摩托羅拉 (MSI) 2009 Q4 法說會逐字稿

Good morning, and thank you for holding.

Welcome to Motorola's fourth-quarter 2009 earnings conference call.

Today's call is being recorded.

If you have any objections, please disconnect at this time.

The presentation material and additional financial tables are currently posted on Motorola's Investor Relations website.

In addition, a replay of this call will be available approximately 3 hours after the conclusion of this call over the Internet through Motorola's investor relations website.

The website address is www.Motorola.com/investor.

At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the presentation.

I would now like to introduce Mr.

Dean Lindroth, Corporate Vice President of Investor Relations.

Mr.

Lindroth, you may begin your conference.

Thank you, and good morning.

Welcome to Motorola's fourth-quarter results conference call.

Today's call will include prepared remarks from Sanjay Jha, Co-Chief Executive Officer of Motorola and CEO of Mobile Devices; Greg Brown, Co-Chief Executive Officer of Motorola and CEO of Broadband Mobility Solutions; and Ed Fitzpatrick, Motorola's Chief Financial Officer.

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 in this morning's press release on pages 18 through 30 and Item 1A of Motorola's 2008 annual report on Form 10-K and in Motorola's other SEC filings.

This presentation is being made on the 28 of January 2010.

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.

I will now turn the call over to Sanjay.

Thanks, Dean.

Good morning, and thank you for joining us.

This morning, Motorola reported results for the fourth quarter and full-year 2009.

Sales in the quarter were $5.7 billion and net earnings, excluding highlighted items, were $0.09 per share.

For the year, sales were $22 billion and net earnings from continuing operations excluding highlighted items were $0.02 per share.

Throughout last year, all of our businesses focused on reducing costs, improving cash flow, and providing innovative products and solutions to our customers.

In 2009, we reduced our overall cost structure by over $1.9 billion, with $1.5 billion coming in Mobile Devices.

We generated over $870 million in operating cash flow in the fourth quarter, ending the year with $8 billion in total cash, up nearly $600 million from the end of 2008.

In Mobile Devices, we reduced product platforms, simplified processes, and delivered two Android part smartphones on time in the fourth quarter, all while implementing a major restructuring of the business.

Our new devices have been well received by consumers, resulting in shipments of 2 million smartphones in the fourth quarter.

In 2009, we significantly reduced Mobile Devices' operating loss and cash consumption compared to 2008.

All that said, we are just at the beginning stage of our transition to a smartphone company, and we have a lot of work ahead of us.

Broadband Mobility Solutions delivered over $1.6 billion in operating earnings for the full year despite the economic headwinds; continued to prioritize R&D to position this business for future growth and sustainable market leadership; and introduced industry-leading products, including a next-generation mission-critical communication platform with the APX family of multiband radios, and our most advanced rugged mobile computer with the MC9500.

As we head into 2010, our markets remain extremely competitive but offer opportunities for growth.

Across the Company, our priorities will continue to focus on driving innovation, solving customer needs, optimizing our cost structure, and improving our financial results.

I'll now turn the call over to Ed to review the financial results in more detail.

Following that, I will come back to discuss Mobile Devices and then Greg will review Broadband Mobility Solutions.

Ed?

Thanks, Sanjay.

Total sales were $5.7 billion in the quarter and $22 billion for the full year.

On a GAAP basis, we reported fourth-quarter net earnings of $0.06 per share.

This includes net charges of $0.03 per share for highlighted items, which relate primarily to costs associated with business reorganization, preparing for separation into two public companies, and legal settlements, which are partially offset by a gain on the sale of an investment.

Excluding highlighted items, earnings were at $0.09 per share in the fourth quarter compared to $0.02 per share in the third quarter.

The sequential increase in earnings was driven by the increase in sales and improvement in gross margin percentage, as well as lower other income and expense costs.

For the full year, on a GAAP basis, we reported a net loss from continuing operations of $0.05 per share compared to a loss of $1.87 per share in 2008.

Excluding highlighted items, earnings from continuing operations were $0.02 per share, flat with 2008.

Consistent with previously reported results, earnings include non-cash charges for amortization of intangibles and stock-based compensation expense.

Beginning this quarter, we will provide details on these expenses to give you additional insight into our earnings performance.

For the quarter and full year on a pretax basis, stock-based compensation expense were $71 million and $296 million, respectively.

Amortization of intangibles was $68 million and $278 million, respectively.

Together, these expenses impacted earnings per share by $0.04 in the quarter and by $0.16 for the full year.

Further details on our highlighted items, stock compensation expense, and amortization of intangibles can be found on our website.

Our remaining financial references will exclude highlighted items and include stock compensation expense and amortization of intangibles.

Gross margin percentage in the quarter was 36% compared to 33.2% in the third quarter.

The sequential improvement was due largely to favorable product mix in Enterprise Mobility Solutions and Mobile Devices, as well as further supply chain efficiencies in Mobile Devices.

For the full year, gross margin percentage improved to 32.3% from 29.9% in 2008, driven largely by the change in our overall sales mix among the businesses.

Operating expenses in the quarter were $320 million or 15% below the year-ago level and up sequentially, primarily due to Mobile Devices' support of its new product launches.

Throughout 2009, we maintained a continuous focus on improving our cost structure.

Compared to the end of 2008, we reduced headcount levels by nearly 11,000 or 17%, dramatically reduced discretionary spending and reduced our real estate footprint by approximately 15% by closing or downsizing several sites around the world.

These and other actions contributed to a year-over-year reduction in operating expenses of over $1.9 billion.

Operating earnings in the quarter were $311 million, up from $171 million in the third quarter.

For the full year, operating earnings were $271 million, a 12% increase compared to 2008.

Total other income and expense was a net income in the quarter compared to a net expense in the third quarter.

This was driven in part by lower net interest expense and improvements in our investment portfolio results.

In 2010, we expect total other income and expense to return to a quarterly net expense, including quarterly net interest expense levels more consistent with the third quarter of 2009.

Our ongoing tax rate was 34% for the quarter and full year.

We would expect our ongoing tax rate in 2010 to be in the 34% to 35% range.

Moving now to the balance sheet, in the quarter, we generated operating cash flow of $877 million.

For the full year, operating cash flow was $629 million, and we ended the year with total cash of $8 billion.

This compares to $7.2 billion at the end of the third quarter and $7.4 billion at the end of 2008.

The increase in total cash of nearly $600 million in 2009 was a result of consistent execution on many fronts, including reductions in operating costs and improved working capital management.

