avatar Motorola Solutions, Inc. Manufacturing

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    Motorola 2002 Summary Annual Report


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    We build real things needed in a global society…


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    in w ays that make sense in an unpredic table w orld.


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    Ensuring c ontinual innovative thinking from a nimble global enterprise.


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    It’s w hat w e do every day.


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    Offering produc ts to enhanc e w hat you do every day!


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    >>> at home >>> at home >>> at home >>> at home >>> at home >>> at home >>>


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    >>> at w ork >>> at w ork >>> at w ork >>> at w ork >>> at w ork >>> at w ork >>>


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    >>> in the c ar >>> in the c ar >>> in the c ar >>> in the c ar >>> in the c ar >>>


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    >>> on the person >>> on the person >>> on the person >>> on the person >>>


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    >>> globally >>> globally >>> globally >>> globally >>> globally >>> globally >>>


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    >>> smarter >>> smarter >>> smarter >>> smarter >>> smarter >>> smarter >>>


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    >>> simpler >>> simpler >>> simpler >>> simpler >>> simpler >>> simpler >>>


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    >>> saf er >>> saf er >>> saf er >>> saf er >>> saf er >>> saf er >>> saf er >>>


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    >>> sync hronized >>> sync hronized >>> sync hronized >>> sync hronized >>>


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    >>> fun >>> fun >>> fun >>> fun >>> fun >>> fun >>> fun >>> fun >>> fun >>>


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    It’s our brand promise – Intelligenc e Everyw here.™ W e asked thousands of people around the w orld how M otorola c ould better link their dreams to tec hnology’s promise. And they told us: M ake the billions of things around us smarter, simpler, safer, sync hronized and, w hen appropriate, fun. W e heard it from c onsumers. W e heard it from business c ustomers. W e heard it from government organizations. W hether for themselves or for their organizations, they w ant Intelligenc e Everyw here solutions around them. That is w hy w e are focused on providing innovative differentiated products, technologies and services to deliver all they w ant and more. W e’re also applying the Intelligenc e Everyw here brand promise to every aspec t of a more effic ient and better operating M otorola; it’s the underpinning of our improving performance and financial strengthening in this middle stage of our turn- around. Initial indic ators c onfirm that w e are on the road to realizing the potential of M otorola, for the benefit of our c ustomers, employees and shareholders. Continuing to pursue high performanc e w ith high princ iples, w e are intently focused on financial results. We are marshalling the pow er of talented employees, fostering long-standing instinc ts for innovation, delivering new and exc iting produc ts, and exec uting on enhanc ed business strategies. In essenc e, w e seek to deliver on our Intelligenc e Everyw here brand promise. It’s w hat w e do every day.


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    CON TEN TS 17 To our stoc kholders and other friends 21 Financ ial highlights 22 Consolidated financ ial statements 27 Non-GAAP measurements 31 Board of Direc tors, M otorola, Inc . 32 Stoc kholder referenc e information 33 Our businesses M otorola is a global leader in providing integrated c ommunic ations and embedded elec tronic solutions. Our Intelligenc e Everyw here solutions inc lude: softw are-enhanc ed w ireless telephone TM and messaging, tw o-w ay radio produc ts and systems, as w ell as netw orking and Internet-ac c ess produc ts for c onsumers, netw ork operators and c ommerc ial, government and industrial c ustomers; end-to-end systems for the delivery of interac tive digital video, voic e and high-speed data solutions for broadband operators; embedded semic onduc tor solutions for c ustomers in w ireless c ommuni- c ations, netw orking and transportation markets; and integrated elec tronic systems for automotive, Telematic s, industrial, telec ommunic ations, c omputing and portable energy systems markets.


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    TO OUR STOCKHOLDERS AN D OTHER FRI EN DS, In the second half of 2002, w e returned M otorola to profitability. We turned our earnings performance around in the fac e of dec lining sales and started building earnings momentum w ell ahead of top-line grow th. M otorola exc eeded the vast majority of the financ ial metric s w e set out to ac hieve in this middle phase of our turnaround in 2002. Gross margins w ere up. Overhead w as dow n. Operating margins w ere up. Positive operating c ash flow w as generated. Debt shrunk. FI N AN CI AL RESULTS Sales dec reased to $26.7 billion c ompared w ith $29.9 billion in 2001. In ac c ordanc e w ith generally ac c epted ac c ounting princ iples (GAAP) w e inc urred a net loss of $2.5 billion, c ompared w ith a net loss of $3.9 billion the prior year. The loss per share w as $(1.09) c ompared to a loss per share of $(1.78) in 2001. Inc luded in the loss for both 2002 and 2001 w ere spec ial items related largely to: > Restruc turing to low er c osts and improve produc tivity; and > Asset revaluations required by GAAP bec ause of dec lining values. Spec ial items resulted in a net c harge of $2.8 billion after tax in 2002 and $3.3 billion after tax in 2001. Exc luding spec ial items, the c ompany had net earnings of $314 million, or $0.14 per share, in 2002 versus a net loss of $697 million, or $(0.31) per share, in 2001. W e c ompiled these results by foc using on our ow n ability to exec ute even as w e enc ountered a diffic ult ec onomy and a c ontinuing steep dec line in most of the high-tec h markets w e serve. W hile moving aggressively to restore profitability and grow th, w e w ere – and are – alw ays insistent on living up to our 74-year-old reputation for being a highly princ ipled and ethic al global c orporation. A rec onc iliation of our non-GAAP measurements to our GAAP financ ial data c an be found on pages 27-30. Full GAAP financ ial data c an be found in the Proxy Statement. THE FI VE- POI N T PLAN The five-point plan introduc ed in 2001 has served us w ell by helping us foc us on c ritic al priorities to drive profitable grow th: 1. To aggressively foc us on the balanc e sheet. 2. To low er our break-even sales level by reduc ing SG& A and manufac turing c osts. 3. To c ontinually strengthen our management team. 4. To pursue grow th through innovative products, softw are applications and customer relationships. 5. To c onstantly evaluate our strategic options and business portfolio. 1. Focusing on the Balance Sheet The numbers tell the story. W e have delivered positive operating c ash flow for eight quarters in a row , generating $1.3 billion in 2002 and $2.0 billion in 2001. W e reduc ed net ac c ounts rec eivable to $4.4 billion from $4.6 billion. W e reduc ed net debt to $2.3 billion from $3.1 billion. W e reduc ed our ratio of net debt to net debt plus equity to 16.7% in the fourth quarter of 2002 from 18.4% in the fourth quarter of 2001. At year end, w e w ere holding more than $6.5 billion in c ash, c ash equivalents and short-term investments w or ldw ide. W e held $4.2 billion of that total in the United States, after moving approximately $3.0 billion from overseas to U.S. ac c ounts during the year. Intelligenc e Everyw here ™ 17


