10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the period ended July 2, 2011

or

¨ 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: 001-34805

MOTOROLA MOBILITY HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

DELAWARE (State of Incorporation)	27-2780868 (I.R.S. Employer Identification No.)
600 N. U.S. Highway 45 Libertyville, Illinois 60048 (Address of principal executive offices)	60048 (Zip Code)

Registrant’s telephone number, including area code:

(847) 523-5000

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 x  No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x  No ¨

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

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

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

The number of shares outstanding of each of the issuer’s classes of common stock as of the close of business on July 2, 2011:

Class	Number of Shares
Common Stock; $.01 Par Value	296,939,608

	Page
PART I - FINANCIAL INFORMATION		1
Item 1. Financial Statements
Condensed Consolidated Statements of Operations (Unaudited) for the Three Months and Six Months Ended July 2, 2011 and July 3, 2010		1
Condensed Consolidated Balance Sheets (Unaudited) as of July 2, 2011 and December 31, 2010		2
Condensed Consolidated Statement of Stockholders’ Equity (Unaudited) for the Six Months Ended July 2, 2011		3
Condensed Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended July  2, 2011 and July 3, 2010		4
Notes to Condensed Consolidated Financial Statements (Unaudited)		5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		22
Item 3. Quantitative and Qualitative Disclosures About Market Risk		38
Item 4. Controls and Procedures		40
PART II - OTHER INFORMATION		42
Item 1. Legal Proceedings		42
Item 1A. Risk Factors		45
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		46
Item 3. Defaults Upon Senior Securities		46
Item 4. (Removed and Reserved)		46
Item 5. Other Information		46
Item 6. Exhibits		46

1

Part I—Financial Information

Motorola Mobility Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)

	Three Months Ended				Six Months Ended
(In millions, except per share amounts)	July 2, 2011		July 3, 2010		July 2, 2011		July 3, 2010
Net revenues		$3,337		$2,609		$6,369		$5,089
Costs of sales		2,473		1,945		4,750		3,830
Gross margin		864		664		1,619		1,259
Selling, general and administrative expenses		456		385		873		756
Research and development expenditures		395		372		752		739
Other charges (income)		36		(209)		53		(180)
Operating earnings (loss)		(23)		116		(59)		(56)
Other income (expense):
Interest income (expense), net		1		(18)		3		(29)
Gains on sales of investments		10		—		10		—
Other, net		(5)		(6)		(22)		(22)
Total other income (expense)		6		(24)		(9)		(51)
Earnings (loss) before income taxes		(17)		92		(68)		(107)
Income tax expense		39		15		69		27
Net earnings (loss)		(56)		77		(137)		(134)
Less: Loss attributable to non-controlling interests		—		(3)		—		(2)
Net earnings (loss) attributable to Motorola Mobility Holdings, Inc.		$(56)		$80		$(137)		$(132)
Earnings (loss) per common share (Note 3):
Basic		$(0.19)		$0.27		$(0.46)		$(0.45)
Diluted		$(0.19)		N/A		$(0.46)		N/A
Weighted average common shares outstanding:
Basic		295.8		294.3		295.3		294.3
Diluted		295.8		N/A		295.3		N/A

See accompanying notes to condensed consolidated financial statements (unaudited).

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Motorola Mobility Holdings, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

(In millions)	July 2, 2011		December 31, 2010
ASSETS
Cash and cash equivalents		$3,026		$—
Accounts receivable, net		1,843		1,571
Inventories, net		744		843
Deferred income taxes		80		110
Other current assets		620		595
Total current assets		6,313		3,119
Cash deposits		180		—
Property, plant and equipment, net		806		806
Investments		122		137
Deferred income taxes		98		49
Goodwill		1,423		1,396
Other assets		614		697
Total assets		$9,556		$6,204
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable		$1,728		$1,731
Accrued liabilities		2,276		2,115
Total current liabilities		4,004		3,846
Other liabilities		648		603
Stockholders’ Equity
Common stock: $.01 par value;		3		—
Authorized shares: 900.0
Issued shares: 297.6
Outstanding shares: 296.9
Additional paid-in capital		5,051		—
Accumulated other comprehensive loss		(13)		(345)
Retained earnings (accumulated deficit)		(137)		—
Owner’s net investment, prior to Separation		—		2,077
Total Motorola Mobility Holdings, Inc. stockholders’ equity		4,904		1,732
Non-controlling interests		—		23
Total stockholders’ equity		4,904		1,755
Total liabilities and stockholders’ equity		$9,556		$6,204

See accompanying notes to condensed consolidated financial statements (unaudited).

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Motorola Mobility Holdings, Inc. and Subsidiaries

Condensed Consolidated Statement of Stockholders’ Equity

(Unaudited)

					Accumulated Other Comprehensive Income (Loss)
(In millions)	Shares		Common Stock and Additional Paid-in Capital		Fair Value Adjustment to Available for Sale Securities, Net of Tax		Foreign Currency Translation Adjustments, Net of Tax		Retirement Benefits Adjustments, Net of Tax		Retained Earnings (Accumulated Deficit)		Owner’s Net Investment, Prior to Separation		Non-Controlling Interests		Comprehensive Earnings (Loss)
Balances at December 31, 2010		—		$—		$14		$(349)		$(10)		$—		$2,077		$23
Capital contribution from Former Parent														3,200
Separation-related adjustments						(5)		346		(4)				(311)		(23)
Reclassification of Owner’s Net Investment to Common Stock and Additional Paid-in Capital in connection with Separation		294.3		4,966										(4,966)
Net loss												(137)						(137)
Impact of sale of securities, net of tax of $5						(9)												(9)
Foreign currency translation adjustments								4										4
Issuance of common stock and stock options exercised		2.6		2
Share-based compensation expense				86
Balances at July 2, 2011		296.9		$5,054		$—		$1		$(14)		$(137)		$—		$—		$(142)

See accompanying notes to condensed consolidated financial statements (unaudited).

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Motorola Mobility Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Six Months Ended
(In millions)	July 2, 2011		July 3, 2010
Operating
Net loss attributable to Motorola Mobility Holdings, Inc.		$(137)		$(132)
Loss attributable to non-controlling interests		—		(2)
Net loss		(137)		(134)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		110		111
Share-based compensation expense		86		78
Non-cash other charges		17		1
Gains on sales of investments		(10)		—
Deferred income taxes		(15)		(3)
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable, net		(263)		51
Inventories		99		60
Other current assets		45		79
Accounts payable and accrued liabilities		95		(89)
Other assets and liabilities		80		(97)
Net cash provided by operating activities		107		57
Investing
Acquisitions and investments		(44)		(20)
Proceeds from sales of investments		17		—
Capital expenditures		(96)		(42)
Cash deposits		(23)		—
Other, net		1		6
Net cash used for investing activities		(145)		(56)
Financing
Share-based compensation activity		2		—
Capital contribution from Former Parent, net of cash deposits of $168		3,032		—
Other, net		15		—
Net transfers to Former Parent		—		(28)
Net cash provided by (used for) financing activities		3,049		(28)
Effect of exchange rate changes on cash and cash equivalents		15		27
Net increase in cash and cash equivalents		3,026		—
Cash and cash equivalents, beginning of period		—		—
Cash and cash equivalents, end of period		$3,026		$—
Cash Flow Information
Cash paid during the period for:
Interest, net		$1		N/A
Income taxes, net of refunds		89		N/A

See accompanying notes to condensed consolidated financial statements (unaudited).

