to Stockholders
`
`(cid:45)(cid:79)(cid:84)(cid:79)(cid:82)(cid:79)(cid:76)(cid:65)(cid:12)(cid:0)(cid:41)(cid:78)(cid:67)(cid:14)
`Motorola, Inc.
`(cid:18)(cid:16)(cid:16)(cid:20)(cid:0)(cid:33)(cid:78)(cid:78)(cid:85)(cid:65)(cid:76)(cid:0)(cid:50)(cid:69)(cid:80)(cid:79)(cid:82)(cid:84)
`2004 Annual Report
`(cid:84)(cid:79)(cid:0)(cid:51)(cid:84)(cid:79)(cid:67)(cid:75)(cid:72)(cid:79)(cid:76)(cid:68)(cid:69)(cid:82)(cid:83)
`
`ZTE/SAMSUNG/HTC 1031-0001
`
`ZTE/SAMSUNG/HTC 1031-0001
`
`

`
`ZTE/SAMSU NG/HTC 1031-0002
`
`ZTE/SAMSUNG/HTC 1031-0002
`
`

`
`March 2005
`
`Fellow Stockholders,
`
`As I close my first full year as CEO of Motorola, I look back with gratification at
`2004 – A Year of Progress.
`
`We gained momentum on many fronts – sales, earnings, cash flow and market share.
`We focused on meeting customer commitments with quality as the pivotal theme in
`every product we deliver, every single day. We captured the world’s attention with iconic
`products like the RAZR, the thinnest mobile device ever made, that is both an engineering
`and a design marvel. Our vision around Seamless Mobility is redefining the future of
`mobile communications.
`
`The progress we made in 2004 is just the beginning, as we continue to deliver increased
`value to our shareholders. We are moving ahead on the path to transform this great
`company into the greatest company – with vision, consistent performance and superior
`financial results.
`
`MOTOMOMENTUM
`Let me share some specific highlights for 2004.
`
`Earnings from continuing operations increased 136% while revenue grew 35% from
`the previous year. Market share increased in most of our businesses, especially in
`mobile devices. Our balance sheet, with more than $5 billion in net cash, is the best it
`has been in our history. On-time launches of great new products with improved quality
`delighted many of our customers. Every member of my management team is now held
`accountable for a few of our key customer accounts to ensure that we never lose
`sight of our commitments.
`
`Just as important as our operational improvements, our organizational structure was
`aligned to implement key strategies around our vision. We simplified our market focus
`and eliminated redundancies by consolidating into four integrated business units – mobile
`devices, networks, government & enterprise and connected home. Support functions are
`streamlined to reduce cost and drive common business processes across the company.
`We invested in our core competencies, including technology, brand and marketing.
`
`We move into 2005 as a nimbler, higher-performance team. Without a doubt, none of this
`would have been possible without the hard work and dedication of talented Motorolans
`worldwide.
`
`continued –
`
`ZTE/SAMSUNG/HTC 1031-0003
`
`

`
`SEAMLESS MOBILITY
`Central to Motorola’s vision for the future of communications is a concept we call
`“Seamless Mobility.” Seamless Mobility aims to provide easy, uninterrupted access to
`what people value most – your communication needs, the information you want, the
`entertainment you desire, the monitoring and control you wish.
`
`To realize that vision, we are building solutions that give people the experience of being
`connected from any location, at any time they choose to be connected, to any device they
`prefer, regardless of the service. Seamless Mobility is about the enhanced experience, not
`the channel that brings the information.
`
`Lifestyle and societal changes are increasing the demand for mobility and flexibility in
`our lives. Boundaries are blurring between working, living, driving and moving. Today,
`consumers want technology to simplify the complexities in life. Tomorrow, people will
`want MORE mobility with LESS effort.
`
`Seamless Mobility accelerates the intersection of full mobility and less effort to drive a
`discontinuity in the adoption of mobile communications and transform the industry as we
`know it today.