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    2. Low ering the Break- Even Sales Level Again, the numbers speak for themselves. We continued to reduce our break-even sales level during 2002 and have ac hieved a 25% reduc tion sinc e the start of our restruc turing in the latter part of 2000. W e expec t to further low er the break-even sales level of the c orporation during 2003. 3. Strengthening the M anagement Team We continued to bring in new talent as w ell as promote internal M otorola talent in 2002. From the very beginning of the year to its end, 12 of the 18 senior leadership team members w ere new in their roles. At the same time, w e retained 97% of our 200 most effec tive exec utives. W e c ompleted a rigorous ranking of 1,200 exec utives as part of our new Leadership Supply proc ess, w hic h is designed to ensure that w e c an loc ate – internally or externally – talented, trained, respec ted and motivated people alw ays ready to ac c ept new assignments. During the year, our Leadership Supply proc ess ensured quic k and effec tive transitions in the naming of a new president and chief operating officer, a new chief financial officer and four business sec tor presidents. Among them w ere three new M otorolans: > David Devonshire, exec utive vic e president and c hief financ ial offic er – formerly CFO at Ow ens-Corning and Ingersoll-Rand Company. > Greg Brow n, exec utive vic e president of M otorola and president and CEO of our Commerc ial, Government and Industrial Solutions Sec tor – formerly c hairman and CEO of M ic romuse Inc ., a leading provider of servic e and business assuranc e softw are. > Dennis Carey, exec utive vic e president of M otorola and president and CEO of our Integrated Elec tronic Systems Sec tor – formerly exec utive vic e president of business development, strategy and c orporate operations at The Home Depot, Inc . 4. Pursuing Grow th W e invested $3.8 billion in researc h and development in 2002. This investment is funding ongoing innovation in the new products and softw are applications that are continuing to build a global society and drive the c ompany’s future grow th. 5. Evaluating Strategic Options and Portfolio Over the past tw o years, w e acquired six businesses, divested six businesses and made investments in more than 40 other c ompanies. These ac tions demonstrate that w e are divesting businesses that are no longer key to our strategies. At the same time, w e are strategic ally ac quiring c ompanies and investing in tec hnology partners. As w e entered 2003, w e revised the five-point plan to reflec t w hat w e learned in 2002. Our foc us in 2003 w ill be: 1. To persistently enhanc e the management team and w ork environment. 2. To aggressively foc us on strengthening the balanc e sheet and generating c ash. 3. To relentlessly pursue c ost c ompetitiveness, quality and c ustomer satisfac tion. 4. To pursue grow th through profitable innovative produc ts, systems, softw are and c ustomer relationships. 5. To c ontinuously reassess and improve our business strategies and portfolio. 18 M otorola, Inc .


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    RETURN I N G TO GROW TH We expect to grow the w ay w e did prior to the artificially inflated grow th that resulted from the telecom and dot-com booms in the late 1990s and the period of decline that follow ed in 2001 and 2002: steadily, rationally, w ith real produc ts serving real needs in real marketplac es. W e believe our markets w ill return to solid, steady grow th. We are No. 1 or No. 2 in market share in most of the markets w e serve. W ithin those markets, our customers already include nine of the top cable service providers w orldw ide, 17 of the top 18 w ireless servic e providers w orldw ide, seven of the top 10 automakers w orldw ide, a signific ant majority of the largest public safety agenc ies w orldw ide and 10 of the top 11 manufac turers of c ommunic ations netw ork equipment. In 2002, w e w ere No. 2 in w ireless handsets; No. 1 in semic onduc tors for the w ireless c ommuni- c ations market, the transportation market and the netw orking c ommunic ations market; N o. 1 in tw o-w ay radio solutions for c ommerc ial, governmental and industrial markets; No. 1 in both digital broadband set-top terminals and c able modems; and N o.1 in integrated elec tronic systems for Telematics, an automotive market technology that enables automated roadside assistance, navigation and advanc ed safety features. W ith these market-leading positions and our c ustomer relationships, w e w ill grow . We expect modest grow th of approximately 3% in 2003. Beyond this w e anticipate grow th rates to improve as the w orld stabilizes and our strategies take hold. BALDRI GE REDUX In 1987, the U.S. Congress established the M alc olm Baldrige National Quality Aw ard to promote and recognize excellence in business. M otorola w as an inaugural w inner of the aw ard in 1988. In 2002, our Commerc ial, Government and Industrial Solutions Sec tor – our Homeland Sec urity business – w on the aw ard. The sector w as assessed in seven categories: leadership, strategic planning, customer and market focus, information and analysis, human resources focus, process management and business results. This ac hievement pays tribute to our employees; it demonstrates a solid c ommitment to our c ustomers; and it evidenc es our ability to help c ustomers effec tively address Homeland Sec urity needs around the w orld. TRAN SI TI ON S W e w elc omed tw o new independent members to our board of direc tors in 2002: Sandy W arner, former c hairman of J . P. M organ Chase & Co., and Indra Nooyi, president and c hief financ ial offic er of PepsiCo, Inc . Sandy led the transformation of J .P. M organ into a fully integrated investment bank and then guided the c reation of one of the largest financ ial servic es firms in the United States w ith the 2001 merger of J . P. M organ and Chase M anhattan. Intelligenc e Everyw here ™ 19


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    Indra ranked No. 4 in Fortune magazine’s 50 most pow erful w omen in business for 2002 – reflecting her signific ant role in PepsiCo’s strategic transformation. Indra w orked in our automotive division from 1986 to 1988, served as vice president and director of M otorola’s corporate strategy and planning from 1988 to 1990, and w orked for Asea Brow n Boveri as senior vic e president of c orporate strategy and strategic marketing before joining PepsiCo. M I LESTON E In 2003 w e are celebrating the 75th anniversary of the founding of M otorola. In 1928 w e incorporated w ith $565 in cash, $750 in tools and a design for our first product. We enter our 75th year as a technology leader helping to build a global soc iety unimagined by our founders, guided by high ethic s and principles and executing a forw ard-looking plan to help us outperform our competitors, generate profit and c ash, and drive grow th. Our five-point plan for building shareholder value w as c onc eived and launched in a time of serious challenge. Yet it is simply about our historic strengths. It is about quality management, a strong balanc e sheet, a low c ost struc ture, steady grow th and c onstant evaluation of strategic options. That’s our formula for building shareholder value; it’s w hat w e do every day. CHRI STOPHER B. GALVI N M I KE S. ZAFI ROVSKI Chairman of the Board and Chief Exec utive Offic er President and Chief Operating Offic er 20 M otorola, Inc .