In the quarter, we reduced inventory by $215 million, driven by reductions in each of the businesses.

The total inventory reduction for all of 2009 was over 50% or nearly $1.4 billion.

Inventory turns improved to 11 from 8 at the end of 2008, driven by improved inventory turn performance in all of our businesses.

In Mobile Devices, turns are now in the mid teens compared to mid-single digits in 2008.

Fourth-quarter accounts receivable were sequentially higher due to the higher sales levels.

This also reflects a decline in the level of sold receivables from $370 million in the third quarter to $280 million as we continue to optimize the level of sold receivables.

Even with this decline, DSO remained flat with the third quarter at 57 days.

During the quarter, we repatriated over $500 million, bringing total repatriations in 2009 to $2.5 billion.

We increased our US cash position to $3.4 billion compared to $2.4 billion at the end of the third quarter and $2 billion at the end of 2008.

US cash is now 43% of total cash compared to 27% at the end of 2008.

Turning now to our outlook, excluding items of the variety typically highlighted in our quarterly earnings releases, we expect a first-quarter net loss in the range of negative $0.01 to negative $0.03 per share.

From a cash perspective, we expect total cash at the end of the first quarter to be flat to slightly below current levels.

With that, I'll pass the call back to Sanjay to discuss Mobile Devices.

Thanks, Ed.

In the fourth quarter, Mobile Devices sales were over $1.8 billion.

We shipped a total of 12 million units, including 2 million Android-based smartphones.

In the quarter, we deferred revenues and the related costs for certain smartphones sold and will be amortizing these amounts over 24 months as required under GAAP.

The impact in the quarter is a deferral of approximately $200 million in sales and the associated gross margin.

Including the deferred sales, our overall ASP was $169 compared to $124 in the third quarter.

Beginning with the first quarter 2010, we expect to adopt new accounting rules that will require us to defer only a portion of the revenues for smartphones sold.

As a result, the quarterly impact of deferred revenue will be significantly lower than what we experienced in the fourth quarter 2009.

The operating loss in the quarter was $114 million, excluding highlighted items compared to an operating loss of $183 million in the third quarter.

The sequential improvement reflects a higher gross margin percentage due to significant contribution from smartphones, as well as further supply chain efficiencies.

From an operational perspective, we made significant progress in 2009.

Restructuring the business resulted in operating expenses that were nearly $1.5 billion lower than in 2008.

Going forward, we'll continue to tightly manage operating expenses as we dial down in some areas, including feature phones, and redirect resources into smartphone innovation, supporting new product launches and building our brand.

Last year, we also made a number of improvements in supply chain and operational execution.

With inventory turns in the mid teens now and a high level of operating effectiveness, we expect to see benefits this year in gross margin, quality, and time-to-market.

Since the launch of CLIQ with MOTOBLUR and DROID, we have added four additional smartphones to our portfolio.

In late December, we announced our first two devices for the China market, both of which are now shipping, including the TD-SCDMA OPhone for China Mobile, which features a thin 12.3 mm form factor and mobile TV functionality.

And, the XT800 for China Telecom, a dual-mode, dual-sim device that features Android 2.0 and handwriting recognition.

So far in January, we have announced BACKFLIP with MOTOBLUR.

BACKFLIP is a mid tier device with a reverse-flip QWERTY keyboard and a navigational touch panel on the back of the device.

We plan to ship this device in several countries, including US, before the end of the quarter and MOTOROI, featuring Android 2.0 and an 8 megapixel camera for SK Telecom, making it the first Android smartphone available in the Korean market.

Later this quarter, we will announce our third smartphone in the China market with another carrier.

All of our smartphone devices are readily upgradable, subject only to hardware constraints.

We work closely with our carrier customers to determine an appropriate and timely upgrade path for each device.

CLIQ, BACKFLIP and the majority of our new smartphones this year will feature MOTOBLUR.

MOTOBLUR is our application and services suite that runs on Android platform.

Our current release of MOTOBLUR addresses the social networking segment of the market by providing users with dynamic pushed Internet content in a unique user interface.

It also aggregates and auto delivers messages, contacts, social network broadcast and other Internet contents.

With hundreds of thousands of activation already, we are able to better understand how to best serve our customers and evolve this suite of services.

Some of our plans for MOTOBLUR include enhancements to address the prosumer segment of the market.

These are users who pay for their own devices and use it for both their personal and work lives.

By expanding MOTOBLUR to offer additional security and device management functionality, we will address the need of this part of the market.

We also plan to broaden the scope of MOTOBLUR by doing to multimedia what we did to social messaging by enabling users to share music, photos and other content in an interactive and dynamic way.

In addition, we are planning to optimize device performance on the network to further conserve bandwidth and provide improved power management for consumers.

The ecosystem around Android-powered smartphones also continues to evolve.

With over 20,000 apps today, it is the fastest growing ecosystem in the industry.

For consumers in China, we recently announced SHOP4APPS, Motorola's store for Android applications.

SHOP4APPS will be available preloaded or over the air on Motorola smartphones.

We're also providing a feature that allows users to select their own search provider.

With our store and the ability to customize these devices, consumers in China will have a wide choice in applications and services, including search, e-mail and maps for their Motorola smartphones.

Moving onto outlook, as we head into 2010, I think of our portfolio across three market segments --smartphones, feature phones, and voice-centric low-end phones.

First, in smartphone, we plan to launch at least 20 devices, including at least one direct-to-consumer device with Google.

We expect to ship between 11 million to 14 million smartphones over the course of the year, with smartphones accounting for over 50% of our total sales this year.

In feature phones, in the mid to high tier, we expect our legacy portfolio to meaningfully decline throughout the year as consumers migrate to smartphones.

Finally, in voice-centric, low-end phones for emerging marketplaces largely, our focus will be to build brand awareness and meet customer needs for products at multiple price points.

We will utilize an ODM model for these devices and expect unit volumes to ramp throughout the year.

For the first quarter, we expect total unit shipments and sales to be lowered compared to the fourth quarter.

Given some market seasonality, we expect smartphone shipments to be down slightly from the fourth quarter.

With our focus on smartphone innovation and support of new product launches, OpEx will be essentially flat with fourth quarter.

The operating loss will be higher sequentially.

In closing, we accomplished a lot in 2009 and the reception to our smartphone portfolio has been positive.

We have seen a meaningful improvement in our brand recognition, particularly in the intent to buy of Motorola smartphones.

In 2010, we expect to improve financial results sequentially throughout the year as we ramp our smartphone and ODM volumes.

