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,	2007

# o TRANSITION	REPORT	PURSUANT	TO	SECTION	13	OR	15(d)	OF	THE	SECURITIES EXCHANGE	ACT	OF	1934

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)

Title	of	Each	Class

# Common	Stock,	$3	Par	Value	per	Share

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:

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	definition	of	"large	accelerated	filer",	"accelerated	filer"	and	"smaller	reporting	company"	in	Rule	12b-2	of the	Exchange	Act.

Large	accelerated	filer		þ					Accelerated	filer		o					Non-accelerated	filer		o					Smaller	reporting	company		o

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	30,	2007	(the	last	business	day	of	the	Registrant's	most	recently	completed	second	quarter)	was	approximately	$40.6	billion	(based	on	closing sale	price	of	$17.70	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,	which	Proxy	Statement	will	be	filed	no	later	than	April	29,	2008,	are	incorporated	by	reference	into	Part	III.

Item	1B. Unresolved	Staff	Comments

Item	2. Properties

Item	3. Legal	Proceedings

Item	4. Submission	of	Matters	to	a	Vote	of	Security	Holders

Executive	Officers	of	the	Registrant

PART	II

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

Item	6. Selected	Financial	Data

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

Item	7A. Quantitative	and	Qualitative	Disclosures	About	Market	Risk

Item	8. Financial	Statements	and	Supplementary	Data

Item	9. Changes	in	and	Disagreements	with	Accountants	on	Accounting	and	Financial	Disclosure

Item	9A. Controls	and	Procedures

Item	9B. Other	Information 124

# PART	III

Item	10. Directors,	Executive	Officers	and	Corporate	Governance

Item	11. Executive	Compensation

Item	12. Security	Ownership	of	Certain	Beneficial	Owners	and	Management	and	Related	Stockholder	Matters

Item	13. Certain	Relationships	and	Related	Transactions,	and	Director	Independence

Item	14. Principal	Accounting	Fees	and	Services 124

# PART	IV

	Motorola,	Inc.	Award	Document	for	the	Motorola	Omnibus	Incentive	Plan	of	2006 	Form	of	Motorola	Stock	Option	Consideration	Agreement 	Form	of	Motorola,	Inc.	Restricted	Stock	Unit	Award	Agreement 	Form	of	Motorola,	Inc.	Award	Document	for	the	Motorola	Omnibus	Incentive	Plan	of	2006 	Form	of	Motorola,	Inc.	Award	Document	for	the	Motorola	Omnibus	Incentive	Plan	of	2006 	Form	of	Motorola	Stock	Option	Consideration	Agreement 	Form	of	Motorola,	Inc.	Restricted	Stock	Unit	Award	Agreement 	Form	of	Motorola,	Inc.	Restricted	Stock	Unit	Award	Agreement

# 	Motorola	2006	Incentive	Plan

# 	Motorola	Long-Range	Incentive	Plan

# 	Description	of	Certain	Compensatory	Arrangements

# 	Chairman/CEO	Retirement	Term	Sheet

# 	Amended	and	Restated	Employment	Agreement

# 	Agreement	with	Ruth	Fattori

	Statement	regarding	Computation	of	Ratio	of	Earnings	to	Fixed	Charges

# 	Subsidiaries	of	Motorola

	Certification	of	Gregory	Q.	Brown

	Certification	of	Thomas	J.	Meredith

	Section	906	Certification	of	Gregory	Q.	Brown

	Section	906	Certification	of	Thomas	J.	Meredith

# 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	solutions	by	people,	businesses	and	governments,	we	are	focused	on	high-quality,	innovative	products	that	meet	the	expanding	needs	of	our	customers	around	the	world.

Motorola	is	a	market	leader	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	("IP")	video	and	broadcast	network	interactive	set-tops	("digital entertainment	devices"),	end-to-end	video	delivery	solutions,	broadband	access	infrastructure	systems,	and	associated	data	and	voice	customer	premise	equipment	("broadband	gateways")	to	cable	television and	telecom	service	providers,	and	(ii)	wireless	access	systems	("wireless	networks"),	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,	utility,	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

Motorola	reports	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	2007,	the	segment's	net	sales	represented	52%	of	the	Company's	consolidated	net	sales.

# Principal	Products	and	Services

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

# Our	Industry

The	overall	wireless	handset	industry	remains	strong.	Total	industry	shipments	of	wireless	handsets	(also	referred	to	as	industry	"sell-in")	increased	to	approximately	1.14	billion	units	in	2007,	an	increase	of approximately	16%	compared	to	2006.	Demand	from	new	subscribers	was	strong	in	emerging	markets,	led	by	India	and	China.	Replacement	sales	in	highly-penetrated	markets	were	also	strong	due	to	generally favorable	economic	conditions,	as	well	as	compelling	new	handset	designs,	attractive	handset	features	and	the	increased	roll-out	of	high-speed	data	networks,	all	creating	greater	demand.

Industry	forecasters	predict	that	the	wireless	handset	industry	will	continue	to	grow	over	the	next	several	years,	although	the	annual	rate	of	growth	is	expected	to	be	in	the	10%	range	as	opposed	to	the approximately	20%	average	annual	growth	the	industry	experienced	from	2003	through	2007.	Continued	growth	is	expected	to	be	driven	primarily	by	demand	from	new	subscribers	in	emerging	markets	and replacement	sales	from	the	current	subscriber	base.

# 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	improving	our	product	portfolio	to	meet consumer	demands	and	improving	our	financial	performance.	This	includes	transitioning	to	silicon	and	software	platforms	that	enable	us	to	lower	costs,	get	to	market	faster	and	offer	richer	consumer	experiences.

We	have	structured	our	mobile	device	product	portfolio	and	development	into	four	primary	product	segments:	Mass	Market,	Feature,	Multimedia	and	Productivity.	Our	strategy	is	to	offer	a	broad	array	of	products in	each	of	these	product	segments.

The	Mass	Market	product	segment	focuses	on	voice-centric	devices	with	targeted	features.	While	this	segment	is	maturing	in	North	America,	Europe	and	parts	of	Asia,	it	is	growing	significantly	in	developing regions.	To	address	this	market,	we	are	expanding	our	handset	offerings	around	our	new	W	Series	of	handsets.	These	handsets	satisfy	everyday	communications	needs,	include	targeted	features	and	are	offered	at affordable	price	points	across	all	regions	and	in	both	CDMA	and	GSM	technologies.	The	key	to	our	success	in	the	Mass	Market	product	segment	is	offering	products	at	competitive	price	points.

The	Feature	product	segment	focuses	on	delivering	iconic,	fashionable	phones	with	high-end	features.	During	2007,	we	refreshed	our	flagship	RAZR	franchise	with	the	RAZR2,	the	luxurious	RAZR2	V8,	and	a RAZR	classic	with	video	playback	and	a	digital	audio	processor	music	player.	We	are	focused	on	building	an	enhanced	portfolio	of	Feature	phone	devices	that	deliver	compelling	2G	and	3G	mobile	experiences.

The	Multimedia	product	segment	is	focused	on	the	convergence	of	voice	capabilities	with	multimedia	experiences	on	a	single	mobile	device.	In	the	recent	past,	many	of	our	customers	have	purchased	and	used different	devices	from	multiple	consumer	electronics	segments	to	meet	their	lifestyle	needs.	In	addition	to	mobile	phones,	they	use	devices	such	as	cameras,	mobile	music	and	video	players,	mobile	gaming	devices	and portable	navigation	devices.	Increasingly,	these	experiences	will	be	delivered	through	compelling	applications	and	services	on	a	single	device.	We	are	developing	handsets	designed	to	strengthen	our	Multimedia	product offerings,	such	as	the	MOTOROKR	Z6	and	the	S9	headset,	a	2008	mobile	music	offering.	We	are	particularly	focused	on	developing	a	broader	offering	of	3G	products	for	the	Multimedia	product	segment.

The	Productivity	product	segment	is	growing	as	workforces	around	the	world	continue	to	demand	increasingly	robust	wireless	handsets	and	consumers	want	their	email	"on	the	go."	In	2007,	we	expanded	our	Q franchise	across	all	regions	and	major	technologies	with	the	launch	of	the	GSM	Q8	and	UMTS	Q9h.	We	are	planning	to	capitalize	on	new	opportunities	in	this	growing	product	segment.

Throughout	each	of	these	product	segments,	we	have	increased	our	focus	in	our	accessories	portfolio	to	deliver	complete	mobile	experiences	and	to	complement	the	features	and	functionalities	of	the	wireless handsets.

Additionally,	we	are	expanding	our	accessory	compatibility	across	all	brands	of	wireless	handsets	and	Bluetooth-enabled	devices.

We	are	investing	in	next-generation	technologies,	such	as	WiMAX,	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	in	these	technologies.	We	will	continue	to	identify	opportunities	to	generate	licensing	revenue	from	these	investments.	We	also	believe	that	innovation	is	critical	to offering	devices	that	demonstrate	unique	experiences	and	value	propositions	for	consumers.	As	an	example,	in	2007	we	began	shipping	our	flagship	RAZR2	devices	with	Crystal	Talk,	a	proprietary	technology	that automatically	adjusts	audio	quality	based	on	ambient	noise	conditions	to	provide	the	optimal	conversational	experience.	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.

In	January	2008,	we	announced	that	we	are	evaluating	alternatives	for	the	structural	and	strategic	realignment	of	our	Mobile	Devices	business	to	better	equip	it	to	recapture	global	market	leadership	and	to	enhance shareholder	value.	This	may	include	the	separation	of	the	Mobile	Devices	business	from	Motorola's	other	businesses	to	permit	each	to	grow	and	better	serve	their	customers.

# Customers

We	continue	to	focus	on	strengthening	our	relationships	with	our	customers.	The	segment	has	several	large	customers	worldwide,	the	loss	of	one	or	more	of	which	could	have	a	material	adverse	effect	on	the segment's	business.	The	largest	of	the	segment's	end	customers	(including	sales	through	distributors)	are	Sprint	Nextel,	AT&T,	Verizon,	China	Mobile	and	America	Movil.	In	2007,	aggregate	net	sales	to	these	five customers	represented	approximately	42%	of	the	segment's	net	sales.

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	33%	of	the segment's	net	sales.	The	largest	of	these	distributors	is	Brightstar	Corporation.

The	U.S.	market	continued	to	be	the	segment's	largest	individual	market,	accounting	for	approximately	46%	of	the	segment's	net	sales	in	2007,	compared	to	approximately	35%	of	the	segment's	net	sales	in	2006. Approximately	54%	of	the	segment's	net	sales	in	2007	were	to	markets	outside	the	U.S.,	the	largest	of	which	were	Brazil,	China	and	Mexico.	Compared	to	2006,	the	segment	experienced	sales	declines	in	each	of	its	four major	sales	regions:	Asia,	the	Europe,	Middle	East	and	Africa	region	("EMEA"),	North	America	and	Latin	America.

# Competition

The	segment	believes	its	overall	market	share	for	the	full	year	2007	was	approximately	14%,	making	it	the	third-largest	worldwide	supplier	of	wireless	handsets.	The	segment	experiences	intense	competition	in worldwide	markets	from	numerous	global	competitors,	including	some	of	the	world's	largest	companies,	such	as	Nokia,	Samsung,	Sony-Ericsson	and	LG.	In	2007,	consolidation	in	the	wireless	handset	industry	slowed compared	to	previous	years,	and	the	five	largest	vendors	together	held	an	aggregate	market	share	of	approximately	83%,	compared	to	84%	at	the	end	of	2006.	During	2007,	regulatory	changes	in	China	precipitated	a substantial	increase	in	the	number	of	manufacturers	producing	handsets	in	that	market.	The	increased	competition,	primarily	in	the	very	low	tier	of	the	Mass	Market	product	segment,	has	impacted	shipment	volumes	in China	for	global	vendors,	as	local	vendors	gained	market	share	in	the	fourth	quarter	of	2007.

Major	competitors	in	the	industry	are	moving	to	applications	and	services	as	key	sources	of	value	and	are	increasing	their	focus	and	investments	in	these	areas.	In	response,	Motorola	has	created	a	global applications	and	services	team	within	the	Mobile	Devices	segment	to	focus	on	building	the	applications	and	services	business.

General	competitive	factors	in	the	market	for	the	segment's	products	include:	design;	time-to-market;	brand	awareness;	technology	offered;	price;	product	proposition,	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	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,	which	can	be	offered without	spectrum	license	costs.	Deregulation	may	introduce	new	competition	and	new	opportunities	for	Motorola	and	our	customers.	In	addition,	Mobile	WiMAX	was	recently	approved	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.

In	January	2008,	the	Federal	Communications	Commission	("FCC")	began	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	open-access	conditions	are	intended	to	help	foster	innovation	in	handsets	and	applications,	however	the	actual	impact	of the	new	licenses	is	unclear.	The	open	access	provision	applies	to	approximately	one-third	of	the	U.S.	spectrum	being	auctioned	and	prevents	the	licensee	from	blocking	devices	or	applications	that	are	compatible	with the	network.

# Backlog

The	segment's	backlog	was	$647	million	at	December	31,	2007,	compared	to	$1.4	billion	at	December	31,	2006.	This	decrease	in	backlog	is	primarily	due	to	a	decline	in	customer	demand	driven	by	gaps	in	the segment's	product	portfolio.	The	2007	backlog	is	believed	to	be	generally	firm	and	100%	of	that	amount	is	expected	to	be	recognized	as	revenue	in	2008.	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	2007,	the	segment	had	a	lower	inventory	balance	than	at	the	end	of	2006.	The	decrease	reflects	the	significant	decline	in	sales	volumes	during	2007,	as	well	as	an	ongoing	emphasis	on	managing	inventory	levels.

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.

Energy	necessary	for	the	segment's	manufacturing	facilities	consists	primarily	of	electricity	and	natural	gas,	which	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	increased	significantly	during	2007	and	increased	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	is	located	in	Libertyville,	Illinois.	Our	other	major	facilities	are	located	in	Plantation,	Florida;	Flensburg,	Germany;	Singapore;	Beijing,	Hangzhou	and	Tianjin,	China;	Jaguariuna,	Brazil; Basingstoke,	England;	and	Chennai,	India.	We	have	recently	announced	our	intent	to	exit	our	Flensburg,	Germany	facility.

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	portion	of	our	handsets	are	manufactured	either	completely	or	substantially	by	non-affiliated	EMS	and	ODM	manufacturers	and	the	percentage	of	total	manufactured	unit volume	with	these	manufacturers	increased	moderately	from	2006	to	2007.

In	2007,	our	handsets	were	primarily	manufactured	in	Asia	and	we	expect	this	to	continue	in	2008.	Our	largest	manufacturing	facilities	are	located	in	China,	Singapore	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	solutions,	broadband	access	infrastructure	systems,	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.	In	2007,	the	segment's	net	sales	represented	27%	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") 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	solutions	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	terminals	for	PON	networks.

In	the	wireless	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	to

create	mobile	IP	broadband	access.	WiMAX	has	the	potential	to	make	mobile	bandwidth	more	affordable	and	accessible	for	mainstream	consumer	adoption.

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

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	is	increasing.	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.

Our	home	business	is	subject	to	regulation	by	the	FCC	in	the	United	States	and	other	governmental	communication	regulators	throughout	the	world.	On	July	1,	2007,	regulations	enacted	by	the	FCC	became effective,	requiring	separation	of	security	functionality	from	cable	set-tops.	A	full	two-way	security	interface	continues	to	be	refined.	Once	developed	and	implemented,	these	changes	are	expected	to	increase competition	and	encourage	the	sale	of	set-tops	and	integrated	devices,	such	as	televisions	and	DVRs,	that	will	allow	retail	customers	direct	access	to	programming.	Traditionally,	service	providers	have	leased	digital entertainment	devices	to	their	customers.

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	CDMA2000	1xEVDO.	We	supply	3G	systems	based	on	UMTS	and	CDMA	2000 1xEVDO	technologies.	An	additional	3G	technology	standard	is	TD-SCDMA,	driven	primarily	by	the	Chinese	government	and	local	Chinese	vendors.	We	expect	3G	licenses	to	be	awarded	in	China	during	2008.

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")	is	currently	developing	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). Based	upon	developments	in	the	802.16e	standard,	we	expect	to	see	the	WiMAX	market	begin	to	develop	in	2008	as	several	WiMAX	networks	come	on-line	and	devices	utilizing	these	networks	become	widely available.	We	are	an	early	leader	in	next-generation	wireless	broadband	products,	including	WiMAX	technology.

The	International	Telecommunications	Union	("ITU")	is	also	adopting	next-generation	cellular	wireless	access	standards	("4G")	for	the	cellular	infrastructure	industry,	also	based	on	OFDM	technology	and known	commonly	as	Long	Term	Evolution	("LTE").	LTE	has	widespread	industry	support,	not	only	from	current	GSM/UMTS	operators,	but	also	from	CDMA/EV-DO	based	carriers.	Motorola	has	been	chosen	as	a trial	supplier	for	a	joint	Verizon/Vodafone	LTE	trial	that	is	currently	underway.

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,	such	as	802.16e,	with	over	800	licenses	outside	North	America.

Demand	for	our	products	depends	primarily	on:	(i)	capital	spending	by	providers	of	cellular	and	broadband	services	for	constructing,	rebuilding	or	upgrading	their	communications	systems,	and	(ii)	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.

In	2007,	the	home	business	benefited	from	increased	spending	by	operators	on	our	products	due	to	the	increase	in	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.	We	expect	this	industry	to	continue	to	grow	in	2008,	driven	by	continued	expansion	of broadband	network	capacity	and	services.

In	2007,	the	overall	market	for	traditional	CDMA	wireless	networks	was	relatively	flat	and	the	overall	markets	for	GSM	and	iDEN	wireless	networks	were	down.	Forecasted	industry	trends	point	to	a	decline	in the	CDMA,	GSM	and	iDEN	markets	in	2008	as	next-generation	3G	and	WiMAX	wireless	networks	are	deployed.	Sales	in	the	overall	wireless	network	market	are	expected	to	be	flat,	or	up	slightly,	in	2008.

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.

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.	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.	During	the	year,	the	segment	continued	to	provide	video	infrastructure,	FTTP	access network	equipment	and	advanced	digital	entertainment	devices	for	the	launch	of	Verizon's	FiOS	service	and	is	supplying	IP	interactive	set-tops	to	leading	telecommunication	companies	around	the	world,	including AT&T,	SingTel	and	Telia	Sonera.

We	are	also	enhancing	and	expanding	our	voice	and	data	portfolio	to	offer	end-to-end	solutions	for	fixed-mobile	convergence	and	next-generation	converged	IP-based	voice,	data	and	video	delivery.	These solutions	include:	(i)	broadband	gateways	with	support	for	handing	off	a	mobile	voice	or	data	call	to	a	carrier's	VoIP	or	data	network,	and	(ii)	next-generation	infrastructure	products	enhancing	our	cable	modem termination	system	("CMTS")	and	PON	platforms	to	expand	the	bandwidth	delivered	to	a	home	or	business.	We	developed	our	first	Femtocell	gateway	in	2007,	which	enables	consumers	to	connect	to	a	wireless	service provider's	network	via	a	DSL	or	cable	broadband	connection.	We	are	also	an	industry	leader	in	broadband	infrastructure	solutions,	introducing	DOCSIS	3.0	channel	bonding	on	our	CMTS	and	cable	modems	and commercially	deploying	our	Gigabit	PON	platform.

In	order	to	enhance	our	strategy,	as	well	as	increase	our	offerings	to	wireline	carriers,	we	have	completed	several	strategic	acquisitions.	During	2007,	we	completed	the	acquisition	of	Netopia,	Inc.,	a	broadband equipment	provider	for	DSL	customers,	which	allows	for	phone,	TV	and	fast	Internet	connections.	We	also	acquired:	(i)	Tut	Systems,	Inc.,	a	leading	developer	of	edge	routing	and	video	encoders;	(ii)	Terayon Communication	Systems,	Inc.,	a	provider	of	real-time	digital	video	networking	applications	to	cable,	satellite	and	telecommunication	service	providers	worldwide;	(iii)	Modulus	Video,	Inc.,	a	provider	of	MPEG-4 Advanced	Coding	compression	systems	designed	for	delivery	of	high-value	video	content	in	the	IP	set-top	devices	for	the	digital	video,	broadcast	and	satellite	marketplaces;	and	(iv)	Leapstone	Systems,	Inc.,	a	provider of	intelligent	multimedia	service	delivery	and	content	management	solutions	to	networks	operators.	These	acquisitions	enhance	our	ability	to:	(i)	provide	complete	solutions	to	operators	as	they	deploy	advanced services,	(ii)	assist	operators	in	growing	their	on-demand	content	offerings,	deploying	switched	digital	video	technology,	and	enabling	targeted	advertising	solutions,	and	(iii)	provide	end-to-end	video	solutions	to wireline	and	wireless	operators	as	they	add	video	to	their	service	offerings.

In	the	wireless	networks	business,	the	segment	is	investing	to	be	a	leader	in	next-generation	wireless	broadband	technologies	with	its	WiMAX	solution.	Because	of	its	projected	quicker	time	to	market,	expected lower	cost	and	expected	superior	performance,	the	WiMAX	wireless	broadband	technology,	which	is	based	on	the	IEEE	standard	802.16e,	represents	a	compelling	offering	for	existing	operators	and	emerging	broadband service	providers.	In	2007,	the	segment	delivered	WiMAX	network	equipment	to	Wateen	Telecom	in	Pakistan	and	Sprint	Nextel	and	Clearwire	in	the	United	States.	In	addition,	at	the	end	of	2007,	the	segment	was participating	in	over

40	WiMAX	trials	globally.	The	segment	is	also	leveraging	its	WiMAX	investment	to	develop	its	LTE	solution.	Vodafone	and	Verizon	have	launched	a	coordinated	LTE	trial	in	2008.	Motorola	has	been	selected	as	a supplier	to	support	this	trial	with	both	infrastructure	equipment	and	handsets.

The	largest	of	the	segment's	customers	are	Comcast,	Verizon,	KDDI	(a	service	provider	in	Japan),	China	Mobile	and	Sprint	Nextel.	In	2007,	aggregate	net	sales	to	these	five	customers	represented	approximately 43%	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	these	contracts	are	long-term,	the	loss	of	a major	customer	could	impact	revenue	and	earnings	over	several	quarters.	Although	sales	in	North	America	continued	to	account	for	a	majority	of	the	segment's	sales,	48%	of	the	segment's	net	sales	in	2007	were	outside North	America.	The	segment	experienced	sales	increases	in	all	geographic	regions	in	2007	compared	to	2006.

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;	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	worldwide	in	the	market	for	digital	entertainment	devices	for	broadband	networks.	Based	on	2007	annual	sales,	we	believe	we	are	the	leading	provider	of	digital	cable	and	IPTV	set-tops	in	North America.	Our	digital	cable	and	IPTV	set-tops	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.	In	North	America,	our	largest	competitor is	Cisco.	Other	competitors	in	North	America	include	ARRIS,	Ericsson	(which	entered	the	market	in	2007	via	the	acquisition	of	Tandberg)	and	Harmonic,	Inc.	Outside	of	North	America,	where	we	have	a	smaller	market position,	we	compete	with	many	equipment	suppliers,	including	several	consumer	electronics	companies.

The	traditional	competitive	environment	in	the	North	American	cable	market	continues	to	evolve.	On	July	1,	2007,	regulations	enacted	by	the	FCC	became	effective	requiring	separation	of	security	functionality from	set-tops.	To	meet	this	requirement,	we	provide	security	modules	to	cable	operators	for	use	with	both	our	own	and	third-party	set-tops.	A	full	two-way	security	interface	specification	continues	to	be	refined.	Once developed	and	implemented,	these	changes	are	expected	to	increase	competition	and	encourage	the	sale	of	set-tops	and	integrated	devices,	such	as	televisions	and	DVRs,	that	will	allow	retail	customers	direct	access	to programming.	Traditionally,	cable	service	providers	have	leased	the	set-top	to	their	customers.

We	also	compete	worldwide	in	the	market	for	broadband	data	and	voice	products.	We	believe	that	we	are	the	leading	provider	of	cable	modems	worldwide,	competing	with	a	number	of	consumer	electronic companies	and	various	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,	state-owned	telecommunications companies	to	many	small,	specialized	firms.	Ericsson	is	the	market	leader,	followed	by	the	Nokia-Siemens	joint	venture,	Alcatel-Lucent,	and	two	vendors	with	similar	market	share,	Motorola	and	Nortel.	Huawei, Samsung,	NEC	and	ZTE	are	also	significant	competitors.

The	segment's	wireless	networks	business	is	confronting	several	factors	that	could	impact	its	business,	including	price	competition,	continuing	consolidation	among	competitor	telecommunications	equipment providers,	a	decline	in	our	proprietary	iDEN	business,	and	vendor	financing	by	competitors	as	customers	continue	to	look	to	vendors	as	an	additional	source	of	financing.	The	market	for	GSM	access	systems	has	become particularly	price	competitive	resulting	in	significant	declines	in	gross	margins	in	the	market	for	those	systems	during	2006	and	2007.

Payment	terms	vary	worldwide,	depending	on	the	arrangement.	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.	Customer	payments	are	generally	due	30	to	60	days	from	the	invoice	date,	and	are	typically	limited	to	90	days	in regions	outside	North	America.

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.

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	affect	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	relating	to	the	access	to	allocated	spectrum	for wireless	communications	users,	especially	in	urban	areas	where	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	on	July	1,	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	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	which	can	be	offered	without spectrum	license	costs.	Deregulation	may	introduce	new	competition	and	new	opportunities	for	Motorola	and	our	customers.

As	more	fully	described	under	"Enterprise	Mobility	Solutions	—	Regulatory	Matters"	beginning	on	page	13	of	this	Form	10-K,	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	has	begun	the	auction	of	spectrum	in	the	700	MHz	band	that	will	be	reclaimed	by	the	government	in	February	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	$2.6	billion	at	December	31,	2007,	compared	to	$3.2	billion	at	December	31,	2006.	The	2007	order	backlog	is	believed	to	be	generally	firm	and	100%	of	that	amount	is	expected	to	be recognized	as	revenue	during	2008.	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.	In	addition,	we	have	licensed	our	digital	conditional	access	technology,	DigiCipher®	II,	to	other	equipment	suppliers	and	have	formed	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	and	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	2007,	the	segment	had	lower inventory	balances	than	at	the	end	of	2006,	primarily	due	to	the	completion	of	significant	project	milestones	and	the	sale	of	the	embedded	communications	computing	business.

Natural	gas,	electricity,	and,	to	a	lesser	extent,	oil	are	the	primary	sources	of	energy	required	for	our	manufacturing	operations,	which	are	currently	in	generally	adequate	supply	for	the	segments	operations.	In addition,	the	cost	to	operate	our	facilities	and	freight	costs	are	dependent	on	world	oil	prices,	which	increased	significantly	during	2007	and	increased	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	is	located	in	Horsham,	Pennsylvania.	Major	design,	integration,	manufacturing	and	distribution	centers	are	located	in:	Arlington	Heights	and	Schaumburg,	Illinois;	Chandler,	Arizona; Fort	Worth,	Texas;	Taipei,	Taiwan;	Nogales,	Mexico;	Bangalore,	India;	Swindon,	England;	Hangzhou	and	Tianjin,	China;	and	Penang,	Malaysia.	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

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,	is	referred	to	as	the	"government	and public	safety	market"),	as	well	as	retail,	utility,	transportation,	manufacturing,	healthcare	and	other	commercial	customers	(which,	collectively,	are	referred	to	as	the	"commercial	enterprise	market").	In	2007,	the segment's	net	sales	represented	21%	of	the	Company's	consolidated	net	sales.

In	the	government	and	public	safety	market,	we	are	the	leading	provider	of	advanced	mission-critical	systems	worldwide,	with	more	than	65	years	of	experience	in	custom,	rugged	devices;	public	safety-grade private	networks;	sophisticated	encryption	technology;	interoperable	voice	and	broadband	data;	and	complex	network	design,	optimization	and	implementation	services.	In	the	commercial	enterprise	market,	we	are	a global	leader	in	end-to-end	enterprise	mobility	solutions.	Our	products	and	solutions	capture,	move	and	manage	information	in	real	time	to	assist	our	customers	in	making	more	efficient	business	decisions.	Our	products include	advanced	data	capture	products,	mobile	computing	platforms	and	software	management	tools,	wireless	infrastructure,	and	radio	frequency	identification	("RFID")	infrastructure	and	tags,	and	are	sold	as	both integrated	solutions	and	individual	devices.

The	segment's	products	are	sold	through	Motorola's	direct	sales	force	and	through	independent	and	authorized	distributors,	dealers	and	value-added	resellers,	original	equipment	manufacturers,	service	operators and	independent	commission	sales	representatives.	Distributors	and	value-added	resellers	may	provide	a	service	or	add	components	in	order	to	resell	our	product	to	end	users.	The	segment's	distribution	organization provides	systems	engineering	and	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	stations	or	from	other	non-Motorola	service	stations.

We	compete	in	the	mobile	segment	of	the	communications	industry,	providing	wireless	equipment	infrastructure	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.	We	expect	this	industry	to	grow	in	the	mid-to-high single	digit	percentage	range	in	2008,	consistent	with	previous	years.	Our	extensive	portfolio	of	products	includes	advanced	solutions	for	each	of	the	major	standards-based	private	network	technologies,	APCO	25 (Association	for	Public	Safety	Communications	Officials)	and	TETRA	(terrestrial	trunked	radio),	as	well	as	biometrics	and	wireless	broadband	applications.	We	expect	sales	to	continue	to	grow	worldwide	as	demand	for integrated,	interoperable	public	safety	communications	increases.	As	new	and	better	spectrum	utilization	evolves,	we	expect	to	see	more	demand	and	greater	potential	for	data	applications,	such	as	video	surveillance	and other	data-based	products,	in	2008	and	beyond.

Within	our	commercial	enterprise	market,	we	believe	there	is	a	significant	growth	opportunity	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	enterprise	wireless	infrastructure,	mobile	computing	solutions,	bar	code	scanning,	RFID	solutions	and	mobile	network	management	platforms. Organizations	looking	to	increase	productivity	and	derive	benefits	from	mobilizing	their	applications	and	workforces	are	driving	growth	in	this	market,	which	we	expect	to	be	in	the	high	single	digits	in	2008.	With	the acquisition	of	Symbol	Technologies,	Inc.	("Symbol")	in	January	2007,	Motorola	is	well	positioned	to	compete	effectively	in	the	enterprise	space.

Motorola	has	been	a	leading	provider	of	mission-critical	systems	in	the	government	and	public	safety	market	worldwide	for	more	than	65	years.	The	acquisition	of	Symbol	is	the	cornerstone	of	the	segment's strategy	to	expand	its	leadership	into	the	commercial	enterprise	market.	We	are	using	our	combined	scale	to	maintain	and	expand	our	leadership	position	in	these	markets	worldwide	by	uniting	the	two	companies' adjacent	assets,	intellectual	property,	customer	and	supplier	bases,	and	industry-leading	products.	The	combination	of	our	direct	sales	and	indirect	channel	partners	provides	significant	distribution	advantages	in	each	of the	markets	we	serve.

In	the	government	and	public	safety	market,	our	objective	is	to	maintain	our	leading	position	as	the	market	and	technology	evolves.	Key	strategies	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	anticipated	public/private	convergence	planned	for potential	700MHz	public	safety	systems	in	the	U.S.,	and	(iv)	continuing	to	lead	the	market	for	APCO	25	and	TETRA	standards-based	voice	and	data	networking	systems	around	the	world.

In	the	commercial	enterprise	market,	our	strategy	is	to	deliver	products	and	solutions	that	are	designed	to	increase	cost	effectiveness,	enhance	efficiency	and	promote	faster	execution	of	critical	business	processes. Key	strategies	include	offering	a	comprehensive	portfolio	of	products	and	services	to	help	businesses:	(i)	streamline	their	supply	chains,	(ii)	improve	customer	service	in	the	field,	(iii)	increase	data	collection	accuracy, and	(iv)	enhance	worker	productivity.

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	allows	us	to	increase	revenues	by	extending	the	reach	of	our	products	and	solutions	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	can	be	very	effective	in	promoting	sales	of Motorola	products.	We	believe	this	tiered	distribution	approach	will	allow	us	to	achieve	our	goal	of	maintaining	gross	margin	over	time,	as	we	drive	greater	scale	from	shipping	more	efficiently	through	better management	of	our	supply	chain.

The	largest	of	the	segment's	customers	are	the	U.S.	Government,	Scansource,	IBM,	Ingram	Micro	and	Wal-Mart.	In	2007,	aggregate	net	sales	to	these	five	customers	represented	approximately	19%	of	the segment's	net	sales.	The	loss	of	any	of	the	segment's	largest	customers	may	have	a	material	adverse	effect	on	the	segment's	business.	Further,	because	some	of	these	contracts	are	long-term,	the	loss	of	a	major	customer could	impact	revenue	and	earnings	over	several	quarters.	Net	sales	to	customers	in	North	America	represented	62%	of	the	segment's	net	sales	in	2007.

A	majority	of	our	sales	were	made	directly	through	our	in-house	sales	force.	However,	as	noted	above,	a	significant	portion	of	our	sales	are	made	through	resellers	and	distributors.	Our	largest	resellers	and distributors	are	Scansource,	IBM	and	Ingram	Micro,	which	primarily	sell	to	the	commercial	enterprise	market.

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;	payment	terms;	availability	of	vendor	financing;	product	and	system	performance;	product	features,	quality,	delivery,	availability	and	warranty;	the	quality	and	availability	of service;	company	image;	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	range	of	offerings.

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

Competitors	in	this	segment	may	also	serve	as	a	subcontractor	to	a	large	system	integrator	and	are	selected	based	on	a	number	of	competitive	factors	and	customer	requirements.	The	segment	is	managing	the impact	of	system	integrators	seeking	to	move	further	into	the	public	safety	area,	specifically	in	the	federal	government	market.	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.	As	demand	for	fully-integrated	voice, data	and	broadband	systems	continues,	the	segment	may	face	additional	competition	from	public	telecommunications	carriers.

The	commercial	enterprise	market	is	highly	competitive	and	acutely	influenced	by	advances	in	technology,	industry	standards,	product	improvements,	new	product	introductions	and	price	competition.	Many firms	are	engaged	in	the	manufacturing	and	marketing	of	products	in	bar	code	reading	equipment,	wireless	networks	and	mobile	computing	devices.	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	segment. Competitors	such	as	Intermec,	Cisco	and	Nokia	deliver	products	in	certain	parts	of	the	commercial	enterprise	market.

Payment	terms	vary	worldwide.	Generally,	contract	payment	terms	range	from	30	to	60	days	from	the	invoice	date	within	North	America	and	are	typically	limited	to	90	days	in	regions	outside	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	the	completion	of	the	milestone.

We	generally	do	not	grant	extended	payment	terms.	As	required	for	competitive	reasons,	we	may	provide	or	work	with	third-party	lenders	to	arrange	for	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	February	17,	2009.	The	soon-to- be	available	spectrum	that	has	historically	been	utilized	for	analog	television	(the	so-called	"digital	dividend"	spectrum)	can	provide	new	opportunities	for	Motorola	and	for	our	competitors.	In	parallel,	108	MHz	of spectrum	historically	used	for	broadcast	television	is	being	redeveloped	for	new	uses,	including	broadband	and	narrowband	wireless	communications.	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.	As	of	February	2008,	approximately	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	deploy	systems	as	broadcast	television	is	cleared	from	the	700	MHz	band.	The	FCC	also	has	made	provisions for	a	700	MHz	band	nationwide	public	safety	broadband	network	to	be	built	over	the	next	10	years.	In	addition,	segments	of	the	spectrum	are	being	auctioned	for	commercial	use	and	Motorola	could	see	new	business opportunities	as	auction	winners	implement	broadband	systems	on	that	spectrum.

