Table	of	Contents

# UNITED	STATES

# SECURITIES	AND	EXCHANGE	COMMISSION

# ANNUAL	REPORT	PURSUANT	TO	SECTION	13	OR	15(d)	OF	THE	SECURITIES

EXCHANGE	ACT	OF	1934

For	the	fiscal	year	ended	December	31,	2008

# TRANSITION	REPORT	PURSUANT	TO	SECTION	13	OR	15(d)	OF	THE	SECURITIES

For	the	transition	period	from										to

Commission	File	number	1-7221

# MOTOROLA,	INC.

(Exact	name	of	registrant	as	specified	in	its	charter)

DELAWARE

(State	of	Incorporation)

(I.R.S.	Employer	Identification	No.)

1303	East	Algonquin	Road,	Schaumburg,	Illinois	60196

(Address	of	principal	executive	offices)

(Registrant's	telephone	number)

Securities	registered	pursuant	to	Section	12(b)	of	the	Act:

Title	of	Each	Class

# Common	Stock,	$3	Par	Value	per	Share

Name	of	Each	Exchange	on	Which	Registered

New	York	Stock	Exchange

# Chicago	Stock	Exchange

# Securities	registered	pursuant	to	Section	12(g)	of	the	Act:

Indicate	by	check	mark	if	the	registrant	is	a	well-known	seasoned	issuer,	as	defined	in	Rule	405	of	the	Securities	Act.		Yes	þ					No	o

Indicate	by	check	mark	if	the	registrant	is	not	required	to	file	reports	pursuant	to	Section	13	or	15(d)	of	the	Securities	Exchange	Act	of	1934.		Yes	o					No	þ

Indicate	by	check	mark	whether	the	registrant	(1)	has	filed	all	reports	required	to	be	filed	by	Section	13	or	15(d)	of	the	Securities	Exchange	Act	of	1934	during	the	preceding	12	months (or	for	such	shorter	period	that	the	registrant	was	required	to	file	such	reports),	and	(2)	has	been	subject	to	such	filing	requirements	for	the	past	90	days.		Yes	þ					No	o

Indicate	by	check	mark	if	disclosure	of	delinquent	filers	pursuant	to	Item	405	of	Regulation	S-K	is	not	contained	herein,	and	will	not	be	contained,	to	the	best	of	registrant's	knowledge, in	definitive	proxy	or	information	statements	incorporated	by	reference	in	Part	III	of	this	Form	10-K	or	any	amendment	to	this	Form	10-K.		o

Indicate	by	check	mark	whether	the	registrant	is	a	large	accelerated	filer,	an	accelerated	filer,	a	non-accelerated	filer,	or	a	smaller	reporting	company.	See	the	definitions	of	"large accelerated	filer,"	"accelerated	filer"	and	"smaller	reporting	company"	in	Rule	12b-2	of	the	Exchange	Act.	(Check	one):

					Large	accelerated	filer	þ Accelerated	filer	o Non-accelerated	filer	o Smaller	reporting	company	o (Do	not	check	if	a	smaller	reporting	company)

Indicate	by	check	mark	whether	the	registrant	is	a	shell	company	(as	defined	in	Rule	12b-2	of	the	Exchange	Act).		Yes	o					No	þ

The	aggregate	market	value	of	voting	and	non-voting	common	equity	held	by	non-affiliates	of	the	registrant	as	of	June	28,	2008	(the	last	business	day	of	the	Registrant's	most	recently completed	second	quarter)	was	approximately	$16.7	billion	(based	on	closing	sale	price	of	$7.35	per	share	as	reported	for	the	New	York	Stock	Exchange-Composite	Transactions).

# DOCUMENTS	INCORPORATED	BY	REFERENCE

Portions	of	the	registrant's	definitive	Proxy	Statement	to	be	delivered	to	stockholders	in	connection	with	its	Annual	Meeting	of	Stockholders	to	be	held	on	May	4,	2009,	are incorporated	by	reference	into	Part	III.

|  |  | Page |
| :--- | :--- | :--- |
| PART\tI |  | 1 |
| Item\t1. | \t Business | 1 |
| General |  | 1 |
| Business\tSegments |  | 1 |
| Mobile\tDevices\tSegment | Mobile\tDevices\tSegment | 1 |
| Home\tand\tNetworks\tMobility\tSegment | Home\tand\tNetworks\tMobility\tSegment | 5 |
| Enterprise\tMobility\tSolutions\tSegment | Enterprise\tMobility\tSolutions\tSegment | 10 |
| Other\tInformation |  | 15 |
| Financial\tInformation\tAbout\tSegments | Financial\tInformation\tAbout\tSegments | 15 |
| Customers |  | 15 |
| Backlog |  | 16 |
| Research\tand\tDevelopment | Research\tand\tDevelopment | 16 |
| Patents\tand\tTrademarks | Patents\tand\tTrademarks | 16 |
| Environmental\tQuality | Environmental\tQuality | 16 |
| Employees |  | 16 |
| Financial\tInformation\tAbout\tGeographic\tAreas | Financial\tInformation\tAbout\tGeographic\tAreas | 16 |
| Available\tInformation |  | 16 |
| Item\t1A. | \t Risk\tFactors | 18 |
| Item\t1B. | \t Unresolved\tStaff\tComments | 30 |
| Item\t2. | Properties | 30 |
| Item\t3. | \t Legal\tProceedings | 30 |
| Item\t4. | Submission\tof\tMatters\tto\ta\tVote\tof\tSecurity\tHolders | 34 |
| Executive\tOfficers\tof\tthe\tRegistrant | Executive\tOfficers\tof\tthe\tRegistrant | 34 |
| PART\tII |  | 35 |
| Item\t5. | \t Market\tfor\tRegistrant's\tCommon\tEquity,\tRelated\tStockholder\tMatters\tand\tIssuer\tPurchases\tof\tEquity\tSecurities | 35 |
| Item\t6. | Selected\tFinancial\tData | 37 |
| Item\t7. | \t Management's\tDiscussion\tand\tAnalysis\tof\tFinancial\tCondition\tand\tResults\tof\tOperations | 38 |
| Item\t7A. | \t Quantitative\tand\tQualitative\tDisclosures\tAbout\tMarket\tRisk | 78 |
| Item\t8. | Financial\tStatements\tand\tSupplementary\tData | 82 |
| Item\t9. | \t Changes\tin\tand\tDisagreements\twith\tAccountants\ton\tAccounting\tand\tFinancial\tDisclosure | 133 |
| Item\t9A. | \t Controls\tand\tProcedures | 133 |
| Item\t9B. | \t Other\tInformation | 135 |
| PART\tIII |  | 135 |
| Item\t11. | \t Executive\tCompensation | 135 |
| Item\t12. | Security\tOwnership\tof\tCertain\tBeneficial\tOwners\tand\tManagement\tand\tRelated\tStockholder\tMatters | 135 |
| Item\t13. | \t Certain\tRelationships\tand\tRelated\tTransactions,\tand\tDirector\tIndependence | 135 |
| Item\t14. | Principal\tAccounting\tFees\tand\tServices | 135 |
| PART\tIV |  | 136 |
| Item\t15. | \t Exhibits\tand\tFinancial\tStatement\tSchedules | 136 |
| 15\t(a)\t(1) | Financial\tStatements | 136 |
| 15\t(a)\t(2) | Financial\tStatement\tSchedule\tand\tIndependent\tAuditors'\tReport |  |

# PART	I

Throughout	this	10-K	report	we	"incorporate	by	reference"	certain	information	in	parts	of	other	documents	filed	with	the	Securities	and	Exchange Commission	(the	"SEC").	The	SEC	allows	us	to	disclose	important	information	by	referring	to	it	in	that	manner.	Please	refer	to	such	information.

We	are	making	forward-looking	statements	in	this	report.	In	"Item	1A:	Risk	Factors"	we	discuss	some	of	the	risk	factors	that	could	cause	actual results	to	differ	materially	from	those	stated	in	the	forward-looking	statements.

"Motorola"	(which	may	be	referred	to	as	the	"Company,"	"we,"	"us,"	or	"our")	means	Motorola,	Inc.	or	Motorola,	Inc.	and	its	subsidiaries,	or one	of	our	segments,	as	the	context	requires.	"Motorola"	is	a	registered	trademark	of	Motorola,	Inc.

# Item	1:	Business

# General

We	provide	technologies,	products	and	services	that	make	a	broad	range	of	mobile	experiences	possible.	Our	portfolio	includes	wireless	handsets, wireless	accessories,	digital	entertainment	devices,	wireless	access	systems,	voice	and	data	communications	systems,	and	enterprise	mobility	products. With	the	rapid	convergence	of	fixed	and	mobile	broadband	Internet	and	the	growing	demand	for	next-generation	mobile	communications	products	by people,	businesses	and	governments,	we	are	focused	on	high-quality,	innovative	products	that	meet	the	expanding	needs	of	our	customers	around	the world.

# We	operate	in	the	following	businesses:

•	The	Mobile	Devices	business	designs,	manufactures,	sells	and	services	wireless	handsets	with	integrated	software	and	accessory	products,	and licenses	intellectual	property.

•	The	Home	and	Networks	Mobility	business	designs,	manufactures,	sells,	installs	and	services:	(i)	digital	video,	Internet	Protocol	video	and broadcast	network	interactive	set-tops,	end-to-end	video	delivery	systems,	broadband	access	infrastructure	platforms,	and	associated	data	and voice	customer	premise	equipment	to	cable	television	and	telecom	service	providers,	and	(ii)	wireless	access	systems,	including	cellular infrastructure	systems	and	wireless	broadband	systems,	to	wireless	service	providers.

•	The	Enterprise	Mobility	Solutions	business	designs,	manufactures,	sells,	installs	and	services	analog	and	digital	two-way	radio,	voice	and	data communications	products	and	systems	for	private	networks,	wireless	broadband	systems	and	end-to-end	enterprise	mobility	solutions	to	a	wide range	of	enterprise	markets,	including	government	and	public	safety	agencies,	as	well	as	retail,	energy	and	utilities,	transportation,	manufacturing, healthcare	and	other	commercial	customers.

Motorola	is	a	corporation	organized	under	the	laws	of	the	State	of	Delaware	as	the	successor	to	an	Illinois	corporation	organized	in	1928.	Motorola's principal	executive	offices	are	located	at	1303	East	Algonquin	Road,	Schaumburg,	Illinois	60196.

# Business	Segments

We	report	financial	results	for	the	following	three	operating	business	segments:

# Mobile	Devices	Segment

The	Mobile	Devices	segment	("Mobile	Devices"	or	the	"segment")	designs,	manufactures,	sells	and	services	wireless	handsets	with	integrated software	and	accessory	products,	and	licenses	intellectual	property.	In	2008,	the	segment's	net	sales	represented	40%	of	the	Company's	consolidated	net sales.

# Principal	Products	and	Services

Our	wireless	subscriber	products	include	wireless	handsets	and	related	software	and	accessory	products.	We	also	sell	and	license	our	intellectual property.	We	market	our	products	globally	to	carriers	and	consumers	through	direct	sales,	distributors,	retailers	and,	in	certain	markets,	through	licensees.

# Our	Industry

Total	industry	shipments	of	wireless	handsets	(also	referred	to	as	industry	"sell-in")	increased	to	approximately	1.2	billion	units	in	2008,	a	5% increase	compared	to	2007.	Demand	from	new	subscribers	was	strong	in	emerging	markets,	led	by	India	and	China.	During	the	second	half	of	2008,	a global	economic	downturn	impacted	the	wireless	handset	industry,	resulting	in	the	slowing	of	end-user	demand.

The	ongoing	downturn	in	the	global	economy	has	many	industry	forecasters	predicting	a	challenging	2009	for	the	wireless	handset	industry,	with many	predicting	industry	handset	unit	shipments	to	decline	approximately	10%	for	the	full	year	2009	compared	to	2008.	This	would	be	the	first	decline	in annual	industry	handset	unit	shipments	since	2001.	The	expected	decline	would	be	a	result	of	both	slowing	growth	in	the	emerging	markets	and	lower replacement	sales	in	highly-penetrated	markets.

Beyond	2009,	we	expect	growth	to	return	to	the	wireless	handset	industry.	We	believe	growth	rates	will	be	in	the	mid	single	digits	for	the	years	2010 and	2011,	compared	to	the	15%	CAGR	experienced	by	the	industry	from	2004	through	2008.	Although	slowing,	growth	is	expected	to	continue	to	be driven	primarily	by	demand	from	new	subscribers	in	emerging	markets	and	replacement	sales	from	the	current	subscriber	base.	As	growth	in	the	overall industry	for	mobile	wireless	handsets	slows,	we	expect	smartphones	(devices	that	primarily	have	an	open	operating	system	and	provide	the	opportunity to	develop	and	run	native	applications)	to	be	the	fastest	growing	market	segment.

# Our	Strategy

Motorola	seeks	to	be	a	leading	supplier	of	wireless	handsets	and	mobile	experiences	to	customers	globally.	To	accomplish	this	objective,	our strategy	is	focused	on	simplifying	product	platforms,	enhancing	our	mid-	and	high-tier	product	portfolio,	and	strengthening	our	position	in	priority markets.	We	have	taken	significant	actions	in	2008	to	simplify	our	wireless	handset	platforms	and	enhance	our	product	portfolio,	while	reducing	the	size and	cost	structure	of	the	Mobile	Devices	business.	These	actions	will	accelerate	our	speed	to	market	with	new	products,	allow	us	to	offer	richer	consumer experiences	and	improve	our	financial	performance.

Simplifying	product	platforms	is	an	essential	component	of	our	overall	strategy.	We	have	reduced	the	number	of	product	platforms	that	we	support, increasing	our	emphasis	on	3G	and	smartphone	devices	and	maintaining	our	focus	on	CDMA	and	iDEN.	We	are	implementing	aggressive	plans	to rationalize	both	hardware	and	software	platforms	in	order	to	reduce	the	complexity	of	our	product	platforms	and	system	architectures.	Our	hardware platforms	will	leverage	fewer	chipset	suppliers	for	our	handsets.	In	addition,	our	software	platforms	will	focus	on	Android	(a	Google-developed,	royalty- free	platform),	Windows	Mobile	(a	Microsoft	platform)	and	P2K	(a	Motorola	internal,	proprietary	platform).	We	will	also	continue	to	focus	on	our proprietary	iDEN	technology	and	the	CDMA	software	platforms.	CDMA	and	iDEN	are	technologies	in	which	our	segment	has	traditionally	maintained	a strong	market	share	position.	Success	in	these	technologies	also	aligns	with	our	focus	on	priority	markets.	These	steps	will	provide	Mobile	Devices	with the	ability	to	streamline	our	portfolio,	emphasizing	product	development	and	innovation,	while	also	addressing	the	changing	marketplace.

As	the	market	evolves	to	reflect	the	emergence	of	converged	wireless	devices,	mobile	internet,	social	networking,	navigation	and	messaging,	the	shift from	"voice-centric"	devices	to	"data-centric"	devices	is	expected	to	continue.	These	devices,	which	include	smartphones,	deliver	unique	consumer experiences	and	require	complete	"end-to-end"	solutions	that	incorporate	various	applications	and	services.	By	utilizing	the	smartphone	platforms,	we will	provide	a	broad	array	of	devices,	targeted	at	delivering	computer-like	functionality,	such	as	web	browsing	and	email,	in	both	our	mid-	and	high-tier offerings.	Over	the	next	12	to	18	months	our	primary	smartphone	development	will	be	based	on	the	Android	operating	system.	As	new	generations	of Windows	Mobile	enter	the	market,	we	intend	to	increase	our	focus	on	this	platform	as	well.	We	will	also	leverage	relationships	with	partners	and developers	in	order	to	provide	the	necessary	applications	and	services	to	support	the	"end-to-end"	solutions	desired	by	our	consumers.	We	intend	to utilize	our	experience	with	the	Linux	/	Java	platform	and	leverage	our	assets	from	previous	Linux/Java	investments,	to	deliver	compelling	applications and	user	experiences,	such	as	more	highly	integrated	social	networking	experiences.

In	addition	to	our	portfolio	streamlining	and	enhancement	efforts,	over	the	next	year	we	will	also	increase	our	focus	in	priority	markets.	These markets	will	include	North	America,	Latin	America	and	parts	of	Asia,	including	China.	Historically,	these	are	regions	in	which	we	have	experienced strong	market	share	and	brand	position.	Additionally,	these	regions	have	represented	a	significant	portion	of	the	segment's	overall	business.	We	will	also continue	to	leverage	our	brand	position	in	these	markets.	In	other	geographies,	we	will	prioritize	and	make

investments	commensurate	with	the	competitiveness	of	our	portfolio.	Longer	term,	we	plan	to	compete	in	all	major	markets.

Along	with	our	mobile	handset	initiatives,	we	have	also	increased	focus	in	our	accessories	portfolio	to	deliver	complete	mobile	experiences	and	to complement	the	features	and	functionalities	of	wireless	handsets.	Expanding	our	accessory	compatibility	across	all	brands	of	wireless	handsets	and Bluetooth-enabled	devices,	as	well	as	into	spaces	such	as	navigation,	will	provide	greater	opportunities	for	growth.

We	continue	to	invest	in	next-generation	technologies	for	wireless	devices	based	on	WiMAX,	High-Speed	Downlink	Packet	Access	("HSDPA")	and Long-Term	Evolution	("LTE").	We	believe	a	strong	intellectual	property	portfolio	is	critical	to	our	long-term	success	and	to	ensuring	that	we	maintain	a favorable	strategic	position	that	demonstrate	unique	experiences	and	value	for	consumers.	In	application	services,	we	continue	to	work	with	third	parties to	improve	upon	and	develop	our	services	and	applications,	which	will	deliver	rich	experiences	to	the	customer.	Motorola	is	committed	to	investing	in evolving	technologies	to	ensure	that	we	continue	to	deliver	enhanced	and	differentiated	wireless	handset	experiences	to	consumers.

# Customers

The	segment	has	several	large	customers	located	throughout	the	world.	In	2008,	aggregate	net	sales	to	the	segment's	five	largest	customers represented	approximately	41%	of	the	segment's	net	sales.	The	loss	of	one	or	more	of	these	customers	could	have	a	material	adverse	effect	on	the segment's	business.	In	addition	to	selling	directly	to	carriers	and	operators,	our	Mobile	Devices	business	also	sells	products	through	a	variety	of	third- party	distributors	and	retailers,	which	account	for	approximately	24%	of	the	segment's	net	sales.

Uncertainty	about	current	and	future	global	economic	conditions	may	cause,	and	in	some	cases	has	caused,	our	customers	to	maintain	tighter inventory	management.	We	experienced	this	beginning	in	the	fourth	quarter	of	2008	and	expect	this	trend	to	continue	into	2009,	which	could	impact	the timing	of	future	sales.

The	U.S.	market	continued	to	be	the	segment's	largest	individual	market,	accounting	for	approximately	44%	of	the	segment's	net	sales	in	2008, compared	to	approximately	46%	of	the	segment's	net	sales	in	2007.	Approximately	56%	of	the	segment's	net	sales	in	2008	were	to	markets	outside	the U.S.,	the	largest	of	which	were	Brazil,	China	and	Mexico.	Compared	to	2007,	the	segment	experienced	sales	declines	in	each	of	its	four	major	sales regions:	North	America,	the	Europe,	Middle	East	and	Africa	("EMEA")	region,	Asia	and	Latin	America.

# Competition

The	segment	believes	its	overall	market	share	for	the	full	year	2008	was	approximately	8%,	making	it	the	fourth-largest	worldwide	supplier	of wireless	handsets	on	a	full-year	basis.	For	full	year	2007,	the	segment's	overall	market	share	was	approximately	14%.	We	estimate	our	market	share	in the	fourth	quarter	of	2008	to	be	approximately	6%,	a	decrease	of	approximately	6	percentage	points	versus	the	fourth	quarter	of	2007.	The	significant decrease	was	primarily	driven	by	the	segment's	limited	product	offerings	in	critical	market	segments,	particularly	3G	products,	including	smartphones, and	very	low-tier	products.

The	segment	experiences	intense	competition	in	worldwide	markets	from	numerous	global	competitors,	such	as	Nokia,	Samsung,	LG	and	Sony- Ericsson.	In	2008,	the	five	largest	handset	manufacturers	together	held	an	aggregate	market	share	of	approximately	80%,	compared	to	83%	at	the	end	of 2007.

Smartphones	emerged	as	a	major	product	in	the	wireless	handset	market	during	2008.	Manufacturers	with	strong	smartphone	portfolios	have benefited	from	this.	Motorola	is	committed	to	enhancing	its	smartphone	portfolio	to	compete	more	effectively	and	will	focus	on	Android	and	Windows Mobile	software	platforms	for	these	products,	while	also	continuing	to	focus	on	our	proprietary	iDEN	technology	and	the	CDMA	software	platforms.

General	competitive	factors	in	the	market	for	the	segment's	products	include:	overall	quality	of	user	experience;	design;	time-to-market;	brand awareness;	technology	offered;	price;	product	features,	performance,	quality,	delivery	and	warranty;	the	quality	and	availability	of	service;	and relationships	with	key	customers.

# Payment	Terms

The	segment's	customers	and	distributors	buy	from	us	regularly	with	payment	terms	that	are	competitive	with	current	industry	practices.	These terms	vary	globally	and	generally	range	from	cash-with-order	to	60	days.

Extended	payment	terms	beyond	60	days	are	provided	to	certain	customers	on	a	limited	basis.	A	customer's	outstanding	credit	at	any	point	in	time	is limited	to	a	predetermined	amount	as	established	by	the	Company.

# Regulatory	Matters

Radio	frequencies	are	required	to	provide	wireless	services.	The	allocation	of	frequencies	is	regulated	in	the	U.S.	and	other	countries,	and	limited spectrum	space	is	allocated	to	wireless	services.	The	growth	of	the	wireless	and	personal	communications	industry	may	be	affected	if	adequate frequencies	are	not	allocated	or,	alternatively,	if	new	technologies	are	not	developed	to	better	utilize	the	frequencies	currently	allocated	for	such	use. Industry	growth	may	also	be	affected	by	the	cost	of	the	new	licenses	required	to	use	frequencies	and	any	related	frequency	relocation	costs.

The	U.S.	leads	the	world	in	spectrum	deregulation,	allowing	new	wireless	communications	technologies	to	be	developed	and	offered	for	sale. Examples	include	wireless	local	area	network	systems,	such	as	WiFi,	and	wide	area	network	systems,	such	as	WiMAX	and	LTE.	Other	countries	have also	deregulated	portions	of	their	available	spectrum	to	allow	deployment	of	these	and	other	new	technologies.	In	addition,	Mobile	WiMAX	was approved	in	2007	as	a	global	IMT	(International	Mobile	Telecommunications)	standard.	This	action	lays	the	foundation	to	further	expand	mobile WiMAX	in	key	bands,	making	additional	spectrum	available	globally.	Deregulation	may	introduce	new	competition	and	new	opportunities	for	Motorola and	our	customers.

In	2008,	the	Federal	Communications	Commission	("FCC")	conducted	its	auction	of	700	MHz	band	spectrum	licenses	in	the	United	States.	This spectrum	can	carry	large	amounts	of	data	across	long	distances	and	penetrate	walls	easier	than	higher	frequencies,	enhancing	in-building	coverage.	The spectrum	is	being	recovered	from	television	broadcast	use	as	a	result	of	the	transition	from	analog	to	digital	television.	The	spectrum	was	expected	to	be fully	available	for	mobile	operations	as	of	February	17,	2009,	however	the	date	of	the	transition	from	analog	to	digital	has	been	moved	to	June	12,	2009. This	delay	is	not	expected	to	significantly	delay	the	deployment	of	services.	However,	any	additional	delays	may	have	a	greater	impact	on	service deployment.	The	FCC	has	imposed	open-access	conditions	that	prevent	the	licensee	from	blocking	devices	or	applications	that	are	compatible	with	the network	on	approximately	one-third	of	the	700	MHz	spectrum	that	was	auctioned.	These	conditions	are	intended	to	help	foster	innovation	in	handsets	and applications.	However,	the	actual	impact	of	the	new	licenses	remains	unclear.

In	January	2009,	China's	Ministry	of	Industry	and	Information	Technology	issued	licenses	for	its	3G	mobile	data	network	to	the	three	key	operators in	China.	With	the	Company's	focus	on	3G	products	and	smartphones	and	its	focus	on	China	as	a	high-priority	market,	we	believe	that	we	will	benefit from	the	3G	transition	in	China.

# Backlog

The	segment's	backlog	was	$290	million	at	December	31,	2008,	compared	to	$647	million	at	December	31,	2007.	This	decrease	in	backlog	is primarily	due	to	a	decline	in	customer	demand,	driven	by	the	segment's	limited	product	portfolio,	as	well	as	the	global	economic	downturn.	The	2008 backlog	is	believed	to	be	generally	firm	and	100%	of	that	amount	is	expected	to	be	recognized	as	revenue	in	2009.	The	forward-looking	estimate	of	the firmness	of	such	orders	is	subject	to	future	events	that	may	cause	the	amount	recognized	to	change.

# Intellectual	Property	Matters

Patent	protection	is	extremely	important	to	the	segment's	operations.	The	segment	has	an	extensive	portfolio	of	patents	relating	to	its	products, technologies	and	manufacturing	processes.	The	segment	licenses	certain	of	its	patents	to	third	parties	and	generates	revenue	from	these	licenses. Motorola	is	also	licensed	to	use	certain	patents	owned	by	others.	Royalty	and	licensing	fees	vary	from	year	to	year	and	are	subject	to	the	terms	of	the agreements	and	sales	volumes	of	the	products	subject	to	licenses.	The	protection	of	these	licenses	is	also	important	to	the	segment's	operations.	Reference is	made	to	the	material	under	the	heading	"Other	Information"	for	additional	information	relating	to	patents	and	trademarks	and	research	and development	activities	with	respect	to	this	segment.

# Inventory,	Raw	Materials,	Right	of	Return	and	Seasonality

The	segment's	practice	is	to	carry	reasonable	amounts	of	inventory	in	manufacturing	and	distribution	centers	in	order	to	meet	customer	delivery requirements	in	a	manner	consistent	with	industry	standards.	At	the	end	of

2008,	the	segment	had	a	lower	inventory	balance	than	at	the	end	of	2007.	The	decrease	reflects	the	continued	decline	in	sales	volumes	during	2008.

Availability	of	materials	and	components	required	by	the	segment	is	relatively	dependable,	but	fluctuations	in	supply	and	market	demand	could cause	selective	shortages	and	affect	results.	We	currently	source	certain	materials	and	components	from	single	vendors.	Any	material	disruption	from	a single-source	vendor	may	have	a	material	adverse	impact	on	our	results	of	operations.	If	certain	key	suppliers	were	to	become	capacity	constrained	or insolvent	as	a	result	of	the	ongoing	global	financial	crisis,	it	could	result	in	a	reduction	or	interruption	in	supplies	or	an	increase	in	the	price	of	supplies and	adversely	impact	the	segment's	financial	results.

Natural	gas,	electricity,	and,	to	a	lesser	extent,	oil	are	the	primary	sources	of	energy	required	for	the	segment's	manufacturing	operations.	Each	of these	resources	are	currently	in	generally	adequate	supply	for	the	segment's	operations.	In	addition,	the	cost	to	operate	our	facilities	and	freight	costs	are dependent	on	world	oil	prices,	which	fluctuated	significantly	during	2008	and	impacted	our	manufacturing	and	shipping	costs.	Labor	is	generally available	in	reasonable	proximity	to	the	segment's	manufacturing	facilities.	However,	difficulties	in	obtaining	any	of	the	aforementioned	items	or	a significant	cost	increase	could	affect	the	segment's	results.

The	segment	permits	returns	under	limited	circumstances	to	remain	competitive	with	current	industry	practices.

The	segment	typically	experiences	higher	sales	in	the	fourth	calendar	quarter	and	lower	sales	in	the	first	calendar	quarter	of	each	year	due	to	seasonal trends	in	the	wireless	handset	industry.

# Our	Facilities/Manufacturing

Our	headquarters	are	located	in	Libertyville,	Illinois.	Our	other	major	facilities	are	located	in	Plantation,	Florida;	Beijing,	Hangzhou,	Nanjing	and Tianjin,	China;	Seoul,	South	Korea;	Chennai,	India;	and	Jaguariuna,	Brazil.

We	also	use	several	electronics	manufacturing	suppliers	("EMS")	and	original	design	manufacturers	("ODM")	to	enhance	our	ability	to	lower	our costs	and/or	deliver	products	that	meet	consumer	demands	in	the	rapidly-changing	technological	environment.	A	significant	portion	of	our	handsets	are manufactured	either	completely	or	substantially	by	non-affiliated	EMS	and	ODM	manufacturers,	primarily	by	two	third-party	manufacturers	in	China.

In	2008,	our	handsets	were	primarily	manufactured	in	Asia	and	Brazil,	and	we	expect	this	to	continue	in	2009.	Our	largest	manufacturing	facilities are	located	in	China	and	Brazil.	Each	of	these	facilities	serves	multiple	countries	and	regions	of	the	world.

# Home	and	Networks	Mobility	Segment

The	Home	and	Networks	Mobility	segment	("Home	and	Networks	Mobility"	or	the	"segment")	designs,	manufactures,	sells,	installs	and	services: (i)	digital	video,	Internet	Protocol	("IP")	video	and	broadcast	network	interactive	set-tops	("digital	entertainment	devices"),	end-to-end	video	delivery systems,	broadband	access	infrastructure	platforms,	and	associated	data	and	voice	customer	premise	equipment	("broadband	gateways")	to	cable television	and	telecom	service	providers	(collectively,	referred	to	as	the	"home	business"),	and	(ii)	wireless	access	systems	("wireless	networks"), including	cellular	infrastructure	systems	and	wireless	broadband	systems,	to	wireless	service	providers	(collectively,	referred	to	as	the	"networks business").	In	2008,	the	segment's	net	sales	represented	33%	of	the	Company's	consolidated	net	sales.

In	the	home	business,	the	segment	is	a	leading	provider	of	end-to-end	networks	used	for	the	delivery	of	video,	data	and	voice	services	over	hybrid fiber	coaxial	("HFC")	networks,	digital	subscriber	line	("DSL")	networks	and	passive	optical	networks	("PON").	Our	portfolio	includes:	MPEG	video encoding	equipment	for	standard-definition	and	high-definition	television	("HDTV"	or	"HD");	video	processing	and	multiplexing	systems;	and video-on-demand,	switched	digital	video	and	conditional	access	systems	used	by	network	operators	and	programmers	to	deliver	video	programming.	We provide	a	broad	array	of	digital	entertainment	devices	supporting	analog,	digital	and	IP	video	delivery,	including	HD	and	digital	video	recording ("DVR")	(together,	"HD/DVR")	applications.	We	support	the	delivery	of	high-speed	data	and	voice	services	with	head-end	and	central	office

equipment,	along	with	data	and	voice	modems	and	gateways	for	HFC	and	DSL	networks	and	optical	line	and	optical	node	terminals	for	PON	networks.

In	the	networks	business,	the	segment	provides	end-to-end	cellular	networks,	including	radio	base	stations,	base	station	controllers,	associated software	and	services,	application	platforms	and	third-party	switching	for	CDMA,	GSM,	iDEN®	and	UMTS	technologies.	The	segment	also	offers	a portfolio	of	WiMAX	products	and	is	in	trials	with	customers	to	provide	our	LTE	technology	to	enable	next-generation	mobile	IP	broadband	access. WiMAX	and	LTE	will	make	mobile	bandwidth	more	affordable	and	accessible	for	mainstream	consumer	adoption.

Our	products	are	marketed	primarily	to	cable	television	operators,	telecom	operators,	wireless	service	providers,	television	programmers	and	other communications	providers	worldwide	and	are	sold	primarily	by	our	internal	sales	force.

The	home	market	is	evolving	rapidly	as	cable	and	telecom	network	operators	expand	their	video,	data	and	voice	services	(commonly	known	as	the "triple	play")	to	grow	their	subscriber	base.	The	competition	between	cable	and	telecom	service	providers	continues	to	increase.	Telecom	operators	are expanding	their	broadband	networks	and	beginning	to	offer	advanced	video	and	data	services	using	IPTV	and	PON	technologies.	Cable	operators	are responding	by	expanding	their	investment	in	HD	programming,	bundling	voice-over-IP	services,	expanding	their	broadband	data	service	through	Data Over	Cable	Service	Interface	Specifications	("DOCSIS")	3.0	channel	bonding,	and	maximizing	utilization	of	network	bandwidth	using	switched	digital video	technology.

Our	home	business	is	subject	to	regulation	by	the	FCC	in	the	United	States	and	other	governmental	communication	regulators	throughout	the	world. FCC	regulations	requiring	separation	of	security	functionality	from	cable	set-tops	became	effective	in	2007.	This	has	resulted	in	increased	competition for	sales	of	set-top	boxes	to	cable	operators	and	has	enabled	a	retail	distribution	of	devices	capable	of	accessing	encrypted	cable	programming.	Our	home business	offers	a	cablecard	that	allows	third-party	consumer	electronic	devices	to	be	deployed	on	a	network	using	the	Motorola	conditional	access system.	Motorola	also	offers	a	portfolio	of	cable	card	host	set-tops	that	allows	our	digital	video	set-tops	to	be	deployed	in	service	provider	networks using	third-party	encryption	technology.

In	the	wireless	networks	market,	the	majority	of	installed	cellular	infrastructure	systems	are	based	on	CDMA,	GSM,	UMTS	and	iDEN	technologies. We	supply	systems	based	on	each	of	these	technologies	and	are	the	sole	supplier	of	proprietary	iDEN	networks.	Advanced	infrastructure	systems	based on	these	technologies	include	GPRS,	CDMA-1X	and	EDGE.	In	addition,	some	segments	of	the	cellular	infrastructure	industry	have	installed,	or	are	in the	process	of	migrating	to,	3G	networks,	which	are	high-capacity	radio	access	wireless	networks	providing	enhanced	data	services,	improved	Internet access	and	increased	voice	capacity.	The	primary	3G	technologies	are	W-CDMA	(based	on	either	UMTS	or	Freedom	of	Mobile	Multimedia	Access ("FOMA")	technologies)	and	CDMA	2000	1xEVDO.	We	supply	3G	systems	based	on	UMTS	and	CDMA	2000	1xEVDO	technologies.	An	additional	3G technology	standard,	TD-SCDMA,	has	been	driven	primarily	by	the	Chinese	government	and	local	Chinese	vendors.	China's	Ministry	of	Industry	and Information	Technology	awarded	3G	licenses	in	early	2009,	which	is	driving	regional	network	upgrades.

Industry	standards	bodies	are	in	the	process	of	defining	the	next	generation	of	wireless	broadband	systems	after	3G.	The	Institute	of	Electrical	and Electronics	Engineers	("IEEE")	has	developed	fixed	and	mobile	broadband	standards	(802.16d	and	802.16e)	based	on	orthogonal	frequency	division multiplexing	("OFDM")	technology,	which	will	utilize	wider	channels	and	enable	triple	play	services	(voice,	data,	video).	These	standards	are	the	basis for	WiMAX,	a	market	that	experienced	strong	growth	in	2008.	Motorola	has	been	awarded	a	number	of	WiMAX	contracts	and	customers	in	various markets	have	started	to	offer	commercial	WiMAX	services	utilizing	Motorola	infrastructure	equipment.	We	are	an	early	leader	in	WiMAX	technology.

The	International	Telecommunications	Union	("ITU")	has	also	adopted	next-generation	cellular	wireless	access	standards	("4G")	for	the	cellular infrastructure	industry,	also	based	on	OFDM	technology	and	known	commonly	as	LTE.	LTE	has	widespread	industry	support,	not	only	from	current GSM	and	UMTS	operators,	but	also	from	CDMA/EV-DO	based	carriers.

Licensing	bodies	of	governments	around	the	world	are	making	spectrum	available	for	advanced	wireless	technologies,	including	4G,	in	recognition of	growing	demand	for	wireless	broadband	services.	Currently,	Motorola	estimates	that	there	are	over	1,200	licenses	available	worldwide	for	advanced wireless	technologies	with	over	800	licenses	outside	of	North	America.

Demand	for	our	products	depends	primarily	on	capital	spending	by	providers	of	cellular	and	broadband	services	for	constructing,	rebuilding	or upgrading	their	communications	systems,	as	well	as	the	marketing	of	advanced	communications	services	by	those	providers.	The	amount	of	spending	by these	providers,	and	therefore	a	majority	of	our	sales	and	profitability,	are	affected	by	a	variety	of	factors,	including:	(i)	the	continuing	trend	of consolidation	within	the	cable,	wireline	and	wireless	industries,	(ii)	the	financial	condition	of	operators	and	alternative	providers,	including	their	access	to financing,	(iii)	technological	developments,	(iv)	standardization	efforts	that	impact	the	deployment	of	new	equipment,	(v)	new	legislation	and	regulations affecting	the	equipment	sold	by	the	segment,	and	(vi)	general	economic	conditions.

During	2008,	wireless	operators'	expenditures	globally	for	2G	technology	and	related	services,	such	as	GSM,	GPRS	and	EDGE,	were	comparable	to 2007,	while	similar	expenditures	for	iDEN	technology	were	down.	Global	expenditures	for	3G	technology	and	related	services,	such	as	UMTS,	increased in	2008,	while	similar	expenditures	for	CDMA/EV-DO	technology	were	comparable	to	2007.	Global	expenditures	for	next-generation	technologies,	such as	WiMAX,	and	related	services	increased	in	2008.

Forecasted	industry	trends	point	to	an	overall	decline	in	operator	expenditures	globally	in	2009,	as	growth	in	UMTS	and	WiMAX	are	not	expected	to offset	the	decline	in	expenditures	for	legacy	technologies,	such	as	GSM	and	CDMA.	Motorola	expects	the	overall	wireless	network	market	to	be	down	in 2009	compared	to	2008.

In	2008,	the	home	business	benefited	from	continued	spending	by	operators	on	our	products	due	to	the	increase	in	the	number	of	video	and	data subscribers	and	the	deployment	of	advanced	video	platforms	by	cable	operators	for	HD/DVR	applications,	as	well	as	from	spending	by	telecom	operators upgrading	their	networks	and	adding	video	services.	The	growth	of	broadband	connectivity	is	expected	to	continue	as	cable	operators	upgrade	to	DOCSIS 3.0	and	telecom	service	providers	continue	to	deploy	very	high	speed	digital	subscriber	line	("VDSL")	and	PON	data	services.	While	continued	growth	is expected	in	these	video	and	data	markets,	industry	analysts	have	been	reducing	their	outlooks	for	capital	spending	due	to	the	ongoing	uncertainty	in	the global	economy.

The	Home	and	Networks	Mobility	segment	is	focused	on	leadership	in	next-generation	broadband	solutions	to	accelerate	the	delivery	of	personal media	experiences.	Key	elements	in	the	segment's	strategy	include:	(i)	providing	for	seamless	convergence	of	services	and	applications	across	delivery platforms	within	the	home	and	across	wireline	and	wireless	networks,	(ii)	innovating	and	optimizing	our	end-to-end	network	portfolio,	and (iii)	developing	new	services	that	leverage	our	platforms	to	provide	revenue	generating	applications	and	services	to	our	operator	customers	while enabling	consumers	to	experience	media	mobility.	As	part	of	our	strategy,	we	have	made	and	will	continue	to	make	strategic	acquisitions.

In	the	home	business,	we	are	focused	on	accelerating	the	rate	of	digital	penetration	by	broadband	operators	in	North	America	through	an	enhanced suite	of	digital	entertainment	devices.	These	products	include	basic	models	supporting	the	industry	movement	to	all-digital	delivery	and	advanced	units supporting	HD/DVR	functions,	as	well	as	whole	home	video	networking.	We	continue	to	invest	to	differentiate	our	products	and	services	and	add	value for	our	customers	in	areas	of	software	and	applications,	content	on-demand	and	targeted	advertising.

We	are	capitalizing	on	telecom	operators	decisions	to	offer	IPTV	to	their	subscribers	globally,	with	products	that	support	delivery	of	video	content using	both	copper-outside-plant	and	fiber-to-the-premises	("FTTP")	networks.	The	segment	continues	to	provide	video	infrastructure,	FTTP	access network	equipment,	advanced	digital	entertainment	devices	and	IP	interactive	set-tops	to	leading	telecommunication	companies	around	the	world.	During 2008,	we	completed	the	acquisition	of	the	set-top	box	and	associated	chipset	assets	of	Zhejung	Dahua	Digital	Technology	Co.,	LTD	and	Hangzhou Image	Silicon,	known	collectively	as	Dahua	Digital	to	increase	our	position	in	the	rapidly	growing	cable	market	in	China.	We	are	also	an	industry	leader in	broadband	data	and	voice	products.	We	are	delivering	DOCSIS	3.0	channel	bonding	on	our	cable	modem	termination	systems	("CMTS")	and	cable modems,	and	commercially	deploying	our	Gigabit	PON	platform.

In	the	networks	business,	the	segment	provides	equipment	and	services	to	over	125	GSM,	CDMA,	and	iDEN	networks	globally.	The	segment	is investing	to	be	a	leader	in	next-generation	wireless	broadband	technologies	with	its	WiMAX	and	LTE	systems.	WiMAX	and	LTE	are	evolved	wireless broadband	technologies	that	enable	operators	to	provide	improved	data	performance	at	lower	operating	cost.	These	technologies	offer	similar	advantages for	existing	operators	and	emerging	broadband	service	providers	and	vary	in	selection	depending	on	the	desired	application	and	available	spectrum.	In 2008,	the	segment	delivered	WiMAX	network	equipment	to	over	25	WiMAX	networks	throughout	the	world.	In	addition,	at	the	end	of	2008,	the segment	was	participating	in	over

20	WiMAX	trials	globally,	representing	new	business	opportunities	in	2009.	As	a	leader	in	the	baseline	OFDM	technology	used	for	WiMAX,	the segment	is	leveraging	this	expertise	to	accelerate	our	LTE	product	offering	which	will	support	both	frequency	division	duplex	("FDD")	and	time	division duplex	("TDD")	modes.	The	LTE	standard	was	ratified	in	December	2008,	enabling	operators	and	vendors	to	accelerate	testing	and	deployment.	The segment	is	participating	in	the	LTE	system	architecture	evolution	trial	initiative.

In	2008,	aggregate	net	sales	to	the	segment's	five	largest	customers,	primarily	large	cable	operators	and	telecommunication	companies	located throughout	the	world,	represented	approximately	45%	of	the	segment's	net	sales.	The	loss	of	any	of	the	segment's	large	customers	could	have	a	material adverse	effect	on	the	segment's	business.	Further,	because	many	of	the	segment's	contracts	are	long-term,	the	loss	of	a	major	customer	could	impact revenue	and	earnings	over	several	quarters.	The	segment's	proportion	of	sales	outside	of	North	America	increased	to	50%	in	2008,	compared	to	48%	in 2007.	This	reflected	5%	aggregate	growth	in	net	sales	outside	of	North	America	and	a	3%	decline	in	net	sales	in	North	America.

The	businesses	in	which	the	segment	operates	are	highly	competitive.	The	rapid	technological	changes	occurring	in	each	of	the	markets	in	which	the segment	competes	are	expected	to	lead	to	the	entry	of	many	new	competitors.	Competitive	factors	in	the	market	for	the	segment's	products	and	systems include:	technology	offered;	product	and	system	performance;	price;	product	features;	quality;	delivery	and	availability.	We	believe	that	we	are competitively	positioned	because	of	our	solid	relationships	with	major	communication	system	operators	worldwide,	our	technological	leadership	and	our new	product	development	capabilities.	Price	is	a	major	area	of	competition	and	often	impacts	margins	for	initial	system	bids,	particularly	in	emerging markets.	Time-to-market	has	also	been	an	important	competitive	factor,	especially	for	new	systems	and	technologies.	We	compete	with	many	equipment suppliers	and	several	consumer	electronics	companies	located	throughout	the	world.

In	our	home	business,	we	compete	worldwide	in	the	market	for	digital	entertainment	devices	and	cable	and	wireline	infrastructure	equipment	for broadband	networks.	Our	largest	competitor	is	Cisco.	Based	on	2008	annual	sales,	we	are	the	leading	provider	of	digital	cable	and	IPTV	set-tops worldwide.	Our	digital	entertainment	devices	and	infrastructure	equipment	compete	with	products	from	a	number	of	different	companies,	including: (i)	those	that	develop	and	sell	products	that	are	distributed	by	direct	broadcast	satellite	service	providers	through	retail	channels,	(ii)	those	that	develop, manufacture	and	sell	products	of	their	own	design,	and	(iii)	those	that	license	technology	from	us	or	other	competitors.

Traditionally,	cable	service	providers	have	leased	set-tops	to	their	customers.	FCC	regulations	requiring	separation	of	security	functionality	from set-tops	became	effective	in	2007.	To	meet	this	requirement,	we	provide	security	modules	to	cable	operators	for	use	with	both	our	own	and	third-party set-tops,	as	well	as	in	consumer	products	designed	to	accept	them.	The	initial	implementation	limited	consumer	products	to	broadcast-delivered	channels including	premium	services.	A	full	two-way	security	interface	specification	that	allows	retail	customers	access	to	all	programming	available	on	the operator's	network	without	the	need	for	a	set-top	box	has	been	adopted	by	a	few	television	manufacturers.	They	began	shipping	television	sets	that incorporate	this	capability	in	2008.

We	also	compete	worldwide	in	the	market	for	broadband	data	and	voice	products.	We	believe	that	we	are	a	leading	provider	of	cable	modems worldwide,	competing	with	several	consumer	electronic	companies	and	original	design	manufacturers	worldwide.

In	the	wireless	networks	market,	there	is	widespread	competition	from	numerous	competitors,	ranging	from	some	of	the	world's	largest	diversified companies	to	foreign	telecommunications	companies	to	many	small,	specialized	firms.	Ericsson	is	the	market	leader,	followed	by	the	Nokia-Siemens joint	venture,	Alcatel-Lucent,	Huawei	and	Motorola,	along	with	other	vendors	with	similar	market	share.	We	believe	we	are	a	leading	provider	of WiMAX	technologies.	Many	of	the	major	competitors	who	compete	across	various	wireless	technologies	also	compete	in	WiMAX.

The	segment's	networks	business	is	confronting	several	factors	that	could	impact	its	business,	including	price	competition,	continuing	consolidation among	competitor	telecommunications	equipment	providers,	consolidation	among	customers,	the	potential	impact	of	global	economic	conditions,	and vendor	financing	by	competitors	as	customers	continue	to	look	to	vendors	as	an	additional	source	of	financing.

Payment	terms	vary	worldwide,	depending	on	the	arrangement.	In	North	America,	payment	is	generally	due	30	to	60	days	from	the	invoice	date.	In regions	outside	of	North	America,	terms	vary	widely	but	are	typically	limited	to	no	more	than	90	days.	Contracts	for	wireless	networks	typically	include implementation	milestones,	such	as	delivery,	installation	and	system	acceptance,	which	generally	take	30	to	180	days	to	complete.	Invoicing	the	customer is	dependent	on	the	completion	of	the	milestone.

As	required	for	competitive	reasons,	extended	payment	terms	are	provided	to	customers	from	time-to-time	on	a	limited	basis.	The	segment's payment	terms	are	consistent	with	industry	practice,	as	many	of	our	contracts	are	awarded	through	a	competitive	bid	process.	When	required	for competitive	reasons,	we	may	provide	long-term	financing	in	connection	with	equipment	purchases.	Financing	may	cover	all	or	a	portion	of	the	purchase price.

Many	of	our	products	are	subject	to	regulation	by	the	FCC	in	the	United	States	and	other	communications	regulatory	agencies	around	the	world.	In addition,	our	customers,	and	their	networks	into	which	our	products	are	incorporated,	are	subject	to	government	regulation.	Government	regulatory policies	affecting	either	the	willingness	or	the	ability	of	cable	and	telecom	operators,	wireless	operators	and	wireline	operators	to	offer	certain	services,	or the	terms	on	which	these	operators	offer	the	services	and	conduct	their	business,	may	have	a	material	adverse	effect	on	the	segment's	results.	Motorola has	developed	products	using	trunking	and	data	communications	technologies	to	enhance	spectral	efficiencies.	The	growth	and	results	of	the	wireless communications	industry	may	be	affected	by	regulations	impacting	access	to	allocated	spectrum	for	wireless	communications	users,	especially	in	urban areas	where	the	spectrum	is	heavily	used.

Historically,	reception	of	digital	television	programming	from	a	cable	broadband	network	has	required	a	set-top	with	security	technology.	This security	technology	has	limited	the	availability	of	set-tops	to	those	manufactured	by	a	few	cable	network	manufacturers,	including	Motorola.	FCC regulations	requiring	separation	of	security	functionality	from	set-tops	that	are	aimed	at	increasing	competition	and	encouraging	the	sale	of	set-tops	in	the retail	market	became	effective	for	most	customers	in	2007.	Traditionally,	cable	service	providers	sold	or	leased	their	set-top	to	their	customer.	As	the retail	market	develops	for	set-tops	and	televisions	capable	of	accepting	the	security	modules,	sales	of	our	set-tops	which	are	sold	to	cable	providers	may be	negatively	impacted.

The	U.S.	leads	the	world	in	spectrum	deregulation,	allowing	new	wireless	communications	technologies	to	be	developed	and	offered	for	sale. Examples	include	wireless	local	area	network	systems,	such	as	WiFi,	and	wide	area	network	systems,	such	as	WiMAX	and	LTE.	Other	countries	have also	deregulated	portions	of	their	available	spectrum	to	allow	deployment	of	these	and	other	technologies.	Deregulation	may	introduce	new	competition and	new	opportunities	for	Motorola	and	our	customers.

As	more	fully	described	under	"Enterprise	Mobility	Solutions	—	Regulatory	Matters",	as	television	transmission	and	reception	technology transitions	from	analog	to	more	efficient	digital	modes,	various	countries	around	the	world	are	examining,	and	in	some	cases	already	pursuing,	the redevelopment	of	portions	of	the	television	spectrum.	Certain	segments	of	the	spectrum	that	have	historically	been	utilized	for	analog	television	have now	been	designated	to	support	new	commercial	communications	systems	and,	therefore,	are	expected	to	generate	new	business	opportunities	for Motorola	in	wireless	and	video	technologies.	In	the	U.S.,	the	FCC	conducted	an	auction	of	spectrum	for	the	700	MHz	band	that	is	expected	to	be reclaimed	by	the	government	on	June	12,	2009.	License	for	this	spectrum	may	be	used	for	flexible	fixed,	mobile	and	broadcast	applications.	Although	the auction	winners	will	determine	the	best	utilization	of	the	acquired	spectrum,	both	LTE	and	WiMAX	are	candidates	for	technology	selection.	In	addition,	a contiguous	portion	of	this	spectrum	has	generated	interest	for	mobile	TV	applications.

The	segment's	backlog	was	$2.3	billion	at	December	31,	2008,	compared	to	$2.6	billion	at	December	31,	2007.	The	2008	order	backlog	is	believed to	be	generally	firm	and	100%	of	that	amount	is	expected	to	be	recognized	as	revenue	during	2009.	The	forward-looking	estimate	of	the	firmness	of	such orders	is	subject	to	future	events	that	may	cause	the	amount	recognized	to	change.

Patent	protection	is	extremely	important	to	the	segment's	operations.	The	segment	has	an	extensive	portfolio	of	patents	relating	to	its	products, systems,	technologies	and	manufacturing	processes.

The	segment	seeks	to	build	upon	our	core	enabling	technologies,	such	as	digital	compression,	encryption	and	conditional	access	systems,	and wireless	air-interface	technology	in	order	to	lead	worldwide	growth	in	the	market	for	wired	and	wireless	communications	networks.	Our	policy	is	to protect	our	proprietary	position	by,	among	other	methods,	filing	U.S.	and	foreign	patent	applications	to	protect	technology	and	improvements	that	we consider	important	to	the	development	of	our	business.	We	also	rely	on	our	proprietary	knowledge	and	ongoing	technological	innovation	to	develop	and maintain	our	competitive	position	and	will	periodically	seek	to	include	our	proprietary	technologies	in	certain	patent	pools	that	support	the implementation	of	standards.	We	are	a	founder	of	MPEG	LA,	the	patent	licensing	authority	established	to	foster	broad	deployment	of	MPEG-2- compliant	systems,	and	we	have	recently	joined	the	MPEG4-Visual	patent	pool	as	a	licensor.	In	addition,	we	have	licensed	our	digital	conditional	access technology,	DigiCipher®	II,	to	other	equipment	suppliers	and	continue	our	joint	ventures	with	Comcast	for	development	and	licensing	of	conditional access	technology.

We	also	enter	into	other	license	agreements,	both	as	licensor	and	licensee,	covering	certain	products	and	processes	with	various	companies.	These license	agreements	require	the	payment	of	certain	royalties	that	are	not	expected	to	be	material	to	the	segment's	financial	results.	Royalty	and	licensing fees	vary	from	year	to	year	and	are	subject	to	the	terms	of	the	agreements	and	sales	volumes	of	the	products	subject	to	licenses.	Reference	is	made	to	the material	under	the	heading	"Other	Information"	for	information	relating	to	patents,	trademarks	and	research	and	development	activities	with	respect	to this	segment.

The	segment's	practice	is	to	carry	reasonable	amounts	of	inventory	in	order	to	meet	customer	delivery	requirements	in	a	manner	consistent	with industry	standards.	At	the	end	of	2008,	the	segment	had	higher	inventory	balances	than	at	the	end	of	2007,	primarily	due	to	a	change	in	manufacturing strategy	to	increase	in-house	manufacturing	and	reduce	outsourced	manufacturing	by	third-party	providers.

Availability	of	materials	and	components	required	by	the	segment	is	relatively	dependable,	but	fluctuations	in	supply	and	market	demand	could cause	selective	shortages	and	affect	results.	We	currently	procure	certain	materials	and	components	from	single-source	vendors.	Any	material	disruption from	a	single-source	vendor	may	have	a	material	adverse	impact	on	our	results	of	operations.	If	certain	key	suppliers	were	to	become	capacity constrained	or	insolvent	as	a	result	of	the	ongoing	global	financial	crisis,	it	could	result	in	a	reduction	or	interruption	in	supplies	or	an	increase	in	the price	of	supplies	and	adversely	impact	the	segment's	financial	results.

Natural	gas,	electricity,	and,	to	a	lesser	extent,	oil	are	the	primary	sources	of	energy	required	for	our	manufacturing	operations.	Each	of	these resources	are	currently	in	generally	adequate	supply	for	the	segment's	operations.	In	addition,	the	cost	to	operate	our	facilities	and	freight	costs	are dependent	on	world	oil	prices,	which	fluctuated	significantly	during	2008	and	impacted	our	manufacturing	and	shipping	costs.	Labor	is	generally available	in	reasonable	proximity	to	the	segment's	manufacturing	facilities.	However,	difficulties	in	obtaining	any	of	the	aforementioned	items	or	a significant	cost	increase	could	affect	the	segment's	results.

Generally,	we	do	not	permit	customers	to	return	products,	other	than	under	standard	warranty	provisions.	The	segment	has	not	experienced	seasonal buying	patterns	for	its	products.

Our	headquarters	are	located	in	Horsham,	Pennsylvania.	Our	other	major	facilities	are	located	in:	Arlington	Heights,	Illinois;	San	Diego,	California; Taipei,	Taiwan;	Bangalore,	India;	Beijing	and	Tianjin,	China;	and	Reynosa,	Mexico.	In	addition	to	our	own	manufacturing,	we	utilize	non-affiliated electronics	manufacturing	suppliers	and	original	design	manufacturers,	primarily	in	Asia,	in	order	to	enhance	our	ability	to	lower	costs	and/or	deliver products	that	meet	consumer	demands.

# Enterprise	Mobility	Solutions	Segment

The	Enterprise	Mobility	Solutions	segment	("Enterprise	Mobility	Solutions"	or	the	"segment")	designs,	manufactures,	sells,	installs	and	services analog	and	digital	two-way	radio,	voice	and	data	communications	products	and	systems	for	private	networks,	wireless	broadband	systems	and	end-to-end enterprise	mobility	systems	for	a	wide	range	of	enterprise	markets,	including	government	and	public	safety	agencies	(which,	together	with	all	sales	to distributors	of	two-way	communication	products,	is	referred	to	as	the	"government	and	public	safety	market"),	as	well	as	retail,	energy	and	utilities, transportation,	manufacturing,	healthcare	and	other	commercial

customers	(which,	collectively,	are	referred	to	as	the	"commercial	enterprise	market").	In	2008,	the	segment's	net	sales	represented	27%	of	the Company's	consolidated	net	sales.

We	are	the	world's	leading	provider	of	advanced	mission-critical	and	commercial	enterprise	mobility	networks,	services,	applications	and	devices.	In the	government	and	public	safety	market,	Motorola	offers	an	extensive	portfolio	of	standard	products	and	services	that	meet	evolving	public	safety	and security	needs,	including	products	based	on	both	TETRA	(terrestrial	trunked	radio)	and	APCO	25	(Association	for	Public	Safety	Communications Officials)	standards,	with	nearly	80	years	of	experience	in	this	space.	In	the	commercial	enterprise	market,	our	products	and	systems	provide	better information	at	the	point	of	business	activity,	connect	seamlessly,	and	present	tools	to	control	the	mobile	experience.	Our	products	include:	two-way radios,	mobile	computing	products,	advanced	data	capture	products	including	barcode	scanners	and	imagers,	radio	frequency	identification	("RFID") infrastructure,	software	management,	security	tools	and	wireless	infrastructure.

The	segment's	products	and	services	are	sold	stand-alone	or	as	an	integrated	solution	through	Motorola's	direct	sales	force	and	through	independent and	authorized	distributors,	dealers	and	value-added	resellers,	independent	software	vendors,	original	equipment	manufacturers	and	service	operators. Distributors	and	value-added	resellers	may	provide	a	service	or	add	components	in	order	to	resell	our	product	to	end	users.	The	segment	provides	systems engineering,	installation	and	other	technical	and	systems	management	services	to	meet	its	customers	particular	needs.	The	customer	may	also	choose	to install	and	maintain	the	equipment	with	its	own	employees,	or	may	obtain	installation,	service	and	parts	from	a	network	of	the	segment's	authorized service	centers	or	from	other	non-Motorola	service	centers.

We	compete	in	the	mobile	segment	of	the	communications	industry,	providing	wireless	products	and	services	to	public	safety,	government	and enterprise	customers.

Within	our	government	and	public	safety	market,	interoperability	and	natural	disaster	preparedness	continue	to	be	important	issues	for	our	customers worldwide.	Our	extensive	portfolio	of	products	includes	integration	services,	equipment	and	support	packages	for	both	of	the	major	standards-based private	network	technologies,	APCO	25	and	TETRA,	as	well	as	wireless	broadband	applications.	As	new	and	better	spectrum	utilization	evolves,	we expect	to	see	more	demand	and	greater	potential	for	broadband	solutions	and	data	applications,	such	as	video	surveillance	and	other	data-based	products, in	2009	and	beyond.	While	mission-critical	communications	and	homeland	security	remain	high	priorities	for	our	customers,	we	have	seen	reduced spending	in	the	construction	and	manufacturing	markets	due	to	the	global	market	conditions,	and	expect	this	to	continue	in	2009.

Within	our	commercial	enterprise	market,	we	believe	there	continues	to	be	long-term	opportunity	for	growth	as	the	global	workforce	continues	to become	more	mobile	and	the	industries	and	markets	that	purchase	our	products	continue	to	expand.	The	markets	in	which	Motorola	competes	include mobile	computing	products	and	services,	enterprise	wireless	infrastructure,	bar	code	scanning,	RFID	products	and	services,	and	mobile	network management	platforms.	Organizations	looking	to	increase	productivity	and	derive	benefits	from	mobilizing	their	applications	and	workforces	are	driving adoption	in	this	market.	In	2009,	given	the	current	global	economic	conditions	and	customer	capital	expenditure	constraints,	we	expect	reduced	spending in	the	commercial	enterprise	market.

The	segment's	strategy	is	to	maintain	our	global	leadership	positions	in	the	government	and	public	safety	and	commercial	enterprise	markets	through the	continued	delivery	of	mobile	products	and	services	and	systems	that	meet	our	customers'	demand	for	real-time	information	everywhere.

Our	strategy	in	the	government	and	public	safety	market	is	to	enable	our	customers	to	focus	on	their	missions,	not	the	technology.	This	is accomplished	by	providing	mission-critical	systems,	seamless	connectivity	through	highly	reliable	voice	and	data	networks	and	a	suite	of	advanced applications	that	provide	real-time	information	to	end	users.	Key	objectives	in	maintaining	our	leadership	position	include:	(i)	continuing	investment	in our	analog	radio	portfolio	while	leading	the	ongoing	migration	to	digital	products,	(ii)	leveraging	our	wireless	broadband	portfolio	to	drive	growth	and enter	new	markets,	(iii)	managing	the	potential	public/private	convergence	of

700MHz	public	safety	systems	in	the	U.S.	and	digital	dividend	spectrum	worldwide,	and	(iv)	continuing	to	lead	the	market	in	APCO	25	and	TETRA standards-based	voice	and	data	networking	systems	around	the	world.	We	continue	to	actively	manage	our	portfolio,	investing	to	expand	into	attractive, complementary	markets,	and	divesting	non-strategic	businesses.

In	the	commercial	enterprise	market,	our	approach	is	to	deliver	products	and	services	that	are	designed	to	empower	the	mobile	workforce	to	increase productivity,	drive	cost	effectiveness,	and	promote	faster	execution	of	critical	business	processes.	Our	solutions	architecture	focuses	on	three	areas: (i)	portfolio	of	devices	and	applications	that	provide	real	time	information	at	the	point	of	business	activity,	(ii)	enterprise	wireless	networks	that	allocate seamless	connectivity	inside	and	outside	the	enterprise,	and	(iii)	a	set	of	management,	security	and	mobility	tools	that	provide	a	controlled	deployment	of the	enterprise	mobility	applications.

Our	products	and	services	are	sold	worldwide	to	a	diverse	set	of	customers,	including	government	and	public	safety	agencies	(police,	fire,	and emergency	management	services)	and	militaries,	as	well	as	retail,	utility,	transportation	and	logistics,	manufacturing,	wholesale	and	distribution, healthcare	and	other	commercial	customers.	Our	sales	model	emphasizes	both	direct	sales	by	our	in-house	sales	force	and	indirect	sales	through	our channel	of	value-added	resellers	and	distributors.	We	believe	this	dual	sales	approach	allows	us	to	meet	customer	needs	effectively,	build	strong,	lasting relationships	and	broaden	our	penetration	across	various	markets.	Our	channel	sales	force	extends	the	reach	of	our	products	and	services	to	meet	demand in	market	segments	where	our	direct	sales	force	does	not	sell.	Resellers	and	distributors	each	have	their	own	sales	organizations	which	complement	and extend	our	sales	organization.	With	deep	expertise	about	specific	customers'	operations,	resellers	are	very	effective	in	promoting	sales	of	the	Company's products.	Our	independent	software	vendor	and	value-added	resale	channels	offer	customized	applications	that	meet	specific	needs	in	each	market segment	we	serve.

Our	largest	customer	is	the	U.S.	Government,	which	represented	approximately	8%	of	the	segment's	net	sales.	The	loss	of	this	customer	could	have a	material	adverse	effect	on	the	segment's	revenue	and	earnings	over	several	quarters,	because	some	of	our	contracts	with	the	U.S.	Government	are	long- term.	Net	sales	to	customers	in	North	America	represented	57%	of	the	segment's	net	sales	in	2008.

A	majority	of	our	sales	are	made	directly	by	our	in-house	sales	force,	and	the	remainder	of	our	sales	are	made	through	global	resellers	and distributors.	Given	the	current	global	economic	conditions,	we	expect	reduced	spending	by	certain	customers,	particularly	retail,	transportation	and logistics,	construction	and	manufacturing,	to	continue	into	2009.

The	businesses	in	which	we	operate	are	highly	competitive.	Continued	evolution	in	the	industry,	as	well	as	technological	migration,	is	opening	up	the market	to	increased	competition.	Other	key	competitive	factors	include:	technology	offered;	price;	availability	of	vendor	financing;	product	and	system performance;	product	features,	quality,	availability	and	warranty;	the	quality	and	availability	of	service;	company	reputation;	relationship	with	key customers;	and	time-to-market.	We	believe	we	are	uniquely	positioned	in	the	industry	due	to	our	strong	customer	relationships,	our	technological leadership	and	capabilities,	and	our	comprehensive	range	of	offerings.

The	segment	experiences	widespread	competition	in	the	government	and	public	safety	market	from	a	growing	number	of	new	and	existing competitors,	including	large	system	integrators.	In	this	market,	the	segment	provides	communications	and	information	systems	compliant	with	both APCO	25	and	TETRA	industry	digital	standards.	Major	competitors	include:	M/A-Com,	EADS,	Kenwood,	EF	Johnson	and	Cisco.

Large	system	integrators	are	seeking	to	move	further	into	the	public	safety	area,	specifically	in	the	federal	government	market.	Competitors	in	this segment,	including	the	Company,	may	also	serve	as	subcontractors	to	large	system	integrators	and	are	selected	based	on	a	number	of	competitive	factors and	customer	requirements.	Where	favorable	to	the	Company,	we	may	partner	with	large	system	integrators	to	make	available	our	portfolio	of	advanced mission-critical	services,	applications	and	devices.

Several	other	competitive	factors	may	have	an	impact	on	the	business,	including:	the	consolidation	among	telecommunications	equipment	providers, evolving	developments	in	the	700	MHz	band,	and	increasing	encroachment	by	broadband	and	IP	solution	providers	and	new	low-tier	entrants.	As demand	for	fully-integrated

voice,	data,	and	broadband	systems	continues,	the	segment	may	face	additional	competition	from	public	telecommunications	carriers.

Within	the	commercial	enterprise	market,	many	firms	are	engaged	in	the	manufacturing	and	marketing	of	mobile	computing	devices,	products	in	bar code	reading	equipment	and	wireless	networks.	Numerous	companies,	including	present	manufacturers	of	scanners,	lasers,	optical	instruments, microprocessors,	wireless	networks,	notebook	computers,	handheld	devices	and	telephonic	and	other	communication	devices,	have	the	technical	potential to	compete	with	the	business.	Competitors	such	as	Intermec,	Honeywell	and	Cisco	deliver	products	in	certain	parts	of	the	commercial	enterprise	market.

Payment	terms	vary	worldwide,	depending	on	the	arrangement.	Generally,	contract	payment	terms	range	from	30	to	45	days	from	the	invoice	date within	North	America	and	are	typically	limited	to	90	days	in	regions	outside	of	North	America.	A	portion	of	the	contracts	in	the	government	and	public safety	market	include	implementation	milestones,	such	as	delivery,	installation	and	system	acceptance,	which	generally	take	30	to	180	days	to	complete. Invoicing	the	customer	is	dependent	on	completion	of	the	milestone.

We	generally	do	not	grant	extended	payment	terms.	As	required	for	competitive	reasons,	we	may	provide	long-term	financing	in	connection	with equipment	purchases.	Financing	may	cover	all	or	a	portion	of	the	purchase	price.

The	use	of	wireless	voice,	data	and	video	communications	systems	requires	radio	spectrum,	which	is	regulated	by	governmental	agencies	throughout the	world.	In	the	U.S.,	the	FCC	and	the	National	Telecommunications	and	Information	Administration	("NTIA")	regulate	spectrum	use	by	non-federal entities	and	federal	entities,	respectively.	Similarly,	countries	around	the	world	have	one	or	more	regulatory	bodies	that	define	and	implement	the	rules for	use	of	the	radio	spectrum,	pursuant	to	their	respective	national	laws	and	international	coordination	under	the	International	Telecommunications	Union ("ITU").	Consequently,	the	business	and	results	of	this	segment	could	be	affected	by	the	rules	and	regulations	adopted	by	the	FCC,	NTIA	or	regulatory agencies	in	other	countries	from	time	to	time.	The	availability	of	additional	radio	spectrum	may	provide	new	business	opportunities.	Regulatory	changes in	current	spectrum	bands	may	also	provide	opportunities	or	may	require	modifications	to	some	of	our	products	so	they	can	continue	to	be	manufactured and	marketed.

The	segment	manufactures	and	markets	products	in	spectrum	bands	already	made	available	by	regulatory	bodies.	These	include	voice	and	data infrastructure,	mobile	radios	and	portable	or	handheld	units.	Our	products	span	the	public	safety,	enterprise,	commercial	and	consumer	markets	and operate	both	on	licensed	and	unlicensed	spectrum.	In	addition,	new	spectrum	bands	and	modified	regulations	provide	possible	opportunities	for	new business.

As	television	transmission	and	reception	technology	transitions	from	analog	to	more	efficient	digital	modes,	various	countries	around	the	world	are examining,	and	in	some	cases	already	pursuing,	the	redevelopment	of	portions	of	the	television	spectrum.	In	the	U.S.,	pursuant	to	federal	legislation, analog	television	stations	must	cease	operation	in	the	broadcast	television	spectrum	by	June	12,	2009.	As	a	result	of	this	transition,	108	MHz	of	spectrum historically	used	for	broadcast	television	is	being	redeveloped	for	new	uses	(the	so-called	"digital	dividend"	spectrum),	including	broadband	and narrowband	wireless	communications.	This	soon-to-be	available	spectrum	can	provide	new	opportunities	for	Motorola	and	for	our	competitors.	Under rules	adopted	by	the	FCC,	this	portion	of	the	spectrum	under	redevelopment	(the	700	MHz	band)	will	support	new	commercial	and	public	safety communications	systems.	Licenses	for	the	majority	of	this	spectrum	have	already	been	issued	and	as	of	February	2009,	over	40	public	safety	customers are	already	implementing	narrowband	700	MHz	systems	in	areas	where	television	incumbency	is	not	an	issue.	Additional	agencies	are	expected	to	begin deploying	systems	once	broadcast	television	is	cleared	from	the	700	MHz	band	in	mid-2009.	The	FCC	is	also	making	provisions	for	a	700	MHz	band nationwide	public	safety	broadband	network	that	may	be	built	over	the	next	10-15	years.	Canada	also	released	a	consultation	requesting	industry	input	on making	additional	spectrum	available	for	public	safety	use	in	the	700	MHz	band.	Segments	of	the	spectrum	have	been	auctioned	for	commercial	use	and Motorola	could	see	new	business	opportunities	as	auction	winners	implement	broadband	systems	on	that	spectrum.	However,	since	many	analog television	operations	will	continue	transmitting	in	this	spectrum	until	June	12,	2009,	it	is	premature	for	auction	winners	to	deploy	in	most	markets.	This delay	may	temporarily	delay	opportunities	for	the	Company.

In	addition	to	reallocating	TV	spectrum	at	700	MHz	for	public	safety	and	commercial	use,	in	November	2008	the	FCC	issued	a	decision	to	open unused	portions	of	the	television	spectrum	below	700	MHz	for	unlicensed	uses,	including	broadband.	The	amount	and	specific	location	in	the	TV	band	of this	"whitespace"	spectrum	available	varies	by	geographic	location.	Also,	its	use	is	governed	by	technical	rules	adopted	to	protect	incumbent	operations from	interference.	For	example,	the	FCC	decision	relies	on	geolocation,	a	technology	recommended	by	Motorola,	to	protect	incumbent	television stations.	This	decision	to	open	the	TV	whitespace	spectrum	provides	additional	potential	opportunities	for	wireless	broadband	systems.	The	FCC decision	also	advised	that	these	initial	TV	whitespace	rules	are	conservative	with	regard	to	protection	of	broadcast	incumbents	and	that	relaxation	to provide	greater	TV	whitespace	opportunities	may	be	possible	once	additional	experience	is	gained.

Internationally,	the	ITU	World	Radio	Conference	held	in	Geneva	in	November	2007	identified	spectrum	that	could	be	made	available	as	part	of	a "digital	dividend"	as	television	transitions	from	analog	to	digital	technology	globally.	Countries	around	the	world	are	studying	the	potential	size,	timing and	use	of	this	potentially	available	spectrum.	In	November	2007,	the	European	Commission	issued	a	statement	promoting	a	common	European approach	to	its	use.	The	United	Kingdom	has	already	decided	to	redevelop	spectrum	as	a	result	of	the	digital	transition	and	is	making	available	112	MHz of	spectrum	through	auctions.	Canada	has	released	a	consultation	requesting	industry	input	on	making	additional	spectrum	available	for	public	safety	use in	the	700	MHz	band.	A	number	of	other	countries	around	the	world	have	also	indicated	their	intention	to	pursue	the	availability	of	digital	dividend spectrum.

In	addition,	some	of	our	operations	use	substances	regulated	under	various	federal,	state,	local	and	international	laws	governing	the	environment	and worker	health	and	safety,	including	those	governing	the	discharge	of	pollutants	into	the	ground,	air	and	water,	the	management	and	disposal	of	hazardous substances	and	wastes	and	the	cleanup	of	contaminated	sites.	Certain	of	our	products	are	subject	to	various	federal,	state,	local	and	international	laws governing	chemical	substances	in	electronic	products.

The	segment's	backlog	was	$2.4	billion	as	of	December	31,	2008,	compared	to	$2.3	billion	as	of	December	31,	2007.	The	2008	order	backlog	is believed	to	be	generally	firm	and	approximately	70%	of	that	amount	is	expected	to	be	recognized	as	revenue	during	2009.	The	forward-looking	estimate of	the	firmness	of	such	orders	is	subject	to	future	events	that	may	cause	the	amount	recognized	to	change.

Patent	protection	is	extremely	important	to	the	segment's	operations.	The	segment	has	an	extensive	U.S.	and	international	portfolio	of	patents relating	to	its	products,	systems,	technologies	and	manufacturing	processes,	including	recent	research	developments	in	scanning,	information	collection, network	communications	and	network	management.	We	have	also	filed	additional	patent	applications	in	the	U.S.	Patent	and	Trademark	Office	as	well	as in	foreign	patent	offices.

The	segment	licenses	some	of	its	patents	to	third	parties	and	this	revenue	is	not	significant.	Motorola	is	also	licensed	to	use	certain	patents	owned	by others.	Royalty	and	licensing	fees	vary	from	year	to	year	and	are	subject	to	the	terms	of	the	agreements	and	sales	volumes	of	the	products	subject	to licenses.

We	actively	participate	in	the	development	of	open	standards	for	interoperable,	mission-critical	digital	two-way	radio	systems.	We	have	published our	technology	and	licensed	patents	to	signatories	of	the	industry's	two	primary	memorandums	of	understanding	defined	by	the	Telecommunications Industry	Association	("TIA"),	Project	25,	and	European	Telecommunications	Standards	Institute	("ETSI"),	TETRA.

Notwithstanding	the	expiration	of	certain	patents	and	the	resulting	potential	for	increased	competition	for	some	of	our	products	in	the	future,	we believe	that	our	extensive	patent	portfolio	will	continue	to	provide	us	with	a	competitive	advantage.	Furthermore,	we	believe	we	are	not	dependent	upon	a single	patent,	or	a	few	patents.	Our	success	depends	more	upon	our	proprietary	know-how,	innovative	skills,	technical	competence	and	marketing abilities.	In	addition,	because	of	changing	technology,	our	present	intention	is	not	to	rely	primarily	on	patents	or	other	intellectual	property	rights	to protect	or	establish	our	market	position.	However,	the	segment	continues	to	litigate	against	competitors	to	enforce	its	intellectual	property	rights	in certain	technologies	and	is	currently	involved	in	several	such	lawsuits.	Reference	is	made	to	the	material	under	the	heading	"Other	Information"	for information	relating	to	patents,	trademarks	and	research	and	development	activities	with	respect	to	this	segment.

