorola and our competitors. In the networks business, the segment has been a long-standing proponent of WiMAX and is now commercially deploying this technology to multiple customers on a global basis. The...

  • Page 69
    ..., manufactures, sells, installs and services analog and digital two-way radios, wireless LAN and security products, 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 customers, including...

  • Page 70
    ... and efficient back office management, as well as the MT2000 series of handheld barcode scanners that incorporates the benefits of a mobile computer. Customer budget constraints within all of the industries we serve have resulted in lower spending for the full year 2009 compared to 2008. However, we...

  • Page 71
    ... of wireless and wireline networks and two-way radio voice and data systems. These systems are designed to meet specific customer requirements and specifications and generally require extended periods to complete. If the Company can reliably estimate revenues and contract costs and the technology is...

  • Page 72
    ... 31, 2009, compared to 22% of the gross inventory balance at December 31, 2008. The Company has inventory reserves for excess inventory, pending cancellations of product lines due to technology changes, long-life cycle products, lifetime buys at the end of supplier production runs, business exits...

  • Page 73
    ...of pre-tax losses, which are attributable to the financial performance of the Mobile Devices segment. During 2007, 2008 and 2009, the Home and Networks Mobility and Enterprise Mobility Solution businesses were profitable in the U.S. and worldwide. Because of the losses at Mobile Devices, the Company...

  • Page 74
    ... on estimates prepared at the time a restructuring plan is approved by management. Exit costs consist of future minimum lease payments on vacated facilities and other contractual terminations. At each reporting date, the Company evaluates its accruals for exit costs and employee separation costs to...

  • Page 75
    ... 2008, respectively. No cash contributions were made to this plan in 2009. The Company expects to make no cash contributions to the Postretirement Health Care Benefits Plan in 2010. The Company maintains a number of endorsement split-dollar life insurance policies that were taken out on now-retired...

  • Page 76
    ... be required to fund these policies. The net periodic pension cost for these split-dollar life insurance arrangements was $6 million for both the years ended December 31, 2009 and 2008. The Company has recorded a liability representing the actuarial present value of the future death benefits as of...

  • Page 77
    ... rates, capital expenditures, cost of capital and discount rates as compared to the estimates utilized for the purpose of calculating the fair value of each reporting unit, as well as a decline in the Company's stock price and related market capitalization, could affect the results of our annual...

  • Page 78
    ... of the Mobile Devices reporting unit. The Company considered this decline in its stock price in the impairment assessment. Based on the results of Step One of our 2008 assessment of the recoverability goodwill, the fair values of the Home, Networks and Government and Public Safety reporting units...

  • Page 79
    ... the Mobile Devices segment consisted primarily of property, plant and equipment and long-term pre-paid licenses. The asset group also included elements of working capital, including inventory and accounts receivable. The Company considered future cash flows expected to be generated by the business...

  • Page 80
    ... 15, 2008. The Company adopted this guidance effective January 1, 2009. The disclosures required by this guidance are included in Note 5 to the Consolidated Financial Statements, ''Risk Management.'' In December 2007, the FASB issued new guidance related to the accounting for and reporting of non...

  • Page 81
    ... of business programs and employee separation costs, (d) the Company's ability and cost to repatriate funds, (e) the impact of the timing and level of sales and the geographic location of such sales, (f) future cash contributions to pension plans or retiree health benefit plans, (g) the Company...

  • Page 82
    ... must be highly correlated with changes in market values of the underlying hedged items both at the inception of the hedge and over the life of the hedge contract. The Company's strategy related to foreign exchange exposure management is to offset the gains or losses on the financial instruments...

  • Page 83
    ...rate payments. The Interest Agreements are not accounted for as a part of a hedging relationship and, accordingly, the changes in the fair value of the Interest Agreements are included in Other income (expense) in the Company's consolidated statements of operations. During the second quarter of 2009...

  • Page 84
    ... of $147 million, comprised of a cost basis of $37 million and a net unrealized gains of $110 million. The value of the available-for-sale equity securities would change by $15 million as of December 31, 2009 if the price of the stock in each of the publicly-traded companies were to change by 10...

  • Page 85
    ...Endorsement Split-Dollar Life Insurance Arrangements (included in FASB ASC Topic 715, Compensation- Retirement Benefits). We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Motorola Inc.'s internal control over financial reporting...

  • Page 86
    ...Motorola, Inc. and Subsidiaries Consolidated Statements of Operations (In millions, except per share amounts) Net sales Costs of sales Gross margin Selling, general and administrative expenses Research and development expenditures Other charges Operating loss Other income (expense): Interest income...