`
`NEXT YEAR’S PRIORITIES
`The priorities for my management team as we roll into the future are clear. First and
`foremost are execution and improved financial performance. Next, we not only want to
`satisfy our customers, we expect to delight them with the highest quality in what we
`deliver. We intend to innovate to create iconic products that draw a stunning response as
`people enjoy the experience. We plan to continue to improve market share and streamline
`our cost structure. With a solid foundation of thought leadership, we intend to refine
`and execute on our strategic direction. We aim to make Motorola the most desirable
`workplace – diverse, inclusive and where people perform to their fullest potential.
`
`As I close this letter, I look forward to 2005 – A Year to Win.
`
`Ed Zander
`Chairman and CEO
`Motorola, Inc.
`
`ZTE/SAMSUNG/HTC 1031-0004
`
`

`
`Motorola, Inc.’s
`2004
`Form 10-K
`
`ZTE/SAMSUNG/HTC 1031-0005
`
`

`
`
`
`(This page intentionally left blank)
`
`ZTE/SAMSUNG/HTC 1031-0006
`
`

`
`UNITED STATES
`SECURITIES AND EXCHANGE COMMISSION
`Washington, D.C. 20549
`
`FORM 10-K
`
`≤ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
`EXCHANGE ACT OF 1934
`
`For the Ñscal year ended December 31, 2004
`or
`n TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
`EXCHANGE ACT OF 1934
`For the transition period from
`Commission File number 1-7221
`
` to
`
`MOTOROLA, INC.
`
`(Exact name of registrant as speciÑed in its charter)
`
`36-1115800
`DELAWARE
`(I.R.S. Employer IdentiÑcation No.)
`(State of Incorporation)
`1303 East Algonquin Road, Schaumburg, Illinois 60196
`(Address of principal executive oÇces)
`(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, $3 Par Value per Share
`
`New York Stock Exchange
`Chicago Stock Exchange
`New York Stock Exchange
`Rights to Purchase Junior Participating
`Chicago Stock Exchange
`Preferred Stock, Series B
`Securities registered pursuant to Section 12(g) of the Act:
`None
`
`Indicate by check mark whether the registrant (1) has Ñled all reports required to be Ñled by Section 13 or 15(d) of
`the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was
`required to Ñle such reports), and (2) has been subject to such Ñling requirements for the past
`90 days. Yes ≤
`No n.
`Indicate by check mark if disclosure of delinquent Ñlers pursuant to Item 405 of Regulation S-K is not contained
`herein, and will not be contained, to the best of registrant's knowledge, in deÑnitive proxy or information statements
`incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ≤
`Indicate by check mark whether the registrant is an accelerated Ñler (as deÑned in Rule 12b-2 of the
`Act). Yes ≤
`No n.
`The aggregate market value of voting and non-voting common equity held by non-aÇliates of the registrant as of
`July 2, 2004 was approximately $42.0 billion (based on closing sale price of $17.77 per share as reported for the New
`York Stock Exchange-Composite Transactions).
`The number of shares of the registrant's Common Stock, $3 par value per share, outstanding as of January 31, 2005
`was 2,450,481,840.
`
`DOCUMENTS INCORPORATED BY REFERENCE
`
`Portions of the registrant's deÑnitive Proxy Statement to be delivered to stockholders in connection with its Annual
`Meeting of Stockholders to be held on May 2, 2005 are incorporated by reference into Part III.
`
`ZTE/SAMSUNG/HTC 1031-0007
`
`

`
`Table of Contents
`
`PART I ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
`Item 1.