The	segment's	practice	is	to	carry	reasonable	amounts	of	inventory	to	meet	customers'	delivery	requirements	in	a	manner	consistent	with	industry standards.	The	segment	provides	custom	products	which	requires	the	stocking	of	inventories	and	large	varieties	of	piece	parts	and	replacement	parts	in order	to	meet	delivery	and	warranty	requirements.	To	the	extent	suppliers'	product	life	cycles	are	shorter	than	the	segment's,	stocking	of	lifetime	buy inventories	is	required	to	meet	long-term	warranty	and	contractual	requirements.	In	addition,	replacement	parts	are	stocked	for	delivery	on	customer demand	within	a	short	delivery	cycle.	At	the	end	of	2008,	the	segment	had	a	higher	inventory	balance	than	at	the	end	of	2007,	primarily	as	a	result	of	the Company	acquiring	a	controlling	interest	in	Vertex	Standard	Co,	Ltd.,	in	January	2008.

Availability	of	materials	and	components	required	by	the	segment	is	relatively	dependable,	but	fluctuations	in	supply	and	market	demand	could cause	selective	shortages	and	affect	results.	We	currently	procure	certain	materials	and	components	from	single-source	vendors.	A	material	disruption from	a	single-source	vendor	may	have	a	material	adverse	impact	on	our	results	of	operations.	If	certain	key	suppliers	were	to	become	capacity constrained	or	insolvent	as	a	result	of	the	ongoing	global	financial	crisis,	it	could	result	in	a	reduction	or	interruption	in	supplies	or	an	increase	in	the	price of	supplies	and	adversely	impact	the	segment's	financial	results.

Natural	gas,	electricity	and,	to	a	lesser	extent,	oil	are	the	primary	sources	of	energy	for	our	manufacturing	operations,	which	are	currently	in	adequate supply.	In	addition,	the	cost	to	operate	our	facilities	and	freight	costs	are	dependent	on	world	oil	prices,	which	fluctuated	significantly	during	2008	and impacted	our	manufacturing	and	shipping	costs.	Labor	is	generally	available	in	reasonable	proximity	to	the	segment's	manufacturing	facilities.	However, difficulties	in	obtaining	any	of	these	items	or	a	significant	cost	increase	could	affect	the	segment's	results.

Generally,	the	segment's	contracts	do	not	include	a	right	of	return,	other	than	for	standard	warranty	provisions.	For	new	product	introductions	in	our government	and	public	safety	market,	we	may	enter	into	milestone	contracts	providing	that	the	product	could	be	returned	if	we	do	not	achieve	the milestones.	Due	to	buying	patterns	in	the	markets	we	serve,	sales	tend	to	be	somewhat	higher	in	the	fourth	quarter.

Our	primary	offices	are	located	in	Schaumburg,	Illinois	and	Holtsville,	New	York.	Our	other	major	facilities	are	located	in:	Penang,	Malaysia; Reynosa,	Mexico;	Krakow,	Poland;	Berlin,	Germany;	and	Arad,	Israel.	In	addition	to	our	own	manufacturing,	we	utilize	non-affiliated	electronics manufacturing	suppliers	and	distribution	and	logistics	services	providers	in	order	to	enhance	our	ability	to	lower	costs	and	deliver	products	that	meet consumer	demands.

# Other	Information

Financial	Information	About	Segments.		The	response	to	this	section	of	Item	1	incorporates	by	reference	Note	12,	"Information	by	Segment	and Geographic	Region,"	of	Part	II,	Item	8:	Financial	Statements	and	Supplementary	Data	of	this	document.

Customers.		Motorola	has	several	large	customers,	the	loss	of	one	or	more	of	which	could	have	a	material	adverse	effect	on	the	Company.	In	2008, aggregate	net	sales	to	the	Company's	five	largest	customers	represented	approximately	25%	of	the	Company's	sales.	No	single	customer	accounted	for more	than	10%	of	the	Company's	net	sales	in	2008.

Approximately	2%	of	Motorola's	net	sales	in	2008	were	to	various	branches	and	agencies,	including	the	armed	services,	of	the	U.S.	Government.	All contracts	with	the	U.S.	Government	are	subject	to	cancellation	at	the	convenience	of	the	Government.

Government	contractors,	including	Motorola,	are	routinely	subjected	to	numerous	audits	and	investigations,	which	may	be	either	civil	or	criminal	in nature.	The	consequences	of	these	audits	and	investigations	may	include	administrative	action	to	suspend	business	dealings	with	the	contractor	and	to exclude	it	from	receiving	new	business.	In	addition,	Motorola,	like	other	contractors,	reviews	aspects	of	its	government	contracting	operations,	and, where	appropriate,	takes	corrective	actions	and	makes	voluntary	disclosures	to	the	U.S.	Government.	These	audits	and	investigations	could	adversely affect	Motorola's	ability	to	obtain	new	business	from	the	U.S.	Government.

Backlog.		Motorola's	aggregate	backlog	position	for	all	Motorola	segments,	as	of	the	end	of	the	last	two	fiscal	years	was	approximately	as	follows:

Except	as	previously	discussed	in	this	Item	1,	the	orders	supporting	the	2008	backlog	amounts	shown	in	the	foregoing	table	are	believed	to	be generally	firm,	and	approximately	90%	of	the	backlog	on	hand	at	December	31,	2008	is	expected	to	be	recognized	as	revenue	in	2009.	The	forward- looking	estimate	of	the	firmness	of	such	orders	is	subject	to	future	events	that	may	cause	the	amount	recognized	to	change.

Research	and	Development.		Motorola's	business	segments	participate	in	very	competitive	industries	with	constant	changes	in	technology. Throughout	its	history,	Motorola	has	relied,	and	continues	to	rely,	primarily	on	its	research	and	development	("R&D")	programs	for	the	development	of new	products,	and	on	its	production	engineering	capabilities	for	the	improvement	of	existing	products.	Technical	data	and	product	application	ideas	are exchanged	among	Motorola's	business	segments	on	a	regular	basis.	Management	believes,	looking	forward,	that	Motorola's	commitment	to	R&D programs	should	allow	each	of	its	segments	to	remain	competitive.

R&D	expenditures	relating	to	new	product	development	or	product	improvement	were	$4.1	billion	in	2008,	compared	to	$4.4	billion	in	2007	and $4.1	billion	in	2006.	R&D	expenditures	decreased	7%	in	2008	as	compared	to	2007,	after	increasing	8%	in	2007	as	compared	to	2006.	Motorola continues	to	believe	that	a	strong	commitment	to	research	and	development	is	required	to	drive	long-term	growth.	As	of	December	31,	2008, approximately	27,000	professional	employees	were	engaged	in	such	R&D	activities.

Patents	and	Trademarks.		Motorola	seeks	to	obtain	patents	and	trademarks	to	protect	our	proprietary	position	whenever	possible	and	practical.	As	of December	31,	2008,	Motorola,	Inc.	and	its	wholly	owned	subsidiaries	owned	approximately	9,907	utility	and	design	patents	in	the	U.S.	and	12,793 patents	in	foreign	countries.	These	foreign	patents	are	mostly	counterparts	of	Motorola's	U.S.	patents,	but	a	number	result	from	research	conducted outside	the	U.S.	and	are	originally	filed	in	the	country	of	origin.	During	2008,	Motorola,	Inc.	and	its	wholly	owned	subsidiaries	were	granted	644	U.S. utility	and	design	patents.	Many	of	the	patents	owned	by	Motorola	are	used	in	its	operations	or	licensed	for	use	by	others,	and	Motorola	is	licensed	to	use certain	patents	owned	by	others.	Royalty	and	licensing	fees	vary	from	year	to	year	and	are	subject	to	the	terms	of	the	agreements	and	sales	volumes	of	the products	subject	to	licenses.

Environmental	Quality.		During	2008,	compliance	with	federal,	state	and	local	laws	regulating	the	discharge	of	materials	into	the	environment,	or otherwise	relating	to	the	protection	of	the	environment,	did	not	have	a	material	effect	on	capital	expenditures,	earnings	or	the	competitive	position	of Motorola.

Employees.		At	December	31,	2008,	there	were	approximately	64,000	employees	of	Motorola	and	its	subsidiaries,	compared	to	66,000	employees	of Motorola	and	its	subsidiaries	at	December	31,	2007.

Financial	Information	About	Geographic	Areas.		The	response	to	this	section	of	Item	1	incorporates	by	reference	Note	11,	"Commitments	and Contingencies"	and	Note	12,	"Information	by	Segment	and	Geographic	Region"	of	Part	II,	Item	8:	Financial	Statements	and	Supplementary	Data	of	this document,	the	"Results	of	Operations—2008	Compared	to	2007"	and	"Results	of	Operations	—	2007	Compared	to	2006"	sections	of	Part	II,	"Item	7: Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations"	and	"Item	A:	Risk	Factors"	of	this	document.

# Available	Information

We	make	available	free	of	charge	through	our	website,	www.motorola.com/investor,	our	annual	reports	on	Form	10-K,	quarterly	reports	on Form	10-Q,	current	reports	on	Form	8-K,	proxy	statements,	other	reports	filed	under	the	Securities	Exchange	Act	of	1934	("Exchange	Act")	and	all amendments	to	those	reports	simultaneously	or	as	soon	as	reasonably	practicable	after	such	material	is	electronically	filed	with,	or	furnished	to,	the Securities	and	Exchange	Commission	("SEC").	Our	reports	are	also	available	free	of	charge	on	the	SEC's	website,	www.sec.gov.	Also	available	free	of charge	on	our	website	are	the	following	corporate	governance	documents:

•	Motorola,	Inc.	Restated	Certificate	of	Incorporation

•	Motorola,	Inc.	Amended	and	Restated	Bylaws

•	Motorola,	Inc.	Board	Governance	Guidelines

•	Motorola,	Inc.	Director	Independence	Guidelines

•	Principles	of	Conduct	for	Members	of	the	Motorola,	Inc.	Board	of	Directors

•	Motorola	Code	of	Business	Conduct,	which	is	applicable	to	all	Motorola	employees,	including	the	principal	executive	officers,	the	principal

financial	officer	and	the	controller	(principal	accounting	officer)

•	Audit	and	Legal	Committee	Charter

•	Compensation	and	Leadership	Committee	Charter

•	Governance	and	Nominating	Committee	Charter

All	of	our	reports	and	corporate	governance	documents	may	also	be	obtained	without	charge	by	contacting	Investor	Relations,	Motorola,	Inc.,

Corporate	Offices,	1303	East	Algonquin	Road,	Schaumburg,	Illinois	60196,	E-mail:	investors@motorola.com.	Our	Annual	Report	on	Form	10-K	and Definitive	Proxy	Statement	may	also	be	requested	in	hardcopy	by	clicking	on	"Printed	Materials"	at	www.motorola.com/investor.	Our	Internet	website and	the	information	contained	therein	or	incorporated	therein	are	not	intended	to	be	incorporated	into	this	Annual	Report	on	Form	10-K.

# Item	1A:	 Risk	Factors

We	wish	to	caution	the	reader	that	the	following	important	risk	factors,	and	those	risk	factors	described	elsewhere	in	this	report	or	our	other Securities	and	Exchange	Commission	filings,	could	cause	our	actual	results	to	differ	materially	from	those	stated	in	forward-looking	statements contained	in	this	document	and	elsewhere.	These	risks	are	not	presented	in	order	of	importance	or	probability	of	occurrence.

We	have	had	substantial	operating	losses	in	2008	and	2007	and	may	continue	to	incur	losses	as	we	reposition	our	Mobile	Devices	business.

In	2008	and	2007,	Motorola	had	substantial	operating	losses	as	a	result	of	the	financial	performance	of	our	Mobile	Devices	business.	While	we	have plans	in	place	intended	to	improve	the	performance	of	this	business,	we	cannot	be	certain	that	we	will	be	successful	or	that	we	will	be	profitable	in	2009.

The	wireless	mobile	handset	market	experienced	slowing	growth	in	2008	and	the	market	is	expected	to	decline	in	2009	which	could	negatively	impact transition	plans	for	our	Mobile	Devices	business.

In	2009,	worldwide	wireless	handset	industry	unit	shipments	are	expected	to	decline	by	approximately	10%.	This	would	be	the	first	annual	decline	in industry	handset	unit	shipments	since	2001.	A	declining	mobile	handset	market	may	make	it	more	difficult	to	improve	our	business,	due	to	excess manufacturing	capacity,	increased	price	competition	and	other	market	factors.

We	have	lost	significant	market	share	in	our	Mobile	Devices	businesses	and	such	loss	has	negatively	impacted	our	performance	and	may	continue	to negatively	impact	our	financial	results.

Our	share	of	the	worldwide	wireless	handset	market	has	declined	significantly	in	the	last	two	years,	from	approximately	22%	in	2006,	to	14%	in 2007,	to	8%	in	2008.	While	we	reduced	our	costs	during	this	period	of	time,	these	market	share	declines	and	resulting	volume	reductions	have	had	an adverse	effect	on	our	results	of	operations.	If	market	share	in	our	Mobile	Devices	business	continues	to	decline,	it	will	adversely	impact	our	financial results.

The	uncertainty	of	current	economic	and	political	conditions	makes	budgeting	and	forecasting	difficult	and	may	reduce	demand	for	our	products.

Current	conditions	in	the	domestic	and	world	economies	are	very	uncertain.	The	global	financial	crisis,	as	well	as	ongoing	political	conflicts	in	the Middle	East	and	elsewhere,	have	created	many	economic	and	political	uncertainties	that	have	impacted	worldwide	markets.	As	a	result,	it	is	difficult	to estimate	changes	in	various	parts	of	the	world	economy,	including	the	markets	in	which	we	participate.	Because	all	components	of	our	budgeting	and forecasting	are	dependent	upon	estimates	in	the	markets	we	serve	and	demand	for	our	products,	the	prevailing	economic	uncertainties	render	estimates	of future	income	and	expenditures	difficult.

We	have	manufacturing	operations	and	engineering	resources	in	Israel	that	could	be	disrupted	as	a	result	of	hostilities	in	the	region.	We	also	sell	our products	and	services	throughout	the	Middle	East	and	demand	for	our	products	and	services	could	be	adversely	impacted	by	hostilities	in	this	region.

The	potential	for	future	terrorist	attacks,	increased	global	conflicts	and	the	escalation	of	existing	conflicts	and	public	health	issues	has	created worldwide	uncertainties	that	have	negatively	impacted,	and	may	continue	to	negatively	impact,	demand	for	certain	of	our	products.

We	operate	in	highly	competitive	markets	and	our	financial	results	will	be	affected	if	we	are	not	able	to	compete	effectively.

The	markets	for	our	products	are	highly	competitive	with	respect	to,	among	other	factors:	pricing,	product	features,	product	and	service	quality,	and the	time	required	to	introduce	new	products	and	services.	We	are	constantly	exposed	to	the	risk	that	our	competitors	may	implement	new	technologies before	we	do,	or	may	offer	lower	prices,	additional	products	or	services	or	other	incentives	that	we	cannot	or	will	not	offer.	We	can	give	no	assurances that	we	will	be	able	to	compete	successfully	against	existing	or	future	competitors.

Our	success	depends	in	part	on	our	timely	introduction	of	new	products	and	technologies	and	our	results	can	be	impacted	by	the	effectiveness	of	our significant	investments	in	new	products	and	technologies.

The	markets	for	our	products	are	characterized	by	rapidly	changing	technologies,	frequent	new	product	introductions,	short	product	life	cycles	and evolving	industry	standards.	We	face	intense	competition	in	these

markets	from	both	established	companies	and	new	entrants.	Product	life	cycles	can	be	short	and	new	products	are	expensive	to	develop	and	bring	to market.	Our	success	depends,	in	substantial	part,	on	the	timely	and	successful	introduction	of	new	products	and	upgrades	of	current	products	to	comply with	emerging	industry	standards	and	to	address	competing	technological	and	product	developments	carried	out	by	our	competitors.	The	research	and development	of	new,	technologically-advanced	products	is	a	complex	and	uncertain	process	requiring	high	levels	of	innovation	and	investment,	as	well as	the	accurate	anticipation	of	technology	and	market	trends.	We	may	focus	our	resources	on	technologies	that	do	not	become	widely	accepted	or	are	not commercially	viable.	In	addition,	our	products	may	contain	defects	or	errors	that	are	detected	only	after	deployment.	If	our	products	are	not	competitive or	do	not	work	properly,	our	business	will	suffer.

Our	results	are	subject	to	risks	related	to	our	significant	investment	in	developing	and	introducing	new	products,	such	as:	advanced	wireless handsets,	including	smartphones;	WiMAX,	LTE	and	other	advanced	technologies	for	wireless	broadband	networks;	products	for	transmission	of telephony	and	high-speed	data	over	hybrid	fiber	coaxial	cable	systems;	integrated	digital	radios;	and	integrated	public	safety	systems.	These	risks include:	(i)	difficulties	and	delays	in	the	development,	production,	testing	and	marketing	of	products;	(ii)	customer	acceptance	of	products;	(iii)	the development	of,	approval	and	compliance	with	industry	standards;	(iv)	the	significant	amount	of	resources	we	must	devote	to	the	development	of	new technology;	and	(v)	the	ability	to	differentiate	our	products	and	compete	with	other	companies	in	the	same	markets.

We	face	a	number	of	risks	related	to	the	ongoing	financial	crisis	and	severe	tightening	in	the	global	credit	markets.

The	ongoing	global	financial	crisis	affecting	the	banking	system	and	financial	markets	has	resulted	in	a	severe	tightening	in	the	worldwide	credit markets,	a	low	level	of	liquidity	in	many	financial	markets	and	extreme	volatility	in	credit	and	equity	markets.	This	financial	crisis	has	impacted,	and could	continue	to	impact,	Motorola's	business	in	a	number	of	ways,	including:

•	Potential	Deferment	or	Cancellation	of	Purchases	and	Orders	by	Customers:		Uncertainty	about	current	and	future	global	economic	conditions may	cause,	and	in	some	cases	has	caused,	consumers,	businesses	and	governments	to	defer	or	cancel	purchases	in	response	to	tighter	credit, decreased	cash	availability	and	declining	consumer	confidence.	If	future	demand	for	our	products	declines,	it	will	adversely	impact	our	financial results.

•	Customers'	Inability	to	Obtain	Financing	to	Make	Purchases	from	Motorola	and/or	Maintain	Their	Business:		Some	of	our	customers	require substantial	financing	in	order	to	fund	their	operations	and	make	purchases	from	Motorola.	The	inability	of	these	customers	to	obtain	sufficient credit	to	finance	purchases	of	our	products	and/or	meet	their	payment	obligations	to	us	could	have,	and	in	some	cases	has	had,	an	adverse	impact on	our	financial	results.	In	addition,	if	the	financial	crisis	results	in	insolvencies	for	our	customers,	it	will	adversely	impact	our	financial	results.

•	Increased	Requests	by	Customers	for	Vendor	Financing	by	Motorola:		Certain	of	the	Company's	customers,	particularly,	but	not	limited	to,	those who	purchase	large	infrastructure	systems,	request	that	their	suppliers	provide	financing	in	connection	with	equipment	purchases.	In	response	to the	recent	tightening	in	the	credit	markets,	these	types	of	requests	continue	to	increase	in	volume	and	scope.	Motorola	has	increased	its commitments	to	provide	financing	in	light	of	these	requests	and	a	continuation	of	the	current	credit	crisis	could	force	Motorola	to	choose	between further	increasing	its	level	of	vendor	financing	or	potentially	losing	sales	to	these	customers.

•	Negative	Impact	from	Increased	Financial	Pressures	on	Third-Party	Dealers,	Distributors	and	Retailers:		A	number	of	our	businesses	make	sales in	certain	regions	through	third-party	dealers,	distributors	and	retailers.	Although	many	of	these	third	parties	have	significant	operations	and maintain	access	to	available	credit,	others	are	smaller	and	more	likely	to	be	impacted	by	the	significant	decrease	in	available	credit	that	has resulted	from	the	current	financial	crisis.	If	credit	pressures	or	other	financial	difficulties	result	in	insolvency	for	important	third	parties	and Motorola	is	unable	to	successfully	transition	end-customers	to	purchase	our	products	from	other	third	parties	or	from	us	directly,	it	will	adversely impact	our	financial	results.

•	Negative	Impact	from	Increased	Financial	Pressures	on	Key	Suppliers:		Our	ability	to	meet	customers'	demands	depends,	in	part,	on	our	ability	to obtain	timely	and	adequate	delivery	of	quality	materials,	parts	and	components	from	our	suppliers.	Certain	of	our	components	are	available	only from	a	single	source	or	limited	sources.	If	certain	key	suppliers	were	to	become	capacity	constrained	or	insolvent	as	a	result	of	the	financial	crisis, it	could	result	in	a	reduction	or	interruption	in	supplies	or	an	increase	in	the	price	of

supplies	and	adversely	impact	our	financial	results.	In	addition,	credit	constraints	at	key	suppliers	have	resulted	in	accelerated	payment	of accounts	payable	by	Motorola,	impacting	our	cash	flow.	This	trend	could	continue	and	may	even	accelerate,	impacting	our	cash	flow.

•	Increased	Risk	of	Losses	or	Impairment	Charges	Related	to	Debt	Securities	and	Equity	and	Other	Investments	Held	by	Motorola:		The	current volatility	in	the	financial	markets	and	overall	economic	uncertainty	increases	the	risk	that	the	actual	amounts	realized	in	the	future	on	our	debt	and equity	investments	will	differ	significantly	from	the	fair	values	currently	assigned	to	them.	In	2008,	Motorola	has	recognized	$186	million	of impairment	charges	and	$101	million	of	temporary	unrealized	losses	on	debt	securities	held	in	its	Sigma	Fund,	a	broadly	diversified	portfolio	of highly	rated,	short-duration	debt	securities.	There	can	be	no	assurance	that	the	value	of	Sigma	Fund	investments	will	not	decline	further	in	the future.

Also,	many	of	the	Company's	equity	investments	are	in	early-stage	technology	companies	and,	therefore,	may	be	particularly	subject	to substantial	price	volatility	and	heightened	risk	from	the	tightening	in	the	credit	markets.

•	Increased	Risk	of	Financial	Counterparty	Failures	Could	Negatively	Impact	our	Financial	Position:		The	Company	uses	financial	instruments	to reduce	its	overall	exposure	to	the	effects	of	currency	fluctuations	on	cash	flows.	The	Company	is	exposed	to	credit	loss	in	the	event	of nonperformance	by	the	counterparties	to	these	financial	instruments.	In	order	to	minimize	this	risk,	the	contracts	are	distributed	among	several leading	financial	institutions,	all	of	whom	presently	have	investment	grade	credit	ratings.	Although	the	Company	has	not	experienced	and	does not	anticipate	nonperformance	by	its	counterparties,	in	light	of	the	ongoing	threats	to	financial	institutions	from	the	global	financial	crisis,	there can	be	no	assurance	of	performance	by	the	counterparties	to	these	financial	instruments.

•	Returns	on	Pension	and	Retirement	Plan	Assets	and	Interest	Rate	Changes	Could	Affect	Our	Earnings	in	Future	Periods:		The	funding	position of	our	pension	plans	is	impacted	by	the	performance	of	the	financial	markets,	particularly	the	equity	markets,	and	the	discount	rates	used	to calculate	our	pension	obligations	for	funding	and	expense	purposes.	Recent	significant	declines	in	the	financial	markets	have	negatively	impacted the	value	of	the	assets	in	the	Company's	pension	plans.	In	addition,	lower	bond	yields	may	reduce	our	discount	rates	resulting	in	increased pension	contributions	and	expense.

Funding	obligations	are	determined	under	government	regulations	and	are	measured	each	year	based	on	the	value	of	assets	and	liabilities	on	a specific	date.	If	the	financial	markets	do	not	provide	the	long-term	returns	that	are	expected	under	the	governmental	funding	calculations,	we could	be	required	to	make	larger	contributions.	The	equity	markets	can	be,	and	recently	have	been,	very	volatile,	and	therefore	our	estimate	of future	contribution	requirements	can	change	dramatically	in	relatively	short	periods	of	time.	Similarly,	changes	in	interest	rates	can	impact	our contribution	requirements.	In	a	low	interest	rate	environment,	the	likelihood	of	higher	contributions	in	the	future	increases.

•	Impact	on	Ability	to	Sell	Receivables:		The	Company	sells	accounts	receivable	and	long-term	receivables	to	third	parties.	Sales	are	made	both	on a	one-time,	non-recourse	basis	and	under	committed	facilities	that	involve	contractual	commitments	from	third	parties	to	purchase	qualifying receivables	up	to	monetary	limits.	These	sales	of	receivables	provide	the	Company	the	ability	to	accelerate	cash	flow	when	it	is	prudent	to	do	so. The	ability	to	sell	(or	"factor")	receivables,	particularly	under	committed	facilities,	is	often	subject	to	the	credit	quality	of	the	obligor	and	the Company's	ability	to	obtain	sufficient	levels	of	credit	insurance	from	independent	insurance	companies.	In	early	2009,	a	$400	million	committed facility	expired	and	was	not	renewed.	Although	the	Company	is	negotiating	replacement	facilities,	there	is	no	assurance	that	the	Company	will	be able	to	implement	these	facilities.	Reduction	in	the	volume	of	committed	receivable	purchasing	facilities	could	limit	the	Company's	ability	to	sell receivables	in	the	future.	Further,	the	severe	tightening	in	the	credit	markets	due	to	the	ongoing	global	financial	crisis	could	limit	the	Company's ability	to	sell	receivables	in	the	future,	particularly	if	the	creditworthiness	of	our	customers	declines.

•	Impact	on	Ability	to	Purchase	Sufficient	Credit	Insurance:		We	purchase	a	large	amount	of	credit	insurance	to	mitigate	some	of	our	credit	risks.	In particular,	our	ability	to	sell	receivables,	particularly	under	committed	receivables	facilities,	is	often	subject	to	obtaining	sufficient	levels	of	credit insurance	from	independent	insurance	companies.	Accordingly,	our	ability	to	sell	certain	of	our	receivables,	and	therefore	our	cash	flows,	could be	negatively	impacted	if	we	are	not	able	to	continue	to	purchase	credit	insurance	in	certain	countries	and	in	sufficient	quantities.	Although	credit insurance	remains	generally	available	to	the	Company,	it	has	become	more	expensive	to	obtain	and	often	requires	higher	deductibles	than	in	the past.

There	can	be	no	assurances	that	the	Company	will	be	able	to	obtain	sufficient	quantities	of	credit	insurance	in	the	necessary	locations	in	the future.

We	face	a	number	of	risks	related	to	the	recent	downgrade	of	the	Company's	long-term	debt	to	non-investment	grade	by	one	credit	rating	agency:

In	December,	Standard	and	Poor's	downgraded	the	Company's	long-term	debt	to	BB+	(one	level	below	investment	grade)	from	BBB	and	removed the	short-term	rating.	In	February	2009,	Fitch	Ratings	downgraded	the	Company's	long-term	debt	to	BBB-	from	BBB	and	downgraded	the	short-term debt	rating	to	F-3	from	F-2.	Also	in	February	2009,	Moody's	Investor	Service	downgraded	the	Company's	long-term	debt	to	Baa3	from	Baa2	and downgraded	the	short-term	debt	rating	to	P-3	from	P-2.	Since	the	Company	has	a	non-investment	grade	rating	from	one	rating	agency,	it	is	referred	to	as a	"split	rated	credit".

•	Our	access	to	short-term	borrowing	in	the	commercial	paper	market	is	very	limited:		While	the	Company	did	not	issue	commercial	paper	in 2008,	if	the	Company	needs	access	to	very	short-term	borrowing,	it	may	no	longer	be	able	to	access	the	unsecured	commercial	paper	market because	of	its	P-3/F-3	short-term	ratings.	Other	sources	of	short-term	borrowing	may	be	more	limited,	if	available	at	all,	and	will	have	higher	cost to	borrow	than	the	commercial	paper	market.

•	Our	access	to	the	long-term	debt	market	may	be	limited:		As	a	split	rated	credit,	our	ability	to	issue	long-term	debt	is	more	limited	and	the	market into	which	split	rated	debt	is	offered	can	be	very	volatile	and	can	be	unavailable	for	periods	of	time.	As	a	result,	it	may	be	more	difficult	for	us	to quickly	issue	long-term	debt	and	any	debt	issued	may	be	more	costly.	These	factors	may	impact	our	operating	flexibility.

•	Our	ability	to	provide	performance	bonds,	bid	bonds,	standby	letters	of	credit	and	surety	bonds	could	be	severely	limited:		Commercial	contracts with	Motorola's	customers	often	require	performance	bonds,	bid	bonds,	standby	letters	of	credit	and	surety	bonds	(collectively,	referred	to	as "Performance	Bonds")	to	be	issued	on	behalf	of	the	Company	by	banks	and	insurance	companies.	As	a	split	rated	credit,	issuers	of	these Performance	Bonds	may	be	less	likely	to	provide	Performance	Bonds	on	the	Company's	behalf	in	the	future,	unless	the	Company	provides collateral.	These	limitations	on	issuance	may	apply	to	the	renewal	and	extension	of	existing	Performance	Bonds,	as	well	as	the	issuance	of	new Performance	Bonds.	Such	collateral	requirements	could	result	in	less	liquidity	for	other	operational	needs.	Also,	as	a	result	of	the	Company's current	credit	ratings,	there	has	been	an	increase	in	the	cost	of	issuance	of	Performance	Bonds.

•	Our	ability	to	hedge	foreign	exchange	risk	could	be	severely	limited:		As	a	split	rated	credit,	counterparties	may	be	unwilling	to	provide	trading and	derivative	lines	for	the	Company	without	cash	collateral.	This	would	severely	limit	our	ability	to	reduce	volatility	in	earnings	and	cash	flow. Should	cash	collateral	be	provided,	less	liquidity	would	be	available	for	operational	needs.

•	Our	ability	to	fund	our	foreign	affiliates	could	be	limited:		The	Company	relies	on	uncommitted	lines	of	credit	from	banks	to	provide	daylight overdraft,	short-term	loans	and	other	sources	of	liquidity	for	foreign	affiliates.	As	a	split	rated	credit,	lenders	may	be	unwilling	to	provide	credit to	our	foreign	affiliates.	This	could	result	in	the	Company	using	U.S.	cash	to	make	loans	to	these	affiliates	or	provide	permanent	equity	where loans	are	not	possible.

•	Trade	terms	with	suppliers	could	become	less	favorable:		Given	the	Company's	split	rating,	suppliers	may	require	letters	of	credit,	cash	collateral or	other	forms	of	security	as	part	of	standard	payment	conditions.	This	could	result	in	reduced	liquidity	and	less	leverage	in	pricing	negotiations.

•	Our	ability	to	sell	receivables	could	be	impacted:		As	a	split	rated	credit,	the	conditions	placed	on	us	by	the	parties	that	we	sell	our	receivables	to will	become	more	stringent.	If	we	are	unable,	or	choose	not	to,	meet	these	new	conditions,	our	ability	to	sell	the	receivables	will	be	negatively impacted.

We	may	not	be	able	to	borrow	funds	under	our	credit	facility	if	we	are	not	able	to	meet	the	conditions	for	borrowing	required	by	our	facility.

Our	existing	$2	billion	five-year	domestic	syndicated	revolving	credit	facility	contains	various	conditions,	covenants	and	representations	with	which we	must	be	in	compliance	in	order	to	borrow	funds.	Although	there	are	no	borrowings	outstanding	under	the	facility,	if	we	wish	to	borrow	under	this facility	in	the	future,	there	can	be	no	assurance	that	we	will	be	in	compliance	with	these	conditions,	covenants	and	representations.

We	may	not	generate	sufficient	future	taxable	income,	which	may	require	additional	deferred	tax	asset	valuation	allowances.

If	the	Company	is	unable	to	generate	sufficient	future	taxable	income	in	the	U.S.	and	certain	other	jurisdictions,	or	if	there	is	a	significant	change	in the	actual	effective	tax	rates	or	the	time	period	within	which	the	underlying	temporary	differences	become	taxable	or	deductible,	the	Company	could	be required	to	increase	its	valuation	allowances	against	its	deferred	tax	assets	resulting	in	an	increase	in	its	effective	tax	rate	and	an	adverse	impact	on	future operating	results.

We	may	be	required	to	record	additional	goodwill	or	amortizable	intangible	assets	impairment	charges,	which	could	result	in	an	additional	significant charge	to	earnings.

Under	generally	accepted	accounting	principles,	we	review	our	amortizable	intangible	assets	for	impairment	when	events	or	changes	in circumstances	indicate	the	carrying	value	may	not	be	recoverable.	Goodwill	is	tested	for	impairment	at	least	annually.	Factors	that	may	be	considered	in assessing	whether	goodwill	or	intangible	assets	may	not	be	recoverable	include	a	decline	in	the	Company's	stock	price	or	market	capitalization,	reduced estimates	of	future	cash	flows,	and	slower	growth	rates	in	our	industry.	During	2008,	the	Company	recorded	goodwill	impairment	charges	of	$1.6	billion and	intangible	assets	impairment	charges	of	$129	million.	The	goodwill	impairment	charges	resulted	from	lower	asset	values	in	the	overall	market	and	the impact	of	the	macroenvironment	on	the	Company's	near-term	forecasts.	The	intangible	asset	impairments	resulted	from	a	change	in	a	technology platform	strategy.	Further	declines	in	the	Company's	stock	price,	the	markets	or	reductions	in	the	Company's	future	cash	flow	estimates	and	future operating	results	may	require	the	Company	to	record	significant	additional	goodwill	or	intangible	asset	impairment	charges	in	our	financial	statements	in future	periods,	negatively	impacting	our	financial	results.

Our	strategy	to	separate	our	businesses	into	two	publicly-traded	companies	may	have	an	adverse	effect	on	business	operations	and	our	assets.

The	Company	has	announced	a	strategy	to	separate	into	two	publicly-traded	companies	in	the	future,	if	and	when	market	and	businesses	conditions support	a	separation.	There	are	various	uncertainties	and	risks	relating	to	the	proposed	separation	of	our	businesses	into	two	publicly-traded	companies, which	are	enhanced	because	we	have	not	announced	a	target	date	for	the	separation	or	determined	the	structure	that	will	best	serve	the	strategic realignment.	The	uncertainties	and	risks	that	could	have	an	adverse	effect	on	our	business	operations	or	assets	include:	(i)	the	distraction	of	management and	disruption	of	operations,	which	could	have	a	material	adverse	effect	on	our	operating	results;	(ii)	perceived	uncertainties	as	to	our	future	direction may	result	in	increased	difficulties	in	recruiting	and	retaining	employees,	particularly	highly	qualified	employees;	(iii)	perceived	uncertainties	as	to	our future	direction	may	have	a	negative	impact	on	our	relationships	with	our	customers,	suppliers,	vendors	and	partners	and	may	result	in	the	loss	of business	opportunities;	(iv)	the	process	of	exploring	strategic	alternatives	may	be	time	consuming	and	expensive	and	may	result	in	the	loss	of	business opportunities;	and	(v)	we	may	not	be	able	to	successfully	achieve	the	benefits	of	any	strategic	alternative	undertaken	by	us.

Our	future	financial	results	may	be	negatively	impacted	if	we	do	not	execute	on	our	hardware	and	software	strategy	for	our	Mobile	Devices	business.

As	part	of	our	ongoing	effort	to	improve	the	product	portfolio	of	our	Mobile	Devices	business,	we	are	in	the	process	of	rationalizing	our	hardware and	software	platforms	to	reduce	the	complexity	of	our	product	platforms	and	system	architecture	to	lower	our	cost	to	produce	devices	and	to	enable richer	consumer	experiences.	Failure	to	execute	these	rationalization	plans	in	a	timely	and	effective	manner	may	cause	us	to	be	competitively disadvantaged	in	many	areas,	including	but	not	limited	to,	cost,	time	to	market	and	the	ability	to	ramp-up	production	in	a	timely	fashion	with	acceptable quality	and	improved/additional	features.

If	our	operating	system	strategy	is	not	successful,	our	Mobile	Devices	business	could	be	negatively	impacted.

We	have	made	a	strategic	decision	to	use	third-party	and/or	open	source	operating	systems,	such	as	Google's	Android	operating	system	and Microsoft's	Windows	Mobile	operating	system	in	our	wireless	products.	As	a	result	of	this,	we	are	at	risk	due	to	our	dependency	on	third	parties continued	development	of	operating	systems	and	third	parties'	software	application	ecosystem	infrastructures.	With	respect	to	Google's	Android operating	system	which	is	a	newer	operating	system	for	wireless	handsets,	in	the	event	that	Google's	Android	team	no	longer	develops	the	Android	code base	and	this	development	is	not	taken	up	by	the	open	source	community,	this	would	increase	the	burden	of	development	on	Motorola.	From	an	overall risk	perspective,	the	industry	is	currently	engaged	in	an	extremely	competitive	phase	with	respect	to	operating	system	platforms	and	software	generally.

Android	is	viewed	as	a	competitive	platform	in	the	Linux	and	smartphone	categories.	If	Android	fails	to	gain	operator	and/or	developer	adoption,	the Company's	financial	results	could	be	negatively	impacted.

We	have	taken,	and	continue	to	take,	cost-reduction	actions.	Our	ability	to	complete	these	actions	and	the	impact	of	such	actions	on	our	business	may	be limited	by	a	variety	of	factors.	The	cost-reduction	actions,	in	turn,	may	expose	us	to	additional	production	risk	and	have	an	adverse	effect	on	our	sales, profitability	and	ability	to	attract	and	retain	employees.

We	have	been	reducing	costs	and	simplifying	our	product	portfolios	in	all	of	our	businesses,	with	sizable	reductions	in	our	Mobile	Devices	business. We	have	discontinued	product	lines,	exited	businesses,	consolidated	manufacturing	operations,	increased	manufacturing	with	third	parties,	reduced	our employee	population	and	changed	our	compensation	and	benefit	programs.

The	impact	of	these	cost-reduction	actions	on	our	sales	and	profitability	may	be	influenced	by	many	factors	including,	but	not	limited	to:	(i)	our ability	to	successfully	complete	these	ongoing	efforts;	(ii)	our	ability	to	generate	the	level	of	cost	savings	we	expect	or	that	are	necessary	to	enable	us	to effectively	compete;	(iii)	delays	in	implementation	of	anticipated	workforce	reductions	in	highly-regulated	locations	outside	the	United	States, particularly	in	Europe	and	Asia;	(iv)	decline	in	employee	morale	and	the	potential	inability	to	meet	operational	targets	due	to	the	loss	of	employees; (v)	our	ability	to	retain	or	recruit	key	employees,	particularly	as	a	result	of	recent	actions	to	suspend	the	Company's	401(k)	contributions	to	employee accounts,	permanently	freeze	all	future	benefit	accruals	under	U.S.	pension	plans	and	eliminate	merit	increase	programs	in	the	U.S.	and	many	other markets;	(vi)	the	adequacy	of	our	manufacturing	capacity,	including	capacity	provided	by	third	parties;	and	(vii)	the	performance	of	other	parties	under contract	manufacturing	arrangements	on	which	we	rely	for	the	manufacture	of	certain	products,	parts	and	components.

All	of	our	businesses	have	consolidated	or	exited	certain	facilities	and	our	products	are	manufactured	in	fewer	facilities	than	in	the	past.	While	we have	business	continuity	and	risk	management	plans	in	place	in	case	capacity	is	significantly	reduced	or	eliminated	at	a	given	facility,	the	reduced number	of	alternative	facilities	could	cause	the	duration	of	any	manufacturing	disruption	to	be	longer.	As	a	result,	we	could	have	difficulties	fulfilling	our orders	and	our	sales	and	profits	could	decline.

The	demand	for	our	products	depends,	in	part,	on	the	continued	growth	of	the	industries	in	which	we	participate.	A	market	decline	in	any	one	of	these industries	could	have	an	adverse	effect	on	our	business.

The	rate	at	which	the	portions	of	the	telecommunications	industry	in	which	we	participate	continue	to	grow	is	critical	to	our	ability	to	improve	our overall	financial	performance	and	we	could	be	negatively	impacted	by	a	slowdown.	Our	business	was	very	negatively	impacted	by	the	economic slowdown	and	the	corresponding	reduction	in	capital	spending	by	the	telecommunications	industry	from	2001	to	2003,	and	we	are	forecasting	declines and	slower	growth	in	2009	for	the	industries	we	compete	in.

Our	customers	and	suppliers	are	located	throughout	the	world	and,	as	a	result,	we	face	risks	that	other	companies	that	are	not	global	may	not	face.

Our	customers	and	suppliers	are	located	throughout	the	world	and	more	than	half	of	our	net	sales	are	made	to	customers	outside	the	U.S.	In	addition, we	have	many	manufacturing,	administrative	and	sales	facilities	outside	the	U.S.	and	more	than	half	of	our	employees	are	employed	outside	the U.S.	Most	of	our	suppliers'	operations	are	outside	the	U.S.,	and	most	of	our	products	are	manufactured	outside	the	U.S.

As	with	all	companies	that	have	sizeable	sales	and	operations	outside	the	U.S.,	we	are	exposed	to	risks	that	could	negatively	impact	sales	or profitability,	including	but	not	limited	to:	(i)	tariffs,	trade	barriers	and	trade	disputes,	customs	classifications	and	certifications,	including	but	not	limited to	changes	in	classifications	or	errors	or	omissions	related	to	such	classifications	and	certifications;	(ii)	changes	in	U.S.	and	non-U.S.	rules	related	to trade,	environmental,	health	and	safety,	technical	standards	&	consumer	protection;	(iii)	longer	payment	cycles;	(iv)	tax	issues,	such	as	tax	law	changes, variations	in	tax	laws	from	country	to	country	and	as	compared	to	the	U.S.,	obligations	under	tax	incentive	agreements,	and	difficulties	in	repatriating cash	generated	or	held	abroad	in	a	tax-efficient	manner;	(v)	currency	fluctuations,	particularly	in	the	Chinese	renminbi,	Euro,	Brazilian	real,	Taiwan dollar	and	Japanese	yen;	(vi)	foreign	exchange	regulations,	which	may	limit	the	Company's	ability	to	convert	or	repatriate	foreign	currency;

(vii)	challenges	in	collecting	accounts	receivable;	(viii)	cultural	and	language	differences;	(ix)	employment	regulations	and	local	labor	conditions;

(x)	difficulties	protecting	IP	in	foreign	countries;	(xi)	instability	in	economic	or	political	conditions,	including	inflation,	recession	and	actual	or anticipated	military	or	political	conflicts;	(xii)	natural	disasters;	(xiii)	public	health	issues	or	outbreaks;

(xiv)	changes	in	laws	or	regulations	that	adversely	impact	benefits	being	received	by	the	Company;	and	(xv)	the	impact	of	each	of	the	foregoing	on	our outsourcing	and	procurement	arrangements.

Many	of	our	products	that	are	manufactured	outside	the	U.S.	are	manufactured	in	Asia	and	Mexico.	If	manufacturing	in	these	regions	is	disrupted, our	overall	capacity	could	be	significantly	reduced	and	sales	or	profitability	could	be	negatively	impacted.	Furthermore,	the	legal	system	in	China	is	still developing	and	is	subject	to	change.	Accordingly,	our	operations	and	orders	for	products	in	China	could	be	adversely	impacted	by	changes	to,	or interpretation	of,	Chinese	law.

We	also	have	presence	in	emerging	markets	such	as	India	and	Russia.	We	face	challenges	in	emerging	markets,	including	creating	demand	for	our products	and	the	negative	impact	of	changes	in	the	laws,	or	the	interpretation	of	the	laws,	in	those	countries.

Changes	in	our	operations	or	sales	outside	the	U.S.	markets	could	result	in	lost	benefits	in	impacted	countries	and	increase	our	cost	of	doing	business.

The	Company	has	entered	into	various	agreements	with	non-U.S.	governments,	agencies,	or	similar	organizations	under	which	the	Company receives	certain	benefits	relating	to	its	operations	and/or	sales	in	the	jurisdiction.	If	the	Company's	circumstances	change	and	operations	or	sales	are	not at	levels	originally	anticipated,	the	Company	may	be	at	risk	of	losing	some	or	all	of	these	benefits	and	increasing	our	cost	of	doing	business.

If	the	quality	of	our	products	does	not	meet	our	customers'	expectations,	then	our	sales	and	operating	earnings,	and	ultimately	our	reputation,	could	be adversely	affected.

Some	of	the	products	we	sell	have	quality	issues	resulting	from	the	design	or	manufacture	of	the	product,	or	from	the	software	used	in	the	product. Sometimes,	these	issues	may	be	caused	by	components	we	purchase	from	other	manufacturers	or	suppliers.	Often	these	issues	are	identified	prior	to	the shipment	of	the	products	and	may	cause	delays	in	shipping	products	to	customers,	or	even	the	cancellation	of	orders	by	customers.	Sometimes,	we discover	quality	issues	in	the	products	after	they	have	been	shipped	to	our	customers,	distributors	or	end-users,	requiring	us	to	resolve	such	issues	in	a timely	manner	that	is	the	least	disruptive	to	our	customers.	Such	pre-shipment	and	post-shipment	quality	issues	can	have	legal	and	financial ramifications,	including:	delays	in	the	recognition	of	revenue,	loss	of	revenue	or	future	orders,	customer-imposed	penalties	on	Motorola	for	failure	to meet	contractual	requirements,	increased	costs	associated	with	repairing	or	replacing	products,	and	a	negative	impact	on	our	goodwill	and	brand	name reputation.

In	some	cases,	if	the	quality	issue	affects	the	product's	safety	or	regulatory	compliance,	then	such	a	"defective"	product	may	need	to	be	recalled. Depending	on	the	nature	of	the	defect	and	the	number	of	products	in	the	field,	it	could	cause	the	Company	to	incur	substantial	recall	costs,	in	addition	to the	costs	associated	with	the	potential	loss	of	future	orders,	and	the	damage	to	the	Company's	goodwill	or	brand/reputation.	In	addition,	the	Company may	be	required,	under	certain	customer	contracts,	to	pay	damages	for	failed	performance	that	might	exceed	the	revenue	that	the	Company	receives	from the	contracts.	Recalls	involving	regulatory	agencies	could	also	result	in	fines	and	additional	costs.	Finally,	recalls	could	result	in	third-party	litigation, including	class	action	litigation	by	persons	alleging	common	harm	resulting	from	the	purchase	of	the	products.

If	the	volume	of	our	sales	decrease	or	do	not	reach	projected	targets,	we	could	face	increased	materials	and	manufacturing	costs	that	may	make	our products	less	competitive.

We	have	negotiated	favorable	pricing	terms	with	many	of	our	suppliers,	some	of	which	have	volume-based	pricing.	In	the	case	of	volume-based pricing	arrangements,	we	may	experience	higher	than	anticipated	costs	if	current	volume-based	purchase	projections	are	not	met.	Some	contracts	have minimum	purchase	commitments	and	we	may	incur	large	financial	penalties	if	these	commitments	are	not	met.	We	also	may	have	unused	production capacity	if	our	current	volume	projections	are	not	met,	increasing	our	production	cost	per	unit.	In	the	future,	as	we	establish	new	pricing	terms,	our volume	demand	could	adversely	impact	future	pricing	from	suppliers.	All	of	these	outcomes	may	result	in	our	products	being	more	costly	to	manufacture and	less	competitive.

Our	future	operating	results	depend	on	our	ability	to	purchase	a	sufficient	amount	of	materials,	parts	and	components	to	meet	the	demands	of	our customers.

Our	ability	to	meet	customers'	demands	depends,	in	part,	on	our	ability	to	obtain	timely	and	adequate	delivery	of	quality	materials,	parts	and components	from	our	suppliers.	We	have	experienced	shortages	in	the	past	that	have	adversely	affected	our	operations.	Although	we	work	closely	with our	suppliers	to	avoid	these	types	of	shortages,	there	can	be	no	assurances	that	we	will	not	encounter	these	problems	in	the	future.	Furthermore,	certain

of	our	components	are	available	only	from	a	single	source	or	limited	sources.	We	may	not	be	able	to	diversify	sources	in	a	timely	manner.	A	reduction	or interruption	in	supplies	or	a	significant	increase	in	the	price	of	supplies	could	have	a	material	adverse	effect	on	our	businesses.

Our	success	is	dependent,	in	part,	upon	our	ability	to	form	successful	strategic	alliances.	If	these	arrangements	do	not	develop	as	expected,	our	business may	be	adversely	impacted.

We	currently	partner	with	industry	leaders	to	meet	customer	product	and	service	requirements	and	to	develop	innovative	advances	in	design	and technology.	Some	of	our	partnerships	allow	us	to	supplement	internal	manufacturing	capacity	and	share	the	cost	of	developing	next-generation technologies.	Other	partnerships	allow	us	to	offer	more	services	and	features	to	our	customers.	If	such	arrangements	do	not	develop	as	expected,	our business	could	be	adversely	impacted.

# We	rely	on	third-party	distributors,	representatives	and	retailers	to	sell	certain	of	our	products.

In	addition	to	our	own	sales	force,	we	offer	our	products	through	a	variety	of	third-party	distributors,	representatives	and	retailers.	Certain	of	our distributors	or	representatives	may	also	market	other	products	that	compete	with	our	products.	The	loss,	termination	or	failure	of	one	or	more	of	our distributors	or	representatives	to	effectively	promote	our	products,	or	changes	in	the	financial	or	business	condition	of	these	distributors,	representatives or	retailers,	could	affect	our	ability	to	bring	products	to	market.

# We	face	many	risks	relating	to	intellectual	property	rights.

Our	business	will	be	harmed	if:	(i)	we,	our	customers	and/or	our	suppliers	are	found	to	have	infringed	intellectual	property	rights	of	third	parties, (ii)	if	the	intellectual	property	indemnities	in	our	supplier	agreements	are	inadequate	to	cover	damages	and	losses	due	to	infringement	of	third-party intellectual	property	rights	by	supplier	products,	(iii)	if	we	are	required	to	provide	broad	intellectual	property	indemnities	to	our	customers,	or	(iv)	if	our intellectual	property	protection	is	inadequate	to	protect	our	proprietary	rights.	We	may	be	harmed	if	we	are	forced	to	make	publicly	available,	under	the relevant	open-source	licenses,	certain	internally	developed	software-related	intellectual	property	as	a	result	of	either	our	use	of	open-source	software code	or	the	use	of	third-party	software	that	contains	open-source	code.

Because	our	products	are	comprised	of	complex	technology,	much	of	which	we	acquire	from	suppliers	through	the	purchase	of	components	or licensing	of	software,	we	are	often	involved	in	or	impacted	by	litigation	regarding	patent	and	other	intellectual	property	rights.	Third	parties	have asserted,	and	in	the	future	may	assert,	intellectual	property	infringement	claims	against	us	and	against	our	customers	and	suppliers.	Defending	claims	may be	expensive	and	divert	the	time	and	efforts	of	our	management	and	employees.	Increasingly,	third	parties	have	sought	broad	injunctive	relief	which could	limit	our	ability	to	sell	our	products	in	the	U.S.	or	elsewhere	with	intellectual	property	subject	to	the	claims.	If	we	do	not	succeed	in	any	such litigation,	we	could	be	required	to	expend	significant	resources	to	pay	damages,	develop	non-infringing	intellectual	property	or	to	obtain	licenses	to	the intellectual	property	that	is	the	subject	of	such	litigation.	However,	we	cannot	be	certain	that	any	such	licenses,	if	available	at	all,	will	be	available	to	us on	commercially	reasonable	terms.	In	some	cases,	we	might	be	forced	to	stop	delivering	certain	products	if	we	or	our	customer	or	supplier	are	subject	to a	final	injunction.

We	attempt	to	negotiate	favorable	intellectual	property	indemnities	with	our	suppliers	for	infringement	of	third-party	intellectual	property	rights,	but there	is	no	assurance	that	we	will	be	successful	in	our	negotiations	or	that	a	supplier's	indemnity	will	cover	all	damages	and	losses	suffered	by	Motorola and	our	customers	due	to	the	infringing	products	or	that	a	supplier	may	choose	to	accept	a	license	or	modify	or	replace	its	products	with	non-infringing products	which	would	otherwise	mitigate	such	damages	and	losses.	Further,	Motorola	may	not	be	able	to	participate	in	intellectual	property	litigation involving	a	supplier	and	may	not	be	able	to	influence	any	ultimate	resolution	or	outcome	that	may	adversely	impact	Motorola's	sales	if	a	court	enters	an injunction	that	enjoins	the	supplier's	products	or	if	the	International	Trade	Commission	issues	an	exclusionary	order	that	blocks	Motorola	products	from importation	into	the	U.S.

In	addition,	our	customers	increasingly	demand	that	we	indemnify	them	broadly	from	all	damages	and	losses	resulting	from	intellectual	property litigation	against	them.	Because	our	customers	often	derive	much	larger	revenue	streams	by	reselling	or	leasing	our	products	than	we	generate	from	the same	products,	these	indemnity	claims	by	our	customers	have	the	potential	to	expose	us	to	damages	that	are	much	higher	than	we	would	be	exposed	to	if we	were	sued	directly.

Our	patent	and	other	intellectual	property	rights	are	important	competitive	tools	and	may	generate	income	under	license	agreements.	We	regard	our intellectual	property	rights	as	proprietary	and	attempt	to	protect	them

with	patents,	copyrights,	trademarks,	trade	secret	laws,	confidentiality	agreements	and	other	methods.	We	also	generally	restrict	access	to	and	distribution of	our	proprietary	information.	Despite	these	precautions,	it	may	be	possible	for	a	third	party	to	obtain	and	use	our	proprietary	information	or	develop similar	technology	independently.	In	addition,	effective	patent,	copyright,	trademark	and	trade	secret	protection	may	be	unavailable	or	limited	in	certain foreign	countries.	Unauthorized	use	of	our	intellectual	property	rights	by	third	parties	and	the	cost	of	any	litigation	necessary	to	enforce	our	intellectual property	rights	could	have	an	adverse	impact	on	our	business.

As	we	expand	our	business,	including	through	acquisitions,	and	compete	with	new	competitors	in	new	markets,	the	breadth	and	strength	of	our intellectual	property	portfolio	in	those	new	areas	may	not	be	as	developed	as	in	our	longer-standing	businesses.	This	may	expose	us	to	a	heightened	risk of	litigation	and	other	challenges	from	competitors	in	these	new	markets.

# We	face	risks	related	to	ongoing	patent-related	disputes	between	Qualcomm	and	Broadcom.

Motorola	is	a	purchaser	of	CDMA	EV-DO	baseband	processor	chips	and	chipsets	from	Qualcomm	Incorporated	("Qualcomm"),	and	we	previously announced	an	intention	to	design	certain	of	Qualcomm's	W-CDMA	chipsets	into	certain	of	our	3G	handsets.	Qualcomm	and	Broadcom	Corporation ("Broadcom")	are	engaged	in	several	patent-related	legal	actions.	In	certain	of	these	actions,	Broadcom	is	seeking	orders	to	ban	the	importation	into	the U.S.	of	Qualcomm's	infringing	EV-DO	and	W-CDMA	baseband	processor	chipsets	and	certain	"downstream"	products	that	contain	them	(including Motorola	handsets)	and/or	limit	Qualcomm's	ability	to	provide	certain	services	and	products	in	the	U.S.	relating	to	such	infringing	chipsets.	A	final outcome	adverse	to	Qualcomm	in	any	of	the	patent-related	legal	actions	could	have	a	material	adverse	impact	on	Motorola's	performance	by	making	it difficult,	more	expensive	or	impossible	for	Motorola	to	make	and/or	import	products	destined	for	the	U.S.	market	that	use	certain	infringing	Qualcomm chipsets.	While	we	continue	to	work	with	Qualcomm	and	others	on	contingency	plans	relating	to	these	cases,	there	is	no	guarantee	that	such	plans	will prove	successful	or	avoid	further	legal	challenge.

Our	future	financial	results	may	be	negatively	impacted	if	we	are	not	successful	in	licensing	our	intellectual	property.

As	part	of	the	business	strategy	of	some	of	our	business	segments,	primarily	our	Mobile	Devices	business,	we	generate	revenue	through	the	licensing of	intellectual	property	rights.	The	licensed	rights	include	those	that	are	essential	to	telecommunications	standards,	such	as	the	GSM	standard.	Previously agreed-upon	terms	of	some	of	our	long-standing	license	agreements	and	the	aging	of	our	essential	patent	portfolio	have	reduced	our	royalty	revenue	over the	past	several	years	and	are	likely	to	continue	to	reduce	that	revenue.	Uncertainty	in	the	legal	environment	makes	it	difficult	to	assure	that	we	will	be able	to	enter	into	new	license	agreements	that	will	be	sufficient	to	offset	that	reduction	in	our	revenue.

Many	of	our	components	and	products	are	designed	or	manufactured	by	third	parties	and	if	third-party	manufacturers	lack	sufficient	quality	control	or	if there	are	significant	changes	in	the	financial	or	business	condition	of	such	third-party	manufacturers,	it	may	have	a	material	adverse	effect	on	our business.

We	rely	on	third-party	suppliers	for	many	of	the	components	used	in	our	products	and	we	rely	on	third-party	manufacturers	to	manufacture	many	of our	assemblies	and	finished	products.	If	we	are	not	able	to	engage	such	manufacturers	with	the	capabilities	or	capacities	required	by	our	business,	or	if such	third	parties	lack	sufficient	quality	control	or	if	there	are	significant	changes	in	the	financial	or	business	condition	of	such	third	parties,	it	could	have a	material	adverse	effect	on	our	business.

We	also	have	third-party	arrangements	for	the	design	or	manufacture	of	certain	products,	parts	and	components.	If	we	are	not	able	to	engage	such parties	with	the	capabilities	or	capacities	required	by	our	business,	or	if	these	third	parties	fail	to	deliver	quality	products,	parts	and	components	on	time and	at	reasonable	prices,	we	could	have	difficulties	fulfilling	our	orders	and	our	sales	and	profits	could	decline.

We	may	continue	to	make	strategic	acquisitions	of	other	companies	or	businesses	and	these	acquisitions	introduce	significant	risks	and	uncertainties, including	risks	related	to	integrating	the	acquired	businesses	and	achieving	benefits	from	the	acquisitions.

In	order	to	position	ourselves	to	take	advantage	of	growth	opportunities,	we	have	made,	and	may	continue	to	make,	strategic	acquisitions	that involve	significant	risks	and	uncertainties.	These	risks	and	uncertainties	include:	(i)	the	difficulty	in	integrating	newly-acquired	businesses	and	operations in	an	efficient	and	effective	manner;	(ii)	the	challenges	in	achieving	strategic	objectives,	cost	savings	and	other	benefits	from	acquisitions;	(iii)	the	risk

that	our	markets	do	not	evolve	as	anticipated	and	that	the	technologies	acquired	do	not	prove	to	be	those	needed	to	be	successful	in	those	markets;	(iv)	the potential	loss	of	key	employees	of	the	acquired	businesses;	(v)	the	risk	of	diverting	the	attention	of	senior	management	from	our	operations;	(vi)	the	risks of	entering	new	markets	in	which	we	have	limited	experience;	(vii)	risks	associated	with	integrating	financial	reporting	and	internal	control	systems; (viii)	difficulties	in	expanding	information	technology	systems	and	other	business	processes	to	accommodate	the	acquired	businesses;	and	(ix)	future impairments	of	goodwill	of	an	acquired	business.

Acquisition	candidates	in	the	industries	in	which	we	participate	may	carry	higher	relative	valuations	(based	on	their	earnings)	than	we	do.	This	is particularly	evident	in	software	and	services	businesses.	Acquiring	a	business	that	has	a	higher	valuation	than	Motorola	may	be	dilutive	to	our	earnings, especially	when	the	acquired	business	has	little	or	no	revenue.	In	addition,	we	may	not	pursue	opportunities	that	are	highly	dilutive	to	near-term	earnings and	have,	in	the	past,	foregone	certain	of	these	acquisitions.

Key	employees	of	acquired	businesses	may	receive	substantial	value	in	connection	with	a	transaction	in	the	form	of	change-in-control	agreements, acceleration	of	stock	options	and	the	lifting	of	restrictions	on	other	equity-	based	compensation	rights.	To	retain	such	employees	and	integrate	the acquired	business,	we	may	offer	additional	retention	incentives,	but	it	may	still	be	difficult	to	retain	certain	key	employees.

The	value	of	our	investments	in	the	securities	of	various	companies	fluctuates	and	it	may	be	difficult	for	us	to	realize	the	value	of	these	investments.

We	hold	a	portfolio	of	investments	in	various	companies.	Since	the	majority	of	these	securities	represent	investments	in	technology	companies,	the fair	market	values	of	these	securities	are	subject	to	significant	price	volatility.	In	addition,	the	realizable	value	of	these	securities	is	subject	to	market	and other	conditions.

We	also	have	invested	in	numerous	privately-held	companies,	many	of	which	can	still	be	considered	in	startup	or	developmental	stages.	These investments	are	inherently	risky	as	the	market	for	the	technologies	or	products	they	have	under	development	are	typically	in	the	early	stages	and	may never	materialize.	We	could	lose	all	or	substantially	all	of	the	value	of	our	investments	in	these	companies,	and	in	some	cases	have.

The	Sigma	Fund	holds	U.S.	Dollar-denominated	debt	obligations	which	include,	among	other	securities,	corporate	bonds,	asset-	and	mortgage- backed	securities.	As	issuers	of	these	securities	continue	to	be	negatively	impacted	by	the	weakened	global	economic	environment	and	dislocation	in	the financial	markets,	the	total	fair	value	of	the	Sigma	Fund	holdings	is	less	than	its	total	original	cost.	The	fair	value	of	these	holdings	may	experience further	declines	due	to	the	widening	credit	spreads	in	several	debt	market	segments	or	if	the	underlying	debtors	should	default	on	their	obligations.	Such events	could	result	in	additional	temporary	unrealized	losses	or	impairment	charges	in	the	Sigma	Fund	investments.

It	may	be	difficult	for	us	to	recruit	and	retain	the	types	of	highly-skilled	employees	that	are	necessary	to	remain	competitive.

Competition	for	key	technical	personnel	in	high-technology	industries	is	intense.	We	believe	that	our	future	success	depends	in	large	part	on	our continued	ability	to	hire,	assimilate,	retain	and	leverage	the	skills	of	qualified	engineers	and	other	highly-skilled	personnel	needed	to	compete	and develop	successful	new	products.	We	may	not	be	as	successful	as	our	competitors	at	recruiting,	assimilating,	retaining	and	utilizing	these	highly-skilled personnel.	In	particular,	we	may	have	more	difficulty	attracting	or	retaining	highly-skilled	personnel	during	periods	of	poor	operating	performance,	and as	a	result	of	recent	actions	to	suspend	the	Company's	401(k)	contributions	to	employee	accounts,	permanently	freeze	all	future	benefit	accruals	under U.S.	pension	plans	and	eliminate	merit	increase	programs	in	the	U.S.	and	many	other	markets.

The	unfavorable	outcome	of	litigation	pending	or	future	litigation	could	materially	impact	the	Company.

Our	financial	results	could	be	materially	adversely	impacted	by	unfavorable	outcomes	to	any	pending	or	future	litigation.	See	"Item	3—Legal Proceedings."	There	can	be	no	assurances	as	to	the	favorable	outcome	of	any	litigation.	In	addition,	it	can	be	very	costly	to	defend	litigation	and	these costs	could	negatively	impact	our	financial	results.

We	are	subject	to	a	wide	range	of	product	regulatory	and	safety,	consumer,	worker	safety	and	environmental	laws.

Our	operations	and	the	products	we	manufacture	and/or	sell	are	subject	to	a	wide	range	of	global	laws.	Compliance	with	existing	or	future	laws	could subject	us	to	future	costs	or	liabilities,	impact	our	production	capabilities,	constrict	our	ability	to	sell,	expand	or	acquire	facilities,	and	generally	impact our	financial

performance.	Some	of	these	laws	relate	to	the	use,	disposal,	clean	up	of,	and	exposure	to	hazardous	substances.	In	the	United	States,	laws	often	require parties	to	fund	remedial	studies	or	action	regardless	of	fault.	Motorola	continues	to	incur	disposal	costs	and	has	ongoing	remediation	obligations. Changes	to	U.S.	environmental	laws	or	our	discovery	of	additional	obligations	under	these	laws	could	have	a	negative	impact	on	Motorola.

Over	the	last	several	years,	laws	focused	on:	the	energy	efficiency	of	electronic	products	and	accessories;	recycling	of	both	electronic	products	and packaging;	and	reducing	or	eliminating	certain	hazardous	substances	in	electronic	products	have	expanded	significantly.	Laws	pertaining	to	accessibility features	of	electronic	products,	standardization	of	connectors	and	power	supplies,	sound	levels	of	music	playing	devices,	and	other	aspects	are	also proliferating.

These	laws	impact	our	products	and	make	it	more	expensive	to	manufacture	and	sell	product.	It	may	also	be	difficult	to	comply	with	the	laws	in	a timely	way	and	we	may	not	have	compliant	products	available	in	the	quantities	requested	by	our	customers,	thereby	impacting	our	sales	and	profitability.

We	expect	these	trends	to	continue.	In	addition,	we	anticipate	increased	demand	to	meet	voluntary	criteria	related	to	reduction	or	elimination	of certain	hazardous	constituents	from	products,	increasing	energy	efficiency,	and	providing	additional	accessibility.

# We	are	exposed	to	risks	under	large	multi-year	system	contracts	that	may	negatively	impact	our	business.

We	enter	into	large	multi-year	system	contracts	with	large	customers.	This	exposes	us	to	risks,	including:	(i)	the	technological	risks	of	such	contracts, especially	when	the	contracts	involve	new	technology,	and	(ii)	financial	risks	under	these	contracts,	including	the	estimates	inherent	in	projecting	costs associated	with	large	contracts	and	the	related	impact	on	operating	results.	We	are	also	facing	increasing	competition	from	traditional	system	integrators and	the	defense	industry	as	system	contracts	become	larger	and	more	complicated.	Political	developments	also	can	impact	the	nature	and	timing	of	these large	contracts.

It	is	important	that	we	are	able	to	obtain	many	different	types	of	insurance,	and	if	we	are	not	able	to	obtain	insurance	we	are	forced	to	retain	the	risk.

The	Company	has	many	types	of	insurance	coverage	and	also	self-insures	for	some	risks	and	obligations.	The	insurance	market	was	disrupted	after the	events	of	September	11,	2001	and	the	2005	hurricanes.	While	the	cost	and	availability	of	most	insurance	has	stabilized,	there	are	still	certain	types and	levels	of	insurance	that	remain	unavailable.	Natural	disasters	and	certain	risks	arising	from	securities	claims	and	public	liability	are	potential	self- insured	events	that	could	negatively	impact	our	financial	results.

Government	regulation	of	radio	frequencies	may	limit	the	growth	of	the	wireless	communications	industry	or	reduce	barriers	to	entry	for	new competitors.

Radio	frequencies	are	required	to	provide	wireless	services.	The	allocation	of	frequencies	is	regulated	in	the	U.S.	and	other	countries	and	limited spectrum	space	is	allocated	to	wireless	services.	The	growth	of	the	wireless	and	personal	communications	industry	may	be	affected:	(i)	by	regulations relating	to	the	access	to	allocated	spectrum	for	wireless	communication	users,	especially	in	urban	areas,	(ii)	if	adequate	frequencies	are	not	allocated,	or (iii)	if	new	technologies	are	not	developed	to	better	utilize	the	frequencies	currently	allocated	for	such	use.	Industry	growth	has	been	and	may	continue	to be	affected	by	the	cost	of	new	licenses	required	to	use	frequencies	and	any	related	frequency	relocation	costs.

The	U.S.	leads	the	world	in	spectrum	deregulation,	allowing	new	wireless	communications	technologies	to	be	developed	and	offered	for	sale. Examples	include	wireless	local	area	network	systems,	such	as	WiFi,	mesh	technologies	and	wide	area	network	systems,	such	as	WiMAX	and	LTE. Other	countries	have	also	deregulated	portions	of	their	available	spectrum	to	allow	deployment	of	these	and	other	technologies.	Deregulation	may introduce	new	competition	and	new	opportunities	for	Motorola	and	our	customers.

Changes	in	government	policies	and	laws	or	economic	conditions	may	adversely	affect	our	financial	results.

Our	results	may	be	affected	by	changes	in	trade,	monetary	and	fiscal	policies,	laws	and	regulations,	or	other	activities	of	U.S.	and non-U.S.	governments,	agencies	and	similar	organizations.	Our	results	may	also	be	affected	by	social	and	economic	conditions,	which	impact	our operations,	including	in	emerging	markets	in	Asia,	India,	Latin	America	and	Eastern	Europe,	and	in	markets	subject	to	ongoing	political	hostilities	and war,	including	the	Middle	East.

In	addition,	the	laws	and	regulations	that	apply	directly	to	access	to,	or	commerce	on,	the	Internet	are	still	evolving.	We	could	be	adversely	affected by	any	such	regulation	in	any	country	where	we	operate,	including	under	the	new	presidential	administration	in	the	U.S.	The	adoption	of	such	measures could	decrease	demand	for	our	products	and	at	the	same	time	increase	the	cost	of	selling	such	products.

# Consolidations	in	both	the	cable	and	telecommunication	industries	may	adversely	impact	our	business.

The	cable	and	telecommunication	industries	have	experienced	consolidation	and	this	trend	is	expected	to	continue	according	to	industry	estimates. Industry	consolidation	could	result	in	delays	of	purchases	or	in	the	selection	of	new	suppliers	by	the	merged	companies.	This	could	adversely	impact equipment	suppliers	like	Motorola	and	our	competitors.	Due	to	continuing	consolidation	within	the	cable	and	telecommunications	industries	worldwide, a	small	number	of	operators	own	a	majority	of	cable	television	systems	and	account	for	a	significant	portion	of	the	capital	spending	made	by	cable telecommunications	systems	operators.

The	effects	of	FCC	regulations	requiring	separation	of	security	functionality	from	set-tops	could	negatively	impact	our	sales	of	set-tops	to	cable providers.

Historically,	reception	of	digital	television	programming	from	a	cable	broadband	network	has	required	a	set-top	with	security	technology. Traditionally,	cable	service	providers	sold	or	leased	their	set-top	to	their	customer.	This	security	technology	has	limited	the	availability	of	set-tops	to those	manufactured	by	a	few	cable	network	manufacturers,	including	Motorola.	FCC	regulations	requiring	separation	of	security	functionality	from	set- tops	that	are	aimed	at	increasing	competition	and	encouraging	the	sale	of	set-tops	in	the	retail	market	became	effective	for	most	customers	in	2007.	As the	retail	market	develops	for	set-tops	and	televisions	capable	of	accepting	the	security	modules,	sales	of	our	set-tops	to	cable	providers	may	be negatively	impacted.	In	addition,	a	full	two-way	security	interface	specification	that	allows	retail	customers	access	to	all	programming	available	on	a cable	operator's	network	without	the	need	for	a	set-top	box	has	been	adopted	by	a	few	television	manufacturers.	They	began	shipping	television	sets	that incorporate	this	capability	in	2008.

We	rely	on	complex	information	technology	systems	and	networks	to	operate	our	business.	Any	significant	system	or	network	disruption	could	have	a material	adverse	impact	on	our	operations,	sales	and	operating	results.

We	rely	on	the	efficient	and	uninterrupted	operation	of	complex	information	technology	systems	and	networks,	some	of	which	are	within	Motorola and	some	are	outsourced.	All	information	technology	systems	are	potentially	vulnerable	to	damage	or	interruption	from	a	variety	of	sources,	including but	not	limited	to	computer	viruses,	security	breach,	energy	blackouts,	natural	disasters,	terrorism,	war	and	telecommunication	failures.	There	also	may be	system	or	network	disruptions	if	new	or	upgraded	business	management	systems	are	defective	or	are	not	installed	properly.	We	have	implemented various	measures	to	manage	our	risks	related	to	system	and	network	disruptions,	but	a	system	failure	or	security	breach	could	negatively	impact	our operations	and	financial	results.	In	addition,	we	may	incur	additional	costs	to	remedy	the	damages	caused	by	these	disruptions	or	security	breaches.

# Our	share	price	has	been	and	may	continue	to	be	volatile.

Our	share	price	has	been	volatile	due,	in	part,	to	generally	volatile	securities	markets,	and	the	volatility	in	the	telecommunications	and	technology companies'	securities	markets	in	particular.	Factors	other	than	our	financial	results	that	may	affect	our	share	price	include,	but	are	not	limited	to,	market expectations	of	our	performance,	spending	plans	of	our	customers,	and	the	level	of	perceived	growth	in	the	industries	in	which	we	participate.

The	outcome	of	currently	ongoing	and	future	examinations	of	our	income	tax	returns	by	the	IRS	could	impact	our	financial	results.

We	are	subject	to	continued	examination	of	our	income	tax	returns	by	the	Internal	Revenue	Service	and	other	tax	authorities.	We	regularly	assess	the likelihood	of	adverse	outcomes	resulting	from	these	examinations	to	determine	the	adequacy	of	our	provision	for	income	taxes.	There	can	be	no assurance	that	the	outcomes	from	these	continuing	examinations	will	not	have	an	adverse	effect	on	future	operating	results.

# Failure	of	our	suppliers	to	use	acceptable	ethical	business	practices	could	negatively	impact	our	business.

It	is	our	policy	to	require	our	suppliers	to	operate	in	compliance	with	applicable	laws,	rules	and	regulations	regarding	working	conditions, employment	practices,	environmental	compliance	and	trademark	and	copyright	licensing.	However,	we	do	not	control	their	labor	and	other	business practices.	If	one	of	our	suppliers	violates	labor	or	other	laws	or	implements	labor	or	other	business	practices	that	are	regarded	as	unethical,	the	shipment of	finished	products	to	us	could	be	interrupted,	orders	could	be	canceled,	relationships	could	be	terminated	and	our

reputation	could	be	damaged.	If	one	of	our	suppliers	fails	to	procure	necessary	license	rights	to	trademarks,	copyrights	or	patents,	legal	action	could	be taken	against	us	that	could	impact	the	salability	of	our	inventory	and	expose	us	to	financial	obligations	to	a	third	party.	Any	of	these	events	could	have	a material	adverse	effect	on	our	sales	and	results	of	operations.

# Copyright	levies	in	numerous	countries	for	the	sale	of	products	may	adversely	impact	our	business.

Motorola	faces	the	possibility	of	substantial	copyright	levies	from	collecting	societies	in	numerous	countries	for	the	sale	of	products	that	might	be used	for	the	private	copying	of	copyright	protected	works	such	as	mobile	phones,	memory	cards,	and	set	top	boxes.	The	collecting	societies	argue	that such	levies	should	apply	to	such	products	because	they	include	audio/video	recording	functionality,	such	as	an	MP3	player	or	DVR	or	storage	capability, despite	the	fact	that	such	products	are	not	primarily	intended	to	act	as	a	recording	device.	As	of	this	date,	to	our	knowledge,	no	copyright	levies	have been	paid	to	any	collecting	societies	anywhere	by	any	manufacturer.	Motorola	is	currently	working	with	other	major	mobile	communications	companies to	challenge	the	applicability	of	these	levies	to	mobile	phones,	and	is	also	engaged	in	aggressive	lobbying	efforts	against	the	levies	in	general	at	the European	Union	level.	However,	if	these	levies	are	imposed,	our	financial	results	will	be	negatively	impacted.

# Item	1B:	Unresolved	Staff	Comments

None.

# Item	2:	Properties

Motorola's	principal	executive	offices	are	located	at	1303	East	Algonquin	Road,	Schaumburg,	Illinois	60196.	Motorola	also	operates	manufacturing facilities	and	sales	offices	in	other	U.S.	locations	and	in	many	other	countries.	(See	"Item	1:	Business"	for	information	regarding	the	location	of	the	major facilities	for	each	of	Motorola's	business	segments.)	Motorola	owns	35	facilities	(manufacturing,	sales,	service	and	office),	21	of	which	are	located	in	the Americas	Region	(USA,	Canada,	Mexico	and	Latin	America)	and	14	of	which	are	located	in	other	countries.	Motorola	leases	321	facilities,	140	of	which are	located	in	the	Americas	Region	and	181	of	which	are	located	in	other	countries.	Motorola	primarily	utilizes	10	major	facilities	for	the	manufacturing and	distribution	of	its	products.	These	facilities	are	located	in:	Hangzhou	and	Tianjin,	China;	Taipei,	Taiwan;	Chennai,	India;	Penang,	Malaysia; Schaumburg,	Illinois;	Jaguariuna,	Brazil;	Reynosa,	Mexico;	Arad,	Israel;	and	Berlin,	Germany.

