How is Motorola managing its exposure to foreign currency fluctuations?

Motorola employs financial instruments, primarily forward contracts and options, to hedge its foreign currency exposure. As of April 1, 2006, the company had $3.8 billion in net outstanding foreign exchange contracts, with the largest positions in Euros, Chinese Renminbi, and Brazilian Real. Their policy is not to speculate and to ensure hedge instruments are effective in reducing risk.

What is the company's strategy for managing interest rate risk?

Motorola manages its interest rate risk by using interest rate swaps to convert fixed-rate debt to floating-rate (LIBOR-based) payments. At April 1, 2006, the company had $2.642 billion in notional amount of interest rate swaps outstanding, which are designated as fair value hedging relationships.

What are the key legal proceedings Motorola is involved in, and what is their potential impact?

Motorola is facing several significant legal proceedings, including personal injury cases related to wireless phone usage and securities class action lawsuits concerning Iridium and Telsim. While the company states that most of these cases, apart from the Iridium-related ones, are not expected to have a material adverse effect on its financial position, liquidity, or results of operations, an unfavorable outcome in the Iridium cases could be material.

How is Motorola addressing its significant investment in Sprint Nextel?

The company has hedged its investment in 37.6 million shares of Sprint Nextel using derivative contracts. This hedge is designed to protect the value of the investment, and Motorola anticipates receiving cumulative proceeds of no less than $941 million and no more than $1.2 billion from the sale of these shares and the settlement of the derivative.

MSI 10-Q Quarterly Report Q2 FY2006 — Revenue, Net Income, EPS

Summary

Motorola Solutions, Inc. (MSI) filed its 10-Q for the period ending March 31, 2006, with key disclosures focusing on market risk management, legal proceedings, and corporate governance. The company actively uses financial instruments to hedge foreign currency and interest rate risks, with significant outstanding foreign exchange contracts totaling $3.8 billion and interest rate swaps notional value of $2.642 billion. Investors should note that the company has a substantial investment in Sprint Nextel and has hedged its value, anticipating a range of $941 million to $1.2 billion from the sale of these shares and derivative settlement. Significant ongoing litigation includes various personal injury and securities class action suits, most notably those related to Iridium and Telsim, which the company states, apart from Iridium, are not expected to have a material adverse effect. The company also disclosed the adoption of a new Omnibus Incentive Plan and amendments to the CEO's employment agreement, reflecting an active approach to executive compensation and corporate governance.

Key Highlights

1Motorola actively manages foreign currency risk with $3.8 billion in outstanding foreign exchange contracts as of April 1, 2006, primarily covering Euros, Chinese Renminbi, and Brazilian Real.
2The company has $4.0 billion in long-term debt and utilizes interest rate swaps with a notional amount of $2.642 billion to manage its interest rate exposure, converting fixed-rate debt to LIBOR-based variable rates.
3Motorola holds 37.6 million shares of Sprint Nextel and has hedged this investment, expecting proceeds between $941 million and $1.2 billion from the sale of shares and derivative settlement.
4Significant legal proceedings persist, including personal injury cases related to wireless telephone usage and securities class action lawsuits concerning Iridium and Telsim, with the company asserting that most are unlikely to have a material adverse effect.
5The company disclosed the adoption of the Motorola Omnibus Incentive Plan of 2006, merging previous plans and reserving 80 million shares for awards.
6Amendments to CEO Edward Zander's employment agreement were made to comply with new IRS regulations (Section 409A) and clarify change-in-control benefits and non-compete clauses.
7Motorola continues its stock repurchase program, having repurchased approximately 37.1 million shares for $21.99 per share during the quarter.

Motorola Solutions, Inc. Quarterly Report for Q2 Ended Apr 1, 2006

Summary

Key Highlights

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