  • Page 87
    ... Consolidated Balance Sheets (In millions, except per share amounts) ASSETS Cash and cash equivalents Sigma Fund Short-term investments Accounts receivable, net Inventories, net Deferred income taxes Other current assets Total current assets Property, plant and equipment, net Sigma Fund Investments...

  • Page 88
    ...Motorola, Inc. and Subsidiaries Consolidated Statements of Stockholders' Equity Motorola, Inc. Shareholders Accumulated Other Comprehensive Income (Loss) Fair Value Common Adjustment Foreign Stock and To Available Currency Retirement Additional For Sale Translation Benefits Other Paid-In Securities...

  • Page 89
    ...Share-based compensation expense Gain on sales of investments and businesses, net Gain from extinguishment of long-term debt Deferred income taxes Changes in assets and liabilities, net of effects of acquisitions and dispositions: Accounts receivable Inventories Other current assets Accounts payable...

  • Page 90
    ... with customers may include multiple deliverables, including any combination of products, equipment, services and software. For multiple element arrangements including software or software-related elements, the Company applies the applicable authoritative accounting guidance to determine separate...

  • Page 91
    ...The Company primarily relies on valuation pricing models and broker quotes to determine the fair value of investments in the Sigma Fund. The valuation models are developed and maintained by third-party pricing services, and use a number of standard inputs, including benchmark yields, reported trades...

  • Page 92
    ...occurs. The Company records interest related to unrecognized tax benefits in Interest expense and penalties in Selling, general and administrative expenses in the Company's consolidated statements of operations. Long-term Receivables: Long-term receivables include trade receivables where contractual...

  • Page 93
    .... Retirement Benefits: The Company records annual expenses relating to its pension benefit and postretirement plans based on calculations which include various actuarial assumptions, including discount rates, assumed asset rates of return, compensation increases, turnover rates and health care cost...

  • Page 94
    ... November 15, 2008. The Company adopted this guidance effective January 1, 2009. The disclosures required by this guidance are included in Note 5, ''Risk Management.'' In December 2007, the FASB issued new guidance related to the accounting for and reporting of non-controlling interests (formerly...

  • Page 95
    ... 31 Net sales Operating earnings Gains on sales of investments and businesses, net Earnings before income taxes Income tax expense (benefit) Earnings from discontinued operations, net of tax 2009 $ 19 (11) 175 162 102 60 2008 2007 $ - 10 - 10 (46) 56 3. Other Financial Data Statement of Operations...

  • Page 96
    ... from the extinguishment of the Company's outstanding long-term debt Investment impairments Foreign currency gain (loss) Impairment charges on Sigma Fund investments U.S. pension plan freeze curtailment gain Liability extinguishment gain Gain on interest rate swaps Other 2009 2008 2007 $(213) $(224...

  • Page 97
    ... securities During the year ended December 31, 2009, the Company recorded gains related to the Sigma Fund investments of $80 million in Other income (expense) in the consolidated statement of operations. During the year ended December 31, 2008, the Company recorded total charges related to Sigma...

  • Page 98
    ... December 31, 2008 Certificates of deposit Available-for-sale securities: U.S. government and agency obligations Corporate bonds Asset-backed securities Mortgage-backed securities Common stock and equivalents Other securities, at cost Equity method investments Recorded Value Short-term Investments...

  • Page 99
    ... in the Mobile Devices segment. Other Current Assets Other current assets consists of the following: December 31 Costs and earnings in excess of billings Contract related deferred costs Contractor receivables Value-added tax refunds receivable Other 2009 $ 686 616 342 95 445 $2,184 Property, plant...

  • Page 100
    ... consists of the following: December 31 Defined benefit plans, including split dollar life insurance policies Deferred revenue Postretirement health care benefit plan Unrecognized tax benefits Other 2009 $2,450 713 287 196 448 $4,094 2008 $2,202 316 261 312 471 $3,562 2008 $1,533 703 599 210 545 496...

  • Page 101
    ... 2008. In February 2009, the Company announced that its Board of Directors suspended the declaration of quarterly dividends on the Company's common stock. The Company paid no cash dividends during the nine months ended December 31, 2009. Par Value Change: On May 4, 2009, Motorola stockholders...

  • Page 102
    ... must be highly correlated with changes in market values of the underlying hedged items both at the inception of the hedge and over the life of the hedge contract. The Company's strategy related to foreign exchange exposure management is to offset the gains or losses on the financial instruments...

  • Page 103
    ... debt, which is primarily priced at long-term, fixed interest rates. As part of its liability management program, the Company historically entered into interest rate swaps (''Hedging Agreements'') to synthetically modify the characteristics of interest rate payments for certain of its outstanding...