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	recently	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.

A	global	focus	on	enhancing	security	and	"connecting	the	unconnected"	is	providing	new	opportunities	for	Motorola's	wireless	broadband	and	RFID	products.	In	addition	to	offering	products	that	operate	in licensed	broadband,	Motorola	offers	wireless	broadband	solutions	that	operate	in	bands	where	no	license	is	required,	providing	an	economical	means	for	enhancing	connectivity	in	developing	countries.	Government funding	to	enhance	connectivity	in	African	countries	is	fueling	new	opportunities	for	these	products.	Likewise,	interest	in	strengthening	border	security	and	global	tracking	and	security	of	products	provides	greater opportunities	for	Motorola's	RFID	products.

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	$2.3	billion	as	of	December	31,	2007,	compared	to	$2.0	billion	as	of	December	31,	2006.	The	2007	order	backlog	is	believed	to	be	generally	firm	and	approximately	74%	of	that amount	is	expected	to	be	recognized	as	revenue	during	2008.	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")	Terrestrial	Trunked Radio	("TETRA").

Notwithstanding	the	expiration	of	certain	patents	and	the	resulting	potential	for	increased	competition	for	certain	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	and	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	2007,	the segment	had	a	higher	inventory	balance	than	at	the	end	of	2006,	primarily	as	a	result	of	the	acquisition	of	Symbol	during	2007.

Natural	gas,	electricity	and,	to	a	lesser	extent,	oil	are	the	primary	sources	of	energy	for	the	segment's	operations,	which	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	increased	significantly	during	2007	and	increased	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.	Major	design,	integration,	manufacturing	and	distribution	centers	are	located	in:	Holtsville,	New	York;	Schaumburg,	Illinois; Basingstoke,	England;	Arad,	Israel;	Tianjin,	China;	Taunusstein	and	Berlin,	Germany;	Reynosa,	Mexico;	McAllen,	Texas;	Brno,	Czech	Republic;	and	Penang,	Malaysia.	In	addition	to	our	own	manufacturing,	we	utilize non-affiliated	electronics	manufacturing	suppliers,	primarily	in	Asia,	in	order	to	enhance	our	ability	to	lower	costs	and	deliver	products	that	meet	consumer	demands.

# Other	Information

2007	Change	in	Organizational	Structure.		Effective	as	of	the	second	quarter	of	2007,	the	Company	realigned	its	operating	business	segments	into	the	following:	(i)	Mobile	Devices,	(ii)	Home	and	Networks Mobility,	and	(iii)	Enterprise	Mobility	Solutions.

Financial	Information	About	Segments.		The	response	to	this	section	of	Item	1	incorporates	by	reference	Note	11,	"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.	Motorola's	largest	end	customers	(including	sales	through	distributors) are	Sprint	Nextel,	Verizon,	China	Mobile,	AT&T	and	America	Movil.	No	single	customer	accounted	for	more	than	10%	of	the	Company's	net	sales	in	2007.

Approximately	2%	of	Motorola's	net	sales	in	2007	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	2007	backlog	amounts	shown	in	the	foregoing	table	are	believed	to	be	generally	firm,	and	approximately	89%	of	the	backlog	on	hand	at December	31,	2007	is	expected	to	be	recognized	as	revenue	in	2008.	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	$4.4	billion	in	2007,	compared	to	$4.1	billion	in	2006	and	$3.6	billion	in	2005.	R&D	expenditures	increased	8%	in	2007	as compared	to	2006,	after	increasing	14%	in	2006	as	compared	to	2005.	Motorola	continues	to	believe	that	a	strong	commitment	to	research	and	development	is	required	to	drive	long-term	growth.	Approximately	27,000 professional	employees	were	engaged	in	such	R&D	activities	during	2007.

Patents	and	Trademarks.		Motorola	seeks	to	obtain	patents	and	trademarks	to	protect	our	proprietary	position	whenever	possible	and	practical.	As	of	December	31,	2007,	Motorola,	Inc.	and	its	wholly	owned subsidiaries	owned	approximately	10,064	utility	and	design	patents	in	the	U.S.	and	12,914	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	2007,	Motorola,	Inc.	and	its	wholly	owned	subsidiaries	were	granted	696	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.		Compliance	with	federal,	state	and	local	laws	regulating	the	discharge	of	materials	into	the	environment,	or	otherwise	relating	to	the	protection	of	the	environment,	has	no	material	effect on	capital	expenditures,	earnings	or	the	competitive	position	of	Motorola.

Employees.		At	December	31,	2007	and	December	31,	2006,	there	were	approximately	66,000	employees	of	Motorola	and	its	subsidiaries.

Financial	Information	About	Geographic	Areas.		The	response	to	this	section	of	Item	1	incorporates	by	reference	Note	10,	"Commitments	and	Contingencies"	and	Note	11,	"Information	by	Segment	and Geographic	Region"	of	Part	II,	Item	8:	Financial	Statements	and	Supplementary	Data	of	this	document,	the	"Results	of	Operations—2007	Compared	to	2006"	and	"Results	of	Operations—2006	Compared	to	2005" 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	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	officer,	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,	phone:	1-800-262-8509.	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.

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.	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	technological	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;	WiMAX;	4G	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.

Our	success,	in	part,	will	be	affected	by	our	ability	to	successfully	compete	in	the	ever-evolving	markets	in	which	we	participate.	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	evaluation	of	structural	and	strategic	realignment	alternatives	for	our	businesses	may	have	an	adverse	effect	on	business	operations	and	our	assets.

In	January	2008,	we	announced	that	we	are	evaluating	alternatives	for	the	structural	and	strategic	realignment	of	our	businesses.	This	may	include	the	separation	of	the	Mobile	Devices	business	from	our	other businesses.	We	have	not	determined	all	structural	and	strategic	alternatives	that	may	be	available	to	us,	whether	we	will	elect	to	pursue	any	such	strategic	alternatives,	or	what	impact	any	particular	strategic	alternative will	have	on	our	business	operations	or	stock	price	if	pursued.	There	are	various	uncertainties	and	risks	relating	to	our	exploration	of	structural	and	strategic	alternatives	that	could	have	an	adverse	effect	on	our	business operations	or	assets,	including:	(i)	exploration	of	structural	and	strategic	alternatives	may	distract	management	and	disrupt	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.

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	and	profitability.

We	have	been	reducing	costs	and	simplifying	our	product	portfolios	in	all	of	our	businesses.	We	have	discontinued	product	lines,	exited	businesses,	consolidated	manufacturing	operations,	increased manufacturing	with	third	parties	and	reduced	our	employee	population.

The	impact	of	these	cost-reduction	actions	on	our	sales	and	profitability	may	be	influenced	by	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	of	the	United States,	particularly	in	Europe	and	Asia;	(iv)	decreases	in	employee	morale	and	the	failure	to	meet	operational	targets	due	to	the	loss	of	employees;	(v)	our	ability	to	retain	or	recruit	key	employees;	(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	now	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	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.

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	approximately	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	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.,	and	difficulties	in	repatriating	cash	generated	or	held	abroad	in	a	tax-efficient	manner;	(v)	currency	fluctuations,	particularly	in	the	Euro,	Chinese	renminbi	and	Brazilian	real;	(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.	In	particular,	we	have	sizeable	operations	in	China,	including	manufacturing	operations,	and	7%	of	our	net	sales	are	to customers	in	China.	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.	Further,	if	manufacturing	in	the	region	is	disrupted,	our	overall	capacity	could	be	significantly	reduced	and	sales	or	profitability	could	be	negatively	impacted.

We	also	are	increasing	our	presence	and/or	selling	more	of	our	products	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	development	activities,	operations	or	sales	in	non-U.S.	markets	could	result	in	lost	benefits	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	development	activities, operations	and/or	sales	in	the	jurisdiction.	If	the	Company's	circumstances	change	or	development	activities,	sales	or	operations	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.

Occasionally,	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	can	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	can	also	result	in	fines	and	additional	costs.	Finally,	recalls	can	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	cost	of	production.	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.

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	global	economies	are	uncertain.	The	U.S.	involvement	in	Iraq	and	other	global	conflicts,	including	in	the	Middle	East,	as	well	as	public	health	issues,	have	created	many economic	and	political	uncertainties	that	have	impacted	the	global	economy.	As	a	result,	it	is	difficult	to	estimate	the	level	of	growth	for	the	world	economy	as	a	whole.	It	is	even	more	difficult	to	estimate	growth	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	of	growth	in	the	markets	we	serve	and	demand for	our	products,	the	prevailing	economic	uncertainties	render	estimates	of	future	income	and	expenditures	difficult.

We	have	sizable	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.

The	future	direction	of	the	overall	domestic	and	global	economies	will	have	a	significant	impact	on	our	overall	performance.	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.

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	its	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.

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.	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.

Our	future	operating	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	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	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.

There	is	no	guarantee	that	design	wins	will	become	actual	orders	and	sales.

A	"design	win"	occurs	when	a	customer	or	prospective	customer	notifies	us	that	our	product	has	been	selected	to	be	integrated	with	the	customer's	product.	There	can	be	delays	of	several	months	or	more	between the	design	win	and	when	a	customer	initiates	actual	orders.	The	design	win	may	never	become	an	actual	order	or	sale.	Further,	if	the	customer's	plans	change,	we	may	commit	significant	resources	to	design	wins	that	do not	result	in	actual	orders.	If	design	wins	do	not	result	in	actual	sales,	our	business	could	be	adversely	affected.

We	may	not	continue	to	have	access	to	the	capital	markets	to	obtain	long-term	and	short-term	financing	on	acceptable	terms	and	conditions,	particularly	if	our	credit	ratings	are	downgraded.

From	time	to	time	we	access	the	long-term	and	short-term	capital	markets	to	obtain	financing.	Although	we	believe	that	we	can	continue	to	access	the	capital	markets	in	2008	on	acceptable	terms	and	conditions, our	access	and	the	availability	of	acceptable	terms	and	conditions	are	impacted	by	many	factors,	including:	(i)	our	credit	ratings,	which	have	been	lowered	in	2007	and	2008;	(ii)	the	liquidity	of	the	overall	capital markets,	which	has

been	negatively	impacted	by	the	U.S.	sub-prime	mortgage	situation;	and	(iii)	the	current	state	of	the	economy,	including	the	telecommunications	industry.	There	can	be	no	assurances	that	we	will	continue	to	have	access to	the	capital	markets	on	terms	acceptable	to	us.

Our	debt	ratings	are	considered	"investment	grade."	If	our	credit	ratings	were	to	decline	two	levels	from	the	current	Fitch	and	S&P	ratings,	the	Company's	long-term	debt	would	no	longer	be	considered investment	grade	and	our	financial	flexibility	would	be	reduced	and	our	cost	of	borrowing	would	increase.	Some	of	the	factors	that	impact	our	credit	ratings,	including	the	overall	economic	health	of	the telecommunications	industry	and	the	U.S.	economy,	are	outside	of	our	control.	There	can	be	no	assurances	that	our	current	credit	ratings	will	continue.

Our	commercial	paper	is	rated	"A-2/P-2/F-2."	Our	A-2	and	F-2	ratings	include	a	"watch	negative."	Although	we	currently	have	access	to	the	commercial	paper	markets,	there	can	be	no	assurances	that	we	will continue	to	have	access	to	the	commercial	paper	markets	on	terms	acceptable	to	us.

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

We	view	our	existing	five-year	revolving	domestic	credit	facility	as	a	source	of	available	liquidity.	This	facility	contains	various	conditions,	covenants	and	representations	with	which	we	must	be	in	compliance	in order	to	borrow	funds.	We	have	never	borrowed	under	this	facility	or	previous	domestic	revolving	credit	facilities.	However,	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	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.

Our	future	operating	results	may	be	negatively	impacted	if	we	do	not	execute	a	successful	silicon	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	transitioning	our	silicon	and	software	platforms	to	lower	our	cost	to	produce	devices	and	to enable	richer	consumer	experiences.	Failure	to	execute	this	transition	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.

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,	an	investment	fund	owned	by	the	Company,	holds	U.S.	Dollar-denominated	debt	obligations	which	include	corporate	bonds	and	asset-	and	mortgage-backed	securities.	The	fair	value	of	these holdings	may	experience	temporary	or	other-than-temporary	declines	due	to	the	widening	credit	spreads	in	several	debt	market	segments	and	impairment	if	the	underlying	debtor	should	default	on	its	obligations.

If	we	are	unable	to	purchase	sufficient	credit	insurance,	our	business	may	be	negatively	impacted.

We	purchase	a	large	amount	of	credit	insurance	to	mitigate	some	of	our	credit	risks.	Our	ability	to	sell	certain	of	our	receivables	could	be	negatively	impacted	if	we	are	not	able	to	continue	to	purchase	credit insurance	in	certain	countries	and	in	sufficient	quantities.	In	addition,	our	success	in	certain	countries	may	be	dependent	on	our	ability	to	obtain	sufficient	credit	insurance.

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.

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	may	provide	financing	and	financial	guarantees	to	our	customers,	some	of	which	may	be	for	significant	amounts.

The	competitive	environment	in	which	we	operate	may	require	us	to	provide	long-term	customer	financing	to	a	customer	in	order	to	win	a	contract.	Customer	financing	arrangements	may	include	all	or	a	portion of	the	purchase	price	for	our	products	and	services.	In	some	circumstances,	these	loans,	leases	and	extended	payment	terms	can	be	very	large.	We	also	provide	revolving,	short-term	financing	to	certain	customers	and distributors	that	purchase	our	equipment.	We	may	also	assist	customers	in	obtaining	financing	from	banks	and	other	sources	and	may	also	provide	financial	guarantees	on	behalf	of	our	customers.	Our	success, particularly	in	our	infrastructure	businesses,	may	be	dependent,	in	part,	upon	our	ability	to	provide	customer	financing	on	competitive	terms	and	on	our	customers'	creditworthiness.

While	we	have	generally	been	able	to	place	a	portion	of	our	customer	financings	with	third-party	lenders,	a	portion	of	these	financings	are	supported	directly	by	us.	There	can	be	higher	risks	of	default	associated with	some	of	these	financings,	particularly	when	provided	to	start-up	operations	such	as	local	network	providers,	customers	in	developing	countries,	or	customers	in	specific	financing-intensive	areas	of	the	industry (such	as	3G	wireless	operators).	Should	customers	fail	to	meet	their	obligations	on	new	or	existing	loans,	losses	could	be	incurred	and	such	losses	could	negatively	impact	our	financial	results.	In	addition,	our	sales	to such	customers	or	distributors	could	be	reduced	in	the	event	of	real	or	perceived	issues	about	the	credit	quality	of	the	customer	or	distributor.

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	performance.

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,	which	can be	offered	without	spectrum	license	costs.	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.	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	effect	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.

Recent	FCC	regulations	requiring	separation	of	security	functionality	from	set-tops	could	negatively	impact	our	sales	of	set-tops.

Historically,	reception	of	digital	television	programming	from	a	cable	broadband	network	has	required	a	set-top	with	security	technology.	As	a	result,	sourcing	of	these	set-tops	was	traditionally	limited	to	a	few cable	network	manufacturers,	including	Motorola.	FCC	regulations	requiring	separation	of	security	functionality	from	set-tops	that	are	aimed	to	increase	competition	and	encourage	the	sale	of	set-tops	in	the	retail market	became	effective	for	most	customers	on	July	1,	2007.	Traditionally,	cable	service	providers	sold	or	leased	the	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	may	be	negatively	impacted.

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,	capital	spending	plans	of	our	customers,	and	the	level	of	perceived	growth	in	the	industries	in which	we	participate.

The	level	of	returns	on	pension	and	retirement	plan	assets	could	affect	our	earnings	in	future	periods.

The	funding	obligations	for	our	pension	plans	are	impacted	by	the	performance	of	the	financial	markets,	particularly	the	equity	markets,	and	interest	rates.	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	required	contributions	in	the	future	increases.

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.

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	recently	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.

None.

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	principal	manufacturing	facilities	for	each	of	Motorola's	business	segments.)	Motorola	owns	43	facilities	(manufacturing,	sales, service	and	office),	26	of	which	are	located	in	Americas	Region	(USA,	Canada,	Mexico	and	Latin	America)	and	17	of	which	are	located	in	other	countries.	Motorola	leases	313	facilities,	122	of	which	are	located	in Americas	Region	and	191	of	which	are	located	in	other	countries.

During	2007,	facilities	in:	Guangzhou,	China;	Cork,	Ireland;	Arlington	Heights,	Illinois	(Ridge	Buildings);	and	a	land	parcel	in	Anderson,	South	Carolina	were	sold.	Sites	at	Beijing,	China;	Flensburg,	Germany; Glen	Rock,	New	Jersey;	Champaign,	Illinois;	and	Chandler,	Arizona,	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.

# Personal	Injury	Cases

# Cases	relating	to	Wireless	Telephone	Usage

On	April	19,	2001,	Farina	v.	Nokia,	Inc.,	et	al.,	was	filed	in	the	Pennsylvania	Court	of	Common	Pleas,	Philadelphia	County.	Farina	claimed	that	the	failure	to	incorporate	a	remote	headset	into	cellular	phones rendered	the	phones	defective	by	exposing	users	to	biological	injury	and	health	risks	and	sought	compensatory	damages	and	injunctive	relief.	After	removal	to	federal	court,	the	Judicial	Panel	on	Multidistrict	Litigation ("MDL	Panel")	transferred	Farina	and	three	similar	but	now	dismissed	cases	to	the	United	States	District	Court	for	the	District	of	Maryland	(the	"MDL	Court")	for	coordinated	or	consolidated	pretrial	proceedings	in	the matter	called	In	re	Wireless	Telephone	Radio	Frequency	Emissions	Products	Liability	Litigation	(the	"MDL	Proceeding").

In	2005,	as	a	result	of	a	decision	of	the	United	States	Court	of	Appeals	for	the	Fourth	Circuit,	the	Farina	case	was	remanded	to	the	Pennsylvania	state	courts.	In	late	2005	and	early	2006,	plaintiffs	in	Farina amended	their

complaints	to	add	allegations	that	cellular	telephones	sold	without	headsets	are	defective	because	they	present	a	safety	risk	when	used	while	driving	and	to	seek	punitive	damages.	Plaintiffs	in	Farina	also	seek declaratory	relief	and	treble	and	statutory	damages.	After	the	Farina	complaint	was	amended,	on	February	17,	2006,	a	newly-added	defendant	to	the	Farina	case	removed	the	case	to	federal	court.	After	initial consolidation	with	the	MDL	Proceeding,	on	June	11,	2007,	the	MDL	Panel	transferred	Farina	back	to	the	federal	district	court	in	Philadelphia.	Plaintiffs'	motion	to	remand	to	Pennsylvania	state	courts	was	denied	on February	13,	2008.	The	federal	district	court	requested	that	defendants	refile	and	rebrief	their	motions	to	dismiss.

On	September	9,	2002,	Dahlgren	v.	Motorola,	Inc.,	et	al.,	was	filed	in	the	D.C.	Superior	Court	containing	class	claims	alleging	deceptive	and	misleading	actions	by	defendants	in	falsely	stating	that	cellular phones	are	safe	and	by	failing	to	disclose	studies	that	allegedly	show	cellular	phones	can	cause	harm.	Dahlgren	seeks	injunctive	and	equitable	relief,	actual	damages,	treble	or	statutory	damages,	punitive	damages	and	a constructive	trust.	On	December	9,	2005,	plaintiff	filed	an	amended	complaint	in	Dahlgren.	Defendants	moved	to	dismiss	Dahlgren	on	February	3,	2006.	That	motion	is	still	pending.

During	2001	and	2002,	several	cases	were	filed	in	the	Superior	Court	of	the	District	of	Columbia	alleging	that	use	of	a	cellular	phone	caused	a	malignant	brain	tumor:	Murray	v.	Motorola,	Inc.,	et	al.,	filed November	15,	2001,	Agro,	et	al.	v.	Motorola,	Inc.,	et	al.,	filed	February	26,	2002;	Cochran,	et	al.	v.	Audiovox	Corporation,	et	al.,	filed	February	26,	2002,	and	Schofield,	et	al.	v.	Matsushita	Electric	Corporation	of America,	et	al.,	filed	February	26,	2002,.	Each	complaint	seeks	compensatory	damages	in	excess	of	$25	million,	consequential	damages	in	excess	of	$25	million	and	punitive	and/or	exemplary	damages	in	excess	of $100	million.	These	cases	were	removed	to	federal	court	and	transferred	to	the	United	States	District	Court	for	the	District	of	Maryland	(the	"MDL	Court").	On	July	19,	2004,	the	MDL	Court	found	that	there	was	no federal	court	jurisdiction	over	Murray,	Agro,	Cochran	and	Schofield	and	remanded	those	cases	to	the	Superior	Court	for	the	District	of	Columbia.	On	November	30,	2004,	defendants	moved	to	dismiss	the	Murray,	Agro, Cochran	and	Schofield	complaints.	On	August	24,	2007,	the	Superior	Court	for	the	District	of	Columbia	granted	the	defendants'	motion	and	dismissed	the	cases	with	prejudice	on	federal	preemption	grounds.	On September	20,	2007,	plaintiffs	appealed	the	dismissal	to	the	District	of	Columbia	Court	of	Appeals	and	that	appeal	is	still	pending.

# Iridium-Related	Cases

# Class	Action	Securities	Lawsuits

Motorola	has	been	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.	Plaintiff's	motion for	class	certification	was	granted	on	January	9,	2006	and	the	trial	is	scheduled	to	begin	on	May	22,	2008.

# Bankruptcy	Court	Lawsuit

Motorola	was	sued	by	the	Official	Committee	of	the	Unsecured	Creditors	of	Iridium	(the	"Committee")	in	the	Bankruptcy	Court	for	the	Southern	District	of	New	York	on	July	19,	2001.	In	re	Iridium	Operating LLC,	et	al.	v.	Motorola	asserts	claims	for	breach	of	contract,	warranty,	fiduciary	duty	and	fraudulent	transfer	and	preferences,	and	seeks	in	excess	of	$4	billion	in	damages.	On	September	20,	2007,	following	trial	on	the solvency	and	capital	adequacy	portion	of	the	Committee's	fraudulent	transfer	and	preference	claims,	the	Iridium	Bankruptcy	Court	granted	judgment	for	Motorola	on	all	those	claims.	The	remaining	claims	for	breach	of contract,	warranty,	fiduciary	duty	and	equitable	subordination	remain	pending.

On	March	30,	2001,	the	United	States	Bankruptcy	Court	for	the	Southern	District	of	New	York	presiding	over	the	Iridium	bankruptcy	proceeding	approved	a	settlement	between	the	unsecured	creditors	of	the Iridium	Debtors	and	the	Iridium	Debtors'	pre-petition	secured	lenders.	The	settlement	agreement	creates	and	provides	for	the	funding	of	a	litigation	vehicle	for	the	purpose	of	pursuing	litigation	against	Motorola. Motorola	appealed	the	approval	of	the	settlement	first	to	the	United	States	District	Court	for	the	Southern	District	of	New	York	and	thereafter	to	the	United	States	Court	of	Appeals	for	the	Second	Circuit.	On	March	5, 2007,	the	Court	of	Appeals	vacated	the	District	Court	order	approving	the	settlement	and	directed	that	the	case	be	remanded	to	the	Iridium	Bankruptcy	Court	for	further	proceedings.	On	June	1,	2007,	the	Unsecured Creditors	Committee	filed	with	the	bankruptcy	court	a	renewed	motion	for	approval	of	the	Settlement	Agreement,	to	which	Motorola	objected.	That	motion	remains	pending.

# Iridium	India	Lawsuits

Motorola	and	certain	of	its	current	and	former	officers	and	directors	were	named	as	defendants	in	a	private	criminal	complaint	filed	by	Iridium	India	Telecom	Ltd.	("Iridium	India")	in	October	2001	in	the	Court	of the	Extra	Judicial	Magistrate,	First	Class,	Khadki,	Pune,	India.	The	Iridium	India	Telecom	Ltd.	v.	Motorola,	Inc.	et	al.	complaint	alleges	that	the	defendants	conspired	to,	and	did,	commit	the	criminal	offense	of "cheating"	by	fraudulently	inducing	Iridium	India	to	purchase	gateway	equipment	from	Motorola,	to	acquire	Iridium	stock,	and	to	invest	in	developing	a	market	for	Iridium	services	in	India.	Under	the	Indian	penal	code, "cheating"	is	punishable	by	imprisonment	for	up	to	7	years	and	a	fine	of	any	amount.	The	court	may	also	require	defendants	to	compensate	the	victim	for	its	losses,	which	the	complaint	estimates	at	about	$100	million. In	August	2003,	the	Bombay	High	Court	granted	Motorola's	petition	to	dismiss	the	criminal	action	against	Motorola	and	the	individual	defendants.	Iridium	India	has	petitioned	the	Indian	Supreme	Court	to	exercise	its discretion	to	review	that	dismissal,	and	that	petition	is	pending.

In	September	2002,	Iridium	India	also	filed	a	civil	suit	in	the	Bombay	High	Court	against	Motorola	and	Iridium.	The	suit	alleges	fraud,	intentional	misrepresentation	and	negligent	misrepresentation	by	Motorola and	Iridium	in	inducing	Iridium	India	to	purchase	gateway	equipment	from	Motorola,	to	acquire	Iridium	stock,	and	to	invest	in	developing	a	market	for	Iridium	services	in	India.	Iridium	India	claims	in	excess	of $200	million	in	damages	and	interest.	Following	extensive	proceedings	in	the	trial	court	and	on	appeal	related	to	Iridium	India's	motion	for	interim	relief,	Motorola	has	deposited	approximately	$44	million	in	a	specially designated	account	in	India,	and	the	Indian	Supreme	Court	has	accepted	for	a	full	hearing	at	a	later	date	Motorola's	appeal	regarding	interim	relief.

# Shareholder	Derivative	Case—Iridium	and	Telsim

M&C	Partners	III	v.	Galvin,	et	al.,	filed	January	10,	2002,	in	the	Circuit	Court	of	Cook	County,	Illinois,	is	a	shareholder	derivative	action	against	fifteen	current	and	former	members	of	the	Motorola	Board	of Directors	and	Motorola	as	a	nominal	defendant.	The	lawsuit	alleges	that	the	Motorola	directors	breached	their	fiduciary	duty	to	the	Company	and/or	committed	gross	mismanagement	of	Motorola's	business	and	assets by	allowing	Motorola	to	engage	in	improper	practices	with	respect	to	Iridium	and	Telsim	(as	defined	below).

In	April	2006,	the	Court	held	that	the	plaintiff	could	not	pursue	its	Iridium-related	claims,	but	denied	without	prejudice	plaintiff's	motion	to	file	a	Third	Amended	Complaint	with	respect	to	new	allegations pertaining	to	Telsim.	Following	the	Court's	ruling	for	defendants	on	the	Iridium-related	claims	and	plaintiff's	July	20,	2006	demand	with	respect	to	Telsim-related	claims,	the	Motorola	Board	of	Directors	appointed	an investigatory	committee	to	investigate	those	Telsim-related	claims.	On	November	13,	2007,	after	considering	the	July	2006	demand,	proposed	complaint,	and	recommendations	made	by	the	Board's	investigatory committee,	the	Board	concluded	that	the	evidence	does	not	support	M&C	Partners	III's	proposed	claims	and	prosecution	of	these	claims	would	not	be	in	the	best	interests	of	Motorola's	shareholders.	Accordingly,	the Board	rejected	M&C	Partners	III's	demand.

An	unfavorable	outcome	in	one	or	more	of	the	Iridium-related	cases	still	pending	could	have	a	material	adverse	effect	on	Motorola's	consolidated	financial	position,	liquidity	or	results	of	operations.

# 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.	Telsim	was	sold	by	the	Turkish	government	to	Vodafone	and Motorola	received	an	aggregate	payment	from	the	sale	of	$910	million.

# U.S.	Judgment

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.

# In	re	Motorola	Securities	Litigation

A	purported	class	action	lawsuit,	Barry	Family	LP	v.	Carl	F.	Koenemann,	was	filed	against	the	former	chief	financial	officer	of	Motorola	on	December	24,	2002,	in	the	United	States	District	Court	for	the	Southern District	of	New	York,	alleging	breach	of	fiduciary	duty	and	violations	of	Section	10(b)	of	the	Securities	Exchange	Act	of	1934	and	SEC	Rule	10b-5.	In	2003,	it	was	consolidated	with	a	number	of	related	cases	as	In	re Motorola	Securities	Litigation	in	the	United	States	District	Court	for	the	Northern	District	of	Illinois	("Illinois	District	Court").	During	2005,	the	Illinois	District	Court	certified	the	case	as	a	class	action.	In	April	2007, the	parties	entered	into	a	settlement	agreement,	pursuant	to	which	Motorola	paid	$190	million	to	the	class	and	all	claims	against	Motorola	by	the	class	have	been	dismissed	and	released.

# 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.

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,	and	defendants	moved	to	dismiss	that	complaint	in	January 2008.

# Charter	Communications	Class	Action	Securities	Litigation

On	August	5,	2002,	Stoneridge	Investment	Partners	LLC	filed	a	purported	class	action	in	the	United	States	District	Court	for	the	Eastern	District	of	Missouri	("District	Court")	against	Charter	Communications, Inc.	("Charter")	and	certain	of	its	officers,	alleging	violations	of	Section	10(b)	of	the	Securities	Exchange	Act	of	1934	and	Rule	10b-5	promulgated	thereunder	relating	to	Charter	securities.	This	complaint	did	not	name Motorola	as	a	defendant,	but	asserted	that	Charter	and	the	other	named	defendants	had	violated	the	securities	laws	in	connection	with,	inter	alia,	a	transaction	with	Motorola.	On	August	5,	2003,	the	plaintiff	amended	its complaint	to	add	Motorola,	Inc.	as	a	defendant.	As	to	Motorola,	the	amended	complaint	alleged	a	claim	under	Section	10(b)	of	the	Securities	Exchange	Act	of	1934	and	Rule	10b-5(a)-(c)	promulgated	thereunder	relating to	Charter	securities	and	seeks	an	award	of	compensatory	damages.	The	District	Court	issued	a	final	judgment	dismissing	Motorola	from	the	case	which	plaintiff	appealed	to	the	United	States	Court	of	Appeals	for	the Eighth	Circuit	("Court	of	Appeals").	On	April	11,	2006,	the	Court	of	Appeals	affirmed	the	final	judgment	of	the	District	Court	dismissing	Motorola	from	the	case.	On	January	15,	2008,	the	Supreme	Court	affirmed	the decision	of	the	Court	of	Appeals.

# 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	is awaiting	decision.

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,	which	is	awaiting	decision.

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,	Motorola	was	named	in	a	complaint	filed	in	state	court	in	Los	Angeles,	California,	naming	Motorola	and	Scientific-Atlanta	and	certain	officers	of	Scientific-Atlanta,	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	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.

# 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.	The	patent	claims	being	asserted	by	Tessera	are	subject	to	reexamination	proceedings	in	the	U.S.	Patent	and	Trademark	Office	("PTO").	In	the	reexamination	proceedings,	the	PTO	has	issued rejections	of	Tessera's	asserted	patent	claims.	On	February	26,	2008,	the	ITC	action	was	stayed	pending	the	completion	of	the	PTO's	reexamination	proceedings.

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.

Not	applicable.

Following	are	the	persons	who	were	the	executive	officers	of	Motorola	as	of	February	28,	2008,	their	ages	as	of	January	1,	2008,	their	current	titles	and	positions	they	have	held	during	the	last	five	years:

Gregory	Q.	Brown;	age	47;	President	and	Chief	Executive	Officer	since	January	1,	2008;	President	and	Chief	Operating	Officer	from	June	2007	to	January	2008;	Executive	Vice	President,	President,	Networks and	Enterprise	from	January	2005	to	June	2007;	Executive	Vice	President	and	President,	Commercial,	Government	and	Industrial	Solutions	Sector	from	January	2003	to	January	2005.

Eugene	A.	Delaney;	age	51;	Senior	Vice	President,	Government	and	Public	Safety,	Enterprise	Mobility	Solutions	since	May	2007;	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	from	January	2003	to	May	2005.

Rita	S.	Lane;	age	45;	Senior	Vice	President,	Integrated	Supply	Chain	since	July	2007;	Corporate	Vice	President	and	Chief	Procurement	Officer	from	June	2006	to	July	2007;	Vice	President	&	Brand	Advocate, Total	Storage	&	x-Series,	Integrated	Supply	Chain,	IBM	Corporation	("IBM")	from	July	2005	to	June	2006;	Vice	President,	x-Series,	Integrated	Supply	Chain,	IBM	from	July	2004	to	July	2005;	Director,	Total Storage,	Integrated	Supply	Chain,	IBM	from	April	2002	to	July	2004.

A.	Peter	Lawson;	age	61;	Executive	Vice	President,	General	Counsel	and	Secretary	since	May	1998.

Gregory	A.	Lee;	age	58;	Senior	Vice	President,	Human	Resources	since	January	2008;	Senior	Vice	President,	Human	Resources,	Coca	Cola	Enterprises	from	August	2006	to	January	2008;	Independent consultant,	providing	advice	and	counsel	on	talent	management	strategies	from	May	2005	to	August	2006;	Senior	Vice	President,	Human	Resources,	Sears,	Roebuck	and	Co.,	from	January	2001	to	May	2005.

Thomas	J.	Meredith;	age	57;	Executive	Vice	President,	Acting	Chief	Financial	Officer	since	April	2007;	General	Partner	and	Co-Founder,	Meritage	Capital,	L.P.	from	May	2003	to	present;	Chief	Executive Officer	of	MFI	Capital	from	July	2001	to	present.

Daniel	M.	Moloney;	age	48;	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.

Patricia	B.	Morrison;	age	48;	Executive	Vice	President,	Chief	Information	Officer	since	February	2007;	Senior	Vice	President,	Chief	Information	Officer	from	July	2005	to	February	2007;	Executive	Vice President,	Chief	Information	Officer	of	Office	Depot,	Inc.	from	January	2002	to	April	2005.

Richard	N.	Nottenburg;	age	53;	Executive	Vice	President,	Chief	Strategy	and	Technology	Officer	since	December	2007;	Executive	Vice	President,	Chief	Strategy	Officer	from	March	2005	to	December	2007; Senior	Vice	President	and	Chief	Strategy	Officer	from	July	2004	to	March	2005;	Strategic	Advisor	to	Motorola,	Inc.	from	February	2004	to	July	2004;	Vice	President	and	General	Manager	of	Vitesse	Semiconductor Corporation	from	August	2003	to	January	2004;	Chairman	of	the	Board,	President	and	Chief	Executive	Officer	of	Multilink	from	January	1995	to	August	2003.

The	above	executive	officers	will	serve	as	executive	officers	of	Motorola	until	the	regular	meeting	of	the	Board	of	Directors	in	May	2008	or	until	their	respective	successors	shall	have	been	elected.	There	is	no family	relationship	between	any	of	the	executive	officers	listed	above.

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,	2008	was	79,907.

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	2008	Annual	Meeting	of	Stockholders.	The	remainder	of	the	response	to	this	Item	incorporates	by	reference	Note	16,	"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,	2007.

