摩托羅拉 (MSI) 2010 Q3 法說會逐字稿

Good morning and thank you for holding.

Welcome to Motorola's third-quarter 2010 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 three hours after the conclusion of this call over the Internet through Motorola's investor relations website.

The website addresses 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 third-quarter results conference call.

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

Dan Moloney, President of Motorola Mobility, will join for the Q&A portion of the call.

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 we can give no assurance that any future results or events discussed in these statements will be achieved.

Any forward-looking statements represent our views only as of today and should not be relied upon representing our views as of any subsequent date.

Forward-looking statements are subject to a variety of risks and uncertainties that could cause our actual results to differ materially from the statements contained in this presentation.

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 17 through 29 in Item 1-A of Motorola's 2009 annual report on Form 10-K and Motorola's other SEC filings, available for free on the SEC's website at www.SEC.gov, and Motorola Mobility, Inc.'s Form 10 filing as amended and on Motorola's website at www.Motorola.com.

This presentation is being made on 28 October, 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 Greg.

Good morning and thank you for joining us.

Motorola had a very good third quarter across all of our businesses.

On a year-over-year basis, overall sales, earnings and total cash are all higher.

Additionally, we also continue to make excellent progress on our planned separation.

Our reported sales were $4.9 billion, up nearly 13% over the same period a year ago.

This excludes the portion of the networks business to be acquired by Nokia Siemens Networks, which is classified as discontinued operations.

If we were to include sales from discontinued operations, sales would have been $5.8 billion, up 6% over the year-ago quarter.

This is the first top-line growth quarter for Motorola since the fourth quarter of 2006 and was driven by growth in Mobile Devices, Home and Enterprise Mobility Solutions.

Non-GAAP earnings, including both continuing and discontinued operations, were $0.16 a share.

This exceeded our guidance of $0.10 to $0.12 per share that we provided on the last earnings call.

Ed will comment further on the reporting changes associated with our planned sale to NSN and our third-quarter results in a few moments.

In the quarter Mobile Devices increased smartphone shipments to 3.8 million units and achieved operating profitability on a non-GAAP basis.

In Home, sales were up sequentially and operating margin was higher.

In EMS, sales grew 9% year-over-year, driven by strong demand in the enterprise markets.

Operating margin and cash generation were very strong as well.

In Networks, financial performance also continued to be very strong again in the third quarter.

Solid operating profitability combined with continued balance sheet management resulted in $502 million of operating cash flow.

As a result, total cash at the end of the quarter increased to $9 billion.

During the quarter we made further progress in our plan to create two independent public companies, which included finalizing various Company agreements and completing further updates to Motorola Mobility's Form 10 registration statement filed with the SEC.

Separation of Motorola Mobility and Motorola Solutions remains targeted for some time in the first quarter of 2011.

I will now turn the call over to Ed to provide additional details on the financial results for the quarter.

I will then come back to review Motorola Solutions, and then Sanjay will discuss Motorola Mobility.

Ed?

Thanks, Greg.

I'll begin today by outlining the changes we've made in our financial reporting.

First, financial results related to the portion of the Networks business to be acquired by to NSN are now classified as discontinued operations.

As such, they are not included in the Motorola reported sales or in earnings from continuing operations.

Second, the results of operations for previously disposed businesses which were deemed to be immaterial at the time of their disposition have now been reclassified from the Enterprise Mobility Solutions segment to discontinued operations.

These businesses include an Israel-based wireless network operator, the biometrics business and Good Technology.

The assets and liabilities of the portion of the Networks business to be acquired by NSN and the assets and liabilities of previously disposed businesses prior to their disposal are now reported as assets and liabilities held for sale in the applicable reporting periods.

Third, the iDEN infrastructure business and certain licensing activity formerly related to the Networks business are now reported as part of Enterprise Mobility Solutions segment.

Finally, certain operating costs which historically have been allocated to Networks are now located to the EMS segment, since the underlying activities will not be transferred to NSN.

To assist in understanding these changes on a historical basis, a revised presentation of the results of Motorola and the EMS segment for 2007 through the first half of 2010 were recently filed in an 8-K and can be found on our website.

Previously reported segment results for Mobile Devices and Home are unchanged.

With that, I'll turn to our financial results for the quarter.

Motorola sales from continuing operations were $4.9 billion in the third quarter, up 13% from the third quarter of 2009.

As Greg mentioned, inclusive of discontinued operations, third-quarter sales would have been $5.8 billion, up 6% from the third quarter of 2009.

On a GAAP basis, third-quarter total earnings were $0.05 per share.

These results include $0.00 per share from continuing operations and $0.05 per share of discontinued operations which I described earlier.

On a non-GAAP basis total earnings were $0.16 per share, which exceeded our guidance of $0.10 to $0.12 per share.

In addition to solid operating results in Mobile Devices, Home and EMS, our strong earnings performance reflected continued CDMA momentum in Network, favorable other income and expense results and a lower tax rate.

Non-GAAP adjustments in the quarter totaled $0.12 per share, including highlighted items totaling a net expense of $0.08 per share.

This is comprised of expenses associated with restructuring and separation and a non-cash income tax expense related to anticipated capital reductions in certain foreign operations, partially offset by income related to an IP reserve and stock compensation and intangible amortization of $0.04 per share, consistent with prior quarters.

For continuing operations, non-GAAP earnings were $0.12 per share.

This compares to $0.04 per share in the second quarter and $0.01 per share in the year-ago quarter.

Further details on non-GAAP earnings are included as part of today's press release and available on our website.

All remaining financial references will exclude discontinued operations, highlighted items, stock compensation expense and intangible amortization.

Gross margin percentage in the quarter increased to 36.8% from 33.3% in the third quarter of 2009.

The increase was driven by improvements in both Mobile Devices and Home.

Sequentially, gross margin percentage was up slightly, reflecting margin percentage improvements in each business, offset partially by a shift in business mix.

Operating expenses in the quarter were flat sequentially and up 8% year-over-year.

The increase was driven by investments in sales and marketing to support business growth and new product introductions.

Total other income and expense was a lower net expense than anticipated, due to lower net interest expense and favorable results associated with foreign currency translation and investments held in the Sigma Fund.

With the exclusion of Networks and other changes in the geographical mix of income anticipated for the year, we now expect a full year ongoing tax rate of 34% to 35%, down from our previous estimate of 36% to 37%.