  • Page 104
    ...rate payments. The Interest Agreements are not accounted for as a part of a hedging relationship and, accordingly, the changes in the fair value of the Interest Agreements are included in Other income (expense) in the Company's consolidated statements of operations. During the second quarter of 2009...

  • Page 105
    ... loss Cost of sales/Sales Other income (expense) Balance at January 1 Increase (decrease) in fair value Reclassifications to earnings Balance at December 31 Fair Value of Financial Instruments The Company's financial instruments include cash equivalents, Sigma Fund investments, short-term...

  • Page 106
    ...Deferred tax charges (benefits) that were recorded within Accumulated other comprehensive income (loss) in the Company's consolidated balance sheets resulted from retirement benefit adjustments, currency translation adjustments, net gains (losses) on derivative instruments and fair value adjustments...

  • Page 107
    ... income and tax planning strategies that are both prudent and feasible. As of December 31, 2009, the Company's U.S. operations had generated three consecutive years of pre-tax losses, which are attributable to the Mobile Devices segment. During 2007, 2008 and 2009, the Home and Networks Mobility...

  • Page 108
    ...effective tax rate, net of resulting changes to valuation allowances. A roll-forward of unrecognized tax benefits, including those attributable to discontinued operations, is as follows: 2009 Balance at January 1 Additions based on tax positions related to current year Additions for tax positions of...

  • Page 109
    ... the Regular Pension Plan benefits that are lost by such individuals under the retirement formula due to application of the limitations imposed by the Internal Revenue Code. However, elected officers who are covered under the Officers' Plan or who participated in the restricted stock buy-out are...

  • Page 110
    ... periodic pension cost (benefit) Officers' Plan and MSPP Years Ended December 31 Service cost Interest cost Expected return on plan assets Amortization of: Unrecognized net loss Unrecognized prior service cost Curtailment gain Settlement loss Net periodic pension cost 2009 $- 6 (2) 3 - - 17 $24 2008...

  • Page 111
    ...: Fair value at January 1 Return on plan assets Company contributions Employee contributions Foreign exchange valuation adjustment Tax payments from plan assets Benefit payments from plan assets Fair value at December 31 Funded status of the plan Unrecognized net loss Unrecognized prior service cost...

  • Page 112
    ...to meet or exceed the expected rate of return on plan assets assumption. To achieve this, the pension plans retain professional investment managers that invest plan assets in equity and fixed income securities and cash. In addition, some plans invest in insurance contracts. The Company's measurement...

  • Page 113
    ... meeting certain age and service requirements upon termination of employment (the ''Postretirement Health Care Benefits Plan''). For eligible employees hired prior to January 1, 2002, the Company offsets a portion of the postretirement medical costs to the retired participant. As of January 1, 2005...

  • Page 114
    ...31 Change in plan assets: Fair value at January 1 Return on plan assets Company contributions Benefit payments made with plan assets Fair value at December 31 Funded status of the plan Unrecognized net loss Unrecognized prior service cost Accrued postretirement health care cost Components of accrued...

  • Page 115
    ... liability and related expense. The Company has no significant postretirement health care benefit plans outside the United States. Other Benefit Plans The Company maintains a number of endorsement split-dollar life insurance policies that were taken out on now-retired officers under a plan that was...

  • Page 116
    ... compensation on an after-tax basis. Plan participants cannot purchase more than $25,000 of stock in any calendar year. The price an employee pays per share is 85% of the lower of the fair market value of the Company's stock on the close of the first trading day or last trading day of the purchase...

  • Page 117
    ... a December 31, 2009 stock price of $7.76 per share. At December 31, 2009 and 2008, 60.5 million shares and 72.2 million shares, respectively, were available for future share-based award grants under the 2006 Motorola Omnibus Plan, covering all equity awards to employees and non-employee directors.

  • Page 118
    ... 14, 2009, the Company initiated a tender offer for certain eligible employees (excluding executive officers and directors) to exchange certain out-of-the-money options for new options with an exercise price equal to the fair market value of the Company's stock as of the grant date. In order to be...

  • Page 119
    ...employee stock purchase plans, RS and RSUs was as follows: Year Ended December 31 Share-based compensation expense included in: Costs of sales Selling, general and administrative expenses Research and development expenditures Share-based compensation expense included in Operating earnings (loss) Tax...

  • Page 120
    ... the changes in fair value of our Level 3 assets: 2009 Balance at January 1 Transfers to Level 3 Transfers from Level 3 Purchases, sales, issuances, settlements and payments received Losses on Sigma Fund investments included in Other income (expense) Balance at December 31 2008 $134 $ 35 11 138...