We expect more significant improvement to come in the second half, including a plan to be profitable in the fourth quarter.

With that, I will pass the call over to Greg to discuss Broadband Mobility Solutions.

Thanks, Sanjay, and good morning.

Broadband Mobility Solutions delivered another strong quarter with sequentially higher sales, operating margin, and cash generation.

For the full year, we generated $15 billion in sales and $1.8 billion in operating earnings and generated significant levels of operating cash flow.

During the year, we reduced operating expenses, maintained a strong focus on innovation and R&D, and reduced working capital levels, driven in large part by improved inventory performance.

We divested non-core businesses and acquired several companies to expand our technology capabilities and complement our portfolio of solutions.

Overall, I'm pleased with the leadership, the operational execution, and the financial results in each of our businesses, particularly in light of the difficult circumstances and uncertainty that we faced in 2009.

Turning now to fourth-quarter results, sales in Home and Networks Mobility were $2 billion.

Operating margin, excluding highlighted items, was 9.4% compared to 9.9% in the third quarter.

For the full year, Home and Networks Mobility sales were $8 billion with sales lower in both Home and Networks compared to 2008.

Despite the decline in sales by reducing operating expenses and improving gross margin percentage, we achieved an operating margin of 9.1% compared to 9.6% in 2008.

In Home, fourth-quarter sales were $1 billion.

Digital entertainment device shipments were 3.4 million units, including our 100 millionth digital entertainment device.

In the quarter, there was a slight seasonal uptick in CPE demand and a pickup in sales of infrastructure compared to the third quarter.

In November, we reached an agreement to acquire BitBand, a leading provider of content management and delivery systems specializing in video-on-demand for IPTV.

This acquisition will add to our portfolio of on-demand solutions and enable us to address a wider range of deployment scales, access networks and video formats.

This month, we completed the acquisition of SecureMedia, a company that specializes in digital rights management for IP video networks.

With this acquisition, we will be able to offer both standalone and integrated digital security solutions to IP video customers.

Looking ahead for home, we anticipate continued near-term pressure on demand for digital entertainment devices until market conditions improve in the US, particularly with regard to consumer spending and housing.

Partially offsetting this, we do anticipate demand for video infrastructure equipment to gradually improve through the year, due to operators' need for more bandwidth and provisioning of advanced services to consumers.

That said, we expect operating margin in Home to improve in 2010, compared to mid-single-digit margins in 2009 as we pursue opportunities to improve gross margin, further prioritize our investments, and tightly manage our costs.

In Networks, sales in the fourth quarter were approximately $1 billion.

Sales were lower sequentially due to the high level of WiMAX revenue in the third quarter.

For the full year, network sales were nearly $4.1 billion.

This included over $600 million in WiMAX sales and lower sales of 2G and 3G technologies on a year-over-year basis.

The team did an outstanding job driving cash and earnings in this business by aggressively reducing operating costs and improving product mix, resulting in a double-digit operating margin for the Networks organization for the year.

As we look ahead to 2010, in Networks we anticipate an overall year-on-year sales decline of approximately 10%, reflecting lower 2G and 3G sales and WiMAX sales that are comparable to 2009 levels.

If market conditions and product mix remain favorable, we expect to, again, reach double-digit operating margin levels in 2010.

Priorities in Networks this year will continue to be on optimizing the 2G and 3G businesses, while continuing to balance our investment in 4G broadband technologies.

In WiMAX, we will build upon a strong portfolio of customers and leveraging our market leadership.

In LTE, we will continue to evolve a competitive RAN solution, while focusing on existing wireless network customers, including KDDI, China Mobile, and other leading operators.

Turning to our outlook for the first quarter for Home and Networks Mobility, we expect the soft demand environment in Home to continue, and we also expect lower sales in Networks.

As a result, as compared to first quarter 2009, we expect sales to be down in the double-digit range and operating margin to be comparable.

In Enterprise Mobility Solutions, fourth-quarter sales were $2 billion, up 10% sequentially, consistent with seasonal trends.

Excluding highlighted items, operating margin was 20.3% compared to 17.3% in the third quarter.

The increase in operating margin was due primarily to higher sales and product mix.

For the full year, sales in Enterprise Mobility Solutions were $7 billion.

Sales were lower than 2008, primarily due to economic conditions impacting the indirect channel for two-way communication solutions and the enterprise markets.

Operating margin for the full year declined to 16% from 18.8% in 2008 due to the lower sales level, offset partially by a reduction in operating expenses.

Fourth-quarter sales in North America were higher sequentially.

Demand for ASTRO systems solutions was strong.

Sales of Apex radios were higher and sales in the indirect channel grew in double digits.

Enterprise sales were also up sequentially in double digits.

In the EMEA and Asia Pac regions, sales were higher sequentially, driven primarily by government and public safety markets.

During the quarter, we further expanded our Apex product portfolio by shipping the industry's first multiband mobile radio.

We also doubled the number of Apex customers to over 200.

In 2010, we plan to ship additional band releases for both the portable and mobile, as well as add Bluetooth capabilities and various accessory offerings.

In the enterprise, we remain focused on expanding our reach in key verticals.

In the quarter, we broadened our distribution capabilities for wireless LAN solutions by establishing several new strategic partnerships.

From a product perspective, our priority in enterprise continues to be around key industry drivers, including enabling the mobile workforce and enhancing consumer in-store experiences.

To this end, we recently announced a number of additions to our portfolio of solutions, including an evolution of our best-selling MC3000 family of mobile computers with the MC3100; industry-leading data capture; and wireless technologies for indoor applications.

The WT4090 wearable hands-free terminal with voice recognition and text-to-speech functionality aimed at the manufacturing and warehouse verticals and a wireless security service offered in partnership with Verizon Business to help retailers enhance their wireless network security.

As we head into 2010, in government and public safety, backlog is up slightly from the end of 2008.

Both inside and outside the US, we expect mission-critical communications to remain a high priority and for our customers to focus on technology as a way to overcome resource limitations and further enhance security.

We also expect continued momentum in our indirect channel, driven by stabilizing economic market conditions.

In the enterprise markets, we believe demand trends are slowly improving.

A few weeks ago, we participated in the National Retail Federation Trade Show in New York.

The mood and tone at the show was markedly better than a year ago.

CIOs came in with better visibility to their capital budgets and priorities, which include improving supply-chain efficiencies, getting more technology into the hands of associates, and improving customer buying experiences.