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    FI N AN CI AL HI GHLI GHTS (Dollars in millions, exc ept as noted) Years Ended December 31 2002 2001 Net sales $ 26,679 $ 29,873 Operating loss (1,813) (5,803) % to sales (6.8)% (19.4)% Loss before inc ome taxes (3,446) (5,511) % to sales (12.9)% (18.4)% Net loss (2,485) (3,937) % to sales (9.3)% (13.2)% Diluted loss per c ommon share (in dollars) (1.09) (1.78) Researc h and development expenditures 3,754 4,318 Capital expenditures 607 1,321 Working c apital 7,324 7,451 Current ratio 1.75 1.77 Return on average invested c apital (15.9)% (18.0)% Return on average stoc kholders’ equity (20.6)% (24.8)% Net debt to net debt plus equity 16.7% 18.4% Book value per c ommon share (in dollars) $ 4.85 $ 6.07 Year-end employment (in thousands) 97 111 40 2500 30 0 20 - 2500 45% United States 14% Europe 14% China 10 - 5000 11% Asia-Pacific 7% Latin America 6% Other M arkets 3% Japan 0 - 7500 98 99 00 01 02 98 99 00 01 02 2002 M a r k e t Sa l e s N e t Sa l e s Ope r a ti ng Ea r ni ngs (Loss) by Re gi on (%) (in billions) (in millions) .75 10 0 0 - .75 - 10 38% Personal Communications Segment 17% Semiconductor Products Segment 16% Global Telecom Solutions Segment 13% Commercial, Government and - 1.5 - 20 Industrial Solutions Segment 8% Integrated Electronic Systems Segment 7% Broadband Communications Segment 1% Other Products Segment - 2.25 - 30 98 99 00 01 02 98 99 00 01 02 2002 N e t Sa l e s D i l ute d Ea r ni ngs (Loss) Re tur n on Ave r a ge by B usi ne ss Se gme nt (%) Pe r Sha r e (in dollars) I nve ste d Ca pi ta l (%) (before interc ompany eliminations)


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    CON SOLI DATED STATEM EN TS OF OPERATI ON S (In millions, exc ept per share amounts) Years Ended December 31 2002 2001 2000 Net sales $ 26,679 $ 29,873 $ 37,346 Costs of sales 17,938 22,661 25,168 Gross margin 8,741 7,212 12,178 Selling, general and administrative expenses 4,203 4,723 5,733 Researc h and development expenditures 3,754 4,318 4,437 Reorganization of businesses 1,764 1,858 596 Other c harges 833 2,116 517 Operating earnings (loss) (1,813) (5,803) 895 Other inc ome (expense): Interest expense, net (356) (413) (171) Gains on sales of investments and businesses, net 96 1,931 1,570 Other (1,373) (1,226) (63) Total other inc ome (expense) (1,633) 292 1,336 Earnings (loss) before inc ome taxes (3,446) (5,511) 2,231 Inc ome tax provision (961) (1,574) 913 Net earnings (loss) $ (2,485) $ (3,937) $ 1,318 Earnings (loss) per common share: Basic $ (1.09) $ (1.78) $ 0.61 Diluted (1.09) (1.78) 0.58 W eighted average common shares outstanding: Basic 2,282.3 2,213.3 2,170.1 Diluted 2,282.3 2,213.3 2,256.6 22 M otorola, Inc . and Subsidiaries


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    CON SOLI DATED BALAN CE SHEETS (In millions, exc ept per share amounts) December 31 2002 2001 ASSETS Current assets Cash and c ash equivalents $ 6,507 $ 6,082 Short-term investments 59 80 Ac c ounts rec eivable, net 4,437 4,583 Inventories, net 2,869 2,756 Deferred inc ome taxes 2,358 2,633 Other c urrent assets 904 1,015 Total c urrent assets 17,134 17,149 Property, plant and equipment, net 6,104 8,913 Investments 2,053 2,954 Deferred inc ome taxes 3,112 1,152 Other assets 2,749 3,230 Total assets $ 31,152 $ 33,398 LIABILITIES AN D STOCKHOLDERS’ EQUITY Current liabilities Notes payable and c urrent portion of long-term debt $ 1,629 $ 870 Ac c ounts payable 2,268 2,434 Ac c rued liabilities 5,913 6,394 Total c urrent liabilities 9,810 9,698 Long-term debt 7,189 8,372 Other liabilities 2,429 1,152 Company-obligated mandatorily redeemable preferred sec urities of subsidiary trust holding solely c ompany-guaranteed debentures 485 485 Stoc kholders’ equity Preferred stoc k, $100 par value Authorized shares: 0.5 (none issued) — — Common stoc k, $3 par value Authorized shares: 2002 and 2001, 4,200 Issued and outstanding: 2002 – 2,315.3; 2001 – 2,254.0 6,947 6,764 Additional paid-in c apital 2,233 1,707 Retained earnings 2,582 5,434 Non-ow ner c hanges to equity (523) (214) Total stoc kholders’ equity 11,239 13,691 Total liabilities and stoc kholders’ equity $ 31,152 $ 33,398 Intelligenc e Everyw here ™ 23


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    CON SOLI DATED STATEM EN TS OF CASH FLOW S (In millions) Years Ended December 31 2002 2001 2000 OPERATIN G Net earnings (loss) $ (2,485) $ (3,937) $ 1,318 Adjustments to rec onc ile net earnings (loss) to net c ash provided by (used for) operating ac tivities: Deprec iation and amortization 2,108 2,552 2,527 Charges for reorganization of businesses and other c harges 2,627 4,786 1,483 Gains on sales of investments and businesses, net (96) (1,931) (1,570) Deferred inc ome taxes (1,570) (2,273) 239 Investment impairments and other 1,391 1,252 332 Change in assets and liabilities, net of effec ts of ac quisitions and dispositions: Ac c ounts rec eivable 155 2,445 (1,471) Inventories (102) 1,838 (2,305) Other c urrent assets 39 249 (532) Ac c ounts payable and ac c rued liabilities (980) (3,030) (666) Other assets and liabilities 252 25 (519) Net c ash provided by (used for) operating ac tivities 1,339 1,976 (1,164) IN VESTIN G Ac quisitions and investments, net (94) (512) (1,912) Proc eeds from sale of investments and businesses 96 4,063 1,433 Capital expenditures (607) (1,321) (4,131) Proc eeds from sale of property, plant and equipment 143 14 174 Sales of short-term investments 23 233 345 Net c ash provided by (used for) investing ac tivities (439) 2,477 (4,091) FIN AN CIN G Net proc eeds from (repayment of) c ommerc ial paper and short-term borrow ings (180) (5,688) 3,884 Net proc eeds from issuanc e of debt 64 4,167 1,190 Repayment of debt (299) (305) (5) Issuanc e of c ommon stoc k 401 362 383 Debt redemption payment (106) — — Payment of dividends (364) (356) (333) Net c ash provided by (used for) financ ing ac tivities (484) (1,820) 5,119 Effec t of exc hange rate c hanges on c ash and c ash equivalents 9 148 (100) Net inc rease (dec rease) in c ash and c ash equivalents 425 2,781 (236) Cash and c ash equivalents, beginning of year 6,082 3,301 3,537 Cash and c ash equivalents, end of year $ 6,507 $ 6,082 $ 3,301 CASH FLOW IN FORM ATION Cash paid during the year for: Interest, net $ 569 $ 844 $ 529 Inc ome taxes, net of refunds 83 676 130 24 M otorola, Inc . and Subsidiaries