During	2008	and	the	beginning	of	2009,	facilities	in:	Flensburg,	Germany;	Bohemia,	New	York;	Glen	Rock,	New	Jersey;	Beijing,	China;	and Taunesstein,	Germany	were	sold.	Sites	at	Chandler,	Arizona;	Arlington	Heights,	Illinois;	and	Nogales,	Mexico	are	currently	for	sale.

Motorola	generally	considers	the	productive	capacity	of	the	plants	operated	by	each	of	its	business	segments	to	be	adequate	and	sufficient	for	the requirements	of	each	business	group.	The	extent	of	utilization	of	such	manufacturing	facilities	varies	from	plant	to	plant	and	from	time	to	time	during	the year.

A	substantial	portion	of	Motorola's	products	are	manufactured	in	Asia,	primarily	China,	either	in	our	own	facilities	or	in	the	facilities	of	others	who manufacture	and	assemble	products	for	Motorola.	If	manufacturing	in	the	region	was	disrupted,	Motorola's	overall	productive	capacity	could	be significantly	reduced.

# Item	3:	Legal	Proceedings

# Telsim-Related	Cases

In	April	2001,	Telsim	Mobil	Telekomunikasyon	Hizmetleri	A.S.	("Telsim"),	a	wireless	telephone	operator	in	Turkey,	defaulted	on	the	payment	of approximately	$2	billion	of	loans	owed	to	Motorola	and	its	subsidiaries	(the	"Telsim	Loans").	The	Uzan	family	controlled	Telsim	until	2004	when	an agency	of	the	Turkish	government	took	over	control	of	Telsim.	In	December	2005,	Telsim	was	sold	by	the	Turkish	government	to	Vodafone	and Motorola	received	an	aggregate	payment	from	the	sale	of	$910	million.

The	Company	continues	its	efforts	to	collect	on	its	judgment	of	$2.13	billion	(the	"U.S.	Judgment")	for	compensatory	damages	rendered	by	the United	States	District	Court	for	the	Southern	District	of	New	York	(the	"District	Court")	against	the	Uzans	on	July	31,	2003	and	affirmed	by	the U.S.	Court	of	Appeals	for	the	Second	Circuit	(the	"Second	Circuit")	in	2004	and	in	connection	with	foreign	proceedings	against	the	Uzan	family. However,	the	Company	believes	that	the	ongoing	litigation,	collection	and/or	settlement	processes	against	the	Uzan

family	will	be	very	lengthy	in	light	of	the	Uzans'	continued	resistance	to	satisfy	the	judgments	against	them	and	their	decision	to	violate	various	courts' orders,	including	orders	holding	them	in	contempt	of	court.	Following	a	remand	from	the	Second	Circuit	of	the	U.S.	Judgment,	on	February	8,	2006,	the District	Court	awarded	a	judgment	in	favor	of	Motorola	for	$1	billion	in	punitive	damages	against	the	Uzan	family	and	their	co-conspirator,	Antonio Luna	Bettancourt.	That	decision	was	affirmed	by	the	Second	Circuit	on	November	21,	2007.	The	District	Court,	on	April	10,	2007,	denied	the	Uzans' motion	to	vacate	the	U.S.	Judgment.	The	Uzans	have	appealed	that	decision	to	the	Second	Circuit.

# Howell	v.	Motorola,	Inc.,	et	al.

A	class	action,	Howell	v.	Motorola,	Inc.,	et	al.,	was	filed	against	Motorola	and	various	of	its	directors,	officers	and	employees	in	the	United	States District	Court	for	the	Northern	District	of	Illinois	("Illinois	District	Court")	on	July	21,	2003,	alleging	breach	of	fiduciary	duty	and	violations	of	the Employment	Retirement	Income	Security	Act	("ERISA").	The	complaint	alleged	that	the	defendants	had	improperly	permitted	participants	in	the Motorola	401(k)	Plan	(the	"Plan")	to	purchase	or	hold	shares	of	common	stock	of	Motorola	because	the	price	of	Motorola's	stock	was	artificially	inflated by	a	failure	to	disclose	vendor	financing	to	Telsim	in	connection	with	the	sale	of	telecommunications	equipment	by	Motorola.	The	plaintiff	sought	to represent	a	class	of	participants	in	the	Plan	and	sought	an	unspecified	amount	of	damages.	On	September	30,	2005,	the	district	court	dismissed	the	second amended	complaint	filed	on	October	15,	2004	(the	"Howell	Complaint").	Three	new	purported	lead	plaintiffs	have	since	intervened	in	the	case,	and	have filed	a	motion	for	class	certification	seeking	to	represent	a	class	of	Plan	participants.	On	September	28,	2007,	the	Illinois	District	Court	granted	the	motion for	class	certification	but	narrowed	the	requested	scope	of	the	class.	On	October	25,	2007,	the	Illinois	District	Court	modified	the	scope	of	the	class, granted	summary	judgment	dismissing	two	of	the	individually-named	defendants	in	light	of	the	narrowed	class,	and	ruled	that	the	judgment	as	to	the original	named	plaintiff,	Howell,	would	be	immediately	appealable.	The	class	as	certified	includes	all	Plan	participants	for	whose	individual	accounts	the Plan	purchased	and/or	held	shares	of	Motorola	common	stock	from	May	16,	2000	through	May	14,	2001,	with	certain	exclusions.	On	February	15,	2008 plaintiffs	and	defendants	each	filed	motions	for	summary	judgment	in	the	Illinois	District	Court.	On	February	22,	2008	the	appellate	court	granted defendants'	motion	for	leave	to	appeal	from	the	Illinois	District	Court's	class-certification	decision.	In	addition,	the	original	named	plaintiff,	Howell,	has appealed	the	dismissal	of	his	claim.

# Silverman/Williams	Federal	Securities	Lawsuits	and	Related	Derivative	Matters

A	purported	class	action	lawsuit	on	behalf	of	the	purchasers	of	Motorola	securities	between	July	19,	2006	and	January	5,	2007,	Silverman	v. Motorola,	Inc.,	et	al.,	was	filed	against	the	Company	and	certain	current	and	former	officers	and	directors	of	the	Company	on	August	9,	2007,	in	the United	States	District	Court	for	the	Northern	District	of	Illinois.	The	complaint	alleges	violations	of	Section	10(b)	of	the	Securities	Exchange	Act	of	1934 and	SEC	Rule	10b-5	as	well	as,	in	the	case	of	the	individual	defendants,	the	control	person	provisions	of	the	Securities	Exchange	Act.	The	factual assertions	in	the	complaint	consist	primarily	of	the	allegation	that	the	defendants	knowingly	made	incorrect	statements	concerning	Motorola's	projected revenues	for	the	third	and	fourth	quarter	of	2006.	The	complaint	seeks	unspecified	damages	and	other	relief	relating	to	the	purported	inflation	in	the	price of	Motorola	shares	during	the	class	period.	An	amended	complaint	was	filed	December	20,	2007	and	Motorola	moved	to	dismiss	that	complaint	in February	2008.	On	September	24,	2008,	the	district	court	granted	this	motion	in	part	to	dismiss	Section	10(b)	claims	as	to	two	individuals	and	certain claims	related	to	forward	looking	statements,	among	other	things,	and	denied	the	motion	in	part.

In	addition,	on	August	24,	2007,	two	lawsuits	were	filed	as	purportedly	derivative	actions	on	behalf	of	Motorola,	Williams	v.	Zander,	et	al.,	and Cinotto	v.	Zander,	et	al.,	in	the	Circuit	Court	of	Cook	County,	Illinois	against	the	Company	and	certain	of	its	current	and	former	officers	and	directors. These	complaints	make	similar	factual	allegations	to	those	made	in	the	Silverman	complaint	and	assert	causes	of	action	for	breach	of	fiduciary	duty, abuse	of	control,	gross	mismanagement,	waste	of	corporate	assets,	and	unjust	enrichment.	The	complaints	seek	unspecified	damages	associated	with	the alleged	loss	to	the	Company	deriving	from	the	defendants'	actions	and	demand	that	Motorola	make	a	number	of	changes	to	its	internal	procedures.	An amended	complaint	was	filed	on	December	14,	2007.	On	January	27,	2009,	Motorola's	motion	to	dismiss	the	amended	complaint	was	granted	in	part	and denied	in	part.

# In	re	Adelphia	Communications	Corp.	Securities	and	Derivative	Litigation

On	December	22,	2003,	Motorola	was	named	as	a	defendant	in	two	cases	relating	to	the	In	re	Adelphia	Communications	Corp.	Securities	and Derivative	Litigation	(the	"Adelphia	MDL").	The	Adelphia	MDL	consists	of	at	least	fourteen	individual	cases	and	one	purported	class	action	that	were filed	in	or	have	been	transferred	to	the	United	States	District	Court	for	the	Southern	District	of	New	York.	First,	Motorola	was	named	as	a	defendant	in the	Second	Amended	Complaint	in	the	individual	case	of	W.R.	Huff	Asset	Management	Co.	L.L.C.	v.	Deloitte	&	Touche	LLP,	et	al.	(the	"Huff Complaint").	This	case	was	originally	filed	by	W.R.	Huff	Asset	Management	Co.	L.L.C.	on	June	7,	2002,	in	the	United	States	District	Court	for	the Western	District	of	New	York	and	was	subsequently	transferred	to	the	Southern	District	of	New	York	as	related	to	the	Adelphia	MDL.	Motorola	and several	other	individual	and	corporate	defendants	are	named	in	the	amended	complaint.

As	to	Motorola,	the	complaint	alleges	a	claim	arising	under	Section	10(b)	of	the	Securities	Exchange	Act	of	1934	and	Rule	10b-5	promulgated thereunder	relating	to	Adelphia	securities,	and	seeks	recovery	of	the	consideration	paid	by	plaintiff	for	Adelphia	debt	securities,	compensatory	damages, costs	and	expenses	of	litigation	and	other	relief.	Motorola	filed	a	motion	to	dismiss	this	complaint	on	March	8,	2004,	which	was	granted	on	January	29, 2009.	Plaintiff's	motion	to	file	an	amended	complaint	is	pending	at	this	time.

Also	on	December	22,	2003,	Motorola	was	named	as	a	defendant	in	Stocke	v.	John	J.	Rigas,	et	al.	This	case	was	originally	filed	in	Pennsylvania	and was	subsequently	transferred	to	the	Southern	District	of	New	York	as	related	to	the	Adelphia	MDL.	Motorola	and	several	other	individual	and	corporate defendants	are	named	in	the	amended	complaint.	As	to	Motorola,	the	complaint	generally	makes	the	same	allegations	as	the	Huff	Complaint	and	a	state law	claim	of	aiding	and	abetting	fraud	relating	to	Adelphia	securities.	The	complaint	seeks	return	of	the	consideration	paid	by	plaintiff	for	Adelphia securities,	punitive	damages	and	other	relief.	Motorola	filed	a	motion	to	dismiss	this	complaint	on	April	12,	2004.	In	March	2008,	the	Stocke	plaintiff agreed	to	become	a	member	of	the	purported	class	in	Argent	and	the	Stocke	action	was	dismissed	by	the	court	as	a	stand-alone	action.

On	July	23,	2004,	Motorola	was	named	as	a	defendant	in	Argent	Classic	Convertible	Arbitrage	Fund	L.P.,	et	al.	v.	Scientific-Atlanta,	Inc.,	et	al.	(the "Argent	Complaint").	The	Argent	Complaint	was	filed	against	Scientific	Atlanta	and	Motorola	in	the	Southern	District	of	New	York.	The	Argent Complaint	generally	makes	the	same	allegations	as	the	other	previously-disclosed	cases	relating	to	the	In	re	Adelphia	Communications	Corp.	Securities and	Derivative	Litigation	that	have	been	transferred	to	the	Southern	District	of	New	York.	The	complaint	seeks	compensatory	damages	and	other	relief. Motorola	filed	a	motion	to	dismiss	the	Argent	Complaint	on	October	12,	2004,	which	is	awaiting	decision.

On	September	14,	2004,	a	complaint	filed	in	state	court	in	Los	Angeles,	California,	named	Motorola,	Scientific-Atlanta	and	certain	officers	of Scientific-Atlanta	as	defendants,	Los	Angeles	County	Employees	Retirement	Association	et	al.	v.	Motorola,	Inc.,	et	al.	The	complaint	raises	claims	under California	law	for	aiding	and	abetting	fraud	and	conspiracy	to	defraud	and	generally	makes	the	same	allegations	as	the	other	previously	disclosed	cases relating	to	the	In	re	Adelphia	Communications	Corp.	Securities	and	Derivative	Litigation	that	have	been	transferred	to	the	Southern	District	of	New York.	There	are	no	new	substantive	allegations.	The	complaint	seeks	compensatory	damages,	opportunity-cost	damages,	punitive	and	other	exemplary damages	and	other	relief.	In	late	2004,	the	Multi-District	Litigation	Panel	transferred	the	case	to	federal	court	in	New	York,	which	transfer	is	now	final. Motorola	filed	a	motion	to	dismiss	the	complaint	in	this	action	on	September	19,	2005,	which	is	awaiting	decision.

On	October	25,	2004,	Motorola	was	named	in	a	complaint	filed	in	state	court	in	Fulton	County,	Georgia,	naming	Motorola	and	Scientific-Atlanta and	certain	officers	of	Scientific-Atlanta,	AIG	DKR	SoundShore	Holdings,	Ltd.,	et	al.	v.	Scientific-Atlanta	Inc.,	et	al.	The	complaint	raises	claims	under Georgia	law	of	conspiracy	to	defraud	and	generally	makes	the	same	allegations	as	the	other	previously	disclosed	cases	relating	to	the	In	re	Adelphia Communications	Corp.	Securities	and	Derivative	Litigation	that	have	already	been	filed	and	transferred	to	the	Southern	District	of	New	York.	The complaint	seeks	damages	and	statutory	compensation,	punitive	damages	and	other	relief.	On	April	18,	2005,	the	Multi-District	Litigation	Panel	issued	a final	order	transferring	the	case	to	New	York	and	that	transfer	is	final.	Motorola	filed	a	motion	to	dismiss	the	complaint	in	this	action	on	September	19, 2005,	which	is	awaiting	decision.

# Adelphia	Communications	Corp.—Bankruptcy	Court	Lawsuit

On	June	23,	2006,	Adelphia,	on	behalf	of	the	estate	and	the	various	classes	of	Adelphia	creditors,	objected	to	Motorola's	claim	for	payment	of $67	million	and	asserted	causes	of	action	against	Motorola	including	preferences,

avoidance	of	liens,	fraudulent	transfers,	equitable	subordination	and	aiding	and	abetting	fraud	as	part	of	the	ongoing	Adelphia	bankruptcy	action	in	the Bankruptcy	Court	for	the	Southern	District	of	New	York.	Plaintiff	is	alleging	damages	in	excess	of	$1	billion	against	Motorola	for	the	above-stated causes	of	action.	The	bankruptcy	action	is	still	pending.

# Intellectual	Property	Related	Cases

# Tessera,	Inc.	v.	Motorola,	Inc.,	et	al.

Motorola	is	a	purchaser	of	semiconductor	chips	with	certain	ball	grid	array	("BGA")	packaging	from	suppliers	including	Qualcomm,	Inc. ("Qualcomm"),	Freescale	Semiconductor,	Inc.	("Freescale	Semiconductor"),	ATI	Technologies,	Inc.	("ATI"),	Spansion	Inc.	("Spansion"),	and STMicroelectronics	N.V.	("STMicro").	On	April	17,	2007,	Tessera,	Inc.	("Tessera")	filed	patent	infringement	legal	actions	against	Qualcomm,	Freescale Semiconductor,	ATI,	Spansion,	STMicro	and	Motorola	in	the	U.S.	International	Trade	Commission	(the	"ITC")	(In	the	Matter	of	Certain	Semiconductor Chips	with	Minimized	Chip	Package	Size	and	Products	Containing	Same,	Inv.	No.	337-TA-605)	and	the	United	States	District	Court,	Eastern	District	of Texas,	Tessera,	Inc.	v.	Motorola,	Inc.,	Qualcomm,	Inc.,	Freescale	Semiconductor,	Inc.	and	ATI	Technologies,	Inc.,	alleging	that	certain	BGA	packaged semiconductors	infringe	patents	that	Tessera	claims	to	own.	Tessera	is	seeking	orders	to	ban	the	importation	into	the	U.S.	of	certain	semiconductor	chips with	BGA	packaging	and	certain	"downstream"	products	that	contain	them	(including	Motorola	products)	and/or	limit	suppliers'	ability	to	provide certain	services	and	products	or	take	certain	actions	in	the	U.S.	relating	to	the	packaged	chips.	On	December	1,	2008,	an	Administrative	Law	Judge issued	an	initial	determination	that	Tessera	failed	to	prove	that	BGA	packaged	semiconductors	contained	in	Motorola	products	infringe	Tessera's	patent claims.	On	January	30,	2009,	the	International	Trade	Commission	issued	a	notice	that	it	will	review	the	Administrative	Law	Judge's	initial	determination and	a	final	determination	on	the	merits	is	expected	on	or	before	April	14,	2009.	The	patent	claims	being	asserted	by	Tessera	are	subject	to	reexamination proceedings	in	the	U.S.	Patent	and	Trademark	Office	("PTO").

Motorola	is	a	defendant	in	various	other	suits,	claims	and	investigations	that	arise	in	the	normal	course	of	business.	In	the	opinion	of	management, and	other	than	discussed	above	with	respect	to	the	Iridium	cases,	the	ultimate	disposition	of	the	Company's	pending	legal	proceedings	will	not	have	a material	adverse	effect	on	the	Company's	consolidated	financial	position,	liquidity	or	results	of	operations.

# Item	4:	Submission	of	Matters	to	a	Vote	of	Security	Holders

Not	applicable.

# Executive	Officers	of	the	Registrant

Following	are	the	persons	who	were	the	executive	officers	of	Motorola	as	of	February	28,	2009,	their	ages	as	of	January	1,	2009,	their	current	titles and	positions	they	have	held	during	the	last	five	years:

Gregory	Q.	Brown;	age	48;	Co-Chief	Executive	Officer,	Motorola,	Inc.	and	Chief	Executive	Officer	of	Broadband	Mobility	Solutions	since	August 2008;	President	and	Chief	Executive	Officer,	Motorola,	Inc.	from	January	2008	to	August	2008;	President	and	Chief	Operating	Officer	from	June	2007 to	January	2008;	Executive	Vice	President,	President,	Networks	and	Enterprise	from	June	2006	to	June	2007;	Executive	Vice	President	and	President, Government	and	Enterprise	Mobility	Solutions	from	January	2005	to	June	2006;	Executive	Vice	President	and	President,	Commercial,	Government	and Industrial	Solutions	Sector	from	January	2003	to	January	2005.

Dr.	Sanjay	K.	Jha;	age	45;	Co-Chief	Executive	Officer,	Motorola,	Inc.	and	Chief	Executive	Officer,	Mobile	Devices	since	August	2008;	Executive Vice	President	and	Chief	Operating	Officer,	Qualcomm,	Inc.	from	December	2006	to	August	2008;	Executive	Vice	President,	Qualcomm,	Inc.	and President,	Qualcomm	CDMA	Technologies	from	January	2003	to	December	2006.

Eugene	A.	Delaney;	age	52;	Executive	Vice	President,	President,	Enterprise	Mobility	Solutions	since	January	2009;	Senior	Vice	President, Government	and	Public	Safety	from	May	2007	to	January	2009;	Senior	Vice	President,	International	Sales	Operations,	Networks	and	Enterprise	from May	2006	to	May	2007;	Senior	Vice	President,	International	Sales	Operations,	Government	and	Enterprise	Mobility	Solutions	from	May	2005	to	May 2006;	Executive	Vice	President	and	President,	Global	Relations	and	Resources	Organization,	Government	and	Enterprise	Mobility	Solutions	from February	2005	to	May	2005;	Executive	Vice	President	and	President,	Global	Relations	and	Resources	Organization	from	January	2003	to	February	2005.

Edward	J.	Fitzpatrick;	age	42;	Senior	Vice	President,	Corporate	Controller	and	Acting	Chief	Financial	Officer	since	February	2009;	Senior	Vice President,	Corporate	Controller	since	January	2009;	Corporate	Vice	President,	Finance,	Home	and	Networks	Mobility	from	January	2008	to	January 2009;	Vice	President,	Finance,	Home	and	Networks	Mobility	from	June	2007	to	January	2008;	Vice	President,	Finance	and	Controller,	Networks	and Enterprise	from	April	2006	to	June	2007;	Vice	President,	Finance	and	Controller,	Government	and	Enterprise	Mobility	Solutions	from	July	2005	to	April 2006;	Senior	Director	and	Controller,	Connected	Home	Solutions	from	February	2000	to	July	2005.

A.	Peter	Lawson;	age	62;	Executive	Vice	President,	General	Counsel	and	Secretary	since	May	1998.

Gregory	A.	Lee;	age	59;	Senior	Vice	President,	Human	Resources	since	January	2008;	Senior	Vice	President,	Human	Resources,	Coca	Cola Enterprises	from	August	2006	to	January	2008;	Independent	Consultant,	Talent	Management	Strategies	from	May	2005	to	August	2006;	Senior	Vice President,	Human	Resources,	Sears,	Roebuck	and	Co.,	from	January	2001	to	May	2005.

Daniel	M.	Moloney;	age	49;	Executive	Vice	President,	President,	Home	and	Networks	Mobility	since	April	2007;	Executive	Vice	President, President,	Connected	Home	Solutions	from	January	2005	to	April	2007;	Executive	Vice	President	and	President,	Broadband	Communications	Sector from	June	2002	to	January	2005.

Karen	P.	Tandy;	age	55;	Senior	Vice	President,	Public	Affairs	and	Communications	since	July	2008;	Senior	Vice	President,	Global	Government Affairs	&	Public	Policy	from	November	2007	to	July	2008;	Administrator	to	the	U.S.	Drug	Enforcement	Agency	from	July	2003	to	November	2007.

The	above	executive	officers	will	serve	as	executive	officers	of	Motorola	until	the	regular	meeting	of	the	Board	of	Directors	in	May	2009	or	until their	respective	successors	shall	have	been	elected.	There	is	no	family	relationship	between	any	of	the	executive	officers	listed	above.

# PART	II

# Item	5:	Market	for	Registrant's	Common	Equity,	Related	Stockholder	Matters	and	Issuer	Purchases	of	Equity Securities

Motorola's	common	stock	is	listed	on	the	New	York	and	Chicago	Stock	Exchanges.	The	number	of	stockholders	of	record	of	Motorola	common stock	on	January	31,	2009	was	76,858.

Information	regarding	securities	authorized	for	issuance	under	equity	compensation	plans	is	incorporated	by	reference	to	the	information	under	the caption	"Equity	Compensation	Plan	Information"	of	Motorola's	Proxy	Statement	for	the	2009	Annual	Meeting	of	Stockholders.	The	remainder	of	the response	to	this	Item	incorporates	by	reference	Note	17,	"Quarterly	and	Other	Financial	Data	(unaudited)"	of	the	Notes	to	Consolidated	Financial Statements	appearing	under	"Item	8:	Financial	Statements	and	Supplementary	Data".

The	following	table	provides	information	with	respect	to	acquisitions	by	the	Company	of	shares	of	its	common	stock	during	the	quarter	ended December	31,	2008.

| Period | Purchased |  | Share | or	Programs(1) |  | Programs(1) |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| 9/28/08\tto\t10/24/08 |  | 0 |  |  | 0 | \t $3,629,062,576 |
| 10/25/08\tto\t11/21/08 |  | 0 |  |  | 0 | \t $3,629,062,576 |
| 11/22/08\tto\t12/31/08 |  | 0 |  |  | 0 | \t $3,629,062,576 |
| Total |  | 0 |  |  | 0 |  |

(1) Through	actions	taken	on	July	24,	2006	and	March	21,	2007,	the	Board	of	Directors	has	authorized	the	Company	to	repurchase	an	aggregate	amount	of	up	to	$7.5	billion	of	its outstanding	shares	of	common	stock	over	a	period	ending	in	June	2009.	The	timing	and	amount	of	future	repurchases,	if	any,	will	be	based	on	market	and	other	conditions.

# PERFORMANCE	GRAPH

The	following	graph	compares	the	five-year	cumulative	total	returns	of	Motorola,	Inc.,	the	S&P	500	Index	and	the	S&P	Communications	Equipment Index.

This	graph	assumes	$100	was	invested	in	the	stock	or	the	Index	on	December	31,	2003	and	also	assumes	the	reinvestment	of	dividends.	This	graph assumes	reinvestment	of	the	Company's	distribution	to	its	shareholders	of	0.110415	shares	of	Class	B	common	stock	of	Freescale	Semiconductor,	Inc. ("Freescale	Class	B	Shares")	on	December	2,	2004	for	each	share	of	Motorola	common	stock.	For	purposes	of	this	graph,	the	Freescale	Semiconductor, Inc.	distribution	is	treated	as	a	non-taxable	cash	dividend	of	$2.06	(the	value	of	0.110415	Freescale	Class	B	Shares,	based	on	Freescale	Semiconductor's December	2,	2004	closing	price	of	$18.69)	that	would	have	been	reinvested	in	Motorola	common	stock	at	the	close	of	business	on	December	2,	2004.

# Five-Year	Performance	Graph

# Item	6:	Selected	Financial	Data

# Motorola,	Inc.	and	Subsidiaries

# Five-Year	Financial	Summary

| (Dollars	in	millions,	except	as	noted) | 2008 | 2007 | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Operating\tResults |  |  |  |  |  |
| Net\tsales | $30,146 | $36,622 | $42,847 | $35,310 | $29,680 |
| Costs\tof\tsales | 21,751 | 26,670 | 30,120 | 23,881 | 19,715 |
| Gross\tmargin | 8,395 | 9,952 | 12,727 | 11,429 | 9,965 |
| Selling,\tgeneral\tand\tadministrative\texpenses | 4,330 | 5,092 | 4,504 | 3,628 | 3,508 |
| Research\tand\tdevelopment\texpenditures | 4,109 | 4,429 | 4,106 | 3,600 | 3,316 |
| Other\tcharges\t(income) | 2,347 | 984 | 25 | (404) | 149 |
| Operating\tearnings\t(loss) | (2,391) | (553) | 4,092 | 4,605 | 2,992 |
| Other\tincome\t(expense): |  |  |  |  |  |
| Interest\tincome\t(expense),\tnet | 48 | 91 | 326 | 71 | (200) |
| Gains\ton\tsales\tof\tinvestments\tand\tbusinesses,\tnet | 82 | 50 | 41 | 1,845 | 460 |
| Other | (376) | 22 | 151 | (109) | (140) |
| Total\tother\tincome\t(expense) | (246) | 163 | 518 | 1,807 | 120 |
| Earnings\t(loss)\tfrom\tcontinuing\toperations\tbefore\tincome\ttaxes | (2,637) | (390) | 4,610 | 6,412 | 3,112 |
| Income\ttax\texpense\t(benefit) | 1,607 | (285) | 1,349 | 1,893 | 1,013 |
| Earnings\t(loss)\tfrom\tcontinuing\toperations | (4,244) | (105) | 3,261 | 4,519 | 2,099 |
| Earnings\t(loss)\tfrom\tdiscontinued\toperations,\tnet\tof\ttax | — | 56 | 400 | 59 | (567) |
| Net\tearnings\t(loss) | $(4,244) | $(49) | $3,661 | $4,578 | $1,532 |
| Per\tShare\tData\t(in\tdollars) |  |  |  |  |  |
| Diluted\tearnings\t(loss)\tfrom\tcontinuing\toperations\tper\tcommon\tshare | $(1.87) | $(0.05) | $1.30 | $1.79 | $0.87 |
| Diluted\tearnings\t(loss)\tper\tcommon\tshare | (1.87) | (0.02) | 1.46 | 1.81 | 0.64 |
| Diluted\tweighted\taverage\tcommon\tshares\toutstanding\t(in\tmillions) | 2,265.4 | 2,312.7 | 2,504.2 | 2,527.0 | 2,472.0 |
| Dividends\tpaid\tper\tshare | $0.20 | $0.20 | $0.18 | $0.16 | $0.16 |
| Balance\tSheet |  |  |  |  |  |
| Total\tassets | $27,869 | $34,812 | $38,593 | $35,802 | $30,922 |
| Long-term\tdebt | 4,092 | 3,991 | 2,704 | 3,806 | 4,581 |
| Total\tdebt | 4,184 | 4,323 | 4,397 | 4,254 | 5,298 |
| Total\tstockholders'\tequity | 9,507 | 15,447 | 17,142 | 16,673 | 13,331 |
| Other\tData |  |  |  |  |  |
| Capital\texpenditures | $504 | $527 | $649 | $548 | $405 |
| %\tof\tsales | 1.7% | 1.4% | 1.5% | 1.6% | 1.4% |
| Research\tand\tdevelopment\texpenditures | $4,109 | $4,429 | $4,106 | $3,600 | $3,316 |
| %\tof\tsales | 13.6% | 12.1% | 9.6% | 10.2% | 11.2% |
| Year-end\temployment\t(in\tthousands) | 64 | 66 | 66 | 69 | 68 |

MANAGEMENT'S	DISCUSSION	AND	ANALYSIS

# OF	FINANCIAL	CONDITION	AND	RESULTS	OF	OPERATIONS

# Item	7:	Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations

The	following	is	a	discussion	and	analysis	of	our	financial	position	and	results	of	operations	for	each	of	the	three	years	in	the	period	ended December	31,	2008.	This	commentary	should	be	read	in	conjunction	with	our	consolidated	financial	statements	and	the	notes	thereto	appearing	under "Item	8:	Financial	Statements	and	Supplementary	Data."

# Executive	Overview

# What	businesses	are	we	in?

Motorola	reports	financial	results	for	the	following	three	operating	business	segments:

•	The	Mobile	Devices	segment	designs,	manufactures,	sells	and	services	wireless	handsets	with	integrated	software	and	accessory	products,	and licenses	intellectual	property.	The	segment's	net	sales	in	2008	were	$12.1	billion,	representing	40%	of	the	Company's	consolidated	net	sales.

•	The	Home	and	Networks	Mobility	segment	designs,	manufactures,	sells,	installs	and	services:	(i)	digital	video,	Internet	Protocol	video	and broadcast	network	interactive	set-tops,	end-to-end	video	delivery	systems,	broadband	access	infrastructure	platforms,	and	associated	data	and voice	customer	premise	equipment	to	cable	television	and	telecom	service	providers	(collectively,	referred	to	as	the	"home	business"),	and (ii)	wireless	access	systems,	including	cellular	infrastructure	systems	and	wireless	broadband	systems,	to	wireless	service	providers	(collectively, referred	to	as	the	"network	business").	The	segment's	net	sales	in	2008	were	$10.1	billion,	representing	33%	of	the	Company's	consolidated	net sales.

•	The	Enterprise	Mobility	Solutions	segment	designs,	manufactures,	sells,	installs	and	services	analog	and	digital	two-way	radio,	voice	and	data communications	products	and	systems	for	private	networks,	wireless	broadband	systems	and	end-to-end	enterprise	mobility	solutions	to	a	wide range	of	enterprise	markets,	including	government	and	public	safety	agencies	(which,	together	with	all	sales	to	distributors	of	two-way communication	products,	are	referred	to	as	the	"government	and	public	safety	market"),	as	well	as	retail,	energy	and	utilities,	transportation, manufacturing,	healthcare	and	other	commercial	customers	(which,	collectively,	are	referred	to	as	the	"commercial	enterprise	market").	The segment's	net	sales	in	2008	were	$8.1	billion,	representing	27%	of	the	Company's	consolidated	net	sales.

# What	were	our	2008	financial	results?

•	Net	Sales	were	$30.1	Billion:		Our	net	sales	were	$30.1	billion	in	2008,	down	18%	compared	to	net	sales	of	$36.6	billion	in	2007.	Net	sales decreased	36%	in	the	Mobile	Devices	segment,	increased	1%	in	the	Home	and	Networks	Mobility	segment	and	increased	5%	in	the	Enterprise Mobility	Solutions	segment.

•	Operating	Loss	of	$2.4	Billion:		We	incurred	an	operating	loss	of	$2.4	billion	in	2008,	compared	to	an	operating	loss	of	$553	million	in	2007. Operating	margin	was	(7.9)%	of	net	sales	in	2008,	compared	to	(1.5)%	of	net	sales	in	2007.	Contributing	to	the	operating	loss	were:

(i)	$1.8	billion	of	goodwill	and	other	asset	impairment	charges,	(ii)	$393	million	of	net	charges	for	reorganization	and	separation-related transaction	costs,	(iii)	excess	inventory	and	other	related	charges	of	$370	million	due	to	a	decision	to	consolidate	software	and	silicon	platforms	in the	Mobile	Devices	segment,	and	(iv)	a	$150	million	charge	related	to	the	settlement	of	a	purchase	commitment.

•	Loss	from	Continuing	Operations	of	$4.2	Billion,	or	$1.87	per	Share:		We	incurred	a	loss	from	continuing	operations	of	$4.2	billion,	or	$1.87	per diluted	common	share,	in	2008,	compared	to	a	loss	from	continuing	operations	of	$105	million,	or	$0.05	per	diluted	common	share,	in	2007. Contributing	to	the	loss	from	continuing	operations	in	2008	were:	(i)	a	$2.4	billion	operating	loss,	(ii)	a	$2.1	billion	reserve	related	to	our	deferred tax	asset	valuation	allowance,	(iii)	$365	million	of	other-than-temporary	investment	impairment	charges,	(iv)	$186	million	of	impairment	charges on	Sigma	Fund	investments,	and	(v)	$101	million	of	temporary	unrealized	losses	of	Sigma	Fund	investments,	partially	offset	by:	(i)	the	tax benefit	resulting	from	our	operating	loss,	and	(ii)	a	$237	million	curtailment	gain	associated	with	the	decision	to	freeze	benefit	accruals	in	the U.S.	pension	plans.

MANAGEMENT'S	DISCUSSION	AND	ANALYSIS OF	FINANCIAL	CONDITION	AND	RESULTS	OF	OPERATIONS

•	2008	Global	Handset	Market	Share	Estimated	at	8%,	based	on	Annual	Handset	Shipments	of	100.1	Million	Units:		We	estimate	our	share	of	the global	handset	market	in	2008	was	approximately	8%,	a	decrease	of	approximately	6	percentage	points	versus	2007.	We	shipped	100.1	million handsets	in	2008,	a	37%	decrease	compared	to	shipments	of	159.1	million	handsets	in	2007.	We	estimate	our	market	share	in	the	fourth	quarter	of 2008	was	approximately	6%,	a	decrease	of	approximately	6	percentage	points	versus	the	fourth	quarter	of	2007.	We	shipped	19.2	million handsets	in	the	fourth	quarter	of	2008,	a	53%	decrease	compared	to	shipments	of	40.9	million	handsets	in	the	fourth	quarter	of	2007.

•	Digital	Entertainment	Device	Shipments	were	18.0	Million:		We	shipped	18.0	million	digital	entertainment	devices	in	2008,	an	increase	of	19% compared	to	shipments	of	15.1	million	units	in	2007.

•	Operating	Cash	Flow	of	$242	Million:		We	generated	operating	cash	flow	of	$242	million	in	2008,	compared	to	operating	cash	flow	of $785	million	in	2007.

# What	were	the	financial	results	for	our	three	operating	business	segments	in	2008?

•	In	Our	Mobile	Devices	Business:		Net	sales	were	$12.1	billion	in	2008,	a	decrease	of	36%	compared	to	net	sales	of	$19.0	billion	in	2007.	On	a geographic	basis,	net	sales	decreased	substantially	in	North	America,	the	Europe,	Middle	East	and	Africa	region	("EMEA"),	and	Asia	and,	to	a lesser	extent,	decreased	in	Latin	America.	The	decrease	in	net	sales	was	primarily	driven	by	a	37%	decrease	in	unit	shipments.

The	segment	incurred	an	operating	loss	of	$2.2	billion	in	2008,	compared	to	an	operating	loss	of	$1.2	billion	in	2007.	The	increase	in	the operating	loss	was	primarily	due	to	a	decrease	in	gross	margin,	driven	by:	(i)	the	36%	decrease	in	net	sales,	(ii)	excess	inventory	and	other	related charges	of	$370	million	in	2008	due	to	a	decision	to	consolidate	software	and	silicon	platforms,	and	(iii)	a	$150	million	charge	in	2008	related	to the	settlement	of	a	purchase	commitment,	partially	offset	by:	(i)	the	absence	in	2008	of	a	$277	million	charge	for	a	legal	settlement	in	2007,	and (ii)	savings	from	supply	chain	cost-reduction	initiatives.	The	decrease	in	gross	margin	was	partially	offset	by	decreases	in:	(i)	selling,	general	and administrative	("SG&A")	expenses,	primarily	due	to	lower	marketing	expenses	and	savings	from	cost-reduction	initiatives,	and	(ii)	research	and development	("R&D")	expenditures,	reflecting	savings	from	cost-reduction	initiatives.

•	In	Our	Home	and	Networks	Mobility	Business:		Net	sales	were	$10.1	billion	in	2008,	an	increase	of	1%	compared	to	net	sales	of	$10.0	billion	in 2007.	On	a	geographic	basis,	net	sales	increased	in	Latin	America	and	Asia,	and	decreased	in	North	America	and	EMEA.	The	increase	in	net	sales primarily	reflects	a	16%	increase	in	net	sales	by	the	home	business,	partially	offset	by	an	11%	decrease	in	net	sales	by	the	networks	business.

Operating	earnings	were	$918	million,	an	increase	of	29%	compared	to	operating	earnings	of	$709	million	in	2007.	The	increase	in	operating earnings	was	primarily	due	to:	(i)	decreases	in	both	SG&A	and	R&D	expenditures,	primarily	related	to	savings	from	cost-reduction	initiatives, and	(ii)	a	decrease	in	reorganization	of	business	charges,	relating	primarily	to	lower	employee	severance	costs.	These	factors	were	partially	offset by	a	decrease	in	gross	margin,	primarily	due	to:	(i)	an	unfavorable	product	mix,	and	(ii)	the	absence	of	net	sales	by	embedded	communication computing	group	("ECC")	that	was	divested	at	the	end	of	2007.

•	In	Our	Enterprise	Mobility	Solutions	Business:		Net	sales	were	$8.1	billion	in	2008,	an	increase	of	5%	compared	to	net	sales	of	$7.7	billion	in 2007.	On	a	geographic	basis,	net	sales	increased	in	EMEA,	Asia	and	Latin	America	and	decreased	in	North	America.	The	increase	in	net	sales reflects	an	8%	increase	in	net	sales	to	the	government	and	public	safety	market,	partially	offset	by	a	2%	decrease	in	net	sales	to	the	commercial enterprise	market.

Operating	earnings	were	$1.5	billion,	an	increase	of	23%	compared	to	operating	earnings	of	$1.2	billion	in	2007.	The	increase	in	operating earnings	was	primarily	due	to	an	increase	in	gross	margin,	driven	by:	(i)	the	5%	increase	in	net	sales,	(ii)	a	favorable	product	mix,	(iii)	the	absence in	2008	of	an	inventory-related	charge	in	connection	with	the	acquisition	of	Symbol	Technologies,	Inc.	("Symbol")	during	the	first	quarter	of 2007,	and	(iv)	a	decrease	in	SG&A	expenses,	primarily	related	to	savings	from	cost-reduction	initiatives.	The	increase	in	gross	margin	was partially	offset	by	increased	R&D	expenditures,	primarily	due	to	developmental	engineering	expenditures	for	new	product	development	and investment	in	next-generation	technologies.

# What	were	our	major	challenges	and	accomplishments	in	2008?

•	In	our	Mobile	Devices	Business:		2008	was	a	very	difficult	year	for	our	Mobile	Devices	business.	Demand	for	Motorola's	wireless	handsets declined	in	2008	primarily	due	to	limited	product	offerings	in	critical	market	segments,	particularly	3G	products,	including	smartphones,	as	well as	very	low-tier	products.	We	also	were	impacted	by	the	worldwide	economic	downturn	in	the	second	half	of	2008,	as	the	overall	market	for handsets	grew	at	a	slower	rate	than	in	2007,	particularly	in	the	fourth	quarter.	Motorola	believes	it	lost	approximately	6	percentage	points	of market	share	and	estimates	its	global	market	share	was	approximately	8%	for	the	full	year	2008.

During	2008,	the	Mobile	Devices	business	launched	a	number	of	new	products,	including:	new	feature	phones	for	GSM,	CDMA	and	UMTS technologies;	additions	to	the	ROKR	family	of	music	devices;	additions	to	the	smartphone	portfolio,	including	Q	and	MING	devices,	for consumers	who	multi-task	and	want	flexibility	in	today's	business	environment;	and	several	handsets	at	affordable	price	points	for	consumers with	everyday	communications	needs.

The	Mobile	Devices	business	has	taken	significant	actions	in	2008	to	reduce	its	size	and	cost	structure,	including	actions	to	simplify	its	wireless handset	platforms	and	enhance	its	product	portfolio.	To	that	end,	we	announced	that	our	silicon	strategy	is	to	use	two	primary	silicon	providers	to achieve	faster	time	to	market	and	reduce	costs.	Our	software	platforms	will	focus	on	fewer	operating	systems,	including	Android	(a	Google- developed,	royalty-free	platform)	and	Windows	Mobile	(a	Microsoft	platform).	Our	portfolio	focus	will	be	increasingly	on	3G	and	smartphone devices,	particularly	in	the	mid-	and	high-price	tiers,	while	continuing	to	focus	on	our	proprietary	iDEN	technology	and	CDMA	software platforms.	In	addition	to	our	portfolio	streamlining	and	enhancement	efforts,	over	the	next	year	we	will	also	increase	our	focus	in	priority	markets. These	markets	will	include	North	America,	Latin	America	and	parts	of	Asia,	including	China.

Actions	taken	throughout	the	year,	including	the	decisions	to	reduce	platforms	and	focus	on	key	markets,	resulted	in	a	lower	operating	expense cost	structure	in	2008	compared	to	2007.

•	In	our	Home	and	Networks	Mobility	Business:		The	Home	and	Networks	Mobility	business	improved	its	operating	margin	and	remained	the world's	leading	provider	of	digital	entertainment	devices.	Total	net	sales	in	the	home	business	grew	by	16%	in	the	year,	which	included significant	business	growth	outside	of	the	U.S.	The	business	enhanced	its	portfolio	of	advanced	video,	voice,	and	data	platforms	with	several	new product	introductions,	including	DOCSIS	3.0	products,	MPEG-4	compression	technology,	and	the	DCX-series	of	multimedia	digital entertainment	devices.	The	home	business	completed	the	acquisition	of	Dahua	Digital	to	increase	our	position	in	the	rapidly	growing	cable	market in	China.

Net	sales	in	the	networks	business	were	lower	primarily	due	to	the	absence	of	net	sales	by	ECC	that	was	divested	at	the	end	of	2007.	The networks	business	also	experienced	a	decline	in	sales	of	iDEN,	CDMA	and	GSM	technologies,	while	sales	of	WiMAX	and	UMTS	technologies and	related	services	increased.	Motorola	continued	its	investments	in	and	focus	on	next-generation	wireless	broadband	technologies,	including WiMAX	and	LTE.	Our	first	sales	for	WiMAX	network	equipment	were	recorded	in	the	fourth	quarter	of	2008.	In	addition,	Motorola	was	the	first wireless	networks	infrastructure	supplier	to	demonstrate	a	handoff	between	CDMA	EV-DO	rev.	A	and	LTE,	as	well	as	the	first	over-the-air session	of	LTE	in	the	700MHz	band.	Despite	the	challenges	facing	the	wireless	infrastructure	industry,	Motorola's	networks	business	improved its	profitability	compared	to	2007	and	demonstrated	leadership	in	next-generation	technologies.

•	In	our	Enterprise	Mobility	Solutions	Business:		In	2008,	the	Enterprise	Mobility	Solutions	business	delivered	solid	results,	including	an improvement	in	operating	margin.	The	business	continued	to	maintain	leading	market	share	positions	in	several	highly	competitive	markets.

Within	the	government	and	public	safety	market,	sales	grew	as	demand	for	integrated,	interoperable	public	safety	communications	increased.	As new	and	better	spectrum	utilization	evolves,	demand	and	sales	have	increased	for	high-speed	data	applications,	such	as	video	surveillance,	dual- mode	devices,	including	the	MOTOTRBO	product	family,	and	other	data-based	products.	In	addition	to	our	continued	success	in	the	U.S.,	our largest	market,	the	business	experienced	significant	growth	in	all	markets	outside	of	the	U.S.	The	business	acquired	a	controlling	interest	in Vertex	Standard	Co.,	Ltd.	to	further	expand	its	two-way	radio	portfolio	and	open	up	new	market	opportunities,	both	in	the	U.S.	and internationally.	We	also	announced

the	industry	leading	APX	family	of	products,	including	mobile	and	portable	radios	and	infrastructure,	and	received	very	positive	customer response.

During	the	year,	the	commercial	enterprise	business	enhanced	its	product	portfolio	by	launching	several	new	mobile	computing,	wireless computing	and	advanced	data	capture	products	that	further	strengthened	our	position	in	the	commercial	enterprise	marketplace.	The	enhanced mobile	computing	offerings	included	the	MC75	product	lines,	which	had	very	successful	product	launches	and	were	well	received	in	all	regions. The	portfolio	was	also	strengthened	by	the	acquisition	of	AirDefense,	a	leading	provider	of	premium	software	security	applications	for	wireless LAN	networks.

# Looking	Forward

Adverse	economic	conditions	around	the	world	have	impacted	many	customers	and	consumers	and	resulted	in	slowing	demand	for	many	of	our businesses.	However,	the	longer-term,	fundamental	trend	regarding	the	dissolution	of	boundaries	between	the	home,	work	and	mobility	continues	to evolve.	We	believe	our	focus	on	designing	and	delivering	differentiated	wireless	communications	products,	unique	experiences	and	powerful	networks, as	well	as	complementary	support	services,	will	enable	consumers	to	have	a	broader	choice	of	when,	where	and	how	they	connect	to	people,	information, and	entertainment.	While	many	markets	we	serve	will	have	little	to	no	growth,	or	even	contraction	in	2009,	there	still	remain	large	numbers	of	businesses and	consumers	around	the	world	who	have	yet	to	experience	the	benefits	of	converged	wireless	communications,	mobility,	and	the	Internet.	As economies,	financial	markets	and	business	conditions	improve,	this	will	present	new	opportunities	to	extend	our	brand,	to	market	our	products	and services,	and	to	pursue	profitable	growth.

In	2008,	the	Company	announced	that	it	was	pursuing	the	creation	of	two	independent,	publicly	traded	companies:	one	comprised	of	our	Mobile Devices	business,	and	the	other	comprised	of	our	Home	and	Networks	Mobility	and	Enterprise	Mobility	Solutions	businesses	(collectively,	referred	to	as "Broadband	Mobility	Solutions	businesses").	The	Company	also	indicated	that	it	was	targeting	the	third	quarter	of	2009	for	the	separation	to	occur. However,	due	to	the	weakened	global	economic	environment	and	dislocation	in	the	financial	markets,	as	well	as	changes	underway	in	the	Mobile Devices	business,	the	Company	is	no	longer	targeting	the	third	quarter	of	2009	to	complete	the	separation.	The	Company	has	made	progress	on	various elements	of	its	separation	plan.	Management	and	the	Board	of	Directors	remain	committed	to	separation	in	as	expeditious	a	manner	as	possible	and continue	to	believe	this	is	the	best	path	for	the	Company.	Goldman	Sachs	&	Co.,	the	Company's	primary	financial	advisor	on	this	matter,	supports	this direction.	The	Board	continues	to	work	with	its	financial	advisors	on	potential	alternative	separation	structures.	The	Board	further	believes	that	in working	with	its	financial	advisors	the	Company	will	be	able	to	find	a	structure	which	will	permit	separation	in	a	way	that	maximizes	value	for	all shareholders.

We	expect	the	overall	global	handset	market	to	remain	intensely	competitive	with	lower	total	demand	due	to	the	continued	adverse	economic environment	around	the	world.	Our	strategy	is	focused	on	simplifying	product	platforms,	enhancing	our	product	portfolio	in	the	mid-	and	high-tier, reducing	cost	structure	and	strengthening	our	position	in	priority	markets.	To	this	end,	in	2008,	we	have	reduced	the	number	of	product	platforms	that	we support,	increasing	our	emphasis	on	3G	and	smartphone	devices	while	maintaining	our	focus	on	CDMA	and	iDEN	technologies.	We	expect	our transition	to	a	more	competitive	portfolio	will	show	progress	by	the	fourth	quarter	2009	and	continue	in	2010.	In	addition	to	our	portfolio	streamlining and	enhancement	efforts,	over	the	next	year	we	will	also	increase	our	focus	in	priority	markets.	These	markets	will	include	North	America,	Latin	America and	parts	of	Asia,	including	China.	Along	with	our	mobile	handset	initiatives,	we	have	also	increased	focus	on	our	accessories	portfolio	to	deliver complete	mobile	experiences	and	to	complement	our	handset	features	and	functionalities.	In	addition	to	our	efforts	to	dramatically	improve	the	product portfolio,	we	have	implemented	cost-reduction	initiatives	to	ensure	that	we	have	a	more	competitive	cost	structure.	These	actions	will	accelerate	our speed	to	market	with	new	products,	allow	us	to	offer	richer	consumer	experiences	and	improve	our	financial	performance.

In	our	Home	and	Networks	Mobility	business,	we	are	focused	on	delivering	personalized	media	experiences	to	consumers	at	home	and	on-the-go and	enabling	service	providers	to	operate	their	networks	more	efficiently	and	profitably.	We	will	build	on	our	market	leading	position	in	digital entertainment	devices	and	video	delivery	systems	to	capitalize	on	demand	for	high	definition	TV,	personalized	video	services,	broadband	connectivity and	higher	speed.	We	will	also	deliver	broadband	access	systems	and	gateway	products	for	video,	voice	and	data	services.	However,	due	to	the	impact that	economic	conditions,	especially	in	the	U.S.,	may	have	on	demand	for	services	provided	by	some	of	our	customers,	demand	is	likely	to	slow	in	2009 in	the	home	business.	We	will	continue	to	make	investments	to	position	ourselves	as	a	leading	infrastructure	provider	of	next-generation	wireless technologies.	As	more	networks	are	commercialized,	we	expect	an	increase	in	WiMAX	sales	opportunities	beginning	in	2009.	We	expect	the	overall	2G and	3G	wireless	infrastructure	market	to	decline	compared	to	2008	and	to	remain	highly	competitive.	The	Home	and	Networks	Mobility	business	will continue	to	optimize	its	cost	structure	and	prioritize	investments	in	innovation	and	future	growth	opportunities.	This	will	position	the	business

for	future	opportunities	in	emerging	technologies,	including	video	and	wireline	and	wireless	broadband,	and	enable	the	business	to	maintain	profitability in	mature	technologies.

In	our	Enterprise	Mobility	Solutions	business,	we	will	build	on	our	leadership	position	in	mission-critical	communications	solutions	and	develop next-generation	products	and	services	for	our	government	and	public	safety	customers	around	the	world.	This	will	enable	us	to	address	the	continued	high priority	placed	on	public	safety	and	homeland	security	by	our	customers.	Our	business-critical	enterprise	communications	products,	including	two-way communications,	mobile	computing,	and	advanced	data	capture	products	and	services,	allow	our	customers	to	reduce	cost,	increase	worker	mobility	and productivity,	and	enhance	their	customers'	experiences.	We	offer	this	leading	portfolio	across	a	broad	spectrum	of	commercial	enterprise	markets, including	retail,	transportation,	utility,	manufacturing,	and	healthcare	industries.

Our	government	and	enterprise	customers	are	facing	uncertainty	and	volatility	as	a	result	of	the	ongoing	global	financial	crisis.	This	will	likely	lead to	lower	capital	spending	by	these	customers	and	slowing	demand	in	the	markets	served	by	our	Enterprise	Mobility	Solutions	business.	Over	40 U.S.	states	and	many	local	governments	are	facing	budget	deficits	in	2009,	and	some	states	may	be	required	to	significantly	curtail	spending. Additionally,	many	governments	outside	the	U.S.	are	facing	2009	budget	deficits.	Although	we	continue	to	believe	that	our	government	customers	will prioritize	public	safety	and	homeland	security	spending,	budget	constraints	could	impact	the	timing	and	volume	of	purchases	by	these	customers.	We believe	that	our	comprehensive	portfolio	of	products	and	services,	leadership	positions	in	government	and	public	safety	and	commercial	enterprise markets	and	global	network	of	channel	partners	and	distributors	make	our	Enterprise	Mobility	Solutions	business	well	positioned	to	meet	these challenges.

On	February	17,	2009,	the	American	Recovery	and	Reinvestment	Act	of	2009	(the	"Stimulus	Package")	became	law.	The	Stimulus	Package implements	$787	billion	of	spending	and	investment	by	the	U.S.	federal	government,	including	spending	in	areas	of	infrastructure	and	technology	that may	benefit	our	customers	and	Motorola.	Our	domestic	government	and	public	safety	customers	may	benefit	from	additional	funding	for	state	and	local law	enforcement	agencies	and	homeland	defense	initiatives.	Opportunities	for	our	Home	and	Networks	Mobility	business	may	result	from	Stimulus Package	funding	for	broadband	and	wireless	internet	initiatives.	In	addition,	as	many	foreign	governments	consider	similar	packages	as	a	way	to	combat the	ongoing	global	financial	crisis,	our	foreign	customers	may	benefit	from	additional	funding	from	stimulus	packages	applicable	to	them.

During	2008	and	in	January	2009,	the	Company	initiated	a	number	of	global	actions	to	reduce	its	cost	structure.	These	actions	were	primarily focused	on	our	Mobile	Devices	business,	but	also	included	the	other	businesses	and	corporate	functions.	Actions	included	workforce	reductions, prioritization	of	investments,	spending	controls	and	changes	to	compensation	and	benefit	programs.	These	actions	are	expected	to	result	in	a	further reduction	in	the	Company's	cost	structure	in	2009.	To	ensure	alignment	with	changing	market	conditions,	the	Company	will	continually	review	its	cost structure	as	it	aggressively	manages	costs	throughout	2009	while	maintaining	investments	in	innovation	and	future	growth	opportunities.

Our	investment	priorities	include:	next-generation	wireless	converged	communications	products	and	services	for	enterprise	markets;	advanced technologies	and	applications	for	mission-critical	communications	in	government	and	public	safety	markets;	broadband	video	systems	for	service providers;	and	next-generation	wireless	handsets	with	application	services.	These	investments,	together	with	the	acquisitions	of	recent	years,	are	designed to	foster	continued	innovation	and	position	us	for	future	profitable	growth	opportunities.

In	light	of	the	ongoing	global	financial	crisis	and	the	severe	tightening	in	the	worldwide	credit	markets,	the	Company	is	very	focused	on	the	strength of	its	balance	sheet	and	its	overall	liquidity	position.	In	2009,	operating	cash	flow	improvement,	working	capital	management	and	preservation	of	total cash	will	continue	to	be	major	focuses	for	the	Company.	We	will	continue	to	direct	our	available	funds,	including	our	Sigma	Fund	investments,	primarily into	cash	or	very	highly-rated,	short-term	securities.	In	February	2009,	the	Company	announced	that	its	Board	of	Directors	suspended	the	declaration	of quarterly	stock	dividends.	We	also	plan	to	reduce	capital	expenditures	in	2009	compared	to	2008.

In	addition	to	the	$2.0	billion	of	cash,	cash	equivalents,	short-term	investments	and	Sigma	Fund	investments	("Cash	and	Sigma	Funds")	the Company	held	in	the	U.S.	at	the	end	of	2008,	the	Company	held	$5.4	billion	of	Cash	and	Sigma	Funds	in	foreign	jurisdictions.	The	Company	repatriated over	$2	billion	to	the	U.S.	in	2008	at	minimal	cash	tax	cost	and	expects	to	continue	to	efficiently	repatriate	funds	from	international	jurisdictions	to	the U.S.	in	2009.	Given	the	level	of	Cash	and	Sigma	Funds,	the	Company	believes	it	has	more	than	sufficient	liquidity	to	operate	its	business.

We	conduct	our	business	in	highly	competitive	markets,	facing	both	new	and	established	competitors.	The	markets	for	many	of	our	products	are characterized	by	rapidly	changing	technologies,	frequent	new	product	introductions,	changing	consumer	trends,	short	product	life	cycles	and	evolving industry	standards.	Market	disruptions	caused	by	new	technologies,	the	entry	of	new	competitors	into	markets	we	serve,	and	frequent	consolidations among	our	customers	and	competitors,	among	other	matters,	can	introduce	volatility	into	our	operating	performance	and	cash	flow	from	operations.	As we	enter	2009,	we	face	a	very	challenging	global	economic	environment	and	with	reduced	visibility	and	slowing	demand.	Meeting	all	of	these	challenges requires	consistent	operational	planning	and	execution	and	investment	in	technology,	resulting	in	innovative	products	that	meet	the	needs	of	our customers	around	the	world.	As	we	execute	on	meeting	these	objectives,	we	remain	focused	taking	the	necessary	action	to	design	and	deliver differentiated	and	innovative	products	and	services	that	will	advance	the	way	the	world	connects	by	simplifying	and	personalizing	communications	and enhancing	mobility.

# Results	of	Operations

| (Dollars	in	millions,	except	per	share<br>amounts) | 2008 | %	of<br>sales | 2007 | %	of<br>sales | 2006 | %	of<br>sales |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Net\tsales | $30,146 |  | $36,622 |  | $42,847 |  |
| Costs\tof\tsales | 21,751 | 72.2% | 26,670 | 72.8% | 30,120 | 70.3% |
| Gross\tmargin | 8,395 | 27.8% | 9,952 | 27.2% | 12,727 | 29.7% |
| Selling,\tgeneral\tand\tadministrative\texpenses | 4,330 | 14.4% | 5,092 | 13.9% | 4,504 | 10.5% |
| Research\tand\tdevelopment\texpenditures | 4,109 | 13.6% | 4,429 | 12.1% | 4,106 | 9.5% |
| Other\tcharges | 2,347 | 7.7% | 984 | 2.7% | 25 | 0.1% |
| Operating\tearnings\t(loss) | (2,391) | (7.9)% | (553) | (1.5)% | 4,092 | 9.6% |
| Other\tincome\t(expense): |  |  |  |  |  |  |
| Interest\tincome,\tnet | 48 | 0.1% | 91 | 0.2% | 326 | 0.8% |
| Gains\ton\tsales\tof\tinvestments\tand\tbusinesses,\tnet | 82 | 0.3% | 50 | 0.1% | 41 | 0.1% |
| Other | (376) | (1.2)% | 22 | 0.1% | 151 | 0.3% |
| Total\tother\tincome\t(expense) | (246) | (0.8)% | 163 | 0.4% | 518 | 1.2% |
| Earnings\t(loss)\tfrom\tcontinuing\toperations\tbefore\tincome\ttaxes | (2,637) | (8.7)% | (390) | (1.1)% | 4,610 | 10.8% |
| Income\ttax\texpense\t(benefit) | 1,607 | 5.4% | (285) | (0.8)% | 1,349 | 3.2% |
| Earnings\t(loss)\tfrom\tcontinuing\toperations | (4,244) | (14.1)% | (105) | (0.3)% | 3,261 | 7.6% |
| Earnings\tfrom\tdiscontinued\toperations,\tnet\tof\ttax | — | 0.0% | 56 | 0.2% | 400 | 0.9% |
| Net\tearnings\t(loss) | $(4,244) | (14.1)% | $(49) | (0.1)% | $3,661 | 8.5% |
| Earnings\t(loss)\tper\tdiluted\tcommon\tshare: |  |  |  |  |  |  |
| Continuing\toperations | $(1.87) |  | $(0.05) |  | $1.30 |  |
| Discontinued\toperations | — |  | 0.03 |  | 0.16 |  |
|  | $(1.87) |  | $(0.02) |  | $1.46 |  |

Geographic	market	sales	measured	by	the	locale	of	the	end	customer	as	a	percent	of	total	net	sales	for	2008,	2007	and	2006	are	as	follows:

# Geographic	Market	Sales	by	Locale	of	End	Customer

|  | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| United\tStates | 49% | 51% | 44% |
| Latin\tAmerica | 14% | 12% | 10% |
| Europe | 13% | 13% | 15% |
| Asia,\texcluding\tChina | 10% | 9% | 11% |
| China | 7% | 7% | 11% |
| Other\tMarkets | 7% | 8% | 9% |
|  | 100% | 100% | 100% |

# Results	of	Operations—2008	Compared	to	2007

# Net	Sales

Net	sales	were	$30.1	billion	in	2008,	down	18%	compared	to	net	sales	of	$36.6	billion	in	2007.	The	decrease	in	net	sales	reflects	a	$6.9	billion,	or 36%,	decrease	in	net	sales	in	the	Mobile	Devices	segment,	partially	offset	by:	(i)	a	$364	million,	or	5%,	increase	in	net	sales	in	the	Enterprise	Mobility Solutions	segment,	and	(ii)	a	$72	million,	or	1%,	increase	in	net	sales	in	the	Home	and	Networks	Mobility	segment.	The	36%	decrease	in	net	sales	in	the Mobile	Devices	segment	was	primarily	driven	by	a	37%	decrease	in	unit	shipments.	The	5%	increase	in	the	Enterprise	Mobility	Solutions	segment	net sales	reflects	an	8%	increase	in	net	sales	to	the	government	and	public	safety	market,	partially	offset	by	a	2%	decrease	in	net	sales	to	the	commercial enterprise	market.	The	1%	increase	in	net	sales	in	the	Home	and	Networks	Mobility	segment	reflects	a	16%	increase	in	net	sales	in	the	home	business, partially	offset	by	an	11%	decrease	in	net	sales	in	the	networks	business.

# Gross	Margin

Gross	margin	was	$8.4	billion,	or	27.8%	of	net	sales,	in	2008,	compared	to	$10.0	billion,	or	27.2%	of	net	sales,	in	2007.	The	decrease	in	gross	margin reflects	lower	gross	margin	in	the	Mobile	Devices	and	Home	and	Networks	Mobility	segments,	partially	offset	by	increased	gross	margin	in	the Enterprise	Mobility	Solutions	segment.	The	decrease	in	gross	margin	in	the	Mobile	Devices	segment	was	primarily	driven	by:	(i)	the	36%	decrease	in	net sales,	(ii)	excess	inventory	and	other	related	charges	recorded	in	2008	of	$370	million	due	to	a	decision	to	consolidate	software	and	silicon	platforms,	and (iii)	a	$150	million	charge	recorded	in	2008	related	to	the	settlement	of	a	purchase	commitment,	partially	offset	by:	(i)	the	absence	in	2008	of	a $277	million	charge	for	a	legal	settlement	recorded	in	2007,	and	(ii)	savings	from	supply	chain	cost-reduction	activities.	The	decrease	in	gross	margin	in the	Home	and	Networks	Mobility	segment	was	primarily	due	to:	(i)	an	unfavorable	product	mix,	and	(ii)	the	absence	of	net	sales	by	ECC	that	was divested	at	the	end	of	2007.	The	increase	in	gross	margin	in	the	Enterprise	Mobility	Solutions	segment	was	primarily	driven	by:	(i)	the	5%	increase	in	net sales,	(ii)	a	favorable	product	mix,	and	(iii)	the	absence	in	2008	of	an	inventory-related	charge	in	connection	with	the	acquisition	of	Symbol	during	the first	quarter	of	2007.

The	increase	in	gross	margin	as	a	percentage	of	net	sales	in	2008	compared	to	the	2007	was	driven	by	an	increase	in	gross	margin	percentage	in	the Enterprise	Mobility	Solutions	segment,	partially	offset	by	a	decrease	in	gross	margin	percentage	in	the	Mobile	Devices	and	Home	and	Networks	Mobility segments.	The	Company's	overall	gross	margin	as	a	percentage	of	net	sales	can	be	impacted	by	the	proportion	of	overall	net	sales	generated	by	its various	businesses.

# Selling,	General	and	Administrative	Expenses

Selling,	general	and	administrative	("SG&A")	expenses	decreased	15%	to	$4.3	billion,	or	14.4%	of	net	sales,	in	2008,	compared	to	$5.1	billion,	or 13.9%	of	net	sales,	in	2007.	The	decrease	in	SG&A	expenses	reflects	lower	SG&A	expenses	in	all	segments.	The	decrease	in	the	Mobile	Devices	segment was	primarily	driven	by	lower	marketing	expenses	and	savings	from	cost-reduction	initiatives.	The	decreases	in	the	Home	and	Networks	Mobility	and Enterprise	Mobility	Solutions	segments	were	primarily	due	to	savings	from	cost-reduction	initiatives.	SG&A	expenses	as	a	percentage	of	net	sales increased	in	the	Mobile	Devices	segment	and	decreased	in	the	Home	and	Networks	Mobility	and	Enterprise	Mobility	Solutions	segments.

# Research	and	Development	Expenditures

Research	and	development	("R&D")	expenditures	decreased	7%	to	$4.1	billion,	or	13.6%	of	net	sales,	in	2008,	compared	to	$4.4	billion,	or	12.1%	of net	sales,	in	2007.	The	decrease	in	R&D	expenditures	reflects	lower	R&D	expenditures	in	the	Mobile	Devices	and	Home	and	Networks	Mobility segments,	partially	offset	by	higher	R&D	expenditures	in	the	Enterprise	Mobility	Solutions	segment.	The	decreases	in	the	Mobile	Devices	and	Home	and Networks	Mobility	segments	were	primarily	due	to	savings	from	cost-reduction	initiatives.	The	increase	in	the	Enterprise	Mobility	Solutions	segment	was primarily	due	to	developmental	engineering	expenditures	for	new	product	development	and	investment	in	next-generation	technologies.	R&D expenditures	as	a	percentage	of	net	sales	increased	in	the	Mobile	Devices	and	Enterprise	Mobility	Solutions	segments	and	decreased	in	the	Home	and Networks	Mobility	segment.	The	Company	participates	in	very	competitive	industries	with	constant	changes	in	technology	and,	accordingly,	the Company	continues	to	believe	that	a	strong	commitment	to	R&D	is	required	to	drive	long-term	growth.

# Other	Charges

The	Company	recorded	net	charges	of	$2.3	billion	in	Other	charges	in	2008,	compared	to	net	charges	of	$1.0	billion	in	2007.	The	net	charges	in	2008 include:	(i)	$1.8	billion	of	goodwill	and	other	asset	impairment	charges,	(ii)	$318	million	of	charges	relating	to	the	amortization	of	intangible	assets, (iii)	$248	million	of	net	reorganization	of	business	charges	included	in	Other	charges,	and	(iv)	$59	million	of	transaction	costs	related	to	the	proposed separation	of	the	Company	into	two	independent,	publicly	traded	companies,	partially	offset	by	a	$48	million	gain	on	the	sale	of	property,	plant	and equipment.	The	net	charges	in	2007	included:	(i)	$369	million	of	charges	relating	to	the	amortization	of	intangibles,	(ii)	$290	million	of	net reorganization	of	business	charges	included	in	Other	charges,	(iii)	$140	million	of	charges	for	legal	settlements	and	related	insurance	matters, (iv)	$96	million	of	acquisition-related	in-process	research	and	development	charges	("IPR&D")	relating	to	2007	acquisitions,	and	(v)	$89	million	of	asset impairment	charges.	The	net	reorganization	of	business	charges	are	discussed	in	further	detail	in	the	"Reorganization	of	Businesses"	section.

# Net	Interest	Income

Net	interest	income	was	$48	million	in	2008,	compared	to	net	interest	income	of	$91	million	in	2007.	Net	interest	income	in	2008	includes	interest income	of	$272	million,	partially	offset	by	interest	expense	of	$224	million.	Net	interest	income	in	2007	included	interest	income	of	$456	million, partially	offset	by	interest	expense	of	$365	million.	The	decrease	in	net	interest	income	is	primarily	attributed	to	lower	interest	income	due	to	the	decrease in	average	cash,	cash	equivalents	and	Sigma	Fund	balances	in	2008	compared	to	2007	and	the	significant	decrease	in	short-term	interest	rates.	This decrease	was	partially	offset	by	a	decrease	in	interest	expense	in	2008	due	to	the	reversal	of	$89	million	of	interest	accruals	that	are	no	longer	needed	as	a result	of	the	effective	settlement	of	certain	tax	audits.

# Gains	on	Sales	of	Investments	and	Businesses

Gains	on	sales	of	investments	and	businesses	were	$82	million	in	2008,	compared	to	$50	million	in	2007.	In	2008,	the	net	gain	primarily	relates	to sales	of	a	number	of	the	Company's	equity	investments,	of	which	$29	million	of	gain	was	attributed	to	a	single	investment.	In	2007,	the	net	gain primarily	reflects	a	gain	of	$34	million	from	the	sale	of	the	Company's	embedded	communications	computing	group.

# Other

Net	charges	classified	as	Other,	as	presented	in	Other	income	(expense),	were	$376	million	in	2008,	compared	to	net	income	of	$22	million	in	2007. The	net	charges	in	2008	were	primarily	comprised	of:	(i)	$365	million	of	other-than-temporary	investment	impairment	charges	of	which	$138	million	was attributed	to	an	equity	security	held	by	the	Company	as	a	strategic	investment,	(ii)	$186	million	of	impairment	charges	on	Sigma	Fund	investments resulting	primarily	from	investments	in	Lehman	Brothers	Holdings	Inc.,	Washington	Mutual,	Inc.	and	Sigma	Finance	Corporation,	an	unrelated	special investment	vehicle	managed	by	United	Kingdom-based	Gordian	Knot	Limited,	(iii)	$101	million	of	temporary	unrealized	losses	on	Sigma	Fund investments,	and	(iv)	$84	million	of	foreign	currency	losses,	partially	offset	by:	(i)	a	$237	million	curtailment	gain	associated	with	the	decision	to	freeze benefit	accruals	in	the	U.S.	pension	plans,	(ii)	$56	million	of	gains	related	to	the	extinguishment	of	a	liability,	and	(iii)	$24	million	of	gains	relating	to several	interest	rate	swaps	not	designated	as	hedges.	The	net	income	in	2007	was	primarily	comprised	of	$97	million	of	foreign	currency	gains,	partially offset	by	$62	million	of	investment	impairment	charges.

# Effective	Tax	Rate

The	Company	recorded	$1.6	billion	of	net	tax	expense	in	2008,	compared	to	$285	million	of	net	tax	benefits	in	2007.	During	2008,	the	Company's net	tax	expense	was	unfavorably	impacted	by:	(i)	non-cash	tax	charges	to	establish	deferred	tax	asset	valuation	allowances,	(ii)	non-deductible	goodwill impairment	charges,	(iii)	non-deductible	transaction	related	costs,	(iv)	a	pension	curtailment	gain,	(v)	a	gain	on	sale	of	property,	plant	and	equipment, (vi)	tax	on	the	reduction	of	interest	expense	related	to	the	recognition	of	previously	unrecognized	tax	benefit,	and	(vii)	a	gain	on	the	extinguishment	of	a liability.	The	Company's	net	tax	expense	was	favorably	impacted	by:	(i)	a	net	reduction	in	unrecognized	tax	benefits,	(ii)	excess	tax	benefits	on repatriations	from	high	tax	jurisdictions,	and	(iii)	tax	benefits	on	charges,	including	charges	for:	a	software	and	silicon	platform	consolidation,	a settlement	relating	to	a	purchase	commitment,	asset	impairment	charges,	investment	impairments	and

reorganization	of	business	charges.	The	Company's	effective	tax	rate,	excluding	these	items,	was	67%.	The	Company's	2008	effective	tax	rate	of	67%	is higher	than	the	comparable	2007	effective	tax	rate	of	26%,	primarily	due	to	non-deductible	foreign	exchange	and	translation	adjustment	losses	incurred in	2008.

The	Company's	net	tax	benefit	for	2007	was	favorably	impacted	by	an	increase	in	tax	credits	compared	to	2006.	The	Company's	net	tax	benefit	was also	favorably	impacted	by:	(i)	the	settlement	of	tax	positions,	(ii)	tax	incentives	received,	and	(iii)	reversal	of	deferred	tax	valuation	allowances,	and unfavorably	impacted	by:	(i)	adjustments	to	deferred	taxes	in	non-U.S.	locations	due	to	enacted	tax	rate	changes,	(ii)	an	increase	in	unrecognized	tax benefits,	and	(iii)	a	non-deductible	IPR&D	charge.	The	Company's	effective	tax	rate	excluding	the	items	described	above	and	the	tax	impact	of restructuring	charges	and	asset	impairments,	was	26%.

# Loss	from	Continuing	Operations

The	Company	incurred	a	net	loss	from	continuing	operations	before	income	taxes	of	$2.6	billion	in	2008,	compared	with	a	net	loss	from	continuing operations	before	income	taxes	of	$390	million	in	2007.	After	taxes,	the	Company	incurred	a	net	loss	from	continuing	operations	of	$4.2	billion,	or	$1.87 per	diluted	share,	in	2008,	compared	to	a	net	loss	from	continuing	operations	of	$105	million,	or	$0.05	per	diluted	share,	in	2007.

The	increase	in	the	loss	from	continuing	operations	before	income	taxes	in	2008	compared	to	2007	was	primarily	attributed	to:	(i)	a	$1.6	billion decrease	in	gross	margin,	(ii)	a	$1.4	billion	increase	in	Other	charges,	(iii)	a	$398	million	increase	in	charges	classified	as	Other,	as	presented	in	Other income	(expense),	and	(iv)	a	$43	million	decrease	in	net	interest	income.	These	factors	were	partially	offset	by:	(i)	a	$762	million	decrease	in	SG&A expenses,	(ii)	a	$320	million	decrease	in	R&D	expenditures,	and	(iii)	a	$32	million	increase	in	gains	on	the	sale	of	investments	and	businesses.

Net	sales	were	$36.6	billion	in	2007,	down	15%	compared	to	net	sales	of	$42.8	billion	in	2006.	The	decrease	in	net	sales	reflected	a	$9.4	billion decrease	in	net	sales	by	the	Mobile	Devices	segment,	partially	offset	by	a	$2.3	billion	increase	in	net	sales	by	the	Enterprise	Mobility	Solutions	segment and	an	$850	million	increase	in	net	sales	by	the	Home	and	Networks	Mobility	segment.	The	33%	decrease	in	net	sales	in	the	Mobile	Devices	segment was	primarily	driven	by:	(i)	a	27%	decrease	in	unit	shipments,	(ii)	a	9%	decrease	in	ASP,	and	(iii)	decreased	revenue	from	intellectual	property	and technology	licensing.	The	43%	increase	in	net	sales	in	the	Enterprise	Mobility	Solutions	segment	was	primarily	driven	by	net	sales	from	the	Symbol business	acquired	in	January	2007,	as	well	as	higher	net	sales	in	the	government	and	public	safety	market	due	to	strong	demand	in	North	America.	The 9%	increase	in	net	sales	in	the	Home	and	Networks	Mobility	segment	was	primarily	driven	by	a	51%	increase	in	unit	shipments	of	digital	entertainment devices,	partially	offset	by	lower	net	sales	of	wireless	networks	due	primarily	to	lower	demand	for	iDEN	and	CDMA	infrastructure	equipment.