As momentum gradually recovers in retail, we expect it to positively impact customers in transportation and logistics, which is our second largest vertical.

So with better visibility and gradually improving trends, in Enterprise Mobility Solutions, we expect 2010 sales growth in the low to mid single-digits with operating margin flat to slightly up year on year.

For the first quarter compared to the year-ago quarter, we expect EMS sales to be slightly up and operating margin flat to slightly up.

In closing, Broadband Mobility Solutions delivered solid results in 2009 amidst challenging market conditions.

I want to thank all of the associates in all of the businesses for their contributions and continued support of our customers.

And now I'm going to turn the call back over to Dean to start the Q&A.

Thanks, Greg.

Before we begin taking questions, we would like to remind callers to limit themselves to one question so that we can accommodate as many participants as possible.

Operator, you can now provide our callers with instructions on how to ask a question.

(Operator Instructions).

Ittai Kidron, Oppenheimer Funds.

Sanjay, I wanted to drill a little bit into your expectations of 2010.

Maybe it's just as a gauge for your level of confidence in your business.

Today versus three months ago, are you more or less confident in your ability to execute relative to your plans for 2010?

And, second, can you give us a little bit more color on how did the competitive environment change in a way that surprised you, if it did, in the last three or four months, and the way you anticipate it will change in 2010.

Thanks, Ittai.

I would say that today, I have greater confidence in our ability to execute to the plan that I outlined earlier in my comments.

As I said, we will ship between 11 million to 14 million smartphones in 2010.

And to the point in your question around the change in our confidence in the last three months, I think in smartphone, we have greater confidence.

In the feature phone, though, we have seen softness that I outlined because of some uncertainty in our prepaid market, and I think that we have a better understanding of that.

And we, on the other hand, in smartphones, see very good traction with carriers both in the United States, as well as outside of the United States.

So, those are the two offsetting factors that have evolved in the last three months.

Well, just to follow up on that if I may, is the deterioration in the feature phone, just from your standpoint, just a reflection of an acceleration of the adoption of smartphones?

And if the answer is yes, then wouldn't your expectations to smartphones, relative to where they have been three months ago, would actually need to go up?

The deterioration in the feature phone is very localized depending on the circumstances of particular carriers.

And in terms of smartphone, I think that we have greater confidence today.

We have much greater visibility.

And as I said, in fourth quarter, we have greater confidence today than I have articulated to you before about our ability to be profitable.

And of course, as you know, our ODM business, addressing the voice-centric low-end of the marketplace for really largely emerging markets is also looking better today than it was before.

So I think what you will see with our business that we will bring smartphones more down to feature phone tiers.

And that ODM business will address more of the low-end voice-centric market for China, for Latin America, Southeast Asia.

And the purpose of the ODM business for us is largely to support our retail channels [than] to keep our brand name vibrant in these countries.

Very good.

Good luck.

Tavis McCourt, Morgan Keegan.

Thanks, guys.

First, I just wanted to make sure I understood the earnings this quarter.

So $0.06 was GAAP.

$0.09 was backing out restructuring charge.

And then is it fair to say the deferral of revenues on the smartphones also had about a $0.02 impact relative to what would normally be the accounting for that?

I think you've got everything right, but we won't comment on the impact of the deferral of the revenue on the smartphones.

Okay.

And then Sanjay, every time you come out and talk to the public, it seems like you've got more Android phones lined up for 2010.

I think a couple of quarters ago, you said 10 maybe and then you said 15, and then you said 15 to 20, and now you're saying 20.

What is allowing you to kind of ramp up the number of SKUs out there?

Is it just better supply-chain and more engineering resources?

Is it more demand from carriers?

Kind of a little comment around that.

And at what point is there diminishing returns in terms of having too many SKUs out there rather than just focusing on one or two hit products?

And then my question for you, Greg, is really in the Enterprise business versus government in Enterprise Mobility.

How swift do you see the pickup in the traditional Enterprise business, in that segment in 2010?

Would you expect this to be a relatively mild recovery?

Or are you seeing -- you mentioned some strength in indirect business there.

Are you seeing a relatively strong comeback in revenues?

Tavis, I'll take the first part of your question.

I think I made two statements on how many smartphones we will launch in 2010.

I think the first one was that we will launch multiple tens of smartphones, and then in some subsequent comments, I clarified that because that wasn't clear enough, that it will be at least 20 new smartphones.

So, I think that I've been relatively consistent on that point.

Let me just kind of articulate how we come to our portfolio.

First of all, we have certain experiences.

There is the social networking experience.

There is the multimedia experience.

There is the enterprise experience.

We have certain experiences.

And then we have certain requirements for exclusivity, and there are certain form factors which some segments of the market prefer.

So if you take our experiences, exclusivities for carriers and the form factors which address certain segments of the marketplace, I think that these three factors drive the portfolio.

And if you look at the countries US, China, and obviously some in Europe and some in Latin America, I think that really accounts for the number of smartphones we'll launch this year.

Tavis, on the Enterprise side, we've talked about and I've talked about longer term for this segment of being 5% to 8% sales growth.

I think it will be on the low end of that range for 2010.

But, that said, we still would look to expand operating margin, flat to slightly up year over year 2010 over 2009.

As I kind of anecdotally referenced with NRF in New York, the former Symbol business or the EMB business is improving sequentially.

The overall kind of Fortune 500 IT environment is stabilizing.

And as I mentioned again, overall for the segment, backlog in aggregate for government and public safety is up slightly.

So, it's feeling a bit better, but you never know.

And that's reflected in our guidance accordingly.

Edward Snyder, Charter Equity.

Thank you.

Sanjay, just to be clear here, you said you sold 2 million smartphones on the quarter.

Were there any other besides Android-based phones in volume?

I know you had the queue out there at one point.

I just wanted to make sure I understand the mix.

And then, I was curious, your North American sales were roughly flat on a dollar basis, a little bit up in the December period.

And that includes Verizon.

So that suggests there's some substitution, maybe not cannibalization.

But certainly some of the older legacy phones probably quit selling here, and I know those were heavily unprofitable.

I was just a little surprised on the operating margin wasn't a bit better.

Can you comment at all about what the profitability of the new Android phones?

We're assuming they are profitable.

Can we say they're double digits?

I know it takes some time to get down the manufacturing curve to see improvement in profits.

But just trying to get an idea of where these mix into your overall consolidated results.

And then I have a question for Greg.

Ed, 2 million was almost completely Android smartphones volume for us in fourth quarter.