This change, along with a favorable tax adjustment, resulted in ongoing tax rate in the quarter of 28%.

Moving now to the balance sheet, in the quarter we generated operating cash flow of $502 million, including a third consecutive quarter of improving cash flow results in Mobile Devices.

Total inventory increased by $280 million sequentially, driven primarily by anticipated fourth-quarter demand in Mobile Devices.

Inventory turned nine times, down compared to 11 turns in the second quarter and flat with nine turns in the third quarter of last year.

(inaudible) also increased in the quarter, reflecting the sequential sales growth.

Days sales outstanding were 60 days compared to 61 days in the second quarter and 58 days in the year-ago quarter.

Total cash at the end of the quarter was $9 billion compared to $8.3 billion at the end of the second quarter.

Net cash at the end of the quarter was $5.6 billion compared to $4.9 billion in the second quarter and $3.2 billion in the third quarter of 2009.

Turning now to our outlook, we expect fourth-quarter earnings from continuing operations to be in the range of $0.14 to $0.16 per share.

This guidance excludes a portion of the Networks business that is held for sale, stock-based compensation and intangible amortization of $0.04 per share and items historically highlighted in our quarterly earnings release.

With that, I'll pass the call to Greg to discuss Motorola Solutions.

Thanks, Ed.

In EMS, third-quarter sales were over $1.9 billion, up 9% compared to the year-ago quarter.

Enterprise markets continued to perform well, evidenced again by double-digit sales growth in all four geographic regions.

In the government markets sales were up slightly against the year-ago quarter.

New orders, particularly in the Enterprise, remained solid, resulting in an increase in total overall EMS backlog compared to the end of the second quarter.

Operating margin was 16.5% compared to 15.9% in the second quarter and 16.9% in the third quarter of last year.

Third-quarter sales in North America grew 5% year-over-year.

Growth was driven by Enterprise markets, primarily retail.

On the government side sales were higher and orders included major public safety wins with the US Marshal Service, Washington Metro Area Transportation Authority, Nashville-Davidson County Metropolitan Government in Tennessee and the State of Arkansas.

Demand for the recently announced ES400 Enterprise Digital Assistant has been strong.

The ES400 offers enterprise-grade durability and functionality for business-critical applications and it recently began shipping and will be available globally during the fourth quarter.

In EMEA, total sales were up 13% in the quarter.

Growth continued to be driven by Enterprise markets, including personal shopping and field mobility solutions for retail, manufacturing, transportation and logistics customers.

Radio solutions sales were also higher, due in part to continued analog-to-digital transition.

In Asia sales in the quarter were up 7% compared to a year ago.

Enterprise markets and public safety continue to perform very well.

And, finally, yesterday it was announced that we signed a three-year extension to our iDEN infrastructure supply agreement with NII, a leading provider of mobile communications for business customers in Latin America.

In the quarter we expanded our mobile computing portfolio with the MC65, a compact, rugged enterprise mobile computer with integrated GPS and data capture.

The MC65 is aimed at improving productivity in task-oriented environments, including field service, field sales, transportation and public safety.

We also announced MOTOTRBO Connect Plus, a scalable two-way radio system designed to accommodate high-volume, wide-area communications for mobile work teams.

We expanded our APX v25 mission-critical two-way radio series with additional mobiles and portables, including radios designed for extreme situations and single-band users and the first encrypted mission-critical Bluetooth earpiece, enabling secure communications when paired with our APX portable radios.

Finally, we added a next-generation interoperability solution which increases the effectiveness of first responders by connecting disparate radio systems and allowing them to operate as one.

Regarding public safety broadband, on our last call we announced that we were awarded the first phase of a 700 MHz LTE public safety network to serve multiple counties in the San Francisco Bay area.

This agreement represents the initial step in deploying a unified state of the art private mission-critical broadband network.

As public safety systems are expanded to include broadband data, they will need to interoperate with carrier networks.

To this end, we recently signed a significant partnership with Ericsson.

In this arrangement Ericsson will provide LTE base station equipment to Motorola.

We will configure it, we will harden it for public safety use and we will provide the overall broadband network solution architecture for our customers.

With respect to the Networks business, in July we announced that NSN would purchase the majority of our Wireless Network assets, including CDMA, GSM, WiMAX and LTE.

In this transaction, which is expected to close by early 2011, we will receive approximately $1.35 billion in value, including $1.2 billion from NSN and $150 million for retained accounts receivables.

In the third quarter the portion of the Networks business being acquired by NSN accounted for $871 million in sales and $177 million in GAAP earnings.

The strong results were again driven primarily by the CDMA business in North America.

Before we move to our outlook for EMS and Networks, I want to provide some background on the EMS cost structure.

As Ed mentioned earlier, there are costs associated with certain activities previously allocated to Networks, which will not be part of the NSN transaction.

These costs are now allocated to EMS.

So, as we head towards separation, we are identifying and taking the appropriate actions to better align our cost structure to the remaining businesses.

These actions may include facility rationalization, discretionary spending reductions and, where necessary, staff reductions.

We do not expect these actions to impact our critical R&D priorities or our critical customer-facing operations.

Regarding our outlook for EMS for the fourth quarter and taking into consideration the impact of our discontinued operations reporting, we expect sales and operating margin to be higher on a sequential basis and we expect full-year sales growth of 7% to 8% with full-year operating margin of approximately 16%.

For the Networks business classified in discontinued operations, in the fourth quarter we expect sequentially higher sales, including higher WiMAX sales and lower CDMA sales.

With the change in product mix we expect operating margin to be lower, resulting in approximately $0.03 for discontinued operations.

This is not incorporated in the guidance Ed provided earlier of $0.14 to $0.16 per share, which comprises only continuing operations.

And with that, I'll now pass the call over to Sanjay to discuss Motorola Mobility.

Thanks, Greg, and good morning.

Mobile Devices reached a major milestone in the third quarter.

We were profitable for the first time in over 3.5 years.

Our sales surpassed $2 billion and were up 20% year-over-year.

Total shipments were 9.1 million units, including smartphone shipment of 3.8 million units.

Overall ASP increased to approximately $223 from $207 in the second quarter, driven by smartphones, which continue to account for over half of our total sales.

In North America, smartphone sales remain strong, led by our family of DROID devices.