Gross	margin	was	$10.0	billion,	or	27.2%	of	net	sales,	in	2007,	compared	to	$12.7	billion,	or	29.7%	of	net	sales,	in	2006.	The	decrease	in	gross margin	reflects	decreases	in	gross	margin	in	the	Mobile	Devices	and	Home	and	Networks	Mobility	segments,	partially	offset	by	an	increase	in	gross margin	in	the	Enterprise	Mobility	Solutions	segment.	The	decrease	in	gross	margin	in	the	Mobile	Devices	segment	was	primarily	due	to:	(i)	a	9% decrease	in	ASP,	(ii)	decreased	income	from	intellectual	property	and	technology	licensing,	(iii)	a	27%	decrease	in	unit	shipments,	and	(iv)	a $277	million	charge	for	a	legal	settlement,	partially	offset	by	savings	from	supply	chain	cost-reduction	initiatives.	The	decrease	in	gross	margin	in	the Home	and	Networks	segment	was	primarily	due	to:	(i)	continuing	competitive	pricing	pressure	in	the	market	for	GSM	infrastructure	equipment,	and (ii)	lower	sales	of	iDEN	infrastructure	equipment,	partially	offset	by	increased	sales	of	digital	entertainment	devices.	The	increase	in	gross	margin	in	the Enterprise	Mobility	Solutions	segment	was	primarily	due	to	the	43%	increase	in	net	sales,	driven	by	net	sales	from	the	Symbol	business	acquired	in January	2007,	as	well	as	higher	net	sales	in	the	government	and	public	safety	market	due	to	strong	demand	in	North	America.	Gross	margin	as	a percentage	of	net	sales	decreased	in	2007	as	compared	to	2006,	reflecting	decreases	in	all	three	of	the	Company's	business	segments.

SG&A	expenses	increased	13%	to	$5.1	billion,	or	13.9%	of	net	sales,	in	2007,	compared	to	$4.5	billion,	or	10.5%	of	net	sales,	in	2006.	In	2007 compared	to	2006,	SG&A	expenses	increased	in	the	Enterprise	Mobility	Solutions	and	Home	and	Networks	Mobility	segments	and	decreased	in	the Mobile	Devices	segment.	The	increases	in	the	Enterprise	Mobility	Solutions	and	Home	and	Networks	Mobility	segments	were	primarily	due	to	expenses from	recently	acquired	businesses,	partially	offset	by	savings	from	cost-reduction	initiatives.	The	decrease	in	the	Mobile	Devices	segment	was	primarily due	to	lower	marketing	expenses	and	savings	from	cost-reduction	initiatives,	partially	offset	by	increased	expenditures	on	information	technology upgrades.	SG&A	expenses	as	a	percentage	of	net	sales	increased	in	the	Mobile	Devices	and	Enterprise	Mobility	Solutions	segments	and	decreased	in	the Home	and	Networks	Mobility	segment.

R&D	expenditures	increased	8%	to	$4.4	billion,	or	12.1%	of	net	sales,	in	2007,	compared	to	$4.1	billion,	or	9.5%	of	net	sales,	in	2006.	In	2007 compared	to	2006,	R&D	expenditures	increased	in	the	Mobile	Devices	and	Enterprise	Mobility	Solutions	segments	and	decreased	in	the	Home	and Networks	Mobility	segment.	The	increase	in	the	Mobile	Devices	segment	was	primarily	due	to	developmental	engineering	expenditures	for	new	product development	and	investment	in	next-generation	technologies,	partially	offset	by	savings	from	cost-reduction	initiatives.	The	increase	in	the	Enterprise Mobility	Solutions	segment	was	primarily	due	to	R&D	expenditures	incurred	by	recently	acquired	businesses,	partially	offset	by	savings	from	cost- reduction	initiatives.	The	decrease	in	the	Home	and	Networks	Mobility	segment	was	primarily	due	to	savings	from	cost-reduction	initiatives,	partially offset	by	expenditures	by	recently	acquired	businesses	and	continued	investment	in	digital	entertainment	devices	and	WiMAX.	R&D	expenditures	as	a percentage	of	net	sales	increased	in	the	Mobile	Devices	segment	and	decreased	in	the	Enterprise	Mobility	Solutions	and	Home	and	Networks	Mobility segments.

# Other	Charges	(Income)

The	Company	recorded	net	charges	of	$984	million	in	Other	charges	(income)	in	2007,	compared	to	net	charges	of	$25	million	in	2006.	The	net charges	in	2007	include:	(i)	$369	million	of	charges	relating	to	the	amortization	of	intangibles,	(ii)	$290	million	of	net	reorganization	of	business	charges, (iii)	$140	million	of	charges	for	legal	settlements	and	related	insurance	matters,	(iv)	$96	million	of	acquisition-related	in-process	research	and development	charges	("IPR&D")	relating	to	2007	acquisitions,	and	(v)	$89	million	for	asset	impairment	charges.	The	net	charges	in	2006	included: (i)	$172	million	of	net	reorganization	of	business	charges,	(ii)	$100	million	of	charges	relating	to	the	amortization	of	intangibles,	(iii)	an	$88	million charitable	contribution	to	the	Motorola	Foundation	of	appreciated	equity	holdings	in	a	third	party,	(iv)	$50	million	of	legal	reserves,	and	(v)	$33	million of	acquisition-related	IPR&D	charges	relating	to	2006	acquisitions,	partially	offset	by	$418	million	of	income	for	payments	relating	to	the	Telsim collection	settlement.

Net	interest	income	was	$91	million	in	2007,	compared	to	net	interest	income	of	$326	million	in	2006.	Net	interest	income	in	2007	included	interest income	of	$456	million,	partially	offset	by	interest	expense	of	$365	million.	Net	interest	income	in	2006	included	interest	income	of	$661	million, partially	offset	by	interest	expense	of	$335	million.	The	decrease	in	net	interest	income	was	primarily	attributed	to	lower	interest	income	due	to	the decrease	in	average	cash,	cash	equivalents	and	Sigma	Fund	balances	during	2007	compared	to	2006,	partially	offset	by	higher	interest	rates.

Gains	on	sales	of	investments	and	businesses	were	$50	million	in	2007,	compared	to	gains	of	$41	million	in	2006.	In	2007,	the	net	gain	primarily reflected	a	gain	of	$34	million	from	the	sale	of	the	Company's	embedded	communications	computing	group.	In	2006,	the	net	gain	primarily	reflected	a gain	of	$141	million	on	the	sale	of	the	Company's	remaining	shares	in	Telus	Corporation,	partially	offset	by	a	loss	of	$126	million	on	the	sale	of	the Company's	remaining	shares	in	Sprint	Nextel	Corporation	("Sprint	Nextel").

Income	classified	as	Other,	as	presented	in	Other	income	(expense),	was	$22	million	in	2007,	compared	to	net	income	of	$151	million	in	2006.	The net	income	in	2007	was	primarily	comprised	of	$97	million	of	foreign	currency	gains,	partially	offset	by	$44	million	of	other-than-temporary	investment impairment	charges.	The	net	income	in	2006	was	primarily	comprised	of:	(i)	a	$99	million	net	gain	due	to	an	increase	in	market	value	of	a	zero-cost collar	derivative	entered	into	to	protect	the	value	of	the	Company's	investment	in	Sprint	Nextel,	and	(ii)	$60	million	of	foreign	currency	gains,	partially offset	by	$27	million	of	investment	impairment	charges.

The	Company	recorded	$285	million	of	net	tax	benefits	in	2007,	compared	to	$1.3	billion	in	net	tax	expense	in	2006.	The	Company's	net	tax	benefit for	2007	was	favorably	impacted	by	an	increase	in	tax	credits	compared	to	2006.	The	Company's	net	tax	benefit	was	also	favorably	impacted	by:	(i)	the settlement	of	tax	positions,	(ii)	tax	incentives	received,	and	(iii)	reversal	of	deferred	tax	valuation	allowances,	and	unfavorably	impacted	by: (i)	adjustments	to	deferred	taxes	in	non-U.S.	locations	due	to	enacted	tax	rate	changes,	(ii)	an	increase	in	unrecognized	tax	benefits,	and	(iii)	a	non- deductible	IPR&D	charge.	The	Company's	effective	tax	rate	for	continuing	operations,	excluding	the	items	described	above	and	the	tax	impact	of restructuring	charges	and	asset	impairments,	was	26%.

The	Company's	net	tax	expense	of	$1.3	billion	in	2006	was	favorably	impacted	by	$348	million	of	net	tax	benefits	relating	to:	(i)	the	reduction	of deferred	tax	asset	valuation	allowances,	(ii)	incremental	tax	benefits	related	to	2005	cash	repatriations,	(iii)	favorable	tax	settlements	reached	with	foreign jurisdictions,	(iv)	tax	benefits	for	foreign	earnings	permanently	reinvested,	(v)	contribution	of	appreciated	investments	to	the	Company's	charitable foundation	and	unfavorably	impacted	by:	(i)	the	incurrence	of	non-deductible	IPR&D	charges,	and	(ii)	restructuring	charges	in	low	tax	jurisdictions.	The effective	tax	rate	for	2006	excluding	these	items	was	36%.

The	effective	tax	rate	for	continuing	operations	excluding	identified	items	of	26%	for	2007	is	less	than	the	comparable	effective	tax	rate	of	36%	for 2006	due	to	an	increase	in	tax	credits	in	2007	compared	to	2006	and	a	change	in	the	mix	of	income	and	loss	by	region.

# Earnings	(Loss)	from	Continuing	Operations

The	Company	incurred	a	net	loss	from	continuing	operations	before	income	taxes	of	$390	million	in	2007,	compared	to	earnings	from	continuing operations	before	income	taxes	of	$4.6	billion	in	2006.	After	taxes,	the	Company	incurred	a	loss	from	continuing	operations	of	$105	million,	or	$0.05	per diluted	share,	in	2007,	compared	to	earnings	from	continuing	operations	of	$3.3	billion,	or	$1.30	per	diluted	share,	in	2006.

The	decrease	in	earnings	(loss)	from	continuing	operations	before	income	taxes	in	2007	compared	to	2006	is	primarily	attributed	to:	(i)	a	$2.8	billion decrease	in	gross	margin,	driven	by	decreases	in	gross	margin	in	the	Mobile	Devices	and	Home	and	Network	Mobility	segments,	partially	offset	by	an increase	in	gross	margin	in	the	Enterprise	Mobility	Solutions	segment,	(ii)	a	$959	million	increase	in	Other	charges	(income),	(iii)	a	$588	million increase	in	SG&A	expenses,	(iv)	a	$323	million	increase	in	R&D	expenditures,	(v)	a	$235	million	decrease	in	net	interest	income,	and	(vi)	a	$129	million decrease	in	income	classified	as	Other,	as	presented	in	Other	income	(expense).

# Reorganization	of	Businesses

The	Company	maintains	a	formal	Involuntary	Severance	Plan	(the	"Severance	Plan"),	which	permits	the	Company	to	offer	eligible	employees severance	benefits	based	on	years	of	service	and	employment	grade	level	in	the	event	that	employment	is	involuntarily	terminated	as	a	result	of	a reduction-in-force	or	restructuring.	The	Company	recognizes	termination	benefits	based	on	formulas	per	the	Severance	Plan	at	the	point	in	time	that future	settlement	is	probable	and	can	be	reasonably	estimated	based	on	estimates	prepared	at	the	time	a	restructuring	plan	is	approved	by	management. Exit	costs	consist	of	future	minimum	lease	payments	on	vacated	facilities	and	other	contractual	terminations.	At	each	reporting	date,	the	Company evaluates	its	accruals	for	employee	separation	and	exit	costs	to	ensure	the	accruals	are	still	appropriate.	In	certain	circumstances,	accruals	are	no	longer needed	because	of	efficiencies	in	carrying	out	the	plans	or	because	employees	previously	identified	for	separation	resigned	from	the	Company	and	did not	receive	severance	or	were	redeployed	due	to	circumstances	not	foreseen	when	the

original	plans	were	initiated.	In	these	cases,	the	Company	reverses	accruals	through	the	consolidated	statements	of	operations	where	the	original	charges were	recorded	when	it	is	determined	they	are	no	longer	needed.

The	Company	realized	cost-saving	benefits	of	approximately	$103	million	in	2008	from	the	plans	that	were	initiated	during	2008,	representing: (i)	$76	million	of	savings	in	R&D	expenditures,	(ii)	$18	million	of	savings	in	SG&A	expenses,	and	(iii)	$9	million	of	savings	in	Costs	of	sales.	Beyond 2008,	the	Company	expects	the	reorganization	plans	initiated	during	2008	to	provide	annualized	cost	savings	of	approximately	$426	million,

representing:	(i)	$222	million	of	savings	in	R&D	expenditures,	(ii)	$93	million	of	savings	in	SG&A	expenses,	and	(iii)	$111	million	of	savings	in	Cost	of sales.

During	2008,	the	Company	committed	to	implement	various	productivity	improvement	plans	aimed	at	achieving	long-term,	sustainable	profitability by	driving	efficiencies	and	reducing	operating	costs.	All	three	of	the	Company's	business	segments,	as	well	as	corporate	functions,	are	impacted	by	these plans,	with	the	majority	of	the	impact	in	the	Mobile	Devices	segment.	The	employees	affected	are	located	in	all	regions.	The	Company	recorded	net reorganization	of	business	charges	of	$334	million,	including	$86	million	of	charges	in	Costs	of	sales	and	$248	million	of	charges	under	Other	charges	in the	Company's	consolidated	statements	of	operations.	Included	in	the	aggregate	$334	million	are	charges	of	$324	million	for	employee	separation	costs, $66	million	for	exit	costs	and	$9	million	for	fixed	asset	impairment	charges,	partially	offset	by	$65	million	of	reversals	for	accruals	no	longer	needed.

The	following	table	displays	the	net	charges	incurred	by	business	segment:

The	following	table	displays	a	rollforward	of	the	reorganization	of	businesses	accruals	established	for	exit	costs	and	employee	separation	costs	from January	1,	2008	to	December	31,	2008:

|  | Accruals	at<br>January	1,<br>2008 | 2008<br>Additional<br>Charges | 2008(1)<br>Adjustments | 2008<br>Amount<br>Used | Accruals	at<br>December	31,<br>2008 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Exit\tcosts | $42 | $66 | $1 | $(29) | $80 |
| Employee\tseparation\tcosts | 193 | 324 | (60) | (287) | 170 |
|  | $235 | $390 | $(59) | $(316) | $250 |

# (1) Includes	translation	adjustments.

# Exit	Costs

At	January	1,	2008,	the	Company	had	an	accrual	of	$42	million	for	exit	costs	attributable	to	lease	terminations.	The	2008	additional	charges	of $66	million	are	primarily	related	to:	(i)	the	exit	of	leased	facilities	in	the	United	Kingdom	by	the	Mobile	Devices	segment,	and	(ii)	the	exit	of	leased facilities	in	Mexico	by	the	Home	and	Networks	Mobility	segment.	The	adjustments	of	$1	million	reflect	$4	million	of	translation	adjustments,	partially offset	by	$3	million	of	reversals	of	accruals	no	longer	needed.	The	$29	million	used	in	2008	reflects	cash	payments.	The	remaining	accrual	of $80	million,	which	is	included	in	Accrued	liabilities	in	the	Company's	consolidated	balance	sheets	at	December	31,	2008,	represents	future	cash payments,	primarily	for	lease	termination	obligations.

# Employee	Separation	Costs

At	January	1,	2008,	the	Company	had	an	accrual	of	$193	million	for	employee	separation	costs,	representing	the	severance	costs	for	approximately 2,800	employees.	The	2008	additional	charges	of	$324	million	represent	severance	costs	for	approximately	an	additional	5,800	employees,	of	which 2,300	are	direct	employees	and	3,500	are	indirect	employees.

The	adjustments	of	$60	million	reflect	$62	million	of	reversals	of	accruals	no	longer	needed,	partially	offset	by	$2	million	of	translation	adjustments. The	$62	million	of	reversals	represent	previously	accrued	costs	for	approximately	600	employees.

During	2008,	approximately	6,200	employees,	of	which	3,000	were	direct	employees	and	3,200	were	indirect	employees,	were	separated	from	the Company.	The	$287	million	used	in	2008	reflects	cash	payments	to	these	separated	employees.	The	remaining	accrual	of	$170	million,	which	is	included in	Accrued	liabilities	in	the	Company's	consolidated	balance	sheets	at	December	31,	2008,	is	expected	to	be	paid	to	approximately	2,000	employees.

During	2007,	the	Company	committed	to	implement	various	productivity	improvement	plans	aimed	at	achieving	long-term,	sustainable	profitability by	driving	efficiencies	and	reducing	operating	costs.	All	three	of	the	Company's	business	segments,	as	well	as	corporate	functions,	were	impacted	by these	plans.	The	majority	of	the	employees	affected	were	located	in	North	America	and	Europe.	The	Company	recorded	net	reorganization	of	business charges	of	$394	million,	including	$104	million	of	charges	in	Costs	of	sales	and	$290	million	of	charges	under	Other	charges	(income)	in	the	Company's consolidated	statements	of	operations.	Included	in	the	aggregate	$394	million	were	charges	of	$401	million	for	employee	separation	costs,	$42	million for	fixed	asset	impairment	charges	and	$19	million	for	exit	costs,	offset	by	reversals	for	accruals	no	longer	needed.

The	following	table	displays	the	net	reorganization	of	business	charges	by	segment:

|  | Accruals	at<br>January	1,<br>2007 | 2007<br>Additional<br>Charges | 2007(1)(2)<br>Adjustments | 2007<br>	 Amount<br>Used | Accruals	at<br>December	31,<br>2007 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Exit\tcosts | $54 | $19 | $2 | $(33) | $42 |
| Employee\tseparation\tcosts | 104 | 401 | (64) | (248) | 193 |
|  | $158 | $420 | $(62) | $(281) | $235 |

(2) Includes	$6	million	of	accruals	established	through	purchase	accounting	for	businesses	acquired,	covering	exit	costs	and	separation	costs	for approximately	200	employees.

At	January	1,	2007,	the	Company	had	an	accrual	of	$54	million	for	exit	costs	attributable	to	lease	terminations.	The	2007	additional	charges	of $19	million	are	primarily	related	to	the	exit	of	certain	activities	and	leased	facilities	in	Ireland	by	the	Home	and	Networks	Mobility	segment.	The	2007 adjustments	of	$2	million	represent	accruals	for	exit	costs	established	through	purchase	accounting	for	businesses	acquired.	The	$33	million

used	in	2007	reflects	cash	payments.	The	remaining	accrual	of	$42	million,	which	was	included	in	Accrued	liabilities	in	the	Company's	consolidated balance	sheets	at	December	31,	2007,	represented	future	cash	payments	for	lease	termination	obligations.

At	January	1,	2007,	the	Company	had	an	accrual	of	$104	million	for	employee	separation	costs,	representing	the	severance	costs	for	approximately 2,300	employees.	The	2007	additional	charges	of	$401	million	represent	severance	costs	for	approximately	6,700	employees,	of	which	2,400	were	direct employees	and	4,300	were	indirect	employees.

The	adjustments	of	$64	million	reflect	$68	million	of	reversals	of	accruals	no	longer	needed,	partially	offset	by	$4	million	of	accruals	for	severance plans	established	through	purchase	accounting	for	businesses	acquired.	The	$68	million	of	reversals	represent	previously	accrued	costs	for 1,100	employees,	and	primarily	relates	to	a	strategic	change	regarding	a	plant	closure	and	specific	employees	previously	identified	for	separation	who resigned	from	the	Company	and	did	not	receive	severance	or	who	were	redeployed	due	to	circumstances	not	foreseen	when	the	original	plans	were approved.	The	$4	million	of	accruals	represents	severance	plans	for	approximately	200	employees	established	through	purchase	accounting	for	businesses acquired.

During	2007,	approximately	5,300	employees,	of	which	1,700	were	direct	employees	and	3,600	were	indirect	employees,	were	separated	from	the Company.	The	$248	million	used	in	2007	reflects	cash	payments	to	these	separated	employees.	The	remaining	accrual	of	$193	million	was	included	in Accrued	liabilities	in	the	Company's	consolidated	balance	sheets	at	December	31,	2007.

During	2006,	the	Company	committed	to	implement	various	productivity	improvement	plans	aimed	principally	at:	(i)	reducing	costs	in	its	supply- chain	activities,	(ii)	integration	synergies,	and	(iii)	reducing	other	operating	expenses,	primarily	relating	to	engineering	and	development	costs.	The Company	recorded	net	reorganization	of	business	charges	of	$213	million,	including	$41	million	of	charges	in	Costs	of	sales	and	$172	million	of	charges under	Other	charges	in	the	Company's	consolidated	statement	of	operations.	Included	in	the	aggregate	$213	million	are	charges	of	$191	million	for employee	separation	costs,	$15	million	for	fixed	asset	impairment	charges	and	$30	million	for	exit	costs,	partially	offset	by	$23	million	of	reversals	for accruals	no	longer	needed.

The	following	table	displays	a	rollforward	of	the	reorganization	of	business	accruals	established	for	exit	costs	and	employee	separation	costs	from January	1,	2006	to	December	31,	2006:

|  | Accruals	at<br>January	1,<br>2006 | 2006<br>Additional<br>Charges | 2006(1)<br>Adjustments | 2006<br>	 Amount<br>Used | Accruals	at<br>December	31,<br>2006 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Exit\tcosts | $50 | $30 | $(7) | $(19) | $54 |
| Employee\tseparation\tcosts | 53 | 191 | (16) | (124) | 104 |
|  | $103 | $221 | $(23) | $(143) | $158 |

At	January	1,	2006,	the	Company	had	an	accrual	of	$50	million	for	exit	costs	attributable	to	lease	terminations.	The	2006	additional	charges	of $30	million	were	primarily	related	to	a	lease	cancellation	by	the	Enterprise	Mobility	Solutions	segment.	The	2006	adjustments	of	$7	million	represented reversals	of	accruals	no	longer	needed.	The	$19	million	used	in	2006	reflects	cash	payments	to	lessors.	The	remaining	accrual	of	$54	million,	which	was included	in	Accrued	liabilities	in	the	Company's	consolidated	balance	sheets	at	December	31,	2006,	represented	future	cash	payments	for	lease termination	obligations.

At	January	1,	2006,	the	Company	had	an	accrual	of	$53	million	for	employee	separation	costs,	representing	the	severance	costs	for	approximately 1,600	employees,	of	which	1,100	were	direct	employees	and	500	were	indirect	employees.	The	2006	additional	charges	of	$191	million	represented	costs for	an	additional	3,900	employees,	of	which	1,700	were	direct	employees	and	2,200	were	indirect	employees.	The	adjustments	of	$16	million	represented reversals	of	accruals	no	longer	needed.

During	2006,	approximately	3,200	employees,	of	which	1,400	were	direct	employees	and	1,800	were	indirect	employees,	were	separated	from	the Company.	The	$124	million	used	in	2006	reflects	cash	payments	to	these	separated	employees.	The	remaining	accrual	of	$104	million	was	included	in Accrued	liabilities	in	the	Company's	consolidated	balance	sheets	at	December	31,	2006.

# Liquidity	and	Capital	Resources

As	highlighted	in	the	consolidated	statements	of	cash	flows,	the	Company's	liquidity	and	available	capital	resources	are	impacted	by	four	key components:	(i)	current	cash	and	cash	equivalents,	(ii)	operating	activities,	(iii)	investing	activities,	and	(iv)	financing	activities.

# Cash	and	Cash	Equivalents

At	December	31,	2008,	the	Company's	cash	and	cash	equivalents	(which	are	highly-liquid	investments	with	an	original	maturity	of	three	months	or less)	were	$3.1	billion,	an	increase	of	$312	million	compared	to	$2.8	billion	at	December	31,	2007.	At	December	31,	2008,	$311	million	of	this	amount was	held	in	the	U.S.	and	$2.8	billion	was	held	by	the	Company	or	its	subsidiaries	in	other	countries.	The	Company	continues	to	analyze	and	review various	repatriation	strategies	to	continue	to	efficiently	repatriate	funds.	At	December	31,	2008,	restricted	cash	was	$343	million	(including	$279	million held	outside	of	the	U.S.),	compared	to	$158	million	(including	$91	million	held	outside	of	the	U.S.)	at	December	31,	2007.

The	Company	has	approximately	$2.9	billion	of	earnings	in	foreign	subsidiaries	that	are	not	permanently	reinvested	and	may	be	repatriated	without additional	U.S.	federal	income	tax	charges	to	the	Company's	consolidated	statements	of	operations,	given	the	U.S.	federal	tax	provisions	accrued	on undistributed	earnings	and	the	utilization	of	available	foreign	tax	credits.	On	a	cash	basis,	these	repatriations	from	the	Company's	non-U.S.	subsidiaries could	require	the	payment	of	additional	foreign	taxes,	which	would	be	creditable	against	U.S.	federal	income	taxes.	While	the	Company	regularly repatriates	funds	and	a	significant	portion	of	the	funds	currently	offshore	can	be	repatriated	quickly	with	minimal	adverse	financial	impact,	repatriation	of some	of	these	funds	could	be	subject	to	delay	for	local	country	approvals	and	could	have	potential	adverse	tax	consequences.

# Operating	Activities

The	cash	provided	by	operating	activities	from	continuing	operations	in	2008	was	$242	million,	compared	to	$785	million	provided	in	2007,	and $3.5	billion	provided	in	2006.	The	primary	contributors	to	cash	flow	from	operations	in	2008	were:	(i)	a	$1.9	billion	decrease	in	accounts	receivable, (ii)	earnings	from	continuing	operations	(adjusted	for	non-cash	items)	of	$1.0	billion,	and	(iii)	a	$466	million	decrease	in	other	current	assets.	These positive	contributors	to	operating	cash	flow	were	partially	offset	by:	(i)	a	$1.6	billion	decrease	in	accounts	payable	and	accrued	liabilities,	(ii)	a $1.5	billion	net	cash	outflow	due	to	changes	in	other	assets	and	liabilities,	and	(iii)	a	$54	million	net	cash	outflow	due	to	changes	in	inventories.

Accounts	Receivable:		The	Company's	net	accounts	receivable	were	$3.5	billion	at	December	31,	2008,	compared	to	$5.3	billion	at	December	31, 2007.	The	decrease	in	net	accounts	receivable	reflects	a	substantial

decrease	in	accounts	receivable	in	the	Mobile	Devices	segment,	primarily	related	to	a	significant	decrease	in	net	sales,	and	decreases	in	accounts receivable	in	the	Enterprise	Mobility	Solutions	and	Home	and	Network	Mobility	segments.	The	Company's	businesses	sell	their	products	in	a	variety	of markets	throughout	the	world	and	payment	terms	can	vary	by	market	type	and	geographic	location.	Accordingly,	the	Company's	levels	of	net	accounts receivable	can	be	impacted	by	the	timing	and	level	of	sales	that	are	made	by	its	various	businesses	and	by	the	geographic	locations	in	which	those	sales are	made.

In	addition,	from	time	to	time,	the	Company	elects	to	sell	accounts	receivable	to	third	parties.	The	Company's	levels	of	net	accounts	receivable	can be	impacted	by	the	timing	and	amount	of	such	sales,	which	can	vary	by	period	and	can	be	impacted	by	numerous	factors.	Although	the	Company	was	not limited	in	its	ability	to	sell	receivables	during	2008,	the	severe	tightening	in	the	credit	markets	and	the	ongoing	global	financial	crisis	may	limit	the Company's	ability	to	sell	receivables	in	the	future,	particularly	if	the	creditworthiness	of	our	customers'	declines.	As	further	described	under	"Sales	of Receivables",	subsequent	to	the	end	of	2008,	one	of	the	Company's	committed	receivables	facilities	expired	and	was	not	renewed.

Inventory:		The	Company's	net	inventory	was	$2.7	billion	at	December	31,	2008,	compared	to	$2.8	billion	at	December	31,	2007.	The	decrease	in net	inventory	reflects	a	decrease	in	net	inventory	in	the	Mobile	Devices	segment,	partially	offset	by	increases	in	net	inventory	in	the	Enterprise	Mobility Solutions	and	Home	and	Networks	Mobility	segments.	Inventory	management	continues	to	be	an	area	of	focus	as	the	Company	balances	the	need	to maintain	strategic	inventory	levels	to	ensure	competitive	delivery	performance	to	its	customers	against	the	risk	of	inventory	excess	and	obsolescence	due to	rapidly	changing	technology	and	customer	spending	requirements.

Accounts	Payable:		The	Company's	accounts	payable	were	$3.2	billion	at	December	31,	2008,	compared	to	$4.2	billion	at	December	31,	2007.	The decrease	in	accounts	payable	reflects	a	decrease	in	accounts	payable	in	the	Mobile	Devices	segment,	partially	offset	by	increases	in	accounts	payable	in the	Enterprise	Mobility	Solutions	and	Home	and	Networks	Mobility	segments.	The	Company	buys	products	in	a	variety	of	markets	throughout	the	world and	payment	terms	can	vary	by	market	type	and	geographic	location.	Accordingly,	the	Company's	levels	of	accounts	payable	can	be	impacted	by	the timing	and	level	of	purchases	made	by	its	various	businesses	and	by	the	geographic	locations	in	which	those	purchases	are	made.

Reorganization	of	Businesses:		The	Company	has	implemented	reorganization	of	businesses	plans.	Cash	payments	for	exit	costs	and	employee separations	in	connection	with	a	number	of	these	plans	were	$316	million	in	2008,	as	compared	to	$281	million	in	2007.	Of	the	$250	million reorganization	of	businesses	accrual	at	December	31,	2008,	$170	million	relates	to	employee	separation	costs	and	is	expected	to	be	paid	in	2009.	The remaining	$80	million	in	accruals	relate	to	lease	termination	obligations	that	are	expected	to	be	paid	over	a	number	of	years.

Benefit	Plan	Contributions:		The	Company	contributed	$243	million	to	its	U.S.	pension	plans	during	2008,	compared	to	$274	million	contributed	in 2007.	The	Company	contributed	$54	million	to	its	non-U.S.	pension	plans	during	2008,	compared	to	$135	million	contributed	in	2007.	During	2009,	the Company	expects	to	make	cash	contributions	of	approximately	$180	million	to	its	U.S.	pension	plans	and	approximately	$50	million	to	its non-U.S.	pension	plans.

The	Company	has	amended	its	U.S.	pension	plans	such	that:	(i)	no	participant	shall	accrue	any	benefits	or	additional	benefits	on	or	after	March	1, 2009,	and	(ii)	no	compensation	increases	earned	by	a	participant	on	or	after	March	1,	2009	shall	be	used	to	compute	any	accrued	benefit.

The	Company	contributed	$16	million	to	its	retiree	health	care	plan	in	2008,	compared	to	$15	million	in	2007,	and	expects	to	make	no	contributions to	this	plan	in	2009.	Retirement-related	benefits	are	further	discussed	below	in	the	"Significant	Accounting	Policies—Retirement-Related	Benefits" section.

# Investing	Activities

The	most	significant	components	of	the	Company's	investing	activities	in	2008	include:	(i)	net	proceeds	from	sales	of	Sigma	Fund	investments, (ii)	capital	expenditures,	(iii)	purchases	of	short-term	investments,	(iv)	strategic	acquisitions	of,	or	investments	in,	other	companies,	and	(v)	proceeds from	the	sales	of	investments	and	businesses.

Net	cash	provided	by	investing	activities	from	continuing	operations	was	$794	million	in	2008,	compared	to	net	cash	provided	of	$2.4	billion	in	2007 and	net	cash	used	of	$1.4	billion	in	2006.	The	$1.6	billion	decrease	in	cash	provided	by	investing	activities	in	2008	as	compared	to	2007	was	primarily due	to:	(i)	a	$6.0	billion	decrease

in	cash	received	from	net	sales	of	Sigma	Fund	investments,	and	(ii)	a	$318	million	decrease	in	proceeds	from	the	sales	of	investments	and	businesses, partially	offset	by:	(i)	a	$4.3	billion	decrease	in	cash	used	for	acquisitions	and	investments,	and	(ii)	a	$380	million	increase	in	sales	of	short-term investments.

Sigma	Fund:		The	Company	and	its	wholly-owned	subsidiaries	invest	most	of	their	U.S.	dollar-denominated	cash	in	a	fund	(the	"Sigma	Fund")	that is	designed	to	provide	investment	returns	similar	to	a	money	market	fund.	The	Company	received	$853	million	in	net	proceeds	from	sales	of	Sigma	Fund investments	in	2008,	compared	to	$6.9	billion	in	net	proceeds	from	sales	of	Sigma	Fund	investments	in	2007	and	$1.3	billion	in	net	cash	used	to	purchase Sigma	Fund	investments	in	2006.	The	Sigma	Fund	aggregate	balances	were	$4.2	billion	at	December	31,	2008	(including	$2.4	billion	held	by	the Company	or	its	subsidiaries	outside	of	the	U.S.),	compared	to	$5.2	billion	at	December	31,	2007	(including	$3.5	billion	held	by	the	Company	or	its subsidiaries	outside	of	the	U.S.).	While	the	Company	regularly	repatriates	funds	and	a	significant	portion	of	the	Sigma	Fund	investments	currently offshore	can	be	repatriated	quickly	and	with	minimal	adverse	financial	impact,	repatriation	of	some	of	these	funds	could	be	subject	to	delay	and	could have	potential	adverse	tax	consequences.	The	Company	continues	to	analyze	and	review	various	repatriation	strategies	to	continue	to	efficiently	repatriate non-U.S.	funds,	including	Sigma	Fund	investments.

The	Sigma	Fund	portfolio	is	managed	by	four	premier	independent	investment	management	firms.	The	investment	guidelines	of	the	Sigma	Fund require	that	purchased	investments	must	be	in	high-quality,	investment	grade	(rated	at	least	A/A-1	by	Standard	&	Poor's	or	A2/P-1	by	Moody's	Investors Service),	U.S.	dollar-denominated	debt	obligations,	including	certificates	of	deposit,	commercial	paper,	government	bonds,	corporate	bonds	and	asset- and	mortgage-backed	securities.	Under	the	Sigma	Fund's	investment	policies,	except	for	debt	obligations	of	the	U.S.	treasury	and	U.S.	agencies,	no	more than	5%	of	the	Sigma	Fund	portfolio	is	to	consist	of	debt	obligations	of	any	one	issuer.	The	Sigma	Fund's	investment	policies	further	require	that	floating rate	investments	must	have	a	maturity	at	purchase	date	that	does	not	exceed	thirty-six	months	with	an	interest	rate	that	is	reset	at	least	annually.	The average	interest	rate	reset	of	the	investments	held	by	the	funds	must	be	120	days	or	less.	The	actual	average	interest	rate	reset	of	the	portfolio	(excluding cash	and	impaired	securities)	was	38	days	and	39	days	at	December	31,	2008	and	2007,	respectively.

Investments	in	the	Sigma	Fund	are	carried	at	fair	value.	The	Company	primarily	relies	on	valuation	pricing	models	and	broker	quotes	to	determine the	fair	value	of	investments	in	the	Sigma	Fund.	The	valuation	models	are	developed	and	maintained	by	third-party	pricing	services,	and	use	a	number	of standard	inputs,	including	benchmark	yields,	reported	trades,	broker/dealer	quotes	where	the	counterparty	is	standing	ready	and	able	to	transact,	issuer spreads,	benchmark	securities,	bids,	offers	and	other	reference	data.	For	each	asset	class,	quantifiable	inputs	related	to	perceived	market	movements	and sector	news	may	be	considered	in	addition	to	the	standard	inputs.

At	December	31,	2008	and	2007,	$3.7	billion	and	$5.2	billion,	respectively,	of	the	Sigma	Fund	investments	were	classified	as	current	in	the Company's	consolidated	balance	sheets.	The	weighted	average	maturity	of	the	Sigma	Fund	investments	classified	as	current	was	5	months	(excluding cash	of	$1.1	billion	and	impaired	securities)	at	December	31,	2008,	compared	to	12	months	(excluding	cash	of	$16	million	and	impaired	securities)	at December	31,	2007.

The	fair	market	value	of	investments	in	the	Sigma	Fund	was	$4.2	billion	and	$5.2	billion	at	December	31,	2008	and	2007,	respectively.	The Company	considers	unrealized	losses	in	the	Sigma	Fund	to	be	temporary,	as	these	losses	have	resulted	primarily	from	the	ongoing	disruptions	in	the capital	markets.	On	the	securities	for	which	the	unrealized	losses	are	considered	temporary	(excluding	impaired	securities),	the	Company	believes	it	is probable	that	it	will	be	able	to	collect	all	amounts	it	is	owed	according	to	their	contractual	terms,	which	may	be	at	maturity.	Temporary	unrealized	losses in	the	Sigma	Fund	were	$101	million	and	$57	million	at	December	31,	2008	and	2007,	respectively.

If	it	becomes	probable	the	Company	will	not	collect	amounts	it	is	owed	on	securities	according	to	their	contractual	terms,	the	Company	considers	the security	to	be	impaired	and	adjusts	the	cost	basis	of	the	security	accordingly.	During	2008	and	2007,	impairment	charges	in	the	Sigma	Fund	were $186	million	and	$18	million,	respectively.	The	impairment	charges	were	primarily	related	to	investments	in	Lehman	Brothers	Holdings,	Inc.,

Washington	Mutual,	Inc.,	and	Sigma	Finance	Corporation,	an	unrelated	special	investment	vehicle	managed	by	United	Kingdom-based	Gordian	Knot, Limited.

Securities	with	a	significant	temporary	unrealized	loss	and	a	maturity	greater	than	12	months	and	impaired	securities	have	been	classified	as	non- current	in	the	Company's	consolidated	balance	sheets.	At	December	31,	2008,	$466	million	of	the	Sigma	Fund	investments	were	classified	as	non- current,	and	the	weighted	average

maturity	of	the	Sigma	Fund	investments	classified	as	non-current	(excluding	impaired	securities)	was	16	months.	At	December	31,	2007,	none	of	the Sigma	Fund	investments	were	classified	as	non-current.

Prior	to	the	fourth	quarter	of	2008,	the	Company	recognized	impairment	charges	from	Sigma	Fund	investments	in	its	consolidated	statements	of operations	and	temporary	unrealized	losses	in	Sigma	Fund	investments	as	a	component	of	Non-owner	changes	to	equity	in	the	consolidated	statements	of stockholders'	equity.	During	the	fourth	quarter	of	2008,	the	Company	determined	that	temporary	unrealized	losses	in	Sigma	Fund	investments	should also	be	recognized	in	the	Company's	consolidated	statements	of	operations,	even	though	the	related	securities	were	not	considered	impaired.	Because	the Sigma	Fund	uses	investment-company	accounting	in	its	stand-alone	financial	statements,	it	marks	the	investments	in	the	fund	to	market	and	records	all unrealized	gains	or	losses	in	earnings,	whether	or	not	the	related	securities	are	considered	impaired.	The	Company	has	determined	that	the	stand-alone accounting	policies	of	the	Sigma	Fund	should	be	retained	in	its	consolidated	financial	statements.	Accordingly,	the	Company	recorded	$101	million	of accumulated	temporary	unrealized	losses	in	Sigma	Fund	investments	in	the	Company's	consolidated	statements	of	operations	during	the	fourth	quarter	of 2008,	which	represents	all	of	the	temporary	unrealized	gains	and	losses	that	have	accumulated	in	Sigma	Fund	investments	as	of	December	31,	2008. Portions	of	the	temporary	unrealized	losses	recognized	in	the	fourth	quarter	of	2008	arose	in	periods	prior	to	the	fourth	quarter	of	2008	and	should	have been	reflected	in	the	Company's	consolidated	statements	of	operations	in	the	periods	in	which	they	arose.	The	Company	has	determined	that	the	impact of	the	amounts	that	arose	in	prior	periods	is	not	material	to	the	consolidated	results	of	operations	of	those	prior	periods.

During	2008,	the	Company	recorded	total	charges	related	to	Sigma	Fund	investments,	including	temporary	unrealized	losses	and	impairment charges,	of	$287	million	in	its	consolidated	statement	of	operations.	During	2007,	the	Company	recorded	total	charges	of	$18	million,	all	of	which	were impairment	charges,	in	its	consolidated	statements	of	operations.	There	were	no	temporary	unrealized	losses	or	impairment	charges	in	the	Sigma	Fund investment	portfolio	during	2006.

The	Company	continuously	assesses	its	cash	needs	and	continues	to	believe	that	the	balance	of	cash	and	cash	equivalents,	short-term	investments and	investments	in	the	Sigma	Fund	classified	as	current	are	more	than	adequate	to	meet	its	current	operating	requirements	over	the	next	twelve	months. Therefore,	the	Company	believes	it	is	prudent	to	hold	the	$466	million	of	securities	classified	as	non-current	to	maturity	(or	until	they	recover	to	cost),	at which	time	we	anticipate	the	securities	will	liquidate	at	cost.

Strategic	Acquisitions	and	Investments:		The	Company	used	net	cash	for	acquisitions	and	new	investment	activities	of	$282	million	in	2008, compared	to	net	cash	used	of	$4.6	billion	in	2007	and	net	cash	used	of	$1.1	billion	in	2006.	During	2008,	the	Company:	(i)	acquired	a	controlling	interest in	Vertex	Standard	Co.	Ltd.	(part	of	the	Enterprise	Mobility	Solutions	segment),	(ii)	acquired	the	assets	related	to	digital	cable	set-top	products	of Zhejiang	Dahua	Digital	Technology	Co.,	LTD.	and	Hangzhou	Image	Silicon,	known	collectively	as	Dahua	Digital	(part	of	the	Home	and	Networks Mobility	segment),	(iii)	completed	the	acquisition	of	Soundbuzz	Pte.	Ltd.	(part	of	the	Mobile	Devices	segment),	and	(iv)	completed	the	acquisition	of AirDefense,	Inc.	(part	of	the	Enterprise	Mobility	Solutions	segment).	The	largest	components	of	the	$4.6	billion	in	2007	expenditures	were: (i)	$3.5	billion	for	the	acquisition	of	Symbol	Technologies,	Inc.	(part	of	the	Enterprise	Mobility	Solutions	segment),	(ii)	$438	million	for	the	acquisition of	Good	Technology,	Inc.	(part	of	the	Enterprise	Mobility	Solutions	segment),	(iii)	$183	million	for	the	acquisition	of	Netopia,	Inc.	(part	of	the	Home	and Networks	Mobility	segment),	(iv)	$137	million	for	the	acquisition	of	Terayon	Communications	Systems	(part	of	the	Home	and	Networks	Mobility segment),	(v)	the	acquisition	of	Tut	Systems,	Inc.	(part	of	the	Home	and	Networks	Mobility	segment),	(vi)	the	acquisition	of	Modulus	Video,	Inc.	(part	of the	Home	and	Networks	Mobility	segment),	and	(vii)	the	acquisition	of	Leapstone	Systems,	Inc.	(part	of	the	Home	and	Networks	Mobility	segment).

Capital	Expenditures:		Capital	expenditures	were	$504	million	in	2008,	compared	to	$527	million	in	2007	and	$649	million	in	2006.	The	Company's emphasis	in	making	capital	expenditures	is	to	focus	on	strategic	investments	driven	by	customer	demand	and	new	design	capability.

Sales	of	Investments	and	Businesses:		The	Company	received	$93	million	in	proceeds	from	the	sales	of	investments	and	businesses	in	2008, compared	to	proceeds	of	$411	million	in	2007	and	proceeds	of	$2.0	billion	in	2006.	The	$93	million	in	proceeds	in	2008	were	primarily	comprised	of	net proceeds	received	in	connection	with	the	sales	of	certain	of	the	Company's	equity	investments.	The	$411	million	in	proceeds	in	2007	were	primarily comprised	of	$346	million	from	the	sale	of	the	Company's	embedded	communications	computing	business.	During	the	first	half	of	2009,	the	Company expects	to	close	on	the	sale	of	its	biometrics	business.

Short-Term	Investments:		At	December	31,	2008,	the	Company	had	$225	million	in	short-term	investments	(which	are	highly-liquid	fixed-income investments	with	an	original	maturity	greater	than	three	months	but	less	than	one	year),	compared	to	$612	million	of	short-term	investments	at December	31,	2007.

Investments:		In	addition	to	available	cash	and	cash	equivalents,	Sigma	Fund	balances	(current	and	non-current)	and	short-term	investments,	the Company	views	its	investments	as	an	additional	source	of	liquidity.	The	majority	of	these	securities	are	available-for-sale	and	cost-method	investments	in technology	companies.	The	fair	market	values	of	these	securities	are	subject	to	substantial	price	volatility.	In	addition,	the	realizable	value	of	these securities	is	subject	to	market	and	other	conditions.	At	December	31,	2008,	the	Company's	available-for-sale	equity	securities	portfolio	had	an approximate	fair	market	value	of	$128	million,	which	represented	a	cost	basis	of	$125	million	and	a	net	unrealized	gain	of	$3	million.	At	December	31, 2007,	the	Company's	available-for-sale	securities	portfolio	had	an	approximate	fair	market	value	of	$333	million,	which	represented	a	cost	basis	of $372	million	and	a	net	unrealized	loss	of	$39	million.	At	December	31,	2008	and	2007,	the	Company's	cost-method	investment	portfolio	had	an approximate	recorded	value	of	$296	million	and	$414	million,	respectively.

# Financing	Activities

The	most	significant	components	of	the	Company's	financing	activities	are:	(i)	payment	of	dividends,	(ii)	repayment	and	repurchase	of	debt, (iii)	issuance	of	common	stock,	and	(iv)	purchases	of	the	Company's	common	stock	under	its	share	repurchase	program.

Net	cash	used	for	financing	activities	from	continuing	operations	was	$645	million	in	2008,	compared	to	$3.3	billion	of	cash	used	in	2007	and $3.2	billion	of	cash	used	in	2006.	Cash	used	for	financing	activities	from	continuing	operations	in	2008	was	primarily:	(i)	$453	million	of	cash	used	to pay	dividends,	(ii)	$225	million	of	cash	used	for	the	repayment	and	repurchase	of	debt,	(iii)	$138	million	of	cash	used	to	purchase	approximately 9.0	million	shares	of	the	Company's	common	stock	under	the	share	repurchase	program,	all	during	the	first	quarter	of	2008,	(iv)	$90	million	in distributions	to	discontinued	operations,	and	(v)	$50	million	of	net	cash	used	for	the	repayment	of	short-term	borrowings,	partially	offset	by: (i)	$158	million	of	proceeds	from	the	termination	of	interest	rate	swaps,	and	(ii)	$145	million	of	net	cash	received	from	the	issuance	of	common	stock	in connection	with	the	Company's	employee	stock	option	plans	and	employee	stock	purchase	plan.

Net	cash	used	for	financing	activities	from	continuing	operations	in	2007	was	primarily:	(i)	$3.0	billion	of	cash	used	to	purchase	171.2	million	shares of	the	Company's	common	stock	under	the	share	repurchase	program,	(ii)	$1.4	billion	of	cash	used	for	the	repayment	of	maturing	debt,	(iii)	$468	million of	cash	used	to	pay	dividends,	(iv)	$242	million	of	net	cash	used	for	the	repayment	of	commercial	paper	and	short-term	borrowings,	and	(v)	$75	million in	distributions	to	discontinued	operations,	partially	offset	by	proceeds	of:	(i)	$1.4	billion	received	from	the	issuance	of	long-term	debt,	(ii)	$440	million received	from	the	issuance	of	common	stock	in	connection	with	the	Company's	employee	stock	option	plans	and	employee	stock	purchase	plan,	and (iii)	$50	million	in	excess	tax	benefits	from	share-based	compensation.

Commercial	Paper	and	Other	Short-Term	Debt:		At	December	31,	2008,	the	Company's	outstanding	notes	payable	and	current	portion	of	long-term debt	was	$92	million,	compared	to	$332	million	at	December	31,	2007.	In	March	2008,	the	Company	repaid,	at	maturity,	the	entire	$114	million outstanding	of	6.50%	Senior	Notes	due	March	1,	2008.	In	October	2008,	the	Company	repaid,	at	maturity,	the	entire	$84	million	outstanding	of 5.80%	Notes	due	October	15,	2008.

In	November	2007,	the	Company	repaid,	at	maturity,	the	entire	$1.2	billion	aggregate	principal	amount	outstanding	of	its	4.608%	Senior	Notes	due November	16,	2007.	In	January	2007,	the	Company	repaid,	at	maturity,	the	entire	$118	million	aggregate	principal	amount	outstanding	of	its	7.6%	Notes due	January	1,	2007.

Net	cash	used	for	the	repayment	of	short-term	borrowings	was	$50	million	in	2008,	compared	to	repayment	of	$242	million	of	commercial	paper	and short-term	borrowings	in	2007.	At	December	31,	2008	and	2007,	the	Company	had	no	commercial	paper	outstanding.	The	capital	and	credit	markets	have been	experiencing	extreme	volatility	and	reduced	liquidity	for	the	past	12	months.	Routine	access	to	the	commercial	paper	market	has	been	limited	for issuers	like	the	Company,	which	have	non-rated	or	split	short-term	ratings.	If	the	Company	were	to	issue	commercial	paper	under	the	current	market conditions,	the	funding	costs	the	Company	would	have	to	pay	to	issue	commercial	paper	would	be	much	higher	than	historical	levels,	and	the	tenors would	likely	be	limited	to	overnight	borrowings.

Long-term	Debt:		At	December	31,	2008,	the	Company	had	outstanding	long-term	debt	of	$4.1	billion,	compared	to	$4.0	billion	at	December	31, 2007.	Although	we	believe	that	we	will	be	able	to	maintain	sufficient	access	to	the	capital	markets,	the	current	volatility	and	reduced	liquidity	in	the financial	markets	may	result	in	periods	of	time	when	access	to	the	capital	markets	is	limited	for	all	issuers	or	issuers	with	credit	ratings	similar	to	the Company's.

In	December	2008,	the	Company	completed	the	open	market	purchase	of	$42	million	of	the	$400	million	aggregate	principal	amount	outstanding	of its	7.50%	Debentures	due	in	2025	(the	"2025	Debentures").	The	$42	million	principal	amount	of	2025	Debentures	was	purchased	for	an	aggregate purchase	price	of	approximately	$28	million,	including	accrued	interest.	During	2008,	the	Company	recognized	a	gain	of	approximately	$14	million related	to	this	open	market	purchase	in	Other	within	Other	income	(expense)	in	the	consolidated	statements	of	operations.

The	Company	may	from	time	to	time	seek	to	retire	certain	of	its	outstanding	debt	through	open	market	cash	purchases,	privately-negotiated transactions	or	otherwise.	Such	repurchases,	if	any,	will	depend	on	prevailing	market	conditions,	the	Company's	liquidity	requirements,	contractual restrictions	and	other	factors.

Share	Repurchase	Program:		During	2008,	the	Company	paid	an	aggregate	of	$138	million,	including	transaction	costs,	to	repurchase	9.0	million shares	of	the	Company's	common	stock	at	an	average	price	of	$15.32,	all	of	which	shares	were	repurchased	during	the	first	quarter.	During	2007,	the Company	repurchased	171.2	million	of	its	common	shares	at	an	aggregate	cost	of	$3.0	billion,	or	an	average	cost	of	$17.74	per	share.	During	2006,	the Company	repurchased	a	total	of	171.7	million	of	its	common	shares	at	an	aggregate	cost	of	$3.8	billion,	or	an	average	cost	of	$22.29	per	share.

Through	actions	taken	in	July	2006	and	March	2007,	the	Board	of	Directors	authorized	the	Company	to	repurchase	an	aggregate	amount	of	up	to $7.5	billion	of	its	outstanding	shares	of	common	stock	over	a	period	ending	in	June	2009.	The	timing	and	amount	of	future	repurchases	will	be	based	on market	and	other	conditions.	As	of	December	31,	2008,	the	Company	remained	authorized	to	purchase	an	aggregate	amount	of	up	to	$3.6	billion	of additional	shares	under	the	current	stock	repurchase	program.	All	repurchased	shares	have	been	retired.

Payment	of	Dividends:		The	Company	paid	$453	million	in	cash	dividends	to	holders	of	its	common	stock	in	2008.	In	January	2009,	the	Company paid	$114	million	in	cash	dividends	that	were	declared	in	November	2008.	In	February	2009,	the	Company	announced	that	its	Board	of	Directors	voted	to suspend	the	declaration	of	quarterly	dividends	on	the	Company's	common	stock.	The	Company	does	not	currently	expect	to	pay	any	additional	cash dividends	during	the	remainder	of	2009.

Credit	Ratings:		Three	independent	credit	rating	agencies,	Fitch	Ratings	("Fitch"),	Moody's	Investors	Service	("Moody's"),	and	Standard	&	Poor's ("S&P"),	assign	ratings	to	the	Company's	short-term	and	long-term	debt.	The	following	chart	reflects	the	current	ratings	assigned	to	the	Company's senior	unsecured	non-credit	enhanced	long-term	debt	and	the	Company's	commercial	paper	by	each	of	these	agencies.

Since	the	Company	has	investment	grade	ratings	from	Fitch	and	Moody's	and	a	non-investment	grade	rating	from	S&P,	it	is	referred	to	as	a	"split rated	credit".

# Credit	Facilities

At	December	31,	2008,	the	Company	maintained	a	$2.0	billion	five-year	domestic	syndicated	revolving	credit	facility	that	matures	in	December 2011	(as	amended,	the	"5-Year	Credit	Facility"),	which	is	not	utilized.	In	order

to	borrow	funds	under	the	5-Year	Credit	Facility,	the	Company	must	be	in	compliance	with	various	representations,	conditions	and	covenants	contained in	the	agreement,	including	a	financial	covenant	relating	to	the	ratio	of	total	debt	to	adjusted	EBITDA	(the	"Financial	Covenant").	The	Company	was	in compliance	with	the	terms	of	the	5-Year	Credit	Facility	at	December	31,	2008.	If	the	Company	borrows	under	the	5-Year	Credit	Facility,	it	is	required	to remain	in	compliance	with	the	terms	of	the	agreement.	Therefore,	the	amount	of	incremental	liquidity	available	from	borrowing	under	the	5-Year	Credit Facility	is	contingent	on	the	Company	maintaining	compliance	with	the	Financial	Covenant	at	the	end	of	each	quarter.

Events	over	the	past	several	months,	including	recent	failures	and	near	failures	of	a	number	of	large	financial	service	companies,	have	made	the capital	markets	increasingly	volatile.	The	Company	also	has	access	to	uncommitted	non-U.S.	credit	facilities	("uncommitted	facilities"),	but	in	light	of the	state	of	the	financial	services	industry	and	the	Company's	current	financial	condition,	the	Company	does	not	believe	it	is	prudent	to	assume	the	same level	of	funding	will	be	available	under	these	facilities	going	forward	as	has	been	available	historically.

# Contractual	Obligations	and	Other	Purchase	Commitments

Summarized	in	the	table	below	are	the	Company's	obligations	and	commitments	to	make	future	payments	under	long-term	debt	obligations (assuming	earliest	possible	exercise	of	put	rights	by	holders),	lease	obligations,	purchase	obligations	and	tax	obligations	as	of	December	31,	2008.

| (in	millions) | Total | 2009 | 2010 | 2011 | 2012 | 2013 | Uncertain<br>Timeframe | Thereafter |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Long-Term\tDebt\tObligations | $4,008 | $3 | $536 | $609 | $410 | $11 | $— | $2,439 |
| Lease\tObligations | 770 | 234 | 175 | 129 | 78 | 48 | — | 106 |
| Purchase\tObligations | 724 | 597 | 98 | 20 | 5 | 4 | — | — |
| Tax\tObligations | 914 | 50 | — | — | — | — | 864 | — |
| Total\tContractual\tObligations | $6,416 | $884 | $809 | $758 | $493 | $63 | $864 | $2,545 |

(1) Amounts	included	represent	firm,	non-cancelable	commitments.

Long-Term	Debt	Obligations:		The	Company's	long-term	debt	obligations,	including	the	current	portion	of	long-term	debt,	totaled	$4.0	billion	at December	31,	2008,	compared	to	$4.2	billion	at	December	31,	2007.	A	table	of	all	outstanding	long-term	debt	securities	can	be	found	in	Note	4,	"Debt and	Credit	Facilities,"	to	the	Company's	consolidated	financial	statements.

Lease	Obligations:		The	Company	owns	most	of	its	major	facilities,	but	does	lease	certain	office,	factory	and	warehouse	space,	land,	and information	technology	and	other	equipment,	principally	under	non-cancelable	operating	leases.	At	December	31,	2008,	future	minimum	lease obligations,	net	of	minimum	sublease	rentals,	totaled	$770	million.	Rental	expense,	net	of	sublease	income,	was	$181	million	in	2008,	$231	million	in 2007	and	$241	million	in	2006.

Purchase	Obligations:		The	Company	has	entered	into	agreements	for	the	purchase	of	inventory,	license	of	software,	promotional	activities,	and research	and	development,	which	are	firm	commitments	and	are	not	cancelable.	At	December	31,	2008,	the	Company's	obligations	in	connection	with these	agreements	run	through	2013,	and	the	total	payments	expected	to	be	made	under	these	agreements	total	$724	million	during	that	period.

The	Company	enters	into	a	number	of	arrangements	for	the	sourcing	of	supplies	and	materials	with	take-or-pay	obligations.	The	Company's obligations	with	these	suppliers	run	through	2012	and	total	a	minimum	purchase	obligation	of	$127	million	during	that	period.	The	Company	does	not anticipate	the	cancellation	of	any	of	these	agreements	in	the	future	and	estimates	that	purchases	from	these	suppliers	will	exceed	the	minimum	obligations during	the	agreement	periods.

Tax	Obligations:		The	Company	has	approximately	$914	million	of	unrecognized	income	tax	benefits	relating	to	multiple	tax	jurisdictions	and	tax years.	A	significant	portion	of	the	unrecognized	tax	benefits,	if	settled,	would	not	result	in	current	or	future	payments	as	tax	carry	forwards	are	available for	utilization.	The	Company	anticipates	that	it	is	reasonably	possible	that	$50	million	of	unrecognized	tax	benefits	could	be	settled	in	2009.	However,	it is	not	possible	to	estimate	the	timing	of	any	other	potential	settlements.

Commitments	Under	Other	Long-Term	Agreements:		The	Company	has	entered	into	certain	long-term	agreements	to	purchase	software,	components, supplies	and	materials	from	suppliers.	Most	of	the	agreements

extend	for	periods	of	one	to	three	years	(three	to	five	years	for	software).	However,	generally	these	agreements	do	not	obligate	the	Company	to	make	any purchases,	and	many	permit	the	Company	to	terminate	the	agreement	with	advance	notice	(usually	ranging	from	60	to	180	days).	If	the	Company	were	to terminate	these	agreements,	it	generally	would	be	liable	for	certain	termination	charges,	typically	based	on	work	performed	and	supplier	on-hand inventory	and	raw	materials	attributable	to	canceled	orders.	The	Company's	liability	would	only	arise	in	the	event	it	terminates	the	agreements	for	reasons other	than	"cause."

The	Company	outsources	certain	corporate	functions,	such	as	benefit	administration	and	information	technology-related	services.	These	contracts	are expected	to	expire	in	2013.	At	December	31,	2008,	the	total	remaining	payments	under	these	contracts	are	approximately	$953	million	over	the remaining	life	of	the	contracts;	however,	these	contracts	can	be	terminated.	Termination	would	result	in	a	penalty	substantially	less	than	the	remaining annual	contract	payments.	The	Company	would	also	be	required	to	find	another	source	for	these	services,	including	the	possibility	of	performing	them	in- house.

As	is	customary	in	bidding	for	and	completing	network	infrastructure	projects	and	pursuant	to	a	practice	the	Company	has	followed	for	many	years, the	Company	has	a	number	of	performance/bid	bonds,	standby	letters	of	credit	and	surety	bonds	outstanding	(collectively,	referred	to	as	"Performance Bonds"),	primarily	relating	to	projects	of	the	Enterprise	Mobility	Solutions	and	Home	and	Networks	Mobility	segments.	These	Performance	Bonds normally	have	maturities	of	up	to	three	years	and	are	standard	in	the	industry	as	a	way	to	give	customers	a	convenient	mechanism	to	seek	resolution	if	a contractor	does	not	satisfy	performance	requirements	under	a	contract.	A	customer	can	draw	on	the	Performance	Bond	only	if	the	Company	does	not fulfill	all	terms	of	a	project	contract.	If	such	an	occasion	occurred,	the	Company	would	be	obligated	to	reimburse	the	financial	institution	that	issued	the Performance	Bond	for	the	amounts	paid.	In	its	long	history,	it	has	been	rare	for	the	Company	to	have	a	Performance	Bond	drawn	upon.	At	December	31, 2008,	outstanding	Performance	Bonds	totaled	approximately	$1.8	billion,	compared	to	$1.7	billion	at	the	end	of	2007.	As	a	result	of	the	Company's current	credit	ratings,	issuers	of	these	Performance	Bonds	may	be	less	likely	to	provide	Performance	Bonds	on	the	Company's	behalf	in	the	future,	unless the	Company	provides	collateral.	These	limitations	on	issuance	may	apply	to	the	renewal	and	extension	of	existing	Performance	Bonds,	as	well	as	the issuance	of	new	Performance	Bonds.	Such	collateral	requirements	could	result	in	less	liquidity	for	other	operational	needs.	Also,	as	a	result	of	the Company's	current	credit	ratings,	there	has	been	an	increase	in	the	cost	of	issuance	of	Performance	Bonds.

Off-Balance	Sheet	Arrangements:		Under	the	definition	contained	in	Item	303(a)(4)(ii)	of	Regulation	S-K,	the	Company	does	not	have	any	off- balance	sheet	arrangements.

# Long-term	Customer	Financing	Commitments

Outstanding	Commitments:		Certain	purchasers	of	the	Company's	infrastructure	equipment	continue	to	request	that	suppliers	provide	long-term financing,	defined	as	financing	with	terms	greater	than	one	year,	in	connection	with	equipment	purchases.	These	requests	may	include	all	or	a	portion	of the	purchase	price	of	the	equipment.	However,	the	Company's	obligation	to	provide	long-term	financing	is	often	conditioned	on	the	issuance	of	a	letter	of credit	in	favor	of	the	Company	by	a	reputable	bank	to	support	the	purchaser's	credit	or	a	pre-existing	commitment	from	a	reputable	bank	to	purchase	the long-term	receivables	from	the	Company.	The	Company	had	outstanding	commitments	to	provide	long-term	financing	to	third	parties	totaling $370	million	and	$610	million	at	December	31,	2008	and	2007,	respectively.	Of	these	amounts,	$266	million	and	$454	million	were	supported	by	letters of	credit	or	by	bank	commitments	to	purchase	long-term	receivables	at	December	31,	2008	and	2007,	respectively.	In	response	to	the	recent	tightening	in the	credit	markets,	certain	customers	of	the	Company	have	requested	financing	in	connection	with	equipment	purchases,	and	these	types	of	requests	have increased	in	volume	and	scope.	Motorola	may	increase	its	commitments	to	provide	financing	in	light	of	these	requests.

Guarantees	of	Third-Party	Debt:		In	addition	to	providing	direct	financing	to	certain	equipment	customers,	the	Company	also	assists	customers	in obtaining	financing	directly	from	banks	and	other	sources	to	fund	equipment	purchases.	The	Company	had	committed	to	provide	financial	guarantees relating	to	customer	financing	totaling	$43	million	and	$42	million	at	December	31,	2008	and	2007,	respectively	(including	$23	million	at	both December	31,	2008	and	2007	relating	to	the	sale	of	short-term	receivables).	Customer	financing	guarantees	outstanding	were	$6	million	and	$3	million	at December	31,	2008	and	2007,	respectively	(including	$4	million	and	$0	million	at	December	31,	2008	and	2007,	respectively,	relating	to	the	sale	of short-term	receivables).

Outstanding	Long-Term	Receivables:		The	Company	had	net	long-term	receivables,	less	allowance	for	losses,	of	$162	million	and	$118	million	at December	31,	2008	and	2007,	respectively	(net	of	allowances	for	losses	of	$7	million	and	$5	million	at	December	31,	2008	and	2007,	respectively). These	long-term	receivables	are	generally

interest	bearing,	with	interest	rates	ranging	from	4%	to	14%.	Interest	income	recognized	on	long-term	receivables	for	the	years	ended	December	31, 2008,	2007	and	2006	was	$3	million,	$7	million	and	$9	million,	respectively.

# Sales	of	Receivables

The	Company	sells	accounts	receivables	and	long-term	receivables	to	third	parties	in	transactions	that	qualify	as	"true-sales."	Certain	of	these accounts	receivables	and	long-term	receivables	are	sold	to	third	parties	on	a	one-time,	non-recourse	basis,	while	others	are	sold	to	third	parties	under committed	facilities	that	involve	contractual	commitments	from	these	parties	to	purchase	qualifying	receivables	up	to	an	outstanding	monetary	limit. Committed	facilities	may	be	revolving	in	nature	and,	typically,	must	be	renewed	on	an	annual	basis.	The	Company	may	or	may	not	retain	the	obligation to	service	the	sold	accounts	receivable	and	long-term	receivables.

In	the	aggregate,	at	December	31,	2008,	these	committed	facilities	provided	for	up	to	$967	million	to	be	outstanding	with	the	third	parties	at	any time,	as	compared	to	up	to	$1.4	billion	and	$1.3	billion	provided	at	December	31,	2007	and	2006,	respectively.	As	of	December	31,	2008,	$759	million	of the	Company's	committed	facilities	were	utilized,	compared	to	$497	million	and	$817	million	utilized	at	December	31,	2007	and	2006,	respectively.	Of the	$967	million	of	committed	facilities	at	December	31,	2008,	$532	million	were	primarily	revolving	facilities	associated	with	the	sale	of	accounts receivable	(of	which	$497	million	was	utilized	at	December	31,	2008),	and	$435	million	were	primarily	committed	facilities	associated	with	the	sale	of specific	long-term	financing	transactions	to	a	single	customer	(of	which	$262	million	was	utilized	at	December	31,	2008).	In	addition,	before	receivables can	be	sold	under	certain	of	the	revolving	committed	facilities,	they	may	need	to	meet	contractual	requirements,	such	as	credit	quality	or	insurability.

For	many	years	the	Company	has	utilized	a	number	of	receivables	programs	to	sell	a	broadly-diversified	group	of	accounts	receivables	to	third parties.	Certain	of	the	accounts	receivables	were	sold	to	a	multi-seller	commercial	paper	conduit.	This	program	provided	for	up	to	$400	million	of accounts	receivables	to	be	outstanding	with	the	conduit	at	any	time.	Subsequent	to	December	31,	2008,	this	$400	million	committed	facility	expired	and the	Company	is	negotiating	a	replacement	facility	under	different	terms.	The	Company	is	also	negotiating	an	additional	committed	revolving	receivable sales	facility	for	European	receivables,	with	the	intent	that	the	combined	capacity	of	the	two	new	facilities	will	be	greater	than	the	facility	that	expired. However,	it	is	not	certain	when	or	if	the	Company	will	be	successful	in	securing	such	facilities.

For	the	year	ended	December	31,	2008,	2007	and	2006,	total	accounts	receivables	and	long-term	receivables	sold	by	the	Company	were	$3.7	billion, $4.9	billion	and	$6.4	billion,	respectively	(including	$3.4	billion,	$4.7	billion	and	$6.2	billion,	respectively,	of	accounts	receivables).	As	of	December	31, 2008	and	2007,	there	were	$1.0	billion	and	$978	million,	respectively,	of	receivables	outstanding	under	these	programs	for	which	the	Company	retained servicing	obligations	(including	$621	million	and	$587	million,	respectively,	of	accounts	receivable).

Under	certain	receivables	programs,	the	value	of	the	receivables	sold	is	covered	by	credit	insurance	obtained	from	independent	insurance	companies, less	deductibles	or	self-insurance	requirements	under	the	policies	(with	the	Company	retaining	credit	exposure	for	the	remaining	portion).	Although	credit insurance	remains	generally	available	to	the	Company,	it	has	become	more	expensive	to	obtain	and	often	requires	higher	deductibles.	The	Company's total	credit	exposure	to	outstanding	short-term	receivables	that	have	been	sold	was	$23	million	at	both	December	31,	2008	and	2007.	Reserves	of $4	million	and	$1	million	were	recorded	for	potential	losses	at	December	31,	2008	and	2007,	respectively.

# Adequate	Internal	Funding	Resources

The	Company	believes	that	it	has	adequate	internal	resources	available	to	fund	expected	working	capital	and	capital	expenditure	requirements	for	the next	twelve	months	as	supported	by	the	level	of	cash,	cash	equivalents,	short-term	investments	and	Sigma	Fund	balances	in	the	U.S.	and	the	ability	to repatriate	cash,	cash	equivalents,	short-term	investments	and	Sigma	Fund	balances	from	foreign	jurisdictions.

# Other	Contingencies

Potential	Contractual	Damage	Claims	in	Excess	of	Underlying	Contract	Value:		In	certain	circumstances,	our	businesses	may	enter	into	contracts with	customers	pursuant	to	which	the	damages	that	could	be	claimed	by	the	other	party	for	failed	performance	might	exceed	the	revenue	the	Company receives	from	the	contract.	Contracts

with	these	types	of	uncapped	damage	provisions	are	fairly	rare,	but	individual	contracts	could	still	represent	meaningful	risk.	There	is	a	possibility	that	a damage	claim	by	a	counterparty	to	one	of	these	contracts	could	result	in	expenses	to	the	Company	that	are	far	in	excess	of	the	revenue	received	from	the counterparty	in	connection	with	the	contract.

Indemnification	Provisions:		In	addition,	the	Company	may	provide	indemnifications	for	losses	that	result	from	the	breach	of	general	warranties contained	in	certain	commercial,	intellectual	property	and	divestiture	agreements.	Historically,	the	Company	has	not	made	significant	payments	under these	agreements,	nor	have	there	been	significant	claims	asserted	against	the	Company.	However,	there	is	an	increasing	risk	in	relation	to	intellectual property	indemnities	given	the	current	legal	climate.	In	indemnification	cases,	payment	by	the	Company	is	conditioned	on	the	other	party	making	a	claim pursuant	to	the	procedures	specified	in	the	particular	contract,	which	procedures	typically	allow	the	Company	to	challenge	the	other	party's	claims. Further,	the	Company's	obligations	under	these	agreements	for	indemnification	based	on	breach	of	representations	and	warranties	are	generally	limited	in terms	of	duration,	typically	not	more	than	24	months,	and	for	amounts	not	in	excess	of	the	contract	value,	and	in	some	instances	the	Company	may	have recourse	against	third	parties	for	certain	payments	made	by	the	Company.

Legal	Matters:		The	Company	is	a	defendant	in	various	lawsuits,	claims	and	actions,	which	arise	in	the	normal	course	of	business.	These	include actions	relating	to	products,	contracts	and	securities,	as	well	as	matters	initiated	by	third	parties	or	Motorola	relating	to	infringements	of	patents, violations	of	licensing	arrangements	and	other	intellectual	property-related	matters.	In	the	opinion	of	management,	the	ultimate	disposition	of	these matters	will	not	have	a	material	adverse	effect	on	the	Company's	consolidated	financial	position,	liquidity	or	results	of	operations.

# Segment	Information

The	following	commentary	should	be	read	in	conjunction	with	the	financial	results	of	each	reporting	segment	as	detailed	in	Note	12,	"Information	by Segment	and	Geographic	Region,"	to	the	Company's	consolidated	financial	statements.	Net	sales	and	operating	results	for	the	Company's	three	operating segments	for	2008,	2007	and	2006	are	presented	below.

The	Mobile	Devices	segment	designs,	manufactures,	sells	and	services	wireless	handsets	with	integrated	software	and	accessory	products,	and licenses	intellectual	property.	In	2008,	the	segment's	net	sales	represented	40%	of	the	Company's	consolidated	net	sales,	compared	to	52%	in	2007	and 66%	in	2006.

| (Dollars	in	millions) | 2008 | 2007 | 2006 | 2008—2007 | 2007—2006 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Segment\tnet\tsales | $12,099 | $18,988 | $28,383 | (36)% | (33)% |
| Operating\tearnings\t(loss) | \t(2,199) | \t(1,201) | 2,690 | 83% | *** |

*** Percentage	change	is	not	meaningful.

In	2008,	the	segment's	net	sales	were	$12.1	billion,	a	decrease	of	36%	compared	to	net	sales	of	$19.0	billion	in	2007.	The	36%	decrease	in	net	sales was	primarily	driven	by	a	37%	decrease	in	unit	shipments.	The	segment's	net	sales	were	negatively	impacted	by	the	segment's	limited	product	offerings in	critical	market	segments,	particularly	3G	products,	including	smartphones,	as	well	as	very	low-tier	products.	In	addition,	the	segment's	net	sales	were impacted	by	the	global	economic	downturn	in	the	second	half	of	2008,	which	resulted	in	the	slowing	of	end	user	demand.	On	a	product	technology	basis, net	sales	decreased	substantially	for	GSM	and	CDMA	technologies	and,	to	a	lesser	extent,	decreased	for	iDEN	and	3G	technologies.	On	a	geographic basis,	net	sales	decreased	substantially	in	North	America,	the	Europe,	Middle	East	and	Africa	region	("EMEA")	and	Asia	and,	to	a	lesser	extent, decreased	in	Latin	America.

The	segment	incurred	an	operating	loss	of	$2.2	billion	in	2008,	compared	to	an	operating	loss	of	$1.2	billion	in	2007.	The	increase	in	the	operating loss	was	primarily	due	to	a	decrease	in	gross	margin,	driven	by:	(i)	a	36%	decrease	in	net	sales,	(ii)	excess	inventory	and	other	related	charges	of $370	million	in	2008	due	to	a	decision	to

consolidate	software	and	silicon	platforms,	and	(iii)	a	$150	million	charge	in	2008	related	to	the	settlement	of	a	purchase	commitment,	partially	offset	by: (i)	the	absence	in	2008	of	a	$277	million	charge	for	a	legal	settlement	recorded	in	2007,	and	(ii)	savings	from	supply	chain	cost-reduction	initiatives.	The decrease	in	gross	margin	was	partially	offset	by	decreases	in:	(i)	selling,	general	and	administrative	("SG&A")	expenses,	primarily	due	to	lower marketing	expenses	and	savings	from	cost-reduction	initiatives,	and	(ii)	research	and	development	("R&D")	expenditures,	reflecting	savings	from	cost- reduction	initiatives.	The	segment's	industry	typically	experiences	short	life	cycles	for	new	products.	Therefore,	it	is	vital	to	the	segment's	success	that new,	compelling	products	are	constantly	introduced.	Accordingly,	a	strong	commitment	to	R&D	is	required	to	fuel	long-term	growth.	As	a	percentage	of net	sales	in	2008	as	compared	to	2007,	R&D	and	SG&A	expenses	increased	and	gross	margin	decreased.

The	segment's	backlog	was	$290	million	at	December	31,	2008,	compared	to	$647	million	at	December	31,	2007.	This	decrease	in	backlog	is primarily	due	to	a	decline	in	customer	demand,	primarily	driven	by	the	segment's	limited	product	portfolio,	as	well	as	the	global	economic	downturn.

Unit	shipments	in	2008	were	100.1	million	units,	a	37%	decrease	compared	to	shipments	of	159.1	million	units	in	2007.	The	overall	decrease	reflects decreased	unit	shipments	of	products	for	all	technologies.	For	the	full	year	2008,	unit	shipments	decreased	substantially	in	North	America,	EMEA	and Asia	and,	to	a	lesser	extent,	decreased	in	Latin	America.	Although	unit	shipments	by	the	segment	decreased	in	2008,	total	unit	shipments	in	the	worldwide handset	market	increased	by	approximately	5%.	The	segment	estimates	its	worldwide	market	share	to	be	approximately	8%	in	2008,	a	decrease	of approximately	6	percentage	points	versus	2007,	reflecting	a	significant	decline	in	market	share	in	North	America.

In	2008,	average	selling	price	("ASP")	was	flat	compared	to	2007.	By	comparison,	ASP	decreased	approximately	9%	in	2007	and	11%	in	2006.	ASP is	impacted	by	numerous	factors,	including	product	mix,	market	conditions	and	competitive	product	offerings,	and	ASP	trends	often	vary	over	time.