  • Page 121
    ... the period Purchases Sales Transfers out, net Balance at December 31 Officers' Plan December 31, 2009 U.S. government and agencies Corporate bonds Mortgage-backed bonds Commingled short-term investment funds Total investment securities Other assets and liabilities, net Fair value plan assets Level...

  • Page 122
    ... 31, 2009 Common stock and equivalents Commingled equity funds Corporate bonds Government and agency obligations Commingled bond funds Short-term investment funds Insurance contracts Total investment securities Cash Accrued income receivable Other assets and liabilities, net Fair value plan assets...

  • Page 123
    ... certain stocks that are not traded on a nationally recognized securities exchange and insurance contracts valued using proprietary models. 10. Long-term Customer Financing and Sales of Receivables Long-term Customer Financing Long-term receivables consist of trade receivables with payment terms...

  • Page 124
    ... insurance coverage, to outstanding accounts receivables that have been sold was $27 million and $23 million at December 31, 2009 and 2008, respectively. 11. Commitments and Contingencies Legal Iridium Program: The Company was named as one of several defendants in putative class action securities...

  • Page 125
    ... Motorola's financial exposure and concluded Motorola's involvement in the Iridium bankruptcy proceedings. Telsim Class Action Securities: In April 2007, the Company entered into a settlement agreement in regards to In re Motorola Securities Litigation, a class action lawsuit relating to the Company...

  • Page 126
    ... property. • The Home and Networks Mobility segment designs, manufactures, sells, installs and services: (i) digital video, Internet Protocol (''IP'') video and broadcast network interactive set-tops (''digital entertainment devices''), end-to-end video distribution systems, broadband access...

  • Page 127
    ...related expenses, (ii) various corporate programs, representing developmental businesses and research and development projects, which are not included in any reporting segment, and (iii) the Company's wholly-owned finance subsidiary. Years Ended December 31 Mobile Devices Home and Networks Mobility...

  • Page 128
    ... based on estimates prepared at the time a restructuring plan is approved by management. Exit costs consist of future minimum lease payments on vacated facilities and other contractual terminations. At each reporting date, the Company evaluates its accruals for employee separation and exit costs to...

  • Page 129
    ... began receiving payments in 2009, and (ii) approximately 1,200 employees who will begin receiving payments in 2010. 2008 Charges During the year ended December 31, 2008, the Company implemented various productivity improvement plans aimed at achieving long-term, sustainable profitability by driving...

  • Page 130
    ... of the employees affected are located in North America and Europe. The Company recorded net reorganization of business charges of $394 million, including $104 million of charges in Costs of sales and $290 million of charges under Other charges (income) in the Company's consolidated statements of...

  • Page 131
    ... companies acquired have varying degrees of timing, technology, costs-to-complete and market risks throughout final development. If the products fail to become viable, the Company will unlikely be able to realize any value from the sale of incomplete technology to another party or through internal...

  • Page 132
    ..., developing, manufacturing and servicing products and systems used in end-to-end enterprise mobility solutions featuring rugged mobile computing, advanced data capture, radio frequency identification (''RFID''), wireless infrastructure and mobility management. The fair value of acquired in-process...

  • Page 133
    ... financial statements were not significant. Terayon Communication Systems, Inc. In July 2007, the Company acquired Terayon Communication Systems, Inc. (''Terayon''), a provider of real-time digital video networking applications to cable, satellite and telecommunication service providers worldwide...

  • Page 134
    ...-ended December 31, 2007, due to a change in software platform strategy, the Company recorded an impairment of intangible assets of $81 million, primarily related to completed technology and other intangibles, in the Mobile Devices segment. Goodwill The following table displays a rollforward of the...

  • Page 135
    ... Mobile Devices reporting unit. The Company considered this decline in its stock price in the impairment assessment. Based on the results of Step One of the 2008 annual assessment of the recoverability goodwill, the fair values of the Home, Networks and Government and Public Safety reporting units...

  • Page 136
    ... 31, 2009, 2008 and 2007: Balance at January 1 2009 Reorganization of Businesses Allowance for Doubtful Accounts Allowance for Losses on Long-term Receivables Inventory Reserves Warranty Reserves Customer Reserves 2008 Reorganization of Businesses Allowance for Doubtful Accounts Allowance for...

  • Page 137
    ... Data (in dollars) Continuing Operations: Basic earnings (loss) per common share Diluted earnings (loss) per common share Net Earnings: Basic earnings (loss) per common share Diluted earnings (loss) per common share Dividends declared Dividends paid Stock prices High Low 2009 2nd 3rd 4th 1st 2008...