# ISSUER	PURCHASES	OF	EQUITY	SECURITIES

(d)	Maximum	Number

(c)	Total	Number (or	Approximate	Dollar

| Period | (a)	Total	Number<br>of	Shares<br>Purchased(1)(2) | (b)	Average	Price<br>Paid	per<br>Share(1)(3) | (c)	Total	Number<br>of	Shares	Purchased<br>as	Part	of	Publicly<br>Announced	Plans<br>or	Programs(2) | (or	Approximate	Dollar<br>Value)	of	Shares	that<br>May	Yet	Be	Purchased<br>Under	the	Plans	or<br>Programs(2) |
| :--- | :--- | :--- | :--- | :--- |
| 9/30/07\tto\t10/26/07 | 2,972,951 | $18.84 | 2,964,225 | $4,267,375,081 |
| 10/27/07\tto\t11/23/07 | 5,709,917 | $17.23 | 5,706,600 | $4,169,061,854 |
| 11/24/07\tto\t12/31/07 | 25,064,045 | $16.04 | 25,064,045 | $3,767,061,887 |
| Total | 33,746,913 | $16.49 | 33,734,870 |  |

(1) In	addition	to	purchases	under	the	2006	Stock	Repurchase	Program	(as	defined	below),	included	in	this	column	are	transactions	under	the	Company's	equity	compensation	plans	involving	the	delivery	to	the	Company	of	12,043	shares	of	Motorola common	stock	to	satisfy	tax	withholding	obligations	in	connection	with	the	vesting	of	restricted	stock	granted	to	Company	employees.

(2) 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, subject	to	market	conditions	(the	"2006	Stock	Repurchase	Program").

(3) Average	price	paid	per	share	of	common	stock	repurchased	under	the	2006	Stock	Repurchase	Program	is	execution	price,	excluding	commissions	paid	to	brokers.

# 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,	2002	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

# Motorola,	Inc.	and	Subsidiaries

# Five	Year	Financial	Summary

| (Dollars	in	millions,	except	as	noted) | 2007 | 2006 | 2005 | 2004 | 2003 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Operating\tResults |  |  |  |  |  |
| Net\tsales | $36,622 | $42,847 | $35,310 | $29,680 | $21,718 |
| Costs\tof\tsales | 26,670 | 30,120 | 23,881 | 19,715 | 14,567 |
| Gross\tmargin | 9,952 | 12,727 | 11,429 | 9,965 | 7,151 |
| Selling,\tgeneral\tand\tadministrative\texpenses | 5,092 | 4,504 | 3,628 | 3,508 | 3,084 |
| Research\tand\tdevelopment\texpenditures | 4,429 | 4,106 | 3,600 | 3,316 | 2,849 |
| Other\tcharges\t(income) | 984 | 25 | (404) | 149 | 77 |
| Operating\tearnings\t(loss) | (553) | 4,092 | 4,605 | 2,992 | 1,141 |
| Other\tincome\t(expense): |  |  |  |  |  |
| Interest\tincome\t(expense),\tnet | 91 | 326 | 71 | (200) | (296) |
| Gains\ton\tsales\tof\tinvestments\tand\tbusinesses,\tnet | 50 | 41 | 1,845 | 460 | 540 |
| Other | 22 | 151 | (109) | (140) | (141) |
| Total\tother\tincome | 163 | 518 | 1,807 | 120 | 103 |
| Earnings\t(loss)\tfrom\tcontinuing\toperations\tbefore\tincome\ttaxes | (390) | 4,610 | 6,412 | 3,112 | 1,244 |
| Income\ttax\texpense\t(benefit) | (285) | 1,349 | 1,893 | 1,013 | 403 |
| Earnings\t(loss)\tfrom\tcontinuing\toperations | (105) | 3,261 | 4,519 | 2,099 | 841 |
| Earnings\t(loss)\tfrom\tdiscontinued\toperations,\tnet\tof\ttax | 56 | 400 | 59 | (567) | 52 |
| Net\tearnings\t(loss) | $(49) | $3,661 | $4,578 | $1,532 | $893 |
| Per\tShare\tData\t(in\tdollars) |  |  |  |  |  |
| Diluted\tearnings\t(loss)\tfrom\tcontinuing\toperations\tper\tcommon\tshare | $(0.05) | $1.30 | $1.79 | $0.87 | $0.36 |
| Diluted\tearnings\t(loss)\tper\tcommon\tshare | (0.02) | 1.46 | 1.81 | 0.64 | 0.38 |
| Diluted\tweighted\taverage\tcommon\tshares\toutstanding\t(in\tmillions) | 2,312.7 | 2,504.2 | 2,527.0 | 2,472.0 | 2,351.2 |
| Dividends\tpaid\tper\tshare | $0.20 | $0.18 | $0.16 | $0.16 | $0.16 |
| Balance\tSheet |  |  |  |  |  |
| Total\tassets | $34,812 | $38,593 | $35,802 | $30,922 | $31,999 |
| Long-term\tdebt\tand\tredeemable\tpreferred\tsecurities | 3,991 | 2,704 | 3,806 | 4,581 | 6,007 |
| Total\tdebt\tand\tredeemable\tpreferred\tsecurities | 4,323 | 4,397 | 4,254 | 5,298 | 6,876 |
| Total\tstockholders'\tequity | 15,447 | 17,142 | 16,673 | 13,331 | 12,689 |
| Other\tData |  |  |  |  |  |
| Capital\texpenditures | $527 | $649 | $548 | $405 | $309 |
| %\tof\tsales | 1.4% | 1.5% | 1.6% | 1.4% | 1.4% |
| Research\tand\tdevelopment\texpenditures | $4,429 | $4,106 | $3,600 | $3,316 | $2,849 |
| %\tof\tsales | 12.1% | 9.6% | 10.2% | 11.2% | 13.1% |
| Year-end\temployment\t(in\tthousands)* | 66 | 66 | 69 | 68 | 88 |
| * |  |  |  |  |  |

* Employment	decrease	in	2004	primarily	reflects	the	impact	of	the	spin-off	of	Freescale	Semiconductor.

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,	2007.	This	commentary	should	be	read	in	conjunction with	our	consolidated	financial	statements	and	the	notes	thereto	which	appear	beginning	under	"Item	8:	Financial	Statements	and	Supplementary	Data."

# Executive	Overview

# What	businesses	are	we	in?

•	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	2007 were	$19.0	billion,	representing	52%	of	the	Company's	consolidated	net	sales.

•	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	solutions,	broadband	access	infrastructure	systems,	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.	The	segment's	net	sales	in	2007	were	$10.0	billion,	representing	27%	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	for	distributors of	two-way	communication	products,	are	referred	to	as	the	"government	and	public	safety	market"),	as	well	as	retail,	utility,	transportation,	manufacturing,	healthcare	and	other	commercial	customers	(which, collectively,	are	referred	to	as	the	"commercial	enterprise	market").	The	segment's	net	sales	in	2007	were	$7.7	billion,	representing	21%	of	the	Company's	consolidated	net	sales.

# What	were	our	2007	financial	results?

•	Net	Sales	were	$36.6	Billion:		Our	net	sales	were	$36.6	billion	in	2007,	down	15%	compared	to	net	sales	of	$42.8	billion	in	2006.	Net	sales	decreased	33%	in	the	Mobile	Devices	segment,	increased	9%	in	the Home	and	Networks	Mobility	segment	and	increased	43%	in	the	Enterprise	Mobility	Solutions	segment.

•	Loss	from	Continuing	Operations	of	$105	Million,	or	$0.05	per	Share:		We	incurred	a	loss	from	continuing	operations	of	$105	million,	or	$0.05	per	diluted	common	share,	in	2007,	compared	to	earnings from	continuing	operations	of	$3.3	billion,	or	$1.30	per	diluted	common	share,	in	2006.

•	Operating	Cash	Flow	of	$785	Million:		We	generated	operating	cash	flow	of	$785	million	in	2007,	compared	to	operating	cash	flow	of	$3.5	billion	in	2006.

•	171.2	Million	Shares	of	Motorola	Common	Stock	Repurchased	for	$3.0	Billion:		During	2007,	the	Company	repurchased	171.2	million	of	its	common	shares	for	an	aggregate	cost	of	$3.0	billion.	Since	the inception	of	its	first-ever	share	repurchase	program	in	May	2005,	the	Company	has	repurchased	384.6	million	of	its	common	shares	for	an	aggregate	cost	of	$7.7	billion.

# What	were	the	financial	results	for	our	three	operating	business	segments	in	2007?

•	In	Our	Mobile	Devices	Business:		Net	sales	were	$19.0	billion	in	2007,	a	decrease	of	33%	compared	to	net	sales	of	$28.4	billion	in	2006.	The	business	incurred	an	operating	loss	of	$1.2	billion	in	2007, compared	to	operating	earnings	of	$2.7	billion	in	2006.	The	business	had	lower	net	sales	in	all	regions.	The	decrease	in	net	sales	was	primarily	driven	by:	(i)	a	27%	decrease	in	unit	shipments,	(ii)	a	9% decrease	in	average	selling	price	("ASP"),	and	(iii)	decreased	revenue	from	intellectual	property	and	technology	licensing.	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	with	Freescale Semiconductor,	partially	offset	by	savings	from	supply	chain	cost-reduction	initiatives.	Our	global	handset	market	share	for	the	full	year	2007	was	approximately	14%,	a	decrease	of	approximately 8	percentage	points	versus	full	year	2006.

•	In	Our	Home	and	Networks	Mobility	Business:		Net	sales	were	$10.0	billion	in	2007,	an	increase	of	9%	compared	to	net	sales	of	$9.2	billion	in	2006.	Operating	earnings	were	$709	million,	a	decrease	of 10%	compared	to	operating	earnings	of	$787	million	in	2006.	The	business	had	higher	net	sales	in	all	regions.	The	increase	in	net	sales	reflected	higher	net	sales	in	the	home	business,	partially	offset	by	lower net	sales	of	wireless	networks.	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	increased	net	sales	of	digital	entertainment	devices.

•	In	Our	Enterprise	Mobility	Solutions	Business:		Net	sales	were	$7.7	billion	in	2007,	an	increase	of	43%	compared	to	net	sales	of	$5.4	billion	in	2006.	Operating	earnings	were	$1.2	billion,	an	increase	of 27%	compared	to	operating	earnings	of	$958	million	in	2006.	The	increase	in	net	sales	reflects	higher	net	sales	in	all	regions	and	was	primarily	driven	by	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	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,	and	(ii)	the	government	and	public	safety	market,	driven	by	strong	net	sales	in	North	America,	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	of	recently	acquired	businesses.

# What	were	our	major	challenges	and	accomplishments	in	2007?

•	In	Our	Mobile	Devices	Business:		The	Mobile	Devices	business	faced	significant	challenges	in	2007.	While	overall	market	demand	remained	strong	during	the	year,	demand	for	Motorola's	wireless	handsets slowed	substantially.	As	a	result,	Mobile	Devices	net	sales	were	down	33%	compared	to	2006	and	the	business	incurred	an	operating	loss	of	$1.2	billion.

Unit	shipments	in	2007	were	159.1	million,	a	27%	decrease	compared	to	unit	shipments	of	217.4	million	in	2006.	The	decrease	in	unit	shipments	resulted	primarily	from	gaps	in	the	segment's	product portfolio,	including	limited	offerings	of	3G	products	and	products	for	the	Multimedia	and	Mass	Market	product	segments,	as	well	as	an	aging	product	portfolio.	As	a	result,	Motorola	believes	it	lost 8	percentage	points	of	market	share	and	estimates	its	global	market	share	to	be	approximately	14%	for	the	full	year	2007.

During	2007,	the	Mobile	Devices	business	launched	41	new	phones,	including	several	devices	based	on	its	newer	open	software	platforms.	New	devices	included:	the	RAZR2	Feature	Phone	for	GSM, CDMA	and	UMTS	technologies;	the	ROKR	Z6	family	of	music	devices;	the	GSM	Q8	and	UMTS	Q9h,	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.

Progress	was	made	on	key	initiatives	to	implement	a	multi-vendor	silicon	strategy	and	utilize	improved	software	platforms.	The	business	will	use	multiple	silicon	providers	to	aid	in	faster	time	to	market and	reduce	costs.	As	an	example,	in	2007	the	Mobile	Devices	business	named	Texas	Instruments	as	one	of	its	silicon	suppliers	for	future	UMTS	devices.	The	business	also	continued	its	efforts	to	streamline and	improve	its	software	platforms,	including	rationalizing	its	R&D	expenditures	on	legacy	platforms	and	acquiring	a	50%	stake	in	UIQ	Technology	AB	("UIQ").	This	investment	will	strengthen	UIQ	as	an open	application	delivery	platform	for	multimedia	devices.	MOTO	DEV	Studio,	which	includes	multi-platform	tools	aimed	at	developers,	was	launched	to	enhance	the	ecosystem	around	its	Linux	wireless platform,	MOTOMAGX.

The	business	implemented	improved	processes	and	discipline	around	product	pricing,	rationalized	elements	of	its	distribution	network,	reduced	channel	inventory	and	improved	its	cash	conversion cycle	in	the	second	half	of	2007	as	compared	to	the	first	half	of	2007.

•	In	Our	Home	and	Networks	Mobility	Business:		The	Home	and	Networks	Mobility	business	remained	the	world's	leading	provider	of	digital	entertainment	devices.	Motorola	shipped	over	15	million	digital entertainment	devices	during	the	year,	with	nearly	one-third	of	these	shipments	being	HD/DVR	capable.	In	2007,	Motorola	shipped	over	11	million	modems	and	achieved	the	milestone	of	shipping	its 50	millionth	cable/voice	modem.	Sales	in	the	home	business	grew	by	27%	in	the	year,	and	included	significant	business	growth	outside	of	the	United	States.

The	business	expanded	its	core	portfolio	by	completing	five	significant	acquisitions,	including:	(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	solutions	to networks	operators.	With	these	acquisitions,	Motorola	improved	its	position	with	global	operators	by	enhancing	its	capabilities	in	end-to-end	video	solutions.

Motorola	also	continued	its	investments	in	and	focus	on	WiMAX,	a	next-generation	wireless	broadband	technology	based	on	the	IEEE	standard	802.16e.	At	the	end	of	2007,	the	business	had	won several	commercial	WiMAX	contracts	and	was	participating	in	over	40	WiMAX	trials	globally.

The	business	also	had	challenges	during	the	year,	as	the	GSM	infrastructure	market	faced	continuing	pricing	pressures	and	sales	of	iDEN	infrastructure	declined	compared	to	2006.	Despite	these	and other	challenges	facing	the	wireless	infrastructure	industry,	the	wireless	networks	business	remained	profitable.	Finally,	the	business	concluded	the	sale	of	its	embedded	communications	computing	business to	Emerson	for	$346	million,	reflecting	its	continuing	efforts	to	focus	on	its	core	businesses.

•	In	our	Enterprise	Mobility	Solutions	Business:		In	2007,	the	Enterprise	Mobility	Solutions	business	delivered	solid	results	in	a	number	of	markets,	largely	due	to	the	acquisition	of	Symbol	Technologies,	Inc. in	January	2007,	and	strong	government	and	public	safety	sales	in	North	America.	The	business	continued	to	maintain	a	leading	market	share	position	in	a	highly	competitive	market	and	also	showed	strong growth	outside	of	the	United	States.

Within	the	government	and	public	safety	business,	sales	continued	to	grow	worldwide	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	and	other	data-based	products.	In	addition	to	its	continued	success	in	the	United	States,	our largest	market,	the	business	was	awarded	several	international	contracts	for	significant	country-wide	system	solutions,	specifically	in	Europe.	The	new	MOTOTRBO	product	line	was	also	successfully launched	and	received	very	positive	customer	acceptance	in	all	geographies.

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	put	it	in	a strong	position	in	the	commercial	enterprise	marketplace	for	the	future.	The	enhanced	mobile	computing	offerings	included	the	MC70	and	the	rugged	MC9090	product	lines	which	had	very	successful	product launches	and	were	well	received	in	all	regions.

# Looking	Forward

The	boundaries	between	the	home,	work	and	mobility	continue	to	dissolve.	We	believe	our	focus	on	designing	and	delivering	differentiated	products,	unique	experiences	and	powerful	networks,	along	with	a	full compliment	of	support	services,	will	enable	consumers	to	have	a	broader	choice	of	when,	where	and	how	they	connect	to	the	people,	information,	and	entertainment	that	they	want	and	need.	Vast	segments	of	the world's	population,	many	of	whom	have	yet	to	experience	wireless	communications	or	connect	to	the	Internet,	present	new	opportunities	to	extend	our	brand	and	market	our	products	and	services.

With	a	renewed	emphasis	on	efficiency	and	time-to-market,	we	are	investing	in	the	future	of	our	businesses.	Our	research	and	development	investment	priorities	include:	next-generation	wireless	products, applications,	and	services	for	enterprise	markets;	advanced	technologies	and	applications	for	government	and	public	safety	markets;	and	next-generation	wireless	handsets	with	application	services.	These	investments, together	with	the	acquisitions	of	the	past	few	years,	are	designed	to	foster	continued	innovation	and	profitable	growth.

In	2007,	our	Home	and	Networks	Mobility	and	Enterprise	Mobility	Solutions	businesses	delivered	solid	results	and	finished	with	strong	momentum.	However,	our	Mobile	Devices	business	faced	significant challenges	in	2007.	We	remain	committed	to	executing	on	our	strategic	plans	and	pursuing	opportunities	for	profitability	improvement	across	all	of	our	businesses	with	continued	dedication	to	our	customers,	quality	and innovation.

In	our	Mobile	Devices	business,	the	overall	global	market	remains	strong	and	the	environment	remains	intensely	competitive.	Our	primary	focus	is	on	driving	a	meaningful	enhancement	of	our	product	portfolio. To	this	end,	we	are	optimizing	our	use	of	silicon	providers	and	improving	our	software	platforms	to	ensure	that	we	can	deliver	the	most	desirable	set	of	experiences	to	wireless	handset	consumers.	Our	portfolio enhancement	objectives	include	a	broad	array	of	cost-effective	products	at	multiple	price	points	in	each	of	our	four	product	segments:	Mass	Market,	Feature,	Multimedia	and	Productivity.	We	expect	our	products	to continue	to	demonstrate	unique	design	and	innovative	features	and	function	around	experiences	including,	for	example,	messaging,	music,	imaging,	video,	audio	and	touch.	We	expect	the	transition	to	having	more devices	featuring	improved	software	platforms	and	silicon	designs	will	show	progress	by	the	end	of	this	year	and	continue	in	2009.	In	applications	and	services,	we	continue	to	work	with	third	parties	to	develop	an ecosystem	and	service	delivery	platform	that	will	deliver	rich	experiences	to	consumers.	In	addition	to	our	efforts	to	dramatically	improve	the	portfolio,	we	are	pursuing	cost-reduction	initiatives	to	ensure	that	we	have the	optimal	cost	structure	for	the	business	going	forward.	We	are	also	evaluating	the	structural	and	strategic	realignment	of	our	business	to	better	equip	the	Mobile	Devices	business	to	recapture	global	market	leadership and	enhance	shareholder	value.

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	leverage	our	market	leading	position	in	digital	entertainment	devices.	In	addition,	numerous	recent	acquisitions	have	expanded	our	leadership	position	in	broadband	products	and services	for	video,	voice	and	data.	These	acquisitions	enable	us	to	continue	capitalizing	on	strong	underlying	demand	for	high	definition	and	video-on-demand	services,	as	well	as	the	convergence	of	services	and applications	across	delivery	platforms.	We	will	continue	to	make	investments	to	position	ourselves	as	a	leading	infrastructure	provider	of	next-generation	wireless	technologies.	We	expect	the	WiMAX	market	to	begin	to materialize	in	2008	as	the	first	networks	are	commercialized.	More	significant	sales	opportunities	for	WiMAX	are	anticipated	beyond	2008.	For	our	wireless	networks	business,	we	expect	the	environment	to	remain highly	competitive	and	challenging.	By	continuing	to	deliver	end-to-end	solutions	that	enable	delivery	of	next-generation	products	and	services	and	allocating	resources	to	investment	priorities,	our	Home	and	Networks Mobility	segment	is	poised	to	grow	profitably	in	emerging	technologies,	including	video	and	wireless	broadband,	and	maintain	profitability	in	mature	technologies.

In	our	Enterprise	Mobility	Solutions	business,	our	key	objective	is	profitable	growth	in	enterprise	markets	around	the	world.	We	will	leverage	our	leadership	position	in	mission-critical	communications	solutions and	develop	next-generation	products	and	solutions	for	our	government	and	public	safety	customers	around	the	world.	Anchored	by	the	2007	acquisition	of	Symbol	Technologies,	Inc.,	we	have	a	very	strong	presence	in the	commercial	enterprise	market,	including	retail,	transportation,	utility,	manufacturing,	healthcare	and	other	commercial	customers.	Our	business-critical	products	and	solutions	allow	our	customers	to	reduce	cost, increase	worker	mobility	and	productivity,	and	enhance	their	customers'	experiences.	We	believe	that	our	comprehensive	portfolio	of	enterprise	products	and	solutions,	leadership	positions	in	government	and	public safety	and	commercial	enterprise	markets,	global	network	of	channel	partners,	and	distributors	and	solid	market	growth	make	our	Enterprise	Mobility	Solutions	segment	well	positioned	for	continued	success.

Although	the	Company	implemented	a	number	of	actions	last	year	to	reduce	cost,	including	workforce	reductions,	prioritization	of	investments,	spending	controls,	reduced	general	and	administrative	expenses	and site	rationalization,	further	cost	savings	actions	are	necessary	to	improve	profitability.	The	Company	has	determined	that	additional	cost-reduction	actions	will	be	taken	in	certain	areas,	including	the	Mobile	Devices business	and	across	various	corporate	general	and	administrative	functions.

The	improvement	in	cash	conversion	cycle	continues	to	be	a	major	focus	of	the	company.	Building	upon	the	improvements	made	during	2007,	we	believe	we	can	further	reduce	the	company's	cash	conversion cycle	in	2008,	resulting	in	improved	cash	flow	from	operations.

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.	And	as	we	enter	2008,	we	face	a	very dynamic	economic	environment.	Meeting	all	of	these	challenges	requires	consistent	operational	planning	and	execution	and	investment	in	technology,	resulting	in	innovative	products	that	meet	the	expanding	needs	of our	customers	around	the	world.	As	we	execute	on	meeting	these	objectives,	our	overall	strategy	remains	unchanged	—	to	focus	our	efforts	on	the	convergence	of	fixed	and	wireless	broadband	internet	and	growing demand	for	next	generation	wireless	communications	solutions	by	people,	businesses	and	governments.	We	will	continue	to	take	the	necessary	strategic	actions	to	enable	these	efforts,	to	provide	for	growth	and	improved profitability	and	position	Motorola	for	future	success.

# Results	of	Operations

# Results	of	Operations—2007	Compared	to	2006

# Net	Sales

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	reflects	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	average	selling	price	("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

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	with	Freescale Semiconductor,	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.	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	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.

# Research	and	Development	Expenditures

Research	and	development	("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.	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	(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.	The	net reorganization	of	business	charges	are	discussed	in	further	detail	in	the	"Reorganization	of	Businesses"	section.

# Net	Interest	Income

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

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	reflects	a	gain	of	$34	million	from	the	sale	of	the	Company's embedded	communications	computing	business.	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").

# Other

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	$62	million	of	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.

# Effective	Tax	Rate

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	valuation	allowances,	(ii)	incremental	tax	benefits	related	to	2005

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.	In	2008,	the	Company	currently	expects	the	effective	tax	rate	for	continuing	operations,	excluding	items	of	the	type	identified	above,	to	be	approximately	35%.

# 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).

Net	sales	were	$42.8	billion	in	2006,	up	21%	compared	to	net	sales	of	$35.3	billion	in	2005.	The	increase	in	net	sales	included:	(i)	a	$6.9	billion	increase	in	net	sales	by	the	Mobile	Devices	segment	driven	by	a 49%	increase	in	unit	shipments,	reflecting	strong	demand	for	GSM	and	CDMA	handsets,	partially	offset	by	an	11%	decline	in	average	selling	price	("ASP"),	(ii)	a	$362	million	increase	in	net	sales	by	the	Enterprise Mobility	Solutions	segment,	primarily	due	to	higher	net	sales	in	the	government	and	public	safety	market,	and	(iii)	a	$127	million	increase	in	net	sales	by	the	Home	and	Networks	Mobility	segment,	primarily	driven	by	a 57%	increase	in	unit	shipments	of	digital	entertainment	devices,	partially	offset	by	lower	net	sales	of	wireless	networks.

Gross	margin	was	$12.7	billion,	or	29.7%	of	net	sales,	in	2006,	compared	to	$11.4	billion,	or	32.4%	of	net	sales,	in	2005.	This	increase	in	gross	margin	was	primarily	driven	by	the	Mobile	Devices	segment,	due to:	(i)	the	49%	increase	in	unit	shipments,	(ii)	savings	from	supply	chain	cost-reduction	initiatives,	and	(iii)	increased	income	from	intellectual	property	and	technology	licensing,	partially	offset	by	an	11%	decline	in ASP.	The	Enterprise	Mobility	Solutions	segment	also	achieved	higher	gross	margin	in	2006	compared	to	2005,	primarily	driven	by	a	7%	increase	in	net	sales.	The	Home	and	Networks	Mobility	Solutions	segment	had lower	gross	margin	in	2006	compared	to	2005,	primarily	due	to	an	unfavorable	product/regional	mix	and	competitive	pricing	in	the	wireless	networks	market,	partially	offset	by	higher	gross	margin	in	the	home business.

Gross	margin	as	a	percentage	of	net	sales	decreased	in	2006	compared	to	2005,	driven	by	decreases	in	the	Mobile	Devices	and	Home	and	Networks	Mobility	segments,	partially	offset	by	an	increase	in	the Enterprise	Mobility	Solutions	segment.	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.	The	decrease	in	overall gross	margin	as	a	percentage	of	net	sales	in	2006	compared	to	2005	can	be	partially	attributed	to	the	fact	that	an	increased	percentage	of	the	Company's	net	sales	were	generated	by	the	Mobile	Devices	segment	in	2006, which	generates	lower	gross	margins	than	the	overall	Company	average.

SG&A	expenses	increased	24%	to	$4.5	billion,	or	10.5%	of	net	sales,	in	2006,	compared	to	$3.6	billion,	or	10.3%	of	net	sales,	in	2005.	The	increase	in	SG&A	expenses	was	primarily	driven	by:	(i)	increased marketing	expenses,	mainly	in	the	Mobile	Devices	segment,	to	support	higher	net	sales	and	promote	brand	awareness,	(ii)	recognition	of	share-based	compensation	expense	to	SG&A-related	employees	in	connection with	the	adoption	of	SFAS	123R,	and	(iii)	increased	selling	and	sales	support	expenses,	driven	by	the	increase	in	sales	commissions	from	the	increase	in	net	sales.	SG&A	expenses	as	a	percentage	of	net	sales	were	up slightly	in	2006	compared	to	2005,	driven	by	an	increase	in	the	Mobile	Devices	segment,	offset	by	decreases	in	the	Enterprise	Mobility	Solutions	and	Home	and	Networks	Mobility	segments.

R&D	expenditures	increased	14%	to	$4.1	billion,	or	9.5%	of	net	sales,	in	2006,	compared	to	$3.6	billion,	or	10.2%	of	net	sales,	in	2005.	The	increase	in	R&D	expenditures	was	primarily	driven	by: (i)	developmental	engineering	expenditures	for	new	product	development	and	investment	in	next-generation	technologies,	mainly	in	the	Mobile	Devices	and	Enterprise	Mobility	Solutions	segments,	and	(ii)	recognition of	share-based	compensation	expense	to	R&D-related	employees	in	connection	with	the	adoption	of	SFAS	123R.	R&D	expenditures	as	a	percentage	of	net	sales	decreased	in	2006	compared	to	2005,	driven	by	decreases in	the	Mobile	Devices	and	Home	and	Networks	Mobility	segments,	offset	by	an	increase	in	the	Enterprise	Mobility	Solutions	segment.

The	Company	recorded	charges	of	$25	million	in	Other	charges	(income)	in	2006,	compared	to	income	of	$404	million	in	2005.	The	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 charges	for	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.	The net	income	in	2005	primarily	consisted	of	$515	million	of	income	for	payments	relating	to	the	Telsim	collection	settlement,	partially	offset	by:	(i)	$67	million	of	charges	relating	to	the	amortization	of	intangibles,	and (ii)	$54	million	of	net	reorganization	of	business	charges.	The	net	reorganization	of	businesses	charges	are	discussed	in	further	detail	in	the	"Reorganization	of	Businesses"	section.

Net	interest	income	was	$326	million	in	2006,	compared	to	net	interest	income	of	$71	million	in	2005.	Net	interest	income	in	2006	included	interest	income	of	$661	million,	partially	offset	by	interest	expense	of $335	million.	Net	interest	income	in	2005	included	interest	income	of	$396	million,	partially	offset	by	interest	expense	of	$325	million.	The	increase	in	net	interest	income	was	primarily	attributed	to	an	increase	in interest	income	due	to	higher	average	cash,	cash	equivalents	and	Sigma	Fund	balances	earning	interest	at	higher	rates.

Gains	on	sales	of	investments	and	businesses	were	$41	million	in	2006,	compared	to	$1.8	billion	in	2005.	In	2006,	the	$41	million	of	net	gains	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").	In	2005,	the	net	gains	were primarily	related	to:	(i)	a	$1.3	billion	net	gain	recognized	in	connection	with	the	completion	of	the	merger	between	Sprint	Corporation	("Sprint")	and	Nextel	Communications,	Inc.	("Nextel"),	and	(ii)	a	$609	million	net gain	on	the	sale	of	a	portion	of	the	Company's	shares	of	Nextel,	partially	offset	by	a	$70	million	net	loss	on	the	sale	of	a	portion	of	the	Company's	shares	of	Sprint	Nextel.

Income	classified	as	Other,	as	presented	in	Other	income	(expense),	was	$151	million	in	2006,	compared	to	net	charges	of	$109	million	in	2005.	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.	In	2005,	the	net	charges	were	primarily	comprised	of: (i)	$137	million	of	debt	retirement	costs,	relating	to	the	Company's	repurchase	of	an	aggregate	principal	amount	of	$1.0	billion	of	long-term	debt	through	cash	tender	offers,	(ii)	$38	million	of	foreign	currency	losses, and	(iii)	$25	million	in	investment	impairment	charges,	partially	offset	by:	(i)	a	$51	million	gain	due	to	an	increase	in	the	market	value	of	variable	forward	instruments	entered	into	to	protect	the	value	of	the	Company's investment	in	Nextel	common	stock	prior	to	the	merger	of	Sprint	and	Nextel,	and	(ii)	$30	million	in	income	from	the	repayment	of	a	previously-reserved	loan	related	to	Iridium.

The	Company	recorded	$1.3	billion	of	net	tax	expense	in	2006,	compared	to	$1.9	billion	of	net	tax	expense	in	2005.	During	2006,	the	Company	recorded	$348	million	of	net	tax	benefits	relating	to:	(i)	the reduction	of	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%.

During	2005,	the	tax	rate	reflected	a	$265	million	net	tax	benefit	related	to	the	repatriation	of	foreign	earnings	under	the	provisions	of	the	American	Jobs	Creation	Act	of	2004	and	an	$81	million	net	tax	benefit	on the	stock	sale	of	a	sensor	business	that	was	divested	in	2005.

# Earnings	from	Continuing	Operations

The	Company	had	earnings	from	continuing	operations	before	income	taxes	of	$4.6	billion	in	2006,	compared	to	earnings	from	continuing	operations	before	income	taxes	of	$6.4	billion	in	2005.	After	taxes,	the Company	had	earnings	from	continuing	operations	of	$3.3	billion,	or	$1.30	per	diluted	share,	in	2006,	compared	with	earnings	from	continuing	operations	of	$4.5	billion,	or	$1.79	per	diluted	share,	in	2005.

The	decrease	in	earnings	from	continuing	operations	before	income	taxes	in	2006	compared	to	2005	is	primarily	attributed	to:	(i)	a	$1.8	billion	decrease	in	gains	on	the	sale	of	investments	and	businesses,	(ii)	an $876	million	increase	in	SG&A	expenses,	(iii)	a	$506	million	increase	in	R&D	expenditures,	and	(iv)	a	$429	million	change	in	Other	charges	(income).	These	negative	impacts	on	operating	earnings	were	partially	offset by:	(i)	a	$1.3	billion	increase	in	gross	margin,	primarily	due	to	the	$7.5	billion	increase	in	net	sales,	(ii)	a	$260	million	increase	in	income	classified	as	Other,	as	presented	in	Other	income	(expense),	and	(iii)	a $255	million	increase	in	net	interest	income.

# 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.	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	primarily	consist	of	future	minimum	lease	payments	on	vacated	facilities.	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	realized	cost-saving	benefits	of	approximately	$165	million	in	2007	from	the	plans	that	were	initiated	during	2007,	representing:	(i)	$93	million	of	savings	in	R&D	expenditures,	(ii)	$46	million	of savings	in	SG&A	expenses,	and	(iii)	$26	million	of	savings	in	Costs	of	sales.	Beyond	2007,	the	Company	expects	the	reorganization	plans	initiated	during	2007	to	provide	annualized	cost	savings	of	approximately	$548 million,

representing:	(i)	$251	million	of	savings	in	R&D	expenditures,	(ii)	$167	million	of	savings	in	SG&A	expenses,	and	(iii)	$130	million	of	savings	in	Cost	of	sales.

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,	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.

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

The	following	table	displays	a	rollforward	of	the	reorganization	of	businesses	accruals	established	for	exit	costs	and	employee	separation	costs	from	January	1,	2007	to	December	31,	2007:

|  | 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—lease\tterminations | $54 | $19 | $2 | $(33) | $42 |
| Employee\tseparation\tcosts | 104 | 401 | (64) | (248) | 193 |
|  | $158 | $420 | $(62) | $(281) | $235 |

(1) Includes	translation	adjustments.

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

# Exit	Costs—Lease	Terminations

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	is	included	in	Accrued	liabilities	in	the	Company's	consolidated	balance	sheets	at	December	31,	2007,	represents	future cash	payments	for	lease	termination	obligations.

# Employee	Separation	Costs

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,	which	is	included	in	Accrued	liabilities	in	the	Company's	consolidated	balance	sheets	at	December	31,	2007,	is	expected	to	be	paid	to approximately	2,800	employees	to	be	separated	in	2008.

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.	Total	employees	impacted	by	the	actions	committed	to	in	2006	were	3,900.

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—lease\tterminations | $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	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	is	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.

During	2005,	the	Company	recorded	net	reorganization	of	business	charges	of	$91	million,	including	$37	million	of	charges	in	Costs	of	sales	and	$54	million	of	charges	under	Other	charges	in	the	Company's consolidated	statements	of	operations.	Included	in	the	aggregate	$91	million	are	charges	of	$86	million	for	employee	separation	costs	and	$15	million	for	fixed	asset	impairment	charges	and	$5	million	for	exit	costs, partially	offset	by	$15	million	of	reversals	for	accruals	no	longer	needed.	Total	employees	impacted	by	these	action	were	approximately	2,600.

|  | Accruals	at<br>January	1,<br>2005 | 2005<br>Additional<br>Charges | 2005(1)<br>Adjustments | 2005<br>Amount<br>Used | Accruals	at<br>December	31,<br>2005 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Exit\tcosts—lease\tterminations | $73 | $5 | $(7) | $(21) | $50 |
| Employee\tseparation\tcosts | 41 | 86 | (14) | (60) | 53 |
|  | $114 | $91 | $(21) | $(81) | $103 |

At	January	1,	2005,	the	Company	had	an	accrual	of	$73	million	for	exit	costs	attributable	to	lease	terminations.	The	2005	additional	charges	of	$5	million	were	primarily	related	to	a	lease	cancellation	by	the Enterprise	Mobility	Solutions	segment.	The	2005	adjustments	of	$7	million	represented	reversals	of	$1	million	for	accruals	no	longer	needed	and	$6	million	of	translation	adjustments.	The	$21	million	used	in	2005 reflected	cash	payments	to	lessors.	The	remaining	accrual	of	$50	million,	which	was	included	in	Accrued	liabilities	in	the	Company's	consolidated	balance	sheets	at	December	31,	2005,	represented	future	cash	payments for	lease	termination	obligations.