So, there is almost de minimis queue in that volume, almost completely Android smartphones.

Ed, the second part of your question, I'm sorry.

If you could just ask that one more time.

Sure.

Profitability of the new Android phones.

Are we talking double digits out the gate?

Or is it something you have to build on as you move down the learning curve?

I think the profitability in Android smartphones really will be -- the gross margin is meaningfully better than our traditional portfolio -- our legacy portfolio.

But the profitability is a function of OpEx versus volume.

And as I say, I see that balance shifting towards profitability as we go towards second half of this year.

And then Greg, you mentioned that WiMAX you're expecting flat year-on-year and some of the other networking equipments to maybe degrade a little bit here.

Given the profile of what's been going on with WiMAX, I know there's some deployments here.

But in terms of investment, especially with regard to LTE, it looks like a lot of folks are moving towards LTE overall.

What does that say for the long-term viability of the Networks division?

We've seen lots of problems with other competitors, including Ericsson.

Is this a business that you are willing to scale to remain profitable?

Or is it something you see strategic that you want to stay in even if you have to slug it out for several quarters to try and get to some place that's maybe more profitable?

Well, and it is a tale of two cities and you described it well.

I think that the 2G and 3G technologies, while down, will probably have a longer tail, in large part because of all the sophisticated mobile Internet devices, smartphones, and I'm referencing particularly in the US.

So I think the 2G legacy technologies, while declining, will have a longer tail and still allow for some reasonable cash and earnings contribution in 2010, which is why I referenced in my comments that if those conditions remain that way, we would still expect all in to have Networks be in the double-digit operating margin range.

WiMAX revenues are comparable year over year, but that's more or less because the WiMAX revenues of over $600 million in '09 represent probably two to 2.5 years worth of sales cycle.

So the funnel continues to build.

And while the revenue recognition is comparable year over year, it still reflects growing overall WiMAX revenues and activity.

I think that over time, you are right; you will see us moderate the investment in 4G, reflective of the opportunity.

We want to be profitable in all the business segments we're in, in Networks.

And clearly there's more and more of a trend and movement toward LTE.

And I think you will see us shift the investment -- we have and we will continue to do that.

But that still means WiMAX is viable in certain areas -- Latin America, the Middle East, backhaul, and we'll invest reflective of that.

Brian Modoff, Deutsche Bank.

Yes, a couple questions.

Sanjay, coming back to the comments you made earlier, so you're talking about smartphones being 11 million to 14 million units this year and 50% of overall volumes.

So you're implying something in the 22 million to 28 million units for handsets this year.

Is that what we're looking at?

No, Brian.

The 50% that we mentioned was the overall revenue rather than the units.

So, obviously, feature phones' ASPs are meaningfully lower, but the revenue is what we refer to in the script.

Okay.

I wanted to get clarified on that.

And then you talked about a $169 ASP factoring in the $200 million.

How would you expect that to trend through the year?

Would you expect -- it was quite a step up from last quarter.

Can you talk about how you see ASP trends tracking through the year?

And then, in terms of the Q1 volumes, then given your last comment, that might imply Q1 handset volumes that are slightly below where the current quarter ended.

Is that correct?

Yes, the volumes in first quarter are going to be below the volumes that we reported in fourth quarter, Brian.

And in terms of ASP, we've not guided you to ASP --

I know.

But it will really depend on the mix.

And as we go through the year, our smartphone mix begins to get a little richer.

But equally, there is clearly a much more competitive environment in smartphones as smartphone volumes ramp and we go and penetrate smartphone in more of the price points which used to be feature phones.

So I would say, it's difficult to give you guidance on ASPs right now.

But I think it will meaningfully depend on that mix.

I would say that our ASP in 2010 will be meaningfully higher year over year relative to 2009.

Mark Sue, RBC.

Thank you.

Sanjay, just trying to get a better sense of why the loss in the first quarter than most expectations of a profit and the differential there.

And whether you feel that it's now incumbent on Motorola to do more sales and marketing, or are the carriers still kind of committed?

Or is it more of a carrier kind of changing from one vendor to another quarter to quarter, so that it takes Motorola an incremental additional sales and marketing dollar for each unit that you need to sell in smartphones?

Well, maybe I can try to give you some factors which lead to the performance that we've guided to you for the first quarter.

First of all, OpEx will remain flat.

And the OpEx for us will be driven by three things.

We are introducing a lot more new products in first quarter.

Second is that as we launch these products, we have to support them with sales and marketing.

Second factor will be that our smartphone volume, we expect to be down slightly.

And the third is that the feature phone volumes will be down in first quarter relative to fourth quarter.

I think as you're looking for factors which will allow you to bridge between fourth-quarter performance for us to first quarter, those are the three factors to look at.

Is reaching breakeven in Mobile Devices for this year still a primary focus for you, or secondary?

It's a primary focus for us, but we want to position this business for growth in 2011 also.

So there are two factors that we consider.

As I said, we are going to be profitable in fourth quarter this year.

Okay.

Thank you, Sanjay.

Good luck.

Maynard Um, UBS.

Thanks.

Sanjay, you did 2 million units of Android with two handsets in the fourth quarter.

And then looking into the Q1, you'll have a total of six Android smartphones, but expecting units to be down sequentially.

And then for 2010, you'll have more than 20 Android handsets, but only 11 million to 14 million, which seems kind of odd because you will have done around 15% of those unit volumes just in this reported quarter with only two handsets.

So can you just talk about the factors there?

Are you expecting greater than normal industry seasonality in Q1?

Is this industry demand issue?

Is it less carriers launching channel inventory?

Can you just talk about some of those factors?

And then separately in the past, you have talked about the three tiers of pricing for Android.

Given the competition in the market that you referred to, has that range changed in the higher end?

Thanks.

So, Maynard, first thing is that clearly in fourth quarter, we had a very significant [heel] product supported by a very large marketing campaign.

And it's not unusual certainly for heel products' volume to be down slightly in first quarter.

But of course that is offset by the products that we launch in first quarter.

A lot of our products in first quarter that are getting launched are not right on January 1; they're going to launch through the quarter.

So the volume ramp for them kind of sort of implies that there is slight, I guess overall in aggregate, slight reduction in volume between fourth quarter and first quarter.

To your point about 11 million to 14 million smartphones, again, I think in our business, you know that fourth quarter tends to be very important because of the Christmas selling season and the marketing push that both ourselves and carriers together put behind these devices.