`Business ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
`General ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
`Business Segments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
`Personal Communications SegmentÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
`Global Telecom Solutions Segment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
`Commercial, Government and Industrial Solutions SegmentÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
`Integrated Electronic Systems Segment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
`Broadband Communications Segment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
`Other Products Segment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
`Other InformationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
`Financial Information About Segments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
`Customers ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
`Backlog ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
`Research and Development ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
`Patents and Trademarks ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
`Environmental Quality ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
`EmployeesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
`Financial Information About Foreign and Domestic Operations and Export Sales ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
`Available Information ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
`Item 2.
`Properties ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
`Item 3.
`Legal Proceedings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
`Item 4.
`Submission of Matters to a Vote of Security Holders ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
`Executive OÇcers of the Registrant ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
`PART II ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
`Item 5.
`Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
`Equity Securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
`Selected Financial Data ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
`Item 6.
`Management's Discussion and Analysis of Financial Condition and Results of OperationsÏÏÏÏÏÏÏÏ
`Item 7.
`Business Risk Factors ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
`Item 7A. Quantitative and Qualitative Disclosures About Market Risk ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
`Item 8.
`Financial Statements and Supplementary Data ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
`Item 9.
`Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ÏÏÏÏÏÏÏ
`Item 9A.
`Controls and Procedures ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
`Item 9B. Other Information ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
`PART IIIÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
`Item 10.
`Directors and Executive OÇcers of the Registrant ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
`Item 11.
`Executive Compensation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
`Item 12.
`Security Ownership of Certain BeneÑcial Owners and Management ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
`Item 13.
`Certain Relationships and Related TransactionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
`Item 14.
`Principal Accounting Fees and Services ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
`PART IVÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
`Item 15.
`Exhibits and Financial Statement Schedules ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
`15(a)(1) Financial Statements ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
`15(a)(2) Financial Statement Schedule and Independent Auditors' ReportÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
`15(a)(3) Exhibits ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
`
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`i
`
`ZTE/SAMSUNG/HTC 1031-0008
`
`

`
`1
`
`PART I
`
`Throughout this 10-K report we ""incorporate by reference'' certain information in parts of other documents
`Ñled with the Securities and Exchange Commission (the ""SEC''). The SEC allows us to disclose important
`information by referring to it in that manner. Please refer to such information.
`
`We are making forward-looking statements in this report. Beginning on page 70 we discuss some of the
`business risks and factors that could cause actual results to diÅer materially from those stated in the forward-
`looking statements.
`
`""Motorola'' (which may be referred to as the ""Company'', ""we'', ""us'' or ""our'') means Motorola, Inc. or
`Motorola, Inc. and its subsidiaries, or one of our segments, as the context requires. ""Motorola'' is a registered
`trademark of Motorola, Inc.
`
`Item 1: Business
`
`General
`
`Motorola, Inc. is a global leader in wireless, broadband and automotive communications technologies and
`embedded electronic products.
`
`‚ Wireless
`
`Handsets: We are one of the world's leading providers of wireless handsets, which transmit and receive
`voice, text, images and other forms of information and communication.
`
`Wireless Networks: We also develop, manufacture and market public and enterprise wireless infrastructure
`communications systems, including hardware, software and services.
`
`Mission-Critical Information Systems: In addition, we are a leading provider of customized, mission-critical
`radio communications and information systems.
`
`‚ Broadband
`
`We are a global leader in developing and deploying end-to-end digital broadband entertainment,
`communication and information systems for the home and for the oÇce. Motorola broadband technology
`enables network operators and retailers to deliver products and services that connect consumers to what
`they want, when they want it.
`
`‚ Automotive
`
`We are the world's market leader in embedded telematics systems that enable automated roadside
`assistance, navigation and advanced safety features for automobiles. Motorola also provides integrated
`electronics for the powertrain, chassis, sensors and interior controls.
