Motorola Q Earnings Release Conference Call

Transcription

1 Motorola Q Earnings Release Conference Call April 18, Slide - 1

2 Ed Gams Corporate Vice President of Investor Relations. Slide - 2

3 Safe Harbor Statement A number of forward-looking statements will be made during this presentation. Forward-looking statements are any statements that are not historical facts. These forward-looking statements are based on the current expectations of Motorola and there can be no assurance that such expectations will prove to be correct. Because forward-looking statements involve risks and uncertainties, Motorola s actual results could differ materially from these statements. Information about factors that could cause, and in some cases have caused, such differences can be found on pages 19 through 27 in item 1A of Motorola s 2005 Annual Report on Form 10-K and in Motorola s other SEC filings. This presentation is being made on the afternoon of April 18, The content of this presentation contains time-sensitive information that is accurate only as of the time hereof. If any portion of this presentation is rebroadcast, retransmitted or redistributed at a later date, Motorola will not be reviewing or updating the material that is contained herein. MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office. All other product or service names are the property of their respective owners. Motorola, Inc Slide -- 3

4 Ed Zander Chief Executive Officer. Slide - 4

5 Slide -- 5

6 David Devonshire Chief Financial Officer. Slide - 6

7 Motorola Inc. Financial Results Q Q Q1'06 vs. Q1'05 Sales $M $ 10,013 $ 8,161 Up 23% Operating Margin 8.9% 10.6% Down 1.7 pts Earnings Per Share $ 0.27 $ 0.28 Down 4% Excluding Significant Items Operating Margin 10.3% 10.6% Down 0.3 pts Earnings Per Share $ 0.28 $ 0.22 Up 27% Slide -- 7

8 Significant Items Discussed in the Earnings Press Release Q Reported EPS * $ 0.27 Includes: Gain on Investments Net of Derivative Loss 0.03 Reorganization of Business Charges (0.02) Stock Compensation Expense (0.02) $ (0.01) Q Reported EPS * $ 0.28 Includes: Gains on Sales of Investments and Businesses 0.06 * See appendix for reconciliation Slide -- 8

9 Motorola Sales Trend $ Billions * Midpoint of Guidance Q1 Q2 Q3 Q4 Sales Increased ~23% Q vs Slide -- 9

10 Revenue Per Employee $(000) s $600 $560 $550 $534 $513 $500 $472 $486 $450 $400 $350 $300 Q1 '05 Q2 '05 Q3 '05 Q4 '05 Q1 '06 4 Quarter Rolling Average Slide -- 10

11 Cash Flow and Debt Cash Flow Cash & Debt Q1 Year End ($ in Billions) Q ($ in Billions) Operating Cash Flow $ 0.7 Cash/Equiv/Mkt Sec $ 14.7 $ 14.8 Free Cash Flow $ 0.6 Short Term/ Current Debt $ (0.5) $ (0.5) Long Term Debt $ (3.8) $ (3.8) Total Debt $ (4.3) $ (4.3) Net Cash/ (Net Debt) $ 10.4 $ 10.5 Debt to Total Capital Now At 20.4% vs. 20.3% at 12/31/05 * * Debt to Total Capital = Debt/ Debt + Stockholders Equity Slide -- 11

12 Stock Repurchase Update May 19, 2005 Authorized to Purchase $4B of Stock over 3 Years In Q1: Purchased ~37M Shares, Average Price of $21.99, Cash Used ~$815M Inception to Date: Purchased 78.7M Shares, Cash Used ~ $1.7B Slide -- 12

13 Q Guidance Sales $10.3B-$10.5B Earnings Per Share (excluding Stock Compensation Expense, any Telsim recovery, impact of Auto business sale, and any further reorganization expenses) Tax Rate Shares Outstanding $ % 2.55 Billion Stock Compensation Expense $.02 Per Share Slide -- 13

14 Comments on 2006 Stock Compensation Expense Estimated Annual Impact of $275M - $300M Estimated Tax Rate is 36% Additional Collection of ~$400M Related to Telsim Expected in Q2 Completion of Automotive Business Sale Expected in Q2 Further Reorganization Expenses Expected Related to Global Supply Chain Consolidation and Operating Expense Reduction Initiatives Slide -- 14

15 mobile devices business earnings results Slide -- 15

16 Q1 earnings release - highlights Mobile Devices Business Results All-time Motorola record for units! All-time record for Mobile Devices Q1 sales! All-time record for Mobile Devices Q1 operating earnings! 6 th consecutive quarter of Y/Y OE% improvement!* 6 th consecutive quarter of Q/Q market-share growth! and we increased global market share to 21% while sequentially expanding GM%! * Excluding Reorganization Charges a great start for 2006! Slide -- 16