So, I actually see 11 million to 14 million as a pretty tremendous growth, given that in 2009, effectively, except for the fourth quarter where we shipped 2 million units, we had no smartphone portfolio.

So I see this as a pretty positive development for our business.

Thanks.

And just in terms of the range of Android pricing in the high end?

The range is really pretty broad.

I think that I won't give you absolute numbers, but you have certainly above $400 and potentially getting below $200.

That would be the range.

Thank you.

Phil Cusick, Macquarie Bank.

Thanks.

So maybe we could start on the ODM strategy.

When do you expect to get some more detail on how that's going to go, and whom partners there might be?

Second, a little clarification on what's going on in China with Google and the options you're now creating on what search engine to use.

And finally, if you could just give us a little more detail on the change in deferral from what's going on in this quarter in the Android devices for deferrals; and then what's going to happen next quarter to help us out with how we should build out these models?

Thanks a lot.

Okay, thanks, Phil.

The first thing on ODM, I'll give you the details.

I won't tell you the names of my partners.

I think we will announce them as they become relevant.

But we have already started shipping some of these products.

The gentleman, [Carl Loufet].

who runs this business for us, we have given him a modest amount of resources, and he works with our partners to generate a portfolio of low-end voice phones for China, for Latin America, for Southeast Asia.

Very little bit for US and very little bit for Central and Eastern Europe.

And the purpose of this portfolio is to stay relevant in retail channels.

Our objective is to make a very modest amount of money, but above all, to guarantee in a risk-adjusted way that we do not lose money in this segment.

That's really the purpose of our ODM voice-centric strategy in this segment.

In terms of Google in China, I would only say that we have taken steps to make sure that our business will continue unaffected to the best way that we possibly can.

Clearly, we had been working with Google and with our partners to make sure that SHOP4APPS was available within very short period of time.

And we were actually very proud of the way we were able to roll that out.

In terms of application suites, I think having the diversity of multiple application suites gives us flexibility in meeting our customer requirements, both in China and in any other country where that becomes a requirement.

In terms of deferrals, this is beyond my accounting knowledge.

I will defer to Ed.

Okay, thanks.

So Phil, Sanjay mentioned on the call that we had deferred revenues of approximately $200 million in the fourth quarter due to the software accounting rules.

We do anticipate adopting the new accounting rules in the first quarter.

As such, we don't expect the deferrals to be nearly as significant as we go throughout the rest of 2010.

Mark McKechnie, Broadpoint.

Thank you.

Easy one here.

In terms of cash flow, do you have any -- you gave some guidance last year on what you expected quarterly and for the year.

Would you expect positive cash flow next quarter?

And any thoughts for the year?

What we mentioned on the call was that we're planning to be flat to down slightly.

Not seeing any of the meaningful reductions that we saw last year.

Again, we are planning roughly flat to down slightly, in line with the earnings guidance that we gave you.

And for the full year, we haven't really guided.

We do have a debt payment due in the fourth quarter which we expect to make.

And we are driving to keep cash relatively flat to up despite the fact that we have to make that payment in the fourth quarter of 2010.

Got you.

And one more question.

On cost reductions, is it safe to assume are most of the cost reductions behind, or do you have more in progress?

Or how should we look at that?

So we're always looking to optimize the cost structure.

And both Sanjay and Greg had talked about that, so we're continuing to refine that.

I wouldn't expect throughout the year that you're going to see meaningful changes in our operating costs as you model throughout the rest of the year.

Great.

Thank you.

Jeff Kvaal, Barclays Capital.

Yes, thanks very much.

Sanjay, on your side, I was wondering if you could help us a little bit with the feature phone margin trajectory there.

Is the unit volume in feature phones a key component to your breakeven target in the fourth quarter?

Or is it kind of irrelevant and it's really all about how many Android phones you are shipping?

The unit -- our feature phone is relevant for 2010 fourth quarter.

But clearly, I think smartphone will begin by fourth quarter to be the dominant part of our portfolio in terms of driving our revenue gross margin.

But as you know, we have iDEN volume in feature phone, and iDEN continues to be a profitable business for us.

So I think iDEN and some actually rugged devices that you see in our portfolio begin to be the places where feature phone matters for us in fourth quarter.

In terms of feature phone margin, I think they will continue to decline not very dramatically.

But it's the unit that drives the performance of the feature phone part of our portfolio.

Thank you.

And then could you give us a little color on how you get to the 11 million to 14 million?

Is that weighted to the second half?

Is there a geographical bent there?

How should we think about that?

Yes, it is, as again, taking seasonality of our business into account, it is weighted to the second half.

And geographically, I think you should think about US dominating that shipment, though China and Europe also play part in that shipment.

We also have shipments in Latin America, but really if I had to give you an order of priority, I would say US, China, Europe, and Latin America for that shipment.

Jim Suva, Citi.

Thanks very much.

Sanjay, can you briefly touch upon, in China, the Google and your change in strategy to use other search engines -- are there added costs associated with that and some deferment of when units were going to hit the market in Q1 that maybe create a bit of a headwind in Q1; that maybe in Q2 it's a little bit stronger when you go through some of those unexpected challenges?

And the second part of the question is, thanks for giving the smartphone outlook of 11 million to 14 million.

Can you help us understand your total portfolio of units for the full year?

Yes.

Let me address the China issue.

I think that there is clearly some incremental R&D work which is already included in our guidance, Jim.

But no, from a revenue record deferral perspective, I don't see any meaningful impact from the change that we have made to our portfolio in China, and to both search as well as App store that we have talked about here.

In terms of the portfolio, as I mentioned to you before, our launches will be reasonably linear through the year.

Though, clearly, the effect, the revenue and margin effect is clearly back-end loaded.

Not least because fourth quarter in our business tends to be such an important quarter.

I was referring more to if you're going to ship 11 million to 14 million smartphone units, in total, your Company, are they going to ship 30 million units, 40 million units, 50 million units?

In total, what should we expect?

I have not provided you that guidance with that specificity.

But clearly we expect the volume in 2010, overall, aggregate volume to be down from 2009.

Any magnitude?

Not today.

Tal Liani, Bank of America.

I want to dive deeply into the gross margin if you don't mind.

The revenues are going up by about $300 million if I put back the -- I'm only talking about Mobile Devices.

Going up by about $300 million if I put back the $100 million or $200 million for deferred.

And I can calculate precisely the contribution of the $2 million of smartphones, because I can back it out.

We know the price before and after, and it's about 40% of your revenues this quarter.