At	January	1,	2005,	the	Company	had	an	accrual	of	$41	million	for	employee	separation	costs,	representing	the	severance	costs	for	approximately	400	employees,	of	which	50	were	direct	employees	and	350	were indirect	employees.	The	2005	additional	charges	of	$86	million	represented	the	severance	costs	for	approximately	2,600	employees,	of	which	1,300	were	direct	employees	and	1,300	were	indirect	employees.	The adjustments	of	$14	million	represented	reversals	of	accruals	no	longer	needed.

During	2005,	approximately	1,400	employees,	of	which	300	were	direct	employees	and	1,100	were	indirect	employees,	were	separated	from	the	Company.	The	$60	million	used	in	2005	reflected	cash	payments	to these	separated	employees.	The	remaining	accrual	of	$53	million	was	included	in	Accrued	liabilities	in	the	Company's	consolidated	balance	sheets	at	December	31,	2005.

# 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

During	2007,	the	Company's	cash	and	cash	equivalents	(which	are	highly-liquid	investments	with	an	original	maturity	of	three	months	or	less)	decreased	by	$64	million	to	$2.8	billion	at	December	31,	2007, compared	to	$2.8	billion	at	December	31,	2006.	At	December	31,	2007,	$230	million	of	this	amount	was	held	in	the	U.S.	and	$2.5	billion	was	held	by	the	Company	or	its	subsidiaries	in	other	countries.	Repatriation	of some	of	these	funds	could	be	subject	to	delay	and	could	have	potential	adverse	tax	consequences.	At	December	31,	2007,	restricted	cash	was	$158	million,	compared	to	$131	million	of	December	31,	2006.

The	Company	has	approximately	$2.7	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.	The	repatriation	of	some	of	these	funds	could	also	be	subject	to	delay	for	local country	approvals.

# Operating	Activities

The	Company	has	generated	positive	cash	flow	from	continuing	operations	in	each	of	the	last	seven	years.	The	cash	provided	by	operating	activities	from	continuing	operations	in	2007	was	$785	million, compared	to	$3.5	billion	in	2006,	and	$4.3	billion	in	2005.	The	primary	contributors	to	cash	flow	from	operations	in	2007	were:	(i)	a	$2.5	billion	decrease	in	accounts	receivable,	(ii)	a	$556	million	decrease	in inventories,	(iii)	earnings	from	continuing	operations	(adjusted	for	non-cash	items)	of	$529	million,	and	(iv)	a	$170	million	cash	inflow	due	to	changes	in	other	assets	and	liabilities.	These	positive	contributors	to operating	cash	flow	were	partially	offset	by:	(i)	a	$2.3	billion	decrease	in	accounts	payable	and	accrued	liabilities,	and	(ii)	a	$705	million	increase	in	other	current	assets.

Accounts	Receivable:		The	Company's	net	accounts	receivable	were	$5.3	billion	at	December	31,	2007,	compared	to	$7.5	billion	at	December	31,	2006.	The	Company's	days	sales	outstanding	("DSO"),	including net	long-term	receivables,	were	50	days	at	December	31,	2007,	compared	to	58	days	at	December	31,	2006.	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	and	DSO	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	and	DSO	can	be impacted	by	the	timing	and	amount	of	such	sales,	which	can	vary	by	period	and	can	be	impacted	by	numerous	factors.

Inventory:		The	Company's	net	inventory	was	$2.8	billion	at	December	31,	2007,	compared	to	$3.2	billion	at	December	31,	2006.	The	Company's	inventory	turns	decreased	to	10.0	at	December	31,	2007, compared	to	11.0	at	December	31,	2006,	primarily	due	to	lower	than	expected	sales	volumes	in	the	Mobile	Devices	business.	Inventory	turns	were	calculated	using	an	annualized	rolling	three	months	of	cost	of	sales method.	The	Company's	days	sales	in	inventory	("DSI")	was	36	days	at	December	31,	2007,	compared	to	32	days	at	December	31,	2006.	DSI	is	calculated	by	dividing	net	inventory	by	the	average	daily	cost	of	sales. 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 obsolescence	due	to	rapidly	changing	technology	and	customer	spending	requirements.

Accounts	Payable:		The	Company's	net	accounts	payable	were	$4.2	billion	at	December	31,	2007,	compared	to	$5.1	billion	at	December	31,	2006.	The	Company's	days	payable	outstanding	("DPO")	were 53	days	at	December	31,	2007,	compared	to	52	days	at	December	31,	2006.	DPO	is	calculated	by	dividing	accounts	payable	by	the	average	daily	cost	of	sales.	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	and	DPO	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.

Cash	Conversion	Cycle:		The	Company's	cash	conversion	cycle	("CCC")	was	33	days	at	December	31,	2007,	compared	to	38	days	at	December	31,	2006.	CCC	is	calculated	by	adding	DSO	and	DSI	and subtracting	DPO.	The	decrease	in	CCC	at	December	31,	2007,	compared	to	December	31,	2006,	was	driven	by	lower	CCC	in	the	Home	and	Networks	Mobility	and	Enterprise	Mobility	Solutions	segments.

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 $281	million	in	2007,	as	compared	to	$143	million	in	2006.	Of	the	$235	million	reorganization	of	businesses	accrual	at	December	31,	2007,	$193	million	relates	to	employee	separation	costs	and	is	expected	to	be	paid in	2008.	The	remaining	$42	million	in	accruals	relate	to	lease	termination	obligations	that	are	expected	to	be	paid	over	a	number	of	years.

Defined	Benefit	Plan	Contributions:		The	Company	contributed	$274	million	to	its	U.S.	pension	plans	during	2007,	compared	to	$276	million	contributed	in	2006.	The	Company	contributed	$135	million	to	its non-U.S.	pension	plans	during	2007,	compared	to	$122	million	contributed	in	2006.	During	2008,	the	Company	expects	to	make	cash	contributions	of	approximately	$240	million	to	its	U.S.	pension	plans	and approximately	$50	million	to	its	non-U.S.	pension	plans.	The	Company	contributed	$15	million	to	its	retiree	health	care	plan	in	2007,	compared	to	$27	million	in	2006,	and	expects	to	contribute	approximately $20	million	to	this	plan	in	2008.	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	include:	(i)	proceeds	from	sales	of	Sigma	Fund	investments,	(ii)	strategic	acquisitions	of,	or	investments	in,	other	companies,	(iii)	capital expenditures,	and	(iv)	proceeds	from	sales	of	investments	and	businesses.

Net	cash	provided	by	investing	activities	from	continuing	operations	was	$2.4	billion	in	2007,	compared	to	net	cash	used	of	$1.4	billion	in	2006	and	net	cash	used	of	$2.4	billion	in	2005.	This	$3.8	billion	increase in	cash	provided	by	investing	activities	from	continuing	operations	was	due	to:	(i)	an	$8.2	billion	increase	in	proceeds	from	sales	of	Sigma	Fund	investments,	(ii)	a	$484	million	increase	in	proceeds	from	sales	of	short- term	investments,	(iii)	a	$122	million	decrease	in	capital	expenditures,	and	(iv)	an	$81	million	increase	in	proceeds	received	from	the	disposition	of	property,	plant	and	equipment,	partially	offset	by:	(i)	a	$3.5	billion increase	in	cash	used	for	acquisitions	and	investments,	and	(ii)	a	$1.6	billion	decrease	in	proceeds	from	sales	of	investments	and	businesses.	The	$2.4	billion	in	cash	used	for	investing	activities	from	continuing operations	in	2005	was	primarily	due	to	the	$3.2	billion	of	net	cash	used	for	purchase	of	Sigma	Fund	investments,	partially	offset	by	$1.5	billion	in	proceeds	from	sale	of	investments	and	businesses.

Sigma	Fund:		The	Company	and	its	wholly-owned	subsidiaries	invest	most	of	their	excess	cash	in	a	fund	(the	"Sigma	Fund")	that	is	similar	to	a	money	market	fund.	During	2007,	the	Company	liquidated	a	similar second	fund	and	now	maintains	only	one	fund.	The	Company	received	$6.9	billion	in	net	proceeds	from	sales	of	Sigma	Fund	investments	in	2007,	compared	to	$1.3	billion	in	net	cash	used	to	purchase	Sigma	Fund investments	in	2006.	The	Sigma	Fund	aggregate	balances	were	$5.2	billion	at	December	31,	2007,	compared	to	$12.2	billion	at	December	31,	2006.	At	December	31,	2007,	$1.7	billion	of	the	Sigma	Fund	investments were	held	in	the	U.S.	and	$3.5	billion	were	held	by	the	Company	or	its	subsidiaries	in	other	countries.	Repatriation	of	some	of	these	funds	could	be	subject	to	delay	and	could	have	potential	adverse	tax	consequences.

The	Sigma	Fund	portfolio	is	managed	by	four	major	independent	investment	management	firms.	Investments	are	made	in	high-quality,	investment	grade	(rated	at	least	A/A-1	by	S&P	or	A2/P-1	by	Moody's	at purchase	date),	U.S.	dollar-denominated	debt	obligations	including	certificates	of	deposit,	commercial	paper,	government	bonds,	corporate	bonds	and	asset-	and	mortgage-backed	securities.	The	Sigma	Fund's	investment policies	require	that	floating	rate	instruments	must	have	a	maturity,	at	purchase	date,	that	does	not	exceed	thirty-six	months	with	an

interest	rate	reset	at	least	annually.	The	average	reset	maturity	of	the	investments	held	by	the	funds	must	be	120	days	or	less	with	the	actual	average	reset	maturity	of	the	investments	being	40	days	and	53	days	at December	31,	2007	and	2006,	respectively.

During	2007,	the	Company	recorded	a	$75	million	reduction	in	the	available-for-sale	securities	held	in	the	Sigma	Fund,	reflecting	a	decline	in	the	fair	value	of	the	securities.	As	of	December	31,	2007,	$57	million of	this	reduction	represents	a	broad-based	temporary	decline	in	market	value	of	various	securities	primarily	due	to	credit	spreads	widening	in	several	debt	market	segments,	with	the	offsetting	reduction	reflected	in	Non- owners	changes	to	equity.	The	Company	believes	credit	market	spreads	will	return	to	normal	levels	in	the	future.	Additionally,	due	to	the	high	credit	ratings	of	the	underlying	securities,	it	is	probable	that	the	Company will	be	able	to	collect	all	amounts	according	to	the	contractual	terms	of	the	corporate	bonds	where	fair	values	are	less	than	their	cost	as	of	December	31,	2007.	It	is	for	these	reasons	that	the	unrealized	losses	on	these corporate	bonds	are	considered	temporary.	If	it	becomes	probable	that	the	Company	will	not	collect	all	amounts	in	accordance	with	the	contractual	terms	of	a	corporate	bond,	the	Company	considers	the	decline	other- than-temporary.	The	remaining	$18	million	reduction	in	available-for-sale	securities	held	by	the	Sigma	Fund	represents	an	other-than-temporary	decline	and	has	been	reflected	as	an	investment	impairment.

Strategic	Acquisitions	and	Investments:		The	Company	used	net	cash	for	acquisitions	and	new	investment	activities	of	$4.6	billion	in	2007,	compared	to	net	cash	used	of	$1.1	billion	in	2006	and	net	cash	used	of $312	million	in	2005.	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	Netopia,	Inc.	(part	of	the	Home	and	Networks	Mobility	segment), (iv)	$137	million	for	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).	The	largest	components of	the	$1.1	billion	in	2006	expenditures	were:	(i)	$300	million	for	an	equity	investment	in	Clearwire,	Inc.,	(ii)	$193	million	for	the	acquisition	of	TTP	Communications	plc	(part	of	the	Mobile	Devices	segment), (iii)	$181	million	for	the	acquisition	of	Broadbus	Technologies,	Inc.	(part	of	the	Home	and	Networks	Mobility	segment),	(iv)	$108	million	for	the	acquisition	of	Kreatel	Communications	AB	(part	of	the	Home	and Networks	Mobility	segment),	(v)	the	acquisition	of	Orthogon	Systems	(part	of	the	Enterprise	Mobility	Solutions	segment),	and	(vi)	the	acquisition	of	NextNet	Wireless,	Inc.	(part	of	the	Home	and	Networks	Mobility segment).

Capital	Expenditures:		Capital	expenditures	were	$527	million	in	2007,	compared	to	$649	million	in	2006	and	$548	million	in	2005.	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	$411	million	in	proceeds	from	the	sales	of	investments	and	businesses	in	2007,	compared	to	proceeds	of	$2.0	billion	in	2006	and	$1.5	billion	in	2005. The	$411	million	in	proceeds	in	2007	were	primarily	comprised	of	$346	million	from	the	sale	of	the	Company's	embedded	communications	computing	business.	The	$2.0	billion	in	proceeds	in	2006	were	primarily comprised	of:	(i)	$856	million	in	net	proceeds	from	the	sale	of	the	automotive	electronics	business,	(ii)	$820	million	from	the	sale	of	the	Company's	remaining	shares	in	Sprint	Nextel	Corporation	("Sprint	Nextel")	and the	termination	and	cash	settlement	of	a	zero-cost	collar	derivative	relating	to	these	Sprint	Nextel	shares,	and	(iii)	$175	million	from	the	sale	of	the	Company's	remaining	shares	in	Telus	Corporation.

Short-Term	Investments:		At	December	31,	2007,	the	Company	had	$612	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	$620	million	of	short-term	investments	at	December	31,	2006.

Investment	Securities:		In	addition	to	available	cash	and	cash	equivalents,	Sigma	Fund	balances	and	short-term	investments,	the	Company	views	its	investment	securities	as	an	additional	source	of	liquidity.	The majority	of	these	securities	represent	investments	in	technology	companies	and,	accordingly,	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,	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,	2006,	the	Company's	available-for-sale	securities	portfolio	had	an	approximate	fair	market	value	of	$130	million,	which	represented	a	cost	basis	of $70	million	and	a	net	unrealized	gain	of	$60	million.

# Financing	Activities

The	most	significant	components	of	the	Company's	financing	activities	are:	(i)	the	purchase	of	the	Company's	common	stock	under	its	share	repurchase	program,	(ii)	the	net	proceeds	from	issuance	of	debt, (iii)	repayment	of	debt,	(iv)	the	payment	of	dividends,	(v)	proceeds	from	the	issuances	of	stock	due	to	the	exercise	of	employee	stock	options	and	purchases	under	the	employee	stock	purchase	plan,	(vi)	repayment	of commercial	paper	and	short-term	borrowings,	(vii)	distributions	to	discontinued	operations,	and	(viii)	excess	tax	benefits	from	share-based	compensation.

Net	cash	used	for	financing	activities	from	continuing	operations	was	$3.3	billion	in	2007,	compared	to	$3.2	billion	of	cash	used	in	2006	and	$907	million	of	cash	used	in	2005.	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.

Cash	used	for	financing	activities	from	continuing	operations	in	2006	was	primarily:	(i)	$3.8	billion	of	cash	used	to	purchase	171.7	million	shares	of	the	Company's	common	stock	under	the	share	repurchase program,	(ii)	$443	million	of	cash	used	to	pay	dividends,	(iii)	$23	million	in	distributions	to	discontinued	operations,	and	(iv)	$18	million	of	cash	used	for	the	repayment	of	debt,	partially	offset	by	proceeds	of: (i)	$918	million	received	from	the	issuance	of	common	stock	in	connection	with	the	Company's	employee	stock	option	plans	and	employee	stock	purchase	plan,	(ii)	$165	million	in	excess	tax	benefits	from	share-based compensation,	and	(iii)	$66	million	in	net	proceeds	from	commercial	paper	and	short-term	borrowings.

Commercial	Paper	and	Other	Short-Term	Debt:		At	December	31,	2007,	the	Company's	outstanding	notes	payable	and	current	portion	of	long-term	debt	was	$332	million,	compared	to	$1.7	billion	at December	31,	2006.	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.	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.	During	2007,	$114	million	of	6.50%	Senior	Notes	due	March	1,	2008	and	$84	million	of 5.80%	Senior	Notes	due	October	15,	2008	were	reclassified	to	current	portion	of	long-term	debt.

Net	cash	used	for	the	repayment	of	commercial	paper	and	short-term	borrowings	was	$242	million	in	2007,	compared	to	$66	million	of	net	cash	proceeds	from	the	sale	of	commercial	paper	and	short-term borrowings	in	2006.	The	Company	had	no	commercial	paper	outstanding	on	December	31,	2007,	compared	to	$300	million	of	outstanding	commercial	paper	on	December	31,	2006.	The	Company	continues	to	have access	to	the	commercial	paper	markets.	For	the	past	four	years,	the	Company	has	generally	maintained	commercial	paper	balances	between	$300	million	and	$400	million.	However,	as	a	result	of	conditions	in	the credit	markets,	the	interest	rates	the	Company	would	have	to	pay	to	issue	commercial	paper	increased	during	the	third	and	fourth	quarters	of	2007.	Accordingly,	the	Company	elected	to	eliminate	its	commercial	paper outstanding	until	pricing	becomes	more	favorable.	The	Company	will	issue	commercial	paper	when	it	believes	it	is	prudent	to	do	so	in	light	of	prevailing	market	conditions	and	other	factors.

Long-term	Debt:		At	December	31,	2007,	the	Company	had	outstanding	long-term	debt	of	$4.0	billion,	compared	to	$2.7	billion	at	December	31,	2006.	The	Company	continues	to	have	access	to	the	long-term debt	markets.

The	Company	may	from	time	to	time	seek	to	opportunistically	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	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.	In	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.	In	2005,	the	Company	repurchased	a	total	of	41.7	million	shares	at	an	aggregate	cost	of $874	million,	or	an	average	cost	of	$20.96	per	share.	Since	the	inception	of	its	first-ever	share	repurchase	program	in	May	2005,	the	Company	has	repurchased	a	total	of	384.6	million	of	its	common	shares	for	an aggregate	cost	of	$7.7	billion.	All	repurchased	shares	have	been	retired.

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,	subject	to	market	conditions	(the	"2006	Stock	Repurchase	Program").	As	of	December	31,	2007,	the	Company	remained	authorized	to	purchase	an	aggregate	amount	of	up	to	$3.8	billion	of additional	shares	under	the	2006	Stock	Repurchase	Program.

Credit	Ratings:		Three	independent	credit	rating	agencies,	Fitch	Investors	Service	("Fitch"),	Moody's	Investor	Services	("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.

# Name	of

The	Company's	debt	ratings	are	considered	"investment	grade."	If	the	Company's	senior	long-term	debt	were	rated	lower	than	"BBB-"	by	S&P	or	Fitch	or	"Baa3"	by	Moody's	(which	would	be	a	decline	of	two levels	from	current	Fitch	and	S&P	ratings),	the	Company's	long-term	debt	would	no	longer	be	considered	"investment	grade."	If	this	were	to	occur,	the	terms	on	which	the	Company	could	borrow	money	would	become more	onerous.	The	Company	would	also	have	to	pay	higher	fees	related	to	its	domestic	revolving	credit	facility.	The	Company	has	never	borrowed	under	its	domestic	revolving	credit	facilities.

As	further	described	under	"Customer	Financing	Arrangements"	below,	for	many	years	the	Company	has	utilized	a	number	of	receivables	programs	to	sell	a	broadly-diversified	group	of	short-term	receivables	to third	parties.	Certain	of	the	short-term	receivables	are	sold	to	a	multi-seller	commercial	paper	conduit.	This	program	provides	for	up	to	$400	million	of	short-term	receivables	to	be	outstanding	with	the	conduit	at	any time.	The	obligations	of	the	conduit	to	continue	to	purchase	receivables	under	this	short-term	receivables	program	could	be	terminated	if	the	Company's	long-term	debt	was	rated	lower	than	"BB+"	by	S&P	or	"Ba1"	by Moody's	(which	would	be	a	decline	of	three	levels	from	the	current	S&P	rating).	If	this	short-term	receivables	program	were	terminated,	the	Company	would	no	longer	be	able	to	sell	its	short-term	receivables	to	the conduit	in	this	manner,	but	it	would	not	have	to	repurchase	previously-sold	receivables.

# Credit	Facilities

At	December	31,	2007,	the	Company's	total	domestic	and	non-U.S.	credit	facilities	totaled	$4.3	billion,	of	which	$314	million	was	considered	utilized.	These	facilities	are	principally	comprised	of:	(i)	a $2.0	billion	five-year	revolving	domestic	credit	facility	maturing	in	December	2011	(the	"5-Year	Credit	Facility")	which	is	not	utilized,	and	(ii)	$2.3	billion	of	uncommitted	non-U.S.	credit	facilities	(of	which $314	million	was	considered	utilized	at	December	31,	2007).	Unused	availability	under	the	existing	credit	facilities,	together	with	available	cash,	cash	equivalents,	Sigma	Fund	balances	and	other	sources	of	liquidity,	are generally	available	to	support	outstanding	commercial	paper,	of	which	none	was	outstanding	at	December	31,	2007.

In	order	to	borrow	funds	under	the	5-Year	Credit	Facility,	the	Company	must	be	in	compliance	with	various	conditions,	covenants	and	representations	contained	in	the	agreements.	The	Company	was	in compliance	with	the	terms	of	the	5-Year	Credit	Facility	at	December	31,	2007.	The	Company	has	never	borrowed	under	its	domestic

revolving	credit	facilities.	Utilization	of	the	non-U.S.	credit	facilities	may	also	be	dependent	on	the	Company's	ability	to	meet	certain	conditions	at	the	time	a	borrowing	is	requested.

# Contractual	Obligations	and	Other	Purchase	Commitments

Summarized	in	the	table	below	are	the	Company's	obligations	and	commitments	to	make	future	payments	under	debt	obligations	(assuming	earliest	possible	exercise	of	put	rights	by	holders),	purchase obligations,	lease	payment	obligations,	and	tax	obligations	as	of	December	31,	2007.

| (in	millions) | Total | 2008 | 2009 | 2010 | 2011 | 2012 | Uncertain<br>Timeframe | Thereafter |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Long-Term\tDebt\tObligations | $4,221 | $198 | $4 | $534 | $607 | $409 | $— | $2,469 |
| Purchase\tObligations | 2,153 | 1,160 | 418 | 30 | 18 | 4 | — | 523 |
| Lease\tObligations | 1,419 | 355 | 268 | 253 | 169 | 162 | — | 212 |
| Tax\tObligations | 1,400 | 40 | — | — | — | — | 1,360 | — |
| Total\tContractual\tObligations | $9,193 | $1,753 | $690 | $817 | $794 | $575 | $1,360 | $3,204 |

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

Debt	Obligations:		At	December	31,	2007,	the	Company's	long-term	debt	obligations,	including	current	maturities	and	unamortized	discount	and	issue	costs,	totaled	$4.2	billion,	as	compared	to	$4.1	billion	at December	31,	2006.	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.

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.	The	longest	of	these	agreements	extends	through	2015.	Total	payments	expected	to	be	made	under	these	agreements	total	$2.2	billion.

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	2011	and	total	a	minimum purchase	obligation	of	$1.2	billion	during	that	period.	The	$1.2	billion	reflects	an	amended	agreement	that	was	completed	subsequent	to	December	31,	2007	with	one	supplier	that	reduced	the	Company's	minimum purchase	obligation	by	approximately	$200	million.	Subsequent	to	the	end	of	2007,	the	Company	entered	into	new	take-or-pay	arrangements	with	suppliers	that	extend	through	2009	with	minimum	purchase	obligations of	$63	million.	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.

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	under	principally	non- cancelable	operating	leases.	At	December	31,	2007,	future	minimum	lease	obligations,	net	of	minimum	sublease	rentals,	totaled	$1.4	billion.	Rental	expense,	net	of	sublease	income,	was	$231	million	in	2007, $241	million	in	2006	and	$250	million	in	2005.

Tax	Obligations:		The	Company	has	approximately	$1.4	billion	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	$40	million	of	unrecognized	tax	benefits	could	be settled	in	2008.	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.	The	total	remaining	payments under	these	contracts	are	approximately	$1.1	billion	over	the	remaining	6	years;	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	and standby	letters	of	credit	outstanding,	primarily	relating	to	projects	of	the	Enterprise	Mobility	Solutions	and	Home	and	Networks	Mobility	segments.	These	instruments	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	instrument	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	bond	or	letter	of	credit	for	the	amounts paid.	The	Company	is	not	generally	required	to	post	any	cash	in	connection	with	the	issuance	of	these	bonds	or	letters	of	credit.	In	its	long	history,	it	has	been	extraordinarily	uncommon	for	the	Company	to	have	a performance/bid	bond	or	standby	letter	of	credit	drawn	upon.	At	December	31,	2007,	outstanding	performance/bid	bonds	and	standby	letters	of	credit	totaled	approximately	$1.7	billion,	compared	to	$1.5	billion	at	the end	of	2006.

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.

# Customer	Financing	Commitments	and	Guarantees

Outstanding	Commitments:		Certain	purchasers	of	the	Company's	infrastructure	equipment	continue	to	request	that	suppliers	provide	financing	in	connection	with	equipment	purchases.	These	requests	may include	all	or	a	portion	of	the	purchase	price	of	the	equipment.	Periodically,	the	Company	makes	commitments	to	provide	financing	to	purchasers	in	connection	with	the	sale	of	equipment.	However,	the	Company's obligation	to	provide	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	receivable	from	the	Company.	The	Company	had	outstanding	commitments	to	extend	long-term	credit	to	third	parties	totaling	$610	million	at	December	31,	2007,	compared	to	$398	million	at December	31,	2006.	Of	these	amounts,	$454	million	was	supported	by	letters	of	credit	or	by	bank	commitments	to	purchase	receivables	at	December	31,	2007,	compared	to	$262	million	at	December	31,	2006.

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	$42	million	and	$122	million	at	December	31,	2007	and	December	31,	2006,	respectively (including	$23	million	and	$19	million	at	December	31,	2007	and	2006,	respectively,	relating	to	the	sale	of	short-term	receivables).	Customer	financing	guarantees	outstanding	were	$3	million	and	$47	million	at December	31,	2007	and	2006,	respectively	(including	$0	million	and	$2	million	at	December	31,	2007	and	2006,	respectively,	relating	to	the	sale	of	short-term	receivables).

# Customer	Financing	Arrangements

Outstanding	Finance	Receivables:		The	Company	had	net	finance	receivables	of	$118	million	at	December	31,	2007,	compared	to	$269	million	at	December	31,	2006	(net	of	allowances	for	losses	of	$5	million	at December	31,	2007	and	$10	million	at	December	31,	2006).	These	finance	receivables	are	generally	interest	bearing,	with	rates	ranging	from	3%	to	14%.	Interest	income	recognized	on	finance	receivables	for	the	years ended	December	31,	2007,	2006	and	2005	was	$7	million,	$9	million	and	$7	million,	respectively.

Sales	of	Receivables	and	Loans:		From	time	to	time,	the	Company	sells	short-term	receivables,	long-term	loans	and	lease	receivables	under	sales-type	leases	(collectively,	"finance	receivables")	to	third	parties	in transactions	that	qualify	as	"true-sales."	Certain	of	these	finance	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. Certain	sales

may	be	made	through	separate	legal	entities	that	are	also	consolidated	by	the	Company.	The	Company	may	or	may	not	retain	the	obligation	to	service	the	sold	finance	receivables.

In	the	aggregate,	at	December	31,	2007,	these	committed	facilities	provided	for	up	to	$1.4	billion	to	be	outstanding	with	the	third	parties	at	any	time,	as	compared	to	up	to	$1.3	billion	provided	at	December	31, 2006	and	up	to	$1.1	billion	provided	at	December	31,	2005.	As	of	December	31,	2007,	$497	million	of	these	committed	facilities	were	utilized,	compared	to	$817	million	utilized	at	December	31,	2006	and	$585	million utilized	at	December	31,	2005.	Certain	events	could	cause	one	of	these	facilities	to	terminate.	In	addition,	before	receivables	can	be	sold	under	certain	of	the	committed	facilities,	they	may	need	to	meet	contractual requirements,	such	as	credit	quality	or	insurability.

Total	finance	receivables	sold	by	the	Company	were	$4.9	billion	in	2007	(including	$4.7	billion	of	short-term	receivables),	compared	to	$6.4	billion	sold	in	2006	(including	$6.2	billion	of	short-term	receivables) and	$4.5	billion	sold	in	2005	(including	$4.2	billion	of	short-term	receivables).	As	of	December	31,	2007,	there	were	$978	million	of	receivables	outstanding	under	these	programs	for	which	the	Company	retained servicing	obligations	(including	$587	million	of	short-term	receivables),	compared	to	$1.1	billion	outstanding	at	December	31,	2006	(including	$789	million	of	short-term	receivables)	and	$1.0	billion	outstanding	at December	31,	2005	(including	$838	million	of	short-term	receivables).

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	December	31,	2007,	as compared	to	$19	million	at	December	31,	2006.	Reserves	of	$1	million	and	$4	million	were	recorded	for	potential	losses	on	sold	receivables	at	December	31,	2007	and	December	31,	2006,	respectively.

# Adequate	Internal	and	External	Funding	Resources

The	Company	believes	that	it	has	adequate	internal	and	external	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.,	the	ability	to	repatriate	cash,	cash	equivalents,	short-term	investments	and	Sigma	Fund	balances	from	foreign	jurisdictions,	the	ability to	borrow	under	the	committed	credit	facility	or	future	credit	facilities,	the	ability	to	issue	commercial	paper,	and	access	to	the	short-term	and	long-term	debt	markets.

# 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	sorts	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	all	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	has	several	lawsuits	filed	against	it	relating	to	the	Iridium	program,	as	further	described	under	Part	I,	Item	3:	Legal	Proceedings	of	this	document.	The	Company	has	not	reserved	for any	potential	liability	that	may	arise	as	a	result	of	U.S.	litigation	related	to	the	Iridium	program.	While	the	still	pending

cases	are	in	various	stages	and	the	outcomes	are	not	predictable,	an	unfavorable	outcome	in	one	or	more	of	these	cases	could	have	a	material	adverse	effect	on	the	Company's	consolidated	financial	position,	liquidity	or results	of	operations.

The	Company	is	a	defendant	in	various	other	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,	and	other	than	discussed above	with	respect	to	the	still	pending	Iridium	cases,	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	11,	"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	2007,	2006	and	2005	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	2007,	the	segment's	net	sales represented	52%	of	the	Company's	consolidated	net	sales,	compared	to	66%	in	2006	and	61%	in	2005.

| (Dollars	in	millions) | 2007 | 2006 | 2005 | 2007—2006 | 2006—2005 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Segment\tnet\tsales | $18,988 | $28,383 | $21,459 | (33)% | 32% |
| Operating\tearnings\t(loss) | \t(1,201) | 2,690 | 2,192 | *** | 23% |

*** Percentage	change	is	not	meaningful.

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	average	selling	price	("ASP"),	and	(iii)	decreased	revenue	from	intellectual	property	and	technology	licensing.	The	segment's	product	sales	were	negatively	impacted	by	gaps	in	the	segment's product	portfolio,	including	limited	offerings	of	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	the	Asia	and	Europe,	Middle	East	and	Africa	("EMEA")	regions.	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	gaps	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	with	Freescale	Semiconductor, partially	offset	by	savings	from	supply	chain	cost-reduction	initiatives.

Research	and	development	("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.	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.	Reorganization	of	business	charges	increased	due	to	employee	severance	costs	and expenses	related	to	the	exit	of	a

facility.	Selling,	general	and	administrative	("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	is	primarily	due	to	a	decline	in	customer	demand	driven	by	the	gaps	in the	segment's	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	16%.	The	segment	estimates	its	worldwide	market	share	to	be	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.	ASP	is	impacted	by	numerous	factors,	including	product	mix,	market	conditions	and	competitive	product	offerings,	and	ASP	trends	often	vary	over	time.

The	largest	of	the	segment's	end	customers	(including	sales	through	distributors)	are	Sprint	Nextel,	AT&T,	Verizon,	China	Mobile,	and	America	Movil.	In	2007,	aggregate	net	sales	to	these	five	customers accounted	for	approximately	42%	of	the	segment's	net	sales	in	2007.	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	is	Brightstar	Corporation.	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	more	than	54%	of	our	segment's	2007	net	sales,	were	outside	the	U.S.	The	largest	of	these international	markets	are	Brazil,	China	and	Mexico.

In	January	2008,	the	Company	announced	that	it	is	evaluating	alternatives	for	the	structural	and	strategic	realignment	of	the	Mobile	Devices	business	to	better	equip	it	to	recapture	global	market	leadership	and enhance	shareholder	value.	This	may	include	the	separation	of	the	Mobile	Devices	business	from	Motorola's	other	businesses	to	permit	each	to	grow	and	better	serve	their	customers.

In	2006,	the	segment's	net	sales	increased	32%	to	$28.4	billion,	compared	to	$21.5	billion	in	2005.	The	increase	in	net	sales	was	driven	by	a	49%	increase	in	unit	shipments,	primarily	driven	by	strong	demand	for GSM	and	CDMA	handsets,	partially	offset	by	an	11%	decrease	in	average	selling	price	("ASP").	On	a	product	technology	basis,	net	sales	of	products	for	GSM	and	CDMA	technologies	increased	and	net	sales	of products	for	iDEN	and	3G	technologies	decreased.	On	a	geographic	basis,	net	sales	increased	in	all	regions.

The	segment's	operating	earnings	increased	to	$2.7	billion	in	2006,	compared	to	operating	earnings	of	$2.2	billion	in	2005.	The	23%	increase	in	operating	earnings	was	primarily	due	to	an	increase	in	gross margin,	driven	primarily	by:	(i)	the	49%	increase	in	unit	shipments,	(ii)	savings	from	supply	chain	cost-reduction	initiatives,	and	(iii)	increased	income	from	intellectual	property	and	technology	licensing,	partially	offset by	the	11%	decline	in	ASP.	The	increase	in	gross	margin	was	partially	offset	by:	(i)	an	increase	in	SG&A	expenses,	primarily	driven	by	an	increase	in	marketing	expenses	to	support	higher	net	sales	and	promote	brand awareness,	and	(ii)	an	increase	in	R&D	expenditures,	as	a	result	of	an	increase	in	developmental	engineering	for	new	product	development	and	software,	as	well	as	ongoing	investment	in	next-generation	technologies. As	a	percentage	of	net	sales	in	2006	as	compared	to	2005,	gross	margin,	R&D	expenditures	and	operating	margin	decreased	and	SG&A	expenses	increased.

The	segment's	backlog	was	$1.4	billion	at	December	31,	2006,	compared	to	$3.0	billion	at	December	31,	2005.	This	decrease	in	backlog	is	primarily	due	to	an	unusually	high	level	of	backlog	at	December	31, 2005	due	to	strong	customer	demand	for	new	products	during	the	fourth	quarter	of	2005,	certain	of	which	were	unable	to	be	shipped	in	significant	quantities	due	to	supply	constraints	for	select	components.

Unit	shipments	increased	49%	to	217.4	million	units	in	2006,	compared	to	146.0	million	units	in	2005.	The	overall	increase	was	driven	by	increased	unit	shipments	of	products	for	GSM,	CDMA	and	3G technologies,	partially	offset	by	decreased	unit	shipments	of	products	for	iDEN	technology.	For	the	full	year	2006,	unit	shipments	by	the	segment	increased	in	all	regions.	Due	to	the	segment's	increase	in	unit	shipments outpacing	overall	growth	in	the	worldwide	handset	market,	which	grew	approximately	20%	in	2006,	the	segment	believes	that	it	expanded	its	global	handset	market	share	to	an	estimated	22%	for	the	full	year	2006.

In	2006,	ASP	decreased	approximately	11%	compared	to	2005.	The	overall	decrease	in	ASP	was	driven	primarily	by	changes	in	the	geographic	and	product-tier	mix	of	sales.	By	comparison,	ASP	decreased approximately	10%	in	2005	and	increased	approximately	15%	in	2004.	ASP	is	impacted	by	numerous	factors,	including	product	mix,	market	conditions	and	competitive	product	offerings,	and	ASP	trends	often	vary over	time.