Devices at other US carriers continued to perform well also.

In a recent JD Power survey of smartphone users, Motorola ranked number two in the US in customer satisfaction, recognition of our focus on high-quality consumer experiences.

Sales outside of North America grew 10% sequentially and accounted for 32% of total sales.

Operating profit in the quarter of $3 million compares to a loss of $109 million in the second quarter.

The sequential improvement was driven by a higher smartphone unit volume and improved overall gross margin percentage.

Operating expenses as a percentage of sales declined also.

Since our last earnings call we have added 12 devices to our smartphone portfolio, all of which will be in stores for the holiday season.

This brings the number of smart phones we have introduced this year to 22.

In North America, DROID X continues to sell extremely well.

DROID 2, which features an improved keyboard and faster processor compared to the original DROID, also sold well in the quarter.

Early in the month we announced DROID Pro, our first device optimized for both personal and business use.

Usable in over 200 countries, it features a 1 GHz processor candy bar form factor, QWERTY keyboard and Adobe Flash 10.1.

To address corporate connectivity and security needs we have added security features on top of the Android OS.

This makes our devices more secure and more manageable using standard enterprise tools and technologies.

As a result, we expect DROID Pro to be very competitive with other devices in the market aimed at business users.

Finally, at Verizon we announced Citrus, an entry-level portable device with an eco-friendly design for first-time smartphone users.

At AT&T, we launched three more devices -- Bravo, FLIPSIDE and FLIPOUT.

With a variety of screen sizes and form factors and affordable retail price points, these devices give consumers added choice in their smartphone experiences.

Another device that we believe will gain strong consumer acceptance is DEFY.

Optimized for active lifestyle, DEFY is compact, water resistant, scratch resistant and dust proof.

It draws on our successes in designing and delivering rugged, durable mobile devices.

In addition to T-Mobile, DEFY is also available in a number of markets outside of the US.

Outside North America, sales growth was driven by a 30% sequential growth in smartphone revenues.

In China, our second-largest smartphone market, we are one of the leading Android smartphone suppliers.

Unit shipments were up over 70% sequentially.

We launched five new smartphones, including three marketed under our well-known Ming brand.

Ming has been a Motorola brand in China since 2006.

It represents devices developed specifically for Chinese consumers that feature distinctive designs, including a signature transparent flip cover.

These devices bring our total China smartphone portfolio to 13, all released in less than a year.

In Latin America, the smartphone market is gaining traction as mid-and low-tier devices become available.

Unit shipments in the quarter were up over 20% sequentially.

Earlier this month we announced SPICE, an affordable smartphone which will launch initially in Brazil and then expand into other markets.

This brings the number of smartphones we have introduced in the region to 10.

In Western Europe we are making good progress.

Sales increased sequentially across a broad range of devices, including recently launched Milestone 2 and DEFY.

The majority of our new devices feature enhanced MOTOBLUR capabilities.

Improvements to MOTOBLUR provide consumers with increased control over their mobile experiences, device customization and device management.

In addition, with over 3 million users, MOTOBLUR provides us with important feedback for our future product and experience development.

Finally, we added to our portfolio of Bluetooth companion devices that allow consumers to stay productive and hands-free.

Device shipping in the fourth quarter feature advanced noise cancellation technology and include the first device to give consumers the option to respond to text with their voice.

As we look ahead, we will continue to enhance and broaden our smartphone portfolio.

With a belief that one size does not fit all, our smartphone focus will continue in three primary areas; first, high-performance smartphones at the leading edge of innovation that deliver the best experiences to consumers who enjoy everything the mobile Internet has to offer, including multimedia, gaming and social collaboration; second, devices with broad appeal that meet the browsing and social messaging needs of consumers who are interested in intuitive, easy-to-use pocketable devices with affordable data plans; and third, devices that address the rapidly growing opportunity with business users.

These consumers want to stay informed and connected in their work life and their personal life and make their own technology choices.

Increasingly, CIOs support giving employees a choice.

If given that choice, we believe a large number of business users would seriously consider an alternative to their current device brand.

Turning to the outlook for the fourth quarter, a sequential basis we expect unit shipments and total sales to be higher.

The sequential increase in smartphone shipments will be driven largely by our midrange devices.

We expect operating earnings to be higher due to higher sales, offset partially by an increase in sales and marketing expenses to support the large number of new product launches.

For the year, smartphone shipments are now expected to hit the upper end of our 12 million to 14 million unit range.

Launching over 20 smartphone devices and achieving profitability have been major goals for us in the transition of this business.

Attaining these milestones has been made possible by a tremendous amount of work by a dedicated team of people here at Motorola.

These accomplishments are reflective of the innovation and determination of the Mobile Devices organization.

Turning now to results for the Home in the current quarter, Home sales were $912 million, up 3% sequentially.

Sales of digital entertainment devices were higher and reflected an improved mix, including higher demand for MoCA-enabled set-tops for whole home digital networks.

Sales of video and access infrastructures were up over 30% year-over-year and continue to account for over 25% of total Home sales.

Looking regionally, sales in North America were flat year on year.

Sales outside of North America were higher and accounted for approximately 25% of total Home sales.

We continue to improve profitability with operating margin increasing to 8.4% from 5% in third quarter of last year.

Improvements in the quarter -- improvement in the quarter was driven by a more favorable product mix and a reduction in operating costs.

In Home, our R&D effort continues to be directed towards leveraging our video leadership to deliver solutions that support the trend towards more personalized content and services.

This includes digital home networks, 3-D TV, interactive services and converged experiences.

That said, with continued macro environment challenges we are also focused on prioritizing our current product portfolio and tightly managing the cost structure.

With respect to enhancing the portfolio, during the quarter we launched the Motorola EDGE software solution.

With these applications, operators can more easily manage broadband services in a multiscreen digital home.

They also help operators reduce operating costs and accelerate revenue producing services.

We also announced a hosted switch to digital video solution.

This solution will enable independent video operators to achieve bandwidth efficiencies previously available only to operators with on-site capabilities.

Finally, we supported Verizon with the launch of its multiscreen video service by providing our Medios software suite.

This solution facilitates the preparation of content for distribution and enables subscriber to share video mix devices such as set-tops, personal computers and smartphones.

Turning to our outlook, for the fourth quarter we expect home sales and operating earnings to be sequentially higher.