17 Q1 earnings release - highlights wickedly cool products RAZR continues as world s best-selling clamshell Motorola will sell 50 millionth RAZR in Q2! Ultra-slim SLVR is redefining the candy bar MOTOmusic is hot! 6-million-unit milestone! 3G units are up nearly 400% vs. Q iden is strong! record Q1 units performance! GSMA award is opening doors and driving sales across price tiers in High-Growth Markets and new launches: 2 GSM, 3 CDMA and 1 iden Slide -- 17

18 mobile devices Q1 Q Q1 06 vs. Q1 05 Sales $M $6,400 Up 45% Operating Earnings $M Operating Margin Units Q1 year 11.0% over Market Share Est. Q1 $ M year 21% Up 60% 1.0 ppt Up 61% Up ~5 ppts Up ~2 ppts vs. Q4 05 Slide -- 18

19 north america Q1 #1 at top 3 wireless operators #1 in sell-through to consumers Source: Motorola, Inc. Shares are calculated on Q1 06 Unit Shipments, includes iden. Slide -- 19

20 latin america Q1 #1 at top 2 wireless operators #1 in sell-through to consumers Source: Motorola, Inc. Shares are calculated on Q1 06 Unit Shipments, includes iden. Slide -- 20

21 europe Q1 strong #2 and growing up 4 points vs. Q Source: Motorola, Inc. Shares are calculated on Q1 06 Unit Shipments, includes iden. Slide -- 21

22 north asia Q1 strong #2 and growing up 8 points vs. Q Source: Motorola, Inc. Shares are calculated on Q1 06 Unit Shipments, includes iden. Slide -- 22

23 high-growth growth markets Q1 strong #2 and growing up 12 points vs. Q Source: Motorola, Inc. Shares are calculated on Q1 06 Unit Shipments, includes iden. Slide -- 23

24 Q1: RAZR the gold standard Spectrum of Technologies: GSM, GPRS, Edge, CDMA 1X, EV-DO, UMTS, Dual- Mode UMA Array of Colors: Silver, Black, Pink, Hot Pink, Lavendar Pink, Blue, Gold, & Gun-Metal Grey Cool Experiences: Style, Imaging, Music Slide -- 24

25 Q1: SLVR redefining candy ba SLVR L7 and L6 each outpaced RAZR s first 180 days in market! Slide -- 25

26 Q1: PEBL the precious stone PEBL U6 units more than doubled vs. Q4! Slide -- 26

27 Q1: MING the smart phone We are China s smart-phone leader. During Q1, MING joined the Motorola A780 China s best-selling smart phone. Slide -- 27

28 Q1: Q countdown to launch Final software and hardware are in pre-launch tests with a leading customer. Slide -- 28

29 Q1: RDIO design for the mass connecting the unconnected FM-equipped style a new Motorola must have for the masses. Slide -- 29

30 mobile devices business our commitment grow profitably with wickedly compelling products and rich experiences with quality and efficiency Slide -- 30

31 mobile devices business Q2 outlook market share up vs. prior year & Q1 sales up vs. prior year operating profits up vs. prior year operating margin up vs. prior year Slide -- 31

32 Government & Enterprise Mobility Solutions Q1 Sales $M $ 1,539 Up 2% Operating Earnings $M $ 171 Up 2% Operating Margin 11.1% Flat - Excluding Reorganization Charge Operating Earnings $M $ 179 Up 7% Operating Margin 11.6% Up 0.5 pts Slide -- 32

33 Motorola Announces Agreement to Sell Automotive Electronics Business Definitive Agreement with Continental AG Approximately $1 Billion in Cash Includes: Controls, Sensor, Interior Electronics, Telematics Subject to Customary Closing and Regulatory Conditions Great Fit for Customers, Employees Sharpens Motorola s Strategic Focus on Seamless Mobility Slide -- 33

34 United States New York City Q1 - Government Market Activity Pierce County, Washington King County, Washington San Diego State of New Hampshire Latin America Military Police/State of Sao Paulo, Brazil Europe O2 Airwave London Underground Asia Completed Command & Control Communications System for Hong Kong Police Slide -- 34

35 Q1 Mesh and Enterprise Market Activity MOTOMESH 4.9 GHz Solution Delaware County, PA Thomasville, GA Port Orange, FL Ohio (multi-agency project) Q1: Enterprise Activity Wireless Valley Acquisition Gaining Traction Focus on Next-Generation Technologies Fixed Mobile Convergence Began Shipping Commercial-off-the-Shelf Mobile Computing Device (HC700-L) and Building out Mobile Computing Channel Slide -- 35