The	segment	has	several	large	customers	located	throughout	the	world.	In	2008,	aggregate	net	sales	to	the	segment's	five	largest	customers accounted	for	approximately	41%	of	the	segment's	net	sales.	Besides	selling	directly	to	carriers	and	operators,	the	segment	also	sells	products	through	a variety	of	third-party	distributors	and	retailers,	which	account	for	approximately	24%	of	the	segment's	net	sales.	The	loss	of	any	of	the	segment's	key customers	could	have	a	significant	impact	on	the	segment's	business.

Although	the	U.S.	market	continued	to	be	the	segment's	largest	individual	market,	many	of	our	customers	and	56%	of	our	segment's	2008	net	sales were	outside	the	U.S.	The	largest	of	these	international	markets	are	Brazil,	China	and	Mexico.

As	the	segment's	revenue	transactions	are	largely	denominated	in	local	currencies,	we	are	impacted	by	the	weakening	in	the	value	of	these	local currencies	against	the	U.S.	dollar.	A	number	of	our	more	significant	international	markets,	particularly	in	Latin	America,	were	impacted	by	this	trend	in late	2008.	We	anticipate	volatility	in	the	currency	markets	to	continue	in	2009.

In	2007,	the	segment's	net	sales	were	$19.0	billion,	a	decrease	of	33%	compared	to	net	sales	of	$28.4	billion	in	2006.	The	33%	decrease	in	net	sales was	primarily	driven	by:	(i)	a	27%	decrease	in	unit	shipments,	(ii)	a	9%	decrease	in	ASP,	and	(iii)	decreased	revenue	from	intellectual	property	and technology	licensing.	The	segment's	product	sales	were	negatively	impacted	by	limitations	in	the	segment's	product	portfolio,	including	3G	products	and products	for	the	Multimedia	and	Mass	Market	product	segments,	as	well	as	an	aging	product	portfolio.	On	a	product	technology	basis,	net	sales	of products	for:	(i)	GSM	technology	decreased	substantially,	(ii)	iDEN	and	CDMA	technologies	decreased,	and	(iii)	3G	technologies	increased	slightly.	On a	geographic	basis,	net	sales	decreased	in	all	regions,	and	decreased	substantially	in	Asia	and	EMEA.	The	substantial	decrease	in	Asia,	particularly	in China,	as	well	as	in	other	emerging	markets,	was	due	to	lower	demand	for	our	products	as	a	result	of	an	aging	product	portfolio	and	increased	industry- wide	competition.	The	substantial	decrease	in	EMEA	was	due	to	limitations	in	our	product	portfolio,	particularly	3G	products.

The	segment	incurred	an	operating	loss	of	$1.2	billion	in	2007,	compared	to	operating	earnings	of	$2.7	billion	in	2006.	The	operating	loss	was primarily	due	to	a	decrease	in	gross	margin,	driven	by:	(i)	a	9%	decrease	in	ASP,	(ii)	decreased	income	from	intellectual	property	and	technology licensing,	(iii)	a	27%	decrease	in	unit	shipments,	and	(iv)	a	$277	million	charge	for	a	legal	settlement,	partially	offset	by	savings	from	supply	chain	cost- reduction	initiatives.	R&D	expenditures	increased,	driven	by	increased	expenditures	on	developmental	engineering	for	new

products	and	software,	as	well	as	ongoing	investment	in	next-generation	technologies,	partially	offset	by	savings	from	cost-reduction	initiatives. Reorganization	of	business	charges	increased	due	to	employee	severance	costs	and	expenses	related	to	the	exit	of	a	facility.	SG&A	expenses	decreased, primarily	due	to	lower	marketing	expenses	and	savings	from	cost-reduction	initiatives,	partially	offset	by	increased	expenditures	on	information technology	upgrades.	As	a	percentage	of	net	sales	in	2007	as	compared	to	2006,	gross	margin	and	operating	margin	decreased,	and	SG&A	expenses	and R&D	expenditures	increased.

The	segment's	backlog	was	$647	million	at	December	31,	2007,	compared	to	$1.4	billion	at	December	31,	2006.	This	decrease	in	backlog	was primarily	due	to	a	decline	in	customer	demand	driven	by	the	segment's	limited	product	portfolio.

The	segment	shipped	159.1	million	units	in	2007,	a	27%	decrease	compared	to	shipments	of	217.4	million	units	in	2006.	The	overall	decrease reflects	decreased	unit	shipments	of	products	for	all	technologies.	For	the	full	year	2007,	unit	shipments:	(i)	decreased	substantially	in	Asia	and	EMEA, (ii)	decreased	in	North	America,	and	(iii)	increased	in	Latin	America.	Although	unit	shipments	by	the	segment	decreased	in	2007,	total	unit	shipments	in the	worldwide	handset	market	increased	by	approximately	16%.	The	segment	estimates	its	worldwide	market	share	was	approximately	14%	for	the	full year	2007,	a	decrease	of	approximately	8	percentage	points	versus	full	year	2006.

In	2007,	ASP	decreased	approximately	9%	compared	to	2006.	The	overall	decrease	in	ASP	was	driven	primarily	by	changes	in	the	product-tier	and geographic	mix	of	sales.	By	comparison,	ASP	decreased	approximately	11%	in	2006	and	10%	in	2005.

The	segment	has	several	large	customers	located	throughout	the	world.	In	2007,	aggregate	net	sales	to	the	segment's	five	largest	customers accounted	for	approximately	42%	of	the	segment's	net	sales.	Besides	selling	directly	to	carriers	and	operators,	the	segment	also	sells	products	through	a variety	of	third-party	distributors	and	retailers,	which	account	for	approximately	33%	of	the	segment's	net	sales.	The	largest	of	these	distributors	was Brightstar	Corporation.

Although	the	U.S.	market	continued	to	be	the	segment's	largest	individual	market,	many	of	our	customers,	and	more	than	54%	of	our	segment's 2007	net	sales,	were	outside	the	U.S.	The	largest	of	these	international	markets	were	Brazil,	China	and	Mexico.

The	Home	and	Networks	Mobility	segment	designs,	manufactures,	sells,	installs	and	services:	(i)	digital	video,	Internet	Protocol	video	and broadcast	network	interactive	set-tops,	end-to-end	video	delivery	systems,	broadband	access	infrastructure	platforms,	and	associated	data	and	voice customer	premise	equipment	to	cable	television	and	telecom	service	providers	(collectively,	referred	to	as	the	"home	business"),	and	(ii)	wireless	access systems,	including	cellular	infrastructure	systems	and	wireless	broadband	systems,	to	wireless	service	providers	(collectively,	referred	to	as	the	"network business").	In	2008,	the	segment's	net	sales	represented	33%	of	the	Company's	consolidated	net	sales,	compared	to	27%	in	2007	and	21%	in	2006.

| (Dollars	in	millions) | 2008 | 2007 | 2006 | 2008—2007 |
| :--- | :--- | :--- | :--- | :--- |
| Segment\tnet\tsales | $10,086 | $10,014 | $9,164 | 1% |
| Operating\tearnings | 918 | 709 | 787 | 29% |

In	2008,	the	segment's	net	sales	increased	1%	to	$10.1	billion,	compared	to	$10.0	billion	in	2007.	The	1%	increase	in	net	sales	primarily	reflects	a 16%	increase	in	net	sales	in	the	home	business,	partially	offset	by	an	11%	decrease	in	net	sales	in	the	networks	business.	The	16%	increase	in	net	sales	in the	home	business	is	primarily	driven	by	a	17%	increase	in	net	sales	of	digital	entertainment	devices,	reflecting	a	19%	increase	in	unit	shipments	to 18.0	million	units,	partially	offset	by	lower	ASP	due	to	product	mix	shift	and	pricing	pressure.	The	11%	decrease	in	net	sales	in	the	networks	business was	primarily	driven	by:	(i)	the	absence	of	net	sales	by	the	embedded	communication	computing	group	("ECC")	that	was	divested	at	the	end	of	2007, and	(ii)	lower	net	sales	of	iDEN,	GSM	and	CDMA	infrastructure	equipment,	partially	offset	by	higher	net	sales	of	UMTS	infrastructure	equipment.

On	a	geographic	basis,	the	1%	increase	in	net	sales	was	primarily	driven	by	higher	net	sales	in	Latin	America	and	Asia,	partially	offset	by	lower	net sales	in	North	America.	The	increase	in	net	sales	in	Latin	America	was

primarily	due	to	higher	net	sales	in	the	home	business.	The	increase	in	net	sales	in	Asia	was	primarily	driven	by	higher	net	sales	of	UMTS	and	CDMA infrastructure	equipment,	partially	offset	by	lower	net	sales	of	GSM	infrastructure.	The	decrease	in	net	sales	in	North	America	was	primarily	due	to	lower net	sales	of	iDEN	and	CDMA	infrastructure	equipment,	partially	offset	by	higher	net	sales	in	the	home	business.	Net	sales	in	North	America	accounted for	approximately	50%	of	the	segment's	total	net	sales	in	2008,	compared	to	approximately	52%	of	the	segment's	total	net	sales	in	2007.	The	regional shift	in	2008	as	compared	to	2007	reflects	a	5%	aggregate	growth	in	net	sales	outside	of	North	America	and	a	3%	decline	in	net	sales	in	North	America.

The	segment	had	operating	earnings	of	$918	million	in	2008,	compared	to	operating	earnings	of	$709	million	in	2007.	The	increase	in	operating earnings	was	primarily	due	to:	(i)	decreases	in	both	SG&A	and	R&D	expenditures,	primarily	related	to	savings	from	cost-reduction	initiatives,	and	(ii)	a decrease	in	reorganization	of	business	charges,	relating	primarily	to	lower	employee	severance	costs.	These	factors	were	partially	offset	by	a	decrease	in gross	margin,	primarily	due	to:	(i)	an	unfavorable	product	mix,	and	(ii)	the	absence	of	net	sales	by	ECC.	As	a	percentage	of	net	sales	in	2008	as	compared to	2007,	gross	margin,	SG&A	expenses	and	R&D	expenditures	all	decreased	and	operating	margin	increased.	The	segment's	gross	margin	percentages differ	among	its	services,	software	and	equipment	products.	Accordingly,	the	aggregate	gross	margin	of	the	segment	can	fluctuate	from	period	to	period depending	upon	the	relative	mix	of	sales	in	the	given	period.

Due	to	the	nature	of	the	segment's	business,	many	of	the	agreements	we	enter	into	are	long-term	contracts	that	require	sizeable	investments	by	our customers.	The	segment	is	dependent	upon	a	small	number	of	customers	for	a	significant	portion	of	its	sales.	In	2008,	sales	to	the	segment's	top	five customers	represented	approximately	45%	of	the	segment's	net	sales.	The	loss	of	one	of	these	major	customers	could	have	a	significant	impact	on	the segment's	business	and,	because	many	of	these	contracts	are	long-term	in	nature,	could	impact	revenue	and	earnings	over	several	quarters.	The	segment's backlog	was	$2.3	billion	at	December	31,	2008,	compared	to	$2.6	billion	at	December	31,	2007.

In	the	home	business,	demand	for	the	segment's	products	depends	primarily	on	the	level	of	capital	spending	by	broadband	operators	for	constructing, rebuilding	or	upgrading	their	communications	systems,	and	for	offering	advanced	services.	Additionally,	in	2008,	our	digital	video	customers significantly	increased	their	purchases	of	the	segment's	products	and	services,	primarily	due	to	increased	demand	for	digital	entertainment	devices, particularly	IP	and	HD/DVR	devices.

In	the	networks	business,	the	segment	has	been	a	long-standing	proponent	of	WiMAX	and	is	now	commercially	deploying	this	technology	to multiple	customers	on	a	global	basis.	The	segment	is	developing	infrastructure	equipment	utilizing	LTE	technology.	LTE	has	widespread	industry support,	not	only	from	current	GSM/UMTS	operators,	but	also	from	CDMA/EV-DO	based	carriers.

In	February	2008,	the	segment	acquired	the	assets	related	to	digital	cable	set-top	products	of	Zhejiang	Dahua	Digital	Technology	Co.,	LTD	and Hangzhou	Image	Silicon,	(known	collectively	as	Dahua	Digital),	a	developer,	manufacturer	and	marketer	of	cable	set-tops	and	related	low	cost	integrated circuits	for	the	emerging	Chinese	cable	business.	The	acquisition	helps	the	segment	strengthen	its	position	in	the	rapidly	growing	cable	market	in	China.

In	2007,	the	segment's	net	sales	increased	9%	to	$10.0	billion,	compared	to	$9.2	billion	in	2006.	The	9%	increase	in	net	sales	reflects	a	27%	increase in	net	sales	in	the	home	business,	partially	offset	by	a	1%	decrease	in	net	sales	in	the	network	business.	The	27%	increase	in	net	sales	in	the	home business	was	primarily	driven	by:	(i)	a	43%	increase	in	net	sales	of	digital	entertainment	devices,	reflecting	a	50%	increase	in	unit	shipments	to 15.1	million	units,	partially	offset	by	a	decline	in	ASP	due	to	a	product	mix	shift	towards	all-digital	set-tops,	and	(ii)	a	6%	increase	in	net	sales	of broadband	gateways,	primarily	due	to	higher	net	sales	of	data	modems,	driven	by	net	sales	from	the	Netopia,	Inc.	business	acquired	in	February	2007. The	1%	decrease	in	net	sales	in	the	networks	business	was	primarily	driven	by	lower	net	sales	of	iDEN	and	CDMA	infrastructure	equipment,	partially offset	by	higher	net	sales	of	GSM	infrastructure	equipment,	despite	competitive	pricing	pressure.

On	a	geographic	basis,	the	9%	increase	in	net	sales	reflects	higher	net	sales	in	all	geographic	regions.	The	increase	in	net	sales	in	North	America	was driven	primarily	by	higher	sales	of	digital	entertainment	devices,	partially	offset	by	lower	net	sales	of	iDEN	and	CDMA	infrastructure	equipment.	The increase	in	net	sales	in	Asia	was	primarily	due	to	higher	net	sales	of	GSM	infrastructure	equipment,	partially	offset	by	lower	net	sales	of	CDMA infrastructure	equipment.	The	increase	in	net	sales	in	EMEA	was	primarily	due	to	higher	net	sales	of	GSM	infrastructure	equipment,	partially	offset	by lower	demand	for	iDEN	and	CDMA	infrastructure	equipment.	Net	sales	in	North	America	continued	to	comprise	a	significant	portion	of	the	segment's business,	accounting	for	52%	of	the	segment's	total	net	sales	in	2007,	compared	to	56%	of	the	segment's	total	net	sales	in	2006.

The	segment	had	operating	earnings	of	$709	million	in	2007,	compared	to	operating	earnings	of	$787	million	in	2006.	The	decrease	in	operating earnings	was	primarily	due	to	a	decrease	in	gross	margin,	driven	by:	(i)	lower	net	sales	of	iDEN	infrastructure	equipment,	and	(ii)	continued	competitive pricing	pressure	in	the	market	for	GSM	infrastructure	equipment,	partially	offset	by:	(i)	increased	net	sales	of	digital	entertainment	devices,	and	(ii)	the reversal	of	reorganization	of	business	accruals	recorded	in	2006	relating	to	employee	severance	which	were	no	longer	needed.	SG&A	expenses	increased primarily	due	to	the	expenses	from	recently	acquired	businesses,	partially	offset	by	savings	from	cost-reduction	initiatives.	R&D	expenditures	decreased primarily	due	to	savings	from	cost-reduction	initiatives,	partially	offset	by	expenditures	by	recently	acquired	businesses	and	continued	investment	in digital	entertainment	devices	and	WiMAX.	As	a	percentage	of	net	sales	in	2007	as	compared	to	2006,	gross	margin,	SG&A	expenses,	R&D	expenditures and	operating	margin	all	decreased.

In	2007,	sales	to	the	segment's	top	five	customers	represented	approximately	43%	of	the	segment's	net	sales.	The	segment's	backlog	was	$2.6	billion at	December	31,	2007,	compared	to	$3.2	billion	at	December	31,	2006.

In	the	home	business,	demand	for	the	segment's	products	depends	primarily	on	the	level	of	capital	spending	by	broadband	operators	for	constructing, rebuilding	or	upgrading	their	communications	systems,	and	for	offering	advanced	services.	During	the	second	quarter	of	2007,	the	segment	began shipping	digital	set-tops	that	support	the	Federal	Communications	Commission	("FCC")	—	mandated	separable	security	requirement.	FCC	regulations mandating	the	separation	of	security	functionality	from	set-tops	went	into	effect	on	July	1,	2007.	As	a	result	of	these	regulations,	many	cable	service providers	accelerated	their	purchases	of	set-tops	in	the	first	half	of	2007.	Additionally,	in	2007,	our	digital	video	customers	significantly	increased	their purchases	of	the	segment's	products	and	services,	primarily	due	to	increased	demand	for	digital	entertainment	devices,	particularly	HD/DVR	devices.

During	2007,	the	segment	completed	the	acquisitions	of:	(i)	Netopia,	Inc.,	a	broadband	equipment	provider	for	DSL	customers,	which	allows	for phone,	TV	and	fast	Internet	connections,	(ii)	Tut	Systems,	Inc.,	a	leading	developer	of	edge	routing	and	video	encoders,	(iii)	Modulus	Video,	Inc.,	a provider	of	MPEG-4	Advanced	Coding	compression	systems	designed	for	delivery	of	high-value	video	content	in	IP	set-top	devices	for	the	digital	video, broadcast	and	satellite	marketplaces,	(iv)	Terayon	Communication	Systems,	Inc.,	a	provider	of	real-time	digital	video	networking	applications	to	cable, satellite	and	telecommunication	service	providers	worldwide,	and	(v)	Leapstone	Systems,	Inc.,	a	provider	of	intelligent	multimedia	service	delivery	and content	management	applications	to	networks	operators.	These	acquisitions	enhance	our	ability	to	provide	complete	end-to-end	systems	for	the	delivery of	advanced	video,	voice	and	data	services.	In	December	2007,	Motorola	completed	the	sale	of	ECC	to	Emerson	for	$346	million	in	cash.

The	Enterprise	Mobility	Solutions	segment	designs,	manufactures,	sells,	installs	and	services	analog	and	digital	two-way	radio,	voice	and	data communications	products	and	systems	for	private	networks,	wireless	broadband	systems	and	end-to-end	enterprise	mobility	solutions	to	a	wide	range	of enterprise	markets,	including	government	and	public	safety	agencies	(which,	together	with	all	sales	to	distributors	of	two-way	communication	products, are	referred	to	as	the	"government	and	public	safety	market"),	as	well	as	retail,	energy	and	utilities,	transportation,	manufacturing,	healthcare	and	other commercial	customers	(which,	collectively,	are	referred	to	as	the	"commercial	enterprise	market").	In	2008,	the	segment's	net	sales	represented	27%	of the	Company's	consolidated	net	sales,	compared	to	21%	in	2007	and	13%	in	2006.

| (Dollars	in	millions) | 2008 | 2007 | 2006 | 2008—2007 | 2007—2006 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Segment\tnet\tsales | $8,093 | $7,729 | $5,400 | 5% | 43% |
| Operating\tearnings | \t1,496 | \t1,213 | 958 | 23% | 27% |

In	2008,	the	segment's	net	sales	increased	5%	to	$8.1	billion,	compared	to	$7.7	billion	in	2007.	The	5%	increase	in	net	sales	reflects	an	8%	increase in	net	sales	to	the	government	and	public	safety	market,	partially	offset	by	a	2%	decrease	in	net	sales	to	the	commercial	enterprise	market.	The	increase	in net	sales	to	the	government	and	public	safety	market	was	primarily	driven	by:	(i)	increased	net	sales	outside	of	North	America,	and	(ii)	the	net	sales generated	by	Vertex	Standard	Co.,	Ltd.,	a	business	the	Company	acquired	a	controlling	interest	of	in	January	2008,	partially	offset	by	lower	net	sales	in North	America.	On	a	geographic	basis,	the	segment's	net	sales	were	higher	in	EMEA,	Asia	and	Latin	America	and	lower	in	North	America.

The	segment	had	operating	earnings	of	$1.5	billion	in	2008,	compared	to	operating	earnings	of	$1.2	billion	in	2007.	The	increase	in	operating earnings	was	primarily	due	to	an	increase	in	gross	margin,	driven	by:	(i)	the	5%	increase	in	net	sales,	(ii)	a	favorable	product	mix,	(iii)	the	absence	in 2008	of	an	inventory-related	charge	in	connection	with	the	acquisition	of	Symbol	Technologies,	Inc.	("Symbol")	during	the	first	quarter	of	2007,	and (iv)	a	decrease	in	SG&A	expenses,	primarily	related	to	savings	from	cost-reduction	initiatives.	The	increase	in	gross	margin	was	partially	offset	by increased	R&D	expenditures,	primarily	due	to	developmental	engineering	expenditures	for	new	product	development	and	investment	in	next-generation technologies.	As	a	percentage	of	net	sales	in	2008	as	compared	to	2007,	gross	margin,	R&D	expenditures	and	operating	margin	increased,	and	SG&A expenses	decreased.

Net	sales	in	North	America	continued	to	comprise	a	significant	portion	of	the	segment's	business,	accounting	for	approximately	57%	of	the segment's	net	sales	in	2008,	compared	to	approximately	62%	in	2007.	The	regional	shift	in	2008	as	compared	to	2007	reflects	19%	growth	in	net	sales outside	of	North	America	and	a	4%	decline	in	net	sales	in	North	America.	Our	products	and	services	are	sold	worldwide	to	a	diverse	set	of	customers, including	customers	involved	in:	government	and	public	safety	(police,	fire,	emergency	management	services),	military,	utilities,	retail,	transportation and	logistics,	manufacturing,	wholesale	and	distribution,	and	healthcare.	The	segment's	backlog	was	$2.4	billion	at	December	31,	2008,	compared	to $2.3	billion	at	December	31,	2007.

In	the	government	and	public	safety	market,	we	see	a	continued	emphasis	on	mission-critical	systems	as	we	face	ongoing	natural	disasters	and world-wide	terrorist-related	events.	We	have	led	new	innovations	in	the	market	this	past	year,	through	the	continued	success	of	our	MOTOTRBO	line and	the	introduction	of	the	APXtm	family	of	products,	an	industry	first	in	many	features.	While	spending	by	the	segment's	government	and	public	safety market	customers	is	affected	by	government	budgets	at	the	national,	state	and	local	levels,	we	have	seen	the	scope	and	size	of	systems	requested	by	some of	the	segment's	customers	continue	to	increase.	We	have	had	many	significant	wins	across	the	globe,	such	as	several	city	and	state-wide communications	systems	in	the	United	States,	several	competitive	TETRA	system	wins	with	major	international	airport	customers	in	Europe	and	Asia, and	our	largest	award	ever	within	Asia	for	the	digital	migration	of	the	Royal	Malaysian	Police.	These	larger	systems	are	more	complex	and	include	a wide	range	of	capabilities	that	our	technological	innovations	are	able	to	provide.

We	are	also	a	market	leader	within	the	commercial	enterprise	markets.	We	continue	to	help	our	customers	move	information	where	it	needs	to	be,	as in	the	product	launch	of	the	MC75,	an	enterprise	digital	assistant	targeted	to	the	mobile	workforce.

During	2008,	the	segment	also:	(i)	acquired	a	controlling	interest	in	Vertex	Standard	Co.,	Ltd.,	a	global	provider	of	two-way	radio	communication solutions,	and	(ii)	completed	the	acquisition	of	AirDefense	Inc.,	a	leading	wireless	local	area	network	(WLAN)	security	provider.

In	2007,	the	segment's	net	sales	increased	43%	to	$7.7	billion,	compared	to	$5.4	billion	in	2006.	The	43%	increase	in	net	sales	was	primarily	due	to increased	net	sales	in	the	commercial	enterprise	market,	driven	by	the	net	sales	from	the	Symbol	business	acquired	in	January	2007.	Net	sales	in	the government	and	public	safety	market	increased	6%,	primarily	due	to	strong	demand	in	North	America.	On	a	geographic	basis,	net	sales	increased	in	all regions.

The	segment	had	operating	earnings	of	$1.2	billion	in	2007,	compared	to	operating	earnings	of	$958	million	in	2006.	The	increase	in	operating earnings	was	primarily	due	to	an	increase	in	gross	margin	in	both:	(i)	the	commercial	enterprise	market,	driven	by	net	sales	from	the	Symbol	business acquired	in	January	2007,	and	(ii)	the	government	and	public	safety	market,	driven	by	strong	net	sales	in	North	America.	This	improvement	in	gross margin	was	partially	offset	by:	(i)	an	inventory-related	charge	in	connection	with	the	acquisition	of	Symbol,	and	(ii)	increases	in	SG&A	and	R&D expenses,	primarily	due	to	expenses	from	recently	acquired	businesses,	partially	offset	by	savings	from	cost-reduction	initiatives.	As	a	percentage	of	net sales	in	2007	as	compared	2006,	gross	margin,	R&D	expenditures	and	operating	margin	decreased,	and	SG&A	expenses	increased.

Net	sales	in	North	America	continued	to	comprise	a	significant	portion	of	the	segment's	business,	accounting	for	approximately	62%	of	the segment's	net	sales	in	2007,	compared	to	approximately	63%	in	2006.	The	segment's	backlog	was	$2.3	billion	at	December	31,	2007,	compared	to $2.0	billion	at	December	31,	2006.

During	2007,	the	segment	completed	the	acquisition	of:	(i)	Symbol	Technologies,	Inc.,	a	leader	in	designing,	developing,	manufacturing	and servicing	products	and	systems	used	in	end-to-end	enterprise	mobility	solutions,	and	(ii)	Good	Technology,	Inc.,	a	provider	of	enterprise	mobile computing	software	and	services.

# Significant	Accounting	Policies

Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations	discusses	the	Company's	consolidated	financial statements,	which	have	been	prepared	in	accordance	with	U.S.	generally	accepted	accounting	principles.	The	preparation	of	these	financial	statements requires	management	to	make	estimates	and	assumptions	that	affect	the	reported	amounts	of	assets	and	liabilities	and	the	disclosure	of	contingent	assets and	liabilities	at	the	date	of	the	financial	statements,	as	well	as	the	reported	amounts	of	revenues	and	expenses	during	the	reporting	period.

Management	bases	its	estimates	and	judgments	on	historical	experience,	current	economic	and	industry	conditions	and	on	various	other	factors	that are	believed	to	be	reasonable	under	the	circumstances.	This	forms	the	basis	for	making	judgments	about	the	carrying	values	of	assets	and	liabilities	that are	not	readily	apparent	from	other	sources.	Actual	results	may	differ	from	these	estimates	under	different	assumptions	or	conditions.	Management believes	the	following	significant	accounting	policies	require	significant	judgment	and	estimates:

—	Revenue	recognition

—	Inventory	valuation

—	Income	taxes

—	Valuation	of	Sigma	Fund	and	investment	portfolios

—	Restructuring	activities

—	Retirement-related	benefits

—	Valuation	and	recoverability	of	goodwill	and	long-lived	assets

The	Company's	arrangements	with	customers	may	differ	in	nature	and	complexity	and	may	contain	multiple	deliverables,	including	products, equipment,	services	and	software	that	may	be	essential	to	the	functionality	of	the	other	deliverables,	requiring	the	Company	to	make	judgments	and estimates	in	recognizing	revenues.

Product	and	equipment	sales	may	contain	discounts,	price	protection,	return	provisions	and	other	customer	incentives.	The	Company's	recorded revenues	are	reduced	by	allowances	for	these	items	at	the	time	the	sales	are	recorded.	The	allowances	are	based	on	management's	best	estimate	of	the amount	of	allowances	that	the	customer	will	ultimately	earn	and	was	based	on	historical	experience	taking	into	account	the	type	of	products	sold,	the type	of	customer	and	the	type	of	transaction	specific	to	each	arrangement.	Where	customer	incentives	cannot	be	reliably	estimated,	the	Company recognizes	revenue	at	the	time	the	product	sells	through	the	distribution	channel	to	the	end	customer.

The	Company's	long-term	contracts	may	involve	the	design,	engineering,	manufacturing	and	installation	of	wireless	and	wireline	networks	and	two- way	radio	voice	and	data	systems.	These	systems	are	designed	to	meet	specific	customer	requirements	and	specifications	and	generally	require	extended periods	to	complete.	If	the	Company	can	reliably	estimate	revenues	and	contract	costs	and	the	technology	is	considered	proven,	revenue	is	recognized under	the	percentage	of	completion	method	as	work	progresses	towards	completion;	otherwise,	the	revenue	is	recognized	under	the	completed	contract method.	Estimates	of	contract	revenues,	contract	costs	and	progress	towards	completion	are	based	on	estimates	that	consider	historical	experience	and other	factors	believed	to	be	relevant	under	the	circumstances.	Management	regularly	reviews	these	estimates	and	considers	the	impact	of	recurring business	risks	and	uncertainties	inherent	in	the	contracts,	such	as	system	performance	and	implementation	delays	due	to	factors	within	or	outside	the control	of	management.

Generally,	multiple	element	arrangements	are	separated	into	specific	accounting	units	when:	(i)	delivered	elements	have	value	to	the	customer	on	a stand-alone	basis,	(ii)	objective	and	reliable	evidence	of	fair	value	exists	for	the	undelivered	element(s),	and	(iii)	delivery	of	the	undelivered	element(s)	is probable	and	substantially	within	the	control	of	the	Company.	Total	arrangement	consideration	is	allocated	to	the	separate	accounting	units	based	on	their relative	fair	values	(if	the	fair	value	of	each	accounting	unit	is	known)	or	using	the	residual	method	(if	the	fair	value	of	the	undelivered	element(s)	is known).	Revenue	is	recognized	for	a	separate	accounting	unit	when	the	revenue	recognition	criteria	are	met	for	that	unit.	In	certain	situations,	judgment	is required	in	determining	both	the	number	of	accounting	units	and	fair	value	of	the	elements,	although	generally	the	fair	value	of	an	element	can	be objectively	determined	if	the	Company	sells	the	element	on	a	stand-alone	basis.	Multiple	element	arrangements	that	include	software	are	separated	into more	than	one	unit	of	accounting	when	the	following	criteria	are	met:	(i)	the	functionality	of	the	delivered	element(s)	is	not	dependent	on	the	undelivered element(s),	(ii)	there	is	vendor-

specific	objective	evidence	of	the	fair	value	of	the	undelivered	element(s),	and	(iii)	general	revenue	recognition	criteria	related	to	the	delivered	element(s) have	been	met.

Changes	in	cost	estimates	and	the	fair	values	of	certain	deliverables	could	negatively	impact	the	Company's	operating	results.	In	addition,	unforeseen conditions	could	arise	over	the	contract	term	that	may	have	a	significant	impact	on	operating	results.

The	Company	records	valuation	reserves	on	its	inventory	for	estimated	excess	or	obsolescence.	The	amount	of	the	reserve	is	equal	to	the	difference between	the	cost	of	the	inventory	and	the	estimated	market	value	based	upon	assumptions	about	future	demand	and	market	conditions.	On	a	quarterly basis,	management	in	each	segment	performs	an	analysis	of	the	underlying	inventory	to	identify	reserves	needed	for	excess	and	obsolescence. Management	uses	its	best	judgment	to	estimate	appropriate	reserves	based	on	this	analysis.	In	addition,	the	Company	adjusts	the	carrying	value	of inventory	if	the	current	market	value	of	that	inventory	is	below	its	cost.

At	December	31,	2008	and	2007,	Inventories	consisted	of	the	following:

| December	31 | 2008 | 2007 |
| :--- | :--- | :--- |
| Finished\tgoods | $1,710 | $1,737 |
| Work-in-process\tand\tproduction\tmaterials | 1,709 | 1,470 |
|  | 3,419 | 3,207 |
| Less\tinventory\treserves | (760) | (371) |
|  | $2,659 | $2,836 |

The	Company	balances	the	need	to	maintain	strategic	inventory	levels	to	ensure	competitive	delivery	performance	to	its	customers	against	the	risk	of inventory	obsolescence	due	to	rapidly	changing	technology	and	customer	requirements.	As	reflected	above,	the	Company's	inventory	reserves represented	22%	of	the	gross	inventory	balance	at	December	31,	2008,	compared	to	12%	of	the	gross	inventory	balance	at	December	31,	2007.	The increase	in	the	inventory	reserves	was	primarily	due	to	the	Company	recording	a	charge	of	$291	million	for	excess	inventory	due	to	a	decision	to consolidate	software	and	silicon	platforms	in	the	Mobile	Devices	segment	in	2008.	The	Company	has	inventory	reserves	for	pending	cancellations	of product	lines	due	to	technology	changes,	long-life	cycle	products,	lifetime	buys	at	the	end	of	supplier	production	runs,	business	exits,	and	a	shift	of production	to	outsourcing.

If	actual	future	demand	or	market	conditions	are	less	favorable	than	those	projected	by	management,	additional	inventory	writedowns	may	be required.

The	Company's	effective	tax	rate	is	based	on	pre-tax	income	and	the	tax	rates	applicable	to	that	income	in	the	various	jurisdictions	in	which	the Company	operates.	An	estimated	effective	tax	rate	for	a	year	is	applied	to	the	Company's	quarterly	operating	results.	In	the	event	that	there	is	a significant	unusual	or	discrete	item	recognized,	or	expected	to	be	recognized,	in	the	Company's	quarterly	operating	results,	the	tax	attributable	to	that item	would	be	separately	calculated	and	recorded	at	the	same	time	as	the	unusual	or	discrete	item.	The	Company	considers	the	resolution	of	prior-year tax	matters	to	be	such	items.	Significant	judgment	is	required	in	determining	the	Company's	effective	tax	rate	and	in	evaluating	its	tax	positions.	The Company	establishes	reserves	when	it	is	more	likely	than	not	that	the	Company	will	not	realize	the	full	tax	benefit	of	the	position.	The	Company	adjusts these	reserves	in	light	of	changing	facts	and	circumstances.

Tax	regulations	may	require	items	of	income	and	expense	to	be	included	in	a	tax	return	in	different	periods	than	the	items	are	reflected	in	the consolidated	financial	statements.	As	a	result,	the	effective	tax	rate	reflected	in	the	consolidated	financial	statements	may	be	different	than	the	tax	rate reported	in	the	income	tax	return.	Some	of	these	differences	are	permanent,	such	as	expenses	that	are	not	deductible	on	the	tax	return,	and	some	are temporary	differences,	such	as	depreciation	expense.	Temporary	differences	create	deferred	tax	assets	and	liabilities.	Deferred	tax	assets	generally represent	items	that	can	be	used	as	a	tax	deduction	or	credit	in	the	tax	return	in	future	years	for	which	the	Company	has	already	recorded	the	tax	benefit	in the	consolidated	financial	statements.	Deferred	tax	liabilities	generally	represent	tax	expense	recognized	in	the	consolidated	financial

statements	for	which	payment	has	been	deferred	or	expense	for	which	the	Company	has	already	taken	a	deduction	on	an	income	tax	return,	but	has	not yet	recognized	in	the	consolidated	financial	statements.

The	Company	accounts	for	income	taxes	in	accordance	with	Statement	of	Financial	Accounting	Standard	(SFAS)	No.	109,	"Accounting	for	Income Taxes,"	which	requires	that	deferred	tax	assets	and	liabilities	be	recognized	using	enacted	tax	rates	for	the	effect	of	the	temporary	differences	between	the book	and	tax	basis	of	recorded	assets	and	liabilities.	The	Company	makes	estimates	and	judgments	with	regard	to	the	calculation	of	certain	income	tax assets	and	liabilities.	SFAS	No.	109	requires	that	deferred	tax	assets	be	reduced	by	valuation	allowances	if,	based	on	the	consideration	of	all	available evidence,	it	is	more	likely	than	not	that	some	portion	of	the	deferred	tax	asset	will	not	be	realized.	Significant	weight	is	given	to	evidence	that	can	be objectively	verified.

The	Company	evaluates	deferred	income	taxes	on	a	quarterly	basis	to	determine	if	valuation	allowances	are	required	by	considering	available evidence,	including	historical	and	projected	taxable	income	and	tax	planning	strategies	that	are	both	prudent	and	feasible.	As	of	December	31,	2008,	the Company's	U.S	operations	had	generated	two	consecutive	years	of	pre-tax	losses,	which	are	attributable	to	the	Mobile	Devices	segment.	During	2007 and	2008,	the	Home	and	Networks	Mobility	and	Enterprise	Mobility	Solution	businesses	(collectively	referred	to	as	the	"Broadband	Mobility	Solutions business")	were	profitable	in	the	U.S.	and	worldwide.	Because	of	the	2007	and	2008	losses	at	Mobile	Devices	and	the	near-term	forecasts	for	the	Mobile Devices	business,	the	Company	believes	that	the	weight	of	negative	historic	evidence	precludes	it	from	considering	any	forecasted	income	from	the Mobile	Devices	business	in	its	analysis	of	the	recoverability	of	deferred	tax	assets.	However,	based	on	the	sustained	profits	of	the	Broadband	Mobility Solutions	business,	the	Company	believes	that	the	weight	of	positive	historic	evidence	allows	it	to	include	forecasted	income	from	that	the	Broadband Mobility	Solutions	business	in	its	analysis	of	the	recoverability	of	its	deferred	tax	assets.	The	Company	also	considered	in	its	analysis	tax	planning strategies	that	are	prudent	and	can	be	reasonably	implemented.	Based	on	all	available	positive	and	negative	evidence,	we	concluded	that	a	partial valuation	allowance	should	be	recorded	against	the	net	deferred	tax	assets	of	our	U.S	operations.	During	fiscal	2008,	we	recorded	a	valuation	allowance of	$2.1	billion.	The	establishment	of	the	valuation	allowance	was	a	non-cash	expense.

The	Company	has	a	total	deferred	tax	asset	valuation	allowance	of	approximately	$2.7	billion	against	net	deferred	tax	assets	of	approximately $6.2	billion	as	of	December	31,	2008,	compared	to	total	deferred	tax	asset	valuation	allowance	of	$515	million	against	net	deferred	tax	assets	of $4.8	billion	as	of	December	31,	2007.

Management	believes	its	assumptions	about	the	future	performance	of	the	Broadband	Mobility	Solutions	business	and	the	ability	of	the	Company	to generate	sufficient	future	taxable	income	to	realize	the	remaining	deferred	tax	assets	are	reasonable.	If	the	Broadband	Mobility	Solutions	business	does not	meet	these	future	forecasts	or	if	the	Company	no	longer	deems	certain	tax	planning	strategies	prudent	or	feasible	due	to	changes	in	circumstances	not currently	contemplated,	additional	valuation	allowances	may	be	required	in	future	periods.

The	Company	and	its	wholly-owned	subsidiaries	invest	a	significant	portion	of	their	U.S.	dollar-denominated	cash	in	a	fund	(the	"Sigma	Fund")	that is	designed	to	provide	investment	returns	similar	to	a	money	market	fund.	Investments	in	Sigma	Fund	are	carried	at	fair	value.	Investments	not	held	in Sigma	Fund	generally	consist	of	equity	and	debt	securities,	which	are	classified	as	available-for-sale	and	are	carried	at	fair	value.

The	Company	adopted	Financial	Accounting	Standards	Board	("FASB")	Statement	of	Financial	Accounting	Standard	("SFAS")	No.	157,	"Fair Value	Measurements"	("SFAS	157")	on	January	1,	2008	for	financial	assets	and	liabilities,	and	non-financial	assets	and	liabilities	that	are	recognized	or disclosed	at	fair	value	in	the	financial	statements	on	a	recurring	basis.	SFAS	157	defines	fair	value,	establishes	a	framework	for	measuring	fair	value	as required	by	other	accounting	pronouncements	and	expands	fair	value	measurement	disclosures.	The	provisions	of	SFAS	157	are	applied	prospectively upon	adoption	and	did	not	have	a	material	impact	on	the	Company's	consolidated	financial	statements.	Based	on	the	framework	provided	by	SFAS	157, the	evidence	to	support	the	fair	value	is	as	follows.

Quoted	market	prices	in	active	markets	are	available	for	investments	in	publicly	traded	common	stock	and	equivalents	and,	as	such,	these investments	are	classified	within	Level	1.

The	securities	classified	as	Level	2	are	primarily	those	that	are	professionally	managed	within	the	Sigma	Fund.	The	valuation	models	are	developed and	maintained	by	third-party	pricing	services	and	use	a	number	of	standard	inputs	to	the	valuation	model,	including	benchmark	yields,	reported	trades, broker/dealer	quotes	where	the	party	is	standing	ready	and	able	to	transact,	issuer	spreads,	benchmark	securities,	bids,	offers	and	other	reference	data.

valuation	model	may	prioritize	these	inputs	differently	at	each	balance	sheet	date	for	any	given	security,	based	on	the	market	conditions.	Not	all	of	the standard	inputs	listed	will	be	used	each	time	in	the	valuation	models.	For	each	asset	class,	quantifiable	inputs	related	to	perceived	market	movements	and sector	news	may	be	considered	in	addition	to	the	standard	inputs.

In	determining	the	fair	value	of	the	Company's	interest	rate	swap	derivatives,	the	Company	uses	the	present	value	of	expected	cash	flows	based	on market	observable	interest	rate	yield	curves	commensurate	with	the	term	of	each	instrument	and	the	credit	default	swap	market	to	reflect	the	credit	risk	of either	the	Company	or	the	counterparty.	For	foreign	currency	derivatives,	the	Company's	approach	is	to	use	forward	contract	and	option	valuation models	employing	market	observable	inputs,	such	as	spot	currency	rates,	time	value	and	option	volatilities.	Since	the	Company	primarily	uses	observable inputs	in	its	valuation	of	its	derivative	assets	and	liabilities,	they	are	considered	Level	2.

Level	3	fixed	income	securities	are	debt	securities	that	do	not	have	actively	traded	quotes	on	the	date	the	Company	presents	its	consolidated	balance sheets	and	require	the	use	of	unobservable	inputs,	such	as	indicative	quotes	from	dealers	and	qualitative	input	from	investment	advisors,	to	value	these securities.

The	Company	cannot	predict	the	occurrence	of	future	events	that	might	have	an	impact	on	the	fair	values	of	its	investments	in	Sigma	Fund	or	other investments	carried	at	fair	value.

The	Company	maintains	a	formal	Involuntary	Severance	Plan	(the	"Severance	Plan"),	which	permits	the	Company	to	offer	eligible	employees severance	benefits	based	on	years	of	service	and	employment	grade	level	in	the	event	that	employment	is	involuntarily	terminated	as	a	result	of	a reduction-in-force	or	restructuring.	Each	separate	reduction-in-force	has	qualified	for	severance	benefits	under	the	Severance	Plan.	The	Company recognizes	termination	benefits	based	on	formulas	per	the	Severance	Plan	at	the	point	in	time	that	future	settlement	is	probable	and	can	be	reasonably estimated	based	on	estimates	prepared	at	the	time	a	restructuring	plan	is	approved	by	management.	Exit	costs	consist	of	future	minimum	lease	payments on	vacated	facilities	and	other	contractual	terminations.	At	each	reporting	date,	the	Company	evaluates	its	accruals	for	exit	costs	and	employee	separation costs	to	ensure	the	accruals	are	still	appropriate.	In	certain	circumstances,	accruals	are	no	longer	required	because	of	efficiencies	in	carrying	out	the	plans or	because	employees	previously	identified	for	separation	resigned	from	the	Company	and	did	not	receive	severance	or	were	redeployed	due	to circumstances	not	foreseen	when	the	original	plans	were	initiated.	The	Company	reverses	accruals	through	the	income	statement	line	item	where	the original	charges	were	recorded	when	it	is	determined	they	are	no	longer	required.

The	Company's	noncontributory	pension	plan	(the	"Regular	Pension	Plan")	covers	U.S.	employees	who	became	eligible	after	one	year	of	service. The	benefit	formula	is	dependent	upon	employee	earnings	and	years	of	service.	Effective	January	1,	2005,	newly-hired	employees	were	not	eligible	to participate	in	the	Regular	Pension	Plan.	The	Company	also	provides	defined	benefit	plans	which	cover	non-U.S.	employees	in	certain	jurisdictions, principally	the	United	Kingdom,	Germany,	Ireland,	Japan	and	Korea	(the	"Non-U.S.	Plans").	Other	pension	plans	are	not	material	to	the	Company	either individually	or	in	the	aggregate.

The	Company	also	has	a	noncontributory	supplemental	retirement	benefit	plan	(the	"Officers'	Plan")	for	its	elected	officers.	The	Officers'	Plan contains	provisions	for	vesting	and	funding	the	participants'	expected	retirement	benefits	when	the	participants	meet	the	minimum	age	and	years	of service	requirements.	Elected	officers	who	were	not	yet	vested	in	the	Officers'	Plan	as	of	December	31,	1999	had	the	option	to	remain	in	the	Officers' Plan	or	elect	to	have	their	benefit	bought	out	in	restricted	stock	units.	Effective	December	31,	1999,	newly	elected	officers	are	not	eligible	to	participate in	the	Officers'	Plan.	Effective	June	30,	2005,	salaries	were	frozen	for	this	plan.

The	Company	has	an	additional	noncontributory	supplemental	retirement	benefit	plan,	the	Motorola	Supplemental	Pension	Plan	("MSPP"),	which provides	supplemental	benefits	to	individuals	by	replacing	the	Regular	Pension	Plan	benefits	that	are	lost	by	such	individuals	under	the	retirement formula	due	to	application	of	the	limitations	imposed	by	the	Internal	Revenue	Code.	However,	elected	officers	who	are	covered	under	the	Officers'	Plan or	who	participated	in	the	restricted	stock	buy-out	are	not	eligible	to	participate	in	MSPP.	Effective	January	1,	2007,	eligible	compensation	was	capped	at the	IRS	limit	plus	$175,000	(the	"Cap")	or,	for	those	already	in	excess	of	the	Cap	as	of	January	1,	2007,	the	eligible	compensation	used	to	compute	such employee's	MSPP	benefit	for	all	future	years	will	be	the	greater	of:	(i)	such	employee's	eligible	compensation	as	of	January	1,

2007	(frozen	at	that	amount),	or	(ii)	the	relevant	Cap	for	the	given	year.	Additionally,	effective	January	1,	2009,	the	MSPP	was	frozen	as	to	any	new participants	after	January	1,	2009	unless	such	participation	was	due	to	a	prior	contractual	entitlement.

In	February	2007,	the	Company	amended	the	Regular	Pension	Plan	and	the	MSPP,	modifying	the	definition	of	average	earnings.	For	years	ended prior	to	December	31,	2007,	benefits	were	calculated	using	the	rolling	average	of	the	highest	annual	earnings	in	any	five	years	within	the	previous	ten calendar	year	period.	Beginning	in	January	2008,	the	benefit	calculation	was	based	on	the	set	of	the	five	highest	years	of	earnings	within	the	ten	calendar years	prior	to	December	31,	2007,	averaged	with	earnings	from	each	year	after	2007.	Also	effective	January	2008,	the	Company	amended	the	Regular Pension	Plan,	modifying	the	vesting	period	from	five	years	to	three	years.

In	December	2008,	the	Company	amended	the	Regular	Pension	Plan,	the	Officers'	Plan	and	the	MSPP	(collectively,	the	"2008	Amended	Pension Plans")	such	that,	effective	March	1,	2009:	(i)	no	participant	shall	accrue	any	benefit	or	additional	benefit	on	and	after	March	1,	2009,	and	(ii)	no compensation	increases	earned	by	a	participant	on	and	after	March	1,	2009	shall	be	used	to	compute	any	accrued	benefit.	In	2008,	the	Company recognized	a	$237	million	curtailment	gain	associated	with	this	plan	amendment.

Certain	healthcare	benefits	are	available	to	eligible	domestic	employees	meeting	certain	age	and	service	requirements	upon	termination	of employment	(the	"Postretirement	Health	Care	Benefits	Plan").	For	eligible	employees	hired	prior	to	January	1,	2002,	the	Company	offsets	a	portion	of the	postretirement	medical	costs	to	the	retired	participant.	As	of	January	1,	2005,	the	Postretirement	Health	Care	Benefits	Plan	has	been	closed	to	new participants.

Accounting	methodologies	use	an	attribution	approach	that	generally	spreads	individual	events	over	the	service	lives	of	the	employees	in	the	plan. Examples	of	"events"	are	plan	amendments	and	changes	in	actuarial	assumptions	such	as	discount	rate,	expected	long-term	rate	of	return	on	plan	assets, and	rate	of	compensation	increases.	The	principle	underlying	the	required	attribution	approach	is	that	employees	render	service	over	their	service	lives	on a	relatively	consistent	basis	and,	therefore,	the	income	statement	effects	of	pension	benefits	or	postretirement	health	care	benefits	are	earned	in,	and should	be	expensed	in,	the	same	pattern.

There	are	various	assumptions	used	in	calculating	the	net	periodic	benefit	expense	and	related	benefit	obligations.	One	of	these	assumptions	is	the expected	long-term	rate	of	return	on	plan	assets.	The	required	use	of	expected	long-term	rate	of	return	on	plan	assets	may	result	in	recognized	pension income	that	is	greater	or	less	than	the	actual	returns	of	those	plan	assets	in	any	given	year.	Over	time,	however,	the	expected	long-term	returns	are designed	to	approximate	the	actual	long-term	returns	and	therefore	result	in	a	pattern	of	income	and	expense	recognition	that	more	closely	matches	the pattern	of	the	services	provided	by	the	employees.	Differences	between	actual	and	expected	returns	are	recognized	in	the	net	periodic	pension	calculation over	five	years.

The	Company	uses	long-term	historical	actual	return	experience	with	consideration	of	the	expected	investment	mix	of	the	plans'	assets,	as	well	as future	estimates	of	long-term	investment	returns,	to	develop	its	expected	rate	of	return	assumption	used	in	calculating	the	net	periodic	pension	cost	and the	net	retirement	healthcare	expense.	The	Company's	investment	return	assumption	for	the	Regular	Pension	Plan	and	Postretirement	Healthcare	was 8.5%	for	2008	and	2007.	The	investment	return	assumption	for	the	Officers'	Plan	was	6%	in	2008	and	2007.	At	December	31,	2008,	the	Regular	Pension Plan	and	the	Postretirement	Health	Care	Benefits	Plan	investment	portfolios	were	predominantly	equity	investments	and	the	Officers'	Plan	investment portfolio	was	predominantly	fixed-income	securities.

A	second	key	assumption	is	the	discount	rate.	The	discount	rate	assumptions	used	for	pension	benefits	and	postretirement	health	care	benefits accounting	reflects,	at	December	31	of	each	year,	the	prevailing	market	rates	for	high-quality,	fixed-income	debt	instruments	that,	if	the	obligation	was settled	at	the	measurement	date,	would	provide	the	necessary	future	cash	flows	to	pay	the	benefit	obligation	when	due.	The	Company's	discount	rates	for measuring	its	U.S.	pension	obligations	were	6.75%	at	both	December	2008	and	2007.	The	Company's	discount	rates	for	measuring	the	Postretirement Health	Care	Benefits	Plan	obligation	were	6.75%	and	6.5%	at	December	31,	2008	and	2007,	respectively.

A	final	set	of	assumptions	involves	the	cost	drivers	of	the	underlying	benefits.	The	rate	of	compensation	increase	is	a	key	assumption	used	in	the actuarial	model	for	pension	accounting	and	is	determined	by	the	Company	based	upon	its	long-term	plans	for	such	increases.	The	Company's	2008	and 2007	rate	for	future	compensation	increase	for	the	Officers'	Plan	was	0%,	as	the	salaries	to	be	utilized	for	calculation	of	benefits	under	this	plan	have been	frozen.	As	a	result	of	the	2008	Amended	Pension	Plans,	the	salaries	to	be	utilized	for	calculation	of	benefits

have	been	frozen,	and	the	Company's	2008	rate	for	future	compensation	increase	for	the	Regular	Pension	Plan	was	set	to	0%.	The	Company's	2007	rate for	future	compensation	increase	for	the	Regular	Pension	Plan	was	4%.	For	Postretirement	Health	Care	Benefits	Plan	accounting,	the	Company	reviews external	data	and	its	own	historical	trends	for	health	care	costs	to	determine	the	health	care	cost	trend	rates.	Based	on	this	review,	the	health	care	cost trend	rate	used	to	determine	the	December	31,	2008	accumulated	postretirement	benefit	obligation	is	8.5%	for	2009,	with	a	declining	trend	rate	of	about 0.7%	each	year	until	it	reaches	5%	by	2014,	with	a	flat	5%	rate	for	2014	and	beyond.

For	the	year	ended	December	31,	2008,	the	Company	recognized	net	periodic	pension	expense	of	$64	million	related	to	its	U.S.	pension	plans	and	a $237	million	curtailment	gain	related	to	the	plan	amendments	that	are	effective	March	1,	2009.	For	the	years	ended	December	31,	2007	and	2006,	the	net periodic	pension	expense	for	its	U.S.	pension	plans	were	$191	million	and	$258	million,	respectively.	Cash	contributions	of	$243	million	were	made	to the	U.S.	pension	plans	in	2008.	The	Company	expects	to	make	cash	contributions	of	approximately	$180	million	to	its	U.S.	pension	plans	and approximately	$50	million	to	its	non-U.S.	pension	plans	during	2009.

The	2008	and	2007	Postretirement	Health	Care	Benefits	Plan	actual	expenses	were	$15	million	in	both	periods.	Cash	contributions	of	$16	million were	made	to	this	plan	in	2008.	The	Company	expects	to	make	no	cash	contributions	to	the	Postretirement	Health	Care	Benefits	Plan	in	2009.

The	Company	maintains	a	number	of	endorsement	split-dollar	life	insurance	policies	that	were	taken	out	on	now-retired	officers	under	a	plan	that was	frozen	prior	to	December	31,	2004.	The	Company	had	purchased	the	life	insurance	policies	to	insure	the	lives	of	employees	and	then	entered	into	a separate	agreement	with	the	employees	that	split	the	policy	benefits	between	the	Company	and	the	employee.	Motorola	owns	the	policies,	controls	all rights	of	ownership,	and	may	terminate	the	insurance	policies.	To	effect	the	split-dollar	arrangement,	Motorola	endorsed	a	portion	of	the	death	benefits	to the	employee	and	upon	the	death	of	the	employee,	the	employee's	beneficiary	typically	receives	the	designated	portion	of	the	death	benefits	directly	from the	insurance	company	and	the	Company	receives	the	remainder	of	the	death	benefits.

The	Company	adopted	the	provisions	of	EITF	06-4,	"Accounting	for	Deferred	Compensation	and	Postretirement	Benefit	Aspects	of	Endorsement Split-Dollar	Life	Insurance	Arrangements"	("EITF	06-4")	as	of	January	1,	2008.	EITF	06-4	requires	that	a	liability	for	the	benefit	obligation	be	recorded because	the	promise	of	postretirement	benefit	had	not	been	settled	through	the	purchase	of	an	endorsement	split-dollar	life	insurance	arrangement.	As	a result	of	the	adoption	of	EITF	06-4,	the	Company	recorded	a	liability	representing	the	actuarial	present	value	of	the	future	death	benefits	as	of	the employees'	expected	retirement	date	of	$45	million	with	the	offset	reflected	as	a	cumulative-effect	adjustment	to	January	1,	2008	Retained	earnings	and Non-owner	changes	to	equity	in	the	amounts	of	$4	million	and	$41	million,	respectively,	in	the	Company's	consolidated	statement	of	stockholders' equity.	It	is	currently	expected	that	no	further	cash	payments	are	required	to	fund	these	policies.

The	2008	Split-Dollar	Life	Insurance	policy	actual	expense	was	$6	million.	As	of	December	31,	2008,	the	Company	has	recorded	a	liability representing	the	actuarial	present	value	of	the	future	death	benefits	as	of	the	employees'	expected	retirement	date	of	$47	million	with	the	offset	reflected in	Retained	earnings	and	Non-owner	changes	to	equity	in	the	amounts	of	$4	million	and	$37	million,	respectively,	in	the	Company's	consolidated statement	of	stockholders'	equity	as	of	December	31,	2008.

Recent	market	conditions	have	resulted	in	an	unusually	high	degree	of	volatility	and	increased	the	risks	and	illiquidity	associated	with	certain investments	held	by	the	pension	plans,	which	could	impact	the	value	of	investments	after	the	date	of	this	filing.	The	Company's	measurement	date	of	its plan	assets	and	obligations	is	December	31.

Goodwill:		The	Company	tests	the	recorded	amount	of	goodwill	for	recovery	on	an	annual	basis	in	the	fourth	quarter	of	each	fiscal	year.	Goodwill	is tested	more	frequently	if	indicators	of	impairment	exist.	The	Company	continually	assesses	whether	any	indicators	of	impairment	exist,	which	requires	a significant	amount	of	judgment.	Such	indicators	may	include:	a	sustained	significant	decline	in	our	share	price	and	market	capitalization;	a	decline	in	our expected	future	cash	flows;	a	significant	adverse	change	in	legal	factors	or	in	the	business	climate;	unanticipated	competition;	the	testing	for recoverability	of	a	significant	asset	group	within	a	reporting	unit;	or	slower	growth	rates,	among	others.	Any	adverse	change	in	these	factors	could	have	a significant	impact	on	the	recoverability	of	these	assets	and	could	have	a	material	impact	on	our	consolidated	financial	statements.

The	goodwill	impairment	test	is	performed	at	the	reporting	unit	level.	A	reporting	unit	is	an	operating	segment	or	one	level	below	an	operating segment	(referred	to	as	a	"component").	A	component	of	an	operating

segment	is	a	reporting	unit	if	the	component	constitutes	a	business	for	which	discrete	financial	information	is	available	and	segment	management regularly	reviews	the	operating	results	of	that	component.	When	two	or	more	components	of	an	operating	segment	have	similar	economic	characteristics, the	components	shall	be	aggregated	and	deemed	a	single	reporting	unit.	An	operating	segment	shall	be	deemed	to	be	a	reporting	unit	if	all	of	its components	are	similar,	if	none	of	its	components	is	a	reporting	unit,	or	if	the	segment	comprises	only	a	single	component.	As	such,	the	Company	has determined	that	the	Mobile	Devices	segment	meets	the	requirement	of	a	reporting	unit.	For	the	Enterprise	Mobility	Solutions	segment,	the	Company	has identified	two	reporting	units,	the	Government	and	Public	Safety	reporting	unit	and	the	Enterprise	Mobility	reporting	unit.	For	the	Home	and	Networks Mobility	segment,	the	Company	has	identified	two	reporting	units,	the	Home	reporting	unit	and	the	Public	Networks	reporting	unit.

The	goodwill	impairment	test	is	a	two	step	analysis.	In	Step	One,	the	fair	value	of	each	reporting	unit	is	compared	to	its	book	value.	Management must	apply	judgment	in	determining	the	estimated	fair	value	of	these	reporting	units.	Fair	value	is	determined	using	a	combination	of	present	value techniques	and	quoted	market	prices	of	comparable	businesses.	If	the	fair	value	of	the	reporting	unit	exceeds	its	carrying	value,	goodwill	is	not	deemed	to be	impaired	for	that	reporting	unit,	and	no	further	testing	would	be	necessary.	If	the	fair	value	of	the	reporting	unit	is	less	than	the	carrying	value,	the Company	performs	Step	Two.	Step	Two	uses	the	calculated	fair	value	of	the	reporting	unit	to	perform	a	hypothetical	purchase	price	allocation	to	the	fair value	of	the	assets	and	liabilities	of	the	reporting	unit.	The	difference	between	the	fair	value	of	the	reporting	unit	calculated	in	Step	One	and	the	fair	value of	the	underlying	assets	and	liabilities	of	the	reporting	unit	is	the	implied	fair	value	of	the	reporting	unit's	goodwill.	A	charge	is	recorded	in	the	financial statements	if	the	carrying	value	of	the	reporting	unit's	goodwill	is	greater	than	its	implied	fair	value.

The	following	describes	the	valuation	methodologies	used	to	derive	the	fair	value	of	the	reporting	units.

•		Income	Approach:		To	determine	fair	value,	the	Company	discounted	the	expected	cash	flows	of	the	reporting	units.	The	discount	rate	used represents	the	estimated	weighted	average	cost	of	capital,	which	reflects	the	overall	level	of	inherent	risk	involved	in	our	operations	and	the	rate of	return	a	market	participant	would	expect	to	earn.	To	estimate	cash	flows	beyond	the	final	year	of	our	model,	the	Company	used	a	terminal value	approach.	Under	this	approach,	the	Company	used	estimated	operating	income	before	interest,	taxes,	depreciation	and	amortization	in	the final	year	of	our	model,	adjusted	it	to	estimate	a	normalized	cash	flow,	applied	a	perpetuity	growth	assumption	and	discounted	it	by	a	perpetuity discount	factor	to	determine	the	terminal	value.	The	Company	incorporated	the	present	value	of	the	resulting	terminal	value	into	our	estimate	of fair	value.

•		Market-Based	Approach:		To	corroborate	the	results	of	the	income	approach	described	above,	the	Company	estimated	the	fair	value	of	our reporting	units	using	several	market-based	approaches,	including	the	value	that	we	derive	based	on	our	consolidated	stock	price	as	described above.	The	Company	also	used	the	guideline	company	method,	which	focuses	on	comparing	our	risk	profile	and	growth	prospects	to	select reasonably	similar/guideline	publicly	traded	companies.

In	the	fourth	quarter	of	2008,	we	conducted	our	annual	assessment	of	goodwill	for	impairment.	The	Company	performed	extensive	valuation analyses,	utilizing	both	income	and	market	approaches	in	our	goodwill	assessment	process.	During	this	quarter,	we	experienced	a	sustained,	significant decline	in	our	stock	price	that	reduced	the	market	capitalization	below	the	book	value	of	the	Company.	The	reduced	market	capitalization	reflected	the macroeconomic	declines	coupled	with	the	market	view	on	the	performance	of	the	Mobile	Devices	reporting	unit.	The	Company	has	considered	this decline	in	our	stock	price	in	our	impairment	assessment.

The	Company	has	weighted	the	valuation	of	its	reporting	units	at	75%	based	on	the	income	approach	and	25%	based	on	the	market-based	approach, consistent	with	prior	periods.	The	Company	believes	that	this	weighting	is	appropriate	since	it	is	often	difficult	to	find	other	appropriate	publicly	traded companies	that	are	similar	to	our	reporting	units	and	it	is	our	view	that	future	discounted	cash	flows	are	more	reflective	of	the	value	of	the	reporting	units. If	a	heavier	weighting	was	put	on	the	market	based	approach	for	certain	reporting	units,	a	higher	fair	value	would	have	been	determined.

The	determination	of	fair	value	of	the	reporting	units	and	assets	and	liabilities	within	the	reporting	units	requires	us	to	make	significant	estimates	and assumptions.	These	estimates	and	assumptions	primarily	include,	but	are	not	limited	to,	the	discount	rate,	terminal	growth	rates,	earnings	before depreciation	and	amortization,	and	capital	expenditures	forecasts.	Due	to	the	inherent	uncertainty	involved	in	making	these	estimates,	actual	results	could differ	from	those	estimates.	The	Company	assigned	discount	rates	ranging	from	13	to	14%	for	the	Home,	Public	Networks,	Government	and	Public Safety	and	Enterprise	Mobility	reporting	units.	The	Company	assigned	a

discount	rate	of	25%	to	the	Mobile	Devices	reporting	unit	commensurate	with	development	stage	enterprises	or	turnaround	opportunities.	The	Company believes	this	rate	reflects	the	inherent	uncertainties	of	the	Mobile	Devices	reporting	unit's	projected	cash	flows.	The	Company	evaluated	the	merits	of each	significant	assumption,	both	individually	and	in	the	aggregate,	used	to	determine	the	fair	value	of	the	reporting	units,	as	well	as	the	fair	values	of	the corresponding	assets	and	liabilities	within	the	reporting	units,	and	concluded	they	are	reasonable.

Based	on	the	results	of	Step	One	of	our	annual	assessment	of	the	recoverability	goodwill,	the	fair	values	of	the	Home,	Public	Networks	and Government	and	Public	Safety	reporting	units	exceeded	their	carrying	values,	indicating	that	there	was	no	impairment	of	goodwill	at	these	reporting units.	The	discount	rate	would	need	to	be	increased	by	5.6%	for	the	Home	reporting	unit,	12.1%	for	the	Public	Networks	reporting	unit	and	22.0%	for	the Government	and	Public	Safety	reporting	unit	before	the	fair	values	of	those	reporting	units	would	be	less	than	their	fair	values.	The	Company	does	not believe	the	resulting	discount	rates	would	be	reasonable	relative	to	the	risks	associated	with	the	future	cash	flows	of	these	businesses.

However,	the	fair	values	of	the	Enterprise	Mobility	and	Mobile	Devices	reporting	units	were	below	their	respective	book	values,	indicating	a potential	impairment	of	goodwill	and	the	requirement	to	perform	Step	Two	of	the	analysis	for	these	reporting	units.	The	Company	acquired	the	main components	of	the	Enterprise	Mobility	reporting	unit	in	2007	at	which	time	the	book	value	and	fair	value	of	the	reporting	unit	was	the	same.	Because	of this	fact,	the	Enterprise	Mobility	reporting	unit	was	most	likely	to	experience	a	decline	in	its	fair	value	below	its	book	value	as	a	result	of	lower	values	in the	overall	market	and	the	deteriorating	macroeconomic	environment	and	the	market's	view	of	its	near	term	impact	on	the	reporting	unit.	The	decline	in the	fair	value	of	the	Mobile	Devices	reporting	unit	below	its	book	value	is	a	result	of	the	deteriorating	macroeconomic	environment,	lower	expected	sales and	cash	flows	as	a	result	of	the	decision	to	consolidate	platforms	announced	in	the	fourth	quarter	of	2008,	and	the	uncertainty	around	the	reporting	unit's future	cash	flows.

The	allocation	of	the	fair	value	of	the	reporting	units	to	individual	assets	and	liabilities	within	the	reporting	units	also	requires	us	to	make	significant estimates	and	assumptions.	The	allocation	requires	several	analyses	to	determine	fair	value	of	assets	and	liabilities	including,	among	others,	definite	lived intangible	assets,	pre-paid	assets,	deferred	taxes	and	current	replacement	costs	for	certain	property,	plant	and	equipment.

Based	on	the	results	of	the	hypothetical	purchase	price	allocation	in	Step	Two	for	the	Enterprise	Mobility	and	Mobile	Devices	reporting	units,	the implied	fair	value	of	goodwill	was	$0	for	Mobile	Devices	and	$1.0	billion	for	Enterprise	Mobility.	As	a	result,	the	Company	reduced	the	recorded	value of	goodwill	by	$55	million	at	the	Mobile	Devices	reporting	unit	(representing	all	of	its	goodwill)	and	$1.6	billion	at	the	Enterprise	Mobility	reporting unit	during	the	three-month	period	ended	December	31,	2008.

A	further	deterioration	in	the	Enterprise	Mobility	reporting	unit's	operating	results	or	projected	cash	flows	in	the	future	could	result	in	additional impairment	charges	to	goodwill.	In	addition,	changes	in	certain	assumptions	in	the	current	analysis	could	have	a	significant	impact	on	the	goodwill impairment	charge	recorded	in	the	fourth	quarter	of	2008	for	the	Enterprise	Mobility	reporting	unit.	For	example,	a	2%	decrease	in	the	forecasted	EBIT would	result	in	an	increase	to	the	goodwill	impairment	charge	of	approximately	$194	million,	and	a	100	basis	point	increase	in	the	discount	rate	would result	in	an	increase	to	the	goodwill	impairment	charge	of	approximately	$187	million.	The	sensitivity	amounts	above	are	calculated	based	on	the	impact of	the	change	in	the	fair	value	of	the	Enterprise	Mobility	reporting	unit,	as	well	as	the	impact	of	changes	in	the	fair	values	of	the	assets	and	liabilities	of the	Enterprise	Mobility	reporting	unit.

The	accounting	principles	regarding	goodwill	acknowledge	that	the	observed	market	prices	of	individual	trades	of	a	company's	stock	(and	thus	its computed	market	capitalization)	may	not	be	representative	of	the	fair	value	of	the	company	as	a	whole.	Additional	value	may	arise	from	the	ability	to take	advantage	of	synergies	and	other	benefits	that	flow	from	control	over	another	entity.	Consequently,	measuring	the	fair	value	of	a	collection	of	assets and	liabilities	that	operate	together	in	a	controlled	entity	is	different	from	measuring	the	fair	value	of	that	entity's	individual	common	stock.	In	most industries,	including	ours,	an	acquiring	entity	typically	is	willing	to	pay	more	for	equity	securities	that	give	it	a	controlling	interest	than	an	investor	would pay	for	a	number	of	equity	securities	representing	less	than	a	controlling	interest.

For	the	purpose	of	determining	the	implied	control	premium	calculation	in	the	overall	goodwill	analysis,	the	Company	applied	assumptions, including	for	determining	the	fair	value	of	corporate	assets.	Corporate	assets	primarily	consist	of	cash	and	cash	equivalents,	Sigma	Fund	balances,	short- term	investments,	investments,	deferred	tax	assets	and	corporate	facilities.	Judgments	about	the	fair	value	of	corporate	assets	include,	among	others,	an assumption	that	deferred	tax	assets	should	be	discounted	to	reflect	their	economic	lives,	that	a	significant	portion	of	the	corporate	assets	are	required	to pay	off	debt,	fund	the	Company's	retirement	obligations,	meet	the	near	term

cash	requirements	of	the	Mobile	Devices	reporting	unit,	and	market	participants'	perceptions	of	the	likely	restructuring	costs,	including	severance	and exit	costs,	that	might	be	incurred	if	the	Company's	strategy	is	not	successful.	The	results	of	the	Company's	impairment	analysis	result	in	an	implied control	premium	commensurate	with	historical	transactions	observed	in	our	industry.

After	reflecting	the	impairment	charges,	goodwill	at	the	Mobile	Devices	and	Enterprise	Mobility	reporting	units	represented	$1.0	billion	of	our $27.9	billion	of	total	assets	as	of	December	31,	2008.	The	Company	has	no	intangible	assets	with	indefinite	useful	lives.

Long-lived	Assets:		Long-lived	assets	include	property,	plant	and	equipment,	intangible	asset,	long-term	prepaid	assets	and	other	non-current	assets. The	Company	reviews	long-lived	assets	held	for	use	for	impairment	whenever	events	or	changes	in	circumstances	indicate	that	the	carrying	amount	may not	be	recoverable.	Events	which	may	indicate	long-lived	assets	may	not	be	recoverable	include,	but	are	not	limited	to,	a	significant	decrease	in	the market	price	of	long-lived	assets,	a	significant	adverse	change	in	the	manner	in	which	the	Company	utilizes	a	long-lived	asset,	a	significant	adverse change	in	the	business	climate,	a	recent	history	of	operating	or	cash	flow	losses,	or	a	current	expectation	that	it	is	more	likely	than	not	likely	that	a	long- lived	asset	will	be	sold	or	disposed	of	in	the	future.	For	impairment	testing	purposes,	the	Company	groups	our	long-lived	assets	at	the	lowest	level	for which	identifiable	cash	flows	are	largely	independent	of	the	cash	flows	of	other	groups	of	assets	and	liabilities	(the	asset	group).

If	the	Company	determines	that	a	long-lived	asset	or	asset	group	may	not	be	recoverable,	it	compares	the	sum	of	the	expected	undiscounted	future cash	flows	that	the	asset	or	asset	group	is	expected	to	generate	to	the	asset	or	asset	group's	carrying	value.	If	the	sum	of	the	undiscounted	future	cash flows	exceed	the	carrying	amount	of	the	asset	or	asset	group,	the	asset	or	asset	group	is	not	considered	impaired.	However,	if	the	sum	of	the	undiscounted future	cash	flows	are	less	than	the	carrying	amount	of	the	assets	or	asset	group,	a	loss	is	recognized	for	the	difference	between	the	fair	value	of	the	asset or	asset	group	and	the	carrying	value	of	the	asset	or	asset	group.	The	fair	value	of	the	asset	or	asset	group	is	generally	determined	by	discounting	the expected	future	cash	flows	using	a	discount	rate	that	is	commensurate	with	the	risk	associated	with	the	amount	and	timing	of	the	expected	future	cash flows.

During	2008,	the	Company	tested	two	asset	groups	for	impairment.	The	first	asset	group	was	tested	for	impairment	when	it	was	determined	that	there was	a	more	likely	than	not	likely	expectation	that	assets	associated	with	a	technology	platform	of	the	Enterprise	Mobility	segment	would	be	disposed	of or	sold.	This	determination	was	made	because	the	technology	platform	was	no	longer	considered	strategic	to	the	Company.	The	Company	determined	that the	expected	future	cash	flows,	which	incorporated	this	change	in	the	strategic	direction	of	the	platform,	did	not	support	its	carrying	amount.	As	a	result, the	assets,	consisting	primarily	of	intangible	assets,	were	written	down	to	their	fair	values.	The	Company	recorded	an	impairment	charge	of	$121	million during	2008	to	reduce	the	carrying	amount	of	the	asset	group	to	its	fair	value.

During	the	fourth	quarter	of	2008,	due	to	the	continued	operating	losses	of	the	Mobile	Devices	segment,	the	Company	tested	the	long-lived	assets	of the	Mobile	Devices	segment	for	impairment.	The	long-lived	assets	of	the	Mobile	Devices	segment	consisted	primarily	of	property,	plant	and	equipment and	long-term	pre-paid	licenses.	The	asset	group	also	included	elements	of	working	capital	including	inventory	and	accounts	receivable.	The	Company considered	future	cash	flows	expected	to	be	generated	by	the	business	and	weighted	them	according	to	management's	view	of	their	probability-weighted outcomes.	The	sum	of	these	probability-weighted	undiscounted	future	cash	flows	indicated	that	the	asset	group	was	recoverable.	As	a	result,	no impairment	of	long-lived	assets	was	recorded	at	the	Mobile	Devices	segment.	A	significant	assumption	in	the	expected	future	cash	flow	forecast	was	that it	is	more	likely	than	not	that	management	will	be	successful	in	its	plans	to	turn	around	the	Mobile	Devices	business.	The	plan	to	turn	around	Mobile Devices	includes	a	successful	execution	of	the	segment's	software	platform	strategy	and	the	Company's	ability	to	execute	its	cost	savings	initiatives.

Expectations	of	future	cash	flows	could	change	if	the	Company	determines	it	will	not	be	successful	in	executing	its	plans	to	turn	around	the	Mobile Devices	business.	Impairment	charges	of	the	long-lived	assets	of	Mobile	Devices	could	be	required	in	future	periods	if	the	Company's	expectations	of future	cash	flows	changes.

# Recent	Accounting	Pronouncements

The	Company	adopted	Financial	Accounting	Standards	Board	("FASB")	Statement	of	Financial	Accounting	Standard	("SFAS")	No.	157,	"Fair Value	Measurements"	("SFAS	157")	on	January	1,	2008	for	financial	assets	and	liabilities,	and	non-financial	assets	and	liabilities	that	are	recognized	or disclosed	at	fair	value	in	the	financial

statements	on	a	recurring	basis.	SFAS	157	defines	fair	value,	establishes	a	framework	for	measuring	fair	value	as	required	by	other	accounting pronouncements	and	expands	fair	value	measurement	disclosures.	The	provisions	of	SFAS	157	are	applied	prospectively	upon	adoption	and	did	not	have a	material	impact	on	the	Company's	consolidated	financial	statements.	The	disclosures	required	by	SFAS	157	are	included	in	Note	6,	"Fair	Value Measurements,"	to	the	Company's	consolidated	financial	statements.

In	February	2008,	the	FASB	issued	FASB	Staff	Position	157-2,	which	delays	the	effective	date	of	SFAS	157	for	non-financial	assets	and	liabilities, which	are	not	measured	at	fair	value	on	a	recurring	basis	(at	least	annually)	until	fiscal	years	beginning	after	November	15,	2008.	The	Company	is currently	assessing	the	impact	of	adopting	SFAS	157	for	non-financial	assets	and	liabilities	on	the	Company's	consolidated	financial	statements.

In	October	2008,	the	FASB	issued	FASB	Staff	Position	157-3,	which	provided	guidance	to	clarify	the	application	of	FAS	157	in	a	market	that	is	not active.	The	Company	adopted	this	FSP	in	the	fourth	quarter	2008.	The	net	impact	of	this	FSP	was	immaterial.