`
`In April 2004, the Company separated its semiconductor operations into a separate subsidiary, Freescale
`Semiconductor, Inc. (""Freescale Semiconductor''). In July 2004, an initial public oÅering of a minority interest of
`approximately 32.5% of Freescale Semiconductor was completed. On December 2, 2004, Motorola completed the
`spin-oÅ of Freescale Semiconductor from the Company by distributing its remaining 67.5% equity interest in
`Freescale Semiconductor to Motorola shareholders. As of that date, Freescale Semiconductor is an entirely
`independent company. In general, discussions of the Company contained in this document reÖect the Company's
`structure at December 31, 2004, after the complete spin-oÅ of Freescale Semiconductor.
`
`Motorola is a corporation organized under the laws of the State of Delaware as the successor to an Illinois
`corporation organized in 1928. Motorola's principal executive oÇces are located at 1303 East Algonquin Road,
`Schaumburg, Illinois 60196.
`
`ZTE/SAMSUNG/HTC 1031-0009
`
`

`
`2
`
`Business Segments
`
`Motorola reports six segments as described below.
`
`Personal Communications Segment
`
`The Personal Communications segment (""PCS'' or the ""segment'') designs, manufactures, sells and services
`wireless handsets with integrated software and accessory products. In 2004, PCS net sales represented 54% of the
`Company's consolidated net sales.
`
`Principal Products and Services
`
`Our wireless subscriber products include wireless handsets, with related software and accessory products. We
`market our products worldwide to carriers and consumers through direct sales, distributors, dealers, retailers and, in
`certain markets, through licensees.
`
`Our Industry
`
`We believe that total industry shipments of wireless handsets (also referred to as industry ""sell-in'') increased
`in 2004 by approximately 25% compared to 2003. Demand from new subscribers was strong in emerging markets,
`including China, Latin America and Eastern Europe. Replacement sales in highly-penetrated markets were also
`strong due to generally improved economic conditions and compelling new phone designs and attractive features,
`such as cameras, large color displays, expanded software applications, advanced messaging functionality, advanced
`gaming features and an increased opportunity for personalization.
`
`In this environment, we were able to grow faster than the market and increase our overall market share. The
`industry forecasters predict that the wireless handset industry will continue to grow over the next several years as
`the transition to next-generation data-rich services, such as point-to-point video and higher speed data, continues.
`
`Our Strategy
`
`PCS is focused on proÑtable and sustainable growth through close partnerships with our carrier customers,
`technology leadership and improving cost competitiveness. We are investing in the development of industry-leading
`GSM, CDMA, iDEN», and 3G UMTS products, with an emphasis on winning greater market share through
`compelling designs, more feature-rich handsets, including handsets with large color displays and cameras, and on-
`time delivery of products to our customers.
`
`We are focused on enhanced partnerships with our customers by aligning with their business strategies and
`objectives. A core component of our customer partnership strategy is the expansion of opportunities for carrier
`customers to increase average revenue per user (ARPU). By utilizing customizable platforms, we enable our carrier
`customers to go to market with handsets that feature diÅerentiated user interfaces, such as consumer
`personalization, to help them build consumer loyalty. These platforms also generate revenue opportunities for our
`carrier customers by supporting data productivity applications, gaming, music and other entertainment oÅerings and
`customized content.
`
`During 2004, we continued to build on our technology leadership with the launch of 60 new products,
`resulting in a strong, well-balanced portfolio across regions, technologies, price tiers and form factors. The new
`portfolio includes iconic models such as the RAZR V3 and the StarTac Classic; the continued delivery of
`3G UMTS handsets; the introduction of EDGE-enabled GSM handsets; and products using Open Source
`technologies such as Linux and Javatm, as well as products featuring the Microsoft Windows Mobiletm operating
`system. We believe we have the most comprehensive and proven line-up of 3G UMTS handsets in the industry. We
`introduced many products based on our platform design strategy that leverages design eÅectiveness and supply chain
`operations, improving product quality and time to market. Many of our products feature Bluetooth» technology to
`support advanced wireless functions, including wireless headsets. For handsets using iDEN technology, we
`
`Note: When discussing the net sales for each of our six segments, we express the segment's net sales as a percentage of the Company's
`consolidated net sales. Because certain of our segments sell products to other Motorola businesses, $963 million of intracompany sales were
`eliminated as part of the consolidation process in 2004. As a result, the percentages of consolidated net sales for each of our business segments
`sum to greater than 100% of the Company's consolidated net sales.