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    SEGM EN T I N FORM ATI ON (In millions) Years Ended December 31 2002 2001 2000 N ET SALES Personal Communic ations Segment $ 10,847 $ 10,436 $ 13,246 Semic onduc tor Produc ts Segment 4,818 4,936 7,876 Global Telec om Solutions Segment 4,540 6,442 7,597 Commercial, Government and Industrial Solutions Segment 3,729 4,306 4,561 Broadband Communic ations Segment 2,087 2,854 3,416 Integrated Electronic Systems Segment 2,189 2,239 2,869 Other Produc ts Segment 486 755 1,057 Adjustments & Eliminations (2,017) (2,095) (3,276) Segment Totals $ 26,679 $ 29,873 $ 37,346 OPERATIN G EARN IN GS (LOSS) AN D % TO SALES Personal Communic ations Segment $ 503 4.6% $ (1,585) (15.2)% $ (332) (2.5)% Semic onduc tor Produc ts Segment (1,515) (31.4)% (1,911) (38.7)% 202 2.6% Global Telec om Solutions Segment (621) (13.7)% (1,409) (21.9)% 812 10.7% Commercial, Government and Industrial Solutions Segment 313 8.4% 52 1.2% 443 9.7% Broadband Communic ations Segment (150) (7.2)% 195 6.8% 367 10.7% Integrated Electronic Systems Segment 52 2.4% (171) (7.6)% 168 5.9% Other Produc ts Segment (280) (57.6)% (516) (68.3)% (502) (47.5)% Adjustments & Eliminations 24 (1.2)% 236 (11.3)% (66) 2.0% Segment Totals (1,674) (6.3)% (5,109) (17.1)% 1,092 2.9% General Corporate (139) (694) (197) Operating Earnings (Loss) $ (1,813) (6.8)% $ (5,803) (19.4)% $ 895 2.4% Intelligenc e Everyw here ™ 25


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    FI VE- YEAR FI N AN CI AL SUM M ARY (Dollars in millions, except as noted) Years Ended December 31 2002 2001 2000 1999 1998 OPERATIN G RESULTS Net sales $ 26,679 $ 29,873 $ 37,346 $ 32,930 $ 31,273 Costs of sales 17,938 22,661 25,168 22,229 21,054 Gross margin 8,741 7,212 12,178 10,701 10,219 Selling, general and administrative expenses 4,203 4,723 5,733 5,731 6,059 Researc h and development expenditures 3,754 4,318 4,437 3,560 3,118 Reorganization of businesses 1,764 1,858 596 (226) 1,980 Other c harges 833 2,116 517 1,406 109 Operating earnings (loss) (1,813) (5,803) 895 230 (1,047) Other inc ome (expense): Interest expense, net (356) (413) (171) (51) (183) Gains on sales of investments and businesses, net 96 1,931 1,570 1,180 260 Other (1,373) (1,226) (63) (76) (310) Total other inc ome (expense) (1,633) 292 1,336 1,053 (233) Earnings (loss) before inc ome taxes (3,446) (5,511) 2,231 1,283 (1,280) Inc ome tax provision (961) (1,574) 913 392 (373) Net earnings (loss) $ (2,485) $ (3,937) $ 1,318 $ 891 $ (907) PER SHARE DATA (in dollars) Diluted earnings (loss) per common share $ (1.09) $ (1.78) $ 0.58 $ 0.41 $ (0.44) Diluted w eighted average common shares outstanding (in millions) 2,282.3 2,213.3 2,256.6 2,202.0 2,071.1 Dividends dec lared (1) $ 0.16 $ 0.16 $ 0.16 $ 0.16 $ 0.16 BALAN CE SHEET Total assets $ 31,152 $ 33,398 $ 42,343 $ 40,489 $ 30,951 Working c apital 7,324 7,451 3,628 4,679 2,532 Long-term debt and redeemable preferred sec urities 7,674 8,857 4,778 3,573 2,633 Total debt and redeemable preferred securities 9,303 9,727 11,169 6,077 5,542 Total stoc kholders’ equity 11,239 13,691 18,612 18,693 13,913 OTHER DATA Current ratio 1.75 1.77 1.22 1.36 1.21 Return on average invested c apital (15.9)% (18.0)% 6.3% 5.3% (5.4)% Return on average stoc kholders’ equity (20.6)% (24.8)% 6.6% 5.7% (6.5)% Capital expenditures $ 607 $ 1,321 $ 4,131 $ 2,856 $ 3,313 % to sales 2.3% 4.4% 11.1% 8.7% 10.6% Researc h and development expenditures $ 3,754 $ 4,318 $ 4,437 $ 3,560 $ 3,118 % to sales 14.1% 14.5% 11.9% 10.8% 10.0% Year-end employment (in thousands) 97 111 147 128 141 (1) Dividends dec lared from 1998 to 1999 w ere on M otorola shares outstanding prior to the General Instrument merger. 26 M otorola, Inc . and Subsidiaries


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    N ON - GAAP M EASUREM EN TS: RESULTS OF OPERATI ON S EXCLUDI N G SPECI AL I TEM S AN D CERTAI N EXI TED BUSI N ESSES The tabular presentation below and as found on pages 28-30 reflec ts non-GAAP measurements o f M otor ola’s r esults of oper ations pr esented on a basis exc luding spec ial items and c er tain exited businesses. The non-GAAP measurements used throughout this report do not replac e the presentation of M otorola’s GAAP financ ial results. These measurements provide supplemental infor mation to assist the r eader in analyzing the Company’s financ ial c ondition and r esults of operations. Items that the Company c onsiders to be spec ial items generally relate to restruc turing ac tivities and asset revaluations. The Company is providing this information to enable c omparisons of c urrent operating results to prior years and show the results of c ore ongoing operations. These ongoing results of operations are used by investors and management to measure the Company’s c urrent and future performanc e. CON SOLI DATED STATEM EN TS OF OPERATI ON S EXCLUDI N G SPECI AL I TEM S Special Excluding (In millions, exc ept per share amounts) GAAP Items Special Year Ended December 31, 2002 Results Inc / (Exp) Items Net sales $ 26,679 $ — $ 26,679 Costs of sales 17,938 (56) 17,882 Gross margin 8,741 (56) 8,797 Selling, general and administrative expenses 4,203 (44) 4,159 Researc h and development expenditures 3,754 — 3,754 Reorganization of businesses 1,764 (1,764) — Other c harges 833 (833) — Operating earnings (loss) (1,813) (2,697) 884 Other inc ome (expense): Interest expense, net (356) — (356) Gains on sales of investments and businesses, net 96 96 — Other (1,373) (1,351) (22) Total other inc ome (expense) (1,633) (1,255) (378) Earnings (loss) before inc ome taxes (3,446) (3,952) 506 Inc ome tax provision (961) 1,153 192 Net earnings (loss) $ (2,485) $ (2,799) $ 314 Earnings (loss) per common share Basic $ (1.09) $ 0.14 Diluted $ (1.09) $ 0.14 Intelligenc e Everyw here ™ 27


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    CON SOLI DATED STATEM EN TS OF OPERATI ON S EXCLUDI N G SPECI AL I TEM S AN D CERTAI N EXI TED BUSI N ESSES Ongoing Special Excluding Exited Operations (In millions, exc ept per share amounts) GAAP Items Special Business Excluding Year Ended December 31, 2001 Results Inc / (Exp) Items Inc / (Exp) Special Items Net sales $ 29,873 $ — $ 29,873 $ 553 $ 29,320 Costs of sales 22,661 (1,081) 21,580 (386) 21,194 Gross margin 7,212 (1,081) 8,293 167 8,126 Selling, general and administrative expenses 4,723 (125) 4,598 (107) 4,491 Researc h and development expenditures 4,318 — 4,318 (31) 4,287 Reorganization of businesses 1,858 (1,858) — — — Other c harges 2,116 (2,116) — — — Operating earnings (loss) (5,803) (5,180) (623) 29 (652) Other inc ome (expense): Interest expense, net (413) (22) (391) (6) (385) Gains on sales of investments and businesses, net 1,931 1,931 — — — Other (1,226) (1,212) (14) — (14) Total other inc ome (expense) 292 697 (405) (6) (399) Earnings (loss) before inc ome taxes (5,511) (4,483) (1,028) 23 (1,051) Inc ome tax provision (1,574) 1,227 (347) (7) (354) Net earnings (loss) $ (3,937) $ (3,256) $ (681) $ 16 $ (697) Loss per common share Basic $ (1.78) $ (0.31) Diluted $ (1.78) $ (0.31) 28 M otorola, Inc . and Subsidiaries