5

Motorola Mobility Holdings, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Dollars in millions, except as noted)

(Unaudited)

1. Background and Basis of Presentation

Background

Motorola Mobility Holdings, Inc. (“Motorola Mobility” or “the Company”) is a provider of innovative technologies, products and services that enable a broad range of mobile and wireline, digital communication, information and entertainment experiences. The Company’s integrated products and platforms deliver rich multimedia content, such as voice, video, messaging and Internet-based applications and services to multiple screens, such as mobile devices, televisions and personal computers (“multi screens”). Our product portfolio primarily includes mobile devices, wireless accessories, set-top boxes and video distribution systems, and wireline broadband infrastructure products and associated customer premises equipment. We are focused on developing differentiated, innovative products to meet the expanding needs of consumers to communicate, to collaborate and to discover, consume, create and share content at a time and place of their choosing on multiple devices.

On January 4, 2011 (the “Distribution Date”), the separation of Motorola Mobility from Motorola, Inc., which effective January 4, 2011 changed its name to Motorola Solutions, Inc. (hereinafter, the “Former Parent”) (the “Separation”), was completed. Motorola Mobility is now an independent public company trading under the symbol “MMI” on the New York Stock Exchange. On January 4, 2011, Former Parent stockholders of record as of the close of business on December 21, 2010 (the “Record Date”) received one (1) share of Motorola Mobility common stock for each eight (8) shares of Motorola, Inc. common stock held as of the Record Date (the “Distribution”). Motorola Mobility did not issue fractional shares of its common stock in the Distribution. Fractional shares that Former Parent stockholders would otherwise have been entitled to receive were aggregated and sold in the public market by the distribution agent and aggregate net cash proceeds of these sales were distributed ratably to those stockholders who would otherwise have been entitled to receive fractional shares.

At the time of the Distribution, the Former Parent contributed $3.2 billion in cash, cash equivalents and cash deposits to the Company (the “Distribution Date Contribution”). Additional contributions totaling $300 million from the Former Parent are due in cash if and when the Former Parent receives cash distributions as a result of the reduction in registered capital of an overseas subsidiary (the “Deferred Contribution”). On July 22, 2011, the Company received $75 million of the Deferred Contribution due from the Former Parent.

Basis of Presentation

The condensed consolidated financial statements include the accounts of the Company and all controlled subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. The condensed consolidated financial statements as of July 2, 2011 and December 31, 2010 and for the three months and six months ended July 2, 2011 and July 3, 2010 include, in the opinion of management, all adjustments (consisting of normal recurring adjustments and reclassifications) necessary to present fairly the Company’s consolidated financial position, results of operations and cash flows for all periods presented.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the combined financial statements and notes thereto included in the Company’s Form 10-K for the year ended December 31, 2010. The results of operations for the three months and six months ended July 2, 2011 are not necessarily indicative of the operating results to be expected for the full year. Certain amounts in prior period financial statements and related notes have been reclassified to conform to the 2011 presentation.

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The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Prior to Separation, the historical financial statements were derived from the consolidated financial statements and accounting records of the Former Parent principally representing the Mobile Devices and Home business segments, using the historical results of operations and historical basis of assets and liabilities of the Company’s businesses. The historical financial statements also include allocations of certain Former Parent general corporate expenses. Management believes the assumptions and methodologies underlying the allocation of general corporate expenses to the historical results of operations were reasonable. However, such expenses may not be indicative of the actual level of expenses that would have been incurred by the Company if it had operated as an independent, publicly traded company or of the costs expected to be incurred in the future. As such, the results of operations prior to Separation, included herein, may not necessarily reflect the Company’s results of operations, financial position or cash flows in the future or what its results of operations, financial position or cash flows would have been had the Company been an independent, publicly traded company during the historical periods presented. Because a direct ownership relationship did not exist among all the various worldwide entities comprising the Company, the Former Parent’s net investment in the Company is presented as Owner’s net investment, rather than stockholders’ equity, in the combined balance sheets for periods prior to the Separation. Transactions between the Mobile Devices and Home business segments and other Former Parent businesses have been identified in the historical financial statements as transactions between related parties for periods prior to the Separation.

The following table presents the expense (income) allocations reflected in the Company’s statements of operations:

July 3, 2010	Three Months Ended		Six Months Ended
Leveraged services expenses		$ 138		$ 267
Employee benefits and incentives		129		208
Basic research		2		5
Interest expense (income), net		15		26
		$ 284		$ 506

The Company and the Former Parent considered these leveraged services expenses, employee benefits and incentives, basic research and interest expense (income) allocations to be a reasonable reflection of the services provided to the Company by the Former Parent. For the three months and six months ended July 2, 2011, there are no allocations from the Former Parent in the statement of operations.

The Former Parent used a worldwide centralized approach to cash management and the financing of its operations with all related activity between the Company and the Former Parent reflected as equity transactions in Owner’s net investment in the Company’s historical balance sheets for periods prior to Separation. Types of intercompany transactions between the Company and the Former Parent prior to Separation included: (i) cash receipts from the Company’s businesses, which were transferred to the Former Parent on a regular basis, (ii) cash injections from the Former Parent used to fund operations, capital expenditures, or acquisitions, (iii) charges (benefits) for income taxes, and (iv) allocations of the Former Parent’s corporate expenses, as discussed above.

Prior to Separation, the historical financial statements included a manufacturing joint venture that primarily benefited the Company. Activity in the joint venture for the benefit of the Company began to wind down prior to Separation. Upon Separation, the Company did not retain any ownership in the joint venture and the Company is no longer receiving any manufactured goods from the joint venture. As such, after Separation, the joint venture is no longer included in the consolidated financial statements of the Company. In addition, because the historical financial statements were derived from the Former Parent’s accounting records, included in

7

the Separation-related adjustments are adjustments to foreign currency translation adjustments, net of tax, in Accumulated other comprehensive loss, to reflect the appropriate opening balances related to the Company’s legal entities at Separation.

For purposes of the Company’s historical financial statements, income tax expense and deferred income tax balances were recorded as if the Company filed tax returns on a separate return basis (“hypothetical carve-out basis”) from the Former Parent. The Company’s historical income tax balances reflected tax losses and tax credits generated by the Company while divisions within the Former Parent’s legal entities which were available for use by the Former Parent’s other businesses. Additionally, as part of the Separation, the Former Parent entered into taxable transactions when separating the Company’s non-U.S. assets and liabilities into separate non-U.S. subsidiaries of the Company. As a result of these taxable transactions and the use of certain tax losses and credits by the Former Parent, the Company’s income tax balances, as presented on the hypothetical carve-out basis, at December 31, 2010 were adjusted after the Separation to reflect the Company’s post-Separation income tax positions, including unrecognized tax benefits, tax loss and credit carry forwards, other deferred tax assets and valuation allowances. The adjustment resulted in a decrease in the hypothetical carve-out income tax balances with an offsetting $32 million increase in Stockholders’ Equity.