The	Company	adopted	SFAS	No.	159,	"The	Fair	Value	Option	for	Financial	Assets	and	Financial	Liabilities—Including	an	Amendment	of	FASB Statement	No.	115"	("SFAS	159")	as	of	January	1,	2008.	SFAS	159	permits	entities	to	elect	to	measure	many	financial	instruments	and	certain	other items	at	fair	value.	The	Company	did	not	elect	the	fair	value	option	for	any	assets	or	liabilities	that	were	not	previously	carried	at	fair	value.	Accordingly, the	adoption	of	SFAS	159	had	no	impact	on	the	Company's	consolidated	financial	statements.

The	Company	adopted	EITF	06-4,	"Accounting	for	Deferred	Compensation	and	Postretirement	Benefit	Aspects	of	Endorsement	Split-Dollar	Life Insurance	Arrangements"	("EITF	06-4")	as	of	January	1,	2008.	EITF	06-4	requires	that	endorsement	split-dollar	life	insurance	arrangements,	which provide	a	benefit	to	an	employee	beyond	the	postretirement	period	be	recorded	in	accordance	with	SFAS	No.	106,	"Employer's	Accounting	for Postretirement	Benefits	Other	Than	Pensions"	or	APB	Opinion	No.	12,	"Omnibus	Opinion—1967"	("the	Statements")	based	on	the	substance	of	the agreement	with	the	employee.	Upon	adoption	of	EITF	06-4,	the	Company	recognized	an	increase	in	Other	liabilities	of	$45	million	with	the	offset reflected	as	a	cumulative-effect	adjustment	to	January	1,	2008	Retained	earnings	and	Non-owner	changes	to	equity	in	the	amounts	of	$4	million	and $41	million,	respectively,	in	the	Company's	consolidated	statement	of	stockholders'	equity.

In	December	2007,	the	FASB	issued	SFAS	No.	141	(revised	2007)	("SFAS	141R"),	a	revision	of	SFAS	141,	"Business	Combinations."	SFAS	141R establishes	requirements	for	the	recognition	and	measurement	of	acquired	assets,	liabilities,	goodwill	and	non-controlling	interests.	SFAS	141R	also provides	disclosure	requirements	related	to	business	combinations.	SFAS	141R	is	effective	for	fiscal	years	beginning	after	December	15,	2008. SFAS	141R	will	be	applied	prospectively	to	business	combinations	with	an	acquisition	date	on	or	after	the	effective	date.

In	December	2007,	the	FASB	issued	SFAS	No.	160,	"Non-Controlling	Interests	in	Consolidated	Financial	Statements,	an	amendment	of	ARB No.	51"	("SFAS	160").	SFAS	160	establishes	new	standards	for	the	accounting	for	and	reporting	of	non-controlling	interests	(formerly	minority	interests) and	for	the	loss	of	control	of	partially	owned	and	consolidated	subsidiaries.	SFAS	160	does	not	change	the	criteria	for	consolidating	a	partially	owned entity.	SFAS	160	is	effective	for	fiscal	years	beginning	after	December	15,	2008.	The	provisions	of	SFAS	160	will	be	applied	prospectively	upon adoption	except	for	the	presentation	and	disclosure	requirements,	which	will	be	applied	retrospectively.	The	Company	does	not	expect	the	adoption	of SFAS	160	to	have	a	material	impact	on	the	Company's	consolidated	financial	statements.

In	March	2008,	the	FASB	issued	SFAS	No.	161,	"Disclosures	about	Derivative	Instruments	and	Hedging	Activities,	an	amendment	of SFAS	No.	133"	("SFAS	161").	SFAS	161	requires	enhanced	disclosures	about	an	entity's	derivative	and	hedging	activities	and	is	effective	for	fiscal years	and	interim	periods	beginning	after	November	15,	2008.	The	Company	is	currently	evaluating	the	additional	disclosures	required	by	SFAS	161.

# Forward-Looking	Statements

Except	for	historical	matters,	the	matters	discussed	in	this	Form	10-K	are	forward-looking	statements	that	involve	risks	and	uncertainties.	Forward- looking	statements	include,	but	are	not	limited	to,	statements	under	the	following	headings:	(1)	"Mobile	Device	Segment,"	about	industry	decline	and growth,	including	as	related	to	smartphones	and	data-centric	devices,	customer	inventory	management	and	timing,	the	impact	of	the	segment's	strategy, opportunities	for	growth,	the	impact	from	the	loss	of	key	customers,	the	impact	from	the	allocation	and	regulation	of	frequencies,	the	impact	of	regulatory matters,	the	availability	of	materials	and	components,	energy	supplies	and	labor,	the	seasonality	of	the	business,	the	firmness	of	the	segment's	backlog, the	competitiveness	of	the

patent	portfolio	and	the	manufacturing	locations;	(2)	"Home	and	Networks	Mobility	Segment,"	about	the	potential	of	the	portfolio,	including	WiMAX and	LTE,	the	impact	of	the	separation	of	set-top	security	functionality,	3G	and	4G	licenses	and	market	development,	the	Company's	involvement	in market	development,	including	China,	sales	and	utilization,	industry	decline	and	growth,	industry	capital	expenditures,	the	impact	of	the	segment's strategy,	the	impact	of	acquisitions,	the	impact	from	the	loss	of	key	customers,	competition	from	new	and	existing	competitors,	consolidation	among providers,	iDEN	trends,	the	impact	of	regulatory	matters,	the	impact	from	the	allocation	and	regulation	of	frequencies,	the	availability	of	materials	and components,	energy	supplies	and	labor,	the	seasonality	of	the	business,	the	firmness	of	the	segment's	backlog,	the	competitiveness	of	the	patent	portfolio and	the	impact	of	license	agreement	royalties;	(3)	"Enterprise	Mobility	Solutions	segment,"	about	industry	and	demand	decline	and	growth,	industry spending,	the	impact	of	the	segment's	strategy,	the	impact	from	the	loss	of	key	customers	and	reduced	spending,	the	competitive	position,	competition from	system	integrators,	the	impact	of	regulatory	matters,	the	impact	from	the	allocation	and	regulation	of	frequencies,	the	availability	of	materials	and components,	energy	supplies	and	labor,	the	seasonality	of	the	business,	the	firmness	of	the	segment's	backlog	and	the	competitiveness	of	the	patent portfolio;	(4)	"Other	Information,"	about	the	impact	from	the	loss	of	key	customers,	the	firmness	of	the	aggregate	backlog	position,	the	competitiveness through	research	and	development	and	utilization	of	technology;	(5)	"Properties,"	about	the	consequences	of	a	disruption	in	manufacturing;	(6)	"Legal Proceedings,"	about	the	ultimate	disposition	of	pending	legal	matters	and	timing;	(7)	"Management's	Discussion	and	Analysis,"	about:	(a)	the	impact	of acquisitions,	(b)	the	success	of	our	business	strategy	and	portfolio,	(c)	future	payments,	charges,	use	of	accruals	and	expected	cost-saving	benefits associated	with	our	reorganization	of	business	programs	and	employee	separation	costs,	(d)	the	Company's	ability	and	cost	to	repatriate	funds,	(e)	the impact	of	the	timing	and	level	of	sales	and	the	geographic	location	of	such	sales,	(f)	future	cash	contributions	to	pension	plans	or	retiree	health	benefit plans,	(g)	the	Company's	ability	to	collect	on	its	Sigma	Fund	and	other	investments,	(h)	outstanding	commercial	paper	balances	and	purchase	obligation payments,	(i)	the	Company's	ability	and	cost	to	access	the	capital	markets,	(j)	the	Company's	ability	to	borrow	under	its	credit	facilities,	(k)	the Company's	ability	to	retire	outstanding	debt,	(l)	the	Company's	ability	and	cost	to	obtain	performance	related	bonds,	(m)	adequacy	of	resources	to	fund expected	working	capital	and	capital	expenditure	measurements,	(n)	expected	payments	pursuant	to	commitments	under	long-term	agreements,	(o)	the outcome	of	ongoing	and	future	legal	proceedings,	(p)	the	success	and	impact	of	the	Company	turning	around	the	Mobile	Devices	business,	(q)	the	impact of	recent	accounting	pronouncements	on	the	Company,	(r)	the	impact	of	the	loss	of	key	customers,	and	(s)	the	expected	effective	tax	rate	and deductibility	of	certain	items;	and	(8)	"Quantitative	and	Qualitative	Disclosures	about	Market	Risk,"	about:	(a)	the	impact	of	foreign	currency	exchange risks,	(b)	future	hedging	activity	and	expectations	of	the	Company,	and	(c)	the	ability	of	counterparties	to	financial	instruments	to	perform	their obligations.

Some	of	the	risk	factors	that	affect	the	Company's	business	and	financial	results	are	discussed	in	"Item	1A:	Risk	Factors."	We	wish	to	caution the	reader	that	the	risk	factors	discussed	in	"Item	1A:	Risk	Factors",	and	those	described	elsewhere	in	this	report	or	our	other	Securities	and Exchange	Commission	filings,	could	cause	our	actual	results	to	differ	materially	from	those	stated	in	the	forward-looking	statements.

# Item	7A.	Quantitative	and	Qualitative	Disclosures	About	Market	Risk

# Foreign	Currency	Risk

The	Company	uses	financial	instruments	to	reduce	its	overall	exposure	to	the	effects	of	currency	fluctuations	on	cash	flows.	The	Company's	policy prohibits	speculation	in	financial	instruments	for	profit	on	the	exchange	rate	price	fluctuation,	trading	in	currencies	for	which	there	are	no	underlying exposures,	or	entering	into	transactions	for	any	currency	to	intentionally	increase	the	underlying	exposure.	Instruments	that	are	designated	as	part	of	a hedging	relationship	must	be	effective	at	reducing	the	risk	associated	with	the	exposure	being	hedged	and	are	designated	as	part	of	a	hedging	relationship at	the	inception	of	the	contract.	Accordingly,	changes	in	market	values	of	hedge	instruments	must	be	highly	correlated	with	changes	in	market	values	of underlying	hedged	items	both	at	the	inception	of	the	hedge	and	over	the	life	of	the	hedge	contract.

The	Company's	strategy	related	to	foreign	exchange	exposure	management	is	to	offset	the	gains	or	losses	on	the	financial	instruments	against	losses or	gains	on	the	underlying	operational	cash	flows	or	investments	based	on	the	operating	business	units'	assessment	of	risk.	The	Company	enters	into derivative	contracts	for	some	of	the	Company's	non-functional	currency	receivables	and	payables,	which	are	primarily	denominated	in	major	currencies that	can	be	traded	on	open	markets.	The	Company	uses	forward	contracts	and	options	to	hedge	these	currency	exposures.	In	addition,	the	Company	enters into	derivative	contracts	for	some	firm	commitments	and	some	forecasted	transactions,	which	are	designated	as	part	of	a	hedging	relationship	if	it	is determined	that	the	transaction	qualifies	for	hedge	accounting	under	the	provisions	of	SFAS	No.	133,	"Accounting	for	Derivative	Instruments	and Hedging	Activities."	A	portion	of	the	Company's	exposure	is	from	currencies	that	are	not	traded	in	liquid	markets	and	these	are	addressed,	to	the	extent reasonably	possible,	by	managing	net	asset	positions,	product	pricing	and	component	sourcing.

At	December	31,	2008	and	2007,	the	Company	had	net	outstanding	foreign	exchange	contracts	totaling	$2.6	billion	and	$3.0	billion,	respectively. Management	believes	that	these	financial	instruments	should	not	subject	the	Company	to	undue	risk	due	to	foreign	exchange	movements	because	gains and	losses	on	these	contracts	should	generally	offset	losses	and	gains	on	the	underlying	assets,	liabilities	and	transactions,	except	for	the	ineffective portion	of	the	instruments,	which	are	charged	to	Other	within	Other	income	(expense)	in	the	Company's	consolidated	statements	of	operations.

The	following	table	shows	the	five	largest	net	notional	amounts	of	the	positions	to	buy	or	sell	foreign	currency	as	of	December	31,	2008	and	the corresponding	positions	as	of	December	31,	2007:

| Net	Buy	(Sell)	by	Currency | December	31,<br>2008 | December	31,<br>2007 |
| :--- | :--- | :--- |
| Chinese\tRenminbi | $(481) | $(1,292) |
| Euro | (445) | (33) |
| Brazilian\tReal | (356) | (377) |
| Taiwan\tDollar | 124 | 112 |
| Japanese\tYen | 542 | 384 |

The	Company	is	exposed	to	credit-related	losses	if	counterparties	to	financial	instruments	fail	to	perform	their	obligations.	However,	the	Company does	not	expect	any	counterparties,	all	of	whom	presently	have	investment	grade	credit	ratings,	to	fail	to	meet	their	obligations.

Foreign	exchange	financial	instruments	that	are	subject	to	the	effects	of	currency	fluctuations,	which	may	affect	reported	earnings,	include	derivative financial	instruments	and	other	financial	instruments	which	are	not	denominated	in	the	functional	currency	of	the	legal	entity	holding	the	instrument. Derivative	financial	instruments	consist	primarily	of	forward	contracts	and	currency	options.	Other	financial	instruments,	which	are	not	denominated	in the	functional	currency	of	the	legal	entity	holding	the	instrument,	consist	primarily	of	cash,	cash	equivalents,	Sigma	Fund	investments	and	short-term investments,	as	well	as	accounts	payable	and	receivable.	Accounts	payable	and	receivable	are	reflected	at	fair	value	in	the	financial	statements.	The	fair value	of	the	foreign	exchange	financial	instruments	would	hypothetically	decrease	by	$234	million	as	of	December	31,	2008	if	the	foreign	currency	rates were	to	change	unfavorably	by	10%	from	current	levels.	This	hypothetical	amount	is	suggestive	of	the	effect	on	future	cash	flows	under	the	following conditions:	(i)	all	current	payables	and	receivables	that	are	hedged	were	not	realized,	(ii)	all	hedged	commitments	and	anticipated	transactions	were	not realized	or	canceled,	and	(iii)	hedges	of	these	amounts	were	not	canceled	or	offset.	The	Company	does	not	expect	that	any	of

these	conditions	will	occur.	The	Company	expects	that	gains	and	losses	on	the	derivative	financial	instruments	should	offset	gains	and	losses	on	the assets,	liabilities	and	future	transactions	being	hedged.	If	the	hedged	transactions	were	included	in	the	sensitivity	analysis,	the	hypothetical	change	in	fair value	would	be	immaterial.	The	foreign	exchange	financial	instruments	are	held	for	purposes	other	than	trading.

The	ineffective	portion	of	changes	in	the	fair	value	of	foreign	currency	fair	value	hedge	positions	for	the	periods	presented	were	de	minimis.	These amounts	are	included	in	Other	within	Other	income	(expense)	in	the	Company's	consolidated	statements	of	operations.	The	above	amounts	include	the change	in	the	fair	value	of	derivative	contracts	related	to	the	changes	in	the	difference	between	the	spot	price	and	the	forward	price.	These	amounts	are excluded	from	the	measure	of	effectiveness.	Expense	(income)	related	to	fair	value	hedges	that	were	discontinued	for	the	years	ended	December	31, 2008,	2007	and	2006	are	included	in	the	amounts	noted	above.

The	Company	recorded	income	(expense)	of	$(2)	million,	$1	million	and	$13	million	for	the	years	ended	December	31,	2008,	2007	and	2006, respectively,	representing	the	ineffective	portions	of	changes	in	the	fair	value	of	cash	flow	hedge	positions.	These	amounts	are	included	in	Other	within Other	income	(expense)	in	the	Company's	consolidated	statements	of	operations.	The	above	amounts	include	the	change	in	the	fair	value	of	derivative contracts	related	to	the	changes	in	the	difference	between	the	spot	price	and	the	forward	price.	These	amounts	are	excluded	from	the	measure	of effectiveness.	Expense	(income)	related	to	cash	flow	hedges	that	were	discontinued	for	the	years	ended	December	31,	2008,	2007	and	2006	are	included in	the	amounts	noted	above.

During	the	years	ended	December	31,	2008,	2007	and	2006,	on	a	pre-tax	basis,	income	(expense)	of	$3	million,	$(16)	million	and	$(98)	million, respectively,	was	reclassified	from	equity	to	earnings	in	the	Company's	consolidated	statements	of	operations.

At	December	31,	2008,	the	maximum	term	of	derivative	instruments	that	hedge	forecasted	transactions	was	one	year.	The	weighted	average	duration of	the	Company's	derivative	instruments	that	hedge	forecasted	transactions	was	seven	months.

# Interest	Rate	Risk

At	December	31,	2008,	the	Company's	short-term	debt	consisted	primarily	of	$89	million	of	short-term	variable	rate	foreign	debt.	The	Company	has $4.1	billion	of	long-term	debt,	including	the	current	portion	of	long-term	debt,	which	is	primarily	priced	at	long-term,	fixed	interest	rates.

As	part	of	its	liability	management	program,	the	Company	historically	entered	into	interest	rate	swaps	("Hedging	Agreements")	to	synthetically modify	the	characteristics	of	interest	rate	payments	for	certain	of	its	outstanding	long-term	debt	from	fixed-rate	payments	to	short-term	variable	rate payments.	During	the	fourth	quarter	of	2008,	the	Company	terminated	all	of	its	Hedging	Agreements.	The	termination	of	the	Hedging	Agreements resulted	in	cash	proceeds	of	approximately	$158	million	and	a	gain	of	approximately	$173	million,	which	has	been	deferred	and	will	be	recognized	as	a reduction	of	interest	expense	over	the	remaining	term	of	the	associated	debt.

Prior	to	the	termination	of	the	Hedging	Agreements	in	the	fourth	quarter	of	2008,	the	Hedging	Agreements	were	designated	as	part	of	fair	value hedging	relationships	of	the	Company's	long-term	debt.	As	such,	the	changes	in	fair	value	of	the	Hedging	Agreements	and	corresponding	adjustments	to the	carrying	amount	of	the	debt	were	recognized	in	earnings.	Interest	expense	on	the	debt	was	adjusted	to	include	payments	made	or	received	under	such Hedging	Agreements.	During	2008	(prior	to	the	Hedging	Agreements	being	terminated)	and	2007,	the	Company	recognized	expense	of	$1	million	and $2	million,	respectively,	representing	the	ineffective	portion	of	changes	in	the	fair	value	of	the	Hedging	Agreements.	These	amounts	are	included	in	Other within	Other	income	(expense)	in	the	Company's	consolidated	statement	of	operations.

Certain	of	the	terminated	Hedging	Agreements	were	originally	entered	into	during	the	fourth	quarter	of	2007.	The	Company	entered	into	the	Hedging Agreements	concurrently	with	issuance	of	long-term	debt	to	convert	the	fixed	rate	interest	cost	on	the	newly	issued	debt	to	a	floating	rate.	The	Hedging Agreements	were	originally	designated	as	fair	value	hedges	of	the	underlying	debt,	including	the	Company's	credit	spread.	During	the	first	quarter	of 2008,	the	swaps	were	no	longer	considered	effective	hedges	because	of	the	volatility	in	the	price	of	the	Company's	fixed-rate	domestic	term	debt	and	the swaps	were	dedesignated.	In	the	same	period,	the	Company	was	able	to	redesignate	the	same	Hedging	Agreements	as	fair	value	hedges	of	the	underlying debt,	exclusive	of	the	Company's	credit	spread.	For	the	period	of	time	that	the	Hedging	Agreements	were	deemed	ineffective	hedges,	the	Company recognized	a	gain	of	$24	million	in	the	Company's	consolidated	statements	of	operations,	representing	the	increase	in	the	fair	value	of	the	Hedging Agreements.

Additionally,	one	of	the	Company's	European	subsidiaries	has	outstanding	interest	rate	agreements	("Interest	Agreements")	relating	to	a	Euro- denominated	loan.	The	interest	on	the	Euro-denominated	loan	is	variable.	The	Interest	Agreements	change	the	characteristics	of	interest	rate	payments from	variable	to	maximum	fixed-rate	payments.	The	Interest	Agreements	are	not	accounted	for	as	a	part	of	a	hedging	relationship	and,	accordingly,	the changes	in	the	fair	value	of	the	Interest	Agreements	are	included	in	Other	income	(expense)	in	the	Company's	consolidated	statements	of	operations.	The weighted	average	fixed	rate	payments	on	these	Interest	Agreements	was	5.07%.	The	fair	value	of	the	Interest	Agreements	at	December	31,	2008	and	2007 were	$(2)	million	and	$3	million,	respectively.	The	fair	value	of	the	Interest	Agreements	would	hypothetically	decrease	by	$1	million	(i.e.,	would decrease	from	$(2)	million	to	$(3)	million)	if	EURIBOR	rates	were	to	change	unfavorably	by	10%	from	current	levels.

The	Company	is	exposed	to	credit	loss	in	the	event	of	nonperformance	by	the	counterparties	to	its	swap	contracts.	The	Company	minimizes	its	credit risk	concentration	on	these	transactions	by	distributing	these	contracts	among	several	leading	financial	institutions,	all	of	whom	presently	have investment	grade	credit	ratings,	and	having	collateral	agreements	in	place.	The	Company	does	not	anticipate	nonperformance.

# Net	Investment	in	Foreign	Operations	Hedge

At	December	31,	2008	and	2007,	the	Company	did	not	have	any	hedges	of	foreign	currency	exposure	of	net	investments	in	foreign	operations.

# Investments	Hedge

During	the	first	quarter	of	2006,	the	Company	entered	into	a	zero-cost	collar	derivative	(the	"Sprint	Nextel	Derivative")	to	protect	itself	economically against	price	fluctuations	in	its	37.6	million	shares	of	Sprint	Nextel	Corporation	("Sprint	Nextel")	non-voting	common	stock.	During	the	second	quarter of	2006,	as	a	result	of	Sprint	Nextel's	spin-off	of	Embarq	Corporation	through	a	dividend	to	Sprint	Nextel	shareholders,	the	Company	received approximately	1.9	million	shares	of	Embarq	Corporation.	The	floor	and	ceiling	prices	of	the	Sprint	Nextel	Derivative	were	adjusted	accordingly.	The Sprint	Nextel	Derivative	was	not	designated	as	a	hedge	under	the	provisions	of	SFAS	No.	133,	"Accounting	for	Derivative	Instruments	and	Hedging Activities."	Accordingly,	to	reflect	the	change	in	fair	value	of	the	Sprint	Nextel	Derivative,	the	Company	recorded	a	net	gain	of	$99	million	for	the	year ended	December	31,	2006,	included	in	Other	income	(expense)	in	the	Company's	consolidated	statements	of	operations.	In	December	2006,	the	Sprint Nextel	Derivative	was	terminated	and	settled	in	cash	and	the	37.6	million	shares	of	Sprint	Nextel	were	converted	to	common	shares	and	sold.	The Company	received	aggregate	cash	proceeds	of	approximately	$820	million	from	the	settlement	of	the	Sprint	Nextel	Derivative	and	the	subsequent	sale	of the	37.6	million	Sprint	Nextel	shares.	The	Company	recognized	a	loss	of	$126	million	in	connection	with	the	sale	of	the	remaining	shares	of	Sprint Nextel	common	stock.	As	described	above,	the	Company	recorded	a	net	gain	of	$99	million	in	connection	with	the	Sprint	Nextel	Derivative.

# Fair	Value	of	Financial	Instruments

The	Company's	financial	instruments	include	cash	equivalents,	Sigma	Fund	investments,	short-term	investments,	accounts	receivable,	long-term receivables,	accounts	payable,	accrued	liabilities,	derivatives	and	other	financing	commitments.	The	Company's	Sigma	Fund,	available-for-sale investment	portfolios	and	derivatives	are	recorded	in	the	Company's	consolidated	balance	sheets	at	fair	value.	All	other	financial	instruments,	with	the exception	of	long-term	debt,	are	carried	at	cost,	which	is	not	materially	different	than	the	instruments'	fair	values.

Using	quoted	market	prices	and	market	interest	rates,	the	Company	determined	that	the	fair	value	of	long-term	debt	at	December	31,	2008	was $2.8	billion,	compared	to	a	carrying	value	of	$4.1	billion.	Since	considerable	judgment	is	required	in	interpreting	market	information,	the	fair	value	of	the long-term	debt	is	not	necessarily	indicative	of	the	amount	which	could	be	realized	in	a	current	market	exchange.

# Equity	Price	Market	Risk

At	December	31,	2008,	the	Company's	available-for-sale	equity	securities	portfolio	had	an	approximate	fair	market	value	of	$128	million,	which represented	a	cost	basis	of	$125	million	and	a	net	unrealized	gains	of	$3	million.	The	value	of	the	available-for-sale	equity	securities	would	change	by $13	million	as	of	year-end	2008	if	the	price	of	the	stock	in	each	of	the	publicly-traded	companies	were	to	change	by	10%.	These	equity	securities	are	held for	purposes	other	than	trading.

®	Reg.	U.S.	Patent	&	Trademark	Office.

"MOTOROLA"	and	"Stylized	M	Logo"	are	registered	trademarks	of	Motorola,	Inc.	throughout	the	world.	These	marks	are	valuable	corporate	assets. Certain	other	trademarks	and	service	marks	of	Motorola	are	registered	in	relevant	markets.	Motorola's	increasing	focus	on	marketing	products	directly	to consumers	is	reflected	in	an	increasing	emphasis	on	brand	equity	creation	and	protection.	All	other	products	or	service	names	are	the	property	of	their respective	owners.

# Item	8:Financial	Statements	and	Supplementary	Data

# REPORT	OF	INDEPENDENT	REGISTERED	PUBLIC	ACCOUNTING	FIRM

# The	Board	of	Directors	and	Stockholders

We	have	audited	the	accompanying	consolidated	balance	sheets	of	Motorola,	Inc.	and	Subsidiaries	as	of	December	31,	2008	and	2007,	and	the related	consolidated	statements	of	operations,	stockholders'	equity	and	cash	flows	for	each	of	the	years	in	the	three-year	period	ended	December	31, 2008.	These	consolidated	financial	statements	are	the	responsibility	of	the	Company's	management.	Our	responsibility	is	to	express	an	opinion	on	these consolidated	financial	statements	based	on	our	audits.

We	conducted	our	audits	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States).	Those	standards require	that	we	plan	and	perform	the	audit	to	obtain	reasonable	assurance	about	whether	the	financial	statements	are	free	of	material	misstatement.	An audit	includes	examining,	on	a	test	basis,	evidence	supporting	the	amounts	and	disclosures	in	the	financial	statements.	An	audit	also	includes	assessing the	accounting	principles	used	and	significant	estimates	made	by	management,	as	well	as	evaluating	the	overall	financial	statement	presentation.	We believe	that	our	audits	provide	a	reasonable	basis	for	our	opinion.

In	our	opinion,	the	consolidated	financial	statements	referred	to	above	present	fairly,	in	all	material	respects,	the	financial	position	of	Motorola,	Inc. and	Subsidiaries	as	of	December	31,	2008	and	2007,	and	the	results	of	their	operations	and	their	cash	flows	for	each	of	the	years	in	the	three-year	period ended	December	31,	2008,	in	conformity	with	U.S.	generally	accepted	accounting	principles.

As	discussed	in	Notes	1	and	9	to	the	consolidated	financial	statements,	effective	January	1,	2008,	the	Company	adopted	the	provisions	of	Statement of	Financial	Accounting	Standards	No.	157,	Fair	Value	Measurements.	Also,	as	discussed	in	Notes	1	and	7	to	the	consolidated	financial	statements, effective	January	1,	2008,	the	Company	adopted	the	provisions	of	Emerging	Issues	Task	Force	Issue	No.	06-4,	Accounting	for	Deferred	Compensation and	Postretirement	Benefit	Aspects	of	Endorsement	Split-Dollar	Life	Insurance	Arrangements.	Also,	as	discussed	in	Notes	1	and	6	to	the	consolidated financial	statements,	effective	January	1,	2007,	the	Company	adopted	the	provisions	of	Financial	Accounting	Standards	Board	Interpretation	No.	48, Accounting	for	Uncertainty	in	Income	Taxes.	Also,	effective	December	31,	2006,	the	Company	adopted	the	provisions	of	Statement	of	Financial Accounting	Standards	No.	158,	Employers'	Accounting	for	Defined	Benefit	Pension	and	Other	Postretirement	Plans	—	an	amendment	of	FASB Statements	No.	87,	88,	106,	and	132(R).

We	also	have	audited,	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States),	Motorola,	Inc.'s internal	control	over	financial	reporting	as	of	December	31,	2008,	based	on	criteria	established	in	Internal	Control	—	Integrated	Framework	issued	by	the Committee	of	Sponsoring	Organizations	of	the	Treadway	Commission	(COSO),	and	our	report	dated	February	26,	2009	expressed	an	unqualified	opinion on	the	effectiveness	of	the	Company's	internal	control	over	financial	reporting.

Chicago,	Illinois

# Consolidated	Statements	of	Operations

| (In	millions,	except	per	share	amounts) | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| Net\tsales | $30,146 | $36,622 | $42,847 |
| Costs\tof\tsales | 21,751 | 26,670 | 30,120 |
| Gross\tmargin | 8,395 | 9,952 | 12,727 |
| Selling,\tgeneral\tand\tadministrative\texpenses | 4,330 | 5,092 | 4,504 |
| Research\tand\tdevelopment\texpenditures | 4,109 | 4,429 | 4,106 |
| Other\tcharges | 2,347 | 984 | 25 |
| Operating\tearnings\t(loss) | (2,391) | (553) | 4,092 |
| Other\tincome\t(expense): |  |  |  |
| Interest\tincome,\tnet | 48 | 91 | 326 |
| Gains\ton\tsales\tof\tinvestments\tand\tbusinesses,\tnet | 82 | 50 | 41 |
| Other | (376) | 22 | 151 |
| Total\tother\tincome\t(expense) | (246) | 163 | 518 |
| Earnings\t(loss)\tfrom\tcontinuing\toperations\tbefore\tincome\ttaxes | (2,637) | (390) | 4,610 |
| Income\ttax\texpense\t(benefit) | 1,607 | (285) | 1,349 |
| Earnings\t(loss)\tfrom\tcontinuing\toperations | (4,244) | (105) | 3,261 |
| Earnings\tfrom\tdiscontinued\toperations,\tnet\tof\ttax | — | 56 | 400 |
| Net\tearnings\t(loss) | $(4,244) | $(49) | $3,661 |
| Earnings\t(loss)\tper\tcommon\tshare: |  |  |  |
| Basic: |  |  |  |
| Continuing\toperations | $(1.87) | $(0.05) | $1.33 |
| Discontinued\toperations | — | 0.03 | 0.17 |
|  | $(1.87) | $(0.02) | $1.50 |
| Diluted: |  |  |  |
| Continuing\toperations | $(1.87) | $(0.05) | $1.30 |
| Discontinued\toperations | — | 0.03 | 0.16 |
|  | $(1.87) | $(0.02) | $1.46 |
| Weighted\taverage\tcommon\tshares\toutstanding: |  |  |  |
| Basic | 2,265.4 | 2,312.7 | 2,446.3 |
| Diluted | 2,265.4 | 2,312.7 | 2,504.2 |
| Dividends\tpaid\tper\tshare | $0.20 | $0.20 | $0.18 |

See	accompanying	notes	to	consolidated	financial	statements.

# Consolidated	Balance	Sheets

| (In	millions,	except	per	share	amounts) | 2008 | 2007 |
| :--- | :--- | :--- |
| ASSETS |  |  |
| Cash\tand\tcash\tequivalents | $3,064 | $2,752 |
| Sigma\tFund | 3,690 | 5,242 |
| Short-term\tinvestments | 225 | 612 |
| Accounts\treceivable,\tnet | 3,493 | 5,324 |
| Inventories,\tnet | 2,659 | 2,836 |
| Deferred\tincome\ttaxes | 1,092 | 1,891 |
| Other\tcurrent\tassets | 3,140 | 3,565 |
| Total\tcurrent\tassets | 17,363 | 22,222 |
| Property,\tplant\tand\tequipment,\tnet | 2,442 | 2,480 |
| Sigma\tFund | 466 | — |
| Investments | 517 | 837 |
| Deferred\tincome\ttaxes | 2,428 | 2,454 |
| Goodwill | 2,837 | 4,499 |
| Other\tassets | 1,816 | 2,320 |
| Total\tassets | $27,869 | $34,812 |
| LIABILITIES\tAND\tSTOCKHOLDERS'\tEQUITY |  |  |
| Notes\tpayable\tand\tcurrent\tportion\tof\tlong-term\tdebt | $92 | $332 |
| Accounts\tpayable | 3,188 | 4,167 |
| Accrued\tliabilities | 7,340 | 8,001 |
| Total\tcurrent\tliabilities | 10,620 | 12,500 |
| Long-term\tdebt | 4,092 | 3,991 |
| Other\tliabilities | 3,650 | 2,874 |
| Stockholders'\tequity |  |  |
| Preferred\tstock,\t$100\tpar\tvalue | — | — |
| Common\tstock,\t$3\tpar\tvalue | 6,831 | 6,792 |
| Issued\tshares:\t2008\t—\t2,276.9\tand\t2007\t—\t2,264.0\tand |  |  |
| Outstanding\tshares:\t2008\t—\t2,276.5\tand\t2007\t—\t2,263.1 |  |  |
| Additional\tpaid-in\tcapital | 1,003 | 782 |
| Retained\tearnings | 3,878 | 8,579 |
| Non-owner\tchanges\tto\tequity | (2,205) | (706) |
| Total\tstockholders'\tequity | 9,507 | 15,447 |
| Total\tliabilities\tand\tstockholders'\tequity | $27,869 | $34,812 |

# Consolidated	Statements	of	Stockholders'	Equity

# Non-Owner	Changes	To	Equity

| (In	millions,	except	per	share	amounts) | Shares | Common<br>Stock	and<br>Additional<br>Paid-In<br>Capital | Fair	Value<br>Adjustment<br>To	Available<br>For	Sale<br>Securities,<br>Net	of	Tax | Foreign<br>Currency<br>Translation<br>Adjustments,<br>Net	of	Tax | Retirement<br>Benefits<br>Adjustments,<br>Net	of	Tax | Other<br>Items,<br>Net	of	Tax | Retained<br>Earnings | Comprehensive<br>Earnings	(Loss) |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Balances\tat\tJanuary\t1,\t2006 | 2,502.7 | 12,199 | 97 | (253) | (1,269) | 2 | 5,897 |  |
| Net\tearnings |  |  |  |  |  |  | 3,661 | $3,661 |
| Net\tunrealized\tlosses\ton\tsecurities\t(net\tof\ttax\tof\t$37) |  |  | (60) |  |  |  |  | (60) |
| Foreign\tcurrency\ttranslation\tadjustments\t(net\tof\ttax\tof\t$1) |  |  |  | 127 |  |  |  | 127 |
| Year-end\tand\tother\tretirement\tadjustments\t(net\tof\ttax\tof\t$150) |  |  |  |  | (308) |  |  | 206 |
| Issuance\tof\tcommon\tstock\tand\tstock\toptions\texercised | 68.1 | 916 |  |  |  |  |  |  |
| Share\trepurchase\tprogram | (171.7) | (3,826) |  |  |  |  |  |  |
| Excess\ttax\tbenefits\tfrom\tshare-based\tcompensation |  | 165 |  |  |  |  |  |  |
| Stock\toption\tand\temployee\tstock\tpurchase\tplan\texpense |  | 252 |  |  |  |  |  |  |
| Net\tgain\ton\tderivative\tinstruments\t(net\tof\ttax\tof\t$6) |  |  |  |  |  | 14 |  | 14 |
| Dividends\tdeclared\t($0.19\tper\tshare) |  |  |  |  |  |  | (472) |  |
| Balances\tat\tDecember\t31,\t2006 | 2,399.1 | 9,706 | 37 | (126) | (1,577) | 16 | 9,086 | $3,948 |
| Cumulative\teffect\t—\tFIN\t48 |  | 93 |  |  |  |  | 27 |  |
| Effect\tof\tNon-U.S.\tpension\tplan\tmeasurement\tdate\tchange |  |  |  |  |  |  | (17) |  |
| Balances\tat\tJanuary\t1,\t2007 | 2,399.1 | 9,799 | 37 | (126) | (1,577) | 16 | 9,096 |  |
| Net\tloss |  |  |  |  |  |  | (49) | $(49) |
| Net\tunrealized\tlosses\ton\tsecurities\t(net\tof\ttax\tof\t$58) |  |  | (96) |  |  |  |  | (96) |
| Foreign\tcurrency\ttranslation\tadjustments\t(net\tof\ttax\tof\t$3) |  |  |  | 142 |  |  |  | 142 |
| Amortization\tof\tretirement\tbenefits\tadjustments\t(net\tof\ttax\tof\t$39) |  |  |  |  | 62 |  |  | 62 |
| Year-end\tand\tother\tretirement\tadjustments\t(net\tof\ttax\tof\t$328) |  |  |  |  | 852 |  |  | 852 |
| Issuance\tof\tcommon\tstock\tand\tstock\toptions\texercised | 36.1 | 484 |  |  |  |  |  |  |
| Share\trepurchase\tprogram | (171.2) | (3,035) |  |  |  |  |  |  |
| Excess\ttax\tbenefits\tfrom\tshare-based\tcompensation |  | 50 |  |  |  |  |  |  |
| Stock\toption\tand\temployee\tstock\tpurchase\tplan\texpense |  | 276 |  |  |  |  |  |  |
| Net\tloss\ton\tderivative\tinstruments\t(net\tof\ttax\tof\t$6) |  |  |  |  |  | (16) |  | (16) |
| Dividends\tdeclared\t($0.20\tper\tshare) |  |  |  |  |  |  | (468) |  |
| Balances\tat\tDecember\t31,\t2007 | 2,264.0 | $7,574 | $(59) | $16 | $(663) | $— | $8,579 | $895 |
| Cumulative\teffect\t—\tPostretirement\tInsurance\tPlan |  |  |  |  | (41) |  | (4) |  |
| Balances\tat\tJanuary\t1,\t2008 | 2,264.0 | 7,574 | (59) | 16 | (704) | — | 8,575 |  |
| Net\tloss |  |  |  |  |  |  | (4,244) | $(4,244) |
| Net\tunrealized\tgains\ton\tsecurities\t(net\tof\ttax\tof\t$36) |  |  | 61 |  |  |  |  | 61 |
| Foreign\tcurrency\ttranslation\tadjustments\t(net\tof\ttax\tof\t$39) |  |  |  | (149) |  |  |  | (149) |
| Amortization\tof\tretirement\tbenefit\tadjustments\t(net\tof\ttax\tof\t$10) |  |  |  |  | 19 |  |  | 19 |
|  |  |  |  |  | (42) |  |  | (42) |
| Year-end\tand\tother\tretirement\tadjustments\t(net\tof\ttax\tof\t$793) |  |  |  |  | (1,340) |  |  | (1,340) |
| Issuance\tof\tcommon\tstock\tand\tstock\toptions\texercised | 21.9 | 197 |  |  |  |  |  |  |
| Share\trepurchase\tprogram | (9.0) | (138) |  |  |  |  |  |  |
| Tax\tshortfalls\tfrom\tshare-based\tcompensation |  | (6) |  |  |  |  |  |  |
| Stock\toption\tand\temployee\tstock\tpurchase\tplan\texpense |  | 207 |  |  |  |  |  |  |
| Net\tloss\ton\tderivative\tinstruments\t(net\tof\ttax\tof\t$5) |  |  |  |  |  | (7) |  | (7) |
| Dividends\tdeclared\t($0.20\tper\tshare) |  |  |  |  |  |  | (453) |  |
| Balances\tat\tDecember\t31,\t2008 | 2,276.9 | $7,834 | $2 | $(133) | $(2,067) | $(7) | $3,878 | $(5,702) |

# Consolidated	Statements	of	Cash	Flows

| (In	millions) | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| Operating |  |  |  |
| Net\tearnings\t(loss) | $(4,244) | $(49) | $3,661 |
| Less:\tEarnings\tfrom\tdiscontinued\toperations | — | 56 | 400 |
| Earnings\t(loss)\tfrom\tcontinuing\toperations | (4,244) | (105) | 3,261 |
| Adjustments\tto\treconcile\tearnings\t(loss)\tfrom\tcontinuing\toperations\tto\tnet\tcash\tprovided\tby\toperating\tactivities: |  |  |  |
| Depreciation\tand\tamortization | 831 | 903 | 558 |
| Non-cash\tother\tcharges | 2,516 | 213 | 49 |
| Share-based\tcompensation\texpense | 280 | 315 | 276 |
| Gains\ton\tsales\tof\tinvestments\tand\tbusinesses,\tnet | (82) | (50) | (41) |
| Deferred\tincome\ttaxes,\tincluding\tchange\tin\tvaluation\tallowance | 1,698 | (747) | 838 |
| Change\tin\tassets\tand\tliabilities,\tnet\tof\teffects\tof\tacquisitions\tand\tdispositions: |  |  |  |
| Accounts\treceivable | 1,891 | 2,538 | (1,775) |
| Inventories | (54) | 556 | (718) |
| Other\tcurrent\tassets | 466 | (705) | (388) |
| Accounts\tpayable\tand\taccrued\tliabilities | (1,631) | (2,303) | 1,654 |
| Other\tassets\tand\tliabilities | (1,429) | 170 | (215) |
| Net\tcash\tprovided\tby\toperating\tactivities\tfrom\tcontinuing\toperations | 242 | 785 | 3,499 |
| Investing |  |  |  |
| Acquisitions\tand\tinvestments,\tnet | (282) | (4,568) | (1,068) |
| Proceeds\tfrom\tsale\tof\tinvestments\tand\tbusinesses | 93 | 411 | 2,001 |
| Distributions\tfrom\tinvestments | 113 | — | — |
| Capital\texpenditures | (504) | (527) | (649) |
| Proceeds\tfrom\tsale\tof\tproperty,\tplant\tand\tequipment | 133 | 166 | 85 |
| Proceeds\tfrom\tsales\t(purchases)\tof\tSigma\tFund\tinvestments,\tnet | 853 | 6,889 | (1,337) |
| Proceeds\tfrom\tsales\t(purchases)\tof\tshort-term\tinvestments,\tnet | 388 | 8 | (476) |
| Net\tcash\tprovided\tby\t(used\tfor)\tinvesting\tactivities\tfrom\tcontinuing\toperations | 794 | 2,379 | (1,444) |
| Financing |  |  |  |
| Proceeds\tfrom\t(repayment\tof)\tcommercial\tpaper\tand\tshort-term\tborrowings,\tnet | (50) | (242) | 66 |
| Repayment\tof\tdebt | (225) | (1,386) | (18) |
| Proceeds\tfrom\tissuance\tof\tdebt,\tnet | 7 | 1,415 | — |
| Issuance\tof\tcommon\tstock | 145 | 440 | 918 |
| Purchase\tof\tcommon\tstock | (138) | (3,035) | (3,826) |
| Proceeds\tfrom\tsettlement\tof\tfinancial\tinstruments | 158 | — | — |
| Payment\tof\tdividends | (453) | (468) | (443) |
| Distribution\tto\tdiscontinued\toperations | (90) | (75) | (23) |
| Other,\tnet | 1 | 50 | 165 |
| Net\tcash\tused\tfor\tfinancing\tactivities\tfrom\tcontinuing\toperations | (645) | (3,301) | (3,161) |
| Effect\tof\texchange\trate\tchanges\ton\tcash\tand\tcash\tequivalents\tfrom\tcontinuing\toperations | (79) | 73 | 148 |
| Net\tincrease\t(decrease)\tin\tcash\tand\tcash\tequivalents | 312 | (64) | (958) |
| Cash\tand\tcash\tequivalents,\tbeginning\tof\tyear | 2,752 | 2,816 | 3,774 |
| Cash\tand\tcash\tequivalents,\tend\tof\tyear | $3,064 | $2,752 | $2,816 |
| Cash\tFlow\tInformation |  |  |  |
| Cash\tpaid\tduring\tthe\tyear\tfor: |  |  |  |
| Interest,\tnet | $252 | $312 | $322 |
| Income\ttaxes,\tnet\tof\trefunds | 407 | 440 | 463 |

# Notes	to	Consolidated	Financial	Statements

# (Dollars	in	millions,	except	as	noted)

# 1. Summary	of	Significant	Accounting	Policies

Principles	of	Consolidation:		The	consolidated	financial	statements	include	the	accounts	of	the	Company	and	all	controlled	subsidiaries.	All intercompany	transactions	and	balances	have	been	eliminated.

Revenue	Recognition:		The	Company's	material	revenue	streams	are	the	result	of	a	wide	range	of	activities,	from	the	delivery	of	stand-alone equipment	to	custom	design	and	installation	over	a	period	of	time	to	bundled	sales	of	equipment,	software	and	services.	The	Company	recognizes	revenue when	persuasive	evidence	of	an	arrangement	exists,	delivery	has	occurred,	the	sales	price	is	fixed	or	determinable,	and	collectibility	of	the	sales	price	is reasonably	assured.	In	addition	to	these	general	revenue	recognition	criteria,	the	following	specific	revenue	recognition	policies	are	followed:

Products	and	Equipment—For	product	and	equipment	sales,	revenue	recognition	generally	occurs	when	products	or	equipment	have	been	shipped, risk	of	loss	has	transferred	to	the	customer,	objective	evidence	exists	that	customer	acceptance	provisions	have	been	met,	no	significant	obligations remain	and	allowances	for	discounts,	price	protection,	returns	and	customer	incentives	can	be	reliably	estimated.	Recorded	revenues	are	reduced	by	these allowances.	The	Company	bases	its	estimates	on	historical	experience	taking	into	consideration	the	type	of	products	sold,	the	type	of	customer,	and	the type	of	transaction	specific	in	each	arrangement.	Where	customer	incentives	cannot	be	reliably	estimated,	the	Company	recognizes	revenue	at	the	time	the product	sells	through	the	distribution	channel	to	the	end	customer.

Long-Term	Contracts—For	long-term	contracts	that	involve	customization	of	the	Company's	equipment	or	software,	the	Company	generally recognizes	revenue	using	the	percentage	of	completion	method	based	on	the	percentage	of	costs	incurred	to	date	compared	to	the	total	estimated	costs	to complete	the	contract.	In	certain	instances,	when	revenues	or	costs	associated	with	long-term	contracts	cannot	be	reliably	estimated	or	the	contract involves	unproven	technologies	or	other	inherent	hazards,	revenues	and	costs	are	deferred	until	the	project	is	complete	and	customer	acceptance	is obtained.	When	current	estimates	of	total	contract	revenue	and	contract	costs	indicate	a	contract	loss,	the	loss	is	recognized	in	the	period	it	becomes evident.

Services—Revenue	for	services	is	generally	recognized	ratably	over	the	contract	term	as	services	are	performed.

Software	and	Licenses—Revenue	from	pre-paid	perpetual	licenses	is	recognized	at	the	inception	of	the	arrangement,	presuming	all	other	relevant revenue	recognition	criteria	are	met.	Revenue	from	non-perpetual	licenses	or	term	licenses	is	recognized	ratably	over	the	period	that	the	licensee	uses	the license.	Revenue	from	software	maintenance,	technical	support	and	unspecified	upgrades	is	generally	recognized	over	the	period	that	these	services	are delivered.

Multiple	Element	Arrangements—Arrangements	with	customers	may	include	multiple	deliverables,	including	any	combination	of	products, equipment,	services	and	software.	For	multiple	element	arrangements	which	include	software	or	software-related	elements,	the	Company	applies	the provisions	of	AICPA	Statement	of	Position	No.	97-2,	"Software	Revenue	Recognition,"	to	determine	separate	units	of	accounting	and	the	amount	of	the arrangement	fee	to	be	allocated	to	those	separate	units	of	accounting.	Multiple	element	arrangements	that	include	software	are	separated	into	more	than one	unit	of	accounting	when	the	following	criteria	are	met:	(i)	the	functionality	of	the	delivered	element(s)	is	not	dependent	on	the	undelivered element(s),	(ii)	there	is	vendor-specific	objective	evidence	of	the	fair	value	of	the	undelivered	element(s),	and	(iii)	general	revenue	recognition	criteria related	to	the	delivered	element(s)	have	been	met.	If	any	of	these	criteria	are	not	met,	revenue	is	deferred	until	the	criteria	are	met	or	the	last	element	has been	delivered.

For	all	other	multiple	element	arrangements,	deliverables	are	separated	into	more	than	one	unit	of	accounting	when	the	following	criteria	are	met: (i)	the	delivered	element(s)	have	value	to	the	customer	on	a	stand-alone	basis,	(ii)	objective	and	reliable	evidence	of	fair	value	exists	for	the	undelivered element(s),	and	(iii)	delivery	of	the	undelivered	element(s)	is	probable	and	substantially	in	the	control	of	the	Company.	Revenue	is	allocated	to	each	unit of	accounting	based	on	the	relative	fair	value	of	each	accounting	unit	or	using	the	residual	method	if	objective	evidence	of	fair	value	does	not	exist	for	the delivered	element(s).	If	any	of	these	criteria	are	not	met,	revenue	is	deferred	until	the	criteria	are	met	or	the	last	element	has	been	delivered.

When	elements	of	an	arrangement	are	separated	into	more	than	one	unit	of	accounting,	revenue	is	recognized	for	each	separate	unit	of	accounting based	on	the	nature	of	the	revenue	as	described	above.

Sales	and	Use	Taxes—The	Company	records	taxes	imposed	on	revenue-producing	transactions,	including	sales,	use,	value	added	and	excise	taxes, on	a	net	basis	with	such	taxes	excluded	from	revenue.

Cash	Equivalents:		The	Company	considers	all	highly-liquid	investments	purchased	with	an	original	maturity	of	three	months	or	less	to	be	cash equivalents.	At	December	31,	2008,	and	2007,	restricted	cash	was	$343	million	and	$158	million,	respectively.

Sigma	Fund:		The	Company	and	its	wholly-owned	subsidiaries	invest	most	of	their	U.S.	dollar-denominated	cash	in	a	fund	(the	"Sigma	Fund")	that is	designed	to	provide	investment	returns	similar	to	a	money	market	fund.	The	Sigma	Fund	portfolio	is	managed	by	four	premier	independent	investment management	firms.	The	investment	guidelines	of	the	Sigma	Fund	require	that	purchased	investments	must	be	high-quality,	investment	grade	(rated	at least	A/A-1	by	Standard	&	Poor's	or	A2/P-1	by	Moody's	Investor	Services)	U.S.	dollar-denominated	debt	obligations,	including	certificates	of	deposit, commercial	paper,	government	bonds,	corporate	bonds	and	asset-backed	and	mortgaged-backed	securities.	Except	for	debt	obligations	of	the U.S.	treasury	and	U.S.	agencies,	no	more	than	5%	of	the	Sigma	Fund	portfolio	is	to	consist	of	debt	obligations	of	a	single	issuer.	The	Sigma	Fund investment	policies	further	require	that	floating	rate	investments	must	have	a	maturity	at	purchase	date	that	is	not	in	excess	of	36	months	with	an	interest rate	that	is	reset	at	least	annually.	The	average	interest	rate	that	is	reset	of	investments	held	in	the	Sigma	Fund	must	be	120	days	or	less.

Investments	in	Sigma	Fund	are	carried	at	fair	value.	The	Company	primarily	relies	on	valuation	pricing	models	and	broker	quotes	to	determine	the fair	value	of	investments	in	the	Sigma	Fund.	The	valuation	models	are	developed	and	maintained	by	third-party	pricing	services,	and	use	a	number	of standard	inputs,	including	benchmark	yields,	reported	trades,	broker/dealer	quotes	where	the	counterparty	is	standing	ready	and	able	to	transact,	issuer spreads,	benchmark	securities,	bids,	offers	and	reference	data.	For	each	asset	class,	quantifiable	inputs	related	to	perceived	market	movements	and	sector news	may	also	be	considered	in	addition	to	the	standard	inputs.

The	Company	considers	a	decline	in	the	fair	value	of	a	security	in	Sigma	Fund	to	be	temporary	if	it	believes	that	it	will	collect	all	amounts	it	is	owed on	the	security	according	to	its	contractual	terms,	which	may	be	at	maturity.	If	it	becomes	probable	that	the	Company	will	not	collect	all	amounts	that	it	is owed	according	to	a	security's	contractual	terms,	it	considers	the	security	to	be	impaired	and	adjusts	its	cost	basis	of	the	security	by	the	related impairment	loss.	Beginning	in	the	fourth	quarter	of	2008,	all	changes	in	the	fair	value	of	Sigma	Fund	investments,	including	temporary	unrealized	gains (losses)	and	impairment	charges,	are	recorded	in	Other	within	Other	income	(expense)	in	the	Company's	consolidated	statements	of	operations.

Investments:		Investments	in	equity	and	debt	securities	classified	as	available-for-sale	are	carried	at	fair	value.	Debt	securities	classified	as	held-to- maturity	are	carried	at	amortized	cost.	Equity	securities	that	are	restricted	for	more	than	one	year	or	that	are	not	publicly	traded	are	carried	at	cost.	Certain investments	are	accounted	for	using	the	equity	method	if	the	company	has	significant	influence	over	the	issuing	entity.

The	Company	assesses	declines	in	the	fair	value	of	investments	to	determine	whether	such	declines	are	other-than-temporary.	This	assessment	is made	considering	all	available	evidence,	including	changes	in	general	market	conditions,	specific	industry	and	individual	company	data,	the	length	of time	and	the	extent	to	which	the	fair	value	has	been	less	than	cost,	the	financial	condition	and	the	near-term	prospects	of	the	entity	issuing	the	security, and	the	Company's	ability	and	intent	to	hold	investment	until	recovery.	Other-than-temporary	impairments	of	investments	are	recorded	to	Other	within Other	income	(expense)	in	the	Company's	consolidated	statements	of	operations	in	the	period	in	which	they	become	impaired.

Inventories:		Inventories	are	valued	at	the	lower	of	average	cost	(which	approximates	computation	on	a	first-in,	first-out	basis)	or	market	(net realizable	value	or	replacement	cost).

Property,	Plant	and	Equipment:		Property,	plant	and	equipment	are	stated	at	cost	less	accumulated	depreciation.	Depreciation	is	recorded	using straight-line	and	declining-balance	methods,	based	on	the	estimated	useful	lives	of	the	assets	(buildings	and	building	equipment,	5-40	years;	machinery and	equipment,	2-10	years)	and	commences	once	the	assets	are	ready	for	their	intended	use.

Goodwill	and	Intangible	Assets:		Goodwill	is	not	amortized,	but	instead	is	tested	for	impairment	at	least	annually.	The	goodwill	impairment	test	is performed	at	the	reporting	unit	level	and	is	a	two-step	analysis.	First,	the	fair	value	("FV")	of	each	reporting	unit	is	compared	to	its	book	value.	If	the	FV of	the	reporting	unit	is	less	than

its	book	value,	the	Company	performs	a	hypothetical	purchase	price	allocation	based	on	the	reporting	unit's	FV	to	determine	the	FV	of	the	reporting unit's	goodwill.	FV	is	determined	using	a	combination	of	present	value	techniques	and	market	prices	of	comparable	businesses.

Intangible	assets	are	generally	amortized	on	a	straight	line	basis	over	their	respective	estimated	useful	lives	ranging	from	one	to	14	years.	The Company	has	no	intangible	assets	with	indefinite	useful	lives.

Impairment	of	Long-Lived	Assets:		Long-lived	assets,	which	include	intangible	assets,	held	and	used	by	the	Company	are	reviewed	for	impairment whenever	events	or	changes	in	circumstances	indicate	that	the	carrying	amount	of	assets	may	not	be	recoverable.	The	Company	evaluates	recoverability of	assets	to	be	held	and	used	by	comparing	the	carrying	amount	of	an	asset	(group)	to	future	net	undiscounted	cash	flows	to	be	generated	by	the	asset (group).	If	an	asset	is	considered	to	be	impaired,	the	impairment	to	be	recognized	is	equal	to	the	amount	by	which	the	carrying	amount	of	the	asset exceeds	the	asset's	fair	value	calculated	using	a	discounted	future	cash	flows	analysis	or	market	comparables.	Assets	held	for	sale,	if	any,	are	reported	at the	lower	of	the	carrying	amount	or	fair	value	less	cost	to	sell.

Income	Taxes:		Deferred	tax	assets	and	liabilities	are	recognized	for	the	future	tax	consequences	attributable	to	differences	between	the	financial statement	carrying	amounts	of	existing	assets	and	liabilities	and	their	respective	tax	bases	and	operating	loss	and	tax	credit	carry	forwards.	Deferred	tax assets	and	liabilities	are	measured	using	enacted	tax	rates	expected	to	apply	to	taxable	income	in	the	years	in	which	those	temporary	differences	are expected	to	be	recovered	or	settled.	The	effect	on	deferred	tax	assets	and	liabilities	from	a	change	in	tax	rates	is	recognized	in	the	period	that	includes	the enactment	date.

Deferred	tax	assets	are	reduced	by	valuation	allowances	if,	based	on	the	consideration	of	all	available	evidence,	it	is	more	likely	than	not	that	some portion	of	the	deferred	tax	asset	will	not	be	realized.	Significant	weight	is	given	to	evidence	that	can	be	objectively	verified.	The	Company	evaluates deferred	income	taxes	on	a	quarterly	basis	to	determine	if	valuation	allowances	are	required	by	considering	available	evidence.	Deferred	tax	assets	are realized	by	having	sufficient	future	taxable	income	to	allow	the	related	tax	benefits	to	reduce	taxes	otherwise	payable.	The	sources	of	taxable	income	that may	be	available	to	realize	the	benefit	of	deferred	tax	assets	are	future	reversals	of	existing	taxable	temporary	differences,	future	taxable	income exclusive	of	reversing	temporary	differences	and	carry-forwards,	taxable	income	in	carry-back	years	and	tax	planning	strategies	that	are	both	prudent	and feasible.

On	January	1,	2007,	the	Company	adopted	FASB	Interpretation	No.	48,	Accounting	for	Uncertainty	in	Income	Taxes	("FIN	48").	Beginning January	1,	2007,	the	Company	recognizes	the	effect	of	income	tax	positions	only	if	sustaining	those	positions	is	more	likely	than	not	in	accordance	with the	provisions	of	FIN	48.	Changes	in	recognition	or	measurement	are	reflected	in	the	period	in	which	a	change	in	judgment	occurs.	Prior	to	January	1, 2007,	the	Company	recognized	the	effect	of	income	tax	positions	only	if	such	positions	were	probable	of	being	sustained.	The	Company	records	interest related	to	unrecognized	tax	benefits	in	Interest	expense	and	penalties	in	Selling,	general	and	administrative	expenses	in	the	Company's	consolidated statements	of	operations.

Long-term	Receivables:		Long-term	receivables	include	trade	receivables	where	contractual	terms	of	the	note	agreement	are	greater	than	one	year. Long-term	receivables	are	considered	impaired	when	management	determines	collection	of	all	amounts	due	according	to	the	contractual	terms	of	the	note agreement,	including	principal	and	interest,	is	no	longer	probable.	Impaired	long-term	receivables	are	valued	based	on	the	present	value	of	expected future	cash	flows,	discounted	at	the	receivable's	effective	rate	of	interest,	or	the	fair	value	of	the	collateral	if	the	receivable	is	collateral	dependent. Interest	income	and	late	fees	on	impaired	long-term	receivables	are	recognized	only	when	payments	are	received.	Previously	impaired	long-term receivables	are	no	longer	considered	impaired	and	are	reclassified	to	performing	when	they	have	performed	under	a	workout	or	restructuring	for	four consecutive	quarters.

Foreign	Currency:		Certain	of	the	Company's	non-U.S.	operations	use	their	respective	local	currency	as	their	functional	currency.	Those	operations that	do	not	have	the	U.S.	dollar	as	their	functional	currency	translate	assets	and	liabilities	at	current	rates	of	exchange	in	effect	at	the	balance	sheet	date and	revenues	and	expenses	using	rates	that	approximate	those	in	effect	during	the	period.	The	resulting	translation	adjustments	are	included	as	a component	of	Non-owner	changes	to	equity	in	the	Company's	consolidated	balance	sheets.	For	those	operations	that	have	the	U.S.	dollar	as	their functional	currency,	transactions	denominated	in	the	local	currency	are	measured	in	U.S.	dollars	using	the	current	rates	of	exchange	for	monetary	assets and	liabilities	and	historical	rates	of	exchange	for	nonmonetary	assets.	Gains	and	losses	from	remeasurement	of	monetary	assets	and	liabilities	are included	in	Other	within	Other	income	(expense)	within	the	Company's	consolidated	statements	of	operations.

Derivative	Instruments:		Gains	and	losses	on	hedges	of	existing	assets	or	liabilities	are	marked-to-market	and	the	result	is	included	in	Other	within Other	income	(expense)	within	the	Company's	consolidated	statements	of	operations.	Gains	and	losses	on	financial	instruments	that	qualify	for	hedge accounting	and	are	used	to	hedge	firm	future	commitments	or	forecasted	transactions	are	deferred	until	such	time	as	the	underlying	transactions	are recognized	or	recorded	immediately	when	the	transaction	is	no	longer	expected	to	occur.	Gains	or	losses	on	financial	instruments	that	do	not	qualify	as hedges	under	Statement	of	Financial	Accounting	Standards	("SFAS")	No.	133,	"Accounting	for	Derivative	Instruments	and	Hedging	Activities" ("SFAS	133")	are	recognized	immediately	as	income	or	expense.

Earnings	(Loss)	Per	Share:		The	Company	calculates	its	basic	earnings	(loss)	per	share	based	on	the	weighted-average	effect	of	all	common	shares issued	and	outstanding.	Net	earnings	(loss)	is	divided	by	the	weighted	average	common	shares	outstanding	during	the	period	to	arrive	at	the	basic earnings	(loss)	per	share.	Diluted	earnings	(loss)	per	share	is	calculated	by	dividing	net	earnings	(loss)	by	the	sum	of	the	weighted	average	number	of common	shares	used	in	the	basic	earnings	(loss)	per	share	calculation	and	the	weighted	average	number	of	common	shares	that	would	be	issued	assuming exercise	or	conversion	of	all	potentially	dilutive	securities,	excluding	those	securities	that	would	be	anti-dilutive	to	the	earnings	(loss)	per	share calculation.	Both	basic	and	diluted	earnings	(loss)	per	share	amounts	are	calculated	for	earnings	(loss)	from	continuing	operations	and	net	earnings	(loss) for	all	periods	presented.

Share-Based	Compensation	Costs:		The	Company	has	incentive	plans	that	reward	employees	with	stock	options,	stock	appreciation	rights, restricted	stock	and	restricted	stock	units,	as	well	as	an	employee	stock	purchase	plan.	Prior	to	January	1,	2006,	the	Company	applied	the	intrinsic	value method	of	accounting	for	share-based	compensation.	On	January	1,	2006,	the	Company	adopted	SFAS	No.	123R,	"Share-Based	Payment" ("SFAS	123R")	using	the	modified	prospective	transition	method.	The	Company	had	previously	disclosed	the	fair	value	of	its	stock	options	in	its footnotes.	The	amount	of	compensation	cost	for	share-based	awards	is	measured	based	on	the	fair	value	of	the	awards,	as	of	the	date	that	the	share-based awards	are	issued	and	adjusted	to	the	estimated	number	of	awards	that	are	expected	to	vest.	The	fair	value	of	stock	options	and	stock	appreciation	rights	is generally	determined	using	a	Black-Scholes	option	pricing	model	which	incorporates	assumptions	about	expected	volatility,	risk	free	rate,	dividend	yield, and	expected	life.	Compensation	cost	for	share-based	awards	is	recognized	on	a	straight-line	basis	over	the	vesting	period.

Retirement	Benefits:		The	Company	records	annual	expenses	relating	to	its	pension	benefit	and	postretirement	plans	based	on	calculations	which include	various	actuarial	assumptions,	including	discount	rates,	assumed	asset	rates	of	return,	compensation	increases,	turnover	rates	and	health	care	cost trend	rates.	The	Company	reviews	its	actuarial	assumptions	on	an	annual	basis	and	makes	modifications	to	the	assumptions	based	on	current	rates	and trends.	The	effects	of	the	gains,	losses,	and	prior	service	costs	and	credits	are	amortized	over	future	service	periods.	The	funding	status,	or	projected benefit	obligation	less	plan	assets,	for	each	plan,	is	reflected	in	the	Company's	consolidated	balance	sheets	using	a	December	31	measurement	date.

Advertising	Expense:		Advertising	expenses,	which	are	the	external	costs	of	marketing	the	Company's	products,	are	expensed	as	incurred. Advertising	expenses	were	$790	million,	$1.1	billion	and	$1.2	billion	for	the	years	ended	December	31,	2008,	2007,	and	2006,	respectively.

Use	of	Estimates:		The	preparation	of	the	accompanying	consolidated	financial	statements	in	conformity	with	accounting	principles	generally accepted	in	the	U.S.	requires	management	to	make	estimates	and	assumptions	about	future	events.	These	estimates	and	the	underlying	assumptions	affect the	amounts	of	assets	and	liabilities	reported,	disclosures	about	contingent	assets	and	liabilities,	and	reported	amounts	of	revenues	and	expenses.	Such estimates	include	the	valuation	of	accounts	receivable	and	long-term	receivables,	inventories,	Sigma	Fund,	investments,	goodwill,	intangible	and	other long-lived	assets,	legal	contingencies,	guarantee	obligations,	indemnifications,	and	assumptions	used	in	the	calculation	of	income	taxes,	retirement	and other	post-employment	benefits	and	allowances	for	discounts,	price	protection,	product	returns,	and	customer	incentives,	among	others.	These	estimates and	assumptions	are	based	on	management's	best	estimates	and	judgment.	Management	evaluates	its	estimates	and	assumptions	on	an	ongoing	basis using	historical	experience	and	other	factors,	including	the	current	economic	environment,	which	management	believes	to	be	reasonable	under	the circumstances.	We	adjust	such	estimates	and	assumptions	when	facts	and	circumstances	dictate.	Illiquid	credit	markets,	volatile	equity,	foreign	currency, energy	markets	and	declines	in	consumer	spending	have	combined	to	increase	the	uncertainty	inherent	in	such	estimates	and	assumptions.	As	future events	and	their	effects	cannot	be	determined	with	precision,	actual	results	could	differ	significantly	from	these	estimates.	Changes	in	those	estimates resulting	for	continuing	changes	in	the	economic	environment	will	be	reflected	in	the	financial	statements	in	future	periods.

Reclassifications:		Certain	amounts	in	prior	years'	financial	statements	and	related	notes	have	been	reclassified	to	conform	to	the	2008	presentation.

Recent	Accounting	Pronouncements:		The	Company	adopted	Financial	Accounting	Standards	Board	("FASB")	Statement	of	Financial Accounting	Standard	("SFAS")	No.	157,	"Fair	Value	Measurements"	("SFAS	157")	on	January	1,	2008	for	financial	assets	and	liabilities,	and	non- financial	assets	and	liabilities	that	are	recognized	or	disclosed	at	fair	value	in	the	financial	statements	on	a	recurring	basis.	SFAS	157	defines	fair	value, establishes	a	framework	for	measuring	fair	value	as	required	by	other	accounting	pronouncements	and	expands	fair	value	measurement	disclosures.	The provisions	of	SFAS	157	were	applied	prospectively	upon	adoption	and	did	not	have	a	material	impact	on	the	Company's	consolidated	financial statements.	The	disclosures	required	by	SFAS	157	are	included	in	Note	9,	"Fair	Value	Measurements,"	to	the	Company's	consolidated	financial statements.

In	October	2008,	the	FASB	issued	FASB	Staff	Position	("FSP")	157-3,	which	provided	guidance	to	clarify	the	application	of	FAS	157	in	a	market that	is	not	active.	The	Company	adopted	this	FSP	in	the	fourth	quarter	of	2008.	The	net	impact	of	this	FSP	was	immaterial.

The	Company	adopted	SFAS	No.	159,	"The	Fair	Value	Option	for	Financial	Assets	and	Financial	Liabilities—Including	an	Amendment	of	FASB Statement	No.	115"	("SFAS	159")	as	of	January	1,	2008.	SFAS	159	permits	entities	to	elect	to	measure	many	financial	instruments	and	certain	other items	at	fair	value.	The	Company	did	not	elect	the	fair	value	option	for	any	assets	or	liabilities,	which	were	not	previously	carried	at	fair	value. Accordingly,	the	adoption	of	SFAS	159	had	no	impact	on	the	Company's	consolidated	financial	statements.

# 2.	Discontinued	Operations

During	the	year	ended	December	31,	2006,	the	Company	completed	the	sale	of	its	automotive	electronics	business	to	Continental	AG	for $856	million	in	net	cash	received.	The	Company	recorded	a	gain	on	sale	of	business	of	$399	million	before	income	taxes,	which	is	included	in	Earnings (loss)	from	discontinued	operations,	net	of	tax,	in	the	Company's	consolidated	statements	of	operations.

On	December	2,	2004,	the	Company	completed	the	separation	and	spin-off	of	Freescale	Semiconductor,	Inc.	("Freescale	Semiconductor").	Under the	terms	of	the	Master	Separation	and	Distribution	Agreement	entered	into	between	Motorola	and	Freescale	Semiconductor,	Freescale	Semiconductor has	agreed	to	indemnify	Motorola	for	substantially	all	past,	present	and	future	liabilities	associated	with	the	semiconductor	business.	The	spin-off	was effected	by	way	of	a	pro	rata	non-cash	dividend	to	Motorola	stockholders,	which	reduced	retained	earnings	by	$2.5	billion.	The	equity	distribution	was structured	to	be	tax-free	to	Motorola	stockholders	for	U.S.	tax	purposes	(other	than	with	respect	to	any	cash	received	in	lieu	of	fractional	shares).

The	financial	results	of	the	automotive	electronics	business	and	Freescale	Semiconductor	were	reflected	as	discontinued	operations	in	the consolidated	financial	statements	and	related	notes	thereto.	During	the	year	ended	December	31,	2008,	the	discontinued	operations	activity	primarily relates	to	the	resolution	and	payment	of	certain	indemnifications	relating	to	a	divestiture.	During	the	year	ended	December	31,	2007,	the	discontinued operations	activity	primarily	relates	to	resolutions	of	certain	matters	with	the	tax	authorities	and	payments	of	post-retiree	medical	claims	to	former employees.

The	following	table	displays	summarized	activity	in	the	Company's	consolidated	statements	of	operations	for	discontinued	operations	during	the years	ended	December	31,	2007	and	2006.	The	Company	had	no	such	activity	during	the	year	end	December	31,	2008.

| Years	Ended	December	31 | 2007 | 2006 |
| :--- | :--- | :--- |
| Net\tsales | $ — | $860 |
| Operating\tearnings | 10 | 87 |
| Gains\ton\tsales\tof\tinvestments\tand\tbusinesses,\tnet | — | 399 |
| Earnings\tbefore\tincome\ttaxes | 10 | 482 |
| Income\ttax\texpense\t(benefit) | (46) | 82 |
| Earnings\tfrom\tdiscontinued\toperations,\tnet\tof\ttax | 56 | 400 |

# Statement	of	Operations	Information

| Years	Ended	December	31 | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| Other\tcharges\t(income): |  |  |  |
| Goodwill\timpairment | $1,619 | $—\t $— | $—\t $— |
| Intangibles\tamortization | 318 | 369 | 100 |
| Reorganization\tof\tbusinesses | 248 | 290 | 172 |
| Asset\timpairments | 136 | 89 | — |
| Separation-related\ttransaction\tcosts | 59 | — | — |
| Legal\tsettlements\tand\trelated\tinsurance\tmatters,\tnet | 14 | 140 | 50 |
| In-process\tresearch\tand\tdevelopment\tcharges | 1 | 96 | 33 |
| Gain\ton\tsale\tof\tproperty,\tplant\tand\tequipment | (48) | — | — |
| Charitable\tcontribution\tto\tMotorola\tFoundation | — | — | 88 |
| Settlements\tand\tcollections\trelated\tto\tTelsim | — | — | (418) |
|  | $2,347 | $984 | $25 |

# Other	Income	(Expense)

Interest	income,	net,	and	Other	both	included	in	Other	income	(expense)	consist	of	the	following:

| Years	Ended	December	31 | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| Interest\tincome,\tnet: |  |  |  |
| Interest\tincome | $272 | $456 | $661 |
| Interest\texpense | (224) | (365) | (335) |
|  | $48 | $91 | $326 |
| Other: |  |  |  |
| Investment\timpairments | $(365) | $(44) | $(27) |
| Impairment\tcharges\ton\tSigma\tFund\tinvestments | (186) | (18) | — |
| Temporary\tunrealized\tlosses\tof\tthe\tSigma\tFund\tinvestments | (101) | — | — |
| Foreign\tcurrency\tgain\t(loss) | (84) | 97 | 60 |
| U.S.\tpension\tplan\tfreeze\tcurtailment\tgain | 237 | — | — |
| Liability\textinguishment\tgain | 56 | — | — |
| Gain\ton\tinterest\trate\tswaps | 24 | — | — |
| Gain\ton\tSprint\tNextel\tderivatives | — | — | 99 |
| Other | 43 | (13) | 19 |
|  | $(376) | $22 | $151 |

# Earnings	(Loss)	Per	Common	Share

Basic	and	diluted	earnings	(loss)	per	common	share	from	both	continuing	operations	and	net	earnings	(loss),	including	discontinued	operations,	is computed	as	follows:

|  | Continuing	Operations | Continuing	Operations | Continuing	Operations | Net	Earnings	(Loss) | Net	Earnings	(Loss) | Net	Earnings	(Loss) |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Years\tEnded\tDecember\t31 | 2008 | 2007 | 2006 | 2008 | 2007 | 2006 |
| Basic\tearnings\t(loss)\tper\tcommon\tshare: |  |  |  |  |  |  |
| Earnings\t(loss) | $(4,244) | $(105) | $3,261 | $(4,244) | $(49) | $3,661 |
| Weighted\taverage\tcommon\tshares\toutstanding | 2,265.4 | 2,312.7 | 2,446.3 | 2,265.4 | 2,312.7 | 2,446.3 |
| Per\tshare\tamount | $(1.87) | $(0.05) | $1.33 | $(1.87) | $(0.02) | $1.50 |
| Diluted\tearnings\t(loss)\tper\tcommon\tshare: |  |  |  |  |  |  |
| Earnings\t(loss) | $(4,244) | $(105) | $3,261 | $(4,244) | $(49) | $3,661 |
| Weighted\taverage\tcommon\tshares\toutstanding | 2,265.4 | 2,312.7 | 2,446.3 | 2,265.4 | 2,312.7 | 2,446.3 |
| Add\teffect\tof\tdilutive\tsecurities: |  |  |  |  |  |  |
| Employee\tshare-based\tawards | — | — | 57.9 | — | — | 57.9 |
| Diluted\tweighted\taverage\tcommon\tshares\toutstanding | 2,265.4 | 2,312.7 | 2,504.2 | 2,265.4 | 2,312.7 | 2,504.2 |
| Per\tshare\tamount | $(1.87) | $(0.05) | $1.30 | $(1.87) | $(0.02) | $1.46 |

For	the	years	ended	December	31,	2008	and	2007,	the	Company	was	in	a	loss	position	and	accordingly,	the	basic	and	diluted	weighted	average shares	outstanding	are	equal	because	any	increase	to	the	basic	shares	would	be	antidilutive.	Once	the	Company	returns	to	profitability,	the	diluted	impact of	stock	options,	stock	appreciation	rights,	and	restricted	stock	units	will	be	evaluated	for	their	impact	on	the	weighted	average	shares	outstanding	for purposes	of	computing	diluted	earnings	(loss)	per	common	share.

For	the	year	ended	December	31,	2006	in	the	computation	of	diluted	earnings	(loss)	per	common	share	from	both	continuing	operations	and	on	a	net earnings	(loss)	basis,	76.6	million	stock	options	were	excluded	because	their	inclusion	would	have	been	antidilutive.