For the full year, despite the top-line decline, we continue to expect to deliver higher operating margin compared to 2009.

In closing, Motorola's business has performed very well in the quarter and have good momentum heading into the fourth quarter.

We also continue to focus on our preparations to create two public companies in the first quarter.

Motorola Mobility will be well positioned to address the growing opportunity in smartphones and converged experiences.

And Motorola Solution will be poised to leverage its leadership position in mission-critical and business-critical communications solutions.

With that, I will turn the call back over to Dean to start the Q&A.

Thanks, Sanjay.

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

(Operator instructions) Brian Modoff, Deutsche Bank.

Sanjay, first, congratulations on reaching profitability earlier than you had expected to.

A question for you -- Verizon, as a percent of your smartphone revenues -- obviously, they've got an iPhone, or a lot of speculation they will have an iPhone in Q1.

And I'm curious as to -- what does Verizon represent as a percent of your total smartphone sales?

How do you plan to deal with that new competition in a key customer in the Q1 time frame, which is around the time you also wanted to?

Thank you, Brian.

Verizon has been a very important customer for us.

I don't think we have broken out our revenue partition to Verizon in particular.

But to address the substance of your question, we expect to continue a very meaningful relationship with her is on.

We think the DROID franchise is economically very valuable for Verizon, and they will continue to invest and foster the DROID franchise.

And as you know, we are a meaningful participant in that franchise.

We will also diversify our portfolio within the United States with other operators.

We are also focused on diversifying our portfolio outside of the United States.

As we said, we have seen meaningful increase in our revenue in China, and we expect that we will focus in expanding our presence in China and Latin America and, to a certain extent, in Europe also.

We have -- as I look into 2011 we have very -- multiple design wins with a number of operators, both in the United States and elsewhere.

And as we look further beyond just the smartphone category, I see opportunities for us in the converged category as we see convergence between computing and mobility.

So if you look at all of these factors, I feel that clearly in first quarter, there will be some seasonality and there will be competitive pressure, as there is in fourth quarter.

But we feel comfortable with our position in light of some of the factors that you mentioned.

Rod Hall, JP Morgan.

Sanjay, I wonder if you could comment on the status of the MOTOBLUR project, and particularly the investment trajectory there.

Have you guys reduced significantly investment in MOTOBLUR?

And then, I also wonder if you could just comment on your view of the ability that you've got now to differentiate yourself on the Android platform itself as opposed to via your hardware.

Rod, as I mentioned, we have over 3 million subscribers now.

In really close to a 12-month period, we have added 3 million subscribers to our MOTOBLUR service.

We get tremendous satisfaction in our surveys from our customers with the MOTOBLUR service and we get a great deal of value in understanding what our customers are doing and how we can serve them better.

The MOTOBLUR service has been a good success for us, and our investment continues, if anything, at a higher pace moving forward.

We believe that providing end-to-end solution to our customers is going to be important.

To address the second part of your question, we see the following ways that we will differentiate.

First of all, we will focus on certain key experiences on top of the Android ecosystem.

One, you've seen the recent focus on enterprise experiences.

Second, I think you would see us focus a lot more on MOTOBLUR as a service and making sure that we provide end-to-end services from a point of view of personalization, customization, as well as diagnostics support.

These devices are getting more and more complex, and our consumers want support to make sure that their devices are working extremely well.

So I think that will be very important for us.

But beyond some of those differentiations, you mentioned our hardware differentiation already.

I really believe that our brand, our distribution, our execution on time, our IP position and the combination of Home and Mobile devices gives us a competitive advantage in the marketplace.

If I could just follow up on that, how supportive do you see Google in your efforts to differentiate the platform, particularly in your MOTOBLUR development?

Do you feel like they are a supportive partner there?

I think Google has taken the view that this ecosystem is better for the diversity that it supports.

There clearly are points of views that this diversity fragments this ecosystem.

I think we have taken the view that fragmentation -- the definition of fragmentation as being the ability to run all applications on all devices.

And we are very, in this ecosystem, careful to make sure all applications can run on all devices.

And, beyond that, the diversity of devices and the pace of innovation in this ecosystem has been very helpful, and our ability to differentiate has actually helped the Android ecosystem and the shipment in this category.

So I think that they are supportive.

And I just had one housekeeping question, which is EMS revenues excluding iDEN.

Is there any way we could get that number, excluding the iDEN adjustment for the quarter?

Rod, it's actually pretty minor.

We had revenue growth of 9%, all in, including iDEN infrastructure.

If you take out iDEN infrastructure, revenue growth, goes to 8%, from 8.5% to 8%.

So it's very modest.

Mark Sue, RBC Capital Markets.

Sanjay, does continuing with a meaningful relationship with Verizon next year imply a sharp increase in sales and marketing spend for Motorola?

In aggregate, will carriers -- their supported advertising, if you include others such as AT&T next year -- will that be greater next year than this year, or does Motorola have to make up the balance to push the incremental unit?

Mark, let me just restate the question so I got it.

You are saying, given the relationship with Verizon, I think the highest-level question is, would you have to spend more on marketing to support your products as you diversify in the US.

Did I get that right?

Okay, well I'll proceed with that assumption.

I think that -- let me just say this way, that I think we will make sure that we support our products.

As I said, in fourth quarter this year we will take special care to support our products.

We expect this fourth quarter to be particularly competitive, and we will spend the marketing dollars to support it in fourth quarter.

As we go into 2011, I really am quite pleased with the traction that we've got with our portfolio across a number of operators.

Our relations with Verizon continues to be very good, and the support that we expect from carriers continues to be very good.

But my anticipation is that we will be flat to higher in our marketing spend in 2011 compared to 2010.

Tim Long, Bank of Montreal.

Sanjay, if I could just follow up on that same line of thinking a little bit, you talked about Europe growing a little bit sequentially.

Could you just talk to us a little bit -- obviously, it's a very important smartphone market.

And if you want to be really successful outside the US, you're going to need that market.

How do you go about restarting a market where Motorola used to have a pretty strong position but now is coming from a very low market share?

What are the costs and what is the timing that you think that we could see Europe become a more meaningful part of your business?

Throughout 2010 we have had products in France, in UK, in Germany.

And in Germany, in particular, actually, we have done well.

You would see going forward in fourth quarter we will have DEFY and Milestone 2 in particular in a number of countries with a number of operators in Europe.