Recently Issued Accounting Pronouncements

In May 2011, the FASB issued authoritative guidance that changes the wording used to describe many of the requirements for measuring fair value and for disclosing information about fair value measurements to ensure consistency between U.S. GAAP and IFRS. The guidance also expands the disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. This new guidance is to be applied prospectively during interim and annual periods beginning after December 15, 2011. The Company anticipates that the adoption of this standard will not materially expand its consolidated financial statement footnote disclosures or change the way it measures fair value.

In June 2011, the FASB issued authoritative guidance which amends current comprehensive income guidance. This guidance eliminates the option to present the components of comprehensive income as part of the statement of stockholders’ equity. Instead, the Company must report comprehensive income in either a single continuous statement of comprehensive income which contains two sections, net income and other comprehensive income, or in two separate but consecutive statements. This guidance will be effective for the Company during the interim and annual periods beginning after December 15, 2011. The adoption of this guidance will not have an impact on the Company’s consolidated statements of operations, balance sheets or cash flows as it only requires a change in the format of the current presentation.

2. Relationship with the Former Parent

In connection with the Separation, the Company entered into a series of agreements with the Former Parent which are intended to govern the relationship between the Company and the Former Parent going forward. These agreements include a Master Separation and Distribution Agreement, intellectual property agreements, a trademark license agreement, a tax sharing agreement and an employee matters agreement. The Company also entered into other related agreements with the Former Parent including transition services agreements. During the three months and six months ended July 2, 2011, the net expense to the Company related to these agreements was not material. See Note 10, “Commitments and Contingencies”, regarding indemnifications to and from the Former Parent.

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3. Other Financial Data

Statement of Operations Information

Other Charges (Income)

Other charges (income) included in Operating earnings (loss) consist of the following:

	Three Months Ended		Six Months Ended
	July 2, 2011	July 3, 2010	July 2, 2011	July 3, 2010
Legal claim provision	$20	$—	$20	—
Intangible asset amortization	16	14	32	$27
Intangible asset impairment	—	—	4	—
Reorganization of businesses	—	5	(3)	21
Legal settlement	—	(228)	—	(228)
	$36	$(209)	$53	$(180)

In June 2010, the Company announced that it had entered into a settlement and license agreement with another company, which resolved all outstanding litigation between the two companies. The agreement includes provisions for an upfront payment of $175 million from the other company to the Company, future royalties to be paid by the other company to the Company for the license of certain intellectual property, and the transfer of certain patents between the companies. As a result of this agreement and the valuation of the patents exchanged, the Company recorded a pre-tax gain of $228 million during the three months ended July 3, 2010, related to the settlement of the outstanding litigation between the parties.

Other Income (Expense)

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

	Three Months Ended				Six Months Ended
	July 2, 2011		July 3, 2010		July 2, 2011		July 3, 2010
Interest income (expense), net:
Interest income		$6		$7		$10		$12
Interest expense		(5)		(25)		(7)		(41)
		$1		$(18)		$3		$(29)
Other, net:
Foreign currency costs		(10)		(10)		(22)		(19)
Investment impairments		—		(1)		—		(8)
Other		5		5		—		5
		$(5)		$(6)		$(22)		$(22)

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Earnings (Loss) Per Common Share

The computation of basic and diluted earnings (loss) per common share attributable to Motorola Mobility Holdings, Inc. common stockholders is as follows:

	Amounts attributable to Motorola Mobility Holdings, Inc. common stockholders
	Three Months Ended				Six Months Ended
	July 2, 2011		July 3, 2010		July 2, 2011		July 3, 2010
Basic earnings (loss) per common share:
Net earnings (loss)		$(56)		$80		$(137)		$(132)
Weighted average common shares outstanding		295.8		294.3		295.3		294.3
Per share amount		$(0.19)		$0.27		$(0.46)		$(0.45)
Diluted earnings (loss) per common share:
Net earnings (loss)		$(56)		N/A		$(137)		N/A
Weighted average common shares outstanding		295.8		N/A		295.3		N/A
Add effect of dilutive securities:
Share-based awards and other		—		N/A		—		N/A
Diluted weighted average common shares outstanding		295.8		N/A		295.3		N/A
Per share amount		$(0.19)		N/A		$(0.46)		N/A

For the three months and six months ended July 2, 2011, the Company was in a net loss position and, accordingly, the assumed exercise of 0.6 million and 1.1 million stock options, respectively, and the assumed vesting of 1.7 million and 2.2 million restricted stock units, respectively, were excluded from diluted weighted average shares outstanding because their inclusion would have been anti-dilutive.

The computation of basic earnings (loss) per common share for all periods through December 31, 2010, is calculated using the number of shares of Motorola Mobility common stock outstanding on January 4, 2011, following the Distribution. No measure of diluted loss per common share is presented since there were no actual shares outstanding prior to Separation.

Balance Sheet Information

Cash and Cash Equivalents and Cash Deposits

The Company’s cash and cash equivalents (which are highly-liquid investments with an original maturity of three months or less) were $3.0 billion at July 2, 2011. In addition, the Company had $203 million of cash deposits, primarily related to various legal disputes, at July 2, 2011. At July 2, 2011, $23 million of this amount was current and included in Other current assets in the Company’s condensed consolidated balance sheet (all of which was held in the U.S.) and $180 million of this amount was non-current (including $171 million held outside the U.S.). Prior to Separation, the Company participated in the Former Parent’s cash management program. As a result, the Company has recorded no cash, cash equivalents or cash deposits on its balance sheet prior to Separation.

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Accounts Receivable

Accounts receivable, net, consists of the following:

	July 2, 2011		December 31, 2010
Accounts receivable		$1,889		$1,620
Less allowance for doubtful accounts		(46)		(49)
		$1,843		$1,571

Inventories

Inventories, net, consists of the following:

	July 2, 2011		December 31, 2010
Work-in-process and production materials		$559		$724
Finished goods		454		508
		1,013		1,232
Less inventory reserves		(269)		(389)
		$744		$843

Other Current Assets

Other current assets consists of the following:

	July 2, 2011		December 31, 2010
Contractor receivables		$228		$239
Deferred costs		125		163
Tax refunds receivable		71		103
Royalty license arrangements		51		44
Cash deposits		23		—
Other		122		46
		$620		$595

Property, Plant and Equipment

Property, plant and equipment, net, consists of the following:

	July 2, 2011		December 31, 2010
Land		$44		$44
Building		712		716
Machinery and equipment		1,728		1,665
		2,484		2,425
Less accumulated depreciation		(1,678)		(1,619)
		$806		$806

Depreciation expense for the three months ended July 2, 2011 and July 3, 2010 was $40 million and $48 million, respectively. Depreciation expense for the six months ended July 2, 2011 and July 3, 2010 was $78 million and $84 million, respectively.