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    SEGM EN T N ET SALES EXCLUDI N G EXI TED BUSI N ESSES (In millions) GAAP Exited Ongoing % Change Year Ended December 31, 2002 Results Businesses Operations from 2001 N ET SALES Personal Communic ations Segment $ 10,847 $ — $ 10,847 4% Semic onduc tor Produc ts Segment 4,818 — 4,818 (2)% Global Telec om Solutions Segment 4,540 — 4,540 (30)% Commerc ial, Government and Industrial Solutions Segment 3,729 — 3,729 (3)% Broadband Communic ations Segment 2,087 — 2,087 (27)% Integrated Elec tronic Systems Segment 2,189 — 2,189 (2)% Other Produc ts Segment 486 — 486 (26)% Adjustments & Eliminations (2,017) — (2,017) 4% Segment Totals $ 26,679 — $ 26,679 (9)% (In millions) GAAP Exited Ongoing Year Ended December 31, 2001 Results Businesses Operations N ET SALES Personal Communic ations Segment $ 10,436 $ — $ 10,436 Semic onduc tor Produc ts Segment 4,936 — 4,936 Global Telec om Solutions Segment 6,442 — 6,442 Commerc ial, Government and Industrial Solutions Segment 4,306 456 3,850 Broadband Communic ations Segment 2,854 — 2,854 Integrated Elec tronic Systems Segment 2,239 — 2,239 Other Produc ts Segment 755 97 658 Adjustments & Eliminations (2,095) — (2,095) Segment Totals $ 29,873 $ 553 $ 29,320 Intelligenc e Everyw here ™ 29


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    SEGM EN T OPERATI N G EARN I N GS EXCLUDI N G SPECI AL I TEM S AN D EXI TED BUSI N ESSES Ongoing Operations Special Excluding Exited Excluding (In millions) GAAP Items Special Businesses Special % to Year Ended December 31, 2002 Results Inc / (Exp) Items Inc / (Exp) Items Sales OPERATIN G EARN IN GS (LOSS) Personal Communic ations Segment $ 503 $ (301) $ 804 $ — $ 804 7% Semic onduc tor Produc ts Segment (1,515) (1,232) (283) — (283) (6)% Global Telec om Solutions Segment (621) (610) (11) — (11) 0% Commerc ial, Government and Industrial Solutions Segment 313 (48) 361 — 361 10% Broadband Communic ations Segment (150) (407) 257 — 257 12% Integrated Elec tronic Systems Segment 52 (63) 115 — 115 5% Other Produc ts Segment (280) (13) (267) — (267) (55)% Adjustments & Eliminations 24 — 24 — 24 (1)% Segment Totals (1,674) (2,674) 1,000 — 1,000 4% General Corporate (139) (23) (116) — (116) Operating Earnings (Loss) $ (1,813) $ (2,697) $ 884 $ — $ 884 3% Ongoing Operations Special Excluding Exited Excluding (In millions) GAAP Items Special Businesses Special % to Year Ended December 31, 2001 Results Inc / (Exp) Items Inc / (Exp) Items Sales OPERATIN G EARN IN GS (LOSS) Personal Communic ations Segment $ (1,585) $ (1,267) $ (318) $ — $ (318) (3)% Semic onduc tor Produc ts Segment (1,911) (911) (1,000) — (1,000) (20)% Global Telec om Solutions Segment (1,409) (1,441) 32 — 32 0% Commerc ial, Government and Industrial Solutions Segment 52 (343) 395 45 350 9% Broadband Communic ations Segment 195 (255) 450 — 450 16% Integrated Elec tronic Systems Segment (171) (159) (12) — (12) (1)% Other Produc ts Segment (516) (288) (228) (16) (212) (32)% Adjustments & Eliminations 236 — 236 — 236 (11)% Segment Totals (5,109) (4,664) (445) 29 (474) (2)% General Corporate (694) (516) (178) — (178) Operating Earnings (Loss) $ (5,803) $ (5,180) $ (623) $ 29 $ (652) (2)% 30 M otorola, Inc . and Subsidiaries


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    DI RECTORS STAN DI N G FOR ELECTI ON TO THE M OTOROLA, I N C. BOARD OF DI RECTORS CHRISTOPHER B. GALVIN JOHN E. PEPPER, JR. Chairman of the Board and Chairman of the Exec utive Committee, Chief Exec utive Offic er, Proc ter & Gamble Company M otorola, Inc . SAM UEL C. SCOTT, III FRAN CESCO CAIO Chairman of the Board and Chief Exec utive Offic er, Chief Exec utive Offic er, Netsc alibur Corn Produc ts International H. LAURAN CE FULLER DOUGLAS A. W ARN ER, III Retired; formerly Co-Chairman, Former Chairman of the Board, BP Amoc o, p.l.c . J .P. M organ Chase & Co. JUDY C. LEW EN T B. KEN N ETH W EST Exec utive Vic e President and Senior Consultant for Corporate Chief Financ ial Offic er, Governanc e to TIAA-CREF M erc k & Co., Inc . DR. JOHN A. W HITE DR. W ALTER E. M ASSEY Chanc ellor, President, University of Arkansas M orehouse College M IKE S. ZAFIROVSKI N ICHOLAS N EGROPON TE President and Chief Operating Offic er, Chairman, M edia Laboratory, M otorola, Inc . M assac husetts Institute of Tec hnology IN DRA N OOYI President and Chief Financ ial Offic er, PepsiCo, Inc . Intelligenc e Everyw here ™ 31