# Balance	Sheet	Information

# Sigma	Fund

Sigma	Fund	consists	of	the	following:

|  |  |  | Temporary | Temporary |
| :--- | :--- | :--- | :--- | :--- |
|  | Recorded\tValue | Recorded\tValue | Unrealized | Unrealized |
| December\t31,\t2008 | \t Current | Non-current | Gains | Losses |
| Cash | $1,108 | $—\t $—\t $— | $—\t $—\t $— | $—\t $—\t $— |
| Certificates\tof\tdeposit | 20 | — | — | — |
| Securities: |  |  |  |  |
| U.S.\tgovernment\tand\tagency\tobligations | 752 | — | — | — |
| Corporate\tbonds | 1,616 | 366 | 25 | (88) |
| Asset-backed\tsecurities | 113 | 59 | — | (24) |
| Mortgage-backed\tsecurities | 81 | 41 | — | (14) |
|  | $3,690 | $466 | $25 | $(126) |

| December	31,	2007 | Recorded	Value | Temporary<br>Unrealized<br>Gains | Temporary<br>Unrealized<br>Losses |
| :--- | :--- | :--- | :--- |
| Cash | $16 | $—\t $— | $—\t $— |
| Certificates\tof\tdeposit | 156 | — | — |
| Securities: |  |  |  |
| Commercial\tpaper | 1,282 | — | — |
| U.S.\tgovernment\tand\tagency\tobligations | 25 | — | — |
| Corporate\tbonds | 3,125 | 1 | (48) |
| Asset-backed\tsecurities | 420 | — | (5) |
| Mortgage-backed\tsecurities | 209 | — | (5) |
| Other | 9 | — | — |
|  | $5,242 | $1 | $(58) |

The	fair	market	value	of	investments	in	the	Sigma	Fund	was	$4.2	billion	and	$5.2	billion	at	December	31,	2008	and	2007,	respectively.

The	Company	considers	unrealized	losses	in	the	Sigma	Fund	to	be	temporary,	as	these	losses	have	resulted	primarily	from	the	ongoing	disruptions	in the	capital	markets.	On	the	securities	for	which	the	unrealized	losses	are	considered	temporary	(excluding	impaired	securities),	the	Company	believes	it	is probable	that	it	will	be	able	to	collect	all	amounts	it	is	owed	according	to	their	contractual	terms,	which	may	be	at	maturity.	Temporary	unrealized	losses in	the	Sigma	Fund	were	$101	million	and	$57	million	at	December	31,	2008	and	2007,	respectively.

If	it	becomes	probable	the	Company	will	not	collect	amounts	it	is	owed	on	securities	according	to	their	contractual	terms,	the	Company	considers	the security	to	be	impaired	and	adjusts	the	cost	basis	of	the	security	accordingly.	For	the	years	ended	December	31,	2008	and	2007,	impairment	charges	in	the Sigma	Fund	were	$186	million	and	$18	million,	respectively.	The	impairment	charges	were	primarily	related	to	investments	in	Lehman	Brothers Holdings,	Inc.,	Washington	Mutual,	Inc.,	and	Sigma	Finance	Corporation,	an	unrelated	special	investment	vehicle	managed	by	United	Kingdom-based Gordian	Knot,	Limited.

Securities	with	a	significant	temporary	unrealized	loss	and	a	maturity	greater	than	12	months	and	impaired	securities	have	been	classified	as	non- current	in	the	Company's	consolidated	balance	sheets.	At	December	31,	2008,	$466	million	of	the	Sigma	Fund	investments	were	classified	as	non- current,	and	the	weighted	average	maturity	of	the	Sigma	Fund	investments	classified	as	non-current	(excluding	impaired	securities)	was	16	months.	At December	31,	2007,	none	of	the	Sigma	Fund	investments	were	classified	as	non-current.

Prior	to	the	three	months	ended	December	31,	2008,	the	Company	recognized	impairment	charges	from	Sigma	Fund	investments	in	its	consolidated statements	of	operations	and	temporary	unrealized	losses	in	Sigma	Fund	investments	as	a	component	of	Non-owner	changes	to	equity	in	the	consolidated statements	of	stockholders'	equity.	During	the	three	months	ended	December	31,	2008,	the	Company	determined	that	temporary	unrealized	losses	in Sigma	Fund	investments	should	also	be	recognized	in	the	Company's	consolidated	statements	of

operations,	even	though	the	related	securities	were	not	considered	impaired.	Because	the	Sigma	Fund	uses	investment-company	accounting	in	its stand-alone	financial	statements,	it	marks	the	investments	in	the	fund	to	market	and	records	all	unrealized	gains	or	losses	in	earnings,	whether	or	not	the related	securities	are	considered	impaired.	The	Company	has	determined	that	the	stand-alone	accounting	policies	of	the	Sigma	Fund	should	be	retained	in its	consolidated	financial	statements.	Accordingly,	the	Company	recorded	$101	million	of	accumulated	temporary	unrealized	losses	in	Sigma	Fund investments	in	its	consolidated	statements	of	operations	during	the	three	months	ended	December	31,	2008,	which	represents	all	of	the	temporary unrealized	gains	and	losses	that	have	accumulated	in	Sigma	Fund	investments	as	of	December	31,	2008.	Portions	of	the	temporary	unrealized	losses recognized	in	the	three	months	ended	December	31,	2008	arose	in	periods	prior	to	the	three	months	ended	December	31,	2008	and	should	have	been reflected	in	the	Company's	consolidated	statements	of	operations	in	the	periods	in	which	they	arose.	The	Company	has	determined	that	the	impact	of	the amounts	that	arose	in	prior	periods	is	not	material	to	the	consolidated	results	of	operations	of	those	prior	periods.

During	the	year	ended	December	31,	2008,	the	Company	recorded	total	charges	related	to	Sigma	Fund	investments,	including	temporary	unrealized losses	and	impairment	charges,	of	$287	million	in	its	consolidated	statement	of	operations.	During	the	year	ended	December	31,	2007,	the	Company recorded	total	charges	of	$18	million,	all	of	which	were	impairment	charges,	in	its	consolidated	statements	of	operations.	There	were	no	temporary unrealized	losses	or	impairment	charges	in	the	Sigma	Fund	investment	portfolio	during	the	year	ended	December	31,	2006.

# Investments

Investments	consist	of	the	following:

|  | Recorded	Value | Recorded	Value | Less | Less |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
| December\t31,\t2008 | Short-term\nInvestments | Investments | Unrealized\nGains | Unrealized\nLosses | Cost\nBasis |
| Certificates\tof\tdeposit | $225 | $— | $— | $— | $ 225 |
| Available-for-sale\tsecurities: |  |  |  |  |  |
| U.S.\tgovernment\tand\tagency\tobligations | — | 25 | 1 | — | 24 |
| Corporate\tbonds | — | 7 | — | — | 7 |
| Asset-backed\tsecurities | — | 1 | — | — | 1 |
| Common\tstock\tand\tequivalents | — | 128 | 5 | (2) | 125 |
|  | 225 | 161 | 6 | (2) | 382 |
| Other\tsecurities,\tat\tcost | — | 296 | — | — | 296 |
| Equity\tmethod\tinvestments | — | 60 | — | — | 60 |
|  | $225 | $517 | $6 | $(2) | $ 738 |

|  | Recorded	Value | Recorded	Value | Less | Less |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
| December\t31,\t2007 | Short-term\nInvestments | Investments | Unrealized\nGains | Unrealized\nLosses | Cost\nBasis |
| Certificates\tof\tdeposit | $509 | $— | $— | $— | $509 |
| Available-for-sale\tsecurities: |  |  |  |  |  |
| U.S.\tgovernment\tand\tagency\tobligations | 19 | — | — | — | 19 |
| Corporate\tbonds | 1 | — | — | — | 1 |
| Common\tstock\tand\tequivalents | — | 333 | 40 | (79) | 372 |
| Other | 83 | — | — | — | 83 |
|  | 612 | 333 | 40 | (79) | 984 |
| Other\tsecurities,\tat\tcost | — | 414 | — | — | 414 |
| Equity\tmethod\tinvestments | — | 90 | — | — | 90 |
|  | $612 | $837 | $40 | $(79) | $1,488 |

At	December	31,	2008,	the	Company	had	$225	million	in	short-term	investments	(which	are	highly-liquid	fixed-income	investments	with	an	original maturity	greater	than	three	months	but	less	than	one	year),	compared	to	$612	million	of	short-term	investments	at	December	31,	2007.

At	December	31,	2008,	the	Company's	available-for-sale	equity	securities	portfolio	had	an	approximate	fair	market	value	of	$128	million,	which represented	a	cost	basis	of	$125	million	and	a	net	unrealized	gain	of	$3	million.	At	December	31,	2007,	the	Company's	available-for-sale	securities portfolio	had	an	approximate	fair	market	value	of	$333	million,	which	represented	a	cost	basis	of	$372	million	and	a	net	unrealized	loss	of	$39	million.

During	the	years	ended	December	31,	2008,	2007	and	2006,	the	Company	recorded	investment	impairment	charges	of	$365	million,	$44	million	and $27	million,	respectively,	representing	other-than-temporary	declines	in	the	value	of	the	Company's	available-for-sale	investment	portfolio.	Investment impairment	charges	are	included	in	Other	within	Other	income	(expense)	in	the	Company's	consolidated	statements	of	operations.

Gains	on	sales	of	investments	and	businesses,	consists	of	the	following:

| Years	Ended	December	31 | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| Gains\ton\tsales\tof\tinvestments,\tnet | $82 | $17 | $41 |
| Gains\ton\tsales\tof\tbusinesses,\tnet | — | 33 | — |
|  | $82 | $50 | $41 |

During	the	year	ended	December	31,	2008,	the	$82	million	of	net	gains	primarily	relates	to	sales	of	a	number	of	the	Company's	equity	investments, of	which	$29	million	of	gain	was	attributed	to	a	single	investment.	During	the	year	ended	December	31,	2007,	the	$50	million	of	net	gains	was	primarily related	to	a	$34	million	gain	on	the	sale	of	the	Company's	embedded	communication	computing	business.	During	the	year	ended	December	31,	2006,	the $41	million	of	net	gains	was	primarily	related	to	a	$141	million	gain	on	the	sale	of	the	Company's	remaining	shares	in	Telus	Corporation,	partially	offset by	a	$126	million	loss	on	the	sale	of	the	Company's	remaining	shares	in	Sprint	Nextel	Corporation	("Sprint	Nextel").

# Accounts	Receivable

During	the	year	ended	December	31,	2008,	the	Company	recorded	a	charge	of	$291	million	for	excess	inventory	due	to	a	decision	to	consolidate software	and	silicon	platforms	in	the	Mobile	Devices	segment.

| December	31 | 2008 | 2007 |
| :--- | :--- | :--- |
| Costs\tand\tearnings\tin\texcess\tof\tbillings | $1,094 | $995 |
| Contract\trelated\tdeferred\tcosts | 861 | 763 |
| Contractor\treceivables | 378 | 960 |
| Value-added\ttax\trefunds\treceivable | 278 | 321 |
| Other | 529 | 526 |
|  | $3,140 | $3,565 |

# Property,	plant,	and	equipment

| December	31 | 2008 | 2007 |
| :--- | :--- | :--- |
| Land | $148 | $134 |
| Building | 1,905 | 1,934 |
| Machinery\tand\tequipment | 5,687 | 5,745 |
|  | 7,740 | 7,813 |
| Less\taccumulated\tdepreciation | (5,298) | (5,333) |
|  | $2,442 | $2,480 |

# Other	Assets

| December	31 | 2008 | 2007 |
| :--- | :--- | :--- |
| Intangible\tassets,\tnet\tof\taccumulated\tamortization\tof\t$1,106\tand\t$819 | $869 | $1,260 |
| Royalty\tlicense\tarrangements | 289 | 364 |
| Contract\trelated\tdeferred\tcosts | 136 | 180 |
| Value-added\ttax\trefunds\treceivable | 117 | — |
| Long-term\treceivables,\tnet\tof\tallowances\tof\t$7\tand\t$5 | 52 | 68 |
| Other | 353 | 448 |
|  | $1,816 | $2,320 |

| December	31 | 2008 | 2007 |
| :--- | :--- | :--- |
| Deferred\trevenue | $1,533 | $1,235 |
| Compensation | 703 | 772 |
| Customer\treserves | 599 | 972 |
| Tax\tliabilities | 545 | 234 |
| Customer\tdownpayments | 496 | 509 |
| Contractor\tpayables | 318 | 875 |
| Warranty\treserves | 285 | 416 |
| Other | 2,861 | 2,988 |
|  | $7,340 | $8,001 |

# Other	Liabilities

     Other	liabilities	consists	of	the	following:

| Other	Liabilities |  |  |
| :--- | :--- | :--- |
| Other\tliabilities\tconsists\tof\tthe\tfollowing: |  |  |
| December\t31 | 2008 | 2007 |
| Defined\tbenefit\tplans,\tincluding\tsplit\tdollar\tlife\tinsurance\tpolicies | $2,202 | $562 |
| Deferred\trevenue | 316 | 393 |
| Unrecognized\ttax\tbenefits | 312 | 933 |
| Postretirement\thealth\tcare\tbenefit\tplan | 261 | 144 |
| Royalty\tlicense\tarrangement | — | 282 |
| Other | 559 | 560 |
|  | $3,650 | $2,874 |

# Stockholders'	Equity	Information

# Share	Repurchase	Program

Share	Repurchase	Program:		During	the	year	ended	December	31,	2008,	the	Company	repurchased	9.0	million	of	its	common	shares	at	an aggregate	cost	of	$138	million,	or	an	average	cost	of	$15.32	per	share,	all	of	which	were	repurchased	during	the	three	months	ended	March	29,	2008. During	the	year	ended	December	31,	2007,	the	Company	repurchased	171.2	million	of	its	common	shares	at	an	aggregate	cost	of	$3.0	billion,	or	an average	cost	of	$17.74	per	share.	During	the	year	ended	December	31,	2006,	the	Company	repurchased	a	total	of	171.7	million	of	its	common	shares	at an	aggregate	cost	of	$3.8	billion,	or	an	average	cost	of	$22.29	per	share.

Since	the	inception	of	its	share	repurchase	program	in	May	2005,	the	Company	has	repurchased	a	total	of	394	million	common	shares	for	an aggregate	cost	of	$7.9	billion.	All	repurchased	shares	have	been	retired.	As	of	December	31,	2008,	the	Company	remained	authorized	to	purchase	an aggregate	amount	of	up	to	$3.6	billion	of	additional	shares	under	the	current	stock	repurchase	program.	The	timing	and	amount	of	future	purchases	will be	based	on	market	and	other	conditions.

Payment	of	Dividends:		The	Company	paid	$453	million	in	cash	dividends	to	holders	of	its	common	stock	in	2008.	In	January	2009,	the	Company paid	$114	million	in	cash	dividends	that	were	declared	in	November	2008.	In	February	2009,	the	Company	announced	that	its	Board	of	Directors	voted to	suspend	the	declaration	of	quarterly	dividends	on	the	Company's	common	stock.

# 4.	Debt	and	Credit	Facilities

| December	31 | 2008 | 2007 |
| :--- | :--- | :--- |
| 6.5%\tnotes\tdue\t2008 | $— | $114 |
| 5.8%\tnotes\tdue\t2008 | — | 84 |
| 7.625%\tnotes\tdue\t2010 | 527 | 527 |
| 8.0%\tnotes\tdue\t2011 | 599 | 599 |
| 5.375%\tsenior\tnotes\tdue\t2012 | 400 | 400 |
| 6.0%\tsenior\tnotes\tdue\t2017 | 399 | 399 |
| 6.5%\tdebentures\tdue\t2025 | 397 | 397 |
| 7.5%\tdebentures\tdue\t2025 | 356 | 398 |
| 6.5%\tdebentures\tdue\t2028 | 297 | 297 |
| 6.625%\tsenior\tnotes\tdue\t2037 | 596 | 596 |
| 5.22%\tdebentures\tdue\t2097 | 195 | 195 |
| Other\tlong-term\tdebt | 178 | 145 |
|  | 3,944 | 4,151 |
| Adjustment\tfor\tinterest\trate\tswaps(1) | 151 | 38 |
| Less:\tcurrent\tportion | (3) | (198) |
| Long-term\tdebt | $4,092 | $3,991 |

(1) At	December	31,	2008,	the	balance	primarily	represents	the	unamortized	gain	associated	with	the	termination	of	all	interest	rate	swaps	designated	as fair	value	hedges.	For	detailed	discussion	please	see	Note	5,	"Risk	Management."	At	December	31,	2007,	the	balance	represents	the	fair	value	of	the interest	rate	swaps.

# Other	Short-Term	Debt

(1) At	December	31,	2008,	the	Company	did	not	have	any	commercial	paper	outstanding.

In	December	2008,	the	Company	completed	the	open	market	purchase	of	$42	million	of	the	$400	million	aggregate	principal	amount	outstanding	of its	7.50%	Debentures	due	2025	(the	"2025	Debentures").	The	$42	million	principal	amount	of	2025	Debentures	was	purchased	for	an	aggregate	purchase price	of	approximately	$28	million,	including	accrued	interest	as	of	the	redemption	date.	During	the	year	ended	December	31,	2008,	the	Company recognized	a	gain	of	approximately	$14	million	related	to	this	open	market	purchase	in	Other	within	Other	income	(expense)	in	the	consolidated statements	of	operations.

In	October	2008,	the	Company	repaid,	at	maturity,	the	entire	$84	million	aggregate	principal	amount	outstanding	of	its	5.80%	Notes	due	October	15, 2008.	In	March	2008,	the	Company	repaid	at	maturity,	the	entire	$114	million	aggregate	principal	amount	outstanding	of	its	6.50%	Notes	due	March	1, 2008.

In	December	2006,	the	Company	entered	into	a	five-year	domestic	syndicated	revolving	credit	facility	("5-Year	Credit	Facility")	for	$2.0	billion.	At December	31,	2008	and	2007,	the	Company	had	no	outstanding	borrowings	under	the	5-Year	Credit	Facility.	At	December	31,	2008,	the	commitment	fee assessed	against	the	daily	average	amounts	unused	was	10.0	basis	points.	Important	terms	of	the	5-Year	Credit	Facility	include	a	covenant	relating	to	the ratio	of	total	debt	to	adjusted	EBITDA.	The	Company	was	in	compliance	with	the	terms	of	the	5-Year	Credit	Facility	at	December	31,	2008.

Events	over	the	past	several	months,	including	recent	failures	and	near	failures	of	a	number	of	large	financial	service	companies,	have	made	the capital	markets	increasingly	volatile.	The	Company	also	has	access	to	uncommitted	non-U.S.	credit	facilities	("uncommitted	facilities"),	but	in	light	of the	state	of	the	financial	services	industry	and	the	Company's	current	financial	condition,	the	Company	does	not	believe	it	is	prudent	to	assume	the	same level	of	funding	will	be	available	under	those	facilities	going	forward	as	has	been	available	historically.

The	Company's	current	corporate	credit	ratings	are	"BBB−"	with	a	negative	outlook	by	Fitch	Ratings	("Fitch"),	"Baa3"	with	a	negative	outlook	by Moody's	Investors	Service	("Moody's"),	and	"BB+"	with	a	stable	outlook	by	Standard	&	Poor's	("S&P").

# 5.	Risk	Management

# Derivative	Financial	Instruments

The	Company	recorded	income	(expense)	of	$(2)	million,	$1	million	and	$13	million	for	the	years	ended	December	31,	2008,	2007	and	2006, respectively,	representing	the	ineffective	portions	of	changes	in	the	fair	value	of	cash	flow	hedge	positions.	These	amounts	are	included	in	Other	within Other	income	(expense)	in	the	Company's	consolidated	statements	of	operations.	The	above	amounts	include	the	change	in	the	fair	value	of

derivative	contracts	related	to	the	changes	in	the	difference	between	the	spot	price	and	the	forward	price.	These	amounts	are	excluded	from	the	measure of	effectiveness.	Expense	(income)	related	to	cash	flow	hedges	that	were	discontinued	for	the	years	ended	December	31,	2008,	2007	and	2006	are included	in	the	amounts	noted	above.

Prior	to	the	termination	of	the	Hedging	Agreements	in	the	fourth	quarter	of	2008,	the	Hedging	Agreements	were	designated	as	part	of	fair	value hedging	relationships	of	the	Company's	long-term	debt.	As	such,	the	changes	in	fair	value	of	the	Hedging	Agreements	and	corresponding	adjustments	to the	carrying	amount	of	the	debt	were	recognized	in	earnings.	Interest	expense	on	the	debt	was	adjusted	to	include	payments	made	or	received	under	such Hedge	Agreements.	During	2008	(prior	to	the	Hedging	Agreements	being	terminated)	and	2007,	the	Company	recognized	expense	of	$1	million	and $2	million,	respectively,	representing	the	ineffective	portion	of	changes	in	the	fair	value	of	the	Hedging	Agreements.	These	amounts	are	included	in	Other within	Other	income	(expense)	in	the	Company's	consolidated	statement	of	operations.

Additionally,	one	of	the	Company's	European	subsidiaries	has	outstanding	interest	rate	agreements	("Interest	Agreements")	relating	to	a	Euro- denominated	loan.	The	interest	on	the	Euro-denominated	loan	is	variable.	The	Interest	Agreements	change	the	characteristics	of	interest	rate	payments from	variable	to	maximum	fixed-rate	payments.	The	Interest	Agreements	are	not	accounted	for	as	a	part	of	a	hedging	relationship	and,	accordingly,	the changes	in	the	fair	value	of	the	Interest	Agreements	are	included	in	Other	income	(expense)	in	the	Company's	consolidated	statements	of	operations.	The weighted	average	fixed	rate	payments	on	these	Interest	Agreements	was	5.07%.	The	fair	value	of	the	Interest	Agreements	at	December	31,	2008	and	2007 were	$(2)	million	and	$3	million,	respectively.

# Stockholders'	Equity

Derivative	instruments	activity,	net	of	tax,	included	in	Non-owner	changes	to	equity	within	the	consolidated	statements	of	stockholders'	equity	for the	years	ended	December	31,	2008,	2007	and	2006	is	as	follows:

|  | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| Balance\tat\tJanuary\t1 | $ — | $16 | $2 |
| Increase\t(decrease)\tin\tfair\tvalue | (9) | (6) | 75 |
| Reclassifications\tto\tearnings | 2 | (10) | (61) |
| Balance\tat\tDecember\t31 | $(7) | $ — | $16 |

At	December	31,	2008,	the	Company's	available-for-sale	equity	securities	portfolio	had	an	approximate	fair	market	value	of	$128	million,	which represented	a	cost	basis	of	$125	million	and	a	net	unrealized	loss	of	$3	million.	These	equity	securities	are	held	for	purposes	other	than	trading.

Deferred	tax	charges	(benefits)	that	were	recorded	within	Non-owner	changes	to	equity	in	the	Company's	consolidated	balance	sheets	resulted	from retirement	benefit	adjustments,	currency	translation	adjustments,	net	gains	(losses)	on	derivative	instruments	and	fair	value	adjustments	to	available-for- sale	securities.	The	adjustments	were	($738)	million,	$306	million	and	$(182)	million	for	the	years	ended	December	31,	2008,	2007	and	2006, respectively.	Except	for	certain	earnings	that	the	Company	intends	to	reinvest	indefinitely,	provisions	have	been	made	for	the	estimated	U.S.	federal income	taxes	applicable	to	undistributed	earnings	of	non-U.S.	subsidiaries.	Undistributed	earnings	that	the	Company	intends	to	reinvest	indefinitely,	and for	which	no	U.S.	federal	income	taxes	have	been	provided,	aggregate	to	$2.9	billion,	$4.1	billion	and	$4.0	billion	at	December	31,	2008,	2007	and	2006, respectively.	The	portion	of	earnings	not	reinvested	indefinitely	may	be	distributed	without	an	additional	U.S.	federal	income	tax	charge	given	the U.S.	federal	tax	accrued	on	undistributed	earnings	and	the	utilization	of	available	foreign	tax	credits.

Differences	between	income	tax	expense	(benefit)	computed	at	the	U.S.	federal	statutory	tax	rate	of	35%	and	income	tax	expense	(benefit)	are	as follows:

| Years	Ended	December	31 | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| Income\ttax\texpense\t(benefit)\tat\tstatutory\trate | $(923) | $(137) | $1,613 |
| Taxes\ton\tnon-U.S.\tearnings | 125 | (206) | (449) |
| State\tincome\ttaxes | (38) | (28) | 77 |
| Valuation\tallowances | 2,321 | (97) | (187) |
| Goodwill\timpairment | 555 | — | — |
| Tax\ton\tundistributed\tnon-U.S.\tearnings | 119 | 72 | 194 |
| Other\tprovisions | (541) | 119 | 247 |
| Research\tcredits | (13) | (46) | (34) |
| Non-deductible\tacquisition\tcharges | — | 34 | 4 |
| Taxes\ton\tsale\tof\tbusinesses | — | 15 | — |
| Tax\tbenefit\ton\tqualifying\trepatriations | — | — | (68) |
| Charitable\tcontributions | — | — | (28) |
| Foreign\texport\tsales\tand\tsection\t199\tdeduction | — | — | (22) |
| Other | 2 | (11) | 2 |
|  | $1,607 | $(285) | $1,349 |

Gross	deferred	tax	assets	were	$9.8	billion	and	$8.9	billion	at	December	31,	2008	and	2007,	respectively.	Deferred	tax	assets,	net	of	valuation allowances,	were	$7.2	billion	and	$8.4	billion	at	December	31,	2008	and

2007,	respectively.	Gross	deferred	tax	liabilities	were	$3.7	billion	and	$4.1	billion	at	December	31,	2008	and	2007,	respectively.

     Significant	components	of	deferred	tax	assets	(liabilities)	are	as	follows:

| 104 |  |  |
| :--- | :--- | :--- |
| 2007,\trespectively.\tGross\tdeferred\ttax\tliabilities\twere\t$3.7\tbillion\tand\t$4.1\tbillion\tat\tDecember\t31,\t2008\tand\t2007,\trespectively. |  |  |
| Significant\tcomponents\tof\tdeferred\ttax\tassets\t(liabilities)\tare\tas\tfollows: |  |  |
| December\t31 | 2008 | 2007 |
| Inventory | $308 | $162 |
| Accrued\tliabilities\tand\tallowances | 483 | 551 |
| Employee\tbenefits | 1,053 | 408 |
| Capitalized\titems | 650 | 621 |
| Tax\tbasis\tdifferences\ton\tinvestments | 171 | 105 |
| Depreciation\ttax\tbasis\tdifferences\ton\tfixed\tassets | 37 | 33 |
| Undistributed\tnon-U.S.\tearnings | (278) | (397) |
| Tax\tcarryforwards | 3,001 | 2,553 |
| Available-for-sale\tsecurities | (1) | 35 |
| Business\treorganization | 70 | 78 |
| Warranty\tand\tcustomer\treserves | 215 | 334 |
| Deferred\trevenue\tand\tcosts | 184 | 205 |
| Valuation\tallowances | (2,692) | (515) |
| Deferred\tcharges | 45 | 44 |
| Other | 225 | 95 |
|  | $3,471 | $4,312 |

The	Company	accounts	for	income	taxes	in	accordance	with	Statement	of	Financial	Accounting	Standards	(SFAS)	No.	109,	"Accounting	for	Income Taxes,"	which	requires	that	deferred	tax	assets	and	liabilities	be	recognized	using	enacted	tax	rates	for	the	effect	of	the	temporary	differences	between	the book	and	tax	basis	of	recorded	assets	and	liabilities.	The	Company	makes	estimates	and	judgments	with	regard	to	the	calculation	of	certain	income	tax assets	and	liabilities.	SFAS	No.	109	requires	that	deferred	tax	assets	be	reduced	by	valuation	allowances	if,	based	on	the	consideration	of	all	available evidence,	it	is	more	likely	than	not	that	some	portion	of	the	deferred	tax	asset	will	not	be	realized.	Significant	weight	is	given	to	evidence	that	can	be objectively	verified.

The	Company	evaluates	deferred	income	taxes	on	a	quarterly	basis	to	determine	if	valuation	allowances	are	required	by	considering	available evidence,	including	historical	and	projected	taxable	income	and	tax	planning	strategies	that	are	both	prudent	and	feasible.	As	of	December	31,	2008,	the Company's	U.S	operations	had	generated	two	consecutive	years	of	pre-tax	losses,	which	are	attributable	to	the	Mobile	Devices	segment.	During	2007 and	2008,	the	Home	and	Networks	Mobility	and	Enterprise	Mobility	Solution	businesses	(collectively	referred	to	as	the	"Broadband	Mobility	Solutions business")	were	profitable	in	the	U.S.	and	worldwide.	Because	of	the	2007	and	2008	losses	at	Mobile	Devices	and	the	near-term	forecasts	for	the	Mobile Devices	business,	the	Company	believes	that	the	weight	of	negative	historic	evidence	precludes	it	from	considering	any	forecasted	income	from	the Mobile	Devices	business	in	its	analysis	of	the	recoverability	of	deferred	tax	assets.	However,	based	on	the	sustained	profits	of	the	Broadband	Mobility Solutions	business,	the	Company	believes	that	the	weight	of	positive	historic	evidence	allows	it	to	include	forecasted	income	from	the	Broadband Mobility	business	in	its	analysis	of	the	recoverability	of	its	deferred	tax	assets.	The	Company	also	considered	in	its	analysis	tax	planning	strategies	that are	prudent	and	can	be	reasonably	implemented.	Based	on	all	available	positive	and	negative	evidence,	we	concluded	that	a	partial	valuation	allowance should	be	recorded	against	the	net	deferred	tax	assets	of	our	U.S	operations.	During	fiscal	2008,	we	recorded	a	valuation	allowance	of	$2.1	billion	for foreign	tax	credits,	general	business	credits,	capital	losses	and	state	tax	carry	forwards	that	are	more	likely	than	not	to	expire.	The	Company	also	recorded valuation	allowances	of	$126	million	relating	to	tax	carryforwards	and	deferred	tax	assets	of	non-U.S.	subsidiaries,	including	Brazil,	China	and	Spain, that	the	Company	believes	are	more	likely	than	not	to	expire	or	go	unused.

At	December	31,	2008	and	2007,	the	Company	had	valuation	allowances	of	$2.7	billion	and	$515	million,	respectively,	against	its	deferred	tax assets,	including	$297	million	and	$310	million,	respectively,	relating	to	deferred	tax	assets	for	non-U.S.	subsidiaries.	The	Company's	valuation allowances	for	its	non-U.S.	subsidiaries	had	a	net	decrease	of	$13	million	during	2008,	which	is	comprised	of	$139	million	decrease	primarily	related	to the	utilization	of	United	Kingdom	tax	carry	forwards	and	changes	in	the	valuation	allowance	balance	due	to	exchange	rate	variances,	partially	offset	by	a $126	million	increase	for	new	valuation	allowances.	The	U.S.	valuation	allowance	relates	primarily	to	tax	carryforwards,	including	foreign	tax	credits, general	business	credits,	tax	carryforwards	of	acquired	businesses	which	have	limitations	upon	their	use,	state	tax	carryforwards	and	future

capital	losses	related	to	certain	investments.	The	Company	believes	that	the	remaining	deferred	tax	assets	are	more	likely	than	not	to	be	realizable	based on	estimates	of	future	taxable	income	and	the	implementation	of	tax	planning	strategies.

Tax	carryforwards	at	December	31,	2008	are	as	follows:

| U.S.	tax	losses | $2,354 | $824 | 2017-2028 |
| :--- | :--- | :--- | :--- |
| Foreign\ttax\tcredits | n/a | 1,111 | 2012-2018 |
| General\tbusiness\tcredits | n/a | 453 | 2018-2028 |
| Minimum\ttax\tcredits | n/a | 102 | Unlimited |
| State\ttax\tlosses | 3,616 | 112 | 2009-2028 |
| State\ttax\tcredits | n/a | 56 | 2009-2024 |
| Non-U.S.\tSubsidiaries: |  |  |  |
| China\ttax\tlosses | 143 | 30 | 2012-2013 |
| United\tKingdom\ttax\tlosses | 223 | 63 | Unlimited |
| Germany\ttax\tlosses | 316 | 91 | Unlimited |
| Other\tsubsidiaries\ttax\tlosses | 244 | 64 | Various |
| Spain\ttax\tcredits | n/a | 32 | 2014-2022 |
| Other\tsubsidiaries\ttax\tcredits | n/a | 63 | Unlimited |

The	Company	adopted	FIN	48	on	January	1,	2007.	The	adoption	resulted	in	a	$120	million	reduction	of	the	Company's	unrecognized	tax	benefits and	related	interest	accrual	and	has	been	reflected	as	an	increase	in	the	opening	balance	of	Retained	earnings	of	$27	million	and	Additional	paid-in capital	of	$93	million	as	of	January	1,	2007.	Upon	the	adoption	of	FIN	48,	the	Company	also	reclassified	unrecognized	tax	benefits	of	$877	million	from Deferred	income	tax	to	Other	liabilities	in	the	Company's	consolidated	balance	sheets.

     A	reconciliation	of	unrecognized	tax	benefits,	including	those	attributable	to	discontinued	operations,	is	as	follows:

Included	in	the	balance	of	total	unrecognized	tax	benefits	at	December	31,	2008	and	2007,	are	potential	benefits	of	approximately	$790	million	and $590	million,	respectively,	net	of	federal	tax	benefits	that	if	recognized	would	affect	the	effective	tax	rate.

During	the	fourth	quarter	of	2008,	the	Company	entered	into	closing	agreements	with	the	appellate	level	of	the	Internal	Revenue	Service	("IRS")	on transfer	pricing	adjustments	for	tax	years	1996	through	2003	and	the	IRS	completed	its	review	of	the	research	credit,	thereby	resolving	all	significant	IRS audit	issues	for	years	1996-2003.	The	IRS	also	completed	its	field	examination	of	the	Company's	2004	and	2005	tax	returns	in	July	2008,	and	there	are	no significant	unagreed	issues.	As	a	result	of	the	foregoing	and	resolution	of	Non-U.S.	audits,	the	Company	reduced	its	unrecognized	income	tax	benefits. The	Company	expects	to	receive	a	net	tax	refund	of	$126	million,	primarily	relating	to	refund	claims	that	were	held	pending	the	resolution	of	the 1996-2003	tax	years.

During	the	fourth	quarter	of	2008,	the	IRS	started	the	field	examination	of	the	Company's	2006	and	2007	tax	years.	The	Company	also	has	several state	and	Non-U.S.	audits	pending.	A	summary	of	open	tax	years	by	major	jurisdiction	is	presented	below:

(1) Includes	federal	as	well	as	state,	provincial	or	similar	local	jurisdictions,	as	applicable.

Although	the	final	resolution	of	the	Company's	global	tax	disputes	is	uncertain,	based	on	current	information,	in	the	opinion	of	the	Company's management,	the	ultimate	disposition	of	these	matters	will	not	have	a	material	adverse	effect	on	the	Company's	consolidated	financial	position,	liquidity or	results	of	operations.	However,	an	unfavorable	resolution	of	the	Company's	global	tax	disputes	could	have	a	material	adverse	effect	on	the	Company's consolidated	financial	position,	liquidity	or	results	of	operations	in	the	periods	in	which	the	matters	are	ultimately	resolved.

Based	on	the	potential	outcome	of	the	Company's	global	tax	examinations,	the	expiration	of	the	statute	of	limitations	for	specific	jurisdictions,	or	the continued	ability	to	satisfy	tax	incentive	obligations,	it	is	reasonably	possible	that	the	unrecognized	tax	benefits	will	decrease	within	the	next	12	months. The	associated	net	tax	benefits,	which	would	favorably	impact	the	effective	tax	rate,	are	estimated	to	be	in	the	range	of	$0	to	$150	million,	with	cash payments	not	expected	to	exceed	$50	million.

At	December	31,	2008,	the	Company	had	$47	million	and	$11	million	accrued	for	interest	and	penalties,	respectively,	on	unrecognized	tax	benefits. At	December	31,	2007,	the	Company	had	$86	million	and	$10	million	accrued	for	interest	and	penalties,	respectively,	on	unrecognized	tax	benefits.

# 7. Retirement	Benefits

# Pension	Benefit	Plans

The	Company	has	a	noncontributory	supplemental	retirement	benefit	plan	(the	"Officers'	Plan")	for	its	officers	elected	prior	to	December	31,	1999. The	Officers'	Plan	contains	provisions	for	vesting	and	funding	the	participants'	expected	retirement	benefits	when	the	participants	meet	the	minimum	age and	years	of	service	requirements.	Elected	officers	who	were	not	yet	vested	in	the	Officers'	Plan	as	of	December	31,	1999	had	the	option	to	remain	in	the Officers'	Plan	or	elect	to	have	their	benefit	bought	out	in	restricted	stock	units.	Effective	December	31,	1999,	newly	elected	officers	are	not	eligible	to participate	in	the	Officers'	Plan.	Effective	June	30,	2005,	salaries	were	frozen	for	this	plan.

The	Company	has	an	additional	noncontributory	supplemental	retirement	benefit	plan,	the	Motorola	Supplemental	Pension	Plan	("MSPP"),	which provides	supplemental	benefits	to	individuals	by	replacing	the	Regular	Pension	Plan	benefits	that	are	lost	by	such	individuals	under	the	retirement formula	due	to	application	of	the	limitations	imposed	by	the	Internal	Revenue	Code.	However,	elected	officers	who	are	covered	under	the	Officers'	Plan or	who	participated	in	the	restricted	stock	buy-out	are	not	eligible	to	participate	in	MSPP.	Effective

January	1,	2007,	eligible	compensation	was	capped	at	the	IRS	limit	plus	$175,000	or,	for	those	already	in	excess	of	the	Cap	as	of	January	1,	2007,	the eligible	compensation	used	to	compute	such	employee's	MSPP	benefit	for	all	future	years	will	be	the	greater	of:	(i)	such	employee's	eligible compensation	as	of	January	1,	2007	(frozen	at	that	amount),	or	(ii)	the	relevant	Cap	for	the	given	year.	Additionally,	effective	January	1,	2009,	the	MSPP was	frozen	as	to	any	new	participants	after	January	1,	2009	unless	such	participation	was	due	to	a	prior	contractual	entitlement.

In	February	2007,	the	Company	amended	the	Regular	Pension	Plan	and	the	MSPP,	modifying	the	definition	of	average	earnings.	For	the	years	ended prior	to	December	31,	2007,	benefits	were	calculated	using	the	rolling	average	of	the	highest	annual	earnings	in	any	five	years	within	the	previous	ten calendar	year	period.	Beginning	in	January	2008,	the	benefit	calculation	was	based	on	the	set	of	the	five	highest	years	of	earnings	within	the	ten	calendar years	prior	to	December	31,	2007,	averaged	with	earnings	from	each	year	after	2007.	Also,	effective	January	2008,	the	Company	amended	the	Regular Pension	Plan,	modifying	the	vesting	period	from	five	years	to	three	years.

In	December	2008,	the	Company	amended	the	Regular	Pension	Plan,	the	Officers'	Plan	and	the	MSPP.	Effective	March	1,	2009,	(i)	no	participant shall	accrue	any	benefit	or	additional	benefit	on	and	after	March	1,	2009,	and	(ii)	no	compensation	increases	earned	by	a	participant	on	and	after	March	1, 2009	shall	be	used	to	compute	any	accrued	benefit.	Additionally,	no	service	performed	on	and	after	March	1,	2009,	shall	be	considered	service	for	any purpose	under	the	MSPP.	The	Company	recognized	a	$237	million	curtailment	gain	associated	with	this	plan	amendment.

The	net	periodic	pension	cost	(benefit)	for	the	Regular	Pension	Plan,	Officers'	Plan	and	MSPP	and	Non-U.S.	plans	was	as	follows:

| Years	Ended	December	31 | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| Service\tcost | $98 | $133 | $150 |
| Interest\tcost | 323 | 311 | 309 |
| Expected\treturn\ton\tplan\tassets | (391) | (350) | (329) |
| Amortization\tof: |  |  |  |
| Unrecognized\tnet\tloss | 52 | 107 | 115 |
| Unrecognized\tprior\tservice\tcost | (31) | (27) | (5) |
| Curtailment\tgain | (232) | — | — |
| Net\tperiodic\tpension\tcost\t(benefit) | $(181) | $174 | $240 |

| Years	Ended	December	31 | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| Service\tcost | $3 | $4 | $5 |
| Interest\tcost | 7 | 7 | 8 |
| Expected\treturn\ton\tplan\tassets | (2) | (3) | (4) |
| Amortization\tof: |  |  |  |
| Unrecognized\tnet\tloss | 1 | 4 | 5 |
| Unrecognized\tprior\tservice\tcost | (1) | (1) | — |
| Curtailment\tgain | (5) | — | — |
| Settlement\tloss | 5 | 6 | 4 |
| Net\tperiodic\tpension\tcost | $8 | $17 | $18 |

# Non-U.S.	Plans

| Years	Ended	December	31 | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| Service\tcost | $34 | $45 | $40 |
| Interest\tcost | 87 | 90 | 67 |
| Expected\treturn\ton\tplan\tassets | (84) | (76) | (54) |
| Amortization\tof\tunrecognized\tnet\tloss | 2 | 14 | 17 |
| Settlement\tgain | (7) | — | — |
| Net\tperiodic\tpension\tcost | $32 | $73 | $70 |

The	status	of	the	Company's	plans	is	as	follows:

|  | 2008 | 2008 | 2008 | 2007 | 2007 | 2007 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Regular | Officers'\nand\nMSPP | Non\nU.S. | Regular | Officers'\nand\nMSPP | Non\nU.S. |
| Change\tin\tbenefit\tobligation: |  |  |  |  |  |  |
| Benefit\tobligation\tat\tJanuary\t1 | $4,879 | $118 | $1,689 | $5,481 | $137 | $1,798 |
| Service\tcost | 98 | 3 | 34 | 133 | 4 | 45 |
| Interest\tcost | 323 | 7 | 87 | 311 | 7 | 90 |
| Plan\tamendments | — | — | 1 | (268) | (3) | 1 |
| Settlement/curtailment | (168) | (2) | — | — | — | (16) |
| Actuarial\t(gain)\tloss | 207 | 7 | (149) | (561) | (7) | (287) |
| Foreign\texchange\tvaluation\tadjustment | — | — | (353) | — | — | 80 |
| Employee\tcontributions | — | — | 6 | — | — | 14 |
| Tax\tpayments | — | (1) | — | — | (1) | — |
| Benefit\tpayments | (229) | (16) | (94) | (217) | (19) | (36) |
| Benefit\tobligation\tat\tDecember\t31 | 5,110 | 116 | 1,221 | 4,879 | 118 | 1,689 |
| Change\tin\tplan\tassets: |  |  |  |  |  |  |
| Fair\tvalue\tat\tJanuary\t1 | 4,674 | 66 | 1,403 | 4,285 | 78 | 1,178 |
| Return\ton\tplan\tassets | (1,390) | 4 | (107) | 336 | 4 | 98 |
| Company\tcontributions | 240 | 3 | 54 | 270 | 4 | 135 |
| Employee\tcontributions | — | — | 6 | — | — | 14 |
| Foreign\texchange\tvaluation\tadjustment | — | — | (305) | — | — | 14 |
| Tax\tpayments\tfrom\tplan\tassets | — | (1) | — | — | (1) | — |
| Benefit\tpayments\tfrom\tplan\tassets | (229) | (16) | (94) | (217) | (19) | (36) |
| Fair\tvalue\tat\tDecember\t31 | 3,295 | 56 | 957 | 4,674 | 66 | 1,403 |
| Funded\tstatus\tof\tthe\tplan | (1,815) | (60) | (264) | (205) | (52) | (286) |
| Unrecognized\tnet\tloss | 2,722 | 48 | 180 | 954 | 43 | 168 |
| Unrecognized\tprior\tservice\tcost | — | — | 4 | (263) | (5) | 4 |
| Prepaid\t(accrued)\tpension\tcost | $907 | $(12) | $(80) | $486 | $(14) | $(114) |
| Components\tof\tprepaid\t(accrued)\tpension\tcost: |  |  |  |  |  |  |
| Prepaid\tbenefit\tcost | $— | $— | $— | $—\t $— | $—\t $— | $19 |
| Non-current\tbenefit\tliability | (1,815) | (60) | (264) | (205) | (52) | (305) |
| Deferred\tincome\ttaxes | 1,008 | 19 | 14 | 255 | 14 | 4 |
| Non-owner\tchanges\tto\tequity | 1,714 | 29 | 170 | 436 | 24 | 168 |
| Prepaid\t(accrued)\tpension\tcost | $907 | $(12) | $(80) | $486 | $(14) | $(114) |

It	is	estimated	that	the	net	periodic	cost	for	2009	will	include	amortization	of	the	unrecognized	net	loss	and	prior	service	costs	for	the	Regular	Plan,

Officers'	and	MSPP	Plans,	and	Non-U.S.	Plans,	currently	included	in	Non-owner	changes	to	equity,	of	$83	million,	$3	million,	and	$7	million, respectively.

The	Company	uses	a	five-year,	market-related	asset	value	method	of	amortizing	asset-related	gains	and	losses.	Prior	service	costs	are	being amortized	over	periods	ranging	from	11	to	12	years.	Benefits	under	all	pension	plans	are	valued	based	upon	the	projected	unit	credit	cost	method.

Certain	actuarial	assumptions	such	as	the	discount	rate	and	the	long-term	rate	of	return	on	plan	assets	have	a	significant	effect	on	the	amounts reported	for	net	periodic	cost	and	benefit	obligation.	The	assumed	discount	rates	reflect	the	prevailing	market	rates	of	a	universe	of	high-quality,	non- callable,	corporate	bonds	currently	available	that,	if	the	obligation	were	settled	at	the	measurement	date,	would	provide	the	necessary	future	cash	flows	to pay	the	benefit	obligation	when	due.	The	long-term	rates	of	return	on	plan	assets	represents	an	estimate	of	long-term	returns	on	an	investment	portfolio consisting	of	a	mixture	of	equities,	fixed	income,	cash	and	other	investments	similar	to	the	actual	investment	mix.	In	determining	the	long-term	return	on plan	assets,	the	Company	considers	long-term	rates	of	return	on	the	asset	classes	(both	historical	and	forecasted)	in	which	the	Company	expects	the	plan funds	to	be	invested.

Weighted	average	actuarial	assumptions	used	to	determine	costs	for	the	plans	were	as	follows:

     The	accumulated	benefit	obligations	for	the	plans	were	as	follows:

The	Company	has	adopted	a	pension	investment	policy	designed	to	meet	or	exceed	the	expected	rate	of	return	on	plan	assets	assumption.	To	achieve this,	the	pension	plans	retain	professional	investment	managers	that	invest	plan	assets	in	equity	and	fixed	income	securities	and	cash.	In	addition,	some plans	invest	in	insurance	contracts.	The	Company's	measurement	date	of	its	plan	assets	and	obligations	is	December	31.	The	Company	has	the	following target	mixes	for	these	asset	classes,	which	are	readjusted	at	least	quarterly,	when	an	asset	class	weighting	deviates	from	the	target	mix,	with	the	goal	of achieving	the	required	return	at	a	reasonable	risk	level	as	follows:

    The	weighted-average	pension	plan	asset	allocation	at	December	31,	2008	and	2007	by	asset	categories	was	as	follows:

| The	weighted-average	pension	plan	asset	allocation	at	December	31,	2008	and	2007	by	asset	categories	was	as	follows: |  |  |
| :--- | :--- | :--- |
|  | Actual\tMix |  |
| Asset\tCategory | 2008 | 2007 |
| Equity\tsecurities | 63% | 70% |
| Fixed\tincome\tsecurities | 34% | 27% |
| Cash\tand\tother\tinvestments | 3% | 3% |

Within	the	equity	securities	asset	class,	the	investment	policy	provides	for	investments	in	a	broad	range	of	publicly-traded	securities	including	both domestic	and	international	stocks.	Within	the	fixed	income	securities	asset	class,	the	investment	policy	provides	for	investments	in	a	broad	range	of publicly-traded	debt	securities	ranging	from	U.S.	Treasury	issues,	corporate	debt	securities,	mortgage	and	asset-backed	securities,	as	well	as	international debt	securities.	In	the	cash	and	other	investments	asset	class,	investments	may	be	in	cash,	cash	equivalents	or	insurance	contracts.

The	Company	expects	to	make	cash	contributions	of	approximately	$180	million	to	its	U.S.	pension	plans	and	approximately	$50	million	to	its non-U.S.	pension	plans	in	2009.

The	following	benefit	payments,	which	reflect	expected	future	service,	as	appropriate,	are	expected	to	be	paid:

| Year | Regular | and<br>MSPP | Non<br>U.S. |
| :--- | :--- | :--- | :--- |
| 2009 | $225 | $17 | $32 |
| 2010 | 232 | 14 | 34 |
| 2011 | 241 | 21 | 35 |
| 2012 | 252 | 22 | 37 |
| 2013 | 265 | 5 | 38 |
| 2014-2018 | 1,552 | 28 | 218 |

# Postretirement	Health	Care	and	Other	Benefit	Plans

Certain	health	care	benefits	are	available	to	eligible	domestic	employees	meeting	certain	age	and	service	requirements	upon	termination	of employment	(the	"Postretirement	Health	Care	Benefits	Plan").	For	eligible	employees	hired	prior	to	January	1,	2002,	the	Company	offsets	a	portion	of the	postretirement	medical	costs	to	the	retired	participant.	As	of	January	1,	2005,	the	Postretirement	Health	Care	Benefit	Plan	has	been	closed	to	new participants.	The	benefit	obligation	and	plan	assets	for	the	Postretirement	Health	Care	Benefit	Plan	have	been	measured	as	of	December	31,	2008.

    The	assumptions	used	were	as	follows:

| Years	Ended	December	31 | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| Service\tcost | $6 | $7 | $8 |
| Interest\tcost | 26 | 23 | 25 |
| Expected\treturn\ton\tplan\tassets | (20) | (19) | (18) |
| Amortization\tof: |  |  |  |
| Unrecognized\tnet\tloss | 5 | 6 | 9 |
| Unrecognized\tprior\tservice\tcost | (2) | (2) | (2) |
| Net\tpostretirement\thealth\tcare\texpense | $15 | $15 | $22 |

The	funded	status	of	the	plan	is	as	follows:

It	is	estimated	that	the	net	periodic	cost	for	the	Postretirement	Health	Care	Benefit	Plan	in	2009	will	include	amortization	of	the	unrecognized	net loss	and	prior	service	costs,	currently	included	in	Non-owner	changes	in	equity,	of	$5	million.

The	Company	has	adopted	an	investment	policy	for	plan	assets	designed	to	meet	or	exceed	the	expected	rate	of	return	on	plan	assets	assumption.	To achieve	this,	the	plan	retains	professional	investment	managers	that	invest	plan	assets	in	equity	and	fixed	income	securities	and	cash.	The	Company	uses long-term	historical	actual	return	experience	with	consideration	of	the	expected	investment	mix	of	the	plans'	assets,	as	well	as	future	estimates	of	long- term	investment	returns,	to	develop	its	expected	rate	of	return	assumption	used	in	calculating	the	net	periodic	pension	cost	and	the	net	retirement healthcare	expense.	The	Company	has	the	following	target	mixes	for	these	asset	classes,	which	are	readjusted	at	least	quarterly,	when	an	asset	class weighting	deviates	from	the	target	mix,	with	the	goal	of	achieving	the	required	return	at	a	reasonable	risk	level	as	follows:

     The	weighted-average	asset	allocation	for	plan	assets	at	December	31,	2008	and	2007	by	asset	categories	were	as	follows:

| The	weighted-average	asset	allocation	for	plan	assets	at	December	31,	2008	and	2007	by	asset	categories	were	as	follows: |  |  |
| :--- | :--- | :--- |
|  | Actual\tMix |  |
| Asset\tCategory | 2008 | 2007 |
| Equity\tsecurities | 64% | 74% |
| Fixed\tincome\tsecurities | 32% | 25% |
| Cash\tand\tother\tinvestments | 4% | 1% |

Within	the	equity	securities	asset	class,	the	investment	policy	provides	for	investments	in	a	broad	range	of	publicly-traded	securities	including	both domestic	and	international	stocks.	Within	the	fixed	income	securities	asset	class,	the	investment	policy	provides	for	investments	in	a	broad	range	of publicly-traded	debt	securities	ranging	from	U.S.	Treasury	issues,	corporate	debt	securities,	mortgages	and	asset-backed	issues,	as	well	as	international debt	securities.	In	the	cash	asset	class,	investments	may	be	in	cash	and	cash	equivalents.

The	Company	expects	to	make	no	cash	contributions	to	the	retiree	health	care	plan	in	2009.	The	following	benefit	payments,	which	reflect	expected future	service,	as	appropriate,	are	expected	to	be	paid:

The	health	care	trend	rate	used	to	determine	the	December	31,	2008	accumulated	postretirement	benefit	obligation	is	8.5%	for	2009.	Beyond	2009, the	rate	is	assumed	to	decrease	by	about	0.7%	per	year	until	it	reaches	5%	by	2014	and	then	remains	flat.	The	health	care	trend	rate	used	to	determine	the December	31,	2007	accumulated	postretirement	benefit	obligation	was	9%.

Changing	the	health	care	trend	rate	by	one	percentage	point	would	change	the	accumulated	postretirement	benefit	obligation	and	the	net	retiree health	care	expense	as	follows:

The	Company	maintains	a	lifetime	cap	on	postretirement	health	care	costs,	which	reduces	the	liability	duration	of	the	plan.	A	result	of	this	lower duration	is	a	decreased	sensitivity	to	a	change	in	the	discount	rate	trend	assumption	with	respect	to	the	liability	and	related	expense.

The	Company	has	no	significant	postretirement	health	care	benefit	plans	outside	the	United	States.

The	2008	Split-Dollar	Life	Insurance	policy	actual	expense	was	$6	million.	As	of	December	31,	2008,	the	Company	has	recorded	a	liability representing	the	actuarial	present	value	of	the	future	death	benefits	as	of	the	employees'	expected	retirement	date	of	$47	million	with	the	offset	reflected in	Retained	earnings	and	Non-owner

changes	to	equity	in	the	amounts	of	$4	million	and	$37	million,	respectively,	in	the	Company's	consolidated	statement	of	stockholders'	equity	as	of December	31,	2008.

# Defined	Contribution	Plan

The	Company	and	certain	subsidiaries	have	various	defined	contribution	plans,	in	which	all	eligible	employees	participate.	In	the	U.S.,	the	401(k) plan	is	a	contributory	plan.	Matching	contributions	are	based	upon	the	amount	of	the	employees'	contributions.	Effective	January	1,	2005,	newly	hired employees	have	a	higher	maximum	matching	contribution	at	4%	on	the	first	5%	of	employee	contributions,	compared	to	3%	on	the	first	6%	of	employee contributions	for	employees	hired	prior	to	January	2005.	Effective	January	1,	2009,	the	Company	temporarily	suspended	all	matching	contributions	to the	Motorola	401(k)	plan.	The	Company's	expenses,	primarily	relating	to	the	employer	match,	for	all	defined	contribution	plans,	for	the	years	ended December	31,	2008,	2007	and	2006	were	$95	million,	$116	million	and	$105	million,	respectively.

# 8. Share-Based	Compensation	Plans	and	Other	Incentive	Plans

# Stock	Options,	Stock	Appreciation	Rights	and	Employee	Stock	Purchase	Plan

The	Company	grants	options	to	acquire	shares	of	common	stock	to	certain	employees,	and	existing	option	holders	in	connection	with	the	merging	of option	plans	following	an	acquisition.	Each	option	granted	has	an	exercise	price	of	no	less	than	100%	of	the	fair	market	value	of	the	common	stock	on the	date	of	the	grant.	Option	awards	have	a	contractual	life	of	five	to	ten	years	and	vest	over	two	to	four	years.	For	stock	options	and	stock	appreciation rights	issued	under	plans	prior	to	the	2006	Omnibus	Plan,	upon	the	occurrence	of	a	change	in	control,	each	stock	option	and	stock	appreciation	right outstanding	on	the	date	on	which	the	change	in	control	occurs	will	immediately	become	exercisable	in	full.	Under	the	2006	Omnibus	Plan,	the	stock option	or	stock	appreciation	right	only	becomes	exercisable	if	the	holder	is	also	involuntarily	terminated	within	24	months	of	the	change	in	control.

The	Company	grants	stock	appreciation	rights	to	acquire	shares	of	common	stock	to	certain	employees.	Each	stock	appreciation	right	granted	has	an exercise	price	of	100%	of	the	fair	market	value	of	the	common	stock	on	the	date	of	the	grant.	Upon	the	occurrence	of	a	change	in	control,	each	stock appreciation	right	outstanding	on	the	date	on	which	the	change	in	control	occurs	will	immediately	become	exercisable	in	full.

The	employee	stock	purchase	plan	allows	eligible	participants	to	purchase	shares	of	the	Company's	common	stock	through	payroll	deductions	of	up to	10%	of	eligible	compensation	on	an	after-tax	basis.	Plan	participants	cannot	purchase	more	than	$25,000	of	stock	in	any	calendar	year.	The	price	an employee	pays	per	share	is	85%	of	the	lower	of	the	fair	market	value	of	the	Company's	stock	on	the	close	of	the	first	trading	day	or	last	trading	day	of	the purchase	period.	The	plan	has	two	purchase	periods,	the	first	one	from	October	1	through	March	31	and	the	second	one	from	April	1	through September	30.	For	the	years	ended	December	31,	2008,	2007	and	2006,	employees	purchased	18.9	million,	10.2	million	and	8.3	million	shares, respectively,	at	purchase	prices	of	$7.91	and	$6.07,	$14.93	and	$15.02,	and	$19.07	and	$19.82,	respectively.

The	Company	calculates	the	value	of	each	employee	stock	option,	estimated	on	the	date	of	grant,	using	the	Black-Scholes	option	pricing	model.	The weighted-average	estimated	fair	value	of	employee	stock	options	granted	during	2008,	2007	and	2006	was	$3.47,	$5.95	and	$9.23,	respectively,	using	the following	weighted-average	assumptions:

|  | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| Expected\tvolatility | 56.4% | 28.3% | 36.2% |
| Risk-free\tinterest\trate | 2.4% | 4.5% | 5.0% |
| Dividend\tyield | 2.7% | 1.1% | 0.8% |
| Expected\tlife\t(years) | 5.5 | 6.5 | 6.5 |

In	2006,	the	Company	began	using	the	implied	volatility	for	traded	options	on	the	Company's	stock	as	the	expected	volatility	assumption	required	in the	Black-Scholes	model.	The	selection	of	the	implied	volatility	approach	was	based	upon	the	availability	of	actively	traded	options	on	the	Company's stock	and	the	Company's	assessment	that	implied	volatility	is	more	representative	of	future	stock	price	trends	than	historical	volatility.

The	risk-free	interest	rate	assumption	is	based	upon	the	average	daily	closing	rates	during	the	year	for	U.S.	treasury	notes	that	have	a	life	which approximates	the	expected	life	of	the	option.	The	dividend	yield

assumption	is	based	on	the	Company's	historical	expectation	of	dividend	payouts.	The	expected	life	of	employee	stock	options	represents	the	weighted- average	period	the	stock	options	are	expected	to	remain	outstanding	based	on	the	simplified	method	permitted	under	Staff	Accounting	Bulletin	No.	110, "Shared-Based	Payment".

The	Company	has	applied	a	forfeiture	rate,	estimated	based	on	historical	data,	of	25%-35%	to	the	option	fair	value	calculated	by	the	Black-Scholes option	pricing	model.	This	estimated	forfeiture	rate	may	be	revised	in	subsequent	periods	if	actual	forfeitures	differ	from	this	estimate.

Stock	option	activity	was	as	follows	(in	thousands,	except	exercise	price	and	employee	data):

|  | 2008 | 2008 | 2007 | 2007 | 2006 | 2006 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Years\tEnded\tDecember\t31 | Shares\nSubject\tto\nOptions | Wtd.\tAvg.\nExercise\nPrice | Shares\nSubject\tto\nOptions | Wtd.\tAvg.\nExercise\nPrice | Shares\nSubject\tto\nOptions | Wtd.\tAvg.\nExercise\nPrice |
| Options\toutstanding\tat\tJanuary\t1 | 224,255 | $19 | 233,445 | $18 | 267,755 | $17 |
| Options\tgranted | 39,764 | 8 | 40,257 | 18 | 37,202 | 21 |
| Options\texercised | (1,920) | 7 | (26,211) | 11 | (59,878) | 13 |
| Options\tterminated,\tcanceled\tor\texpired | (33,954) | 18 | (23,236) | 19 | (11,634) | 19 |
| Options\toutstanding\tat\tDecember\t31 | 228,145 | 17 | 224,255 | 19 | 233,445 | 18 |
| Options\texercisable\tat\tDecember\t31 | 148,072 | 19 | 138,741 | 19 | 135,052 | 19 |
| Approx.\tnumber\tof\temployees\tgranted\toptions | 3,300 |  | 32,000 |  | 28,900 |  |

At	December	31,	2008,	the	Company	had	$283	million	of	total	unrecognized	compensation	expense,	net	of	estimated	forfeitures,	related	to	stock option	plans	and	the	employee	stock	purchase	plan	that	will	be	recognized	over	the	weighted	average	period	of	approximately	two	years.	Cash	received from	stock	option	exercises	and	the	employee	stock	purchase	plan	was	$145	million,	$440	million	and	$918	million	for	the	years	ended	December	31, 2008,	2007	and	2006,	respectively.	The	total	intrinsic	value	of	options	exercised	during	the	years	ended	December	31,	2008,	2007	and	2006	was $2	million,	$177	million	and	$568	million,	respectively.	The	aggregate	intrinsic	value	for	options	outstanding	and	exercisable	as	of	December	31,	2008 was	$1	million	and	$1	million,	respectively,	based	on	a	December	31,	2008	stock	price	of	$4.43	per	share.

The	significant	decrease	in	the	number	of	employees	that	were	granted	options	in	2008	is	due	to	the	broad	based	equity	grant	being	issued	in restricted	stock	units.

At	December	31,	2008	and	2007,	72.2	million	shares	and	88.0	million	shares,	respectively,	were	available	for	future	share-based	award	grants	under the	2006	Motorola	Omnibus	Plan,	covering	all	equity	awards	to	employees	and	non-employee	directors.

The	following	table	summarizes	information	about	stock	options	outstanding	and	exercisable	at	December	31,	2008	(in	thousands,	except	exercise price	and	years):

|  | Options	Outstanding | Options	Outstanding | Options	Outstanding | Options	Outstanding | Options	Exercisable | Options	Exercisable |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Exercise\tprice\trange | No.\tof\noptions | Wtd.\tavg.\nExercise\nPrice | Wtd.\tavg.\ncontractual\nlife\t(in\tyrs.) |  | No.\tof\noptions | Wtd.\tavg.\nExercise\nPrice |
| Under\t$7 | 12,602 | $4 |  | 5 | 538 | $4 |
| $7-$13 | 73,630 | 10 |  | 6 | 46,474 | 10 |
| $14-$20 | 88,155 | 17 |  | 7 | 59,463 | 16 |
| $21-$27 | 26,066 | 22 |  | 7 | 13,905 | 22 |
| $28-$34 | 1,659 | 32 |  | 1 | 1,659 | 32 |
| $35-$41 | 25,696 | 39 |  | 6 | 25,696 | 39 |
| $42-$48 | 301 | 44 |  | 2 | 301 | 44 |
| $49-$55 | 36 | 51 |  | 1 | 36 | 51 |
|  | 228,145 |  |  |  | 148,072 |  |

The	weighted	average	contractual	life	for	options	outstanding	and	exercisable	as	of	December	31,	2008	was	six	and	five	years,	respectively.

# Restricted	Stock	and	Restricted	Stock	Units

Restricted	stock	("RS")	and	restricted	stock	unit	("RSU")	grants	consist	of	shares	or	the	rights	to	shares	of	the	Company's	common	stock	which	are awarded	to	employees	and	non-employee	directors.	The	grants	are	restricted	such	that	they	are	subject	to	substantial	risk	of	forfeiture	and	to	restrictions on	their	sale	or	other	transfer	by	the	employee.	For	shares	of	RS	and	RSUs	issued	under	plans	prior	to	the	2006	Omnibus	Plan,	upon	the	occurrence	of	a change	in	control,	the	restrictions	on	all	shares	of	RS	and	RSUs	outstanding	on	the	date	on	which	the	change	in	control	occurs	will	lapse.	Under	the	2006 Omnibus	Plan,	the	shares	of	RS	or	RSUs	only	become	exercisable	if	the	holder	is	also	involuntarily	terminated	within	24	months	of	the	change	in	control.

Restricted	stock	and	restricted	stock	unit	activity	was	as	follows	(in	thousands,	except	fair	value	and	employee	data):

|  | 2008 | 2008 | 2007 | 2007 | 2006 | 2006 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Years\tEnded\tDecember\t31 | \t RS\tand\tRSU | Wtd.\tAvg.\nGrant\tDate\nFair\tValue | RS\tand\tRSU | Wtd\tAvg.\nGrant\tDate\nFair\tValue | RS\tand\tRSU | Wtd\tAvg.\nGrant\tDate\nFair\tValue |
| RS\tand\tRSU\toutstanding\tat\tJanuary\t1 | 10,755 | $17 | 6,016 | $19 | 4,383 | $16 |
| Granted | 27,102 | 9 | 7,766 | 18 | 2,761 | 22 |
| Vested | (2,308) | 17 | (1,068) | 19 | (938) | 15 |
| Terminated,\tcanceled\tor\texpired | (3,319) | 13 | (1,959) | 19 | (190) | 18 |
| RSU\toutstanding\tat\tDecember\t31 | 32,230 | 11 | 10,755 | 17 | 6,016 | 19 |
| Approx.\tnumber\tof\temployees\tgranted\tRSUs | 28,981 |  | 1,801 |  | 252 |  |

At	December	31,	2008,	the	Company	had	unrecognized	compensation	expense	related	to	restricted	stock	units	of	$213	million,	net	of	estimated forfeitures,	expected	to	be	recognized	over	the	weighted	average	period	of	approximately	three	years.	An	aggregate	of	approximately	27.1	million, 7.8	million	and	2.8	million	shares	of	restricted	stock	units	were	granted	in	2008,	2007	and	2006,	respectively.	The	total	fair	value	of	restricted	stock	and restricted	stock	unit	shares	vested	during	the	years	ended	December	31,	2008,	2007	and	2006	was	$19	million,	$13	million	and	$22	million,	respectively. The	aggregate	intrinsic	value	of	outstanding	restricted	stock	units	as	of	December	31,	2008	was	$143	million.	The	significant	increase	in	the	number	of employees	that	were	granted	RSUs	in	2008	is	due	to	the	broad	based	equity	grant	being	issued	in	RSUs	in	lieu	of	stock	options.

# Total	Share-Based	Compensation	Expense

Compensation	expense	for	the	Company's	employee	stock	options,	stock	appreciation	rights,	employee	stock	purchase	plans,	restricted	stock	and restricted	stock	units	was	as	follows:

| Year	Ended	December	31 | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| Share-based\tcompensation\texpense\tincluded\tin: |  |  |  |
| Costs\tof\tsales | $32 | $33 | $30 |
| Selling,\tgeneral\tand\tadministrative\texpenses | 155 | 188 | 162 |
| Research\tand\tdevelopment\texpenditures | 93 | 94 | 84 |
| Share-based\tcompensation\texpense\tincluded\tin\tOperating\tearnings\t(loss) | 280 | 315 | 276 |
| Tax\tbenefit | 86 | 99 | 85 |
| Share-based\tcompensation\texpense,\tnet\tof\ttax | $194 | $216 | $191 |
| Decrease\tin\tBasic\tearnings\tper\tshare | $(0.09) | $(0.09) | $(0.08) |
| Decrease\tin\tDiluted\tearnings\tper\tshare | $(0.09) | $(0.09) | $(0.08) |

# Motorola	Incentive	Plan

The	Motorola	Incentive	Plan	provides	eligible	employees	with	an	annual	payment,	calculated	as	a	percentage	of	an	employee's	eligible	earnings,	in the	year	after	the	close	of	the	current	calendar	year	if	specified	business	goals	and	individual	performance	targets	are	met.	The	provisions	for	awards under	these	incentive	plans	for	the	years	ended	December	31,	2008,	2007	and	2006	were	$172	million,	$190	million	and	$268	million,	respectively.

# Long-Range	Incentive	Plan

The	Long-Range	Incentive	Plan	("LRIP")	rewards	participating	elected	officers	for	the	Company's	achievement	of	specified	business	goals	during the	period,	based	on	two	performance	objectives	measured	over	three-year	cycles.	The	provision	for	LRIP	(net	of	the	reversals	of	previously	recognized reserves)	for	the	years	ended	December	31,	2008,	2007	and	2006	was	$(13)	million,	$(8)	million	and	$16	million,	respectively.	On	April	21,	2008,	the Compensation	and	Leadership	Committee	of	the	Board	of	Directors	of	Motorola,	Inc.	approved	the	cancellation	of	the	2006-2008	performance	cycle	and the	2007-2009	performance	cycle	under	the	Company's	Long	Range	Incentive	Plan	of	2006	without	the	payment	of	awards	for	such	performance	cycles, as	reported	on	Form	8-K,	filed	April	25,	2008.

# 9. Fair	Value	Measurements

The	Company	adopted	Financial	Accounting	Standards	Board	("FASB")	Statement	of	Financial	Accounting	Standards	("SFAS")	No.	157,	"Fair Value	Measurements"	("SFAS	157")	on	January	1,	2008	for	all	financial	assets	and	liabilities	and	non-financial	assets	and	liabilities	that	are	recognized or	disclosed	at	fair	value	in	the	financial	statements	on	a	recurring	basis.	SFAS	157	defines	fair	value,	establishes	a	consistent	framework	for	measuring fair	value	and	expands	disclosure	requirements	about	fair	value	measurements.	SFAS	157	does	not	change	the	accounting	for	those	instruments	that	were, under	previous	GAAP,	accounted	for	at	cost	or	contract	value.	In	February	2008,	the	FASB	issued	staff	position	No.	157-2	("FSP	157-2"),	which	delays the	effective	date	of	SFAS	157	one	year	for	all	non-financial	assets	and	non-financial	liabilities,	except	those	recognized	or	disclosed	at	fair	value	in	the financial	statements	on	a	recurring	basis.	The	Company	has	no	non-financial	assets	and	liabilities	that	are	required	to	be	measured	at	fair	value	on	a recurring	basis	as	of	December	31,	2008.	Under	FSP	157-2,	the	Company	will	apply	the	measurement	criteria	of	SFAS	157	to	the	remaining	assets	and liabilities	no	later	than	the	first	quarter	of	2009.

The	Company	holds	certain	fixed	income	securities,	equity	securities	and	derivatives,	which	must	be	measured	using	the	SFAS	157	prescribed	fair value	hierarchy	and	related	valuation	methodologies.	SFAS	157	specifies	a	hierarchy	of	valuation	techniques	based	on	whether	the	inputs	to	each measurement	are	observable	or	unobservable.	Observable	inputs	reflect	market	data	obtained	from	independent	sources,	while	unobservable	inputs	reflect the	Company's	assumptions	about	current	market	conditions.	The	prescribed	fair	value	hierarchy	and	related	valuation	methodologies	are	as	follows:

# Level	1—Quoted	prices	for	identical	instruments	in	active	markets.

Level	2—Quoted	prices	for	similar	instruments	in	active	markets,	quoted	prices	for	identical	or	similar	instruments	in	markets	that	are	not	active	and model-derived	valuations,	in	which	all	significant	inputs	are	observable	in	active	markets.

Level	3—Valuations	derived	from	valuation	techniques,	in	which	one	or	more	significant	inputs	are	unobservable.

The	levels	of	the	Company's	financial	assets	and	liabilities	that	are	carried	at	fair	value	were	as	follows:

# Valuation	Methodologies

Quoted	market	prices	in	active	markets	are	available	for	investments	in	common	stock	and	equivalents	and,	as	such,	these	investments	are	classified within	Level	1.

The	securities	classified	above	as	Level	2	are	primarily	those	that	are	professionally	managed	within	the	Sigma	Fund.	The	Company	primarily	relies on	valuation	pricing	models	and	broker	quotes	to	determine	the	fair	value	of	investments	in	the	Sigma	Fund.	The	valuation	models	are	developed	and maintained	by	third	party	pricing	services	and	use	a	number	of	standard	inputs	to	the	valuation	model	including	benchmark	yields,	reported	trades, broker/dealer	quotes	where	the	party	is	standing	ready	and	able	to	transact,	issuer	spreads,	benchmark	securities,	bids,	offers	and	other	reference	data. The	valuation	model	may	prioritize	these	inputs	differently	at	each	balance	sheet	date	for	any	given	security,	based	on	the	market	conditions.	Not	all	of the	standard	inputs	listed	will	be	used	each	time	in	the	valuation	models.	For	each	asset	class,	quantifiable	inputs	related	to	perceived	market	movements and	sector	news	may	be	considered	in	addition	to	the	standard	inputs.

At	December	31,	2008,	the	Company	has	$499	million	of	investments	in	money	market	mutual	funds	classified	as	Cash	and	cash	equivalents	in	its consolidated	balance	sheets.	The	money	market	funds	have	quoted	market	prices	that	are	generally	equivalent	to	par.

# 10. Long-term	Customer	Financing	and	Sales	of	Receivables

# Long-term	Customer	Financing

Long-term	receivables	consist	of	trade	receivables	with	payment	terms	greater	than	twelve	months,	long-term	loans	and	lease	receivables	under sales-type	leases.	Long-term	receivables	consist	of	the	following:

The	current	portion	of	long-term	receivables	is	included	in	Accounts	receivable	and	the	non-current	portion	of	long-term	receivables	is	included	in Other	assets	in	the	Company's	consolidated	balance	sheets.	Interest	income	recognized	on	long-term	receivables	for	the	years	ended	December	31,	2008, 2007	and	2006	was	$3	million,	$7	million	and	$9	million,	respectively.

Certain	purchasers	of	the	Company's	infrastructure	equipment	continue	to	request	that	suppliers	provide	long-term	financing,	defined	as	financing with	terms	greater	than	one	year,	in	connection	with	equipment	purchases.	These	requests	may	include	all	or	a	portion	of	the	purchase	price	of	the equipment.	However,	the	Company's	obligation	to	provide	long-term	financing	is	often	conditioned	on	the	issuance	of	a	letter	of	credit	in	favor	of	the Company	by	a	reputable	bank	to	support	the	purchaser's	credit	or	a	pre-existing	commitment	from	a	reputable	bank	to	purchase	the	long-term	receivables from	the	Company.	The	Company	had	outstanding	commitments	to	provide	long-term	financing	to	third	parties	totaling	$370	million	and	$610	million	at December	31,	2008	and	2007,	respectively.	Of	these	amounts,	$266	million	and	$454	million	were	supported	by	letters	of	credit	or	by	bank	commitments to	purchase	long-term	receivables	at	December	31,	2008	and	2007,	respectively.	In	response	to	the	recent	tightening	in	the	credit	markets,	certain customers	of	the	Company	have	requested	financing	in	connection	with	equipment	purchases,	and	these	types	of	requests	have	increased	in	volume	and scope.

In	addition	to	providing	direct	financing	to	certain	equipment	customers,	the	Company	also	assists	customers	in	obtaining	financing	directly	from banks	and	other	sources	to	fund	equipment	purchases.	The	Company	had	committed	to	provide	financial	guarantees	relating	to	customer	financing totaling	$43	million	and	$42	million	at	December	31,	2008	and	2007,	respectively	(including	$23	million	at	both	December	31,	2008	and	2007	relating	to the	sale	of	short-term	receivables).	Customer	financing	guarantees	outstanding	were	$6	million	and	$3	million	at	December	31,	2008	and	2007, respectively	(including	$4	million	and	$0	million	at	December	31,	2008	and	2007,	respectively,	relating	to	the	sale	of	short-term	receivables).