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Investments

Investments consists of the following:

July 2, 2011	Recorded Value		Less				Cost Basis
			Unrealized Gains		Unrealized Losses
Available-for-sale securities:
Common stock and equivalents		$—		$—		$—		$—
Other securities, at cost		95		—		—		95
Equity method investments		27		—		—		27
		$122		$—		$—		$122

December 31, 2010	Recorded Value		Less				Cost Basis
			Unrealized Gains		Unrealized Losses
Available-for-sale securities:
Common stock and equivalents		$21		$14		$—		$7
Other securities, at cost		89		—		—		89
Equity method investments		27		—		—		27
		$137		$14		$—		$123

During the three months ended July 2, 2011, the Company disposed of Available-for-sale common stock and equivalents resulting in a gain on sale of investments of $10 million.

During the three months and six months ended July 2, 2011, investment impairment charges recorded by the Company were de minimis. During the three months and six months ended July 3, 2010, the Company recorded investment impairment charges of $1 million and $8 million, respectively, representing other-than-temporary declines in the value of the Company’s investment portfolio, primarily related to other securities recorded at cost. Investment impairment charges are included in Other within Other income (expense) in the Company’s condensed consolidated statements of operations.

Other Assets

Other assets consists of the following:

	July 2, 2011		December 31, 2010
Royalty license arrangements		$224		$228
Intangible assets, net of accumulated amortization of $646 and $614		176		205
Deferred costs		145		180
Value-added tax refunds receivable		29		48
Other		40		36
		$614		$697

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Accrued Liabilities

Accrued liabilities consists of the following:

	July 2, 2011		December 31, 2010
Customer reserves		$360		$256
Deferred revenue		334		325
Warranty reserves		258		206
Royalty license arrangements		242		211
Compensation		226		246
Contractor payables		159		179
Tax liabilities		102		140
Other		595		552
		$2,276		$2,115

Other Liabilities

Other liabilities consists of the following:

	July 2, 2011		December 31, 2010
Deferred revenue		$194		$224
Defined benefit pension plans		99		93
Facility financing obligation		98		96
Deferred income taxes		79		79
Unrecognized tax benefits		7		18
Other		171		93
		$648		$603

4. Risk Management

Derivative Financial Instruments

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 exchange rate price fluctuations, trading in currencies for which there are no underlying exposures, or entering into transactions for any currency to intentionally increase the underlying exposure. Instruments that are designated as part of a hedging relationship must be effective at reducing the risk associated with the exposure being hedged and are designated as part of a hedging relationship at the inception of the contract. Accordingly, changes in the market values of hedge instruments must be highly correlated with changes in market values of the underlying hedged items both at the inception of the hedge and over the life of the hedge contract.

The Company’s strategy related to foreign exchange exposure management is to offset the gains or losses on the financial instruments against losses or gains on the underlying operational cash flows or investments based on the operating business units’ assessment of risk. The Company enters into derivative contracts for some of the Company’s non-functional currency receivables and payables, which are primarily denominated in major currencies that can be traded on open markets. The Company typically 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

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hedging relationship if it is determined that the transaction qualifies for hedge accounting under the provisions of the authoritative accounting guidance for derivative instruments and hedging activities. A portion of the Company’s exposure is from currencies that are not traded in liquid markets and these are addressed, to the extent reasonably possible, by managing net asset positions, product pricing and component sourcing.

As of July 2, 2011 and December 31, 2010, the Company had outstanding foreign exchange contracts with notional values totaling $362 million and $608 million, respectively. Management believes that these financial instruments should not subject the Company to undue risk due to foreign exchange movements because gains and losses on these contracts should generally offset losses and gains on the underlying assets, liabilities and transactions, except for the ineffective portion of the instruments, which are charged to Other within Other income (expense) in the Company’s condensed consolidated statements of operations.

The following table shows the five largest net notional amounts of the positions to buy or sell foreign currency as of July 2, 2011 and the corresponding positions as of December 31, 2010:

	Notional Amount
Net Buy (Sell) by Currency	July 2, 2011		December 31, 2010
Chinese Yuan		$101		$14
Indian Rupee		(26)		(43)
Brazilian Real		(26)		(394)
Korean Won		(40)		(30)
Euro		(58)		(54)

Counterparty Risk

The use of derivative financial instruments exposes the Company to counterparty credit risk in the event of nonperformance by counterparties. However, the risk is limited to the fair value of the instruments when the derivative is in an asset position. At the present time, all of the counterparties have investment grade credit ratings. The Company is not exposed to material credit risk with any single counterparty.

Fair Value of Financial Instruments

The Company’s financial instruments include short-term investments, accounts receivable, accounts payable, accrued liabilities, derivative financial instruments and other financing commitments. The Company’s available-for-sale investment portfolios and derivative financial instruments are recorded in the Company’s condensed consolidated balance sheets at fair value. All other financial instruments are carried at cost, which is not materially different than the instruments’ fair values.

5. Income Taxes

Basis of Presentation

For purposes of the Company’s historical financial statements pre-Separation, income tax expense and deferred income tax balances were recorded as if the Company had filed tax returns on a separate return basis (“hypothetical carve-out basis”) from the Former Parent. Post-Separation, income tax expense and deferred income tax balances are recorded in accordance with the Company’s stand-alone income tax positions.

Income Tax Expense

For the three months ended July 2, 2011 and July 3, 2010, the Company recorded net income tax expense of $39 million and $15 million, respectively, primarily comprised of taxes on foreign earnings and foreign withholding taxes on royalty and other income.

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For the six months ended July 2, 2011 and July 3, 2010, the Company recorded net income tax expense of $69 million and $27 million, respectively, primarily comprised of taxes on foreign earnings and foreign withholding taxes on royalty and other income.

The Company has not recorded a tax benefit on its U.S. losses due to its recent history of cumulative U.S. losses.

Deferred Income Taxes

As of July 2, 2011, the Company’s net deferred tax assets, exclusive of valuation allowances, were $2.5 billion, compared to $2.9 billion as of December 31, 2010. As of July 2, 2011, the valuation allowance against the net deferred tax assets was $2.4 billion, as compared to $2.8 billion as of December 31, 2010.

Included in the net deferred tax assets of $2.5 billion as of July 2, 2011 are: (i) approximately $1.0 billion of deferred tax assets related to capitalized R&D costs that may be amortized for tax purposes through 2019; (ii) approximately $600 million of deferred tax assets related to U.S. and foreign tax loss and credit carry forwards; and (iii) approximately $900 million of deferred taxes related to other temporary differences.

Unrecognized Tax Benefits

The Company had unrecognized tax benefits of $25 million and $101 million, at July 2, 2011 and December 31, 2010, respectively. The decrease in unrecognized tax benefits is attributable to a $76 million decrease relating to post-Separation adjustments.

6. Share-Based Compensation Plans

Upon Separation, all outstanding Former Parent stock options, stock appreciation rights and restricted stock units (“RSU”) for the Company’s employees were replaced with awards in the Company using a formula designed to preserve the intrinsic value and fair value of the award immediately prior to Separation. There was no incremental compensation expense to the Company related to the replacement of the Former Parent share-based compensation awards. Any unrecognized compensation expense related to the replaced awards will be recognized by the Company over the remaining vesting period of the awards. During the six months ended July 2, 2011, the Company began to grant share based compensation to employees and non-employee directors under the Company’s incentive plans.