In	2006,	the	largest	of	the	segment's	end	customers	(including	sales	through	distributors)	were	China	Mobile,	Verizon,	Sprint	Nextel,	Cingular,	and	T-Mobile.	These	five	largest	customers	accounted	for approximately	39%	of	the	segment's	net	sales	in	2006.	Besides	selling	directly	to	carriers	and	operators,	the	segment	also	sold	products	through	a	variety	of	third-party	distributors	and	retailers,	which	accounted	for approximately	38%	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	65%	of	the	segment's	2006	net	sales,	were	outside	the	U.S.	The	largest	of	these international	markets	were	China,	Brazil,	the	United	Kingdom	and	Mexico.

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	solutions,	broadband	access	infrastructure	systems,	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. In	2007,	the	segment's	net	sales	represented	27%	of	the	Company's	consolidated	net	sales,	compared	to	21%	in	2006	and	26%	in	2005.

| (Dollars	in	millions) | 2007 | 2006 | 2005 | 2007—2006 |
| :--- | :--- | :--- | :--- | :--- |
| Segment\tnet\tsales | $10,014 | $9,164 | $9,037 | 9% |
| Operating\tearnings | 709 | 787 | \t1,232 | (10)% |

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	of	wireless	networks.	Net	sales	of	digital	entertainment	devices	increased	approximately	43%,	reflecting	increased	demand	for	digital	set-tops,	including	HD/DVR	set-tops	and	IP	set-tops,	partially offset	by	a	decline	in	ASP	due	to	a	product	mix	shift	towards	all-digital	set-tops.	Unit	shipments	of	digital	entertainment	devices	increased	51%	to	15.2	million	units.	Net	sales	of	broadband	gateways	increased approximately	6%,	primarily	due	to	higher	net	sales	of	data	modems,	driven	by	net	sales	from	the	Netopia	business	acquired	in	February	2007.	Net	sales	of	wireless	networks	decreased	1%,	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	continue	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	reported	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	are	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.	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.	A	small	number	of	large	cable	television	multiple	system	operators	("MSOs")	own	a	large	portion	of	the	cable	systems	and	account	for	a	significant	portion	of	the	total capital	spending	in	the	cable	industry.	In	2007,	sales	to	our	top	five	customers	(Comcast;	Verizon;	KDDI,	a	service	provider	in	Japan;	China	Mobile;	and	Sprint	Nextel)	represented	approximately	43%	of	the	segments 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	$2.6	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	video	set-tops, particularly	HD/DVR	set-tops.

In	the	wireless	networks	business,	the	segment	has	been	a	long-standing	proponent	of	WiMAX	and	is	now	participating	in	over	40	WiMAX	trials	globally	and	several	commercial	contracts	globally.	The	segment also	maintained	momentum	in	infrastructure	development	and	services	in	2007	by	continuing	to	deliver	outstanding	technologies	and	services	for	wireless	and	wireline	carriers.

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	solutions	to	networks	operators.	These	acquisitions	enhance	our	ability	to	provide	a	complete end-to-end	solution	for	the	delivery	of	advanced	video,	voice	and	data	services.	In	December	2007,	Motorola	completed	the	sale	of	its	embedded	communication	computing	business	to	Emerson	for	$346	million	in	cash.

In	2006,	the	segment's	net	sales	increased	1%	to	$9.2	billion,	compared	to	$9.0	billion	in	2005.	The	1%	increase	in	net	sales	reflected	a	16%	increase	in	net	sales	in	the	home	business,	partially	offset	by	a	5% decrease	in	net	sales	of	wireless	networks.	Net	sales	of	digital	entertainment	devices	increased	approximately	24%,	reflecting	increased	demand	for	HD/DVR	set-tops,	partially	offset	by	a	decline	in	ASP	due	to	a	product mix	shift.	Unit	shipments	of	digital	entertainment	devices	increased	57%	to	10.1	million	units.	Net	sales	of	broadband	gateways	increased	approximately	18%,	primarily	due	to:	(i)	increased	unit	shipments	of	cable modems,	and	(ii)	increased	ASPs	for	cable	modems,	reflecting	increased	demand	for	advanced	voice-enabled	modems.	Net	sales	of	wireless	networks	decreased	5%,	primarily	driven	by	lower	demand	for	GSM,	iDEN and	CDMA	infrastructure	equipment.

On	a	geographic	basis,	the	1%	increase	in	net	sales	reflects	higher	net	sales	in	North	America	and	EMEA,	partially	offset	by	lower	net	sales	in	Asia.	The	increase	in	net	sales	in	North	America	was	driven	primarily by	higher	sales	of	digital	entertainment	devices,	partially	offset	by	lower	demand	for	iDEN	infrastructure	equipment	driven	by	customer	expenditures	returning	to	historic	trends	compared	to	an	exceptionally	strong 2005.	The	increase	in	net	sales	in	EMEA	was	driven	primarily	by	higher	sales	of	digital	entertainment	devices.	The	decrease	in	net	sales	in	Asia	was	due,	in	part,	to	delays	in	the	granting	of	3G	licenses	in	China	that	led service	providers	to	slow	their	near-term	capital	investment,	as	well	as	competitive	pricing	pressure.	Net	sales	in	North	America	continued	to	comprise	a	significant	portion	of	the	segment's	business,	accounting	for approximately	56%	of	the	segment's	total	net	sales	in	2006,	compared	to	approximately	55%	of	the	segment's	total	net	sales	in	2005.

The	segment	reported	operating	earnings	of	$787	million	in	2006,	compared	to	operating	earnings	of	$1.2	billion	in	2005.	The	36%	decrease	in	operating	earnings	was	primarily	due	to:	(i)	a	decrease	in	gross margin,	due	to	an	unfavorable	product/regional	mix	and	competitive	pricing	in	the	wireless	networks	market,	and	(ii)	an	increase	in	Other	charges	(income)	from	an	increase	in	reorganization	of	business	charges, primarily	related	to	employee	severance,	and	from	a	legal	reserve.	As	a	percentage	of	net	sales	in	2006	as	compared	to	2005,	gross	margin,	SG&A	expenses,	R&D	expenditures	and	operating	margin	all	decreased.

In	2006,	net	sales	to	the	segment's	top	five	customers,	which	included	Sprint	Nextel,	Comcast	Corporation,	Verizon,	KDDI	and	China	Mobile,	represented	45%	of	the	segment's	total	net	sales.	The	segment's backlog	was	$3.2	billion	at	December	31,	2006,	compared	to	$2.4	billion	at	December	31,	2005.	The	increase	in	backlog	is	primarily	due	to	strong	orders	for	our	digital	and	HD/DVR	set-tops.

In	the	market	for	digital	entertainment	devices,	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.	In	2006,	our	digital	video	customers	significantly	increased	their	purchases	of	the	segment's	products	and	services,	primarily	due	to	increased	demand	for digital	video	set-tops,	particularly	HD/DVR	set-tops.

During	2006,	the	segment	completed	a	number	of	significant	acquisitions,	including:	(i)	Kreatel	Communications	AB,	a	leading	developer	of	innovative	IP-based	digital	set-tops	and	software,	(ii)	NextNet Wireless,	Inc.,	a	former	Clearwire	Corporation	subsidiary	and	a	leading	provider	of	OFDM-based	non-line-of-sight	("NLOS")	wireless	broadband	infrastructure	equipment,	(iii)	Broadbus	Technologies,	Inc.,	a	provider of	technology	solutions	for	television	on	demand,	and	(iv)	Vertasent	LLC,	a	software	developer	for	managing	technology	elements	for	switched	digital	video	networks.	These	acquisitions	did	not	have	a	material	impact on	the	segment	results	in	2006.

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 communications	products,	are	referred	to	as	the	"government	and	public	safety	market"),	as	well	as	retail,	utility,	transportation,	manufacturing,	healthcare	and	other	commercial	customers	(which,	collectively,	are referred	to	as	the	"commercial	enterprise	market").	In	2007,	the	segment's	net	sales	represented	21%	of	the	Company's	consolidated	net	sales,	compared	to	13%	in	2006	and	14%	in	2005.

| (Dollars	in	millions) | 2007 | 2006 | 2005 | 2007—2006 | 2006—2005 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Segment\tnet\tsales | $7,729 | $5,400 | $5,038 | 43% | 7% |
| Operating\tearnings | \t1,213 | 958 | 860 | 27% | 11% |

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	reported	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)	an	increase	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	continue	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. 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	$2.3	billion	at	December	31,	2007,	compared	to	$2.0	billion	at	December	31,	2006.

In	the	government	and	public	safety	market,	natural	disasters	and	terrorist-related	worldwide	events	continued	to	place	an	emphasis	on	mission-critical	communications	systems.	Spending	by	the	segment's government	and	public	safety	market	customers	is	affected	by	government	budgets	at	the	national,	state	and	local	levels.	The	scope	and	size	of	systems	requested	by	some	of	the	segment's	customers	continue	to increase,	including	requests	for	country-wide	and	statewide	systems.	These	larger	systems	are	more	complex	and	include	a	wide	range	of	capabilities.	Large-system	projects	impact	how	contracts	are	bid,	which companies	compete	for	bids,	and	how	companies	partner	on	projects.

During	2007,	the	Company	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.	In	January	2008,	the	segment	acquired	a	controlling	interest	in	Vertex	Standard	Co.,	Ltd.,	a	global	provider	of two-way	radio	communication	solutions.

In	2006,	the	segment's	net	sales	increased	7%	to	$5.4	billion,	compared	to	$5.0	billion	in	2005.	The	7%	increase	in	net	sales	was	primarily	due	to	increased	net	sales	in	the	government	and	public	safety	market, driven	by	increased	demand	for	enhanced	mission-critical	communications	systems.	The	net	sales	in	the	commercial	enterprise	market	increased	14%,	primarily	due	to	increased	demand	for	business-critical communications.	On	a	geographic	basis,	net	sales	increased	in	all	regions.

The	segment	reported	operating	earnings	of	$958	million	in	2006,	compared	to	operating	earnings	of	$860	million	in	2005.	The	increase	in	operating	earnings	was	primarily	due	to	the	increase	in	gross	margin, driven	by	the	7%	increase	in	net	sales	from	the	government	and	public	safety	market.	This	improvement	in	gross	margin	was	partially	offset	by:	(i)	an	increase	in	reorganization	of	business	charges,	primarily	related	to employee	severance,	and	(ii)	an	increase	in	R&D	expenses,	driven	by	increased	investment	in	next-generation	technologies	across	the	segment.	As	a	percentage	of	net	sales	in	2007	as	compared	2006,	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	63%	of	the	segment's	total	net	sales	in	2006,	compared	to	approximately	66%	in 2005.	The	segment's	backlog	was	$2.0	billion	at	December	31,	2006,	compared	to	$2.1	billion	at	December	31,	2005.

# 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	reserves

—	Retirement-related	benefits

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,	which	requires	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	is	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	obsolescence	or	non-marketability.	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	and,	for	the	remaining	inventory,	assesses	the	net	realizable	value.	Management	uses	its	best	judgment	to	estimate	appropriate	reserves	based	on	this	analysis.

Inventories	consisted	of	the	following:

| December	31 | 2007 | 2006 |
| :--- | :--- | :--- |
| Finished\tgoods | $1,737 | $1,796 |
| Work-in-process\tand\tproduction\tmaterials | 1,470 | 1,782 |
|  | 3,207 | 3,578 |
| Less\tinventory\treserves | (371) | (416) |
|  | $2,836 | $3,162 |

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	12%	of	the	gross	inventory	balance	at	both	December	31,	2007	and	2006.	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.	Likewise,	as	with	other	reserves	based	on	management's judgment,	if	the	reserve	is	no	longer	needed,	amounts	are	reversed	into	income.	There	were	no	significant	reversals	into	income	of	this	type	in	the	periods	presented.

# Taxes	on	Income

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.	The	Company	establishes	valuation	allowances	for	its	deferred	tax	assets	when it	is	more	likely	than	not	that	the	amount	of	expected	future	taxable	income	will	not	support	the	use	of	the	deduction	or	credit.	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	as	expense	in	the	consolidated	financial statements.

# Valuation	of	Sigma	Fund,	Investments	and	Long-Lived	Assets

The	Company	assesses	the	impairment	of	its	Sigma	Fund	and	investment	portfolios	and	long-lived	assets,	including	identifiable	property,	plant	and	equipment	and	intangible	assets,	whenever	events	or	changes	in

circumstances	indicate	that	the	carrying	value	may	not	be	recoverable.	The	Company	performs	a	goodwill	impairment	test	at	the	reporting	unit	level	at	least	annually	on	October	1,	or	more	often	should	triggering	events occur.	Factors	considered	important	that	could	trigger	an	impairment	review	include:	(i)	underperformance	relative	to	expected	historical	or	projected	future	operating	results,	(ii)	changes	in	the	manner	of	use	of	the assets	or	the	strategy	for	our	overall	business,	(iii)	negative	industry	or	economic	trends,	(iv)	declines	in	price	of	an	investment	for	a	sustained	period,	and	(v)	our	market	capitalization	relative	to	net	book	value.

If	it	becomes	probable	that	the	Company	will	not	collect	all	amounts	in	accordance	with	the	contractual	terms	of	a	debt	security	within	the	Sigma	Fund,	the	Company	considers	the	decline	other-than-temporary and	an	investment	impairment	is	recorded.

When	the	Company	determines	that	the	carrying	value	of	intangible	assets	and	long-lived	assets	may	not	be	recoverable,	an	impairment	charge	is	recorded.	Impairment	is	generally	measured	based	on	a	projected discounted	cash	flow	method	using	a	discount	rate	determined	by	management	to	be	commensurate	with	the	risk	inherent	in	our	current	business	model	or	prevailing	market	rates	of	investment	securities,	if	available.

When	performing	a	goodwill	impairment	test,	the	fair	value	of	the	reporting	unit	is	determined	using	a	combination	of	present	value	techniques	and	quoted	market	prices	of	comparable	businesses.

At	December	31,	2007	and	2006,	the	net	book	values	of	these	assets	were	as	follows	(in	millions):

| December	31 | 2007 | 2006 |
| :--- | :--- | :--- |
| Sigma\tFund | $5,242 | $12,204 |
| Investments | 837 | 895 |
| Property,\tplant\tand\tequipment | 2,480 | 2,267 |
| Intangible\tassets | 1,260 | 354 |
| Goodwill | 4,499 | 1,706 |
|  | $14,318 | $17,426 |

The	Company	recorded	investment	impairment	charges	of	$62	million,	$27	million	and	$25	million	in	2007,	2006	and	2005,	respectively,	representing	other-than-temporary	declines	in	the	value	of	the Company's	Sigma	Fund	and	investment	portfolios.	Additionally,	the	available-for-sale	securities	portfolio	reflected	an	unrealized	loss	position	of	$96	million	and	an	unrealized	gain	position	of	$60	million	at December	31,	2007	and	2006,	respectively.

The	Company	recorded	fixed	asset	impairment	charges	of	$50	million	in	2007,	and	$15	million	in	both	2006	and	2005.	The	Company	recorded	intangible	asset	impairment	charges	of	$81	million	in	2007, compared	to	no	impairment	charges	in	2006	and	2005.	No	goodwill	impairment	charges	were	required	in	the	periods	presented.

The	Company	cannot	predict	the	occurrence	of	future	impairment-triggering	events	nor	the	impact	such	events	might	have	on	these	reported	asset	values.	Such	events	may	include	strategic	decisions	made	in response	to	the	economic	conditions	relative	to	product	lines	or	operations	and	the	impact	of	the	economic	environment	on	our	customer	base.

# Restructuring	Activities

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").	Any	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	in	excess	of	the	limitations imposed	by	the	Internal	Revenue	Code	on	the	Regular	Pension	Plan.	Elected	officers	covered	under	the	Officers'	Plan	or	who	participated	in	the	restricted	stock	buy-out	are	not	eligible	to	participate	in	MSPP.	Effective January	1,	2005,	newly	hired	employees	were	not	eligible	to	participate	in	the	MSPP.	Effective	January	1,	2007,	eligible	compensation	has	been	capped	at	the	IRS	limit	plus	$175,000	or,	for	those	in	excess	of	this	cap	at January	1,	2007,	the	eligible	compensation	used	to	compute	the	employee's	MSPP	benefit	is	the	greater	of:	(i)	the	employee's	frozen	January	1,	2007	eligible	compensation	amount,	or	(ii)	the	earnings	cap	for	the	given year.

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	will	be	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.

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	Health	Care	Benefits	Plan	was	8.5%	in	2007	and	2006.	The	investment	return	assumption	for	the	Officers'	Plan	was	6%	in	2007	and	2006.	At	December	31,	2007,	the	Regular	Pension	Plan	and	the Postretirement	Health	Care	Benefits	Plan	investment	portfolio	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%	and	6%	at	December	2007	and	2006,	respectively.	The	Company's	discount	rates	for	measuring	the	Postretirement	Health	Care	Benefits Plan	obligation	were	6.5%	and	5.75%	at	December	31,	2007	and	2006,	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.	In	both	2007	and	2006,	the	Company's	rate	for	future	compensation	increase	was	4%	for	the	Regular	Pension	Plan.	The	Company's	2007	and	2006	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.	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, 2007	accumulated	postretirement	benefit	obligation	is	9%	for	2008,	with	a	declining	trend	rate	of	1%	each	year	until	it	reaches	5%	by	2012,	with	a	flat	5%	rate	for	2012	and	beyond.

The	2007	and	2006	Regular	Plan	actual	expenses	were	$174	million	and	$240	million,	respectively.	Cash	contributions	of	$270	million	were	made	to	the	Regular	Pension	Plan	in	2007.	The	Company	expects	to make	cash	contributions	of	approximately	$240	million	to	its	U.S.	pension	plans	and	approximately	$50	million	to	its	non-U.S.	pension	plans	during	2008.

The	2007	and	2006	Postretirement	Health	Care	Benefits	Plan	actual	expenses	were	$15	million	and	$22	million,	respectively.	Cash	contributions	of	$15	million	were	made	to	this	plan	in	2007.	The	Company expects	to	make	cash	contributions	of	approximately	$20	million	to	the	Postretirement	Health	Care	Benefits	Plan	in	2008.

The	impact	on	the	future	financial	results	of	the	Company	in	relation	to	retirement-related	benefits	is	dependent	on	economic	conditions,	employee	demographics,	interest	rates	and	investment	performance.	The Company's	measurement	date	of	its	plan	assets	and	obligations	is	December	31.

# Recent	Accounting	Pronouncements

The	Company	adopted	Financial	Accounting	Standards	Board	("FASB")	Interpretation	No.	48,	"Accounting	for	Uncertainty	in	Income	Taxes"	("FIN	48")	effective	January	1,	2007.	Among	other	things	FIN	48 prescribes	a	"more-likely-than-not"	threshold	to	the	recognition	and	de-recognition	of	tax	positions,	provides	guidance	on	the	accounting	for	interest	and	penalties	relating	to	tax	positions	and	requires	that	the	cumulative effect	of	applying	the	provisions	of	FIN	48	shall	be	reported	as	an	adjustment	to	the	opening	balance	of	retained	earnings	or	other	appropriate	components	of	equity	or	net	assets	in	the	statement	of	financial	position.	The adoption	of	FIN	48	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	adoption	of	FIN	48,	the	Company	also	reclassified	unrecognized	tax	benefits	of	$877	million	from	Deferred	income	taxes	to	Other liabilities	in	the	Company's	consolidated	balance	sheets.

In	September	2006,	the	FASB	issued	Statement	of	Financial	Accounting	Standards	("SFAS")	No.	158,	"Employers'	Accounting	for	Defined	Benefit	Pension	and	Other	Postretirement	Plans"	("SFAS	158"). SFAS	158	has	certain	recognition	and	disclosure	requirements	which	the	Company	adopted	as	of	December	31,	2006.	Additionally,	SFAS	158	requires	employers	to	measure	defined	benefit	plan	assets	and	obligations as	of	the	date	of	the	statement	of	financial	position.	The	measurement	date	provision	of	SFAS	158	only	affects	the	Company's	non-U.S.	pension	plans.	The	Company	adopted	the	measurement	date	provisions	for	its Non-U.S.	plans	as	of	December	31,	2007.	Upon	adoption	of	the	measurement	provisions,	the	Company	recorded	$17	million,	net	of	$2	million	of	taxes,	as	a	decrease	in	the	opening	balance	of	Retained	earnings	at January	1,	2007	in	the	consolidated	statements	of	stockholders'	equity.

In	September	2006,	the	FASB	issued	EITF	06-4,	"Accounting	for	Deferred	Compensation	and	Postretirement	Benefit	Aspects	of	Endorsement	Split-Dollar	Life	Insurance	Arrangements"	("EITF	06-4"). 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.	Under	the	provisions	of	these	Statements,	a	liability should	be	accrued	equal	to	the	actuarial	present	value	of	the	future	death	benefit	over	the	service	period.	EITF	06-4	is	effective	for	fiscal	years	beginning	after	December	15,	2007.	The	Company	will	adopt	EITF	06-4	as of	January	1,	2008	and	anticipates	that	the	adoption	of	this	pronouncement	will	result	in	an	increase	in	Other	liabilities	of	approximately	$50	million	with	the	offset	reflected	as	a	cumulative-effect	adjustment	to	Retained earnings.

In	September	2006,	the	FASB	issued	SFAS	No.	157,	"Fair	Value	Measurements"	("SFAS	157").	SFAS	157	defines	fair	value,	establishes	a	framework	for	measuring	fair	value	as	required	by	other	accounting pronouncements	and	expands	fair	value	measurement	disclosures.	SFAS	157	is	effective	for	fiscal	years	beginning	after	November	15,	2007.	In	February	of	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	evaluating	the	impact	of	SFAS	157	on	the	Company's	consolidated	financial	statements.

In	February	2007,	the	FASB	issued	SFAS	No.	159,	"The	Fair	Value	Option	for	Financial	Assets	and	Financial	Liabilities—Including	an	amendment	of	FASB	Statement	No.	115"	("SFAS	159").	SFAS	159 permits	entities	to	elect	to	measure	many	financial	instruments	and	certain	other	items	at	fair	value.	Unrealized	gains	and	losses	on	items	for	which	the	fair	value	option	has	been	elected	will	be	recognized	in	earnings	at each	subsequent	reporting	date.	SFAS	159	is	effective	for	fiscal	years	beginning	after	November	15,	2007.	The	Company	is	currently	assessing	the	impact	of	SFAS	159	on	the	Company's	consolidated	financial statements.

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	will	have	a	material	impact	on	the	Company's	consolidated	financial	statements.

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.

# Realignment	of	Segments

As	described	in	a	Form	8-K	filed	on	July	17,	2007,	the	Company	has	realigned	its	operations,	effective	as	of	the	second	quarter	of	2007,	into	the	following	three	business	segments	in	order	to	better	align	its operations	with	the	evolving	nature	of	our	customers	and	served	markets:	(i)	Mobile	Devices,	(ii)	Home	and	Networks	Mobility,	and	(iii)	Enterprise	Mobility	Solutions.	The	Form	8-K	filed	on	July	17,	2007	presented the	Company's	segment	net	sales	and	operating	earnings	for	2006	and	first	quarter	of	2007	reclassified	to	reflect	the	presentation	of	the	realigned	segments.

# 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	growth,	including	in	emerging	markets	and	for	replacement	sales,	the	impact	of	the	segment's	strategy,	our	exploration	of	structural	and strategic	realignment,	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	and	the	manufacturing	location;	(2)	"Home	and	Networks	Mobility	Segment,"	about	the	potential	of	the	portfolio,	including WiMAX,	the	impact	of	the	separation	of	set-top	security	functionality,	3G	licenses	and	market	development,	sales	and	utilization,	industry	growth,	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,	energy	supplies	and	labor,

the	seasonality	of	the	business,	the	firmness	of	the	segment's	backlog	and	the	competitiveness	of	the	patent	portfolio;	(3)	"Enterprise	Mobility	Solutions	Segment,"	about	industry	and	demand	growth,	the	impact	of	the segment's	strategy,	the	impact	of	acquisitions,	the	impact	from	the	loss	of	key	customers,	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,	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;	(7)	"Management's	Discussion	and	Analysis,"	about:	(a)	the	impact	of acquisitions,	(b)	the	success	of	our	business	strategy,	(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	retire	outstanding	debt,	(k)	adequacy	of	resources	to	fund	expected	working	capital	and	capital	expenditure	measurements,	(l)	expected	payments	pursuant	to	commitments	under long-term	agreements,	(m)	the	outcome	of	ongoing	and	future	legal	proceedings,	(n)	the	impact	of	recent	accounting	pronouncements	on	the	Company,	(o)	the	impact	of	the	loss	of	key	customers	and	(p)	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.

# 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	trades	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	a	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	in	foreign	exchange	exposure	issues	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,	through managing	net	asset	positions,	product	pricing	and	component	sourcing.

At	December	31,	2007	and	2006,	the	Company	had	net	outstanding	foreign	exchange	contracts	totaling	$3.0	billion	and	$4.8	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	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,	in	millions	of	U.S.	dollars,	the	five largest	net	foreign	exchange	contract	positions	as	of	December	31,	2007	and	the	corresponding	positions	as	of	December	31,	2006:

| largest	net	foreign	exchange	contract	positions	as	of	December	31,	2007	and	the	corresponding	positions	as	of	December	31,	2006: |  |  |
| :--- | :--- | :--- |
| Buy\t(Sell) | December\t31,\n2007 | 2006 |
| Chinese\tRenminbi | $(1,292) | $(1,195) |
| Brazilian\tReal | (377) | (466) |
| Taiwan\tDollar | 112 | 87 |
| Japanese\tYen | 384 | 143 |
| British\tPound | 396 | 252 |

The	Company	is	exposed	to	credit	loss	in	the	event	of	nonperformance	by	the	counterparties	to	its	financial	instruments.	The	Company	minimizes	its	credit	risk	on	these	transactions	by	only	dealing	with	leading, creditworthy	financial	institutions	and	does	not	anticipate	nonperformance.	In	addition,	the	contracts	are	distributed	among	several	financial	institutions,	all	of	whom	presently	have	investment	grade	credit	ratings,	thus minimizing	credit	risk	concentration.

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	$330	million	as	of December	31,	2007	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	be	realized.	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	Company	recorded	income	of	$0.6	million	and	$1.5	million	for	the	years	ended	December	31,	2006	and	2005,	respectively,	representing	the	ineffective	portions	of	changes	in	the	fair	value	of	fair	value	hedge positions.	The	ineffective	portion	of	changes	in	the	fair	value	of	foreign	currency	fair	value	hedge	positions	in	2007	was	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,	2007,	2006	and	2005	are	included	in	the	amounts noted	above.

The	Company	recorded	income	of	$1	million,	$13	million	and	$1	million	for	the	years	ended	December	31,	2007,	2006	and	2005,	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,	2007,	2006	and	2005	are	included	in	the	amounts	noted	above.

During	the	years	ended	December	31,	2007,	2006	and	2005,	on	a	pre-tax	basis,	income	(expense)	of	$(16)	million,	$(98)	million	and	$21	million,	respectively,	was	reclassified	from	equity	to	earnings	in	the Company's	consolidated	statements	of	operations.

At	December	31,	2007,	the	maximum	term	of	derivative	instruments	that	hedge	forecasted	transactions	was	one	year.	However,	the	weighted	average	duration	of	the	Company's	derivative	instruments	that	hedge forecasted	transactions	was	five	months.

# Interest	Rate	Risk

At	December	31,	2007,	the	Company's	short-term	debt	consisted	primarily	of	$134	million	of	short-term	foreign	debt,	priced	at	short-term	interest	rates.	The	Company	has	$4.2	billion	of	long-term	debt, including	the	current	portion	of	long-term	debt,	which	is	primarily	priced	at	long-term,	fixed	interest	rates.

In	order	to	manage	the	mix	of	fixed	and	floating	rates	in	its	debt	portfolio,	the	Company	has	entered	into	interest	rate	swaps	to	change	the	characteristics	of	interest	rate	payments	from	fixed-rate	payments	to short-term	LIBOR-based	variable	rate	payments.	The	following	table	displays	these	outstanding	interest	rate	swaps	at	December	31,	2007:

# Notional	Amount

The	weighted	average	short-term	LIBOR-based	variable	rate	payments	on	each	of	the	above	interest	rate	swaps	was	6.60%	for	the	three	months	ended	December	31,	2007.	The	fair	value	of	the	above	interest	rate swaps	at	December	31,	2007	and	December	31,	2006,	was	$36	million	and	$(47)	million,	respectively.	The	fair	value	of	the	above	interest	rate	swaps	would	hypothetically	decrease	by	$38	million	(i.e.,	would	decrease from	$36	million	to	$(2)	million)	if	LIBOR	were	to	change	unfavorably	by	10%	from	current	levels.	Except	as	noted	below,	the	Company	had	no	outstanding	commodity	derivatives,	currency	swaps	or	options	relating to	debt	instruments	at	December	31,	2007	or	December	31,	2006.

The	Company	designated	the	above	interest	rate	swap	agreements	as	part	of	fair	value	hedging	relationships.	As	such,	changes	in	the	fair	value	of	the	hedging	instrument,	as	well	as	the	hedged	debt	are	recognized in	earnings,	therefore	adjusting	the	carrying	amount	of	the	debt.	Interest	expense	on	the	debt	is	adjusted	to	include	the	payments	made	or	received	under	such	hedge	agreements.	In	2007,	the	Company	recorded	an expense	of	$2.3	million	representing	the	ineffective	portions	of	changes	in	the	fair	value	of	interest	rate	swap	hedge	positions.	These	amounts	are	included	in	Other	within	Other	income	(expense)	in	the	Company's consolidated	statements	of	operations.	In	the	event	the	underlying	debt	instrument	matures	or	is	redeemed	or	repurchased,	the	Company	is	likely	to	terminate	the	corresponding	interest	rate	swap	contracts.

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 floating	based	on	3-month	EURIBOR	plus	a	spread.	The	Interest	Agreements	change	the	characteristics	of	interest	rate	payments	from	short-term	EURIBOR	based	variable	payments	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	EURIBOR	interest	rate	agreements	was	6.71%.	The	fair	value	of	the	Interest	Agreements	at	December	31,	2007	and December	31,	2006	was	$3	million	and	$1	million,	respectively.	The	fair	value	of	the	Interest	Agreements	would	hypothetically	decrease	by	$2	million	(i.e.,	would	decrease	from	$3	million	to	$1	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	on	these	transactions	by	only	dealing	with	leading, creditworthy	financial	institutions	and	does	not	anticipate	nonperformance.	In	addition,	the	contracts	are	distributed	among	several	financial	institutions,	all	of	whom	presently	have	investment	grade	credit	ratings,	thus minimizing	credit	risk	concentration.

# Net	Investment	in	Foreign	Operations	Hedge

At	December	31,	2007	and	2006,	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.

Prior	to	the	merger	of	Sprint	Corporation	("Sprint")	and	Nextel	Communications,	Inc.	("Nextel"),	the	Company	had	entered	into	variable	share	forward	purchase	agreements	(the	"Variable	Forwards")	to	hedge	its Nextel	common	stock.	The	Company	did	not	designate	the	Variable	Forwards	as	a	hedge	of	the	Sprint	Nextel	shares	received	as	a	result	of	the	merger.	Accordingly,	the	Company	recorded	$51	million	of	gains	for	the year	ended	December	31,	2005	reflecting	the	change	in	value	of	the	Variable	Forwards.	The	Variable	Forwards	were	settled	during	the	fourth	quarter	of	2005.

# Fair	Value	of	Financial	Instruments

The	Company's	financial	instruments	include	cash	equivalents,	Sigma	Fund	investments,	short-term	investments,	accounts	receivable,	long-term	finance	receivables,	accounts	payable,	accrued	liabilities, derivatives	and	other	financing	commitments.	The	Company's	Sigma	Fund	and	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,	2007	was	$4.2	billion,	compared	to	a	carrying	value	of	$4.2	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,	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.	The	value	of	the	available-for-sale	securities	would	change	by	$33	million	as	of	year-end	2007	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.

# 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,	2007	and	2006,	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,	2007.	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,	2007	and	2006,	and	the results	of	their	operations	and	their	cash	flows	for	each	of	the	years	in	the	three-year	period	ended	December	31,	2007,	in	conformity	with	U.S.	generally	accepted	accounting	principles.

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,	as	discussed	in	Notes	1	and	8	to	the	consolidated	financial	statements,	effective	January	1,	2006,	the	Company	adopted	the	provisions	of	Statement	of	Financial	Accounting Standards	No.	123	(revised	2004),	Share-Based	Payment.	Also,	as	discussed	in	Notes	1	and	7	to	the	consolidated	financial	statements,	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	have	also	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,	2007, 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	28,	2008	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) | 2007 | 2006 | 2005 |
| :--- | :--- | :--- | :--- |
| Net\tsales | $36,622 | $42,847 | $35,310 |
| Costs\tof\tsales | 26,670 | 30,120 | 23,881 |
| Gross\tmargin | 9,952 | 12,727 | 11,429 |
| Selling,\tgeneral\tand\tadministrative\texpenses | 5,092 | 4,504 | 3,628 |
| Research\tand\tdevelopment\texpenditures | 4,429 | 4,106 | 3,600 |
| Other\tcharges\t(income) | 984 | 25 | (404) |
| Operating\tearnings\t(loss) | (553) | 4,092 | 4,605 |
| Other\tincome\t(expense): |  |  |  |
| Interest\tincome,\tnet | 91 | 326 | 71 |
| Gains\ton\tsales\tof\tinvestments\tand\tbusinesses,\tnet | 50 | 41 | 1,845 |
| Other | 22 | 151 | (109) |
| Total\tother\tincome\t(expense) | 163 | 518 | 1,807 |
| Earnings\t(loss)\tfrom\tcontinuing\toperations\tbefore\tincome\ttaxes | (390) | 4,610 | 6,412 |
| Income\ttax\texpense\t(benefit) | (285) | 1,349 | 1,893 |
| Earnings\t(loss)\tfrom\tcontinuing\toperations | (105) | 3,261 | 4,519 |
| Earnings\tfrom\tdiscontinued\toperations,\tnet\tof\ttax | 56 | 400 | 59 |
| Net\tearnings\t(loss) | $(49) | $3,661 | $4,578 |
| Earnings\t(loss)\tper\tcommon\tshare: |  |  |  |
| Basic: |  |  |  |
| Continuing\toperations | $(0.05) | $1.33 | $1.83 |
| Discontinued\toperations | 0.03 | 0.17 | 0.02 |
|  | $(0.02) | $1.50 | $1.85 |
| Diluted: |  |  |  |
| Continuing\toperations | $(0.05) | $1.30 | $1.79 |
| Discontinued\toperations | 0.03 | 0.16 | 0.02 |
|  | $(0.02) | $1.46 | $1.81 |
| Weighted\taverage\tcommon\tshares\toutstanding: |  |  |  |
| Basic | 2,312.7 | 2,446.3 | 2,471.3 |
| Diluted | 2,312.7 | 2,504.2 | 2,527.0 |
| Dividends\tpaid\tper\tshare | $0.20 | $0.18 | $0.16 |

See	accompanying	notes	to	consolidated	financial	statements.