In	the	aggregate,	at	December	31,	2008,	these	committed	facilities	provided	for	up	to	$967	million	to	be	outstanding	with	the	third	parties	at	any time,	as	compared	to	up	to	$1.4	billion	and	$1.3	billion	provided	at	December	31,	2007	and	2006,	respectively.	As	of	December	31,	2008,	$759	million	of the	Company's	committed	facilities	were	utilized,	compared	to	$497	million	and	$817	million	utilized	at	December	31,	2007	and	2006,	respectively.	Of the	$967	million	of	committed	facilities	at	December	31,	2008,	$532	million	were	primarily	revolving	facilities	associated	with	the	sale	of	accounts receivables	(of	which	$497	million	was	utilized	at	December	31,	2008)	and	$435	million	were	primarily	committed	facilities	associated	with	the	sale	of specific	long-term	financing	transactions	to	a	single	customer	(of	which	$262	million	was	utilized	at	December	31,	2008).	In	addition,	before	receivables can	be	sold	under	certain	of	the	revolving	committed	facilities,	they	may	need	to	meet	contractual	requirements,	such	as	credit	quality	or	insurability.

For	many	years	the	Company	has	utilized	a	number	of	receivables	programs	to	sell	a	broadly-diversified	group	of	accounts	receivables	to	third parties.	Certain	of	the	accounts	receivables	are	sold	to	a	multi-seller	commercial	paper	conduit.	This	program	provided	for	up	to	$400	million	of	accounts receivables	to	be	outstanding	with	the	conduit	at	any	time.	Subsequent	to	December	31,	2008,	this	$400	million	committed	facility	expired	and	the Company	is	negotiating	a	replacement	facility	under	different	terms.	The	Company	is	also	negotiating	an	additional	committed	revolving	receivable	sales facility	for	European	receivables,	with	the	intent	that	the	combined	capacity	of	the	two	new	facilities	will	be	greater	than	the	facility	that	expired. However,	it	is	not	certain	when	or	if	the	Company	will	be	successful	in	securing	such	facilities.

Under	certain	receivables	programs,	the	value	of	the	receivables	sold	is	covered	by	credit	insurance	obtained	from	independent	insurance	companies, less	deductibles	or	self-insurance	requirements	under	the	policies	(with	the	Company	retaining	credit	exposure	for	the	remaining	portion).	The Company's	total	credit	exposure	to	outstanding	short-term	receivables	that	have	been	sold	was	$23	million	at	both	December	31,	2008	and	2007. Reserves	of	$4	million	and	$1	million	were	recorded	for	potential	losses	at	December	31,	2008	and	2007,	respectively.

# 11. Commitments	and	Contingencies

# Legal

Iridium	Program:		The	Company	was	named	as	one	of	several	defendants	in	putative	class	action	securities	lawsuits	arising	out	of	alleged misrepresentations	or	omissions	regarding	the	Iridium	satellite	communications	business	which,	on	March	15,	2001,	were	consolidated	in	the	federal district	court	in	the	District	of	Columbia	under	Freeland	v.	Iridium	World	Communications,	Inc.,	et	al.,	originally	filed	on	April	22,	1999.	In	April	2008, the	parties	reached	an	agreement	in	principle,	subject	to	court	approval,	to	settle	all	claims	against	Motorola	in	exchange	for	Motorola's	payment	of $20	million.	During	the	three	months	ended	March	29,	2008,	the	Company	recorded	a	charge	associated	with	this	settlement.	On	October	23,	2008,	the court	granted	final	approval	of	the	settlement	and	dismissed	the	claims	with	prejudice.

The	Company	was	sued	by	the	Official	Committee	of	the	Unsecured	Creditors	of	Iridium	(the	"Committee")	in	the	United	States	Bankruptcy	Court for	the	Southern	District	of	New	York	(the	"Iridium	Bankruptcy	Court")	on	July	19,	2001.	In	re	Iridium	Operating	LLC,	et	al.	v.	Motorola	asserted claims	for	breach	of	contract,	warranty	and	fiduciary	duty	and	fraudulent	transfer	and	preferences,	and	sought	in	excess	of	$4	billion	in	damages.	On May	20,	2008,	the	Bankruptcy	Court	approved	a	settlement	in	which	Motorola	is	not	required	to	pay	anything,	but	released	its	administrative,	priority and	unsecured	claims	against	the	Iridium	estate	and	withdrew	its	objection	to	the	2001	settlement	between	the	unsecured	creditors	of	the	Iridium	Debtors and	the	Iridium	Debtors'	pre-petition	secured	lenders.	This	settlement,	and	its	approval	by	the	Bankruptcy	Court,	extinguished	Motorola's	financial exposure	and	concluded	Motorola's	involvement	in	the	Iridium	bankruptcy	proceedings.

Telsim	Class	Action	Securities:		In	April	2007,	the	Company	entered	into	a	settlement	agreement	in	regards	to	In	re	Motorola	Securities	Litigation,	a class	action	lawsuit	relating	to	the	Company's	disclosure	of	its	relationship	with	Telsim	Mobil	Telekomunikasyon	Hizmetleri	A.S.	Pursuant	to	the settlement,	Motorola	paid	$190	million	to	the	class	and	all	claims	against	Motorola	by	the	class	have	been	dismissed	and	released.

During	the	three	months	ended	March	31,	2007,	the	Company	recorded	a	charge	of	$190	million	for	the	legal	settlement,	partially	offset	by $75	million	of	estimated	insurance	recoveries,	of	which	$50	million	had	been	tendered	by	certain	insurance	carriers.	During	the	three	months	ended June	30,	2007,	the	Company	commenced	actions	against	the	non-tendering	insurance	carriers.	In	response	to	these	actions,	each	insurance	carrier	who has	responded	denied	coverage	citing	various	policy	provisions.	As	a	result	of	this	denial	of	coverage	and	related	actions,	the	Company	recorded	a reserve	of	$25	million	in	the	three	months	ended	June	30,	2007	against	the	receivable	from	insurance	carriers.	During	the	three	months	ended September	27,	2008,	the	Company	received	the	$50	million	tendered	by	the	insurance	carriers.	During	the	three	months	ended	December	31,	2008,	the Company	received	a	net	$43	million	tendered	by	other	insurance	carriers.

Other:		The	Company	is	a	defendant	in	various	other	suits,	claims	and	investigations	that	arise	in	the	normal	course	of	business.	In	the	opinion	of management,	the	ultimate	disposition	of	these	matters	will	not	have	a	material	adverse	effect	on	the	Company's	consolidated	financial	position,	liquidity or	results	of	operations.

Leases:		The	Company	owns	most	of	its	major	facilities	and	leases	certain	office,	factory	and	warehouse	space,	land,	and	information	technology and	other	equipment	under	principally	non-cancelable	operating	leases.	Rental	expense,	net	of	sublease	income,	for	the	years	ended	December	31,	2008, 2007	and	2006	was	$181	million,	$231	million	and	$241	million,	respectively.	At	December	31,	2008,	future	minimum	lease	obligations,	net	of	minimum sublease	rentals,	for	the	next	five	years	and	beyond	are	as	follows:	2009—$234	million;	2010—$175	million;	2011—$129	million;	2012—$78	million; 2013—$48	million;	beyond—$106	million.

Indemnifications:		The	Company	is	also	a	party	to	a	variety	of	agreements	pursuant	to	which	it	is	obligated	to	indemnify	the	other	party	with	respect to	certain	matters.	Some	of	these	obligations	arise	as	a	result	of	divestitures	of	the	Company's	assets	or	businesses	and	require	the	Company	to	hold	the other	party	harmless	against	losses	arising	from	the	settlement	of	these	pending	obligations.	The	total	amount	of	indemnification	under	these	types	of provisions	is	$64	million,	of	which	the	Company	accrued	$47	million	as	of	December	31,	2008	for	potential	claims	under	these	provisions.

In	addition,	the	Company	may	provide	indemnifications	for	losses	that	result	from	the	breach	of	general	warranties	contained	in	certain	commercial and	intellectual	property.	Historically,	the	Company	has	not	made	significant	payments	under	these	agreements.	However,	there	is	an	increasing	risk	in relation	to	patent	indemnities	given	the	current	legal	climate.

In	indemnification	cases,	payment	by	the	Company	is	conditioned	on	the	other	party	making	a	claim	pursuant	to	the	procedures	specified	in	the particular	contract,	which	procedures	typically	allow	the	Company	to	challenge	the	other	party's	claims.	Further,	the	Company's	obligations	under	these agreements	for	indemnification	based	on	breach	of	representations	and	warranties	are	generally	limited	in	terms	of	duration,	and	for	amounts	not	in excess	of	the	contract	value,	and,	in	some	instances,	the	Company	may	have	recourse	against	third	parties	for	certain	payments	made	by	the	Company.

Other:		During	the	three	months	ended	September	27,	2008,	the	Company	recorded	a	$150	million	charge	related	to	the	settlement	of	a	purchase commitment.	During	the	three	months	ended	December	31,	2007,	the	Company	recorded	a	$277	million	charge	for	a	legal	settlement.

# 12. Information	by	Segment	and	Geographic	Region

The	Company	reports	financial	results	for	the	following	business	segments:

•		The	Mobile	Devices	segment	designs,	manufactures,	sells	and	services	wireless	handsets	with	integrated	software	and	accessory	products,	and licenses	intellectual	property.

•		The	Home	and	Networks	Mobility	segment	designs,	manufactures,	sells,	installs	and	services:	(i)	digital	video,	Internet	Protocol	("IP")	video and	broadcast	network	interactive	set-tops	("digital	entertainment	devices"),	end-to-end	video	delivery	systems,	broadband	access	infrastructure platforms,	and	associated	data	and	voice	customer	premise	equipment	("broadband	gateways")	to	cable	television	and	telecom	service	providers (collectively,	referred	to	as	the	"home	business"),	and	(ii)	wireless	access	systems	("wireless	networks"),	including	cellular	infrastructure systems	and	wireless	broadband	systems,	to	wireless	service	providers	(collectively,	referred	to	as	the	"networks	business").

•		The	Enterprise	Mobility	Solutions	segment	designs,	manufactures,	sells,	installs	and	services	analog	and	digital	two-way	radio,	voice	and	data communications	products	and	systems	for	private	networks,	wireless	broadband	systems	and	end-to-end	enterprise	mobility	solutions	to	a	wide range	of	enterprise	markets,	including	government	and	public	safety	agencies	(which,	together	with	all	sales	to	distributors	of	two-way communication	products,	are	referred	to	as	the	"government	and	public	safety	market"),	as	well	as	retail,	utility,	transportation,	manufacturing, health	care	and	other	commercial	customers	(which,	collectively,	are	referred	to	as	the	"commercial	enterprise	market").

Segment	operating	results	are	measured	based	on	operating	earnings	adjusted,	if	necessary,	for	certain	segment-specific	items	and	corporate allocations.	Intersegment	and	intergeographic	sales	are	accounted	for	on	an	arm's-length	pricing	basis.	Intersegment	sales	included	in	other	and eliminations	were:

| Years	Ended	December	31 | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| Mobile\tDevices | $53 | $56 | $65 |
| Home\tand\tNetworks\tMobility | 2 | 14 | 13 |
| Enterprise\tMobility\tSolutions | 86 | 58 | 31 |
|  | $141 | $128 | $109 |

Identifiable	assets	(excluding	intersegment	receivables)	are	the	Company's	assets	that	are	identified	with	classes	of	similar	products	or	operations	in each	geographic	region.

(1) Primarily	comprised	of:	(i)	general	corporate-related	expenses,	(ii)	various	corporate	programs,	representing	developmental	businesses	and	research and	development	projects,	which	are	not	included	in	any	reporting	segment,	and	(iii)	the	Company's	wholly-owned	finance	subsidiary.

(2) Primarily	comprised	of:	(i)	compensation	expense	related	to	the	Company's	employee	stock	options,	stock	appreciation	rights	and	employee	stock purchase	plans,	and	(ii)	compensation	expenses	related	to	the	restricted	stock	and	restricted	stock	units	granted	to	the	corporate	employees.

|  | Assets | Assets | Assets | Capital	Expenditures | Capital	Expenditures | Capital	Expenditures | Depreciation	Expense | Depreciation	Expense | Depreciation	Expense |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Years\tEnded\tDecember\t31 | 2008 | 2007 | 2006 | 2008 | 2007 | 2006 | 2008 | 2007 | 2006 |
| Mobile\tDevices | $3,559 | $6,325 | $9,316 | $84 | $132 | $164 | $115 | $146 | $133 |
| Home\tand\tNetworks\tMobility | 7,024 | 7,451 | 6,746 | 147 | 160 | 149 | 135 | 141 | 165 |
| Enterprise\tMobility\tSolutions | 6,000 | 8,694 | 3,268 | 166 | 113 | 190 | 158 | 167 | 92 |
|  | 16,583 | 22,470 | 19,330 | 397 | 405 | 503 | 408 | 454 | 390 |
| Other\tand\tEliminations | 11,286 | 12,342 | 19,263 | 107 | 122 | 146 | 103 | 83 | 73 |
|  | $27,869 | $34,812 | $38,593 | $504 | $527 | $649 | $511 | $537 | $463 |

Assets	in	Other	include	primarily	cash	and	cash	equivalents,	Sigma	Fund,	deferred	income	taxes,	short-term	investments,	property,	plant	and equipment,	investments,	and	the	administrative	headquarters	of	the	Company.

# Geographic	area	information

|  | Net	Sales(1) | Net	Sales(1) | Net	Sales(1) | Assets | Assets | Assets |  | Equipment |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Years\tEnded\tDecember\t31 | 2008 | 2007 | 2006 | 2008 | 2007 | 2006 | 2008 | 2007 | 2006 |
| United\tStates | $14,708 | $18,548 | $18,776 | $17,938 | $22,385 | $24,212 | $1,240 | $1,252 | $1,089 |
| China | 2,011 | 2,632 | 4,664 | 3,307 | 3,926 | 4,649 | 294 | 311 | 278 |
| Brazil | 1,554 | 1,671 | 1,269 | 1,057 | 1,440 | 1,219 | 110 | 109 | 107 |
| United\tKingdom | 936 | 1,070 | 1,306 | 1,314 | 1,305 | 1,773 | 85 | 121 | 134 |
| Germany | 322 | 516 | 874 | 467 | 644 | 1,195 | 57 | 75 | 131 |
| Israel | 696 | 741 | 659 | 1,268 | 1,374 | 1,195 | 141 | 165 | 156 |
| Singapore | 116 | 128 | 176 | 1,875 | 3,120 | 3,713 | 32 | 40 | 39 |
| Other\tnations,\tnet\tof\teliminations | 9,803 | 11,316 | 15,123 | 643 | 618 | 637 | 483 | 407 | 333 |
|  | $30,146 | $36,622 | $42,847 | $27,869 | $34,812 | $38,593 | $2,442 | $2,480 | $2,267 |

(1) Net	sales	by	geographic	region	are	measured	by	the	locale	of	end	customer.

The	Company	maintains	a	formal	Involuntary	Severance	Plan	(the	"Severance	Plan"),	which	permits	the	Company	to	offer	eligible	employees severance	benefits	based	on	years	of	service	and	employment	grade	level	in	the	event	that	employment	is	involuntarily	terminated	as	a	result	of	a reduction-in-force	or	restructuring.	The	Company	recognizes	termination	benefits	based	on	formulas	per	the	Severance	Plan	at	the	point	in	time	that future	settlement	is	probable	and	can	be	reasonably	estimated	based	on	estimates	prepared	at	the	time	a	restructuring	plan	is	approved	by	management. Exit	costs	consist	of	future	minimum	lease	payments	on	vacated	facilities	and	other	contractual	terminations.	At	each	reporting	date,	the	Company evaluates	its	accruals	for	employee	separation	and	exit	costs	to	ensure	the	accruals	are	still	appropriate.	In	certain	circumstances,	accruals	are	no	longer needed	because	of	efficiencies	in	carrying	out	the	plans	or	because	employees	previously	identified	for	separation	resigned	from	the	Company	and	did not	receive	severance	or	were	redeployed	due	to	circumstances	not	foreseen	when	the	original	plans	were	initiated.	In	these	cases,	the	Company	reverses accruals	through	the	consolidated	statements	of	operations	where	the	original	charges	were	recorded	when	it	is	determined	they	are	no	longer	needed.

During	the	year	ended	December	31,	2008,	the	Company	committed	to	implement	various	productivity	improvement	plans	aimed	at	achieving	long- term,	sustainable	profitability	by	driving	efficiencies	and	reducing	operating	costs.	All	three	of	the	Company's	business	segments,	as	well	as	corporate functions,	are	impacted	by	these	plans,	with	the	majority	of	the	impact	in	the	Mobile	Devices	segment.	The	employees	affected	are	located	in	all	regions. The	Company	recorded	net	reorganization	of	business	charges	of	$334	million,	including	$86	million	of	charges	in	Costs	of	sales	and	$248	million	of charges	under	Other	charges	in	the	Company's	consolidated	statements	of	operations.	Included	in	the	aggregate	$334	million	are	charges	of	$324	million for	employee	separation	costs,	$66	million	for	exit	costs	and	$9	million	for	fixed	asset	impairment	charges,	partially	offset	by	$65	million	of	reversals	for accruals	no	longer	needed.

During	the	year	ended	December	31,	2008,	approximately	6,200	employees,	of	which	3,000	were	direct	employees	and	3,200	were	indirect employees,	were	separated	from	the	Company.	The	$287	million	used	in	2008	reflects	cash	payments	to	these	separated	employees.	The	remaining accrual	of	$170	million,	which	is	included	in	Accrued	liabilities	in	the	Company's	consolidated	balance	sheets	at	December	31,	2008,	is	expected	to	be paid	to	approximately	2,000	employees.

During	the	year	ended	December	31,	2007,	the	Company	committed	to	implement	various	productivity	improvement	plans	aimed	at	achieving	long- term,	sustainable	profitability	by	driving	efficiencies	and	reducing	operating	costs.	All	three	of	the	Company's	business	segments,	as	well	as	corporate functions,	are	impacted	by	these	plans.	The	majority	of	the	employees	affected	are	located	in	North	America	and	Europe.	The	Company	recorded	net reorganization	of	business	charges	of	$394	million,	including	$104	million	of	charges	in	Costs	of	sales	and	$290	million	of	charges	under	Other	charges (income)	in	the	Company's	consolidated	statements	of

operations.	Included	in	the	aggregate	$394	million	are	charges	of	$401	million	for	employee	separation	costs,	$42	million	for	fixed	asset	impairment charges	and	$19	million	for	exit	costs,	offset	by	reversals	for	accruals	no	longer	needed.

At	January	1,	2007,	the	Company	had	an	accrual	of	$54	million	for	exit	costs	attributable	to	lease	terminations.	The	2007	additional	charges	of $19	million	are	primarily	related	to	the	exit	of	certain	activities	and	leased	facilities	in	Ireland	by	the	Home	and	Networks	Mobility	segment.	The	2007 adjustments	of	$2	million	represent	accruals	for	exit	costs	established	through	purchase	accounting	for	businesses	acquired.	The	$33	million	used	in	2007 reflects	cash	payments.	The	remaining	accrual	of	$42	million,	which	was	included	in	Accrued	liabilities	in	the	Company's	consolidated	balance	sheets	at December	31,	2007,	represented	future	cash	payments	for	lease	termination	obligations.

During	the	year	ended	December	31,	2007,	approximately	5,300	employees,	of	which	1,700	were	direct	employees	and	3,600	were	indirect employees,	were	separated	from	the	Company.	The	$248	million	used	in	2007	reflects	cash	payments	to	these	separated	employees.	The	remaining accrual	of	$193	million	is	included	in	Accrued	liabilities	in	the	Company's	consolidated	balance	sheets	at	December	31,	2007.

During	the	year	ended	December	31,	2006,	the	Company	committed	to	implement	various	productivity	improvement	plans	aimed	principally	at: (i)	reducing	costs	in	its	supply-chain	activities,	(ii)	integration	synergies,	and	(iii)	reducing	other	operating	expenses,	primarily	relating	to	engineering	and development	costs.	The	Company	recorded	net	reorganization	of	business	charges	of	$213	million,	including	$41	million	of	charges	in	Costs	of	sales	and $172	million	of	charges	under	Other	charges	in	the	Company's	consolidated	statements	of	operations.	Included	in	the	aggregate	$213	million	are	charges of	$191	million	for	employee	separation	costs,	$15	million	for	fixed	asset	impairment	charges	and	$30	million	for	exit	costs,	partially	offset	by $23	million	of	reversals	for	accruals	no	longer	needed.

At	January	1,	2006,	the	Company	had	an	accrual	of	$50	million	for	exit	costs	attributable	to	lease	terminations.	The	2006	additional	charges	of $30	million	were	primarily	related	to	a	lease	cancellation	by	the	Enterprise	Mobility	Solutions	segment.	The	2006	adjustments	of	$7	million	represent reversals	of	accruals	no	longer	needed.	The	$19	million	used	in	2006	reflects	cash	payments	to	lessors.	The	remaining	accrual	of	$54	million,	which	was included	in	Accrued	liabilities	in	the	Company's	consolidated	balance	sheets	at	December	31,	2006,	represented	future	cash	payments	for	lease termination	obligations.

During	the	year	ended	December	31,	2006,	approximately	3,200	employees,	of	which	1,400	were	direct	employees	and	1,800	were	indirect employees,	were	separated	from	the	Company.	The	$124	million	used	in	2006	reflects	cash	payments	to	these	separated	employees.	The	remaining accrual	of	$104	million	was	included	in	Accrued	liabilities	in	the	Company's	consolidated	balance	sheets	at	December	31,	2006.

# 14. Acquisitions	and	Related	Intangibles

The	Company	accounts	for	acquisitions	using	purchase	accounting	with	the	results	of	operations	for	each	acquiree	included	in	the	Company's consolidated	financial	statements	for	the	period	subsequent	to	the	date	of	acquisition.	The	pro	forma	effects	of	these	acquisitions	on	the	Company's consolidated	financial	statements	were	not	significant	individually	nor	in	the	aggregate.

The	allocation	of	value	to	in-process	research	and	development	was	determined	using	expected	future	cash	flows	discounted	at	average	risk	adjusted rates	reflecting	both	technological	and	market	risk	as	well	as	the	time	value	of	money.	Historical	pricing,	margins	and	expense	levels,	where	applicable, were	used	in	the	valuation	of	the	in-process	products.	The	in-process	research	and	development	acquired	will	have	no	alternative	future	uses	if	the products	are	not	feasible.

The	developmental	products	for	the	companies	acquired	have	varying	degrees	of	timing,	technology,	costs-to-complete	and	market	risks	throughout final	development.	If	the	products	fail	to	become	viable,	the	Company	will	unlikely	be	able	to	realize	any	value	from	the	sale	of	incomplete	technology	to another	party	or	through	internal	re-use.	The	risks	of	market	acceptance	for	the	products	under	development	and	potential	reductions	in	projected	sales volumes	and	related	profits	in	the	event	of	delayed	market	availability	for	any	of	the	products	exist.	Efforts	to	complete	all	developmental	products continue	and	there	are	no	known	delays	to	forecasted	plans	except	as	disclosed.

The	Company	did	not	have	any	significant	acquisitions	during	the	year	ended	December	31,	2008.	The	following	is	a	summary	of	significant acquisitions	during	the	years	ended	December	31,	2007	and	2006:

|  | Quarter<br>	 Acquired | Consideration,	net | Form	of<br>Consideration | Development<br>Charge |
| :--- | :--- | :--- | :--- | :--- |
| 2007\tAcquisitions |  |  |  |  |
| Symbol\tTechnologies,\tInc. | Q1 | $3,528 | Cash | $95 |
| Good\tTechnology,\tInc. | Q1 | $438 | Cash | — |
| Netopia,\tInc. | Q1 | $183 | Cash | — |
| Terayon\tCommunication\tSystems,\tInc. | Q3 | $137 | Cash | — |
| 2006\tAcquisitions |  |  |  |  |
| Broadbus\tTechnologies,\tInc. | Q3 | $181 | Cash | $12 |
| TTP\tCommunications\tplc | Q3 | $193 | Cash | $17 |
| Kreatel\tCommunications\tAB | Q1 | $108 | Cash | $1 |

The	following	table	summarizes	net	tangible	and	intangible	assets	acquired	and	the	consideration	paid	for	the	acquisitions	identified	above:

| Years	Ended	December	31 | 2007 | 2006 |
| :--- | :--- | :--- |
| Tangible\tnet\tassets | $83 | $20 |
| Goodwill | 2,793 | 262 |
| Other\tintangibles | 1,315 | 170 |
| In-process\tresearch\tand\tdevelopment | 95 | 30 |
|  | $4,286 | $482 |
| Consideration,\tnet: |  |  |
| Cash | $4,286 | $482 |
| Stock | — | — |
|  | $4,286 | $482 |

# Symbol	Technologies,	Inc.

In	January	2007,	the	Company	acquired,	for	$3.5	billion	in	net	cash,	the	outstanding	common	stock	of	Symbol	Technologies,	Inc.	("Symbol"),	a leader	in	designing,	developing,	manufacturing	and	servicing	products	and	systems	used	in	end-to-end	enterprise	mobility	solutions	featuring	rugged mobile	computing,	advanced	data	capture,	radio	frequency	identification	("RFID"),	wireless	infrastructure	and	mobility	management.

The	fair	value	of	acquired	in-process	research	and	development	was	$95	million.	The	acquired	in-process	research	and	development	will	have	no alternative	future	uses	if	the	products	are	not	feasible	and,	as	such,	costs	were	expensed	at	the	date	of	acquisition.	At	the	date	of	acquisition,	31	projects were	in	process	and	were	completed	through	2008.	The	average	risk	adjusted	rate	used	to	value	these	projects	is	15-16%.	The	allocation	of	value	to	in- process	research	and	development	was	determined	using	expected	future	cash	flows	discounted	at	average	risk	adjusted	rates	reflecting	both	technological and	market	risk	as	well	as	the	time	value	of	money.

The	fair	value	of	the	acquired	intangible	assets	was	$1.0	billion	at	the	time	of	acquisition.	Intangible	assets	are	included	in	Other	assets	in	the Company's	consolidated	balance	sheets.	The	intangible	assets	are	being	amortized	over	periods	ranging	from	1	to	8	years	on	a	straight-line	basis.	The Company	recorded	$2.3	billion	of	goodwill,	none	of	which	is	expected	to	be	deductible	for	tax	purposes.

The	results	of	the	operations	of	Symbol	have	been	included	in	the	Enterprise	Mobility	Solutions	segment	in	the	Company's	consolidated	financial statements	subsequent	to	the	date	of	acquisition.	The	pro	forma	effects	of	this	acquisition	on	the	Company's	consolidated	financial	statements	were	not significant.

# Good	Technology,	Inc.

In	January	2007,	the	Company	acquired	Good	Technology,	Inc.	("Good"),	a	provider	of	enterprise	mobile	computing	software	and	services,	for $438	million	in	net	cash.	The	Company	recorded	$296	million	in	goodwill,	none	of	which	is	expected	to	be	deductible	for	tax	purposes	and	$158	million in	identifiable	intangible	assets.	However,	due	to	recent	changes	in	software	platform	strategy,	impairment	charges	of	$123	million	were	recorded	for	the year	ended	December	31,	2008,	representing	write-downs	of:	(i)	$121	million	of	intangible	assets,	primarily	relating	to	completed	technology	and	other intangibles,	and	(ii)	$2	million	of	property,	plant	and	equipment.

The	results	of	operations	of	Good	have	been	included	in	the	Enterprise	Mobility	Solutions	segment	in	the	Company's	consolidated	financial statements	subsequent	to	the	date	of	acquisition.	The	pro	forma	effects	of	this	acquisition	on	the	Company's	consolidated	financial	statements	were	not significant.

# Netopia,	Inc.

In	February	2007,	the	Company	acquired	Netopia,	Inc.	("Netopia"),	a	broadband	equipment	provider	for	DSL	customers,	which	allows	for	phone, TV	and	fast	Internet	connections,	for	$183	million	in	net	cash.	The	Company	recorded	$61	million	in	goodwill,	none	of	which	is	expected	to	be deductible	for	tax	purposes,	and	$100	million	in	identifiable	intangible	assets.	Intangible	assets	are	included	in	Other	assets	in	the	Company's consolidated	balance	sheets.	The	intangible	assets	are	being	amortized	over	a	period	of	7	years	on	a	straight-line	basis.

The	results	of	operations	of	Netopia	have	been	included	in	the	Home	and	Networks	Mobility	segment	in	the	Company's	consolidated	financial statements	subsequent	to	the	date	of	acquisition.	The	pro	forma	effects	of	this	acquisition	on	the	Company's	consolidated	financial	statements	were	not significant.

# Terayon	Communication	Systems,	Inc.

In	July	2007,	the	Company	acquired	Terayon	Communication	Systems,	Inc.	("Terayon"),	a	provider	of	real-time	digital	video	networking applications	to	cable,	satellite	and	telecommunication	service	providers	worldwide,	for	$137	million	in	net	cash.	The	Company	recorded	$21	million	in goodwill,	none	of	which	is	expected	to	be	deductible	for	tax	purposes,	and	$52	million	in	identifiable	intangible	assets.	Intangible	assets	are	included	in Other	assets	in	the	Company's	consolidated	balance	sheets.	The	intangible	assets	are	being	amortized	over	periods	ranging	from	4	to	6	years	on	a straight-line	basis.

The	results	of	operations	of	Terayon	have	been	included	in	the	Home	and	Networks	Mobility	segment	in	the	Company's	consolidated	financial statements	subsequent	to	the	date	of	acquisition.	The	pro	forma	effects	of	this	acquisition	on	the	Company's	consolidated	financial	statements	were	not significant.

# Broadbus	Technologies,	Inc.

In	September	2006,	the	Company	acquired	Broadbus	Technologies,	Inc.	("Broadbus"),	a	provider	of	television	on	demand	technology,	for $181	million	in	cash.	The	Company	recorded	$131	million	in	goodwill,	none	of	which

is	expected	to	be	deductible	for	tax	purposes,	a	$12	million	charge	for	acquired	in-process	research	and	development	costs,	and	$30	million	in	identifiable intangible	assets.	The	acquired	in-process	research	and	development	will	have	no	alternative	future	uses	if	the	products	are	not	feasible.	At	the	date	of	the acquisition,	two	projects	were	in	process.	During	the	year	ended	December	31,	2008,	one	of	the	projects	was	completed	while	the	other	project	was abandoned.	The	average	risk	adjusted	rate	used	to	value	this	project	was	22%.	The	allocation	of	value	to	in-process	research	and	development	was determined	using	expected	future	cash	flows	discounted	at	average	risk	adjusted	rates	reflecting	both	technological	and	market	risk	as	well	as	the	time value	of	money.	These	research	and	development	costs	were	expensed	at	the	date	of	acquisition.	Intangible	assets	are	included	in	Other	assets	in	the Company's	consolidated	balance	sheets.	The	intangible	assets	are	being	amortized	over	periods	ranging	from	3	to	5	years	on	a	straight-line	basis.

The	results	of	operations	of	Broadbus	have	been	included	in	the	Home	and	Networks	Mobility	segment	in	the	Company's	consolidated	financial statements	subsequent	to	the	date	of	acquisition.	The	pro	forma	effects	of	this	acquisition	on	the	Company's	consolidated	financial	statements	were	not significant.

# TTP	Communications	plc

In	August	2006,	the	Company	acquired	TTP	Communications	plc	("TTPCom"),	a	provider	of	wireless	software	platforms,	protocol	stacks	and semiconductor	solutions,	for	$193	million	in	cash.	The	Company	recorded	$52	million	in	goodwill,	a	portion	of	which	is	expected	to	be	deductible	for	tax purposes,	a	$17	million	charge	for	acquired	in-process	research	and	development	costs,	and	$118	million	in	identifiable	intangible	assets.	The	acquired in-process	research	and	development	will	have	no	alternative	future	uses	if	the	products	are	not	feasible.	At	the	date	of	the	acquisition,	a	total	of	four projects	were	in	process.	The	average	risk	adjusted	rate	used	to	value	these	projects	was	18%.	These	projects	have	since	been	completed.	The	allocation	of value	to	in-process	research	and	development	was	determined	using	expected	future	cash	flows	discounted	at	average	risk	adjusted	rates	reflecting	both technological	and	market	risk	as	well	as	the	time	value	of	money.	These	research	and	development	costs	were	expensed	at	the	date	of	acquisition. However,	due	to	changes	in	software	platform	strategy,	impairment	charges	of	$89	million	were	recorded	for	the	year	ended	December	31,	2007, representing	write-downs	of:	(i)	$81	million	of	intangible	assets,	primarily	relating	to	completed	technology	and	other	intangibles,	and	(ii)	$8	million	of property,	plant	and	equipment.

The	results	of	operations	of	TTPCom	have	been	included	in	the	Mobile	Devices	segment	in	the	Company's	consolidated	financial	statements subsequent	to	the	date	of	acquisition.	The	pro	forma	effects	of	this	acquisition	on	the	Company's	consolidated	financial	statements	were	not	significant.

# Kreatel	Communications	AB

In	February	2006,	the	Company	acquired	Kreatel	Communications	AB	("Kreatel"),	a	leading	developer	of	innovative	Internet	Protocol	("IP")	based digital	set-tops	and	software,	for	$108	million	in	cash.	The	Company	recorded	$79	million	in	goodwill,	a	portion	of	which	is	expected	to	be	deductible	for tax	purposes,	a	$1	million	charge	for	acquired	in-process	research	and	development	costs,	and	$22	million	in	identifiable	intangible	assets.	The	acquired in-process	research	and	development	will	have	no	alternative	future	uses	if	the	products	are	not	feasible.	At	the	date	of	the	acquisition,	a	total	of	two projects	were	in	process.	These	projects	have	since	been	completed.	The	average	risk	adjusted	rate	used	to	value	these	projects	was	19%.	The	allocation	of value	to	in-process	research	and	development	was	determined	using	expected	future	cash	flows	discounted	at	average	risk	adjusted	rates	reflecting	both technological	and	market	risk	as	well	as	the	time	value	of	money.	These	research	and	development	costs	were	expensed	at	the	date	of	acquisition. Intangible	assets	are	included	in	Other	assets	in	the	Company's	consolidated	balance	sheets.	The	intangible	assets	are	being	amortized	over	periods ranging	from	2	to	4	years	on	a	straight-line	basis.

The	results	of	operations	of	Kreatel	have	been	included	in	the	Home	and	Networks	Mobility	segment	in	the	Company's	consolidated	financial statements	subsequent	to	the	date	of	acquisition.	The	pro	forma	effects	of	this	acquisition	on	the	Company's	consolidated	financial	statements	were	not significant.

Amortized	intangible	assets	were	comprised	of	the	following:

|  | 2008 | 2008 | 2007 | 2007 |
| :--- | :--- | :--- | :--- | :--- |
| December\t31 | Gross\n\tCarrying\nAmount | Accumulated\nAmortization | Gross\nCarrying\nAmount | Accumulated\nAmortization |
| Intangible\tassets: |  |  |  |  |
| Completed\ttechnology | $1,127 | $633 | $1,234 | $484 |
| Patents | 292 | 125 | 292 | 69 |
| Customer-related | 277 | 104 | 264 | 58 |
| Licensed\ttechnology | 129 | 118 | 123 | 109 |
| Other\tintangibles | 150 | 126 | 166 | 99 |
|  | $1,975 | $1,106 | $2,079 | $819 |

Amortized	intangible	assets,	excluding	goodwill,	by	business	segment:

|  | 2008 | 2008 | 2007 | 2007 |
| :--- | :--- | :--- | :--- | :--- |
| December\t31 | Gross\n\tCarrying\nAmount | Accumulated\nAmortization | Gross\nCarrying\nAmount | Accumulated\nAmortization |
| Mobile\tDevices | $45 | $45 | $36 | $36 |
| Home\tand\tNetworks\tMobility | 722 | 522 | 712 | 455 |
| Enterprise\tMobility\tSolutions | 1,208 | 539 | 1,331 | 328 |
|  | $1,975 | $1,106 | $2,079 | $819 |

During	the	year	ended	December	31,	2008,	the	Company	recorded	an	impairment	of	intangible	assets	of	$121	million	due	to	a	change	in	a technology	platform	strategy,	relating	to	completed	technology	and	other	intangibles,	in	the	Enterprise	Mobility	Solutions	segment.	During	the	year ended	December	31,	2007	due	to	a	change	in	software	platform	strategy,	the	Company	recorded	an	impairment	of	intangible	assets	of	$81	million, primarily	relating	to	completed	technology	and	other	intangibles,	in	the	Mobile	Devices	segment.

# Goodwill

The	following	tables	display	a	rollforward	of	the	carrying	amount	of	goodwill	from	January	1,	2007	to	December	31,	2008,	by	business	segment:

| Segment | January	1,<br>2008 | Acquired | Adjustments(1) | Impaired | December	31,<br>2008 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Mobile\tDevices | $19 | $15 | $21 | $(55) | $— |
| Home\tand\tNetworks\tMobility | 1,576 | 12 | (179) | — | 1,409 |
| Enterprise\tMobility\tSolutions | 2,904 | 60 | 28 | (1,564) | 1,428 |
|  | $4,499 | $87 | $(130) | $(1,619) | $2,837 |

During	the	year	ended	December	31,	2008,	the	Company	finalized	its	assessment	of	the	Internal	Revenue	Code	Section	382	Limitations	("IRC Section	382")	relating	to	the	pre-acquisition	tax	loss	carry-forwards	of	its	2007	acquisitions.	As	a	result	of	the	IRC	Section	382	studies,	the	company recorded	additional	deferred	tax	assets	and	a	corresponding	reduction	in	goodwill,	which	is	reflected	in	the	adjustment	column	above.

In	the	fourth	quarter	of	2008,	we	conducted	our	annual	assessment	of	goodwill	for	impairment.	The	Company	performed	extensive	valuation analyses,	utilizing	both	income	and	market	approaches,	in	our	goodwill

assessment	process.	The	goodwill	impairment	test	is	performed	at	the	reporting	unit	level.	A	reporting	unit	is	an	operating	segment	or	one	level	below	an operating	segment.	The	Company	has	determined	that	the	Mobile	Devices	segment	meets	the	requirement	of	a	reporting	unit.	For	the	Enterprise	Mobility Solutions	segment,	the	Company	has	identified	two	reporting	units,	the	Government	and	Public	Safety	reporting	unit	and	the	Enterprise	Mobility reporting	unit.	For	the	Home	and	Networks	Mobility	segment,	the	Company	has	identified	two	reporting	units,	the	Home	reporting	unit	and	the	Public Networks	reporting	unit.

During	this	quarter,	we	experienced	a	sustained,	significant	decline	in	our	stock	price	that	reduced	the	market	capitalization	below	the	book	value	of the	Company.	The	reduced	market	capitalization	reflected	the	macroeconomic	declines	coupled	with	the	market	view	on	the	performance	of	the	Mobile Devices	reporting	unit.	The	Company	has	considered	this	decline	in	our	stock	price	in	our	impairment	assessment.

The	Company	has	weighted	the	valuation	of	its	reporting	units	at	75%	based	on	the	income	approach	and	25%	based	on	the	market	based	approach consistent	with	prior	periods.	The	Company	believes	that	this	weighting	is	appropriate	since	it	is	often	difficult	to	find	other	appropriate	market participants	that	are	similar	to	our	reporting	units	and	the	Company	view	of	future	discounted	cash	flows	is	more	reflective	of	the	value	of	the	reporting units.	If	a	heavier	weighting	was	put	on	the	market	based	approach	for	certain	reporting	units,	a	higher	fair	value	would	have	been	determined.

The	determination	of	fair	value	of	the	reporting	units	and	other	assets	and	liabilities	within	the	reporting	units	requires	us	to	make	significant estimates	and	assumptions.	These	estimates	and	assumptions	primarily	include,	but	are	not	limited	to,	the	discount	rate,	terminal	growth	rates,	earnings before	depreciation	and	amortization,	and	capital	expenditures	forecasts.	Due	to	the	inherent	uncertainty	involved	in	making	these	estimates,	actual results	could	differ	from	those	estimates.	The	Company	assigned	discount	rates	ranging	from	13	to	14%	for	the	Home,	Public	Networks,	Government	and Public	Safety	and	Enterprise	Mobility	Reporting	units.	The	Company	assigned	a	discount	rate	of	25%	to	the	Mobile	Devices	reporting	unit	commensurate with	development	stage	enterprises	or	turnaround	opportunities.	The	Company	believes	this	rate	reflects	the	inherent	uncertainties	of	the	Mobile	Devices reporting	unit's	projected	cash	flows.	The	Company	evaluated	the	merits	of	each	significant	assumption,	both	individually	and	in	the	aggregate,	used	to determine	the	fair	value	of	the	reporting	units,	as	well	as	the	fair	values	of	the	corresponding	assets	and	liabilities	within	the	reporting	units,	and concluded	they	are	reasonable.

Based	on	the	results	of	Step	One	of	our	annual	assessment	of	the	recoverability	goodwill,	the	fair	values	of	the	Home,	Public	Networks	and Government	and	Public	Safety	reporting	units	exceeded	their	book	value,	indicating	that	there	was	no	impairment	of	goodwill	at	these	reporting	units.

However,	the	fair	value	of	the	Enterprise	Mobility	and	Mobile	Devices	reporting	units	was	below	their	respective	book	values,	indicating	a	potential impairment	of	goodwill	and	the	requirement	to	perform	Step	Two	of	the	analysis	for	these	reporting	units.	The	Company	acquired	the	main	components of	the	Enterprise	Mobility	reporting	unit	in	2007	at	which	time	the	book	value	and	fair	value	of	the	reporting	unit	was	the	same.	Because	of	this	fact,	the Enterprise	Mobility	reporting	unit	was	most	likely	to	experience	a	decline	in	its	fair	value	below	its	book	value	as	a	result	of	lower	values	in	the	overall market	and	the	deteriorating	macroeconomic	environment	and	the	market's	view	of	its	near	term	impact	on	the	reporting	unit.	The	decline	in	the	fair value	of	the	Mobile	Devices	reporting	unit	below	its	book	value	is	a	result	of	the	deteriorating	macroeconomic	environment,	lower	expected	sales	and cash	flows	as	a	result	of	the	decision	to	consolidate	platforms	announced	in	the	fourth	quarter	of	2008,	and	the	uncertainty	around	the	reporting	unit's future	cash	flow.	For	the	year	ended	December	31,	2008,	the	Company	determined	that	goodwill	relating	to	the	Enterprise	Mobility	Solution	and	Mobile Devices	segments	were	impaired,	resulting	in	charges	of	$1.6	billion	and	$55	million,	respectively.	Additional	impairment	charges	could	be	recognized in	the	near	term	if	the	Company's	market	capitalization	continues	to	decline	or	macroeconomic	conditions	continue	to	deteriorate.	No	impairment	charges were	required	for	the	years	ended	December	31,	2007	and	2006.

| Segment | January	1,<br>2007 | Acquired | Dispositions | Adjustments | December	31,<br>2007 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Mobile\tDevices | $69 | $—\t $— | $—\t $— | $(50) | $19 |
| Home\tand\tNetworks\tMobility | 1,266 | 427 | (119) | 2 | 1,576 |
| Enterprise\tMobility\tSolutions | 371 | 2,569 | — | (36) | 2,904 |
|  | $1,706 | $2,996 | $(119) | $(84) | $4,499 |

# 15. Valuation	and	Qualifying	Accounts

The	following	table	presents	the	valuation	and	qualifying	account	activity	for	the	years	ended	December	31,	2008,	2007	and	2006:

|  | Balance	at<br>January	1 | Charged	to<br>Earnings | Used | Adjustments(1) | Balance	at<br>December	31 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| 2008 |  |  |  |  |  |
| Reorganization\tof\tBusinesses | $235 | $390 | $(316) | $(59) | $250 |
| Allowance\tfor\tDoubtful\tAccounts | 184 | 63 | (35) | (30) | 182 |
| Allowance\tfor\tLosses\ton\tLong-term\tReceivables | 5 | 5 | — | (3) | 7 |
| Inventory\tReserves | 371 | 735 | (366) | 20 | 760 |
| Warranty\tReserves | 416 | 452 | (488) | (95) | 285 |
| Customer\tReserves | 972 | 1,587 | (1,544) | (416) | 599 |
| 2007 |  |  |  |  |  |
| Reorganization\tof\tBusinesses | 158 | 420 | (281) | (62) | 235 |
| Allowance\tfor\tDoubtful\tAccounts | 78 | 130 | (3) | (21) | 184 |
| Allowance\tfor\tLosses\ton\tLong-term\tReceivables | 10 | 2 | — | (7) | 5 |
| Inventory\tReserves | 416 | 546 | (524) | (67) | 371 |
| Warranty\tReserves | 530 | 756 | (735) | (135) | 416 |
| Customer\tReserves | 1,305 | 2,809 | (2,205) | (937) | 972 |
| 2006 |  |  |  |  |  |
| Reorganization\tof\tBusinesses | 103 | 221 | (143) | (23) | 158 |
| Allowance\tfor\tDoubtful\tAccounts | 101 | 50 | (58) | (15) | 78 |
| Allowance\tfor\tLosses\ton\tLong-term\tReceivables | 12 | 5 | (8) | 1 | 10 |
| Inventory\tReserves | 529 | 517 | (490) | (140) | 416 |
| Warranty\tReserves | 467 | 977 | (891) | (23) | 530 |
| Customer\tReserves | 1,171 | 4,218 | (3,597) | (487) | 1,305 |

# 16. Quarterly	and	Other	Financial	Data	(unaudited)*

| 16.<br>Quarterly	and	Other	Financial	Data	(unaudited)* |  |  |  |  |  |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2008 | 2008 | 2008 | 2008 | 2007 | 2007 | 2007 | 2007 |
|  | 1st | 2nd | 3rd | 4th(1) | 1st | 2nd | 3rd | 4th |
| Operating\tResults |  |  |  |  |  |  |  |  |
| Net\tsales | $7,448 | $8,082 | $7,480 | $7,136 | $9,433 | $8,732 | $8,811 | $9,646 |
| Costs\tof\tsales | 5,303 | 5,757 | 5,677 | 5,014 | 6,979 | 6,279 | 6,306 | 7,106 |
| Gross\tmargin | 2,145 | 2,325 | 1,803 | 2,122 | 2,454 | 2,453 | 2,505 | 2,540 |
| Selling,\tgeneral\tand\tadministrative\texpenses | 1,183 | 1,115 | 1,044 | 988 | 1,313 | 1,296 | 1,210 | 1,273 |
| Research\tand\tdevelopment\texpenditures | 1,054 | 1,048 | 999 | 1,008 | 1,117 | 1,115 | 1,100 | 1,097 |
| Other\tcharges | 177 | 157 | 212 | 1,801 | 390 | 200 | 205 | 189 |
| Operating\tearnings\t(loss) | (269) | 5 | (452) | (1,675) | (366) | (158) | (10) | (19) |
| Earnings\t(loss)\tfrom\tcontinuing\toperations | (194) | 4 | (397) | (3,657) | (218) | (38) | 40 | 111 |
| Net\tearnings\t(loss) | (194) | 4 | (397) | (3,657) | (181) | (28) | 60 | 100 |
| Per\tShare\tData\t(in\tdollars) |  |  |  |  |  |  |  |  |
| Continuing\tOperations: |  |  |  |  |  |  |  |  |
| Basic\tearnings\t(loss)\tper\tcommon\tshare | $ (0.09) | $0.00 | $ (0.18) | $(1.61) | $ (0.09) | $ (0.02) | $0.02 | $0.05 |
| Diluted\tearnings\t(loss)\tper\tcommon\tshare | (0.09) | 0.00 | (0.18) | (1.61) | (0.09) | (0.02) | 0.02 | 0.05 |
| Net\tEarnings: |  |  |  |  |  |  |  |  |
| Basic\tearnings\t(loss)\tper\tcommon\tshare | (0.09) | 0.00 | (0.18) | (1.61) | (0.08) | (0.01) | 0.03 | 0.04 |
| Diluted\tearnings\t(loss)\tper\tcommon\tshare | (0.09) | 0.00 | (0.18) | (1.61) | (0.08) | (0.01) | 0.03 | 0.04 |
| Dividends\tdeclared | 0.05 | 0.05 | 0.05 | 0.05 | 0.05 | 0.05 | 0.05 | 0.05 |
| Dividends\tpaid | 0.05 | 0.05 | 0.05 | 0.05 | 0.05 | 0.05 | 0.05 | 0.05 |
| Stock\tprices |  |  |  |  |  |  |  |  |
| High | 16.20 | 10.38 | 10.50 | 7.52 | 20.91 | 19.18 | 18.88 | 19.68 |
| Low | 8.98 | 7.20 | 6.52 | 3.00 | 17.45 | 17.32 | 15.61 | 14.87 |

(1) Includes:	(i)	a	$2.1	billion	charge	related	to	increase	the	U.S.	deferred	tax	asset	valuation	allowance,	as	described	in	Note	6,	"Income	Taxes",	(ii)	a $1.6	billion	charge	related	to	the	impairment	of	goodwill,	as	described	in	Note	14,	"Acquisitions	and	Related	Intangibles",	and	(iii)	accumulated temporary	unrealized	losses	in	Sigma	Fund	investments,	as	described	in	Note	3,	"Other	Financial	Data".

	* Certain	amounts	in	prior	years'	financial	statements	and	related	notes	have	been	reclassified	to	conform	to	the	2008	presentation.

# Item	9:	Changes	in	and	Disagreements	with	Accountants	on	Accounting	and	Financial	Disclosure

# Item	9A:	Controls	and	Procedures

# Evaluation	of	Disclosure	Controls	and	Procedures.

Under	the	supervision	and	with	the	participation	of	our	senior	management,	including	our	chief	executive	officers	and	chief	financial	officer,	we conducted	an	evaluation	of	the	effectiveness	of	the	design	and	operation	of	our	disclosure	controls	and	procedures,	as	defined	in	Rules	13a-15(e)	and 15d-15(e)	under	the	Securities	Exchange	Act	of	1934,	as	amended	(the	"Exchange	Act"),	as	of	the	end	of	the	period	covered	by	this	annual	report	(the "Evaluation	Date").	Based	on	this	evaluation,	our	chief	executive	officers	and	chief	financial	officer	concluded	as	of	the	Evaluation	Date	that	our disclosure	controls	and	procedures	were	effective	such	that	the	information	relating	to	Motorola,	including	our	consolidated	subsidiaries,	required	to	be disclosed	in	our	Securities	and	Exchange	Commission	("SEC")	reports	(i)	is	recorded,	processed,	summarized	and	reported	within	the	time	periods specified	in	SEC	rules	and	forms,	and	(ii)	is	accumulated	and	communicated	to	Motorola's	management,	including	our	chief	executive	officer	and	chief financial	officer,	as	appropriate	to	allow	timely	decisions	regarding	required	disclosure.

# Management's	Report	on	Internal	Control	Over	Financial	Reporting.

Motorola's	management	is	responsible	for	establishing	and	maintaining	adequate	internal	control	over	financial	reporting	as	such	term	is	defined	in Rule	13a-15(f)	of	the	Exchange	Act.	Under	the	supervision	and	with	the	participation	of	our	senior	management,	including	our	chief	executive	officers and	chief	financial	officer,	we	assessed	the	effectiveness	of	our	internal	control	over	financial	reporting	as	of	December	31,	2008,	using	the	criteria	set forth	in	the	Internal	Control—Integrated	Framework	issued	by	the	Committee	of	Sponsoring	Organizations	of	the	Treadway	Commission	(COSO). Based	on	this	assessment,	management	has	concluded	that	our	internal	control	over	financial	reporting	is	effective	as	of	December	31,	2008.	The Company's	independent	registered	public	accounting	firm,	KPMG	LLP,	has	issued	an	attestation	report	on	the	Company's	internal	control	over	financial reporting.	The	report	on	the	audit	of	internal	control	over	financial	reporting	appears	in	this	Form	10-K.

# Changes	in	Internal	Control	Over	Financial	Reporting.

There	have	been	no	changes	in	our	internal	control	over	financial	reporting	that	occurred	during	the	quarter	ended	December	31,	2008	that	have materially	affected	or	are	reasonably	likely	to	materially	affect	our	internal	control	over	financial	reporting.

We	have	audited	Motorola	Inc.'s	internal	control	over	financial	reporting	as	of	December	31,	2008,	based	on	criteria	established	in	Internal Control	—	Integrated	Framework	issued	by	the	Committee	of	Sponsoring	Organizations	of	the	Treadway	Commission	(COSO).	Motorola	Inc.'s management	is	responsible	for	maintaining	effective	internal	control	over	financial	reporting	and	for	its	assessment	of	the	effectiveness	of	internal	control over	financial	reporting,	included	in	the	accompanying	Management's	Report	on	Internal	Control	Over	Financial	Reporting	in	Item	9A:	Controls	and Procedures.	Our	responsibility	is	to	express	an	opinion	on	the	Company's	internal	control	over	financial	reporting	based	on	our	audit.

We	conducted	our	audit	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States).	Those	standards require	that	we	plan	and	perform	the	audit	to	obtain	reasonable	assurance	about	whether	effective	internal	control	over	financial	reporting	was	maintained in	all	material	respects.	Our	audit	included	obtaining	an	understanding	of	internal	control	over	financial	reporting,	assessing	the	risk	that	a	material weakness	exists,	and	testing	and	evaluating	the	design	and	operating	effectiveness	of	internal	control	based	on	the	assessed	risk.	Our	audit	also	included performing	such	other	procedures	as	we	considered	necessary	in	the	circumstances.	We	believe	that	our	audit	provides	a	reasonable	basis	for	our	opinion.

A	company's	internal	control	over	financial	reporting	is	a	process	designed	to	provide	reasonable	assurance	regarding	the	reliability	of	financial reporting	and	the	preparation	of	financial	statements	for	external	purposes	in	accordance	with	generally	accepted	accounting	principles.	A	company's internal	control	over	financial	reporting	includes	those	policies	and	procedures	that	(1)	pertain	to	the	maintenance	of	records	that,	in	reasonable	detail, accurately	and	fairly	reflect	the	transactions	and	dispositions	of	the	assets	of	the	company;	(2)	provide	reasonable	assurance	that	transactions	are	recorded as	necessary	to	permit	preparation	of	financial	statements	in	accordance	with	generally	accepted	accounting	principles,	and	that	receipts	and	expenditures of	the	company	are	being	made	only	in	accordance	with	authorizations	of	management	and	directors	of	the	company;	and	(3)	provide	reasonable assurance	regarding	prevention	or	timely	detection	of	unauthorized	acquisition,	use,	or	disposition	of	the	company's	assets	that	could	have	a	material effect	on	the	financial	statements.

Because	of	its	inherent	limitations,	internal	control	over	financial	reporting	may	not	prevent	or	detect	misstatements.	Also,	projections	of	any evaluation	of	effectiveness	to	future	periods	are	subject	to	the	risk	that	controls	may	become	inadequate	because	of	changes	in	conditions,	or	that	the degree	of	compliance	with	the	policies	or	procedures	may	deteriorate.

In	our	opinion,	Motorola,	Inc.	maintained,	in	all	material	respects,	effective	internal	control	over	financial	reporting	as	of	December	31,	2008,	based on	criteria	established	in	Internal	Control	—	Integrated	Framework	issued	by	the	Committee	of	Sponsoring	Organizations	of	the	Treadway	Commission (COSO).

We	also	have	audited,	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States),	the	consolidated balance	sheets	of	Motorola,	Inc.	and	Subsidiaries	as	of	December	31,	2008	and	2007,	and	the	related	consolidated	statements	of	operations,	stockholders' equity	and	cash	flows	for	each	of	the	years	in	the	three-year	period	ended	December	31,	2008,	and	our	report	dated	February	26,	2009	expressed	an unqualified	opinion	on	those	consolidated	financial	statements.

# Item	9B:	Other	Information

# PART	III

The	response	to	this	Item	required	by	Item	401	of	Regulation	S-K,	with	respect	to	directors,	incorporates	by	reference	the	information	under	the caption	"Nominees"	of	Motorola's	Proxy	Statement	for	the	2009	Annual	Meeting	of	Stockholders	(the	"Proxy	Statement")	and,	with	respect	to	executive officers,	is	contained	in	Part	I	hereof	under	the	caption	"Executive	Officers	of	the	Registrant"	and,	with	respect	to	the	audit	committee,	incorporates	by reference	the	information	under	the	caption	"What	Are	the	Committees	of	the	Board?"	and	"Report	of	Audit	and	Legal	Committee"	of	Motorola's	Proxy Statement.

The	response	to	this	Item	required	by	Item	405	of	Regulation	S-K	incorporates	by	reference	the	information	under	the	caption	"Other	Matters— Section	16(a)	Beneficial	Ownership	Reporting	Compliance"	of	Motorola's	Proxy	Statement.

The	response	to	this	Item	also	incorporates	by	reference	the	information	under	the	caption	"Communications—How	Can	I	Recommend	a	Director Candidate	to	the	Governance	and	Nominating	Committee?"	of	Motorola's	Proxy	Statement.

Motorola	has	adopted	a	code	of	ethics,	the	Motorola	Code	of	Business	Conduct	(the	"Code"),	that	applies	to	all	employees,	including	Motorola's principal	executive	officer,	principal	financial	officer	and	controller	(principal	accounting	officer).	The	Code	is	posted	on	Motorola's	Internet	website, www.motorola.com/investor,	and	is	available	free	of	charge,	upon	request	to	Investor	Relations,	Motorola,	Inc.,	Corporate	Offices,	1303	East	Algonquin Road,	Schaumburg,	Illinois	60196,	E-mail:	investors@motorola.com.	Any	amendment	to,	or	waiver	from,	the	Code	will	be	posted	on	our	Internet website	within	four	business	days	following	the	date	of	the	amendment	or	waiver.	Motorola's	Code	of	Business	Conduct	applies	to	all	Motorola employees	worldwide,	without	exception,	and	describes	employee	responsibilities	to	the	various	stakeholders	involved	in	our	business.	The	Code	goes beyond	the	legal	minimums	by	implementing	the	values	we	share	as	employees	of	Motorola—our	key	beliefs—uncompromising	integrity	and	constant respect	for	people.	The	Code	places	special	responsibility	on	managers	and	prohibits	retaliation	for	reporting	issues.

# Item	11:	Executive	Compensation

The	response	to	this	Item	incorporates	by	reference	the	information	under	the	captions	"How	Are	the	Directors	Compensated?,"	"Compensation Discussion	and	Analysis,"	"Report	of	the	Compensation	and	Leadership	Committee	on	Executive	Compensation,"	"Summary	Compensation	Table," "Grants	of	Plan-Based	Awards	in	2008,"	"Outstanding	Equity	Awards	at	2008	Fiscal	Year-End,"	"Option	Exercises	and	Stock	Vested	for	2008," "Pension	Benefits	in	2008,"	"Nonqualified	Deferred	Compensation	in	2008,"	and	"Employment	Contracts,	Termination	of	Employment	and	Change	in Control	Arrangements"	of	Motorola's	Proxy	Statement.

# Item	12:	Security	Ownership	of	Certain	Beneficial	Owners	and	Management	and	Related	Stockholder	Matters

The	response	to	this	Item	incorporates	by	reference	the	information	under	the	captions	"Equity	Compensation	Plan	Information"	and	"Ownership	of Securities"	of	Motorola's	Proxy	Statement.

# Item	13:	Certain	Relationships	and	Related	Transactions,	and	Director	Independence

The	response	to	this	Item	incorporates	by	reference	the	relevant	information	under	the	caption	"Related	Person	Transaction	Policy	and	Procedures" and	"Which	Directors	Are	Independent"	of	Motorola's	Proxy	Statement.

# Item	14:	Principal	Accounting	Fees	and	Services

The	response	to	this	Item	incorporates	by	reference	the	information	under	the	caption	"Independent	Registered	Public	Accounting	Firm"	and	"Audit and	Legal	Committee	Pre-Approval	Policies"	of	Motorola's	Proxy	Statement.

# PART	IV

# Item	15:	Exhibits,	Financial	Statement	Schedules

# (a) 1.	Financial	Statements

See	Part	II,	Item	8	hereof.

2.	Financial	Statement	Schedule	and	Independent	Auditors'	Report

All	schedules	omitted	are	inapplicable	or	the	information	required	is	shown	in	the	consolidated	financial	statements	or	notes	thereto.

# 3.	Exhibits

Exhibits	required	to	be	attached	by	Item	601	of	Regulation	S-K	are	listed	in	the	Exhibit	Index	attached	hereto,	which	is	incorporated	herein	by	this reference.	Exhibit	numbers	10.1	through	10.58,	listed	in	the	attached	Exhibit	Index,	are	management	contracts	or	compensatory	plans	or arrangements	required	to	be	filed	as	exhibits	to	this	form	by	Item	15(b)	hereof.

# (b) Exhibits:

# CONSENT	OF	INDEPENDENT	REGISTERED	PUBLIC	ACCOUNTING	FIRM

# The	Board	of	Directors

We	consent	to	the	incorporation	by	reference	in	the	registration	statements	on	Form	S-8	(Nos.	33-59285,	333-51847,	333-88735,	333-36308, 333-37114,	333-53120,	333-60560,	333-60612,	333-60976,	333-87724,	333-87728,	333-87730,	333-104259,	333-105107,	333-123879,	333-133736, 333-142845	and	333-155334)	and	S-3	(Nos.	333-76637	and	333-36320)	of	Motorola,	Inc.	of	our	reports	dated	February	26,	2009,	with	respect	to	the consolidated	balance	sheets	of	Motorola,	Inc.	and	Subsidiaries	as	of	December	31,	2008	and	2007,	and	the	related	consolidated	statements	of	operations, stockholders'	equity	and	cash	flows	for	each	of	the	years	in	the	three-year	period	ended	December	31,	2008,	and	the	effectiveness	of	internal	control	over financial	reporting	as	of	December	31,	2008,	which	reports	appear	in	the	December	31,	2008	annual	report	on	Form	10-K	of	Motorola,	Inc.	Our	report	on the	consolidated	financial	statements	refers	to	the	adoption	of	the	provisions	of	Statement	of	Financial	Accounting	Standards	No.	157,	Fair	Value Measurements,	effective	January	1,	2008,	Emerging	Issues	Task	Force	Issue	No.	06-4,	Accounting	for	Deferred	Compensation	and	Postretirement Benefit	Aspects	of	Endorsement	Split-Dollar	Life	Insurance	Arrangements,	effective	January	1,	2008,	Financial	Accounting	Standards	Board Interpretation	No.	48,	Accounting	for	Uncertainty	in	Income	Taxes,	effective	January	1,	2007,	and	Statement	of	Financial	Accounting	Standards	No.	158, Employers'	Accounting	for	Defined	Benefit	Pension	and	Other	Postretirement	Plans	—	an	amendment	of	FASB	Statements	No.	87,	88,	106,	and	132(R), effective	December	31,	2006.

# SIGNATURES

Pursuant	to	the	requirements	of	Section	13	or	15(d)	of	the	Securities	Exchange	Act	of	1934,	Motorola,	Inc.	has	duly	caused	this	report	to	be signed	on	its	behalf	by	the	undersigned,	thereunto	duly	authorized.

Gregory	Q.	Brown

Co-Chief	Executive	Officer

Sanjay	K.	Jha

Pursuant	to	the	requirements	of	the	Securities	Exchange	Act	of	1934,	this	report	has	been	signed	below	by	the	following	persons	on	behalf of	Motorola,	Inc.	and	in	the	capacities	and	on	the	dates	indicated.

| /s/		Gregory	Q.	Brown | Co-Chief	Executive	Officer | February	26,	2009 |
| :--- | :--- | :--- |
| Gregory\tQ.\tBrown | and\tDirector |  |
|  | (Principal\tExecutive\tOfficer) |  |
| /s/\t\tSanjay\tK.\tJha | Co-Chief\tExecutive\tOfficer | February\t26,\t2009 |
| Sanjay\tK.\tJha | and\tDirector |  |
|  | (Principal\tExecutive\tOfficer) |  |
| /s/\t\tEdward\tJ.\tFitzpatrick | Senior\tVice\tPresident, | February\t26,\t2009 |
| Edward\tJ.\tFitzpatrick | Corporate\tController\tand |  |
|  | Acting\tChief\tFinancial\tOfficer |  |
|  | (Principal\tFinancial\tOfficer) |  |
|  | (Principal\tAccounting\tOfficer) |  |
| /s/\t\tDavid\tW.\tDorman\nDavid\tW.\tDorman | Chairman\tof\tthe\tBoard | February\t26,\t2009 |
| /s/\t\tWilliam\tR.\tHambrecht\nWilliam\tR.\tHambrecht | Director | February\t26,\t2009 |
| /s/\t\tJudy\tC.\tLewent\nJudy\tC.\tLewent | Director | February\t26,\t2009 |
| /s/\t\tKeith\tA.\tMeister\nKeith\tA.\tMeister | Director | February\t26,\t2009 |
| /s/\t\tThomas\tJ.\tMeredith | Director | February\t26,\t2009 |

| /s/		Samuel	C.	Scott	III<br>Samuel	C.	Scott	III | Director | February	26,	2009 |
| :--- | :--- | :--- |
| /s/\t\tRon\tSommer\nRon\tSommer | Director | February\t26,\t2009 |
| /s/\t\tJames\tR.\tStengel\nJames\tR.\tStengel | Director | February\t26,\t2009 |
| /s/\t\tAnthony\tJ.\tVinciquerra\nAnthony\tJ.\tVinciquerra | Director | February\t26,\t2009 |
| /s/\t\tDouglas\tA.\tWarner\tIII\nDouglas\tA.\tWarner\tIII | Director | February\t26,\t2009 |
| /s/\t\tDr.\tJohn\tA.\tWhite | Director | February\t26,\t2009 |

# EXHIBIT	INDEX

# Exhibit	No. 	 Exhibit

3.1 Restated	Certificate	of	Incorporation	of	Motorola,	Inc.,	as	amended	through	May	3,	2000	(incorporated	by	reference	to	Exhibit	3(i) (b)	to	Motorola's	Quarterly	Report	on	Form	10-Q	for	the	fiscal	quarter	ended	April	1,	2000)	(File	No.	1-7221)).

4.1(a) Senior	Indenture,	dated	as	of	May	1,	1995,	between	The	Bank	of	New	York	Trust	Company,	N.A.	(as	successor	Trustee	to JPMorgan	Chase	Bank	(as	successor	in	interest	to	Bank	One	Trust	Company)	and	BNY	Midwest	Trust	Company	(as	successor	in interest	to	Harris	Trust	and	Savings	Bank)	and	Motorola,	Inc.	(incorporated	by	reference	to	Exhibit	4(d)	of	the	Registrant's Registration	Statement	on	Form	S-3	dated	September	25,	1995	(Registration	No.	33-62911)).

4.1(b) Instrument	of	Resignation,	Appointment	and	Acceptance,	dated	as	of	January	22,	2001,	among	Motorola,	Inc.,	Bank	One	Trust Company,	N.A.	and	BNY	Midwest	Trust	Company	(as	successor	in	interest	to	Harris	Trust	and	Savings	Bank)	(incorporated	by reference	to	Exhibit	4.2(b)	to	Motorola's	Annual	Report	on	Form	10-K	for	the	fiscal	year	ended	December	31,	2000	(File	No.	1- 7221)).

Certain	instruments	defining	the	rights	of	holders	of	long-term	debt	of	Motorola	and	of	all	its	subsidiaries	for	which	consolidated	or unconsolidated	financial	statements	are	required	to	be	filed	are	being	omitted	pursuant	to	paragraph(4)(iii)(A)	of	Item	601	of Regulation	S-K.	Motorola	agrees	to	furnish	a	copy	of	any	such	instrument	to	the	Commission	upon	request.

10.1 Motorola	Omnibus	Incentive	Plan	of	2006	(As	Amended	and	Restated	as	of	January	30,	2008)	(incorporated	by	reference	to	Exhibit 10.1	to	Motorola's	Annual	Report	on	Form	10-K	for	the	fiscal	year	ended	December	31,	2007	(File	No.	1-7221)).

10.6 Form	of	Motorola,	Inc.	Award	Document—Terms	and	Conditions	Related	to	Employee	Nonqualified	Stock	Options	relating	to	the Motorola	Omnibus	Incentive	Plan	of	2006	for	grants	on	or	after	February	11,	2007	(incorporated	by	reference	to	Exhibit	10.37	to Motorola's	Report	on	Form	8-K	filed	on	February	15,	2007	(File	No.	1-7221)).

10.7 Form	of	Motorola	Stock	Option	Consideration	Agreement	for	grants	on	or	after	February	27,	2007	(incorporated	by	reference	to Exhibit	10.4	to	Motorola's	Annual	Report	on	Form	10-K	for	the	fiscal	year	ended	December	31,	2006	(File	No.	1-27221)).

10.18 Form	of	Motorola	Stock	Option	Consideration	Agreement	for	Paul	J.	Liska	(incorporated	by	reference	to	Exhibit	10.14	to Motorola's	Annual	Report	on	Form	10-K	for	the	fiscal	year	ended	December	31,	2007	(File	No.	1-7221)).

10.19 Form	of	Motorola,	Inc.	Restricted	Stock	Unit	Award	Agreement	for	Paul	J.	Liska	relating	to	the	Motorola	Omnibus	Incentive	Plan of	2006	(Sign-on	Grant)	(incorporated	by	reference	to	Exhibit	No.	10.15	to	Motorola's	Annual	Report	on	Form	10-K	for	the	fiscal year	ended	December	31,	2007)	(File	No.	1-7221)).

10.20 Form	of	Motorola,	Inc.	Restricted	Stock	Unit	Award	Agreement	for	Paul	J.	Liska	relating	to	the	Motorola	Omnibus	Incentive	Plan of	2006	(incorporated	by	reference	to	Exhibit	No.	10.16	to	Motorola's	Annual	Report	on	Form	10-K	for	the	fiscal	year	ended December	31,	2007)	(File	No.	1-7221)).

10.23 Form	of	Deferred	Stock	Units	Agreement	between	Motorola,	Inc.	and	its	non-employee	directors,	relating	to	the	deferred	stock units	issued	in	lieu	of	cash	compensation	to	directors	under	the	Motorola	Omnibus	Incentive	Plan	of	2006	or	any	successor	plan, for	acquisitions	on	or	after	February	11,	2007	(incorporated	by	reference	to	Exhibit	10.8	to	Motorola's	Annual	Report	on	Form	10- K	for	the	fiscal	year	ended	December	31,	2006	(File	No.	1-27221)).

10.29 Motorola	Amended	and	Restated	Incentive	Plan	of	1998,	as	amended	through	April	2,	2004	(incorporated	by	reference	to	Exhibit 10.5	to	Motorola's	Quarterly	Report	on	Form	10-Q	for	the	fiscal	quarter	ended	April	3,	2004	(File	No.	1-7221)).

10.30 Form	of	Motorola,	Inc.	Award	Document—Terms	and	Conditions	Related	to	Non-Employee	Director	Nonqualified	Stock	Options relating	to	the	Motorola	Omnibus	Incentive	Plan	of	2002	(incorporated	by	reference	to	Exhibit	10.2	to	Motorola's	Quarterly	Report on	Form	10-Q	for	the	fiscal	quarter	ended	March	30,	2002	(File	No.	1-7221)).

10.31 Form	of	Motorola,	Inc.	Award	Document—Terms	and	Conditions	Related	to	Employee	Nonqualified	Stock	Options,	relating	to	the Motorola	Omnibus	Incentive	Plan	of	2003,	the	Motorola	Omnibus	Incentive	Plan	of	2002,	the	Motorola	Omnibus	Incentive	Plan	of 2000,	the	Motorola	Amended	and	Restated	Incentive	Plan	of	1998	and	the	Motorola	Compensation/Acquisition	Plan	of	2000	for grants	on	or	after	May	2,	2005	(incorporated	by	reference	to	Exhibit	10.46	to	Motorola's	Quarterly	Report	on	Form	10-Q	for	the fiscal	quarter	ended	April	2,	2005	(File	No.	1-7221)).

10.33 Form	of	Motorola,	Inc.	Restricted	Stock	Unit	Agreement	(Periodic	Vesting),	relating	to	the	Motorola	Omnibus	Incentive	Plan	of 2003,	the	Motorola	Omnibus	Incentive	Plan	of	2002,	the	Motorola	Omnibus	Incentive	Plan	of	2000	and	the	Motorola Compensation/	Acquisition	Plan	of	2000,	for	grants	on	or	after	July	29,	2004	(incorporated	by	reference	to	Exhibit	10.34	to Motorola's	Quarterly	Report	on	Form	10-Q	for	the	fiscal	quarter	ended	July	3,	2004	(File	No.	1-7221)).

10.34 Form	of	Motorola,	Inc.	Award	Document—Terms	and	Conditions	Related	to	Employee	Nonqualified	Stock	Options	for	Edward	J. Zander,	relating	to	the	Motorola	Omnibus	Incentive	Plan	of	2003,	the	Motorola	Omnibus	Incentive	Plan	of	2002,	the	Motorola Omnibus	Incentive	Plan	of	2000	and	the	Motorola	Amended	and	Restated	Incentive	Plan	of	1998,	for	grants	on	or	after	February 14,	2005	(incorporated	by	reference	to	Exhibit	10.24(b)	to	Motorola's	Annual	Report	on	Form	10-K	for	the	fiscal	year	ended December	31,	2004	(File	No.	1-7221)).

10.35 Form	of	Motorola,	Inc.	Restricted	Stock	Unit	Award	Agreement	for	Edward	J.	Zander,	relating	to	the	Motorola	Omnibus	Incentive Plan	of	2003,	for	grants	on	or	after	May	3,	2005	(incorporated	by	reference	to	Exhibit	No.	10.45	to	Motorola's	Report	on	Form	8-K filed	on	May	6,	2005	(File	No.	1-7221)).

10.36 Form	of	Motorola,	Inc.	Restricted	Stock	Unit	Award	Agreement	for	Edward	J.	Zander,	relating	to	the	Motorola	Omnibus	Incentive Plan	of	2003	(incorporated	by	reference	to	Exhibit	10.33	to	Motorola's	Quarterly	Report	on	Form	10-Q	for	the	fiscal	quarter	ended April	3,	2004	(File	No.	1-7221)).

10.37 Form	of	Deferred	Stock	Units	Agreement	between	Motorola,	Inc.	and	its	non-employee	directors,	relating	to	the	deferred	stock units	issued	in	lieu	of	cash	compensation	to	directors	under	the	Motorola	Omnibus	Incentive	Plan	of	2003	or	any	successor	plan, for	acquisitions	from	January	1,	2006	to	February	11,	2007	(incorporated	by	reference	to	Exhibit	No.	10.25	to	Motorola's	Annual Report	on	Form	10-K	for	the	fiscal	year	ended	December	31,	2005	(File	No.	1-7221)).

10.43 Motorola	Management	Deferred	Compensation	Plan,	as	amended	through	May	2,	2006	(incorporated	by	reference	to	Exhibit No.	10.29	to	Motorola's	Quarterly	Report	on	Form	10-Q	for	the	fiscal	quarter	ended	April	1,	2006	(File	No.	1-7221)).

*10.44 	 Motorola,	Inc.	Senior	Officer	Amended	and	Restated	Change	in	Control	Severance	Plan.

10.48 Insurance	covering	non-employee	directors	and	their	spouses	(including	a	description	incorporated	by	reference	from	the information	under	the	caption	"Director	Retirement	Plan	and	Insurance	Coverage"	of	the	Motorola	Proxy	Statement	and	to	Exhibit 10.57	to	Motorola's	Report	on	Form	10-Q	for	the	fiscal	quarter	ended	March	29,	2008	(File	No.	1-7221)).

*32.3 	 Certification	of	Edward	J.	Fitzpatrick	pursuant	to	Section	906	of	the	Sarbanes-Oxley	Act	of	2002.

* Filed	herewith



Question: what was the percentage decline in the operating loss from 2007 to 2008
Calculation: operating_loss_change = 1.2 - 2.2
percent_change = operating_loss_change / 1.2
answer = percent_change * 100
Answer: -83.3%