Stock Options

During the six months ended July 2, 2011, the Company granted 9.7 million stock options. The weighted-average estimated fair value of employee stock options granted during the six months ended July 2, 2011 was $11.70. As of July 2, 2011, the Company had 23.9 million stock options and stock appreciation rights outstanding.

Restricted Stock and Restricted Stock Units

During the six months ended July 2, 2011, the Company granted 4.4 million restricted stock (“RS”) and RSUs with a weighted-average fair market value of $29.33 per RS and RSU. As of July 2, 2011, the Company had 9.2 million RS and RSUs outstanding.

Employee Stock Purchase Plan

During the three months ended July 2, 2011, employees began to participate in the Company’s new employee stock purchase plan. The employee stock purchase plan allows eligible participants to purchase

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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 May 1 through October 31 and the second one from November 1 through April 30. During the three months ended July 2, 2011, there was no purchase of the Company’s stock under the plan as the initial offering period had not yet closed.

Compensation expense related to the Company’s employee stock options, stock appreciation rights, restricted stock, restricted stock units and employee stock purchase plan was as follows (prior to Separation, compensation expense included the Company’s employees, as well as allocated compensation expense from the Former Parent’s corporate functions):

	Three Months Ended				Six Months Ended
	July 2, 2011		July 3, 2010		July 2, 2011		July 3, 2010
Share-based compensation expense included in:
Costs of sales		$4		$4		$8		$7
Selling, general and administrative expenses		28		23		49		46
Research and development expenditures		14		13		29		25
Share-based compensation expense included in Operating earnings (loss)		46		40		86		78
Tax benefit		—		—		—		—
Share-based compensation expense, net of tax		$46		$40		$86		$78

7. Fair Value Measurements

The Company had no non-financial assets or liabilities that are required to be measured at fair value on a recurring basis as of July 2, 2011.

Applicable accounting standards specify a hierarchy of valuation techniques based on whether the inputs to each measurement are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s assumptions about current market conditions. The prescribed fair value hierarchy and related valuation methodologies are as follows:

Level 1—Quoted prices for identical instruments in active markets.

Level 2—Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations, in which all significant inputs are observable in active markets.

Level 3—Valuations derived from valuation techniques, in which one or more significant inputs are unobservable.

The fair values of the Company’s financial assets and liabilities by level in the fair value hierarchy as of July 2, 2011 were as follows:

July 2, 2011	Level 1		Level 2		Level 3		Total
Assets:
Foreign exchange derivative contracts		$—		$2		$—		$2
Liabilities:
Foreign exchange derivative contracts		$—		$6		$—		$6

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8. Sales of Receivables

Prior to Separation, the Former Parent sold accounts receivable generated from its business units to third-parties in transactions that qualified as “true-sales.” Until Separation, the Company’s businesses participated in this activity by transferring certain of their accounts receivable balances to the Former Parent. The Company also has agreements under which the Company sells its accounts receivable directly to a third party in transactions that qualify as “true-sales.”

Total sales of accounts receivable were $66 million and $45 million during the three months ended July 2, 2011 and July 3, 2010, respectively, and $97 million and $116 million for the six months ended July 2, 2011 and July 3, 2010, respectively. As of July 2, 2011, there were $66 million of accounts receivable outstanding under these programs for which the Company retained servicing obligations, compared to $43 million at December 31, 2010.

9. Credit Facilities

On January 4, 2011, the Company entered into a $500 million unsecured three-year credit agreement (the “Credit Agreement”) with a syndicate of lenders. The Credit Agreement provides for a revolving credit facility and a letter of credit facility, is guaranteed by certain of the Company’s subsidiaries, and contains restrictive covenants. The Company may use any borrowings under the Credit Agreement for general corporate purposes. No obligations are outstanding under the Credit Agreement as of July 2, 2011.

10. Commitments and Contingencies

Legal

The Company is involved in various lawsuits, claims and investigations arising in the normal course of business and relating to the Company’s business. In the opinion of management, the ultimate disposition of these matters is not expected to 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 matters are ultimately resolved.

Tax and Regulatory Proceedings in Brazil

In connection with the Company’s operations in Brazil, Brazilian tax authorities have proposed assessments against the Company’s Brazilian subsidiary relating to various technology transfer taxes, duties, value added taxes, certain other taxes and labor related matters related to the subsidiary’s operations for calendar years 1997 through 2010. As of July 2, 2011, these assessments collectively represent reasonably possible loss contingencies under the applicable accounting standards of up to approximately $530 million, based on the exchange rate in effect at July 2, 2011, including interest and penalties. However, the Company is vigorously disputing these matters, believes it has valid defenses that are supported by the law, and believes that this amount is not a meaningful indicator of liability. These matters are progressing through the multiple levels of administrative and judicial review available in Brazil. Due to the complexities and uncertainty surrounding the administrative and judicial process in Brazil and the nature of the claims asserted, the Company does not expect a final resolution of these matters for several years.

The Company routinely assesses the probability of ultimately incurring a loss in each of these matters and records the Company’s best estimate of the ultimate loss in situations where the Company assesses the likelihood of an ultimate loss as probable. Based on the Company’s assessment of these matters, the Company has recorded accruals on only a small portion of the total exposure. It is, however, very difficult to predict the outcome of legal disputes and controversies, including litigation, in Brazil and our ultimate loss may be significantly greater than our current assessments and related accruals.

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As of July 2, 2011, the Company had approximately $166 million of cash deposits, including accrued interest, for these matters, which are included in Cash deposits in the Company’s condensed consolidated balance sheet as of July 2, 2011.

Indemnifications

The Company may provide indemnifications for losses associated with indemnification and/or warranty provisions contained in certain commercial and intellectual property agreements. Historically, the Company has not made significant payments under these indemnifications. However, there is an increasing risk in relation to intellectual property indemnities given the current legal climate. In particular, two customers of the Company have made indemnification demands of the Company related to patent infringement claims by TiVo, Inc. against our products.

Furthermore, pursuant to the Master Separation and Distribution Agreement and certain other agreements with the Former Parent, the Company agreed to indemnify the Former Parent for certain liabilities, and the Former Parent agreed to indemnify the Company for certain liabilities, in each case for uncapped amounts.

Generally, in indemnification cases, payment by the Company is conditioned on the other party making a claim pursuant to the procedures specified in the particular contract, which procedures typically allow the Company to challenge the other party’s claims. Further, the Company’s obligations under these agreements for indemnification are generally limited in terms of duration and are for amounts not in excess of the contract value, except with respect to certain intellectual property infringement claims. In some instances, the Company may have recourse against third-parties for certain payments made by the Company.

11. Segment Information

The Company reports financial results for the following business segments:

• The Mobile Devices segment designs, manufactures, sells and services wireless mobile devices, including smartphones and media tablets, with integrated software and accessory products, and licenses intellectual property.