# Consolidated	Balance	Sheets

| (In	millions,	except	per	share	amounts) | 2007 | 2006 |
| :--- | :--- | :--- |
| ASSETS |  |  |
| Cash\tand\tcash\tequivalents | $2,752 | $2,816 |
| Sigma\tFund | 5,242 | 12,204 |
| Short-term\tinvestments | 612 | 620 |
| Accounts\treceivable,\tnet | 5,324 | 7,509 |
| Inventories,\tnet | 2,836 | 3,162 |
| Deferred\tincome\ttaxes | 1,891 | 1,731 |
| Other\tcurrent\tassets | 3,565 | 2,933 |
| Total\tcurrent\tassets | 22,222 | 30,975 |
| Property,\tplant\tand\tequipment,\tnet | 2,480 | 2,267 |
| Investments | 837 | 895 |
| Deferred\tincome\ttaxes | 2,454 | 1,325 |
| Goodwill | 4,499 | 1,706 |
| Other\tassets | 2,320 | 1,425 |
| Total\tassets | $34,812 | $38,593 |
| LIABILITIES\tAND\tSTOCKHOLDERS'\tEQUITY |  |  |
| Notes\tpayable\tand\tcurrent\tportion\tof\tlong-term\tdebt | $332 | $1,693 |
| Accounts\tpayable | 4,167 | 5,056 |
| Accrued\tliabilities | 8,001 | 8,676 |
| Total\tcurrent\tliabilities | 12,500 | 15,425 |
| Long-term\tdebt | 3,991 | 2,704 |
| Other\tliabilities | 2,874 | 3,322 |
| Stockholders'\tequity |  |  |
| Preferred\tstock,\t$100\tpar\tvalue | — | — |
| Common\tstock,\t$3\tpar\tvalue | 6,792 | 7,197 |
| Issued\tshares:\t2007\t—\t2,264.0\tand\t2006\t—\t2,399.1 |  |  |
| Outstanding\tshares:\t2007\t—\t2,263.1\tand\t2006\t—\t2,397.4 |  |  |
| Additional\tpaid-in\tcapital | 782 | 2,509 |
| Retained\tearnings | 8,579 | 9,086 |
| Non-owner\tchanges\tto\tequity | (706) | (1,650) |
| Total\tstockholders'\tequity | 15,447 | 17,142 |
| Total\tliabilities\tand\tstockholders'\tequity | $34,812 | $38,593 |

# 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,\t2005 | 2,447.8 | $11,664 | $1,417 | $(139) | $(1,061) | $(272) | $1,722 |  |
| Net\tearnings |  |  |  |  |  |  | 4,578 | $4,578 |
| Net\tunrealized\tlosses\ton\tsecurities\t(net\tof\ttax\tof\t$812) |  |  | (1,320) |  |  |  |  | (1,320) |
| Foreign\tcurrency\ttranslation\tadjustments\t(net\tof\ttax\tof\t$29) |  |  |  | (114) |  |  |  | (114) |
| Retirement\tbenefits\tadjustments\t(net\tof\ttax\tof\t$66) |  |  |  |  | (208) |  |  | (208) |
| Issuance\tof\tcommon\tstock\tand\tstock\toptions\texercised\t(including\ttax\tbenefits\tof\t$210) | 96.6 | 1,409 |  |  |  |  |  |  |
| Share\trepurchase\tprogram | (41.7) | (874) |  |  |  |  |  |  |
| Net\tgain\ton\tderivative\tinstruments\t(net\tof\ttax\tof\t$154) |  |  |  |  |  | 274 |  | 274 |
| Dividends\tdeclared\t($0.16\tper\tshare) |  |  |  |  |  |  | (403) |  |
| Balances\tat\tDecember\t31,\t2005 | 2,502.7 | 12,199 | 97 | (253) | (1,269) | 2 | 5,897 | $3,210 |
| 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 |
| Retirement\tbenefits\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 |
| Retirement\tbenefits\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 |

# Consolidated	Statements	of	Cash	Flows

| (In	millions) | 2007 | 2006 | 2005 |
| :--- | :--- | :--- | :--- |
| Operating |  |  |  |
| Net\tearnings\t(loss) | $(49) | $3,661 | $4,578 |
| Less:\tEarnings\tfrom\tdiscontinued\toperations | 56 | 400 | 59 |
| Earnings\t(loss)\tfrom\tcontinuing\toperations | (105) | 3,261 | 4,519 |
| Adjustments\tto\treconcile\tearnings\t(loss)\tfrom\tcontinuing\toperations\tto\tnet\tcash\tprovided\tby\toperating\tactivities: |  |  |  |
| Depreciation\tand\tamortization | 903 | 558 | 540 |
| Non-cash\tother\tcharges | 213 | 49 | 106 |
| Share-based\tcompensation\texpense | 315 | 276 | 14 |
| Gains\ton\tsales\tof\tinvestments\tand\tbusinesses,\tnet | (50) | (41) | (1,845) |
| Deferred\tincome\ttaxes | (747) | 838 | 1,000 |
| Change\tin\tassets\tand\tliabilities,\tnet\tof\teffects\tof\tacquisitions\tand\tdispositions: |  |  |  |
| Accounts\treceivable | 2,538 | (1,775) | (1,303) |
| Inventories | 556 | (718) | (19) |
| Other\tcurrent\tassets | (705) | (388) | (721) |
| Accounts\tpayable\tand\taccrued\tliabilities | (2,303) | 1,654 | 2,405 |
| Other\tassets\tand\tliabilities | 170 | (215) | (388) |
| Net\tcash\tprovided\tby\toperating\tactivities\tfrom\tcontinuing\toperations | 785 | 3,499 | 4,308 |
| Investing |  |  |  |
| Acquisitions\tand\tinvestments,\tnet | (4,568) | (1,068) | (312) |
| Proceeds\tfrom\tsale\tof\tinvestments\tand\tbusinesses | 411 | 2,001 | 1,538 |
| Capital\texpenditures | (527) | (649) | (548) |
| Proceeds\tfrom\tsale\tof\tproperty,\tplant\tand\tequipment | 166 | 85 | 103 |
| Proceeds\tfrom\tsales\t(purchases)\tof\tSigma\tFund\tinvestments,\tnet | 6,889 | (1,337) | (3,157) |
| Proceeds\tfrom\tsales\t(purchases)\tof\tshort-term\tinvestments | 8 | (476) | 8 |
| Net\tcash\tprovided\tby\t(used\tfor)\tinvesting\tactivities\tfrom\tcontinuing\toperations | 2,379 | (1,444) | (2,368) |
| Financing |  |  |  |
| Net\tproceeds\tfrom\t(repayment\tof)\tcommercial\tpaper\tand\tshort-term\tborrowings | (242) | 66 | 11 |
| Repayment\tof\tdebt | (1,386) | (18) | (1,132) |
| Net\tproceeds\tfrom\tissuance\tof\tdebt | 1,415 | — | — |
| Issuance\tof\tcommon\tstock | 440 | 918 | 1,199 |
| Purchase\tof\tcommon\tstock | (3,035) | (3,826) | (874) |
| Excess\ttax\tbenefits\tfrom\tshare-based\tcompensation | 50 | 165 | — |
| Payment\tof\tdividends | (468) | (443) | (394) |
| Distribution\tfrom\t(to)\tdiscontinued\toperations | (75) | (23) | 283 |
| Net\tcash\tused\tfor\tfinancing\tactivities\tfrom\tcontinuing\toperations | (3,301) | (3,161) | (907) |
| Effect\tof\texchange\trate\tchanges\ton\tcash\tand\tcash\tequivalents\tfrom\tcontinuing\toperations | 73 | 148 | (105) |
| Discontinued\tOperations |  |  |  |
| Net\tcash\tprovided\tby\t(used\tfor)\toperating\tactivities\tfrom\tdiscontinued\toperations | (75) | (16) | 297 |
| Net\tcash\tused\tfor\tinvesting\tactivities\tfrom\tdiscontinued\toperations | — | (13) | (16) |
| Net\tcash\tprovided\tby\t(used\tfor)\tfinancing\tactivities\tfrom\tdiscontinued\toperations | 75 | 23 | (283) |
| Effect\tof\texchange\trate\tchanges\ton\tcash\tand\tcash\tequivalents\tfrom\tdiscontinued\toperations | — | 6 | 2 |
| Net\tcash\tprovided\tby\t(used\tfor)\tdiscontinued\toperations | — | — | — |
| Net\tincrease\t(decrease)\tin\tcash\tand\tcash\tequivalents | (64) | (958) | 928 |
| Cash\tand\tcash\tequivalents,\tbeginning\tof\tyear | 2,816 | 3,774 | 2,846 |
| Cash\tand\tcash\tequivalents,\tend\tof\tyear | $2,752 | $2,816 | $3,774 |
| Cash\tFlow\tInformation |  |  |  |
| Cash\tpaid\tduring\tthe\tyear\tfor: |  |  |  |
| Interest,\tnet | $312 | $322 | $318 |
| Income\ttaxes,\tnet\tof\trefunds | 440 | 463 | 703 |

# 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.	The Company's	investments	in	non-controlled	entities	in	which	it	has	the	ability	to	exercise	significant	influence	over	operating	and	financial	policies	are	accounted	for	by	the	equity	method.	The	Company's	investments	in other	entities	are	accounted	for	using	the	cost	method.

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.

Sigma	Fund:		The	Company	and	its	wholly-owned	subsidiaries	invested	most	of	their	excess	cash	in	a	fund	(the	"Sigma	Fund")	that	is	similar	to	a	money	market	fund.	During	2007,	the	Company	liquidated	a similar	second	fund	and	now	maintains	only	one	fund.	The	Sigma	Fund	portfolio	is	managed	by	four	major	independent	investment	management	firms.	Investments	are	made	in	high-quality,	investment	grade	(rated	at least	A/A-1	by	S&P	or	A2/P-1	by	Moody's	at	purchase	date),	U.S.	dollar-denominated	debt	obligations	including	certificates	of	deposit,	commercial	paper,	government	bonds,	corporate	bonds	and	asset-	and	mortgage- backed	securities.	The	Sigma	Fund's	investment	policies	require	that	floating	rate	instruments	must	have	a	maturity,	at	purchase	date,	that	does	not	exceed	thirty-six	months	with	an	interest	rate	reset	at	least	annually. The	average	reset	maturity	of	the	investments	held	by	the	funds	must	be	120	days	or	less	with	the	actual	average	reset	maturity	of	the	investments	being	40	days	and	53	days	at	December	31,	2007	and	2006,	respectively. While	the	Sigma	Fund	includes	some	securities	with	maturities	beyond	one	year,	the	fund	is	classified	as	short-term	because	it	represents	the	investments	of	cash	available	for	current	operating	needs.

Investments	in	the	Sigma	Fund	are	designated	as	available-for-sale	securities	recorded	at	fair	value.	As	of	December	31,	2006,	the	fair	value	of	the	Sigma	Fund	was	approximated	by	the	amortized	cost	method. Under	this	method,	investments	were	valued	at	cost	when	purchased	and	thereafter,	a	constant	proportionate	amortization	of	any	discount	or	premium	is	recorded	until	maturity	of	the	security.	During	the	year	ended 2007,	the	Sigma	Fund	fair	value	was	no	longer	approximated	by	the	amortized	cost	method	and,	accordingly,	an	unrealized	holding	loss	was	recorded.

For	all	available-for-sale	securities,	any	unrealized	holding	gains	and	losses,	net	of	taxes,	are	excluded	from	operating	results	and	are	recognized	as	a	component	of	Non-owner	changes	to	equity	until	realized.	The fair	values	of	the	securities	are	determined	based	on	prevailing	market	prices.	The	Company	assesses	declines	in	the	value	of	individual	investments	to	determine	whether	such	decline	is	other-than-temporary.	This assessment	is	made	by	considering	available	evidence,	including	changes	in	general	market	conditions,	specific	industry	and	individual	company	data,	the	length	of	time	and	the	extent	to	which	the	market	has	been	less than	cost,	the	financial	condition	and	near-term	prospects	of	the	individual	issuing	entity,	and	the	Company's	intent	and	ability	to	hold	the	investment	until	recovery.	Other-than-temporary	impairments	are	charged	to Other,	as	presented	in	Other	income	(expense)	within	the	Company's	consolidated	statements	of	operations,	in	the	period	in	which	they	become	impaired.

Investments:		Investments	include	available-for-sale	equity	securities,	held-to-maturity	debt	securities	at	amortized	cost,	securities	that	are	restricted	for	more	than	one	year	or	not	publicly	traded	at	cost,	and equity	method	investments.

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	on	October	1.	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	quoted	market	prices	of	comparable	businesses.

Intangible	assets	are	amortized	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.

Deferred	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	of	a	change	in	tax	rates	is	recognized	in	the	period	that	includes	the	enactment	date.	In	assessing	the realizability	of	the	deferred	tax	assets,	management	considers	whether	it	is	more	likely	than	not	that	some	or	all	of	the	deferred	tax	assets	will	not	be	realized.	A	valuation	allowance	is	recorded	for	the	portion	of	the deferred	tax	assets	that	are	not	expected	to	be	realized	based	on	the	level	of	historical	taxable	income,	projections	for	future	taxable	income	over	the	periods	in	which	the	temporary	differences	are	deductible	and allowable	tax	planning	strategies.	Beginning	January	1,	2007,	the	Company	recognizes	the	effect	of	income	tax	positions	only	if	sustaining	those	positions	is	more	likely	than	not.	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.

Finance	Receivables:		Finance	receivables	include	trade	receivables	where	contractual	terms	of	the	note	agreement	are	greater	than	one	year.	Finance	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	finance	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	finance receivables	are	recognized	only	when	payments	are	received.	Previously	impaired	finance	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	the	prior	period	month-end	exchange	rates.	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	into	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	included	in	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	Per	Share:		The	Company	calculates	its	basic	earnings	per	share	based	on	the	weighted-average	effect	of	all	common	shares	issued	and	outstanding.	Net	earnings	is	divided	by	the	weighted	average common

shares	outstanding	during	the	period	to	arrive	at	the	basic	earnings	per	share.	Diluted	earnings	per	share	is	calculated	by	dividing	net	earnings	by	the	sum	of	the	weighted	average	number	of	common	shares	used	in	the basic	earnings	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	and	restricted	stock,	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	Company's	consolidated	financial	statements	for	the	fiscal	year	ending	December	31,	2005 have	not	been	restated	to	reflect,	and	do	not	include,	the	impact	of	SFAS	123R.	The	amount	of	compensation	cost	for	share-based	awards	is	measured	based	on	the	fair	value	of	the	awards,	as	determined	by	the	Black- Scholes	option	pricing	model,	as	of	the	date	that	the	share-based	awards	are	issued	and	adjusted	for	the	estimated	number	of	awards	that	are	expected	to	vest.	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	$1.1	billion,	$1.2	billion	and	$972	million for	the	years	ended	December	31,	2007,	2006,	and	2005,	respectively.

Use	of	Estimates:		The	preparation	of	financial	statements	in	conformity	with	U.S.	generally	accepted	accounting	principles	requires	management	to	make	certain	estimates	and	assumptions	that	affect	the reported	amounts	of	assets,	liabilities,	revenues	and	expenses	and	the	disclosure	of	contingent	assets	and	liabilities	in	the	financial	statements.	Actual	results	may	differ	from	those	estimates.

Reclassifications:		Certain	amounts	in	prior	years'	financial	statements	and	related	notes	have	been	reclassified	to	conform	to	the	2007	presentation.

Recent	Accounting	Pronouncements:		The	Company	adopted	Financial	Accounting	Standards	Board	("FASB")	Interpretation	No.	48,	"Accounting	for	Uncertainty	in	Income	Taxes"	("FIN	48")	effective January	1,	2007.	Among	other	things	FIN	48	prescribes	a	"more-likely-than-not"	threshold	to	the	recognition	and	de-recognition	of	tax	positions,	provides	guidance	on	the	accounting	for	interest	and	penalties	relating	to tax	positions	and	requires	that	the	cumulative	effect	of	applying	the	provisions	of	FIN	48	shall	be	reported	as	an	adjustment	to	the	opening	balance	of	retained	earnings	or	other	appropriate	components	of	equity	or	net assets	in	the	statement	of	financial	position.	The	adoption	of	FIN	48	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	adoption	of	FIN	48,	the	Company	also	reclassified	unrecognized	tax	benefits	of $877	million	from	Deferred	income	taxes	to	Other	liabilities	in	the	Company's	consolidated	balance	sheets.

In	September	2006,	the	FASB	issued	Statement	of	Financial	Accounting	Standards	("SFAS")	No.	158,	"Employers'	Accounting	for	Defined	Benefit	Pension	and	Other	Postretirement	Plans"	("SFAS	158"). SFAS	158	has	certain	recognition	and	disclosure	requirements	which	the	Company	adopted	as	of	December	31,	2006.	Additionally,	SFAS	158	requires	employers	to	measure	defined	benefit	plan	assets	and	obligations as	of	the	date	of	the	statement	of	financial	position.	The	measurement	date	provision	of	SFAS	158	only	affects	the	Company's	non-U.S.	pension	plans.	The	Company	adopted	the	measurement	date	provisions	for	its Non-U.S.	pension	plans	as	of	December	31,	2007.	Upon	adoption	of	the	measurement	provisions,	the	Company	recorded	$17	million,	net	of	$2	million	of	taxes,	as	a	decrease	in	the	opening	balance	of	Retained	earnings at	January	1,	2007	in	the	consolidated	statements	of	stockholders'	equity.

In	September	2006,	the	FASB	issued	EITF	06-4,	"Accounting	for	Deferred	Compensation	and	Postretirement	Benefit	Aspects	of	Endorsement	Split-Dollar	Life	Insurance	Arrangements"	("EITF	06-4"). 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.	Under	the	provisions of	these	Statements,	a	liability	should	be	accrued	equal	to	the	actuarial	present	value	of	the	future	death	benefit	over	the	service	period.	EITF	06-4	is	effective	for	fiscal	years	beginning	after	December	15,	2007.	The Company	will	adopt	EITF	06-4	as	of	January	1,	2008	and	anticipates	that	the	adoption	of	this	pronouncement	will	result	in	an	increase	in	Other	liabilities	of	approximately	$50	million	with	the	offset	reflected	as	a cumulative-effect	adjustment	to	Retained	earnings.

# 2.	Discontinued	Operations

During	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	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.

| Years	Ended	December	31 | 2007 | 2006 | 2005 |
| :--- | :--- | :--- | :--- |
| Net\tsales\t(including\tsales\tto\tother\tMotorola\tbusinesses\tof\t$0\tmillion\tand\t$3\tmillion\tfor\tthe\tyears\tended\tDecember\t31,\t2006\tand\t2005,\trespectively) | $— | $860 | $1,581 |
| Operating\tearnings | 10 | 87 | 118 |
| Gains\ton\tsales\tof\tinvestments\tand\tbusinesses,\tnet | — | 399 | 16 |
| Earnings\tbefore\tincome\ttaxes | 10 | 482 | 135 |
| Income\ttax\texpense\t(benefit) | (46) | 82 | 76 |
| Earnings\tfrom\tdiscontinued\toperations,\tnet\tof\ttax | 56 | 400 | 59 |

# 3. Other	Financial	Data

# Statement	of	Operations	Information

# Earnings	(Loss)	Per	Common	Share

Basic	and	diluted	earnings	(loss)	per	common	share	from	both	continuing	operations	and	net	earnings	(loss),	which	includes	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 | 2007 | 2006 | 2005 | 2007 | 2006 | 2005 |
| Basic\tearnings\t(loss)\tper\tcommon\tshare: |  |  |  |  |  |  |
| Earnings\t(loss) | $(105) | $3,261 | $4,519 | $(49) | $3,661 | $4,578 |
| Weighted\taverage\tcommon\tshares\toutstanding | 2,312.7 | 2,446.3 | 2,471.3 | 2,312.7 | 2,446.3 | 2,471.3 |
| Per\tshare\tamount | $(0.05) | $1.33 | $1.83 | $(0.02) | $1.50 | $1.85 |
| Diluted\tearnings\t(loss)\tper\tcommon\tshare: |  |  |  |  |  |  |
| Earnings\t(loss) | $(105) | $3,261 | $4,519 | $(49) | $3,661 | $4,578 |
| Weighted\taverage\tcommon\tshares\toutstanding | 2,312.7 | 2,446.3 | 2,471.3 | 2,312.7 | 2,446.3 | 2,471.3 |
| Add\teffect\tof\tdilutive\tsecurities: |  |  |  |  |  |  |
| Employee\tshare-based\tawards | — | 57.9 | 55.7 | — | 57.9 | 55.7 |
| Diluted\tweighted\taverage\tcommon\tshares\toutstanding | 2,312.7 | 2,504.2 | 2,527.0 | 2,312.7 | 2,504.2 | 2,527.0 |
| Per\tshare\tamount | $(0.05) | $1.30 | $1.79 | $(0.02) | $1.46 | $1.81 |

In	the	computation	of	diluted	earnings	(loss)	per	common	share	from	both	continuing	operations	and	on	a	net	earnings	(loss)	basis	for	the	years	ended	December	31,	2007,	2006	and	2005	the	assumed	exercise	of 108.4	million,	76.6	million	and	44.8	million	stock	options,	respectively,	were	excluded	because	their	inclusion	would	have	been	antidilutive.

# Balance	Sheet	Information

# Sigma	Fund	and	Investments

Sigma	Fund	and	Investments	consist	of	the	following:

|  | Fair	Value | Fair	Value | Fair	Value | Less | Less |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Years\tEnded\tDecember\t31 | Sigma\nFund | Short-term\nInvestments | Investments | Unrealized\nGains | Unrealized\nLosses | Cost\nBasis |
| Available-for-sale\tsecurities: |  |  |  |  |  |  |
| Cash | $16 | $—\t $—\t $—\t $— | $—\t $—\t $—\t $— | $—\t $—\t $—\t $— | $—\t $—\t $—\t $— | $16 |
| Certificates\tof\tdeposit | 156 | 509 | — | — | — | 665 |
| Commercial\tpaper | 1,282 | — | — | — | — | 1,282 |
| Government\tand\tagencies | 25 | 19 | — | — | — | 44 |
| Corporate\tbonds | 3,125 | 1 | — | 1 | (48) | 3,173 |
| Asset-backed\tsecurities | 420 | — | — | — | (5) | 425 |
| Mortgage-backed\tsecurities | 209 | — | — | — | (5) | 214 |
| Common\tstock\tand\tequivalents | — | — | 333 | 40 | (79) | 372 |
| Other | 9 | 83 | — | — | — | 92 |
|  | 5,242 | 612 | 333 | 41 | (137) | 6,283 |
| Other\tsecurities,\tat\tcost | — | — | 414 | — | — | 414 |
| Equity\tmethod\tinvestments | — | — | 90 | — | — | 90 |
|  | $5,242 | $612 | $837 | $41 | $(137) | $6,787 |

|  | Fair	Value | Fair	Value | Fair	Value | Less | Less |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Years\tEnded\tDecember\t31 | Sigma\nFund | Short-term\nInvestments | Investments | Unrealized\nGains | Unrealized\nLosses | Cost\nBasis |
| Available-for-sale\tsecurities: |  |  |  |  |  |  |
| Commercial\tpaper | $4,461 | $—\t $—\t $—\t $— | $—\t $—\t $—\t $— | $—\t $—\t $—\t $— | $—\t $—\t $—\t $— | $4,461 |
| Certificates\tof\tdeposit | — | 574 | — | — | — | 574 |
| Bank\tobligation\tnotes | 392 | — | — | — | — | 392 |
| Government\tand\tagencies | 330 | 20 | — | — | — | 350 |
| Short-term\tcorporate\tobligation | 40 | — | — | — | — | 40 |
| Corporate\tbonds | 5,791 | 2 | — | — | — | 5,793 |
| Asset-backed\tsecurities | 860 | — | — | — | — | 860 |
| Mortgage-backed\tsecurities | 285 | — | — | — | — | 285 |
| Common\tstock\tand\tequivalents | — | — | 130 | 68 | (8) | 70 |
| Other | 45 | 24 | — | — | — | 69 |
|  | 12,204 | 620 | 130 | 68 | (8) | 12,894 |
| Other\tsecurities,\tat\tcost | — | — | 676 | — | — | 676 |
| Equity\tmethod\tinvestments | — | — | 89 | — | — | 89 |
|  | $12,204 | $620 | $895 | $68 | $(8) | $13,659 |

During	the	year	ended	December	31,	2007,	the	Company	recorded	a	$75	million	reduction	in	the	available-for-sale	securities	held	in	the	Sigma	Fund,	reflecting	a	decline	in	the	fair	value	of	the	securities.	As	of December	31,	2007,	$57	million	of	this	reduction	represents	a	broad-based	temporary	decline	in	market	value	of	various	securities	primarily	due	to	credit	spreads	widening	in	several	debt	market	segments,	with	the offsetting	reduction	reflected	in	Non-owners	changes	to	equity.	The	Company	believes	credit	market	spreads	will	return	to	normal	levels	in	the	future.	Additionally,	due	to	the	high	credit	ratings	of	the	underlying securities,	it	is	probable	that	the	Company	will	be	able	to	collect	all	amounts	according	to	the	contractual	terms	of	the	corporate	bonds	where	fair	values	are	less	than	their	cost	as	of	December	31,	2007.	It	is	for	these reasons	that	the	unrealized	losses	on	these	corporate	bonds	are	considered	temporary.	If	it	becomes	probable	that	the	Company	will	not	collect	all	amounts	in	accordance	with	the	contractual	terms	of	a	corporate	bond, the	Company	considers	the	decline	other-than-temporary.	The	remaining	$18	million	reduction	in	available-for-sale	securities	held	by	the	Sigma	Fund	represents	an	other-than-temporary	decline	and	has	been	reflected as	an	investment	impairment.

As	of	December	31,	2007,	there	is	an	unrealized	loss	of	$79	million	associated	with	common	stock	and	equivalents,	of	which	$75	million	is	attributable	to	one	equity	security	with	a	fair	value	of	$228	million	as	of December	31,	2007.	Based	on	positive	analyst	coverage	surrounding	this	equity	security	and	the	ability	for	strong	growth,	the	Company	believes	the	security	will	recover	to	its	cost	basis.	Additionally,	the	Company	has both	the	ability	and	intent	to	hold	the	common	stock	and	equivalents	until	recovery.	Accordingly,	the	unrealized	loss	is	considered	temporary.

The	Company	recorded	investment	impairment	charges	of	$62	million,	$27	million	and	$25	million	for	the	years	ended	December	31,	2007,	2006	and	2005,	respectively.	These	impairment	charges	represent other-than-temporary	declines	in	the	value	of	the	Company's	Sigma	Fund	and	investment	portfolios.	Investment	impairment	charges	are	included	in	Other	within	Other	income	(expense)	in	the	Company's	consolidated statements	of	operations.

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

| Years	Ended	December	31 | 2007 | 2006 | 2005 |
| :--- | :--- | :--- | :--- |
| Gains\ton\tsales\tof\tinvestments | $17 | $41 | $1,848 |
| Gains\t(loss)\ton\tsales\tof\tbusinesses | 33 | — | (3) |
|  | $50 | $41 | $1,845 |

In	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.

In	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").

During	the	first	half	of	2005,	the	Company	sold	22.5	million	shares	of	common	stock	of	Nextel	Communications,	Inc.	("Nextel").	The	Company	received	approximately	$679	million	in	cash	and	realized	a	pre-tax gain	of	$609	million	from	these	sales.

On	August	12,	2005,	Sprint	Corporation	completed	its	merger	(the	"Sprint	Nextel	Merger")	with	Nextel.	In	connection	with	the	Sprint	Nextel	Merger,	Motorola	received	$46	million	in	cash,	31.7	million	voting shares	and	37.6	million	non-voting	shares	of	Sprint	Nextel,	in	exchange	for	its	remaining	54.7	million	shares	of	Nextel.	As	a	result	of	this	transaction,	the	Company	realized	a	gain	of	$1.3	billion,	comprised	of	a $1.7	billion	gain	recognized	on	the	receipt	of	cash	and	the	69.3	million	shares	of	Sprint	Nextel	in	exchange	for	its	shares	of	Nextel,	net	of	a	$418	million	loss	recognized	on	its	hedge	of	25	million	shares	of	common stock	of	Nextel.

During	the	fourth	quarter	of	2005,	the	Company	elected	to	settle	variable	share	purchase	agreements	by	delivering	30.3	million	shares	of	Sprint	Nextel	common	stock,	with	a	value	of	$725	million,	to	the counterparties	and	selling	the	remaining	1.4	million	Sprint	Nextel	common	shares	in	the	open	market.	The	Company	received	aggregate	cash	proceeds	of	$391	million	and	realized	a	loss	of	$70	million	in	connection with	the	settlement	and	sale.

On	December	14,	2004,	in	connection	with	the	announcement	of	the	definitive	agreement	relating	to	the	Sprint	Nextel	Merger,	Motorola,	a	Motorola	subsidiary	and	Nextel	entered	into	an	agreement	pursuant	to which	Motorola	and	its	subsidiary	agreed	to	not	dispose	of	their	29.7	million	non-voting	shares	of	Nextel	(which	became	37.6	million	shares	of	non-voting	common	stock	of	Sprint	Nextel	issued	in	exchange	for	Nextel non-voting	common	stock	pursuant	to	the	Sprint	Nextel	Merger)	for	a	period	of	no	longer	than	two	years.	In	exchange	for	this	agreement,	Nextel	paid	Motorola	a	fee	of	$50	million	in	2005.

# Accounts	Receivable

       Accounts	receivable,	net,	consists	of	the	following:

# Stockholders'	Equity	Information

# Comprehensive	Earnings	(Loss)

Net	unrealized	gains	(losses)	on	securities	included	in	Comprehensive	earnings	(loss)	are	comprised	of	the	following:

| Years	Ended	December	31 | 2007 | 2006 | 2005 |
| :--- | :--- | :--- | :--- |
| Gross\tunrealized\tgains\t(losses)\ton\tsecurities,\tnet\tof\ttax | $(102) | $31 | $(204) |
| Less:\tRealized\tgains\t(losses),\tnet\tof\ttax | (6) | 91 | 1,116 |
| Net\tunrealized\tlosses\ton\tsecurities,\tnet\tof\ttax | $(96) | $(60) | $(1,320) |

# Share	Repurchase	Program

Share	Repurchase	Program:		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.	In	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.	In	2005,	the	Company	repurchased	a	total	of	41.7	million	shares	at	an	aggregate	cost of	$874	million,	or	an	average	cost	of	$20.96	per	share.	Since	the	inception	of	its	first-ever	share	repurchase	program	in	May	2005,	the	Company	has	repurchased	a	total	of	384.6	million	of	its	common	shares	for	an aggregate	cost	of	$7.7	billion.	All	repurchased	shares	have	been	retired.

# 4. Debt	and	Credit	Facilities

| December	31 | 2007 | 2006 |
| :--- | :--- | :--- |
| 7.6%\tnotes\tdue\t2007 | $— | $118 |
| 4.608%\tsenior\tnotes\tdue\t2007 | — | 1,205 |
| 6.5%\tnotes\tdue\t2008 | 114 | 114 |
| 5.8%\tnotes\tdue\t2008 | 84 | 84 |
| 7.625%\tnotes\tdue\t2010 | 527 | 525 |
| 8.0%\tnotes\tdue\t2011 | 599 | 599 |
| 5.375%\tsenior\tnotes\tdue\t2012 | 400 | — |
| 6.0%\tsenior\tnotes\tdue\t2017 | 399 | — |
| 6.5%\tdebentures\tdue\t2025 | 397 | 397 |
| 7.5%\tdebentures\tdue\t2025 | 398 | 398 |
| 6.5%\tdebentures\tdue\t2028 | 297 | 297 |
| 6.625%\tsenior\tnotes\tdue\t2037 | 596 | — |
| 5.22%\tdebentures\tdue\t2097 | 195 | 194 |
| Other\tlong-term\tdebt | 145 | 141 |
|  | 4,151 | 4,072 |
| Fair\tvalue\tadjustment | 38 | (28) |
| Less:\tcurrent\tportion | (198) | (1,340) |
| Long-term\tdebt | $3,991 | $2,704 |

| December	31 | 2007 | 2006 |
| :--- | :--- | :--- |
| Notes\tto\tbanks | $134 | $71 |
| Commercial\tpaper | — | 300 |
|  | 134 | 371 |
| Add:\tcurrent\tportion | 198 | 1,340 |
| Fair\tvalue\tadjustment | — | (18) |
| Notes\tpayable\tand\tcurrent\tportion\tof\tlong-term\tdebt | $332 | $1,693 |
| Weighted\taverage\tinterest\trates\ton\tshort-term\tborrowings\tthroughout\tthe\tyear |  |  |
| Commercial\tpaper | 5.3% | 5.1% |
| Other\tshort-term\tdebt | 4.6% | 5.8% |

In	November	2007,	the	Company	repaid,	at	maturity,	the	entire	$1.2	billion	aggregate	principal	amount	outstanding	of	its	4.608%	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.

In	September	2005,	the	Company	repurchased	an	aggregate	principal	amount	of	$1.0	billion	of	its	outstanding	long-term	debt	for	an	aggregate	purchase	price	of	$1.1	billion	through	cash	tender	offers.	Included	in the	$1.0	billion	of	long-term	debt	repurchased	were	repurchases	of	a	principal	amount	of:	(i)	$86	million	of	the	$200	million	of	6.50%	Notes	due	2008	outstanding,	(ii)	$241	million	of	the	$325	million	of	5.80%	Notes due	2008	outstanding,	and	(iii)	$673	million	of	the	$1.2	billion	of	7.625%	Notes	due	2010	outstanding.	In	addition,	the	Company	terminated	a	notional	amount	of	$1.0	billion	of	fixed-to-floating	interest	rate	swaps associated	with	the	debt	repurchased,	resulting	in	an	expense	of	approximately	$22	million.	The	aggregate	charge	for	the	repurchase	of	the	debt	and	the	termination	of	the	associated	interest	rate	swaps,	as	presented	in Other	income	(expense)	in	the	Company's	consolidated	statements	of	operations,	was	$137	million.

In	September	2005,	the	Company	retired	approximately	$1	million	of	the	$398	million	of	6.5%	Debentures	due	2025	(the	"2025	Debentures")	in	connection	with	the	holders	of	the	debentures	right	to	put	their debentures	back	to	the	Company.	The	residual	put	options	expired	unexercised	and	the	remaining	$397	million	of	2025	Debentures	were	reclassified	to	long-term	debt.

Aggregate	requirements	for	long-term	debt	maturities	during	the	next	five	years	are	as	follows:

In	December	2006,	the	Company	signed	a	new	five-year	revolving	domestic	credit	facility	("5-Year	Credit	Facility")	for	$2.0	billion,	replacing	the	$1.0	billion	facility	due	to	expire	in	May	2007.	At	December	31, 2007,	the	commitment	fee	assessed	against	the	daily	average	amounts	unused	was	8.0	basis	points.	Important	terms	of	the	5-Year	Credit	Facility	include	a	covenant	relating	to	the	ratio	of	total	debt	to	EBITDA.	The Company	was	in	compliance	with	the	terms	of	the	5-year	Credit	Facility	at	December	31,	2007.

The	Company's	current	corporate	credit	ratings	are	"BBB"	on	rating	watch	negative	by	Fitch,	"Baa1"	with	a	review	for	possible	downgrade	by	Moody's,	and	"BBB"	on	credit	watch	negative	by	S&P.	The Company	has	never	borrowed	under	its	domestic	revolving	credit	facilities.	The	Company	also	has	$2.3	billion	of	uncommitted	non-U.S.	credit	facilities	with	interest	rates	on	borrowings	varying	from	country	to country	depending	upon	local	market	conditions.	At	December	31,	2007,	the	Company's	total	domestic	and	non-U.S.	credit	facilities	totaled	$4.3	billion,	of	which	$314	million	was	considered	utilized.

# 5. Risk	Management

# Derivative	Financial	Instruments

The	Company	recorded	income	of	$1	million,	$13	million	and	$1	million	for	the	years	ended	December	31,	2007,	2006	and	2005,	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,	2007,	2006	and	2005	are	included	in	the	amounts	noted	above.

The	weighted	average	short-term	LIBOR-based	variable	rate	payments	on	each	of	the	above	interest	rate	swaps	was	6.60%	for	the	three	months	ended	December	31,	2007.	The	fair	value	of	the	above	interest	rate swaps	at	December	31,	2007	and	December	31,	2006,	was	$36	million	and	$(47)	million,	respectively.	Except	as	noted	below,	the	Company	had	no	outstanding	commodity	derivatives,	currency	swaps	or	options relating	to	debt	instruments	at	December	31,	2007	or	December	31,	2006.