`
`ZTE/SAMSUNG/HTC 1031-0010
`
`

`
`3
`
`introduced the Ñrst product with an integrated camera, increased our portfolio of GPS-enabled handsets and
`expanded the portfolio of handsets targeted speciÑcally at the prepaid market.
`
`As part of our eÅorts to improve our brand, we are developing youth-driven brand partnerships that will
`support a consumer-centric design philosophy and further reinforce the brand strength generated by our MOTO
`marketing activities. Additionally, PCS product oÅerings have played a key role in reinvigorating the Motorola
`brand among consumers worldwide, which we expect will help fuel demand for new products and experiences
`during 2005 and beyond.
`
`The success of our strategy is evidenced by our continued market leadership in several key markets and
`signiÑcant sales growth for the full year 2004 compared to the full year 2003. We attribute this success to our
`strong replacement sales in developed markets and sales to new subscribers in developing countries.
`
`Customers
`
`The PCS customer partnership strategy continues to focus on strengthening relationships with our top
`customers. PCS has several large customers, worldwide, the loss of one or more of which could have a negative
`impact on our results. In 2004, purchases of iDEN» products by Nextel Communications, Inc. (""Nextel'') and its
`aÇliates comprised approximately 14% of our segment's net sales. In addition to Nextel, the largest of our end
`customers include Cingular, China Mobile and Vodafone. Besides selling directly to carriers and operators, PCS also
`sells products through a variety of third-party distributors and retailers, which account for approximately 30% of
`the segment's net sales. The largest of these represented approximately 5% of the segment's net sales in 2004 and is
`our primary distributor in Latin America.
`
`Although the U.S. market continued to be the segment's largest individual market, many of our customers, and
`more than 60% of our net sales, are outside the U.S. The largest of these international markets are China, the
`United Kingdom and Brazil. Compared to 2003, the segment saw substantial sales growth in all regions of the
`world as a result of an improved product portfolio, strong market growth in the emerging markets, and high
`replacement sales in the more mature markets.
`
`In North America, the industry saw consolidation of some major carriers, including some of the segment's
`largest customers. The segment did not see any signiÑcant impact on its business in 2004 as a result of these
`consolidations, nor do we foresee any signiÑcant impact from these consolidations in the future.
`
`Nextel is our largest customer and we have been their sole supplier of iDEN handsets and core network
`infrastructure equipment for over ten years. Nextel uses Motorola's proprietary iDEN technology to support its
`nationwide wireless service business. In December 2004, Motorola announced that it reached an agreement with
`Nextel to extend the companies' iDEN infrastructure and iDEN subscriber supply agreements for a period from
`January 1, 2005 through December 31, 2007. Motorola also announced an agreement with Nextel for
`implementation of Next Generation Dispatch, a new Internet Protocol-based call processing engine designed to
`replace the current call-processing system. In addition, Motorola has developed a new 6:1 vocoder which will allow
`Nextel to increase capacity on its current system. Nextel has announced its intention to activate the 6:1 vocoder in
`substantially all of its markets in 2005. In December 2004, Nextel and Sprint Corp. (""Sprint'') announced an
`intended merger of their companies. The segment does not anticipate any signiÑcant impact to its business in 2005
`as compared to 2004 as a result of this merger.
`
`Competition
`
`The segment believes it increased overall market share in 2004 and solidiÑed its hold on the second-largest
`worldwide market share of wireless handsets. The segment experiences intense competition in worldwide markets
`from numerous global competitors, including some of the world's largest companies. The segment's primary
`competitors are European and Asian manufacturers. Currently, its largest competitors include Nokia, Samsung, LG,
`Siemens and Sony Ericsson.