36 Government & Enterprise Mobility Solutions Q2 Outlook Sales Operating Earnings Operating Margin Up Slightly vs. Prior Year Up Slightly vs. Prior Year Up Slightly vs. Prior Year Slide -- 36

37 Networks Q1 Sales $M $ 1,431 Down 14% Operating Earnings $M $ 132 Down 44% Operating Margin 9.2% Down 4.9 pts Excluding Reorganization Charge Operating Earnings $M $ 153 Down 35% Operating Margin 10.7% Down 3.4 pts Slide -- 37

38 Q1 - Networks Market Activity Earthlink/Google to use Canopy for San Francisco Metro Wi Fi Canopy Network for the Indian State of Rajasthan IP Core Network Solution for Vistream for MVNOs in Germany Continued to Strengthen Leadership in the Push-to-Talk Over Cellular with Recent Contracts: -Vodafone (Spain) -Public Telecommunications Corp (Yemen) 5-Year Access Network Deal with MTC Namibia Encompassing GSM, GPRS, EDGE and Canopy Slide -- 38

39 Networks New Initiatives/ Future Revenue CDMA 1X EV-DO Rev A MOTOwi4 WiMAX Solutions Canopy Softswitch: Push to Everything FTTP M-Wallet Services: GAMA Architecture Slide -- 39

40 Networks Q2 Outlook Sales Operating Earnings Operating Margin Flat vs. Prior Year, Up vs. Q1 Down vs. Prior Year, Up vs. Q1 Down vs. Prior Year, Up vs. Q1 Slide -- 40

41 Motorola Combines GEMS & Networks Businesses Into One Segment The Networks & Enterprise Segment Strengthen Our Position in End-to-End Network Infrastructure Solutions to Private, Public and Enterprise Customers Leverage Key Current and Next-Generation Technologies Improve Cost Structure Seamless Inside Slide -- 41

42 Connected Home Q1 Q Q1'06 vs. Q1'05 Sales $M $ 710 Up 7% Operating Earnings $M $ 15 Down 21% Operating Margin 2.1% Down 0.8 pts Excluding Reorganization Charge Operating Earnings $M $ 58 Up 205% Operating Margin 8.2% Up 5.3 pts Slide -- 42

43 Connected Home Q1 Highlights Shipped Over 2 Million Digital Entertainment Devices, 38% Increase over Q105, Record for a Single Quarter Completed Acquisition of Kreatel Communications, Leading Developer of IPTV Based Set-Tops Shipped Quarterly Record of ~ 630K Voice Modems; Total Modem Shipments Were 2.6 Million Introduced a Residential Seamless Mobility Gateway Allowing Consumers to Use the Same Mobile Device and Phone Number Inside and Outside of the Home Starhub (Singapore) to Upgrade Hybrid Fiber Coaxial Cable Network to DOCSIS 3.0-Compatible Leveraging Motorola s Channel Bonding Technology Slide -- 43

44 Connected Home Q1 Highlights The Connected Home Belongs to Motorola Delivering Seamless Video and Voice Solutions Today! Operators are Becoming Engaged The Motorola Experience MOTO ME Slide -- 44

45 Connected Home Q2 Outlook Sales Operating Earnings Operating Margin Up vs. Prior Year Up vs. Prior Year Up vs. Prior Year Slide -- 45

46 Q Summary Market Share Revenue Profit Cash Flow Balance Sheet Cost Structure Innovation Outlook Slide -- 46

47 Motorola Q&A Participants Ed Zander Chief Executive Officer David Devonshire Chief Financial Officer Ron Garriques Greg Brown President, Mobile Devices Business President, Networks and Enterprise Business Dan Moloney President, Connected Home Business Ed Gams Ed Gams Vice President, Investor Relations Slide -- 47

48 Use of Non-GAAP Measurements In addition to the GAAP results provided during this conference call, Motorola has presented certain non-gaap measurements. Motorola has provided these non-gaap measurements as a measure to help investors better understand its core operating performance, enhance comparisons of Motorola s core operating performance from period to period and to allow better comparisons of Motorola s operating performance to that of its competitors. Among other things, the Company s management uses these operating results, excluding the identified items, to evaluate the performance of its businesses and to evaluate results relative to incentive compensation targets. Management uses operating results excluding these items because they believe this measure enables them to make better period-to-period evaluations of the financial performance of its core business operations. There are inherent limitations in the use of operating results excluding these items because the company's GAAP results do include the impact of these items. The non-gaap measures are intended only as a supplement to the comparable GAAP measures and the company compensates for the limitations inherent in the use of non-gaap measures by using GAAP measures in conjunction with the non- GAAP measures. As a result, investors should consider these non-gaap measures in addition to, and not in substitution for, or as superior to, measures of financial performance prepared in accordance with GAAP. Details of the these items and reconciliations of the non-gaap measurements provided during this call to GAAP measurements can be found: (i) in the Form 8-K filed by Motorola on April 18, 2006 (which is attached to this afternoon s earnings press release), (ii) within the text of the slides that accompany this webcast, or (iii) on the company s website. Each of these items can be found on Motorola s website at Slide -- 48