So we are making progress in Europe even in fourth quarter this year.

In 2011, I think we will have opportunities to expand our presence.

The central question facing us is, will we make a substantial investment to make a big reentry into European market?

And I frankly can't tell you the answer today.

We always have to make the calculation of whether those dollars are better spent in US, China, Latin America or Europe.

We will make that determination as our relationship -- continued improvement in our relationship happens in Europe.

But second half 2011 is the earliest that I can anticipate making that decision.

But we have not made that decision yet.

Maynard Um, UBS.

If I could start with a clarification, Sanjay, you talked about some seasonality in Q1.

Is that a commentary on total handsets or smartphone units?

And then the question is that, you've done a great job of lowering your breakeven point in the Mobile Device business.

If we assume that there is a decline in the handset units in -- and revenue in Q1, even from this quarter's levels and then taking your comment about flat to up sales in marketing in 2011, should we assume that Q1 might go back into the red?

Or are there some other variable cost within the business where you can further lower your breakeven mark?

As you know, we tend not to guide two quarters in advance, so I will not give you precision.

But I understand your question and I'll make the following comments.

First of all, my comments with relation to seasonality were for industry seasonality.

We have seen, over the last few years, between 7% and 10% seasonality.

And we expect that quarter on quarter, from fourth quarter to first quarter we will see a decline in smartphone sales.

As was said earlier, there are some particular competitive situations developing in first quarter.

And of course, we have a large number of new product introductions and execution and timing of those launches will be very important for us.

But as I look more broadly at our portfolio in 2011, I feel extremely comfortable, extremely comfortable, that we are well positioned.

I won't guide you with specificity about some of the particular things that you talked about.

The only thing I would say is that we have been very diligent about managing our cost structure and optimizing our cost structure as the need has arisen, so we will keep that in mind, also.

Matthew Hoffman, Cowen.

Sanjay, you were pro forma profitable with ASPs up and units growing faster than the market, but if I heard you right, it seemed you are pointing more toward the mid range, moving forward.

Was that a signal that ASPs have stopped going up, or will just be going up more slowly, especially here in the fourth quarter?

And I was also hoping we could just get a comment from you on integrating Android's Gingerbread 3.0 on tablets, and maybe what the impact is there on ASPs.

A few comments there -- first of all, your question was, what is my expectation and can I guide to ASP in the fourth quarter?

I have actually -- it really does depend, as you point out, to the product mix.

We have some very, very good high-end products in the marketplace and they're performing extremely well.

But as we see our base expanding, we see more mid-range shipments.

So I can't, with precision, tell you what our ASP will be.

But those are the factors that will drive that.

Going forward in terms of tablets, it's not clear if Gingerbread is the right platform for tablets or not.

I think that will become clear over a period of time.

We are very engaged in the tablet market, and certainly I think tablets have the possibility, depending on the volume and mix, of driving our ASP higher.

Tal Liani, Banc of America.

I have three questions -- actually, two questions.

The first one is, this past quarter you had [firsthand] competition at Verizon with other Android devices.

And in volume, and there was even a buy one/get one free, I think, for Samsung.

So can you describe the environment, what happened at Verizon from all aspects, kind of pricing, margins, advertisement money you had to put in?

What happened when you had new competition coming from multiple vendors?

So that's question number one.

Number two is about accounts payable.

Cash flow was positive, but the majority or all of the increase came from account payable increase.

Can you elaborate on that?

The first question, I think, was what happened with competition in this quarter at Verizon.

I think, if you look at our shipment, I felt that DROID X and DROID 2 continued to perform extremely well.

There is clearly a big increase in Android shipment at Verizon going on, and I believe that was highlighted in the earnings call just recently.

We see HTC and Samsung as our primary competitor in Android, and we feel like we are very well-positioned both with our brand name, with our support, with the consumer satisfaction, with J.D.

Power's satisfaction rating and the quality of our products at Verizon and other carriers in the United States.

And I think that that was reflected somewhat in our results.

In terms of accounts payable?

What was the question?

Can you repeat the question on accounts payable, Tal, please?

If you are on mute, we can't hear you.

Operator, can you get that speaker back, please?

Is that possible?

Mr.

Liani, if you would press star and 1 to enter the phone queue again, please?

Can you hear me now?

We got you.

So, Sanjay, my question was not about the success of Verizon, but about your changes.

Did you have to change anything in the way you deal with Verizon during the quarter because you had new competition?

So did you have to lower prices or did you have to increase the marketing expenses?

I'm trying to understand, how do you change behavior when you have new competition with a carrier for the same kind of class oh phones?

About account payable, cash flow went up but all of the cash flow increase came from accounts payable.

So I'm wondering if there's anything there or it's just quarterly fluctuations.

On the first question, accounts payable, it's strictly timing, guys.

It all relates to linearity of shipments and linearity of products coming in the door.

We pay our bills as they come due, like clockwork, so there's really no fluctuation there as a result of anything other than fluctuations in levels of business.

And, Tal, with respect to how we respond to competitive pressure, I think probably a little of both, probably a little of both.

Certainly, there is greater ASP pressure, but also we look to support our products a little more aggressively with marketing dollars, but probably a little of both.

On the other hand, I think the quality of our product has also shown through and the shipments support that.

Ehud Gelblum, Morgan Stanley.

Just a couple quick ones -- first of all, as we look at the various versions of Android and as it goes into Gingerbread, Honeycomb, etc., there has been some talk that you may not be able to do things like BLUR on future versions of Android.

If you can just talk about if there are modifications to future versions of Android that would limit your ability to do some of the overlays like BLUR and how you would treat that.

Or, if that's not really an issue, that would be helpful to understand that.

And then, following up with some other questions, when you look at your Q4 guidance, you are now talking about the high end of $12 million to $14 million, so that implies a certain number north of $5 million for the fourth quarter.

Can you talk about how you get there vis-a-vis your current main customer base?

Obviously, you're larger at AT&T.

But how much more is China going to be in the mix?

I believe China right now is somewhere around 12% or 13% of your units.

Where does that go in the fourth quarter to get you up almost 1.5 to 2 million units from Q3?

And if you can kind of, again, just talk about at least geographically if not more specific as to how to get from the 3.7 now into the 5 million more, where are they coming from, so that we can feel comfortable that you actually get there without relying continually on, essentially, Verizon and the same guys that you have been?