• The Home segment designs, manufactures, sells, installs and services set-top boxes for digital video, Internet Protocol (“IP”) video, satellite and terrestrial broadcast networks, end-to-end digital video and Internet Protocol Television (“IPTV”) distribution systems, broadband access network infrastructure platforms, and associated data and voice customer premises equipment and associated software solutions to cable television (“TV”) and telecommunication service providers.

Summarized below are the Company’s net revenues and operating earnings (loss) by segment for the three months and six months ended July 2, 2011 and July 3, 2010:

	Net Revenues				Operating Earnings (Loss)
Three Months Ended	July 2, 2011		July 3, 2010		July 2, 2011		July 3, 2010
Mobile Devices		$2,430		$1,723		$(85)		$87
Home		907		886		62		29
		$3,337		$2,609
Operating earnings (loss)						(23)		116
Total other income (expense)						6		(24)
Earnings (loss) before income taxes						$(17)		$92

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	Net Revenues				Operating Earnings (Loss)
Six Months Ended	July 2, 2011		July 3, 2010		July 2, 2011		July 3, 2010
Mobile Devices		$4,558		$3,365		$(174)		$(105)
Home		1,811		1,724		115		49
		$6,369		$5,089
Operating loss						(59)		(56)
Total other expense						(9)		(51)
Loss before income taxes						$(68)		$(107)

12. 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. Prior to Separation, the Company participated in the Former Parent’s Severance Plan. The Company recognizes termination benefits based on formulas per the Severance Plan at the point in time that future settlement is probable and can be reasonably estimated based on estimates prepared at the time a restructuring plan is approved by management. Exit costs consist of future minimum lease payments on vacated facilities and other contractual terminations. At each reporting date, the Company evaluates its accruals for employee separation and exit costs to ensure the accruals are still appropriate. In certain circumstances, accruals are no longer needed because of efficiencies in carrying out the plans or because employees previously identified for separation resigned from the Company and did not receive severance or were redeployed due to circumstances not foreseen when the original plans were initiated. In these cases, the Company reverses accruals through the condensed consolidated statements of operations where the original charges were recorded when it is determined they are no longer needed.

2011 Activity

During the three months ended July 2, 2011, the Company recorded $1 million of additional charges related to restructuring actions under Other charges in the Company’s condensed consolidated statements of operations, and $1 million of reversals of reorganization of business charges for accruals no longer needed.

During the six months ended July 2, 2011, the Company recorded $6 million of net reversals of reorganization of business charges, including $3 million of Separation-related adjustments for employees that remained with the Former Parent and $4 million of reversals for accruals no longer needed, partially offset by $1 million of additional charges related to restructuring actions under Other charges in the Company’s condensed consolidated statements of operations.

The following table displays the net charges (reversals of accruals) incurred by business segment:

July 2, 2011	Three Months Ended		Six Months Ended
Mobile Devices		$—		$(3)
Home		—		—
		$—		$(3)

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The following table displays a rollforward of the reorganization of businesses accruals established for exit costs and employee separation costs from January 1, 2011 to July 2, 2011:

	Accruals at January 1, 2011		Additional Charges		Adjustments		Amount Used		Accruals at July 2, 2011
Exit costs		$12		$—		$—		$(2)		$10
Employee separation costs		32		1		(7)		(23)		3
		$44		$1		$(7)		$(25)		$13

Adjustments include foreign currency translation adjustments.

Exit Costs

At January 1, 2011, the Company had an accrual of $12 million for exit costs attributable to lease terminations. The $2 million used reflects cash payments. The remaining accrual of $10 million, which is included in Accrued liabilities in the Company’s condensed consolidated balance sheet at July 2, 2011, represents future cash payments, primarily for lease termination obligations that are expected to be paid over a number of years.

Employee Separation Costs

At January 1, 2011, the Company had an accrual of $32 million for employee separation costs, representing the severance costs for approximately 1,100 employees. The adjustments of $7 million reflect reversals of accruals no longer needed and the additional charges of $1 million relate to restructuring actions taken by the Company. During the six months ended July 2, 2011, approximately 600 employees, of which 100 were direct employees and 500 were indirect employees, were separated from the Company. The $23 million used reflects cash payments to these separated employees. The remaining accrual of $3 million is included in Accrued liabilities in the Company’s condensed consolidated balance sheet at July 2, 2011.

2010 Activity

During the three months ended July 3, 2010, the Company recorded net reorganization of business charges of $7 million, including $2 million of charges in Costs of sales and $5 million of charges under Other charges in the Company’s condensed consolidated statements of operations. Included in the aggregate $7 million are charges of $12 million for employee separation costs, partially offset by $5 million of reversals for accruals no longer needed.

During the six months ended July 3, 2010, the Company recorded net reorganization of business charges of $27 million, including $6 million of charges in Costs of sales and $21 million of charges under Other charges in the Company’s condensed consolidated statements of operations. Included in the aggregate $27 million are charges of $36 million for employee separation costs, partially offset by $9 million of reversals for accruals no longer needed.

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

July 3, 2010	Three Months Ended		Six Months Ended
Mobile Devices		$2		$17
Home		5		10
		$7		$27

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The following table displays a rollforward of the reorganization of businesses accruals established for exit costs and employee separation costs from January 1, 2010 to July 3, 2010:

	Accruals at January 1, 2010		Additional Charges		Adjustments		Amount Used		Accruals at July 3, 2010
Exit costs		$39		$—		$(3)		$(15)		$21
Employee separation costs		33		36		(8)		(35)		26
		$72		$36		$(11)		$(50)		$47

Adjustments include foreign currency translation adjustments.

Exit Costs

At January 1, 2010, the Company had an accrual of $39 million for exit costs attributable to lease terminations. There were no material additional charges related to exit costs. The adjustments of $3 million reflect: (i) $2 million of reversals of accruals no longer needed, and (ii) $1 million of foreign currency translation adjustments. The $15 million used reflects cash payments. The remaining accrual of $21 million was included in Accrued liabilities in the Company’s condensed combined balance sheet at July 3, 2010.

Employee Separation Costs

At January 1, 2010, the Company had an accrual of $33 million for employee separation costs, representing the severance costs for approximately 400 employees. The additional charges of $36 million represent severance costs for approximately an additional 1,000 employees, of which 400 were direct employees and 600 were indirect employees. The adjustments of $8 million reflect: (i) $7 million of reversals of accruals no longer needed and (ii) $1 million of foreign currency translation adjustments. During the six months ended July 3, 2010, approximately 700 employees, of which 200 were direct employees and 500 were indirect employees, were separated from the Company. The $35 million used reflects cash payments to these separated employees. The remaining accrual of $26 million was included in Accrued liabilities in the Company’s combined balance sheet at July 3, 2010.