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    STOCKHOLDER REFEREN CE I N FORM ATI ON STOCK TRAN SFER, REGISTRAR, DIVIDEN D FORM 10- K DISBURSIN G, DIRECT STOCK PURCHASE AN D The Form 10-K is available on the Internet at DIVIDEN D REIN VESTM EN T AGEN T w w w .motorola.c om/investor. A c opy of the M ellon Investor Servic es LLC Form 10-K may be obtained w ithout c harge by Overpec k Centre c ontac ting the Investor Relations Department 85 Challenger Road as listed to the left. Ridgefield Park, NJ 07660 U.S.A. 1 800 704 4098 IN DEPEN DEN T AUDITORS w w w .melloninvestor.c om KPM G LLP For shareholder c orrespondenc e: 303 East W ac ker Drive M ellon Investor Servic es LLC Chic ago, IL 60601 U.S.A. Shareholder Relations Department BUSIN ESS RISKS P.O. Box 3315 Statements that are not historic al fac ts, inc luding statements South Hac kensac k, NJ 07606-1915 U.S.A. about low ering our break-even sales level, grow th in the next sever al year s, long- t er m f inanc ial t ar get s, int r oduc t ion of For transfer of stoc k: new pr oduc ts, mar ket- shar e expec tations and industry-grow th M ellon Investor Servic es LLC expec tations are forw ard-looking statements based on c urrent Stoc k Transfer Department expec tations and involve risks and unc ertainties. P.O. Box 3312 M otorola w ishes to c aution the reader that the fac tors below and South Hac kensac k, NJ 07606-1912 U.S.A. those in the appendix to M otorola’s Proxy Statement for the 2003 annual meeting of stoc kholders and its other SEC filings c ould IN VESTOR RELATION S c ause M otorola’s results to differ materially from those stated in Sec urity analysts, investment professionals forw ard-looking statements. These factors include: (i) the general ec onomic outlook for the telec ommunic ations, semic onduc tor and shareholders c an find investor relations and automotive industries; (ii) the rate of the recovery in the overall information on the Internet at ec onomy and the unc ertainty of c urrent ec onomic and politic al P r i n t i n g : A n d e r so n Li t h o g r a p h w w w .motorola.c om/investor. c onditions; (iii) the impac t on our business of inc reased c onflic t w ith Iraq or other c ountries; (iv) lac k of predic tability of future Inquiries should be direc ted to: operating results; (v) the Company’s ability to effectively carry out the planned c ost-reduc tion ac tions and realize the savings Investor Relations, M otorola, Inc . expec ted from those ac tions; (vi) the potential for unantic ipated Corporate Offic es results from cost-reduction activities on the Company’s performance, 1303 East Algonquin Road including productivity and the retention of key employees; (vii) the Sc haumburg, IL 60196 U.S.A. Company’s c ontinuing ability to ac c ess the c apital markets on P h o t o g r a p h y: V i c t o r J o h n P e n n e r ( Li f e st yl e ) , S a n d r o ( Ex e c u t i ve P o r t r a i t ) E-mail: investors@motorola.c om favorable terms; (viii) demand for the Company’s produc ts, including products related to new technologies; (ix) the Company’s 1 800 262 8509 ability to c ontinue to inc rease profitability and market share in its w ireless handset business; (x) the Company’s suc c ess in the 3G COM M ON STOCK market; (xi) unexpected liabilities or expenses, including unfavorable M otorola c ommon stoc k is listed on the New outcomes to any pending or future litigation, including any relating York, Chic ago and Tokyo Stoc k Exc hanges. to the Iridium project; (xii) difficulties in integrating the operations of new ly-acquired businesses and achieving strategic objectives, AN N UAL M EETIN G OF STOCKHOLDERS cost savings and other benefits; (xiii) the impact of foreign currency fluc tuations; (xiv) the impac t of c hanges in governmental polic ies, The annual meeting w ill be held on M ay 5, 2003. law s or regulations; and (xv) volatility in the market value of A notic e of the meeting, together w ith a form sec urities held by the Company. of Proxy and a Proxy Statement, w ill be mailed to stoc kholders on or about M arc h 27, 2003, at w hic h time proxies w ill be solic ited by the Board of Direc tors. PROXY STATEM EN T D e si g n : S a m a t a M a so n The Proxy Statement is available on the Internet at w w w .motorola.c om/investor. A c opy of the Proxy Statement may be obtained w ithout c harge by c ontac ting the Investor Relations Department as listed above. This entire report has been printed on rec yc led paper. 32 M otorola, Inc .


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    Our businesses.


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    PERSON AL COM M UN I CATI ON S SEGM EN T Can you guess how many people in the w orld use mobile handsets today? Only 1.2 billion, out of a global population of more than 6 billion. M any of those 6 billion are our potential c ustomers – w hic h means signific ant opportunities to sell someone their first mobile handset and 1.2 billion opportunities to provide replacement units. In market share, w e are the No. 2 mobile handset provider in the w orld today. W e started out c alling them c ell phones, but that w as w hen you only used them for c onversation. Today w e c an use them to transmit and rec eive music , games, text, images and other forms of information and c ommunic ation – all personalized to your needs and interests. It’s about self-expression and self-extension; these devic es have bec ome a genuine instrument of your personal potential. In 2002, w e returned to profitability, gained A 830: DUA L M ODE 3G / UM TS HA N DSET W ITH IN TEGRATED CA M ERA market share, improved our customer relationships, reinvigorated the M otorola brand and revitalized our produc t portfolio w ith design innovation and tec hnology leadership. We are a c o-leader for the No. 1 share of market in North America, and w e are No. 2 in Latin America. We believe our hard-w on gains in North America c an be replic ated in Europe / M iddle East / Afric a, w here w e are intent on moving up from our N o. 3 position. We continue to be No. 1 in China and No. 2 for the entire Asia / Pac ific Region. In 2002, net sales for the Personal Communications Segment inc reased 4% to $10.8 billion, c ompared to $10.4 billion in 2001. The segment reported 2002 operating earnings of $503 million, presented on a GAAP basis, versus an operating loss of $1.6 billion in 2001. Excluding special items, the segment reported operating earnings of $804 million, compared w ith an operating loss of $318 million in 2001. Improvements in the segment’s cost structure, c ustomer relation- ships, produc t portfolio and strength of the brand E360: GSM COLOR DISPLAY HAN DSET W ITH continue to drive earnings and market-share gains. Future grow th w ill be driven by inc reases in the customer base and an active replacement market. In V70: GSM HA N DSET FEATURIN G the emerging markets of Russia and Eastern Europe, AFFORDABLE M ULTIM EDIA India, China, Southeast Asia, Brazil and M exic o, HEA D-TURN IN G DESIGN w e are w ell-armed w ith entry-level handsets suc h as our C330 series. In more developed markets w e sw eeten the replac ement opportunity w ith games, produc tivity tools and pic ture messaging – all in c olor. 34 M otorola, Inc .


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    V60i : HAN DSET-FASHION AND FUNCTIONALITY i DEN i 90c SPECIA L EDITION : IN CDM A, GSM IN SPIRED BY VICTORIN OX ® AN D TDM A M A KER OF THE ORIGIN A L SW ISS A RM Y ™ KN IFE A 388: GSM PDA -VOICE HA N DSET W ITH HA N DW RITIN G RECOGN ITION C330 SERIES: EN TRY-LEVEL DIFFEREN TIATION FOR OPERATORS A N D CON SUM ERS IN CDM A , GSM A N D TDM A T720i : GSM PICTURE M ESSA GIN G HA N DSFREE, EA SY-IN STA LL KIT Intelligenc e Everyw here ™ 35