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 floating	based	on	3-month	EURIBOR	plus	a	spread.	The	Interest	Agreements	change	the	characteristics	of	interest	rate	payments	from	short-term	EURIBOR	based	variable	payments	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	EURIBOR	interest	rate	agreements	was	6.71%.

The	fair	value	of	the	Interest	Agreements	at	December	31,	2007	and	December	31,	2006	was	$3	million	and	$1	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,	2007	and	2006	is	as	follows:

|  | 2007 | 2006 | 2005 |
| :--- | :--- | :--- | :--- |
| Balance\tat\tJanuary\t1 | $16 | $2 | $(272) |
| Increase\t(decrease)\tin\tfair\tvalue | (6) | 75 | 28 |
| Reclassifications\tto\tearnings | (10) | (61) | 246 |
| Balance\tat\tDecember\t31 | $— | $16 | $2 |

# 6. Income	Taxes

Components	of	earnings	(loss)	from	continuing	operations	before	income	taxes	are	as	follows:

Deferred	tax	charges	(benefits)	that	were	recorded	within	Non-owner	changes	to	equity	in	the	Company's	consolidated	balance	sheets	resulted	from	fair	value	adjustments	to	available-for-sale	securities,	net unrealized	losses	on	securities,	net	gains	(losses)	on	derivative	instruments	and	retirement	benefit	adjustments.	The	adjustments	were	$306	million,	$(182)	million	and	$(753)	million	for	the	years	ended	December	31, 2007,	2006	and	2005,	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	$4.1	billion,	$4.0	billion	and $2.8	billion	at	December	31,	2007,	2006	and	2005,	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 | 2007 | 2006 | 2005 |
| :--- | :--- | :--- | :--- |
| Income\ttax\texpense\t(benefit)\tat\tstatutory\trate | $(137) | $1,613 | $2,244 |
| Taxes\ton\tnon-U.S.\tearnings | (206) | (449) | (460) |
| State\tincome\ttaxes | (28) | 77 | 121 |
| Tax\tbenefit\ton\tqualifying\trepatriations | — | (68) | (265) |
| Tax\ton\tundistributed\tnon-U.S.\tearnings | 72 | 194 | 202 |
| Research\tcredits | (46) | (34) | (23) |
| Foreign\texport\tsales\tand\tsection\t199\tdeduction | — | (22) | (13) |
| Non-deductible\tacquisition\tcharges | 34 | 4 | 2 |
| Taxes\ton\tsale\tof\tbusinesses | 15 | — | (81) |
| Other\tprovisions | 119 | 247 | 233 |
| Charitable\tcontributions | — | (28) | — |
| Valuation\tallowance | (97) | (187) | (88) |
| Other | (11) | 2 | 21 |
|  | $(285) | $1,349 | $1,893 |

On	October	22,	2004,	the	American	Jobs	Creation	Act	of	2004	("the	Act")	was	signed	into	law.	The	Act	provides	for	a	special	one-time	tax	incentive	for	U.S.	multinationals	to	repatriate	accumulated	earnings from	their	foreign	subsidiaries	by	providing	an	85	percent	dividends	received	deduction	for	certain	qualifying	dividends.	The	Company	repatriated	approximately	$4.6	billion	of	accumulated	earnings	under	the	Act	and recorded	an	associated	tax	benefit	of	$265	million	in	2005.	The	Company	finalized	certain	actions	maximizing	the	tax	benefit	attributable	to	the	repatriation	of	foreign	earnings	under	the	provisions	of	the	Act	and recognized	an	additional	$68	million	of	net	tax	benefits	relating	to	these	actions	during	2006.

Gross	deferred	tax	assets	were	$8.9	billion	and	$8.7	billion	at	December	31,	2007	and	2006,	respectively.	Deferred	tax	assets,	net	of	valuation	allowances,	were	$8.4	billion	and	$8.0	billion	at	December	31,	2007 and	2006,	respectively.	Gross	deferred	tax	liabilities	were	$4.1	billion	and	$5.0	billion	at	December	31,	2007	and	2006,	respectively.

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

| December	31 | 2007 | 2006 |
| :--- | :--- | :--- |
| Inventory | $162 | $163 |
| Accrued\tliabilities\tand\tallowances | 551 | 380 |
| Employee\tbenefits | 408 | 915 |
| Capitalized\titems | 621 | 915 |
| Tax\tbasis\tdifferences\ton\tinvestments | 105 | 110 |
| Depreciation\ttax\tbasis\tdifferences\ton\tfixed\tassets | 33 | 89 |
| Undistributed\tnon-U.S.\tearnings | (397) | (329) |
| Tax\tcarryforwards | 2,553 | 1,515 |
| Available-for-sale\tsecurities | 35 | (23) |
| Business\treorganization | 78 | 38 |
| Warranty\tand\tcustomer\treserves | 334 | 398 |
| Deferred\trevenue\tand\tcosts | 205 | 224 |
| Valuation\tallowances | (515) | (740) |
| Deferred\tcharges | 44 | 46 |
| Other | 95 | (728) |
|  | $4,312 | $2,973 |

At	December	31,	2007	and	2006,	the	Company	had	valuation	allowances	of	$515	million	and	$740	million,	respectively,	against	its	deferred	tax	assets,	including	$310	million	and	$523	million,	respectively, relating	to	deferred	tax	assets	for	non-U.S.	subsidiaries.	The	net	change	in	the	total	valuation	allowance	was	a	decrease	of	$225	million	and	$156	million	in	2007	and	2006,	respectively,	primarily	attributable	to:	(i)	the reversal	of	valuation	reserves	in	Germany,	UK	and	Israel	based	on	additional	positive	evidence	supporting	a	conclusion	that	the	Company	would	more	likely	than	not	be	able	to	utilize	the	tax	carryforwards	and	deferred tax	assets	in	the

future,	and	(ii)	reversals	of	valuation	reserves	recorded	as	an	offset	to	Non-owner	changes	to	equity	and	Goodwill	in	the	Company's	consolidated	balance	sheets.

The	valuation	allowances	relate	primarily	to	tax	carryforwards,	including	tax	carryforwards	of	acquired	businesses	which	have	limitations	upon	their	use,	state	tax	carryforwards	with	short	expiration	periods	and future	capital	losses	related	to	certain	investments.	Additionally,	$37	million	of	valuation	reserves	relate	to	deferred	tax	assets	established	in	connection	with	acquisitions	which,	if	reversed,	would	be	a	reduction	in goodwill	or	other	identifiable	intangible	assets.	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,	2007	are	as	follows:

| U.S.	tax	losses | $1,422 | $498 | 2019-2027 |
| :--- | :--- | :--- | :--- |
| Foreign\ttax\tcredits | n/a | 814 | 2013-2017 |
| General\tbusiness\tcredits | n/a | 523 | 2018-2027 |
| Minimum\ttax\tcredits | n/a | 107 | Unlimited |
| Capital\tlosses | 36 | 13 | 2011 |
| State\ttax\tlosses | 3,367 | 102 | 2008-2027 |
| State\ttax\tcredits | n/a | 54 | 2009-2024 |
| Non-U.S.\tSubsidiaries: |  |  |  |
| United\tKingdom\ttax\tlosses | 572 | 160 | Unlimited |
| Germany\ttax\tlosses | 374 | 108 | Unlimited |
| Brazil\thedge\tlosses | 66 | 22 | Unlimited |
| Turkey\ttax\tlosses | 105 | 21 | 2012 |
| Israel\ttax\tlosses | 75 | 20 | Unlimited |
| Korea\ttax\tlosses | 45 | 12 | 2008 |
| Other\tsubsidiaries\ttax\tlosses | 51 | 14 | Various |
| Spain\ttax\tcredits | n/a | 32 | 2014-2021 |
| Other\tsubsidiaries\ttax\tcredits | n/a | 53 | 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:

(1) Includes	acquisitions.

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

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

# 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.

The	Company	is	currently	contesting	significant	tax	adjustments	related	to	transfer	pricing	for	the	1996	through	2003	tax	years	at	the	appellate	level	of	the	Internal	Revenue	Service	("IRS").	The	Company disagrees	with	all	of	these	proposed	transfer	pricing-related	adjustments	and	intends	to	vigorously	dispute	them	through	applicable	IRS	and	judicial	procedures,	as	appropriate.	However,	if	the	IRS	were	to	ultimately prevail	on	these	matters,	it	could	result	in:	(i)	additional	taxable	income	for	the	years	1996	through	2000	of	approximately	$1.4	billion,	which	could	result	in	additional	income	tax	liability	for	the	Company	of approximately	$500	million,	and	(ii)	additional	taxable	income	for	the	years	2001	and	2002	of	approximately	$800	million,	which	could	result	in	additional	income	tax	liability	for	the	Company	of	approximately $300	million.	The	IRS	is	currently	reviewing	a	claim	for	additional	research	tax	credits	for	the	years	1996-2003.	The	IRS	is	conducting	its	field	examination	of	the	Company's	2004	and	2005	tax	returns.	Although	the final	resolution	of	these	matters	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	could	have	a	material	adverse	effect	on	the	Company's	consolidated	financial	position,	liquidity	or results	of	operations	in	the	periods	in	which	the	matter	is	ultimately	resolved.	It	is	reasonably	possible	that	within	the	next	12	months,	these	disputes	will	be	resolved	and	such	resolution	may	have	a	significant	impact upon	the	amount	of	unrecognized	tax	benefits	related	to	these	issues.

The	Company	has	several	other	non-U.S.	income	tax	audits	pending	and	while	the	final	resolution	is	uncertain,	in	the	opinion	of	the	Company's	management,	the	ultimate	disposition	of	the	audits	will	not	have	a material	adverse	effect	on	the	Company's	consolidated	financial	position,	liquidity	or	results	of	operations.

Based	on	the	outcome	of	these	examinations,	or	as	a	result	of	the	expiration	of	statute	of	limitations	for	specific	jurisdictions,	it	is	reasonably	possible	that	the	related	unrecognized	tax	benefits	for	tax	positions taken	regarding	previously	filed	tax	returns	will	differ	from	those	recorded	as	liabilities	in	the	Company's	consolidated	balance	sheets	at	December	31,	2007.	The	Company	anticipates	that	it	is	reasonably	possible	that within	the	next	12	months,	several	of	the	audits	may	be	finalized	resulting	in	a	reduction	in	unrecognized	tax	benefits	of	approximately	$40	million.	However,	based	on	the	number	of	tax	years	currently	under	audit	by the	relevant	federal,	state	and	foreign	tax	authorities,	the	status	of	these	examinations,	and	the	protocol	of	finalizing	audits	by	the	relevant	tax	authorities,	which	could	include	formal	legal	proceedings,	it	is	not	possible to	estimate	the	impact	of	any	other	amounts	of	such	changes,	if	any,	to	previously	recorded	uncertain	tax	positions.

# 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.

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	will	be	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.

The	net	periodic	pension	cost	for	the	Regular	Pension	Plan,	Officers'	Plan	and	MSPP	and	Non-U.S.	plans	was	as	follows:

# Regular	Pension	Plan

The	status	of	the	Company's	plans	is	as	follows:

|  | 2007 | 2007 | 2007 | 2006 | 2006 | 2006 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Regular | Officers'\nand\nMSPP | Non\nU.S. | Regular | Officers'\nand\nMSPP | Non\nU.S. |
| Change\tin\tbenefit\tobligation: |  |  |  |  |  |  |
| Benefit\tobligation\tat\tJanuary\t1 | $5,481 | $137 | $1,798 | $5,175 | $160 | $1,520 |
| Service\tcost | 133 | 4 | 55 | 150 | 5 | 40 |
| Interest\tcost | 311 | 7 | 111 | 309 | 8 | 67 |
| Plan\tamendments | (268) | (3) | 1 | — | — | — |
| Settlement/curtailment | — | — | (16) | — | — | — |
| Actuarial\t(gain)\tloss | (561) | (7) | (287) | 76 | (13) | (10) |
| Foreign\texchange\tvaluation\tadjustment | — | — | 49 | — | — | 195 |
| Employee\tcontributions | — | — | 14 | — | — | 12 |
| Tax\tpayments | — | (1) | — | — | (3) | — |
| Benefit\tpayments | (217) | (19) | (36) | (229) | (20) | (26) |
| Benefit\tobligation\tat\tDecember\t31 | 4,879 | 118 | 1,689 | 5,481 | 137 | 1,798 |
| Change\tin\tplan\tassets: |  |  |  |  |  |  |
| Fair\tvalue\tat\tJanuary\t1 | 4,285 | 78 | 1,178 | 3,736 | 92 | 896 |
| Return\ton\tplan\tassets | 336 | 4 | 98 | 508 | 3 | 55 |
| Company\tcontributions | 270 | 4 | 135 | 270 | 6 | 122 |
| Employee\tcontributions | — | — | 14 | — | — | 12 |
| Foreign\texchange\tvaluation\tadjustment | — | — | 14 | — | — | 119 |
| Tax\tpayments\tfrom\tplan\tassets | — | (1) | — | — | (3) | — |
| Benefit\tpayments\tfrom\tplan\tassets | (217) | (19) | (36) | (229) | (20) | (26) |
| Fair\tvalue\tat\tDecember\t31 | 4,674 | 66 | 1,403 | 4,285 | 78 | 1,178 |
| Funded\tstatus\tof\tthe\tplan | (205) | (52) | (286) | (1,196) | (59) | (620) |
| Unrecognized\tnet\tloss | 954 | 43 | 168 | 1,612 | 53 | 469 |
| Unrecognized\tprior\tservice\tcost | (263) | (5) | 4 | (25) | (2) | 4 |
| Prepaid\t(accrued)\tpension\tcost | $486 | $(14) | $(114) | $391 | $(8) | $(147) |
| Components\tof\tprepaid\t(accrued)\tpension\tcost: |  |  |  |  |  |  |
| Prepaid\tbenefit\tcost | $—\t $— | $—\t $— | $19 | $—\t $— | $—\t $— | $13 |
| Current\tbenefit\tliability | — | — | — | — | (3) | (3) |
| Non-current\tbenefit\tliability | (205) | (52) | (305) | (1,196) | (56) | (630) |
| Deferred\tincome\ttaxes | 255 | 14 | 4 | 587 | 19 | 2 |
| Non-owner\tchanges\tto\tequity | 436 | 24 | 168 | 1,000 | 32 | 471 |
| Prepaid\t(accrued)\tpension\tcost | $486 | $(14) | $(114) | $391 | $(8) | $(147) |

The	funded	status	of	the	Company's	Non-U.S.	pension	plans	reflects	the	change	in	measurement	date	from	October	to	December	31	in	connection	with	the	adoption	of	SFAS	158	in	2007.	This	change	required	the Company	to	obtain	a	cost	projection	of	fifteen	months,	which	covered	the	period	of	October	1,	2006	to	December	31,	2006	as	well	as	the	fiscal	year	2007.	The	costs	pertaining	to	the	period	October	1,	2006	to December	31,	2006	were	treated	as	a	direct	charge	to	opening	retained	earnings.	The	statement	of	stockholders'	equity	reflects	a	decrease	in	retained	earnings	of	$17	million,	net	of	taxes	of	$2	million,	as	of	January	1, 2007.

It	is	estimated	that	the	net	periodic	cost	for	2008	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	$23	million,	$3	million,	and	$2	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	large	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	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	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:

| 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: |  |  |
| :--- | :--- | :--- |
|  | Target\tMix |  |
| Asset\tCategory | 2007 | 2006 |
| Equity\tsecurities | 71% | 75% |
| Fixed\tincome\tsecurities | 27% | 24% |
| Cash\tand\tother\tinvestments | 2% | 1% |

| The	weighted-average	pension	plan	asset	allocation	at	December	31,	2007	and	2006	by	asset	categories	was	as	follows: |  |  |
| :--- | :--- | :--- |
|  | Actual\tMix |  |
| Asset\tCategory | 2007 | 2006 |
| Equity\tsecurities | 70% | 75% |
| Fixed\tincome\tsecurities | 27% | 24% |
| Cash\tand\tother\tinvestments | 3% | 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,	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	$240	million	to	its	U.S.	pension	plans	and	approximately	$50	million	to	its	non-U.S.	pension	plans	in	2008.

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. |
| :--- | :--- | :--- | :--- |
| 2008 | $196 | $14 | $25 |
| 2009 | 211 | 5 | 26 |
| 2010 | 220 | 13 | 27 |
| 2011 | 235 | 21 | 28 |
| 2012 | 251 | 22 | 30 |
| 2013-2017 | 1,544 | 26 | 173 |

# Postretirement	Health	Care	Benefit	Plan

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,	2007.

      The	assumptions	used	were	as	follows:

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	2008	will	include	amortization	of	the	unrecognized	net	loss	and	prior	service	costs,	currently	included	in	Non-owner changes	in	equity,	of	$2	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	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,	2007	and	2006	by	asset	categories	were	as	follows: |  |  |
| :--- | :--- | :--- |
|  | Actual\tMix |  |
| Asset\tCategory | 2007 | 2006 |
| Equity\tsecurities | 74% | 75% |
| Fixed\tincome\tsecurities | 25% | 22% |
| Cash\tand\tother\tinvestments | 1% | 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,	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	cash	contributions	of	approximately	$20	million	to	the	retiree	health	care	plan	in	2008.	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,	2007	accumulated	postretirement	benefit	obligation	is	9%	for	2008.	Beyond	2008,	the	rate	is	assumed	to	decrease	by	1%	per	year	until	it	reaches	5% by	2012	and	then	remains	flat.	The	health	care	trend	rate	used	to	determine	the	December	31,	2006	accumulated	postretirement	benefit	obligation	was	10%.

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.

# 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.	The	Company's	expenses,	primarily	relating	to	the	employer	match,	for	all	defined	contribution	plans,	for	the	years	ended	December	31, 2007,	2006	and	2005	were	$116	million,	$105	million	and	$105	million,	respectively.

# 8. Share-Based	Compensation	Plans	and	Other	Incentive	Plans

# Stock	Options	and	Employee	Stock	Purchase	Plan

The	Company	grants	options	to	acquire	shares	of	common	stock	to	certain	employees,	non-employee	directors	and	to	existing	option	holders	in	connection	with	the	merging	of	option	plans	following	an acquisition.	Each	option	granted	has	an	exercise	price	of	100%	of	the	fair	market	value	of	the	common	stock	on	the	date	of	the	grant.	Most	option	awards	have	a	contractual	life	of	ten	years	and	vest	over	four	years. Upon	the	occurrence	of	a	change	in	control,	each	stock	option	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,	2007,	2006	and	2005,	employees	purchased	10.2	million,	8.3	million	and	11.9	million	shares,	respectively,	at	purchase	prices	of	$14.93	and	$15.02,	$19.07	and	$19.82,	and	$12.66	and	$12.72, respectively.

      Compensation	expense	for	the	Company's	employee	stock	options	and	employee	stock	purchase	plans	was	as	follows:

| respectively. |  |  |
| :--- | :--- | :--- |
| Compensation\texpense\tfor\tthe\tCompany's\temployee\tstock\toptions\tand\temployee\tstock\tpurchase\tplans\twas\tas\tfollows: |  |  |
| Year\tEnded\tDecember\t31 | 2007 | 2006 |
| Share-based\tcompensation\texpense\tincluded\tin: |  |  |
| Costs\tof\tsales | $33 | $30 |
| Selling,\tgeneral\tand\tadministrative\texpenses | 149 | 138 |
| Research\tand\tdevelopment\texpenditures | 94 | 84 |
| Share-based\tcompensation\texpense\tfor\temployee\tstock\toptions\tand\temployee\tstock\tpurchase\tplans\tincluded\tin\tOperating\tearnings\t(loss) | 276 | 252 |
| Tax\tbenefit | 85 | 78 |
| Share-based\tcompensation\texpense\tfor\temployee\tstock\toptions\tand\temployee\tstock\tpurchase\tplans,\tnet\tof\ttax | $191 | $174 |
| Decrease\tin\tBasic\tearnings\tper\tshare | $(0.08) | $(0.07) |
| Decrease\tin\tDiluted\tearnings\tper\tshare | $(0.08) | $(0.07) |

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	2007,	2006	and	2005	was	$5.95,	$9.23,	and	$5.75,	respectively,	using	the	following	weighted-average	assumptions:

|  | 2007 | 2006 | 2005 |
| :--- | :--- | :--- | :--- |
| Expected\tvolatility | 28.3% | 36.2% | 35.2% |
| Risk-free\tinterest\trate | 4.5% | 5.0% | 3.9% |
| Dividend\tyield | 1.1% | 0.8% | 1.0% |
| Expected\tlife\t(years) | 6.5 | 6.5 | 5.0 |

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.	Prior	to	2006,	the	Company	used	a blended	volatility	rate	using	a	combination	of	historical	stock	price	volatility	and	market-implied	volatility	for	purposes	of	its	pro	forma	information.	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	and	future	expectation	of	dividend	payouts.	The	expected	life	of	employee	stock	options	represents	the	weighted-average	period	the	stock	options	are	expected	to	remain outstanding.

The	Company	has	applied	a	forfeiture	rate,	estimated	based	on	historical	data,	of	25%	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.	Prior	to	2006,	the	Company	used	the	actual	forfeiture	method,	which	assumed	that	all	options	would	vest	with	the	pro	forma	expense	adjusted	when options	were	forfeited	prior	to	the	vesting	dates.

Stock	option	activity	was	as	follows	(in	thousands,	except	exercise	price	and	employee	data):

|  | 2007 | 2007 | 2006 | 2006 | 2005 | 2005 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| 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 | 233,445 | $18 | 267,755 | $17 | 335,757 | $16 |
| Options\tgranted | 40,257 | 18 | 37,202 | 21 | 40,675 | 16 |
| Options\texercised | (26,211) | 11 | (59,878) | 13 | (85,527) | 12 |
| Options\tterminated,\tcanceled\tor\texpired | (23,236) | 19 | (11,634) | 19 | (23,150) | 25 |
| Options\toutstanding\tat\tDecember\t31 | 224,255 | 19 | 233,445 | 18 | 267,755 | 17 |
| Options\texercisable\tat\tDecember\t31 | 138,741 | 19 | 135,052 | 19 | 149,329 | 19 |
| Approx.\tnumber\tof\temployees\tgranted\toptions | 32,000 |  | 28,900 |  | 25,300 |  |

At	December	31,	2007,	the	Company	had	$361	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	$440	million,	$918	million	and	$1.2	billion	for	the	years ended	December	31,	2007,	2006	and	2005,	respectively.	The	total	intrinsic	value	of	options	exercised	during	the	years	ended	December	31,	2007,	2006	and	2005	was	$177	million,	$568	million	and	$571	million, respectively.	The	aggregate	intrinsic	value	for	options	outstanding	and	exercisable	as	of	December	31,	2007	was	$307	million	and	$292	million,	respectively,	based	on	a	December	31,	2007	stock	price	of	$16.04	per share.

At	December	31,	2007	and	2006,	88.0	million	shares	and	110.9	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,	2007	(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 | 907 | $4 |  | 7 | 264 | $6 |
| $7-$13 | 51,569 | 10 |  | 4 | 51,085 | 10 |
| $14-$20 | 110,907 | 17 |  | 7 | 49,363 | 16 |
| $21-$27 | 31,923 | 22 |  | 8 | 9,080 | 22 |
| $28-$34 | 1,716 | 32 |  | 2 | 1,716 | 32 |
| $35-$41 | 26,865 | 39 |  | 7 | 26,865 | 39 |
| $42-$48 | 332 | 44 |  | 3 | 332 | 44 |
| $49-$55 | 36 | 51 |  | 2 | 36 | 51 |
|  | 224,255 |  |  |  | 138,741 |  |

The	weighted	average	contractual	life	for	options	outstanding	and	exercisable	as	of	December	31,	2007	was	seven	and	six	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.	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.

Restricted	stock	and	restricted	stock	unit	activity	was	as	follows	(in	thousands,	except	fair	value):

|  | 2007 | 2007 | 2006 | 2006 |
| :--- | :--- | :--- | :--- | :--- |
| Years\tEnded\tDecember\t31 | 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 | 6,016 | $19 | 4,383 | $16 |
| Granted | 7,766 | 18 | 2,761 | 22 |
| Vested | (1,068) | 19 | (938) | 15 |
| Terminated,\tcanceled\tor\texpired | (1,959) | 19 | (190) | 18 |
| RS\tand\tRSU\toutstanding\tat\tDecember\t31 | 10,755 | 17 | 6,016 | 19 |

At	December	31,	2007,	the	Company	had	unrecognized	compensation	expense	related	to	restricted	stock	and	restricted	stock	units	of	$113	million,	expected	to	be	recognized	over	the	weighted	average	period	of approximately	three	years.	An	aggregate	of	approximately	7.8	million,	2.8	million	and	1.7	million	shares	of	restricted	stock	and	restricted	stock	units	were	granted	in	2007,	2006	and	2005,	respectively.	The	amortization of	unrecognized	compensation	for	the	years	ended	December	31,	2007,	2006	and	2005	was	$39	million,	$24	million	and	$14	million,	respectively.	The	total	fair	value	of	restricted	stock	and	restricted	stock	unit	shares vested	during	the	years	ended	December	31,	2007,	2006	and	2005	was	$13	million,	$22	million	and	$32	million,	respectively.	The	aggregate	intrinsic	value	of	outstanding	restricted	stock	and	restricted	stock	units	as	of December	31,	2007	was	$173	million.

# Total	Share-Based	Compensation	Presentation

Under	the	modified	prospective	transition	method,	results	for	2005	have	not	been	restated	to	reflect	the	effects	of	implementing	SFAS	123R.	The	following	pro	forma	information	is	presented	for	comparative purposes	and	illustrate	the	pro	forma	effect	on	Earnings	from	continuing	operations	and	Net	earnings	and	the	respective	earnings	per	share	for	each	period	presented	as	if	the	Company	had	applied	the	fair	value recognition	provisions	to	share-based	employee	compensation	prior	to	2006	(in	millions,	except	per	share	amounts):

|  | Continuing	Operations | Continuing	Operations | Continuing	Operations | Net	Earnings	(Loss) | Net	Earnings	(Loss) | Net	Earnings	(Loss) |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Years\tEnded\tDecember\t31 | 2007 | 2006 | 2005 | 2007 | 2006 | 2005 |
| Earnings\t(loss): |  |  |  |  |  |  |
| Earnings\t(loss),\tas\treported | $(105) | $3,261 | $4,519 | $(49) | $3,661 | $4,578 |
| Add:\tShare-based\temployee\tcompensation\texpense\tincluded\tin\treported\tearnings,\tnet\tof\trelated\ttax\teffects | n/a | n/a | 9 | n/a | n/a | 9 |
| Deduct:\tShare-based\temployee\tcompensation\texpense\tdetermined\tunder\tfair\tvalue-based\tmethod\tfor\tall\tawards,\tnet\tof\trelated |  |  |  |  |  |  |
| tax\teffects | n/a | n/a | (170) | n/a | n/a | (170) |
| Pro\tforma\tearnings\t(loss) | $(105) | $3,261 | $4,358 | $(49) | $3,661 | $4,417 |
| Basic\tearnings\t(loss)\tper\tcommon\tshare: |  |  |  |  |  |  |
| As\treported | $(0.05) | $1.33 | $1.83 | $(0.02) | $1.50 | $1.85 |
| Pro\tforma | $n/a | $n/a | $1.76 | $n/a | $n/a | $1.79 |
| Diluted\tearnings\t(loss)\tper\tcommon\tshare: |  |  |  |  |  |  |
| As\treported | $(0.05) | $1.30 | $1.79 | $(0.02) | $1.46 | $1.81 |
| Pro\tforma | $n/a | $n/a | $1.72 | $n/a | $n/a | $1.75 |

Prior	to	adopting	SFAS	123R,	the	Company	presented	all	tax	benefits	resulting	from	the	exercise	of	stock	options	as	operating	cash	flows	in	the	consolidated	statements	of	cash	flows.	As	a	result,	$210	million	of excess	tax	benefits	for	2005	has	been	classified	as	an	operating	cash	inflow.	SFAS	123R	requires	cash	flows	resulting	from	excess	tax	benefits	to	be	classified	as	a	part	of	cash	flows	from	financing	activities.	Excess	tax benefits	are	realized	tax	benefits	from	tax	deductions	for	exercised	options	in	excess	of	the	deferred	tax	asset	attributable	to	stock

compensation	costs	for	such	options.	As	a	result	of	adopting	SFAS	123R,	$50	million	and	$165	million	of	excess	tax	benefits	for	the	years	2007	and	2006,	respectively,	have	been	classified	as	a	financing	cash	inflow.

# 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	are	met.	The	provisions	for	awards	under	these	incentive	plans	for	the	years	ended	December	31,	2007,	2006	and	2005	were	$190	million,	$268	million	and	$548	million,	respectively.

# Mid-Range	Incentive	Plan

The	Mid-Range	Incentive	Plan	("MRIP")	rewarded	participating	elected	officers	for	the	Company's	achievement	of	specified	business	goals	during	the	period,	based	on	two	performance	objectives	measured	over two-year	cycles.	The	provision	for	MRIP	for	the	year	ended	December	31,	2005	was	$19	million.	As	of	December	31,	2005,	the	MRIP	was	canceled.

# Long-Range	Incentive	Plan

In	2005,	a	Long-Range	Incentive	Plan	("LRIP")	was	introduced	to	replace	MRIP.	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	for	the	years	ended	December	31,	2007,	2006	and	2005	was	$(8)	million,	$16	million	and	$15	million,	respectively.

# 9. Financing	Arrangements

| December	31 | 2007 | 2006 |
| :--- | :--- | :--- |
| Gross\tfinance\treceivables | $123 | $279 |
| Less\tallowance\tfor\tlosses | (5) | (10) |
|  | 118 | 269 |
| Less\tcurrent\tportion | (50) | (124) |
| Long-term\tfinance\treceivables | $68 | $145 |

Current	finance	receivables	are	included	in	Accounts	receivable	and	long-term	finance	receivables	are	included	in	Other	assets	in	the	Company's	consolidated	balance	sheets.	Interest	income	recognized	on	finance receivables	for	the	years	ended	December	31,	2007,	2006	and	2005	was	$7	million,	$9	million	and	$7	million,	respectively.

From	time	to	time,	the	Company	sells	short-term	receivables,	long-term	loans	and	lease	receivables	under	sales-type	leases	(collectively,	"finance	receivables")	to	third	parties	in	transactions	that	qualify	as	"true- sales."	Certain	of	these	finance	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.	Certain	sales	may	be	made	through separate	legal	entities	that	are	also	consolidated	by	the	Company.	The	Company	may	or	may	not	retain	the	obligation	to	service	the	sold	finance	receivables.

Total	finance	receivables	sold	by	the	Company	were	$4.9	billion	in	2007	(including	$4.7	billion	of	short-term	receivables),	compared	to	$6.4	billion	sold	in	2006	(including	$6.2	billion	of	short-term	receivables)

$4.5	billion	sold	in	2005	(including	$4.2	billion	of	short-term	receivables).	As	of	December	31,	2007,	there	were	$978	million	of	receivables	outstanding	under	these	programs	for	which	the	Company	retained	servicing obligations	(including	$587	million	of	short-term	receivables),	compared	to	$1.1	billion	outstanding	at	December	31,	2006	(including	$789	million	of	short-term	receivables)	and	$1.0	billion	outstanding	at December	31,	2005	(including	$838	million	of	short-term	receivables).

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	December	31,	2007	as compared	to	$19	million	at	December	31,	2006.	Reserves	of	$1	and	$4	million	was	recorded	for	potential	losses	on	sold	receivables	at	both	December	31,	2007	and	December	31,	2006,	respectively.

Certain	purchasers	of	the	Company's	infrastructure	equipment	continue	to	request	that	suppliers	provide	financing	in	connection	with	equipment	purchases.	These	requests	may	include	all	or	a	portion	of	the purchase	price	of	the	equipment.	Periodically,	the	Company	makes	commitments	to	provide	financing	to	purchasers	in	connection	with	the	sale	of	equipment.	However,	the	Company's	obligation	to	provide	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	receivable	from the	Company.	The	Company	had	outstanding	commitments	to	extend	long-term	credit	to	third	parties	totaling	$610	million	at	December	31,	2007,	compared	to	$398	million	at	December	31,	2006.	Of	these	amounts, $454	million	was	supported	by	letters	of	credit	or	by	bank	commitments	to	purchase	receivables	at	December	31,	2007,	compared	to	$262	million	at	December	31,	2006.

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	$42	million	and	$122	million	at	December	31,	2007	and	December	31,	2006,	respectively	(including	$23	million	and $19	million	at	December	31,	2007	and	2006,	respectively,	relating	to	the	sale	of	short-term	receivables).	Customer	financing	guarantees	outstanding	were	$3	million	and	$47	million	at	December	31,	2007	and	2006, respectively	(including	$0	million	and	$2	million	at	December	31,	2007	and	2006,	respectively,	relating	to	the	sale	of	short-term	receivables).

# 10. Commitments	and	Contingencies

# 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,	2007,	2006	and	2005	was	$231	million,	$241	million	and	$250	million,	respectively.	At	December	31,	2007,	future	minimum	lease	obligations, net	of	minimum	sublease	rentals,	for	the	next	five	years	and	beyond	are	as	follows:	2008—$355	million;	2009—$268	million;	2010—$253	million;	2011—$169	million;	2012—$162	million;	beyond—$212	million.

# Legal

Iridium	Program:		The	Company	has	been	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.	Plaintiffs'	motion	for	class	certification	was	granted	on	January	9,	2006	and	the	trial	is	scheduled	to	begin	on	May	22,	2008.

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	asserts	claims	for	breach	of	contract,	warranty	and	fiduciary	duty	and	fraudulent	transfer	and	preferences,	and	seeks	in	excess	of	$4	billion	in damages.	On	September	20,	2007,	following	a	trial	on	the	solvency	and	capital	adequacy	portion	of	the	Committee's	fraudulent	transfer	and	preference	claims,	the	Iridium	Bankruptcy	Court	granted	judgment	for Motorola	on	all	those	claims.	The	remaining	claims	for	breach	of	contract,	warranty,	fiduciary	duty	and	equitable	subordination	remain	pending.

The	Company	has	not	reserved	for	any	potential	liability	that	may	arise	as	a	result	of	the	litigation	described	above	related	to	the	Iridium	program.	An	unfavorable	outcome	in	one	or	more	of	these	cases	could have	a	material	adverse	effect	on	the	Company's	consolidated	financial	position,	liquidity	or	results	of	operations.

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.

In	the	first	quarter	of	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	second	quarter	of	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	second	quarter	of	2007	against	the	receivable	from	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,	and	other	than	as	discussed	above	with	respect	to the	Iridium	cases,	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.

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	$193	million,	which	the	Company	accrued	$123	million	as	of	December	31,	2007	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,	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	patent	indemnities	given the	current	legal	climate.

In	all	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.

The	Company's	operating	results	are	dependent	upon	our	ability	to	obtain	timely	and	adequate	delivery	of	quality	materials,	parts	and	components	to	meet	the	demands	of	our	customers.	Furthermore,	certain	of our	components	are	available	only	from	a	single	source	or	limited	sources.	Even	where	alternative	sources	of	supply	are	available,	qualification	of	the	alternative	suppliers	and	establishment	of	reliable	supplies	could result	in	delays	and	a	possible	loss	of	sales,	which	may	have	an	adverse	effect	on	the	Company's	operating	results.

In	the	fourth	quarter	of	2007,	the	Company	recorded	a	$277	million	charge	for	a	legal	settlement	with	Freescale	Semiconductor.

