10-QPeriod: Q3 FY2010

Motorola Solutions, Inc. Quarterly Report for Q3 Ended Jul 3, 2010

Filed August 5, 2010For Securities:MSI

Summary

Motorola, Inc. reported a significant turnaround in its financial performance for the second quarter of 2010 compared to the same period in 2009. The company achieved operating earnings of $363 million, a substantial improvement from the $10 million in operating earnings in Q2 2009, and reported net earnings attributable to Motorola, Inc. of $162 million, or $0.07 per diluted share, versus $26 million, or $0.01 per diluted share, in the prior year quarter. This improvement was driven by a stronger gross margin of 37.0% and a substantial gain from a legal settlement. Revenue saw a slight decrease of 2% to $5.4 billion, impacted by declines in the Home and Mobile Devices segments, though partially offset by growth in Enterprise Mobility Solutions. The company also provided updates on its strategic separation plan, aiming to split into two independent public companies by Q1 2011, and announced the sale of the majority of its Networks infrastructure assets to Nokia Siemens Networks for $1.2 billion. Following this sale and the separation, Motorola, Inc. will be renamed Motorola Solutions and will comprise the Enterprise Mobility Solutions business. Investors should note the ongoing restructuring efforts, which included significant separation-related costs and reorganization charges. Despite these costs, the company demonstrated improved profitability and positive operating cash flow of $242 million for the quarter, indicating progress in its operational and strategic initiatives.

Financial Highlights

51 data points
Beta

Revenue

$1.87B

50.2% Gross Margin

Net Income

$162.00M

8.7% Net Margin

EPS (Diluted)

$0.49

Total Assets

$24.81B

Cash & Equivalents

$2.89B

Free Cash Flow

$103.00M

Financial Statements
Beta
Revenue$1.87B
Cost of Revenue$931.00M
Gross Profit$938.00M
R&D Expenses$259.00M
SG&A Expenses$461.00M
Operating Income$154.00M
Interest Expense$56.00M
Net Income$162.00M
EPS (Basic)$0.49
EPS (Diluted)$0.49
Shares Outstanding (Basic)332.70M
Shares Outstanding (Diluted)337.90M

Key Highlights

  • 1Operating earnings improved significantly to $363 million in Q2 2010 from $10 million in Q2 2009.
  • 2Net earnings attributable to Motorola, Inc. were $162 million ($0.07/share) in Q2 2010, up from $26 million ($0.01/share) in Q2 2009.
  • 3Net sales slightly decreased by 2% to $5.4 billion, with varied performance across segments.
  • 4The company announced the planned separation into two independent public companies by Q1 2011.
  • 5Agreement to sell the majority of its Networks infrastructure assets to Nokia Siemens Networks for $1.2 billion.
  • 6Operating cash flow was positive at $242 million for the quarter.
  • 7A significant legal settlement contributed positively to the quarter's results, alongside improved gross margins.

Frequently Asked Questions

Motorola expects continued competition in Mobile Devices, with a focus on smartphones. The Home business anticipates a contraction in set-top box demand but sees long-term growth drivers. Enterprise Mobility Solutions is positioned for profitable growth, driven by demand in both government/public safety and commercial enterprise markets. The Networks business anticipates a decline in the 2G/3G market but will focus on 4G technologies. The company is also undergoing a significant strategic restructuring.

Motorola is planning to separate into two independent public companies by Q1 2011. Additionally, it has agreed to sell the majority of its Networks infrastructure assets to Nokia Siemens Networks for $1.2 billion. Post-transaction, Motorola, Inc. will be renamed Motorola Solutions and will consist of the Enterprise Mobility Solutions business. These actions are expected to reshape the company's structure and focus.

Motorola generated $727 million in cash from operating activities in the first half of 2010, a significant improvement from the $864 million used in the prior year period. The company repurchased $500 million of its outstanding long-term debt during the six months ended July 3, 2010, resulting in a loss of approximately $12 million. Cash and cash equivalents remained stable at approximately $2.9 billion.

The company incurred separation-related transaction costs of $105 million in Q2 2010 and $130 million in the first half of 2010. It also recorded a significant pre-tax gain of $228 million during Q2 2010 related to a legal settlement. Reorganization of business charges and amortization of intangibles were also noted.