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    SEM I CON DUCTOR PRODUCTS SEGM EN T How does your car know w hen to deploy an airbag? IF YOU’ RE CON N ECTED TO THE IN TERN ET, THERE’ S A GOOD CHA N CE M OTOROLA CHIPS A RE HA N DLIN G A N D How does a router sort all the Internet traffic passing ROUTIN G YOUR DATA . OUR POW ERQUICC™ FA M ILY t h r o u g h i t ? Ho w d o t h e y c r a m a l l t h e servic es COM M A N DS M ORE THA N 70% M A RKET SHA RE IN THE COM M UN ICATION PROCESSOR A REN A . and features into your new est w ireless d e v i c e ? W e lc o me t o t h e w o r ld o f e mb e d d e d processing <<< >>> and c onnec tivity, delivered by system-on- c hip tec hnologies. It’s a w orld w e c reated, and t oday w e ar e t he global N o. 1 pr oduc er of embedded proc essors and the N o. 1 silic on supplier in our w ireless, netw orking and automotive markets. W e are foc used on these markets: > W ireless, w here our platform solutions help devic e manufac turers get to market quic kly w ith more features and more func tionality. > Netw orking, w here our communication proces- sors are c onnec ting the w orld and driving vital upgrades in the telecom and Internet infrastructure. > Automotive , w here w e are helping customers create “ smart” vehicles that enhanc e safety, the envir onment and the driving experienc e. > Standard Products, used in everything from POW ERQUICC™ COM M UN ICATION PROCESSOR poc ket-sized digital c ameras to smart w ashing mac hines. For 2002, Semiconductor Products Segment (SPS) TELEM ATICS COM BINES W IRELESS VOICE AND DATA SERVICES sales w ere $4.8 billion, c ompared to $4.9 billion in W ITH GLOBA L POSITION IN G SYSTEM TECHN OLOGY, GIVIN G 2001. The segment reported an operating loss of VEHICLES THE ABILITY TO COM M UN ICATE W ITH THE OUTSIDE W ORLD. TELEM ATICS EN A BLES A UTOM ATED ROA DSIDE $1.5 billion, presented on a GAAP basis, versus an ASSISTANCE, NAVIGATION AND ADVANCED SAFETY FEATURES. operating loss of $1.9 billion a year ago. Exc luding M OTOROLA PROCESSORS HAVE GA RN ERED A 90% M A RKET SHA RE IN TELEM ATICS CON TROL UN ITS. spec ial items, SPS reported an operating loss of $283 million, c ompared w ith an operating loss of <<< >>> $1.0 billion a year ago. The decrease in the operating loss, exc luding spec ial items, w as due to higher gross margin and muc h low er operating expenses. In 2002, w e took the follow ing steps to deal w ith the c yc lic al nature of the semic onduc tor industry and c urrent ec onomic realities: trimmed our c osts; reduc ed our c apital expenditures; outsourc ed more produc tion; and partnered to spread the c ost and risk of R& D. W e inc reased our lic ensing of intellec tual property. W e improved our perfor- manc e as the semic onduc tor industry began to rec over from its deepest dow nturn in history. Now the sense of urgenc y shifts to improving sales and generating profits. We introduced 181 new products in 2002 and plan to launc h more than 200 in 2003. M GT5100 TELEM ATICS SYSTEM PROCESSOR 36 M otorola, Inc .


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    HCO8 CHIP W ITH BM W 7 SERIES SIDE M IRROR <<< >>> <<< >>> i .250 BOA RD W ITH SEW ON PHON E <<< >>> <<< >>> DRA GON BA LL™ M X PROCESSOR W ITH GA RM IN PDA SYM PHON Y™ DIGITA L CHIP SET W ITH A UTON ET RA DIO Intelligenc e Everyw here ™ 37


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    GLOBAL TELECOM SOLUTI ON S M OTOROLA N ODE B BA SE TRA N SCEIVER STATION (UM TS) SEGM EN T W ant to c hec k e-mail on your w ireless handset? Ac c ess a W eb site? Dow nload an applic ation? Essentially, rec reate your offic e on the move? These are all c apabilities supported by the infra- struc ture of the w ireless netw ork. W e are a key provider of w ireless infrastruc ture systems that are used in every part of the w orld. W e’re behind the sc enes, helping your w ireless operator put voic e, data and images at your fingertips. The tric ky part is making the new tec hnology w ork w ith the old, so operators c an keep expanding your options w ithout starting from sc ratc h every time. W e develop, manufac ture and market the new est generation of base stations and equipment for w ireless netw orks. W e also provide the servic es and softw are that help operators improve perfor- manc e and expand use of their existing netw orks. After many years of strong grow th, the w ireless infrastruc ture industry experienc ed a sec ond c on- sec utive year of dec line in 2002. The dec line in industry sales w as the result of a c ontinuing steep dec line in c apital expenditures by w ireless servic e providers in all regions of the w orld, as servic e providers c ontinued to low er their c ost struc tures to improve c ash flow and reduc e their signific ant debt levels. For 2002, sales for the Global Telec om Solutions Segment (GTSS) w ere $4.5 billion, compared to $6.4 billion in 2001. The reduc tion in sales reflec ts the w eak industry climate. Presented on a GAAP basis, the segment reported a 2002 operating loss of $621 million versus an operating loss of $1.4 billion in 2001. Exc luding spec ial items, GTSS reported an operating loss of $11 million, compared w ith operat- ing earnings of $32 million a year ago. Despite the $1.9 billion dec line in sales, operating earnings, M OTOROLA TELEPHON Y SERVER (GSM / UM TS) excluding special items, declined by only $43 million as t he segment impr oved it s gr oss mar gin and dramatic ally low ered its c ost struc ture. In 2003 w e expec t to fac e another dec lining market. W e intend to aggressively respond to this market reality w ith c ompelling produc ts, new ser- vices and further improvement to our cost structure. 38 M otorola, Inc .


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    M OTOROLA SC™ 300 BA SE TRA N SCEIVER STATION (CDM A ) M OTOROLA SOFTSW ITCH (CDM A ) M OTOROLA HORIZON II BA SE TRA N SCEIVER STATION (GPRS) M OTOROLA SC™ 4812T BA SE TRA N SCEIVER STATION (CDM A ) Intelligenc e Everyw here ™ 39


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    COM M ERCI AL, GOVERN M EN T AN D I N DUSTRI AL M TH500 TETRA DIGITA L RA DIO SOLUTI ON S SEGM EN T Tr y t a l ki n g a b o u t sa f e t y a n d se c u r i t y w i t h o u t mentioning information and c ommunic ation – you c an’t do it. The same goes for quality, produc tivity and effic ienc y. It’s all about c ollec ting information, analyzing it and getting it in the hands of the right p e o p le a t t h e r ig h t t ime . Th a t ’s w h a t w e d o f o r businesses and governments around the w orld. W e are a big part of bringing information and c ommunic ation together to meet mission-c ritic al requirements, making w ork teams better at w hat they do. Today w e’re the leading provider of integrated radio communications and information solutions for public safety, government and enterprise. And w e’re the only provider that c an offer systems that w ork w ith both of the private digital radio c ommunic ation standards – Projec t 25 and TETRA. In 2002, w e maintained our leading market share in a diffic ult market that inc luded large system proc urement delays by government c ustomers in N orth Americ a, as Homeland Sec urity programs are still being finalized. Rec ognizing that pressure on sales w ould be w ith us throughout the year, w e focused on reducing our cost structure. At the same time, w e received the prestigious M alcolm Baldrige National Quality Aw ard from the U.S. government for performanc e exc ellenc e and quality ac hievement. Sa l e s f o r t h e Co m m e r c i a l , Go ve r n m e n t a n d Industrial Solutions Segment (CGISS) in 2002 w ere $3.7 billion, c ompared to $4.3 billion in 2001. The sales dec line w as primarily due to the sale of the segment’s Integrated Information Systems Group during 2001 as w ell as the industry c ondition described above. For 2002, CGISS reported operating earnings of $313 million, presented on a GAAP basis, versus operating earnings of $52 million a year ago. Excluding special items and exited businesses, CGISS reported operating earnings of $361 million, c ompared w ith operating earnings of $350 million a year ago. In 2003, w e look for sales grow th to return as a result of inc reased demand for integrated and interoperable voic e, data and broadband w ireless systems at all government levels related to Homeland Sec urity and c ontinued migration from analog to digital tw o-w ay radio c ommunic ation systems. PREM IER CA D™ DISPATCH SYSTEM 40 M otorola, Inc .