  • Page 138
    ... of the Exchange Act. Under the supervision and with the participation of our senior management, including our chief executive officers and chief financial officer, we assessed the effectiveness of our internal control over financial reporting as of December 31, 2009, using the criteria set forth in...

  • Page 139
    ...audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Motorola, Inc. and Subsidiaries as of December 31, 2009 and 2008, and the related consolidated statements of operations, stockholders' equity, and cash flows...

  • Page 140
    ... Code of Business Conduct (the ''Code''), that applies to all employees, including Motorola's principal executive officer, principal financial officer and controller (principal accounting officer). The Code is posted on Motorola's Internet website, www.motorola.com/investor, and is available free...

  • Page 141
    ...are listed in the Exhibit Index attached hereto, which is incorporated herein by this reference. Exhibit numbers 10.1 through 10.53, listed in the attached Exhibit Index, are management contracts or compensatory plans or arrangements required to be filed as exhibits to this form by Item 15(b) hereof...

  • Page 142
    ..., 2009, which reports appear in the December 31, 2009 annual report on Form 10-K of Motorola, Inc. As discussed in Notes 1 and 9 to the consolidated financial statements, effective January 1, 2008, the Company adopted the provisions of Statement of Financial Accounting Standards No. 157, Fair Value...

  • Page 143
    ... and Director (Principal Executive Officer) Co-Chief Executive Officer and Director (Principal Executive Officer) Senior Vice President and Chief Financial Officer (Principal Financial Officer) Corporate Vice President and Chief Accounting Officer (Principal Accounting Officer) Chairman of the Board...

  • Page 144
    ... Stengel /s/ ANTHONY J. VINCIQUERRA Anthony J. Vinciquerra /s/ DOUGLAS A. WARNER III Douglas A. Warner III /s/ DR. JOHN A. WHITE Dr. John A. White Director Title Date February 16, 2010 Director February 16, 2010 Director February 16, 2010 Director February 16, 2010 Director February 16, 2010

  • Page 145
    ... Motorola's Quarterly Report on Form 10-Q for the fiscal quarter ended July 4, 2009 (File No. 1-7221)). Form of Motorola, Inc. Award Document-Terms and Conditions Related to Employee Nonqualified Stock Options relating to the Motorola Omnibus Incentive Plan of 2006 for grants on or after May 6, 2008...

  • Page 146
    ... Inc. Award Document for the Motorola Omnibus Incentive Plan of 2006, Terms and Conditions Related to Employee Nonqualified Stock Options granted to Gregory Q. Brown on January 31, 2008 (Market-based vesting) (incorporated by reference to Exhibit 10.9 to Motorola's Annual Report on Form 10-K for the...

  • Page 147
    ... 2003 or any successor plan, for acquisitions from January 1, 2006 to February 11, 2007 (incorporated by reference to Exhibit No. 10.25 to Motorola's Annual Report on Form 10-K for the fiscal year ended December 31, 2005 (File No. 1-7221)). Motorola Non-Employee Directors Stock Plan, as amended and...

  • Page 148
    ...-K for the fiscal year ended December 31, 2008 (File No. 1-7221)). Motorola, Inc. Retiree Basic Life Insurance for Elected Officers prior to January 1, 2004 who retire after January 1, 2005 (incorporated by reference to Exhibit 10.36 to Motorola's Annual Report on Form 10-K for the fiscal year ended...

  • Page 149
    ... 10-Q for the fiscal quarter ended April 4, 2009 (File No. 1-7221)). Statement regarding Computation of Ratio of Earnings to Fixed Charges. Subsidiaries of Motorola. Consent of Independent Registered Public Accounting Firm, see page 134 of the Annual Report on Form 10-K of which this Exhibit Index...

  • Page 150
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  • Page 151
    ... Officer, Mobile Devices and Home business Michele A. Carlin Human Resources Gene A. Delaney Presidens, Enserprise Mobilisy Solusions Edward J. Fitzpatrick Chief Financial Officer A. Peter Lawson General Counsel and Secresary Karen P. Tandy Public Affairs and Communicasions Investor Relations...

  • Page 152
    Mosorola, Inc. 1303 E. Algonquin Road Schaumburg, Illinois 60196 U.S.A. +1 847 576 5000 www.mosorola.com MOTOROLA and she Ssylized M Logo are regissered in she US Pasens & Trademark Office. All osher producs or service names are she propersy of sheir respecsive owners. © 2010 Mosorola, Inc. All ...