And then, just for Greg, North America seemed to have slowed in government to -- or decelerated, let's say, to about 5% year-over-year growth versus I believe it was north of 10% last quarter.

Is that just a function of how the seasons work and the ups and downs of the year-over-years, or is there something going on where North America may be slowing going into the end of the year?

I will take the first two parts of your question.

Android OS -- I have no indication from anybody that our ability to differentiate is going to be limited.

I think that question has come up a couple of times, and I've been consistent in my response on that.

In fourth quarter, what will drive our growth?

Two things, really -- one, continued performance of what we call high-tier performance category products.

And then secondly, diversification in the mid tier at other carriers in the United States, but also China and, internationally, Latin America and Europe.

I think those are the things that will drive it.

Generally, there is -- as you know, fourth quarter, there is general uplift in sales in our business; there is that effect.

But also the diversification with mid-tier products will be a very important part of our sales growth.

And on the other hand, I don't want to minimize the importance of DROID X and DROID 2 for us also.

So we should be looking for international perhaps getting as high as 40%?

I don't know that I'll guide you with that precision, but there will be growth in international sales, yes.

As it relates to EMS, North America, as you mentioned, grew 5%.

I think if you take a composite look for all of Q3 across EMS, government grew about 1.5% and enterprise grew about 20%.

So we had very strong performance from the Enterprise Mobility or traditionally the [single] group.

But having said that, backlog was up slightly, generally stable for government and up more strongly for the Enterprise Mobility group.

So I think we are solidly positioned into Q4, and the annual guidance reflects our expectations for the fourth quarter.

If I can squeeze one more in, do you expect government to recover next year, or do you expect it to still be in the 1% to 2% range?

Not going to guide at this point.

Consistent with Sanjay around Mobility, I think we'll give you that color in Q1.

But we feel pretty comfortable coming into Q4 in terms of the disposition of the business, and it's reflected in the guidance we gave.

And I'll update you over the next few months.

Mark McKechnie, Gleacher & Company.

A question for Ed on the cash flow side.

So how much of your cash is onshore?

And then also for Q4, what was your outlook for cash flow?

And then I have a follow-up question for Greg.

I'll give you kind of rough terms, in the area of 45% US, the balance outside North America, and we expect the balance to be roughly comparable as we end the year, in that range.

And then for Q4, in terms of cash flow?

Overall cash flow -- so, as you know, we have 530 or thereabouts debt payment due in the quarter.

We're going to try to offset as much of that as possible.

If I had to range it for you, we are probably in the 8.7 to 8.8 range, is where we are.

And there's a lot of things that could happen with foreign currency fluctuations, as we mentioned on the call, that could leave it out as well as -- and as well as linearity in the business.

So I think something in the 8.7 to 8.8 range is where you should be looking right now.

Got you, and then, thank you.

For Greg, this LTE deal -- kind of curious as to why you selected Ericsson over Nokia.

And then also, how will that partnership impact your infrastructure business over time, and when do you expect that LTE with Ericsson to ramp?

So Ericsson was selected after a pretty comprehensive due diligence process of a couple quarters with the public safety team.

We picked Ericsson because they lead worldwide.

Both in market share domestically in the US as well as worldwide they are number one in cellular-based wireless infrastructure.

We also were very impressed with the quality of their LTE development.

The Ericsson discussions were ongoing before we did the deal with Nokia Siemens.

Now, having said that, we're also evaluating Nokia Siemens, and there is nothing to preclude or prevent us from adding an additional partner beyond Ericsson.

But, we were impressed with the capability of their technology.

Obviously, there's significant footprint in incumbency, and we think it's a great partnership.

The interesting part of that -- it doesn't -- so we are divesting of the Wireless Networks business, and what you'll see is Motorola Solutions have a very strong position in public safety LTE, or private network LTE.

So we are developing LTE infrastructure for private networks and for private broadband within our public safety group.

As we interoperate or roam onto a carrier network, we will take the e-node B equipment from Ericsson, harden it, provide encryption and software, secure it and provide it as an overall public safety solution with the Ericsson base station embedded in an overall Motorola Solutions architecture and solution to our end-user customers.

So we're very optimistic about it.

We think it's a very important strategic alliance.

But, to the extent there's other opportunity with Nokia Siemens, for us to consider their infrastructure, we are able to do that.

Simona Jankowski, Goldman Sachs.

Sanjay, just a couple of questions -- one is, if I got these numbers correctly, I think you said your international sales were up about 10% sequentially.

And within that, you cited China's shipments up 17% and Latin America up 20%.

Assuming I got those numbers right, that would seem to imply that either something else fell off quite a bit, or that ASPs fell off.

So can you just help explain the full picture there?

I don't think that ASPs fell off.

Just to make sure we got your question correct, could you repeat the question?

Sorry.

Yes.

And I might not have gotten all the numbers right, but I think you said international sales in Mobile Devices were up 10% sequentially and China's shipments were up 70% and Latin American shipments up 20%.

And so, since those two are the two biggest chunks of international, that would seem to have driven more than the 10% sequential growth.

So just wanted to see what helps it add up to that 10% overall growth.

Simona, I think we will have to get back to you with precision on that one.

We don't see the conclusion that you've drawn.

We'll get back to you on that.

Sure, sure.

And then the second question was on the DROID Pro, and you highlighted an increased focus on the enterprise.

Can you just expand on that a little bit?

So is it going to be specific to introducing a product similar to this one over time, or is it going to also include you investing in your own enterprise-oriented sales force?

Or do you think you're going to be leveraging more the sales force and the marketing efforts of your partners like Google or the carriers as you ramp up your focus on the enterprise?

Simona, it's going to be all three.

We will clearly leverage the efforts of our carrier partners.

And, as you know, Google has a presence in this space as well.

But we will invest modestly to grow and support enterprise sales also, from the point of view of making sure we have specific call support for CIOs, that we have sales calling on Fortune 500.

So we will have that.

But you remember, our strategy here is a very specific strategy, in the first instance.

The strategy is to deliver devices which consumers like to use as a consumer device, but it has the enterprise capability which allows for CIOs to accept it into their enterprises.

So our sales effort is to make sure that CIOs don't bar these devices or put it in an excepted list.

But the sale is to the consumers.