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    HDT500 HA N DHELD DATA TERM IN A L XTS 5000™ PROJ ECT 25 DIGITA L RA DIO W ITH COM M A N DER™ REM OTE SPEA KER M ICROPHON E XLS PROFESSION A L RA DIO GP2100 A LPHA SERIES RA DIO • HT1550 LIVESCA N ™ A UTOM ATED BOOKIN G M A N A GEM EN T SYSTEM CDM 1550 M OBILE RA DIO M CC 5500 DISPATCH CON SOLE M W 800 M OBILE W ORKSTATION Intelligenc e Everyw here ™ 41


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    BROADBAN D COM M UN I CATI ON S SEGM EN T The w ord “ Broadband” stands for a big experience – in this c ase, a w orld in w hic h video, voic e and data c ome and go as natural extensions of the human experienc e. Broadband is c apable of c arrying all the megabytes nec essary to keep you seamlessly i n f o r m e d , e n t e r t a i n e d a n d c o n n e c t e d . Th e infrastruc ture and the devic es that c onnec t you to these information and entertainment servic es are our obsession, and today w e are the N o. 1 global DCT5100 DIGITA L CA BLE, HIGH-DEFIN ITION DECODER provider of these solutions. For video, voice and data to come and go as natural extensions of the human experience, certain capa- bilities are required. Like ease of use and netw ork c ompatibility. Sec urity. Reliability. Our broadband technology enables netw ork operators and retailers to deliver these c apabilities. No other c ompany is positioned as w ell as M otorola to deliver on the promise of the broadband c onnec ted home, offic e or business. In 2002, after many years of solid grow th, the c able equipment industry, like muc h of the telec om equipment industry, faced the second consecutive DVi 3000 (DIGITA L VIDEO BROA DCA ST) IN TERA CTIVE DIGITA L CON SUM ER TERM IN A L year of sales declines as service providers reduc ed c apital spending to low er their c ost struc ture, improve cash flow and reduce their significant debt levels. Even in this w eak c limate, w e shipped over 5.4 million digital set-tops and over 3.5 million c able modems, raising the number of units sold to over 25 million and 10 million, respectively, evidence of the c ompetitive strength of our business. For 2002, Broadband Communic ations Segment (BCS) sales w ere $2.1 billion, compared to $2.9 billion in 2001. The reduc tion in sales reflec ts the w eak industry climate. For 2002, BCS reported an operating loss of $150 million, presented on a GAAP basis, versus operating earnings of $195 million a year ago. Exc luding spec ial items, BCS reported operating earnings of $257 million, c ompared w ith operating earnings of $450 million a year ago. We expect declining sales again in 2003. Looking BROA DBA N D SERVICES ROUTER 64000 (BSR64000) forw ard, how ever, w e are foc using on grow ing our business by driving our c onnec ted home solutions to the c onsumer, globalization of our broadband business, broadening the penetration of our digital produc ts, expanding our produc t offering for alter- native ac c ess netw orks and the expansion of our netw ork solutions business. OM N ISTA R® BROA DBA N D TRA N SM ISSION PLATFORM 42 M otorola, Inc .


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    M ULTISERVICE BROA DBA N D TRA N SPORT (M BT) SBV4200 VOICE OVER IP SB5100 CA BLE M ODEM CA BLE M ODEM SBG1000 W IRELESS CA BLE M ODEM GATEW AY Intelligenc e Everyw here ™ 43


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    I N TEGRATED ELECTRON I C SYSTEM S SEGM EN T Your c ar is pac ked w ith elec tronic s. Your notebook c omputer and mobile phone w ork longer than ever w ithout recharging. And complex automated equip- ment is increasingly assembled from basic computing building bloc ks. In eac h c ase, there are systems w ithin systems, functionalities w ithin functionalities, technologies w ithin technologies – little things that make bigger things do more and more w ith less and less. A lot of those little things are ours. DIRECT DIESEL HIGH PRESSURE IN J ECTION HIGH SEN SOR FOR PRESSURE SEN SOR BRA KIN G SYSTEM In automobiles, w e provide the elec tronic s for the pow ertrain, c hassis, sensors, interior c ontrols and Telematic s systems, an automotive market tec h- nology that enables automated roadside assistance, navigation and advanc ed safety features. The automotive market is w here w e started as a c om- pany, and today w e see exc eptional opportunities ON STA R™ in three broad automotive elec tronic s arenas: > The Netw orked Automobile , c onnec tivity w ith the w orld of w ireless information. > The Architected Automobile , c onnec tivity among advanc ed, in-vehic le systems. > The Aw are Automobile , c onnec tivity w ith the c hanging dynamic s of the driving environment. In portable electronic devices, w e’re the experts at integrating pow er-related technologies that drive performance. For original equipment manufacturers in various industries, w e provide open-architecture hardw are, ric h softw are and applic ation-ready platforms that help c ustomers quic kly and c ost- effec tively bring their produc ts to market. Integrated Elec tronic Systems Segment (IESS) sales w ere $2.2 billion in both 2002 and 2001. For 2002, I ESS r e p o r t e d o p e r a t in g e a r n in g s o f $52 million, presented on a GAAP basis, versus an operating loss of $171 million a year ago. Exc luding spec ial items, IESS reported operating earnings of $115 million, c ompared w ith an operating loss of $12 million a year ago. The improvement in operating earnings, excluding special items, w as the result of benefits from actions taken to reduce operating costs. The future for the markets w e serve is bright, w i t h e st i m a t e d a n n u a l g r o w t h r a t e s o f 8% f o r automotive elec tronic s, 6% for the portable energy market, 16% for embedded c omputing and 45% for Telematic s systems. A RCHITECTED A UTOM OBILE 44 M otorola, Inc .


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    VMEBUS SINGLE-BOARD COMPUTER NOTEBOOK COMPUTER BATTERY TRANSMISSION HIGH PRESSURE SENSOR ASSEMBLY INSTANT GLOBAL POSITIONING SYSTEM ENGINE CONTROL UNIT MULTISERVICE PACKET TRANSPORT PLATFORM PROCESSOR PMC BOARD


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    visit us at www.motorola.com Motorola, Inc. Corporate Offices 1303 East Algonquin Road Schaumburg IL 60196 U.S.A. +1 847 576 5000 MOTOROLA and the Stylized M logo are registered in the U.S. Patent and Trademark Office. All other product or service names are the property of their respective owners. © Motorola, Inc. 2003 Motorola is an Equal Employment Opportunity / Affirmative Action Employer


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