13. Intangible Assets and Goodwill

Intangible Assets

Amortized intangible assets were comprised of the following:

	July 2, 2011				December 31, 2010
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Completed technology		$511		$441		$507		$418
Licensed technology		106		106		105		105
Patents		97		20		97		16
Customer-related		64		41		62		37
In-process research and development		6		—		10		—
Other intangibles		38		38		38		38
		$822		$646		$819		$614

Amortization expense on intangible assets, which is included within Other charges, was $16 million and $14 million for the three months ended July 2, 2011 and July 3, 2010, respectively. Amortization expense on

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intangible assets, which is included within Other charges, was $32 million and $27 million for the six months ended July 2, 2011 and July 3, 2010, respectively. As of July 2, 2011, annual amortization expense is estimated to be $60 million in 2011, $43 million in 2012, $33 million in 2013, $19 million in 2014 and $11 million in 2015.

During the three months ended April 2, 2011, the Company recorded an impairment of $4 million related to the abandonment of previously acquired in-process research and development.

Amortized intangible assets, excluding goodwill, by business segment were as follows:

	July 2, 2011				December 31, 2010
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Mobile Devices		$150		$59		$153		$53
Home		672		587		666		561
		$822		$646		$819		$614

Goodwill

The following table displays a rollforward of the carrying amount of goodwill by reportable segment from January 1, 2011 to July 2, 2011:

	Mobile Devices		Home		Total
Balances as of January 1, 2011:
Aggregate goodwill acquired		$133		$1,391		$1,524
Accumulated impairment losses		(55)		(73)		(128)
Goodwill, net of impairment losses		78		1,318		1,396
Goodwill acquired		—		25		25
Adjustments		2		—		2
Balances as of July 2, 2011:
Aggregate goodwill acquired		135		1,416		1,551
Accumulated impairment losses		(55)		(73)		(128)
Goodwill, net of impairment losses		$80		$1,343		$1,423

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MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This commentary should be read in conjunction with Motorola Mobility Holdings, Inc.’s (the “Company’s”) condensed consolidated financial statements for the three and six months ended July 2, 2011 and July 3, 2010, as well as the Company’s combined financial statements and related notes thereto and management’s discussion and analysis of financial condition and results of operations in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

Introduction

Management’s discussion and analysis of financial condition and results of operations (“MD&A”) is a supplement to the accompanying condensed consolidated financial statements and provides additional information on Motorola Mobility’s business, recent developments, financial condition, liquidity and capital resources, cash flows and results of operations. MD&A is organized as follows:

• Separation from Motorola, Inc.—This section provides a general discussion of our separation from Motorola, Inc., which changed its name to Motorola Solutions, Inc. (hereinafter, our “Former Parent”) effective January 4, 2011.

• Executive Overview—This section provides a general description of our business, as well as recent developments we believe are important in understanding our results of operations and financial condition or in understanding anticipated future trends.

• Looking Forward—This section provides a discussion of management’s general outlook about market demand, competition and product development.

• Results of Operations—This section provides an analysis of our results of operations for the three and six months ended July 2, 2011 and July 3, 2010.

• Liquidity and Capital Resources—This section provides a discussion of our current financial condition and an analysis of our cash flows for the six months ended July 2, 2011 and July 3, 2010.

• Significant Accounting Policies—This section identifies and summarizes those accounting policies that significantly impact our reported results of operations and financial condition and require significant judgment or estimates on the part of management in their application.

Separation from Motorola, Inc.

On January 4, 2011 (the “Distribution Date”), Motorola Mobility Holdings, Inc. became an independent, publicly traded company as a result of our Former Parent’s distribution of its shares of Motorola Mobility to our Former Parent’s stockholders. On the Distribution Date, Former Parent stockholders of record as of the close of business on December 21, 2010 (the “Record Date”) received one share of Motorola Mobility common stock for every eight shares of Motorola, Inc. common stock held as of the Record Date (the “Distribution”). Motorola Mobility is comprised of Motorola, Inc.’s former Mobile Devices and Home businesses. Our Former Parent’s Board of Directors approved the distribution of its shares of Motorola Mobility Holdings, Inc. on November 30, 2010. Motorola Mobility Holdings, Inc. was incorporated on May 28, 2010 and is the parent of Motorola Mobility, Inc., our main U.S. wholly owned operating subsidiary through which we conduct substantially all of the business activities discussed in this Form 10-Q. Our Registration Statement on Form 10 was declared effective by the U.S. Securities and Exchange Commission on December 1, 2010. Our common stock began trading “regular-way” under the ticker symbol “MMI” on the New York Stock Exchange on January 4, 2011.

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The Motorola Mobility businesses discussed herein represent the historical operating results and financial condition of Motorola Mobility. For operating results prior to the separation, any references to “we,” “us,” “Motorola Mobility Holdings, Inc.,” “Motorola Mobility” or the “Company” in this MD&A refer to the Mobile Devices and Home businesses as they operated as a part of our Former Parent prior to the Distribution.

Executive Overview

The Company

Motorola Mobility Holdings, Inc. is a provider of innovative technologies, products and services that enable a range of mobile and wireline digital communication, information and entertainment experiences. The Company’s integrated products and platforms deliver rich multimedia content, such as voice, video, messaging and Internet-based applications and services to multiple screens, such as mobile devices, including smartphones and media tablets, televisions and personal computers. Our product portfolio primarily includes mobile devices, wireless accessories, set-top boxes and video distribution systems, and wireline broadband infrastructure products and associated customer premises equipment. We are focused on developing differentiated, innovative products to meet the expanding needs of consumers to communicate, to collaborate and to discover, consume, create and share content at a time and place of their choosing on multiple devices.

We operate our business in two segments. The Mobile Devices segment is focused on mobile wireless devices and related products and services. This segment’s net revenues were $2.4 billion in the second quarter of 2011 and $1.7 billion in the second quarter of 2010, representing 73% and 66%, respectively, of Motorola Mobility’s consolidated net revenues. The Home segment is focused on technologies to provide video entertainment services to consumers by enabling subscribers to access a variety of interactive digital television services. This segment’s net revenues were $907 million in the second quarter of 2011 and $886 million in the second quarter of 2010, representing 27% and 34%, respectively, of Motorola Mobility’s consolidated net revenues.

Motorola Mobility’s Financial Results for the quarter ended July 2, 2011

• Net Revenues: Our net revenues were $3.3 billion in the second quarter of 2011, up 28% compared to net revenues of $2.6 billion in the second quarter of 2010. Net revenues increased 41% in the Mobile Devices segment and 2% in the Home segment.

• Operating Earnings (Loss): We incurred an operating loss of $23 million in the second quarter of 2011, compared to operating earnings of $116 million in the second quarter of 2010.

• Net Earnings (Loss): We incurred a net loss of $56 million in the second quarter of 2011, compared to net earnings of $80 million in the second quarter of 2010.

• Operating Cash Flows: We generated $107 million of net cash from operating activities in the first half of 2011, compared to generating $57 million of net cash from operating activities in the first half of 2010.