49 Significant Items Discussed Q Q PBT (Inc)/Exp Q Tax Inc/(Exp) Q PAT (Inc)/Exp EPS impact Gains on sales of investments, net of derivative loss (118) (45) (73) 0.03 Reorganization of business charges (0.02) Stock compensation expense (0.02) TOTAL IMPACT $ 23 $ (7) $ 30 (0.01) Q Q PBT (Inc)/Exp Q Tax Inc/(Exp) Q PAT (Inc)/Exp EPS impact Gains on sales of investments (234) (89) (145) 0.06 TOTAL IMPACT $ (234) $ (89) $ (145) $ 0.06 Slide -- 49

50 OE Reconciliation of Significant Items Q Net Sales $ 10,013 Operating earnings $ 894 Operating earnings as a percentage of net sales 8.9% Operating earnings $ 894 Less: Significant items discussed 141 Operating earnings excluding significant items discussed $ 1,035 Operating earnings as a percentage of net sales 10.3% Q Net Sales $ 8,161 Operating earnings $ 865 Operating earnings as a percentage of net sales 10.6% Operating earnings $ 865 Less: Significant items discussed 0 Operating earnings excluding significant items discussed $ 865 Operating earnings as a percentage of net sales 10.6% Slide -- 50

51 OE Reconciliation By Segment of Significant Items From Continuing Operations Q TOTAL Mobile Devices GEMS Networks Conn.Home Other/Elims Net Sales $ 10,013 $ 6,400 $ 1,539 $ 1,431 $ 710 $ (67) Operating earnings (126) Operating earnings as a percentage of net sales 8.9% 11.0% 11.1% 9.2% 2.1% 188.1% Operating earnings (126) Less: Significant items discussed 141 (1) Operating earnings excluding significant items discussed $ 1,035 $ 701 $ 179 $ 153 $ 58 $ (56) Operating earnings as a percentage of net sales 10.3% 11.0% 11.6% 10.7% 8.2% 83.6% Q TOTAL Mobile Devices GEMS Networks Conn.Home Other/Elims Net Sales $ 8,161 $ 4,414 $ 1,503 $ 1,657 $ 662 $ (75) Operating earnings Operating earnings as a percentage of net sales 10.6% 10.0% 11.1% 14.1% 2.9% -6.7% Operating earnings Less: Significant items discussed Operating earnings excluding significant items discussed $ 865 $ 440 $ 167 $ 234 $ 19 $ 5 Operating earnings as a percentage of net sales 10.6% 10.0% 11.1% 14.1% 2.9% -6.7% Slide -- 51

52 Reconciliation of Revenue Per Headcount Q1 '05 Q2 '05 Q3 '05 Q4 '05 Q1 '06 Headcount 67,641 68,971 67,952 68,568 68,777 68,971 69,142 Rolling 12 Months of Sales 31,323 36,843 32,043 33,326 35,252 36,843 38,698 *Revenue / HC (In 000's) * Revenue Per Head = Rolling 12 Months of Sales / Qtr Ending Headcount Slide -- 52

53 Safe Harbor Statement A number of forward-looking statements will be made during this presentation. Forward-looking statements are any statements that are not historical facts. These forward-looking statements are based on the current expectations of Motorola and there can be no assurance that such expectations will prove to be correct. Because forward-looking statements involve risks and uncertainties, Motorola s actual results could differ materially from these statements. Information about factors that could cause, and in some cases have caused, such differences can be found on pages 19 through 27 in item 1A of Motorola s 2005 Annual Report on Form 10-K and in Motorola s other SEC filings. This presentation is being made on the afternoon of April 18, The content of this presentation contains time-sensitive information that is accurate only as of the time hereof. If any portion of this presentation is rebroadcast, retransmitted or redistributed at a later date, Motorola will not be reviewing or updating the material that is contained herein. MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office. All other product or service names are the property of their respective owners. Motorola, Inc Slide -- 53