So, I don't understand why the operating margins this quarter are not improving more substantially if you have 20% sequential improvement in revenues, you have 40% smartphones that carry substantially higher gross margins, as you mentioned; and still, the sequential improvement in operating margin is nice, but it's not something that is out of the expectations, or it's not in line with the growth in revenues.

So the question is, what happens to the gross margin in the non-smartphones when you introduce smartphones?

Do you see more pricing pressure?

Do you see -- and then why don't you give us more explicit guidance for gross margin?

It's very important for the model, given that you're going to break up pretty soon.

Thanks.

First of all, the OpEx in fourth quarter was up from third quarter.

When you're launching for the first time a smartphone, and in fact two smartphones, particularly with MOTOBLUR, we spent meaningfully more in launching our products with sales and marketing for smartphones.

In terms of your question around what it did for feature phone portfolio, I think that you have seen our feature phone volume come down over the course of actually 2009, and I've guided you to a similar effect in 2010.

But really, the thing that drove our OpEx in fourth quarter this year was our sales and marketing support.

So, in OpEx, OpEx for first quarter we expect will be flat from fourth quarter.

But as volume of smartphone is slightly down and we see feature phone coming down a little more, I think those two things contribute to our performance or the guidance that we've given you.

And I think the thing to realize is that as our volume in smartphone goes up, I see throughout the year higher-quality volume going up and more of our legacy -- higher quality in the sense of gross margin going up -- and legacy volume in the sense of again, our gross margin coming down.

And as I've said again, in fourth quarter 2010, I expect to be profitable as I see this crossover between these two effects.

Sanjay, when do you think you will start providing us with more -- gross margin is very important to understand the dynamics.

When do you think you are going to provide us with more granular information on the handset division?

Is it only when you break even and plan to break up the Company or is it before that?

I understand your point.

I think at the moment we have no plans to provide you gross margin.

I understand your point, and we will take that into account.

Simona Jankowski, Goldman Sachs.

I just wanted to ask you just directionally for feature phones, do you think ASPs are going to be up or down this year?

ASPs will be down.

For feature phones.

Okay.

So then just following up to that, if I put that together with your guidance for smartphones to be more than half of sales, that would imply something like a 30% decline in feature phone units this year.

And I think you also said that the gross margins would decline slightly and that there's not going to be a meaningful decline in OpEx.

So just putting those together, lower pricing, much lower volumes, no meaningful decline in OpEx and declining margins, how do you think you will be profitable in that business?

In the overall business?

Really, I think it's basis of the smartphone.

No, I'm sorry.

I just again mean in the feature phone business.

Because I think you made a comment that you expect to be modestly profitable and that your goal is to not lose money in that business.

Okay.

So maybe I need to clarify.

Simona, I broke up my portfolio into three segments for you.

First of all, smartphone.

Secondly, feature phone.

And thirdly, voice-centric ODM portfolio.

My comments to be slightly profitable were in voice-centric ODM portfolio.

I think feature phone, we are investing very little money in our feature phone portfolio except of course in iDEN and some rugged devices where we garner some good gross margin.

And I see that smartphone, our strategy in feature phone really is to bring smartphones into that tier.

And, that will, of course, bring our ASP of overall smartphone down but it will expand our volume.

So I actually think that there is a good chance that given the iDEN portfolio, that we will be profitable as we take our OpEx in that particular segment down.

Richard Kramer, Arete Research.

Thanks very much, guys.

Just two simple questions.

One for Ed and one for Greg.

For Ed, you have a level of working capital now that's almost $1 billion lower than you had in first quarter.

Is that a sustainable level?

And also, if there is a separation going to happen in the back end of the year, is this still a realistic prospect?

And given the debt repayment coming up, can you maybe reflect a little bit on how you might fund the separation?

And for Greg, if we've looked at both consolidation in the customers and among your competitors in Home and Networks, can you envision any scenario where, by the end of the year 2010, we might see a different sort of lineup for Home and Networks business in terms of finding partnerships or participating somehow in this industry consolidation?

Thanks.

Okay.

I'll take the first couple questions there.

On the working capital front, we're really managing the metrics as opposed to the absolute dollar value, if you will.

So as sales ramp, I would expect the working capital to ramp slightly.

However, what we are managing to is continue to improve inventory turns, maintaining receivable days at the existing levels, and potentially improving to a certain extent.

So I really look at the metric as opposed to the absolute dollar value, which frankly, really drove a lot of the improvement that you saw this year.

We didn't just reduce working capital levels.

We actually improved significantly our inventory turns, as I mentioned on the call.

So we will be driving that.

And I don't see significant working capital impacts for the year, which is good because as we mentioned we are going to be hoping to improve the businesses as we go throughout 2010.

On the separation costs, remember we have $8 billion in cash.

I also mention that we are going to plan even with the debt payment for cash to be relatively consistent.

And we hope to drive it even higher than that if we can.

So I don't expect the separation costs really to be a gating item with respect to that.

And so really won't impact it at all.

Maybe I can take the question around separation, and Greg, you could take it around Home and Network process.

Our plan of record really is for us to proceed with the separation that we've talked about a number of times and separate into two companies.

If you look, I think we've talked about three factors that will govern the timing of that separation and how we considered that those three factors are the performance of Mobile Devices, the performance of the handset market, the growth of the handset market generally, and the economic environment more broadly.

I guess I'd like to give you a little color on how we see those factors.

Today, I guided you to our becoming profitable in fourth quarter in Mobile Devices.

As you know, we have launched two products already and we've guided you to the fact that we will launch 20 smartphones throughout 2010.

And I think that we are making very good progress in Mobile Devices.

I think most analysts now agree that in 2010, there will be a modest, probably high single-digit to low double-digit increase in the handset marketplace.

So I think that those two factors certainly begin to point us towards a more amenable environment in which we can contemplate a spin.

In terms of the macro environment, I will defer that to Greg, and Greg could also add some more color.

Yes, so -- and Sanjay and I both have both been consistent on those three things, right?

So the handset industry is clearly going to grow in 2010.

MDB is clearly improving -- successful transition to an Android-based smartphone portfolio, operating loss is narrowing, and etc.

The macroeconomic environment is improving as well.

We've seen a stabilization in many of the economies we compete in.

The US economy is expected to grow.

I've talked about sequential growth in the former Symbol business.

Stabilization of the indirect channels.

So generally, the three things we've looked at have gotten better.

As a result, we are still planning to separate this Company.

I think with that progress we've made on separation, and the alternative structures that Sanjay and I continually look at to maximize shareholder value -- I've acknowledged there's speculation in the media.