`We believe the ability to diÅerentiate our products and provide additional value to our customers will be
`increasingly realized, primarily through the continued introduction of unique and compelling product designs, the
`addition of new features to enhance our products and through consumer experiences. These consumer experiences
`will be shaped by the user interface and software applications that can be delivered on handsets at point of
`purchase and beyond. The segment utilizes JavaTM technology to better leverage the largest wireless developer
`community in the world. The segment also uses the Microsoft Windows MobileTM operating system for its MPx
`product line.
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`General competitive factors in the market for our products include: time-to-market; brand awareness;
`technology oÅered; price; product performance, features, design, quality, delivery and warranty; the quality and
`availability of service; company image and relationship with key customers.
`
`Payment Terms
`
`The segment's customers and distributors buy from us regularly with payment terms that are competitive with
`current industry practices. These terms vary globally and range from cash-with-order to 60 days. Payment terms
`allow the customer or distributor to purchase products from us on a periodic basis and pay for those products at
`the end of the agreed term applicable to each purchase. A customer's outstanding credit at any point in time is
`limited to a predetermined amount as established by management. Extended payment terms beyond 60 days are
`provided to customers on a case-by-case basis. Such extended terms are not related to a signiÑcant portion of our
`revenues.
`
`Regulatory Matters
`
`Radio frequencies are required to provide wireless services. The allocation of frequencies is regulated in the
`U.S. and other countries throughout the world, and limited spectrum space is allocated to wireless services. The
`growth of the wireless and personal communications industry may be aÅected if adequate frequencies are not
`allocated or, alternatively, if new technologies are not developed to better utilize the frequencies currently allocated
`for such use. Industry growth may also be aÅected by the cost of the new licenses required to use frequencies and
`any related frequency relocation costs.
`
`The U.S. leads the world in spectrum deregulation, allowing new wireless communications technologies to be
`developed and oÅered for sale. Examples include Wireless Local Area Network systems such as WiFi, and Wide
`Area Network systems such as WiMax. Other countries also deregulated portions of the available spectrum to
`allow these and other new technologies, which can be oÅered without spectrum license costs and may introduce
`new competition and new opportunities for Motorola and our customers.
`
`Backlog
`
`The segment's backlog was $1.5 billion at December 31, 2004, compared to $2.2 billion at December 31,
`2003. The 2004 backlog is believed to be generally Ñrm and 100% of that amount is expected to be recognized as
`revenue in 2005. The forward-looking estimates of the Ñrmness of such orders is subject to future events which
`may cause the amount recognized to change. In 2004, the segment had strong order growth but backlog decreased
`as a result of the segment's improved ability to meet demand for new products in a more timely manner. Backlog
`at the end of 2003 was above normal due to a key component supply constraint which resulted in the segment's
`inability to meet the demand for certain new products in the fourth quarter of 2003.
`
`Intellectual Property Matters
`
`Patent protection is extremely important to the segment's operations. The segment has an extensive portfolio
`of patents relating to its products, technologies and manufacturing processes. The segment licenses certain of its
`patents to third parties and generates revenue from these licenses. Motorola is also licensed to use certain patents
`owned by others. Royalty and licensing fees vary from year to year and are subject to the terms of the agreements
`and sales volumes of the products subject to licenses. The protection of these licenses is also important to the
`segment's operations. Reference is made to the material under the heading ""Other Information'' for information
`relating to patents and trademarks and research and development activities with respect to this segment.
`
`Inventory, Raw Materials, Right of Return and Seasonality
`
`PCS's practice is to carry reasonable amounts of inventory in distribution centers in order to meet customer
`delivery requirements in a manner consistent with industry standards. At the end of 2004, the segment had a slightly
`higher inventory balance than at the end of 2003. The increased inventory is to support anticipated higher Ñrst
`quarter 2005 sales compared to the Ñrst quarter of 2004. We also made certain strategic purchases of critical
`components to support the anticipated sales.