# 11. Information	by	Segment	and	Geographic	Region

Beginning	in	the	second	quarter	of	2007,	the	Company	reports	financial	results	for	the	following	business	segments	with	all	historical	amounts	reclassified	to	conform	to	the	current	segment	presentation:

•		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	solutions,	broadband	access	infrastructure	systems,	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.

•		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,	healthcare	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 | 2007 | 2006 | 2005 |
| :--- | :--- | :--- | :--- |
| Mobile\tDevices | $56 | $65 | $190 |
| Home\tand\tNetworks\tMobility | 14 | 13 | 7 |
| Enterprise\tMobility\tSolutions | 58 | 31 | 45 |
|  | $128 | $109 | $242 |

Identifiable	assets	(excluding	intersegment	receivables)	are	the	Company's	assets	that	are	identified	with	classes	of	similar	products	or	operations	in	each	geographic	region.

For	the	year	ended	December	31,	2005,	approximately	12%	of	net	sales	were	to	one	customer,	Sprint	Nextel	(including	Nextel	and	Nextel	affiliates	where	appropriate).	No	single	customer	accounted	for	more than	10%	of	net	sales	for	the	years	ended	December	31,	2007	and	2006.

|  | Net	Sales | Net	Sales | Net	Sales | Operating	Earnings	(Loss) | Operating	Earnings	(Loss) | Operating	Earnings	(Loss) |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Years\tEnded\tDecember\t31 | 2007 | 2006 | 2005 | 2007 | 2006 | 2005 |
| Mobile\tDevices | $18,988 | $28,383 | $21,459 | $(1,201) | $2,690 | $2,192 |
| Home\tand\tNetworks\tMobility | 10,014 | 9,164 | 9,037 | 709 | 787 | 1,232 |
| Enterprise\tMobility\tSolutions | 7,729 | 5,400 | 5,038 | 1,213 | 958 | 860 |
|  | 36,761 | 42,947 | 35,534 | 721 | 4,435 | 4,284 |
| Other\tand\tEliminations | (109) | (100) | (224) | (1,274) | (343) | 321 |
|  | $36,622 | $42,847 | $35,310 |  |  |  |
| Operating\tearnings\t(loss) |  |  |  | (553) | 4,092 | 4,605 |
| Total\tother\tincome |  |  |  | 163 | 518 | 1,807 |
| Earnings\t(loss)\tfrom\tcontinuing\toperations\tbefore\tincome\ttaxes |  |  |  | $(390) | $4,610 | $6,412 |

Other	and	Eliminations	is	primarily	comprised	of:	(i)	amortization	of	intangible	assets	and	acquisition-related	in-process	research	and	development	charges	relating	to	all	of	the	Company's	acquisitions, (ii)	general	corporate-related	expenses,	including	stock	option	and	employee	stock	purchase	plan	expenses,	(iii)	various	corporate	programs	representing	developmental	businesses	and	research	and	development	projects, which	are	not	included	in	any	other	segment,	and	(iv)	the	Company's	wholly-owned	finance	subsidiary.

Additionally,	included	in	Other	and	Eliminations	in	2007	are:	(i)	net	charges	of	$140	million	relating	to	the	Telsim	class	action	securities	legal	settlement,	partially	offset	by	estimated	insurance	recoveries,	and (ii)	charges	of	$81	million	relating	to	an	impairment	of	intangible	assets.	In	2006,	the	Company	also	recorded	expenses	of	$88	million	representing	a	charitable	contribution	to	the	Motorola	Foundation	of	appreciated equity	holdings	in	a	third	party,	partially	offset	by	income	of	$418	million	for	a	payment	relating	to	the	Telsim	collection	settlement

both	of	which	are	presented	in	Other	and	Eliminations.	In	2005,	the	Company	also	recorded	income	of	$515	million	for	a	payment	relating	to	the	Telsim	collection	settlement	which	was	presented	in	Other	and Eliminations.

|  | Assets | Assets | Assets | Capital	Expenditures | Capital	Expenditures | Capital	Expenditures | Expense | Expense | Expense |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Years\tEnded\tDecember\t31 | 2007 | 2006 | 2005 | 2007 | 2006 | 2005 | 2007 | 2006 | 2005 |
| Mobile\tDevices | $6,318 | $9,316 | $7,551 | $132 | $164 | $126 | $146 | $133 | $127 |
| Home\tand\tNetworks\tMobility | 7,451 | 6,746 | 5,688 | 160 | 149 | 135 | 141 | 165 | 180 |
| Enterprise\tMobility\tSolutions | 8,694 | 3,268 | 2,647 | 113 | 190 | 164 | 167 | 92 | 98 |
|  | 22,463 | 19,330 | 15,886 | 405 | 503 | 425 | 454 | 390 | 405 |
| Other\tand\tEliminations | 12,349 | 19,263 | 19,281 | 122 | 146 | 123 | 83 | 73 | 68 |
|  | 34,812 | 38,593 | 35,167 | $527 | $649 | $548 | $537 | $463 | $473 |
| Discontinued\tOperations | — | — | 635 |  |  |  |  |  |  |
|  | $34,812 | $38,593 | $35,802 |  |  |  |  |  |  |

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* | Net	Sales* | Net	Sales* | Assets** | Assets** | Assets** | Property,	Plant,	and	Equipment | Property,	Plant,	and	Equipment | Property,	Plant,	and	Equipment |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Years\tEnded\tDecember\t31 | 2007 | 2006 | 2005 | 2007 | 2006 | 2005 | 2007 | 2006 | 2005 |
| United\tStates | $18,548 | $18,776 | $16,749 | $22,385 | $24,212 | $23,635 | $1,252 | $1,089 | $1,010 |
| China | 2,632 | 4,664 | 2,908 | 3,926 | 4,649 | 3,843 | 311 | 278 | 189 |
| United\tKingdom | 1,070 | 1,306 | 1,532 | 1,305 | 1,773 | 1,962 | 121 | 134 | 127 |
| Germany | 516 | 874 | 882 | 644 | 1,195 | 990 | 75 | 131 | 118 |
| Israel | 741 | 659 | 534 | 1,374 | 1,195 | 1,372 | 165 | 156 | 134 |
| Singapore | 128 | 176 | 156 | 3,120 | 3,713 | 2,993 | 40 | 39 | 35 |
| Other\tnations,\tnet\tof\teliminations | 12,987 | 16,392 | 12,549 | 2,058 | 1,856 | 372 | 516 | 440 | 407 |
|  | $36,622 | $42,847 | $35,310 | $34,812 | $38,593 | $35,167 | $2,480 | $2,267 | $2,020 |

		* Net	sales	by	geographic	region	are	measured	by	the	locale	of	end	customer.

** Excludes	assets	held	for	sale	relating	to	discontinued	operations	of	$635	million	at	December	31,	2005.

# 12. Shareholder	Rights	Plan

Effective	August	1,	2006	(the	"Termination	Date"),	the	Company	terminated	its	shareholder	rights	plan.	The	shareholder	rights	plan	was	scheduled	to	expire	in	November	2008.	On	the	Termination	Date,	in connection	with	the	termination	of	the	shareholder	rights	plan,	the	Company	made	the	filings	necessary	to	eliminate	all	references	to	the	Company's	Junior	Participating	Preferred	Stock,	Series	B	("Series	B")	from	its Restated	Certificate	of	Incorporation.	Accordingly,	no	authorized	Series	B	shares	are	reflected	in	the	Company's	consolidated	balance	sheets	as	of	December	31,	2007	and	2006.	No	Series	B	shares	were	or	have	been issued.

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	primarily	consist	of	future	minimum	lease	payments	on	vacated	facilities.	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.

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.

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.

At	January	1,	2005,	the	Company	had	an	accrual	of	$41	million	for	employee	separation	costs,	representing	the	severance	costs	for	approximately	400	employees,	of	which	50	were	direct	employees	and	350	were

indirect

employees.	The	2005	additional	charges	of	$86	million	represented	the	severance	costs	for	approximately	2,600	employees,	of	which	1,300	were	direct	employees	and	1,300	were	indirect	employees.	The	adjustments	of $14	million	represented	reversals	of	accruals	no	longer	needed.

# 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.

| forecasted	plans	except	as	disclosed. |  |  |  |  |
| :--- | :--- | :--- | :--- | :--- |
| The\tfollowing\tis\ta\tsummary\tof\tsignificant\tacquisitions\tin\t2007,\t2006\tand\t2005: |  |  |  |  |
|  | Quarter\nAcquired | Consideration,\tnet | Form\tof\nConsideration | In-Process\nResearch\tand\nDevelopment\nCharge |
| 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 |
| 2005\tAcquisitions |  |  |  |  |
| No\tsignificant\tacquisitions | — | — | — | — |

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 | 2005 |
| :--- | :--- | :--- | :--- |
| 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	are	expected	to	be	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	is	$1.0	billion.	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	$301	million	in goodwill,	none	of	which	is	expected	to	be	deductible	for	tax	purposes	and	$158	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	2	to	10	years	on	a	straight-line	basis.

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	$122	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	Company	is	in	the	process	of	performing	a	review	of	its	ability	to	utilize	acquired	tax	carryovers.	In	addition,	the	Company	is	in	the	process	of	finalizing	valuations	of	acquired	assets	and	liabilities. Accordingly,	the	outcome	of	these	processes	may	result	in	an	adjustment	to	the	preliminary	purchase	price	allocation.	Any	necessary	adjustment	will	be	recorded	in	the	period	finalized.

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	$102	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	technology	solutions	for	television	on	demand,	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,	one	project	was	in	process.	This	project	is	expected	to	be	completed	in	2008.	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%.	As	of	December	31,	2007,	the	work	on	one	of	these	projects	continues	and	is	expected	to	be	completed	in	2008.	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	recent	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.

# Intangible	Assets

Amortized	intangible	assets,	excluding	goodwill	were	comprised	of	the	following:

|  | 2007 | 2007 | 2006 | 2006 |
| :--- | :--- | :--- | :--- | :--- |
| December\t31 | Gross\nCarrying\nAmount | Accumulated\nAmortization | Gross\nCarrying\nAmount | Accumulated\nAmortization |
| Intangible\tassets: |  |  |  |  |
| Completed\ttechnology | $1,234 | $484 | $486 | $334 |
| Patents | 292 | 69 | 27 | 12 |
| Customer-related | 264 | 58 | 65 | 21 |
| Licensed\ttechnology | 123 | 109 | 119 | 107 |
| Other\tintangibles | 166 | 99 | 193 | 62 |
|  | $2,079 | $819 | $890 | $536 |

Amortized	intangible	assets,	excluding	goodwill	by	business	segment:

|  | 2007 | 2007 | 2006 | 2006 |
| :--- | :--- | :--- | :--- | :--- |
| December\t31 | Gross\nCarrying\nAmount | Accumulated\nAmortization | Gross\nCarrying\nAmount | Accumulated\nAmortization |
| Mobile\tDevices | $36 | $36 | $154 | $41 |
| Home\tand\tNetworks\tMobility | 712 | 455 | 588 | 430 |
| Enterprise\tMobility\tSolutions | 1,331 | 328 | 148 | 65 |
|  | $2,079 | $819 | $890 | $536 |

During	the	year	ended	December	31,	2007	due	to	a	recent	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.

The	following	tables	display	a	rollforward	of	the	carrying	amount	of	goodwill	from	January	1,	2006	to	December	31,	2007,	by	business	segment:

| Segment | January	1,<br>2007 | Acquired | Adjustments | Dispositions | December	31,<br>2007 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Mobile\tDevices | $69 | $— | $(50) | $— | $19 |
| Home\tand\tNetworks\tMobility | 1,266 | 427 | 2 | (119) | 1,576 |
| Enterprise\tMobility\tSolutions | 371 | 2,569 | (36) | — | 2,904 |
|  | $1,706 | $2,996 | $(84) | $(119) | $4,499 |

| Segment | January	1,<br>2006 | Acquired | Adjustments | Dispositions | December	31,<br>2006 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Mobile\tDevices | $17 | $52 | $— | $— | $69 |
| Home\tand\tNetworks\tMobility | 1,009 | 235 | 22 | — | 1,266 |
| Enterprise\tMobility\tSolutions | 323 | 49 | (1) | — | 371 |
|  | $1,349 | $336 | $21 | $— | $1,706 |

# 15. Valuation	and	Qualifying	Accounts

The	following	table	presents	the	valuation	and	qualifying	account	activity	for	the	years	ended	December	31,	2007,	2006	and	2005:

|  | Balance	at<br>January	1 | Charged	to<br>Earnings | Used | Adjustments(1) | Balance	at<br>December	31 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| 2007 |  |  |  |  |  |
| Reorganization\tof\tBusinesses | $158 | $420 | $(281) | $(62) | $235 |
| Allowance\tfor\tDoubtful\tAccounts | 78 | 130 | (3) | (21) | 184 |
| Allowance\tfor\tLosses\ton\tFinance\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\tFinance\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 |
| 2005 |  |  |  |  |  |
| Reorganization\tof\tBusinesses | 114 | 91 | (81) | (21) | 103 |
| Allowance\tfor\tDoubtful\tAccounts | 173 | 17 | (14) | (75) | 101 |
| Allowance\tfor\tLosses\ton\tFinance\tReceivables | 1,966 | — | (1,926) | (28) | 12 |
| Inventory\tReserves | 522 | 569 | (389) | (173) | 529 |
| Warranty\tReserves | 472 | 816 | (696) | (125) | 467 |
| Customer\tReserves | 842 | 3,215 | (2,588) | (298) | 1,171 |

# 16. Quarterly	and	Other	Financial	Data	(unaudited)*

| 16.<br>Quarterly	and	Other	Financial	Data	(unaudited)* |  |  |  |  |  |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2007 | 2007 | 2007 | 2007 | 2006 | 2006 | 2006 | 2006 |
|  | 1st | 2nd | 3rd | 4th | 1st | 2nd | 3rd | 4th |
| Operating\tResults |  |  |  |  |  |  |  |  |
| Net\tsales | $9,433 | $8,732 | $8,811 | $9,646 | $9,632 | $10,820 | $10,603 | $11,792 |
| Costs\tof\tsales | 6,979 | 6,279 | 6,306 | 7,106 | 6,701 | 7,463 | 7,233 | 8,723 |
| Gross\tmargin | 2,454 | 2,453 | 2,505 | 2,540 | 2,931 | 3,357 | 3,370 | 3,069 |
| Selling,\tgeneral\tand\tadministrative\texpenses | 1,313 | 1,296 | 1,210 | 1,273 | 1,069 | 1,154 | 1,123 | 1,158 |
| Research\tand\tdevelopment\texpenditures | 1,117 | 1,115 | 1,100 | 1,097 | 964 | 1,035 | 1,046 | 1,061 |
| Other\tcharges\t(income) | 390 | 200 | 205 | 189 | 49 | (354) | 233 | 97 |
| Operating\tearnings\t(loss) | (366) | (158) | (10) | (19) | 849 | 1,522 | 968 | 753 |
| Earnings\t(loss)\tfrom\tcontinuing\toperations | (218) | (38) | 40 | 111 | 656 | 1,349 | 727 | 529 |
| Net\tearnings\t(loss) | (181) | (28) | 60 | 100 | 686 | 1,384 | 968 | 623 |
| Per\tShare\tData\t(in\tdollars) |  |  |  |  |  |  |  |  |
| Continuing\tOperations: |  |  |  |  |  |  |  |  |
| Basic\tearnings\t(loss)\tper\tcommon\tshare | $(0.09) | $(0.02) | $0.02 | $0.05 | $0.26 | $0.55 | $0.30 | $0.22 |
| Diluted\tearnings\t(loss)\tper\tcommon\tshare | (0.09) | (0.02) | 0.02 | 0.05 | 0.26 | 0.54 | 0.29 | 0.21 |
| Net\tEarnings: |  |  |  |  |  |  |  |  |
| Basic\tearnings\t(loss)\tper\tcommon\tshare | (0.08) | (0.01) | 0.03 | 0.04 | 0.28 | 0.56 | 0.40 | 0.26 |
| Diluted\tearnings\t(loss)\tper\tcommon\tshare | (0.08) | (0.01) | 0.03 | 0.04 | 0.27 | 0.55 | 0.39 | 0.25 |
| Dividends\tdeclared | 0.05 | 0.05 | 0.05 | 0.05 | 0.04 | 0.05 | 0.05 | 0.05 |
| Dividends\tpaid | 0.05 | 0.05 | 0.05 | 0.05 | 0.04 | 0.04 | 0.05 | 0.05 |
| Stock\tprices |  |  |  |  |  |  |  |  |
| High | 20.91 | 19.18 | 18.88 | 19.68 | 24.67 | 24.24 | 25.55 | 26.30 |
| Low | 17.45 | 17.32 | 15.61 | 14.87 | 20.22 | 19.01 | 18.66 | 20.17 |

* Certain	amounts	in	prior	years'	financial	statements	and	related	notes	have	been	reclassified	to	conform	to	the	2007	presentation.

# Evaluation	of	Disclosure	Controls	and	Procedures.

Under	the	supervision	and	with	the	participation	of	our	senior	management,	including	our	chief	executive	officer	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	officer	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	officer	and	chief	financial	officer,	we	assessed	the	effectiveness	of	our	internal	control	over	financial	reporting	as	of	December	31,	2007, 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,	2007.	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,	2007	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,	2007,	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,	2007,	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, 2007	and	2006,	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,	2007,	and	our	report	dated	February	28,	2008 expressed	an	unqualified	opinion	on	those	consolidated	financial	statements.

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	2008 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,	phone:	1-800-262-8509.	Any	amendment	to,	or	waiver	from,	the	Code	will	be	posted	on	our	Internet	website	within five	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.

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	2007,"	"Outstanding	Equity	Awards	at	2007	Fiscal	Year-End,"	"Option	Exercises	and	Stock Vested	for	2007,"	"Pension	Benefits	in	2007,"	"Nonqualified	Deferred	Compensation	in	2007,"	and	"Employment	Contracts,	Termination	of	Employment	and	Change	in	Control	Arrangements"	of	Motorola's	Proxy Statement.

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.

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.

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.

# 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.	Following	is	a	list	of	management	contracts	and compensatory	plans	and	arrangements	required	to	be	filed	as	exhibits	to	this	form	by	Item	15(b)	hereof:

# Motorola	Omnibus	Incentive	Plan	of	2006

Form	of	Motorola,	Inc.	Award	Document—Terms	and	Conditions	Related	to	Employee	Nonqualified	Stock	Options	relating	to	the	Motorola	Omnibus	Incentive	Plan	of	2006 Form	of	Motorola,	Inc.	Restricted	Stock	Unit	Award	Agreement	relating	to	the	Motorola	Omnibus	Incentive	Plan	of	2006

# Form	of	Motorola	Stock	Option	Consideration	Agreement

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	2006 Form	of	Motorola,	Inc.	Restricted	Stock	Unit	Award	Agreement	for	Edward	J.	Zander	relating	to	the	Motorola	Omnibus	Incentive	Plan	of	2006

Form	of	Motorola	Stock	Option	Consideration	Agreement	for	Edward	J.	Zander

Motorola,	Inc.	Award	Document	for	the	Motorola	Omnibus	Incentive	Plan	of	2006,	Terms	and	Conditions	Related	to	Employee	Nonqualified	Stock	Options,	granted	to	Edward	J.	Zander	on	May	8,	2007 (Market-based	vesting)

Motorola,	Inc.	Award	Document	for	the	Motorola	Omnibus	Incentive	Plan	of	2006,	Terms	and	Conditions	Related	to	Employee	Nonqualified	Stock	Options	granted	to	Gregory	Q.	Brown	on	January	31,	2008 (Market-based	vesting)

Form	of	Motorola	Stock	Option	Consideration	Agreement	for	Gregory	Q.	Brown	for	option	grants	on	or	after	January	31,	2008

Form	of	Motorola,	Inc.	Restricted	Stock	Unit	Award	Agreement	for	Gregory	Q.	Brown	relating	to	the	Motorola	Omnibus	Incentive	Plan	of	2006	for	grants	on	or	after	January	31,	2008 Form	of	Motorola,	Inc.	Award	Document	for	the	Motorola	Omnibus	Incentive	Plan	of	2006,	Terms	and	Conditions	Related	to	Employee	Nonqualified	Stock	Options	for	Paul	J.	Liska	(Sign-on	Grant)

Form	of	Motorola,	Inc.	Award	Document	for	the	Motorola	Omnibus	Incentive	Plan	of	2006,	Terms	and	Conditions	Related	to	Employee	Nonqualified	Stock	Options	for	Paul	J.	Liska	(Market-based	vesting).

Form	of	Motorola	Stock	Option	Consideration	Agreement	for	Paul	J.	Liska

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)

Form	of	Motorola,	Inc.	Restricted	Stock	Unit	Award	Agreement	for	Paul	J.	Liska	relating	to	the	Motorola	Omnibus	Incentive	Plan	of	2006

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

Form	of	Deferred	Stock	Units	Award	Agreement	between	Motorola,	Inc.	and	its	non-employee	directors	under	the	Motorola	Omnibus	Incentive	Plan	of	2006	or	any	successor	plan Motorola	Omnibus	Incentive	Plan	of	2003

# Motorola	Omnibus	Incentive	Plan	of	2000

# Motorola	Compensation/Acquisition	Plan	of	2000

# Motorola	Amended	and	Restated	Incentive	Plan	of	1998

# Share	Option	Plan	of	1996

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

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	(collectively	the	"Prior Plans")

Form	of	Motorola,	Inc.	Restricted	Stock	Agreement,	relating	to	the	Prior	Plans

Form	of	Motorola,	Inc.	Restricted	Stock	Unit	Award	Agreement	(Cliff	Vesting)	relating	to	the	Prior	Plans

Form	of	Motorola,	Inc.	Restricted	Stock	Unit	Award	Agreement	(Periodic	Vesting),	relating	to	the	Prior	Plans

Form	of	Motorola,	Inc.	Award	Document—Terms	and	Conditions	Related	to	Employee	Nonqualified	Stock	Options	for	Edward	J.	Zander,	relating	to	the	Prior	Plans

Form	of	Motorola,	Inc.	Restricted	Stock	Unit	Award	Agreement	for	Edward	J.	Zander	relating	to	the	Motorola	Omnibus	Incentive	Plan	of	2003,	as	amended	for	grants	on	or	after	May	3,	2005 Form	of	Motorola,	Inc.	Restricted	Stock	Unit	Award	Agreement	for	Edward	J.	Zander	relating	to	the	Motorola	Omnibus	Incentive	Plan	of	2003

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

# Motorola	Non-Employee	Directors	Stock	Plan

2006	Motorola	Incentive	Plan

Motorola	Long-Range	Incentive	Plan	(LRIP)	of	2005 Motorola	Long-Range	Incentive	Plan	(LRIP)	of	2006 Motorola	Elected	Officers	Supplementary	Retirement	Plan Motorola	Management	Deferred	Compensation	Plan Motorola,	Inc.	Senior	Officer	Change	in	Control	Severance	Plan

Motorola,	Inc.	Retiree	Basic	Life	Insurance	for	Elected	Officers	prior	to	January	1,	2004	who	retire	after	January	1,	2005 Arrangement	for	directors'	fees	for	non-employee	directors Insurance	covering	non-employee	directors	and	their	spouses

# Description	of	Certain	Compensatory	Arrangements	between	Motorola,	Inc.	and	Gregory	Q.	Brown

# Description	of	Certain	Compensatory	Arrangements	between	Motorola,	Inc.	and	Paul	J.	Liska

Employment	Agreement	between	Motorola,	Inc.	and	Edward	J.	Zander	dated	as	of	December	15,	2003,	as	amended Chairman/CEO	Retirement	Term	Sheet	dated	November	29,	2007	for	Edward	J.	Zander Amended	and	Restated	Employment	Agreement	between	Thomas	J.	Meredith	and	Motorola,	Inc.

Agreement	between	Motorola,	Inc.	and	Adrian	Nemcek	dated	July	18,	2006

Agreement	between	Motorola,	Inc.	and	David	Devonshire	dated	September	18,	2007

# Agreement	between	Ruth	Fattori	and	Motorola,	Inc.	dated	December	20,	2007

# (b) Exhibits:

# CONSENT	OF	INDEPENDENT	REGISTERED	PUBLIC	ACCOUNTING	FIRM

# The	Board	of	Directors

# 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

President	and	Chief	Executive	Officer

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 | President	and	Chief	Executive	Officer | February	28,	2008 |
| :--- | :--- | :--- |
| Gregory\tQ.\tBrown | and\tDirector |  |
|  | (Principal\tExecutive\tOfficer) |  |
| /s/\t\tThomas\tJ.\tMeredith | Executive\tVice\tPresident, | February\t28,\t2008 |
| Thomas\tJ.\tMeredith | Acting\tChief\tFinancial\tOfficer |  |
|  | and\tDirector |  |
|  | (Principal\tFinancial\tOfficer) |  |
| /s/\t\tMarc\tE.\tRothman | Senior\tVice\tPresident,\tFinance | February\t28,\t2008 |
| Marc\tE.\tRothman | and\tCorporate\tController |  |
|  | (Principal\tAccounting\tOfficer) |  |
| /s/\t\tEdward\tJ.\tZander\nEdward\tJ.\tZander | Chairman\tof\tthe\tBoard | February\t28,\t2008 |
| /s/\t\tDavid\tW.\tDorman\nDavid\tW.\tDorman | Director | February\t28,\t2008 |
| /s/\t\tJudy\tC.\tLewent\nJudy\tC.\tLewent | Director | February\t28,\t2008 |
| /s/\t\tNicholas\tNegroponte\nNicholas\tNegroponte | Director | February\t28,\t2008 |
| /s/\t\tSamuel\tC.\tScott\tIII\nSamuel\tC.\tScott\tIII | Director | February\t28,\t2008 |
| /s/\t\tRon\tSommer | Director | February\t28,\t2008 |

# EXHIBIT	INDEX

# Exhibit	No. 	 Exhibit

2.1 Agreement	and	Plan	of	Merger,	dated	as	of	September	18,	2006,	among	Motorola,	Inc.,	Motorola	GTG	Subsidiary	I	Corp.	and	Symbol	Technologies,	Inc.	(incorporated	by	reference	to Exhibit	2.1	to	Motorola's	Report	on	Form	8-K	filed	on	September	25,	2006	(File	No.	1-7221)).

2.2 Amendment	No.	1,	dated	as	of	October	30,	2006,	to	Agreement	and	Plan	of	Merger,	dated	as	of	September	18,	2006,	among	Motorola,	Inc.,	Motorola	GTG	Subsidiary	I	Corp.	and	Symbol Technologies,	Inc.	(incorporated	by	reference	to	Exhibit	2.2	to	Motorola's	Quarterly	Report	on	Form	10-Q	for	the	fiscal	quarter	ended	September	30,	2006)	(File	No.	1-7221)).

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.

10.2 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)).

10.3 Form	of	Motorola,	Inc.	Restricted	Stock	Unit	Agreement	relating	to	the	Motorola	Omnibus	Incentive	Plan	of	2006	for	grants	on	or	after	February	27,	2007	(incorporated	by	reference	to Exhibit	10.3	to	Motorola's	Annual	Report	on	Form	10-K	for	the	fiscal	year	ended	December	31,	2006	(File	No.	1-27221)).

10.4 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)).

10.5 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	2006	or	any	successor	plan	for	grants	on	or	after	February	11,	2007	(incorporated	by	reference	to	Exhibit	10.5	to	Motorola's	Annual	Report	on	Form	10-K	for	the	fiscal	year	ended December	31,	2006	(File	No.	1-27221)).

10.6 Form	of	Motorola,	Inc.	Restricted	Stock	Unit	Award	Agreement	for	Edward	J.	Zander	relating	to	the	Motorola	Omnibus	Incentive	Plan	for	2006	for	grants	on	or	after	February	11,	2007 (incorporated	by	reference	to	Exhibit	10.6	to	Motorola's	Annual	Report	on	Form	10-K	for	the	fiscal	year	ended	December	31,	2006	(File	No.	1-27221)).

10.7 Form	of	Motorola	Stock	Option	Consideration	Agreement	for	Edward	J.	Zander	for	grants	on	or	after	May	2,	2006	(incorporated	by	reference	to	Exhibit	10.41	to	Motorola's	Quarterly Report	on	Form	10-Q	for	the	fiscal	quarter	ended	July	1,	2006)	(	File	No.	1-7221)).

10.8 Motorola,	Inc.	Award	Document	for	the	Motorola	Omnibus	Incentive	Plan	of	2006,	Terms	and	Conditions	Related	to	Employee	Nonqualified	Stock	Options,	granted	to	Edward	J.	Zander	on May	8,	2007	(Market-based	vesting)	(incorporated	by	reference	to	Exhibit	10.40	to	Motorola's	Report	on	Form	8-K	filed	on	May	14,	2007	(File	No.	1-7221)).

*10.9 Motorola,	Inc.	Award	Document	for	the	Motorola	Omnibus	Incentive	Plan	of	2006,	Terms	and	Conditions	Related	to	Employee	Nonqualified	Stock	Options	granted	to	Gregory	Q.	Brown on	January	31,	2008	(Market-based	vesting).

*10.10 Form	of	Motorola	Stock	Option	Consideration	Agreement	for	Gregory	Q.	Brown	for	grants	on	or	after	January	31,	2008. *10.11 Form	of	Motorola,	Inc.	Restricted	Stock	Unit	Award	Agreement	for	Gregory	Q.	Brown	relating	to	the	Motorola	Omnibus	Incentive	Plan	of	2006	for	grants	on	or	after	January	31,	2008. *10.12 Form	of	Motorola,	Inc.	Award	Document	for	the	Motorola	Omnibus	Incentive	Plan	of	2006,	Terms	and	Conditions	Related	to	Employee	Nonqualified	Stock	Options	for	Paul	J.	Liska	(Sign- on	Grant).

*10.13 Form	of	Motorola,	Inc.	Award	Document	for	the	Motorola	Omnibus	Incentive	Plan	of	2006,	Terms	and	Conditions	Related	to	Employee	Nonqualified	Stock	Options	for	Paul	J.	Liska (Market-based	vesting).

10.17 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)).

10.18 Form	of	Deferred	Stock	Units	Award	Agreement	between	Motorola,	Inc.	and	its	non-employee	directors	under	the	Motorola	Omnibus	Incentive	Plan	of	2006	or	any	successor	plan	for grants	on	or	after	February	11,	2007	(incorporated	by	reference	to	Exhibit	10.9	to	Motorola's	Annual	Report	on	Form	10-K	for	the	fiscal	year	ended	December	31,	2006	(File	No.	1-27221)).

10.19 Motorola	Omnibus	Incentive	Plan	of	2003,	as	amended	through	April	2,	2004	(incorporated	by	reference	to	Exhibit	10.1	to	Motorola's	Quarterly	Report	on	Form	10-Q	for	the	fiscal	quarter ended	April	3,	2004	(File	No.	1-7221)).

10.20 Motorola	Omnibus	Incentive	Plan	of	2002,	as	amended	through	April	2,	2004	(incorporated	by	reference	to	Exhibit	10.2	to	Motorola's	Quarterly	Report	on	Form	10-Q	for	the	fiscal	quarter ended	April	3,	2004	(File	No.	1-7221)).

10.21 Motorola	Omnibus	Incentive	Plan	of	2000,	as	amended	through	April	2,	2004	(incorporated	by	reference	to	Exhibit	10.3	to	Motorola's	Quarterly	Report	on	Form	10-Q	for	the	fiscal	quarter ended	April	3,	2004	(File	No.	1-7221)).

10.22 Motorola	Compensation/	Acquisition	Plan	of	2000,	as	amended	through	April	2,	2004	(incorporated	by	reference	to	Exhibit	10.4	to	Motorola's	Quarterly	Report	on	Form	10-Q	for	the	fiscal quarter	ended	April	3,	2004	(File	No.	1-7221)).

10.23 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)).

10.25 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)).

10.26 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)).

10.27 Form	of	Motorola,	Inc.	Restricted	Stock	Agreement,	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	10.11	to	Motorola's	Quarterly Report	on	Form	10-Q	for	the	fiscal	quarter	ended	July	3,	2004	(File	No.	1-7221)).

10.28 Form	of	Motorola,	Inc.	Restricted	Stock	Unit	Agreement	(Cliff	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	10.12	to Motorola's	Quarterly	Report	on	Form	10-Q	for	the	fiscal	quarter	ended	July	3,	2004	(File	No.	1-7221)).

10.29 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)).

10.30 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)).

10.31 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)).

10.32 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)).

10.33 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	Motorola's	Annual	Report	on Form	10-K	for	the	fiscal	year	ended	December	31,	2005	(File	No.	1-7221)).

10.39 Motorola	Management	Deferred	Compensation	Plan,	as	amended	through	May	2,	2006	(incorporated	by	reference	to	Motorola's	Quarterly	Report	on	Form	10-Q	for	the	fiscal	quarter	ended April	1,	2006	(File	No.	1-7221)).

10.40 Motorola,	Inc.	Senior	Officer	Change	in	Control	Severance	Plan,	amended	on	May	2,	2006	(incorporated	by	reference	to	Exhibit	10.30	to	Motorola's	Annual	Report	on	Form	10-Q	for	the fiscal	quarter	ended	April	1,	2006	(File	No.	1-7221)).

10.41 Motorola,	Inc.	Retiree	Basic	Life	Insurance	for	Elected	Officers	prior	to	January	1,	2004	who	retire	after	January	1,	2005	(incorporated	by	reference	to	Exhibit	10.36	to	Motorola's	Annual Report	on	Form	10-K	for	the	fiscal	year	ended	December	31,	2004	(File	No.	1-7221)).

10.42 Arrangement	for	directors'	fees	and	retirement	plan	for	non-employee	directors	(description	incorporated	by	reference	from	the	information	under	the	caption	"How	Are	the	Directors Compensated?"	of	Motorola's	Proxy	Statement	for	the	Annual	Meeting	of	Stockholders	to	be	held	on	May	5,	2008	("Motorola	Proxy	Statement")).

10.43 Insurance	covering	non-employee	directors	and	their	spouses	(including	a	description	incorporated	by	reference	from	the	information	under	the	caption	"How	Are	the	Directors Compensated?"	of	the	Motorola	Proxy	Statement	and	to	Exhibit	10.38	to	Motorola's	Annual	Report	on	Form	10-K	for	the	fiscal	year	ended	December	31,	2004	(File	No.	1-7221)).

*10.44 Description	of	Certain	Compensatory	Arrangements	between	Motorola,	Inc.	and	Gregory	Q.	Brown. *10.45 Description	of	Certain	Compensatory	Arrangements	between	Motorola,	Inc.	and	Paul	J.	Liska.

10.46 Employment	Agreement	between	Motorola,	Inc.	and	Edward	J.	Zander	dated	as	of	December	15,	2003	as	amended	through	May	11,	2007	(incorporated	by	reference	to	Exhibit	10.35	to Motorola's	Quarterly	Report	on	Form	10-Q	for	the	fiscal	quarter	ended	June	30,	2007	(File	No.	1-7221)).

*10.47 Chairman/CEO	Retirement	Term	Sheet	dated	November	29,	2007	for	Edward	J.	Zander.

*10.48 Amended	and	Restated	Employment	Agreement	between	Thomas	J.	Meredith	and	Motorola,	Inc.	(As	Amended	January	30,	2008). 10.49 Agreement	between	Motorola,	Inc.	and	Adrian	Nemcek	dated	July	18,	2006	(incorporated	by	reference	to	Exhibit	10.45	to	Motorola's	Quarterly	Report	on	Form	10-Q	for	the	fiscal	quarter ended	July	1,	2006	(File	No.	1-7221)).

*32.1 Certification	of	Gregory	Q.	Brown	pursuant	to	Section	906	of	the	Sarbanes-Oxley	Act	of	2002.

*32.2 Certification	of	Thomas	J.	Meredith	pursuant	to	Section	906	of	the	Sarbanes-Oxley	Act	of	2002.

* Filed	herewith


what was the average segment net sales from 2005 to 2007 in millions