80% of people in enterprises pay for their own device, and it is to that audience that we are selling primarily.

Kulbinder Garcha, Credit Suisse.

A question cash flow and how it's going to be used -- so you've got $5.6 billion of net cash.

You will probably generate $1 billion prior to separation, and you are going to get $1.3 billion from NSN.

So that will take you to about $8 billion of cash.

I think you've implied that devices would get $3.5 billion.

So the question for Greg is, what are you going to use this cash pile, which could be approaching $5 billion by the end of Q1 -- is it something that we should think about cash distribution?

I assume acquisitions of any significant size isn't something that you want.

But maybe you could comment on that.

So, Kulbinder, just a couple things as it relates to some of the assumptions that you outlined.

Ed Fitzpatrick talked about ending the year, call it at approximately $8.8 billion of cash.

That assumes we pay down, and we plan to do that, the $527 million note in November.

But I think you are also, in your calculus there, assuming that we would close networks in fiscal 2010.

And we have guided that that may occur in early 2011.

So that shouldn't be assumed in the calculation of the cash and of your forecast that you're calculating.

Having said that, we obviously remain co- -- Motorola Solutions will be keeping the debt.

We'll also have other obligations.

We'll have to look at our net cash position as we exit Q4 and go into next year.

I think it's premature to speculate on how we ultimately make decisions with Motorola Solutions in the optimal allocation of capital.

But we want to finish the year strong across all the businesses.

Sanjay and I want to successfully separate the firm sometime in Q1 of 2011.

And then, in terms of future capital allocation plans and what we would do, we would update you accordingly at that point in time.

Okay, and just one follow-up here for Sanjay.

I just want to understand the comments of diversification.

As I understand, you're going to bring out new products, new devices, converge devices as well and trying to go international.

But for all of this to play out, it's going to take some time.

Is it fair to assume that we're looking at maybe a year from now until your sales split, is much more resembling what the rest of the handset or the smartphone industry looks like, as opposed to this very significant American bias that you have today?

Kulbinder, I caught most of what you asked.

I think your question was with respect to diversification and the timing thereof.

Yes.

I would say that, clearly, we have a North American bias to our sales focus at the moment, and we are looking to diversify both within the United States as well as outside of the United States.

And you're right; it won't happen instantly.

But I think we feel that diversification, which is already happening, and the increased focus on diversifying, combined with our opportunity that exists for us within the convergence of computing and mobility.

I think that such competitive pressures as we may see in the first quarter, we will be able to cope with that circumstance in a relatively good way.

I would actually like to take this opportunity to say one more thing, that I see what is happening in Home and the convergence between ourselves and Home as being a very important factor.

And in fact, I'd like Dan to just comment on -- Dan's view on what is happening in Home and the convergence opportunities there.

I think, as we now have been at this combined Mobile Device and Home for a little over eight months, it's very clear that some of the ideas that led to putting these two businesses together really are becoming much more positive.

We see many opportunities for content linkages between the set-top and the mobile device world, sharing content back and forth, and are focused on being able to deliver solutions in 2011 that demonstrate that capability.

Sanjay touched on the tablet space and our future participation in this space, and that creates another new great opportunity in the converged world when you think about adding the screen in the home and the ability to supplement your large viewing screen with a smaller viewing screen simultaneously around content.

So collectively, we have energy today focused around expanding that capability that could be provided on the set-top as well as in the Mobile space to enable it.

And finally I'd just say, on the convergence piece, as we look at what MOTOBLUR is doing today, and we talked about the EDGE capability from the home, linking those together and being able to enable us to manage and enhance those capabilities to the consumer and really bring this converged world such that the consumer gets their content on any of their device that they want creates some wonderful opportunities into the future.

So you will start beginning to see, in 2011, some converged experiences from us.

And then, as we move forward, more and more opportunity to differentiate our products, both Home, Mobile, in this converged world.

Jim Suva, Citi.

Thank you, and congratulations, Motorola, to you and your entire team.

A quick question on the handset side -- Motorola really has a leading position in Android as an early adopter of it.

But it's pretty clear that some of the bigger players such as Samsung and such have kind of, for the first part of this year, not come to market.

Sanjay, can you talk a little bit about your positioning relative to how you see the additional competition heating up there?

Do you think you can get to industry average smartphone profitability longer-term?

Or I guess, longer-term, should industry average profitability come lower?

And where do you see that industry average profitability going for the Android marketplace?

Jim, definitely, I see Android ecosystem is expanding pretty dramatically.

And Samsung has entered with some very good products in the marketplace.

Galaxy, I think, is a very competitive, good product in the marketplace.

HTC continues to deliver good products in the marketplace.

On the other hand, I think you're right in characterizing Motorola as the leading, if not one of the leading handset manufacturers here.

I see no reason for us not to get to industry-standard profitability and a gross margin in profitability over the long period of time.

And I see -- in my guidance, I've always said that this is going to be a high-single-digit/low-double-digit kind of number, is where we want to end up in terms of our operating earnings in the long-term.

And clearly, as I've said in a number of recent comments, I see that the job of transforming this organization is half done.

We have some more work to do in terms of becoming a much more software-centric, experience-focused organization.

But in one year we have delivered 22 products.

Our focus on execution, or focus on innovation and differentiation is far greater today, and I feel we are very well positioned not just in the fundamental transformation that we are making in the organization, but the response we are getting to the portfolio in 2011 from our customers.

So again, we can think that we have a good portfolio.

Until our customers accept our products and range our products, we don't have real basis to be optimistic.

On the basis of that feedback, on the basis of the ranging that we are seeing of our products not just in the United States but elsewhere, I feel pretty comfortable that we are making good progress.

And more precisely, I feel that we should definitely get to industry-level profitability.

Thanks, and congratulations to you and your team.

Edward Snyder, Charter Equity.

I want to build on Matt Hoffman's questions a little bit.

You've been big in the US; and, as you stated, the market is getting a lot more competitive, fast.

So it seems inevitable that your non-US growth would probably outstrip the US fairly soon.

I think that's kind of folded into your guidance here.

But what's the cost and profitability of a lot of the markets you're entering into?

It seems the US, as I think we all know, is one of the most lucrative smartphone market out there, and you are getting big carrier subsidies, which kind of leave you some of your marketing spend.

That sounds like it's all changing coming up, ergo the I guess focus on the mid-tier phones.