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`Where economically and technically feasible, materials used in the segment's operations are generally second-
`sourced to ensure a continuity of supply. Occasionally, shortages or extended delivery periods occur for various
`component parts, the eÅects of which are generally short in duration.
`
`Energy necessary for the segment's manufacturing facilities consists of electricity, natural gas and gasoline, all
`of which are currently in generally adequate supply. The segment's facilities contain automation and, therefore,
`require a reliable source of electrical power. Labor is generally available in reasonable proximity to the segment's
`manufacturing facilities. DiÇculties in obtaining any of the aforementioned items could aÅect the segment's results.
`
`The segment permits returns under certain circumstances, generally pursuant to warranties which we consider
`to be competitive with current industry practices.
`
`The segment typically experiences increased sales in the fourth calendar quarter and lower sales in the Ñrst
`calendar quarter of each year. Sales of wireless handsets and related products increase during the year-end holiday
`season.
`
`Our Facilities/Manufacturing
`
`Our headquarters are located in Libertyville, Illinois. Our major facilities are located in Libertyville, Illinois;
`Plantation, Florida; Flensburg, Germany; Tianjin, China; Singapore; Jaguariuna, Brazil; and Seoul, Korea. We also
`maintain interests in joint ventures in Hangzhou, China. Additional engineering, software development and
`administration oÇces are located in San Diego and Sunnyvale, California; South PlainÑeld, New Jersey; Champaign,
`Illinois; Fort Worth, Texas; Boynton Beach, Florida; Basingstoke, England; Toulouse, France; Torino, Italy; Taipei,
`Taiwan; and Beijing, China. As planned, certain manufacturing was ceased in Flensburg, Germany during the Ñrst
`quarter of 2004 and the Boynton Beach, Florida facility was vacated in 2004.
`
`We also use several electronics manufacturing suppliers (EMS) and original design-manufacturers (ODM) to
`enhance our ability to lower our costs and deliver products that meet consumer demands in the rapidly-changing
`technological environment.
`
`In 2004, our handsets were primarily manufactured in Asia, including products manufactured for us by third
`parties. We expect this trend to continue in 2005. Our largest manufacturing facilities are located in China,
`Singapore, Brazil, Malaysia and Korea. Each of these facilities serves multiple countries and regions of the world. In
`2004, approximately one-third of our handsets were manufactured by third parties, who primarily manufacture in
`Asia. In 2005, this percentage is expected to remain consistent.
`
`Global Telecom Solutions Segment
`
`The Global Telecom Solutions segment (""GTSS'' or the ""segment'') designs, manufactures, sells, installs and
`services wireless infrastructure communication systems, including hardware and software. In 2004, GTSS net sales
`represented 17% of the Company's consolidated net sales.
`
`Principal Products and Services
`
`GTSS provides end-to-end wireless networks, including radio base stations, base site controllers, associated
`software and services, mobility soft switching, application platforms and third-party switching for CDMA, GSM,
`iDEN» and UMTS technologies. GTSS products are marketed to wireless service providers worldwide through a
`direct sales force, licensees and agents.
`
`Our Industry
`
`The wireless infrastructure industry experienced signiÑcant growth in 2004 after three years of decline. The
`segment believes that its 24% increase in net sales outpaced overall sales growth in the industry, and resulted in
`increased market share for the segment in 2004.
`
`The industry's migration to 3G systems, which are high-capacity wireless networks designed to provide
`enhanced data services, improved Internet access and increased voice capacity, is currently focused primarily on two
`technologiesÌCDMA2000 1X and UMTS. GTSS is a supplier for both of these technologies. CDMA markets have
`begun to deploy CDMA2000 1X-EVDO technology, which provides increased data bandwidth compared to
`
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`CDMA2000 1X. In