10-QPeriod: Q3 FY2008

Motorola Solutions, Inc. Quarterly Report for Q3 Ended Sep 27, 2008

Filed October 30, 2008For Securities:MSI

Summary

Motorola, Inc. reported a significant net loss of $397 million for the third quarter of 2008, a stark contrast to the $60 million net earnings in the same period of 2007. This downturn was primarily driven by a 15% decrease in net sales, falling to $7.5 billion from $8.8 billion year-over-year. The company's Mobile Devices segment, which constitutes a substantial portion of its revenue, experienced a severe 31% decline in net sales, attributed to product portfolio gaps, particularly in 3G and low-tier devices, and a 32% drop in unit shipments. This segment also incurred a substantial operating loss of $840 million, exacerbated by $370 million in charges for excess inventory and a $150 million settlement for a purchase commitment. Despite the challenging performance in Mobile Devices, the Enterprise Mobility Solutions segment showed resilience with a 4% increase in net sales, while Home and Networks Mobility remained relatively flat. The company is also navigating a difficult macroeconomic environment, leading to a deferral of its previously planned separation of businesses into two independent companies, originally targeted for mid-2009. Motorola is implementing cost-reduction initiatives globally, including workforce reductions, to mitigate the impact of the weakened economic outlook.

Financial Statements
Beta

Key Highlights

  • 1Net sales decreased by 15% to $7.5 billion in Q3 2008, down from $8.8 billion in Q3 2007.
  • 2The company reported a net loss of $397 million in Q3 2008, compared to a net earning of $60 million in Q3 2007.
  • 3The Mobile Devices segment saw a significant 31% decline in net sales, with unit shipments down 32%.
  • 4The Mobile Devices segment recorded a substantial operating loss of $840 million in Q3 2008.
  • 5Significant charges include $370 million for excess inventory consolidation and $150 million for a purchase commitment settlement.
  • 6Enterprise Mobility Solutions segment sales increased by 4%, demonstrating relative strength.
  • 7The planned separation of the company into two independent entities has been postponed due to economic conditions.
  • 8Operating cash flow for Q3 2008 was $180 million, down from $342 million in Q3 2007.

Frequently Asked Questions

The primary drivers were a significant decline in net sales, particularly within the Mobile Devices segment, due to product portfolio gaps and a 32% decrease in unit shipments. This was compounded by substantial charges related to excess inventory and a purchase commitment settlement. While Enterprise Mobility Solutions showed growth, it was not enough to offset the weakness in Mobile Devices.

Motorola postponed the separation due to the weakened global economic environment, dislocation in financial markets, and ongoing changes within the Mobile Devices business. The company will reassess the timing to ensure it serves the best interests of shareholders.

Motorola is implementing global cost-reduction initiatives, including planned workforce reductions, to streamline its cost structure. The company is also focusing on enhancing its product portfolio, simplifying platforms, and concentrating on key markets to improve future financial results.

The Sigma Fund represents the company's investment of most of its U.S. dollar-denominated cash. In Q3 2008, the company recorded significant investment impairment charges related to Sigma Fund investments due to declines in value of certain holdings, including those related to Lehman Brothers and Washington Mutual. The fair value of the Sigma Fund decreased substantially compared to the prior year.