Why shouldn't we expect to see OpEx in handsets as a percent of unit sales to start going up from here on out, given, A, the composition in the US; and, B, your focus on international markets?

Ed, that's a very good question.

First of all, what I call the performance tier or the high tier of smartphone market today carries a disproportionately high amount of gross margin with it because, as you know, of the price points that has been set -- $199 and $99 -- and the lifetime ownership cost of these devices is such that you are biased towards buying higher tier smart phones in US.

I actually continue to believe that we will do well, if not extremely well, in that tier.

So I think that in your question you assume that the competitive pressures there force us to diversify in the middle.

I don't think it's a matter of one or the other; I think that you will see us do both.

You will see us focus very, very much in leading in the performance tier, because the halo of performance tier is probably just as important in driving mid-tier as anything else.

And the performance in North America actually is just as important in driving outside US smartphone sales as anything else.

You will see our brand name being very relevant in China and Latin America, and we will focus there as a matter of first step.

But Europe, I think, is a very important marketplace.

And the dynamics there, particularly right now, potentially create an opportunity for us to capitalize on.

So we will focus on those things.

But we are, I think -- we have not, by the way, guided you to improving OpEx as our sales increase.

But I really believe that performance tier is important for us to succeed on, as I think you imply in your comments.

But the diversification with mid tier is also important because the pace of smartphone is increasing, and more feature phone consumers are coming to smartphone, and we have to win in both places.

And then as a follow-on, if I could -- maybe Dan should jump in here.

It seems to be clear that Motorola is doing the hardware for this tablet, Google is doing all the software for it.

And I can see the thesis that kind of a converged solution like Apple is approaching in terms of their ecosystem would be beneficial.

But doesn't this put you at a steep disadvantage if you're not controlling the OS and the software and the whole look and feel of it from a UI point of view, versus, say, Apple and maybe some of your other competitors?

Well, I think this goes back to the fundamental discussion around OS that I think we've had multiple times here.

My view is that, over a period of time, whenever we do what is called a Google experience device, clearly Google is disproportionately responsible for developing the software.

But over a period of time we have demonstrated that we can build on that platform and differentiate.

And I think tablet is no less open to that differentiation.

And I think I'll let Dan comment on his views and some of the possibilities as that convergence occurs with Home.

And this is the place where I think we are better positioned than anyone else in the industry.

I think, Ed, when you look at the opportunity to provide the linkage up between the Home and the Mobile space, whether it's a tablet or another mobile device, the fact that we have a beachhead today in the home space, it's continuing to evolve to an IP video world inside the home.

And that provides us with the opportunity to add new software capability into those home devices that we can then link together with the capability.

Running on top of the OS sitting in the tablet gives us as strong a position as anybody to own this converged experience opportunity in the future.

And then finally, Sanjay, there was a lot of chatter in the last couple weeks about softness in the end part of the quarter for Motorola and a few other OEMs.

How linear was the quarter?

Would you say it started stronger than it ended?

Nothing remarkable to report there, Ed.

I saw that, and I won't comment more precisely, except nothing remarkable in the development of this quarter.

Thanks, Ed; operator, we'll take our final question.

Tavis McCourt, Morgan Keegan.

First, a clarification for Sanjay.

I think you said 32% of handsets were sold outside of North America.

Can you give us the percentage of smart phones that are now outside the US or outside North America?

And then for Greg, you mentioned you didn't want to talk about what you may or may not do with the cash.

But can you at least talk about, do you believe that the capitalization upon the separation is suboptimal?

Can we at least expect some desire to put the cash to work, even if you don't want to talk about what exactly it will be used for?

First of all, I said that 32% of the revenue was outside of US.

And in terms of the precise numbers, I don't think we've provided you that guidance.

Let me just take one second on the cash question, and I'll turn it over to Greg.

I really think that, with the cash performance that Motorola as an organization has delivered this year, I think we place ourselves in a very good position to make both parts, Motorola Solutions and Motorola Mobility, a strong, vibrant organization with a solid balance sheet.

And I think that that's the primary purpose right now for the organization, is to make sure that both parts of the organizations are very well positioned to succeed in the marketplace.

In terms of what Greg will do with the cash afterwards, I think he can comment.

Yes, Tavis, I think your question was more around Motorola Solutions' balance sheet post-separation.

And again, just to remind you that, as Sanjay just referenced, we want to position both businesses for sustainable long-term success.

We have articulated that, for Motorola Solutions, at separation we are targeting solid investment-grade ratings.

So that, by definition, drives us to a certain cash position, and we will also look to optimize and maximize the US cash disposition within the overall balance.

Again, after that, I think we'll have other things to consider.

The Motorola Solutions business is a market-leading business in public safety, it's market-leading in mobile computing; in advanced data capture, we'll have a very strong IPR position, and from an organic standpoint, has a solid path of growth.

Irrespective of some of the headwinds we've had with state and local government budgets, we are still growing and the business is still contributing a 16-digit -- 16% operating margin business.

So the organic business is strong.

The opportunities to grow it organically are strong.

After separation, we will evaluate other uses to put to use for the optimal capital allocation for shareholder return.

Thanks a lot.

Thanks, Tavis.

I want to remind everyone that an audio replay and this morning's slide presentation will be available on our website shortly after this call.

During this call, we have made a number of forward-looking statements within the meaning of applicable federal securities law.

Forward-looking statements are any statements that are not historical facts.

These forward-looking statements are based on the current expectations of Motorola, and we can give no assurance that any future results or events discussed will be achieved.

Any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date.

Such forward-looking statements include, but are not limited to, our comments and answers relating to the following topics -- plans and progress relating to the separation of Motorola's businesses into two independent publicly-traded companies and the sale of our Networks business; guidance for Motorola's earnings per share; future strategic plans; potential cost reductions; expected timing for the announcement, launch and shipment of new products; expectations for the volume and financial impact of handset shipments, including smartphones; guidance for future sales, operating expenses, expected cash position, margins, profitability, ASP, demand trends or market share for each of Motorola's businesses and their products.

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

Information about the factors that could cause and in some cases have caused such differences can be found in this morning's press release on pages 17 through 29 in Item 1-A of Motorola's 2009 annual report on Form 10-K and in Motorola's other SEC filings.

Thank you for joining us this morning.

This now concludes our call.

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