But that said, Home is, despite a difficult 2009, a strong business with long-term trends that are favorable, both in global expansion, the growth of HDTV, the continued expansion of IPTV.

And as I've mentioned with the insatiable demand for more bandwidth, we expect to see an expansion of video infrastructure spending.

So, the long-term trends on Home are still favorable.

We've invested just recently, in my comments here, in SecureMedia and BitBand.

So I think it's a strategic asset that is number one in the US and the world, and will recover.

And it is driven more or less by US-based housing and a few other things.

On Networks, we continue to manage it and optimizing it for earnings and cash.

You know we've done the 3G agreement, probably three years ago with Huawei.

If there's partnerships that make sense to pursue, that would enhance value, we will always consider that.

But I'm proud of what the team is doing in that business too.

With the expansion and demand still for CDMA and GSM-based 2G and 3G technologies, we will have a long tail on it.

So that's how we are viewing the overall portfolio and proceeding.

But we are moving full steam ahead on separation.

Ehud Gelblum, Morgan Stanley.

Thanks very much for getting me in.

Most questions have been asked already so I have a smattering of kind of random things and then a follow-up for Greg after I go through Mobile Devices.

Sanjay, as you launch all these 20 new models across the world, you said US versus China and Europe, can you give us a sense of what the gross margin and ASP profile will look by geography?

Should we assume that the gross margins is consistent across all these regions?

Or as you get outside the US does the gross margin come down at all?

And is it proportional to ASP, or is it not proportional to ASP?

These are kind of these rules of thumb that at times don't work and sometimes do work.

Can you give us a sense of what iDEN did sequentially from Q3 to Q4?

Did that hold up and was still just as strong?

And then as far as what you saw in the fourth quarter, a number of other of your competitors hinted to the fact that smartphones and higher-end phones were hurt a little bit in fourth quarter versus what they expected because of a weaker economy in various areas.

Granted, this was your first quarter of actually having smartphones out there, so I'm not sure if you actually could see an impact.

But versus what you thought, did you possibly end up with maybe more inventory or maybe saw a little bit more smartphone inventory left out in the channel because possibly a weaker economy in the fourth quarter?

And then if I could, I want to sneak one in for Greg later.

That was a lot.

Let me see if I remember each of the parts, and then I will try to be as responsive as I can.

First of all, I think your question was ASP and gross margin distribution across geographies for smartphones.

I won't guide you more precisely, but clearly in United States, and China, and Europe, the ASPs are higher than in Latin America.

But it's probably in that order.

In US, I think there is -- US is probably the number one market for smartphones today and probably all of the innovation in smartphones are happening faster in US than anywhere else.

So, we think -- we see US is the largest market, and there's the greatest appetite because the competitive landscape that's been set up here for carriers to subsidize the devices and bring it to consumer price points.

So I think US is clearly the most important marketplace.

I think that we are seeing feature phones which were down --

Are your gross margins different between -- will they be different between the US and China and Europe as you roll out Android phones?

It's too early to tell.

I don't know that I could give you any color on that.

Feature phones were really down from third quarter to fourth quarter.

That's the second part of your question.

But I won't comment specifically on iDEN because some of our customers haven't announced yet.

And I think I will let them announce for themselves how that business progressed.

In terms of again, I think those are the two big parts that I remember of your question.

The last one was, did you observe any softness in smartphones, either in your numbers or the market?

As you saw, I think we had a pretty strong fourth quarter.

Right.

That's a sell-in number.

I'm talking about a sell-through in terms of what actually people bought?

Yes, no, I feel pretty good about where our inventory and channel is.

So I don't know that I would necessarily agree with some of the guidance that some other folks have provided on that account.

That's very helpful.

And if I could sneak in for Greg, with the trends going on at Home being weaker now but getting stronger like you're suggesting, how should we be looking at the stories that occasionally come out in the papers talking about looking into diversify out and spin out Home and Networks?

Why do you think, logically speaking, would that make sense to you to be pursuing something like that?

Or, if they're doing well, why wouldn't you keep them in house with EMS?

Well, I think you go back to what I just said a few moments ago.

I think Home is in a trough, but the long-term trends are still pretty strong.

We're in a good position with IPR.

We're in a good position on end-to-end assets.

Dan and his team have done surgical acquisitions both in the home as well as in the cloud.

So I think we are well positioned.

And as the economy, particularly since it's an 80% North American-centric business as it relates to home, as the economy and consumer spending starts to tick back up and US housing stabilizes, I think that business is fine.

I think it's still going to be rugged and we have limited visibility and I think that's reflected in the guidance we gave.

I acknowledge there is always going to be speculation and things in the media and elsewhere.

I think it's more or less a byproduct of Sanjay and me continually working on the appropriate structures for separation.

I think that's unavoidable.

And on Networks, I've described how we are managing the business and our position there.

I want to remind everyone that details outlined or highlighted items, GAAP to non-GAAP reconciliations and other financial information can be found on our investor website.

An audio replay along with today's slides will also be available shortly after this call.

During this call, we have made a number of forward-looking statements.

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.

Such forward-looking statements include but are not limited to our comments and answers relating to the following topics -- expected net interest expense in 2010; our expected ongoing tax rate for 2010; guidance for Motorola's earnings per share for the first quarter of 2010 and future performance of our businesses; expectations for cash flow and total cash levels; expected timing for the announcement, launch and shipment of new products; expected adoption of new accounting rules; expectations for the volume and financial impact of smartphone shipments in 2010; guidance for future sales, operating expenses, margins, profitability, ASPs, product pricing, demand trends or market share for each of Motorola's businesses and our industries; plans, progress, costs regarding the potential separation of Motorola's businesses into two independent, publicly traded companies; the expectations for our Home and Networks business and our related investment in those businesses; guidance on overall unit shipments at Mobile Devices; expectations for cost reductions; and expectations for working capital.

Because forward-looking statements involve risks and uncertainties, Motorola's actual results could differ materially from those stated in the forward-looking statements.

Information about factors that could cause such differences can be found in this morning's press release on pages 18 through 30 in Item 1A of Motorola's 2008 annual report on Form 10-K and in Motorola's other SEC filings.

Thank you for joining us today, and this now concludes our conference call.

Ladies and gentlemen, this does conclude today's teleconference.

A replay of this call will be available over the Internet in approximately 3 hours.

The website address is www.Motorola.com/investor.

We thank you for your participation and ask that you please disconnect your lines at this time.

Have a wonderful day.