Financial results for our two business segments for the quarter ended July 2, 2011

• In Our Mobile Devices Business: Net revenues were $2.4 billion in the second quarter of 2011, an increase of 41% compared to net revenues of $1.7 billion in the second quarter of 2010. The increase in net revenues was primarily driven by an 8% increase in average selling price (“ASP”) and by a 33% increase in unit shipments. We shipped 11.0 million mobile devices in the second quarter of 2011, a 33% increase compared to shipments of 8.3 million mobile devices in second quarter of 2010, and a 19% increase sequentially compared to shipments of 9.3 million mobile devices in the first quarter of 2011. We shipped 4.4 million Android-based smartphones in the second quarter of 2011, a 63% increase compared to shipments of 2.7 million in the second quarter of 2010, and a 7% increase sequentially compared to shipments of 4.1 million in the first quarter of 2011. On a geographic basis, net revenues increased substantially in Asia, Latin America, and the Europe, Middle East and Africa region (“EMEA”), and decreased in North America.

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The segment incurred an operating loss of $85 million in the second quarter of 2011, compared to operating earnings of $87 million in the second quarter of 2010. The change from operating earnings to an operating loss was primarily due to the absence in 2011 of a comparable $228 million gain related to a legal settlement in 2010, partially offset by an increase in gross margin driven by the 41% increase in net revenues. Selling, general and administrative (“SG&A”) expenses also increased to support the growth in smartphone volumes.

• In Our Home Business: Net revenues were $907 million in the second quarter of 2011, an increase of 2% compared to net revenues of $886 million in the second quarter of 2010. The increase in net revenues in the Home segment was primarily driven by a 10% increase in net revenues from sales of set-top boxes, reflecting a 12% increase in shipments of set-top boxes, partially offset by lower ASP. Net revenues from sales of video and access infrastructure equipment declined 10%. On a geographic basis, net revenues increased in North America and Latin America, partially offset by decreased net revenues in EMEA and Asia.

The segment had operating earnings of $62 million in the second quarter of 2011, compared to operating earnings of $29 million in the second quarter of 2010. The increase in operating earnings was primarily due to (i) an increase in gross margin, driven by the 2% increase in net revenues and a favorable product mix shift and (ii) a slight decrease in SG&A expenses, partially offset by an increase in research and development (“R&D”) expenditures.

Looking Forward

In our Mobile Devices business, while we expect the overall global mobile device market to remain intensely competitive, we expect annual growth in total industry demand over the next several years, particularly in smartphones and media tablets. Our strategy is focused on developing and marketing a comprehensive smartphone portfolio and strengthening our position in priority markets. Our smartphone priorities and areas of differentiation include the following areas: (i) providing a broad based portfolio of devices at multiple price points and distributed through carriers, distributors and retailers globally, (ii) expanding our portfolio to include 4G LTE devices, (iii) software applications and services for consumers, including cloud based social networking, media and content related experiences, (iv) Webtop, a proprietary software application, and related accessories that enable enhanced and more interactive computer-like user experiences, and (v) enterprise-ready devices that address the security and device management needs required for business use. Our mid- to high-tier feature phone portfolio will be limited given declining global demand in this segment of the handset industry. We will continue to develop and market our iDEN portfolio of devices, although we expect overall iDEN unit demand in 2011 to be lower than in 2010. For lower-priced, voice-centric mobile devices, our portfolio will also be limited as we deliver devices to meet certain market needs. To address a new growth opportunity, we are developing a portfolio of media tablets, wireless devices which enable enhanced access to the mobile Internet, content consumption, and enterprise experiences for consumers and business users. We shipped our first LTE-upgradable media tablet, the Motorola XOOM, beginning in the first quarter of 2011. We expect significant annual growth in total industry demand for media tablets over the next several years and for this market to be intensely competitive. Mobile Devices’ market priorities continue to be primarily North America, China and Latin America, followed by Western Europe and other strategic markets. With the growth in demand for smartphones and media tablets, and by accelerating our speed to market, providing rich consumer experiences and strengthening our brand, we expect to continue to improve the financial performance in our Mobile Devices business.

In our Home business, we expect overall industry demand in 2011 to be comparable to 2010 levels. We expect a return to industry growth when market conditions improve, particularly in the U.S., which may drive increased consumer demand for high definition TV set-top boxes, whole-home IP-based network solutions, 3D-TV, advanced interactive services and converged experiences. In addition, consumer demand for video services is expected to drive the need for infrastructure equipment to optimize networks and storage, increase bandwidth and provide new services across multiple screens, including smartphones, media tablets and TV’s. We will continue to leverage our market leadership position in set-top boxes and video delivery systems and in intellectual property to develop innovative solutions for new and emerging market opportunities. As we address these opportunities, we will continue to manage our overall cost structure, focus on the profitability of our core business, and position ourselves for profitable growth.

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Other opportunities we plan to focus on include those resulting from the convergence of industries like wireless, media, computing and the Internet. These industries are increasingly interacting with each other, which we expect will create demand for new consumer devices, applications and services. We believe we will be well positioned to deliver innovative experiences, both in the home and on the go, across multiple types of devices to address this emerging opportunity.

Important suppliers to the company are located in Japan. While we do not expect any significant disruption in our ability to meet our customer needs in the second half of the year, we continue to carefully monitor the continuing impact of the March 2011 earthquake and ensuing tsunami in Japan. Uncertainties remain, including the potential for unanticipated events, which could have a negative impact on our business.

The Company has an industry leading patent portfolio encompassing many wireless, video, and other innovative technologies. We are also involved in significant patent litigation with industry competitors and other relevant patent holders. Several of these matters could be resolved during the remainder of 2011 or the first half of 2012. The outcome of these disputes could have a significant impact on our business and such matters are discussed in “Part II. Item 1. Legal Proceedings”.

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, consolidations among our customers and competitors, changes in regulatory requirements, or other factors, can introduce volatility into our businesses. We face challenging, but relatively stable, global economic conditions in our largest markets. Meeting all of these challenges requires consistent operational planning and execution and investment in technology, resulting in innovative products that meet the needs of our customers around the world. As we execute on meeting these objectives, we remain focused on taking the necessary action to design and deliver differentiated and innovative products, services and experiences that simplify, connect, and enrich people’s lives.

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Results of Operations

	Three Months Ended								Six Months Ended
(Dollars in millions, except per share amounts)	July 2, 2011		% of Sales		July 3, 2010		% of Sales		July 2, 2011		% of Sales		July 3, 2010		% of Sales
Net revenues		$3,337				$2,609				$6,369				$5,089
Costs of sales		2,473		74.1%		1,945		74.5%		4,750		74.6%		3,830		75.3%
Gross margin		864		25.9%		664		25.5%		1,619		25.4%		1,259		24.7%
Selling, general and administrative expenses		456		13.7%		385		14.8%		873		13.7%		756		14.8%
Research and development expenditures		395		11.8%		372		14.3%		752		11.8%		739		14.5%
Other charges (income)		36		1.1%		(209)		(8.0)%		53		0.8%		(180)		(3.5)%
Operating earnings (loss)		(23)		(0.7)%		116		4.4%		(59)		(0.9)%		(56)		(1.1)%
Other income (expense):
Interest income (expense), net		1		—%		(18)		(0.7)%		3		—%		(29)		(0.6)%
Gains on sales of investments		10		0.3%		—		—%		10		0.2%		—		—%
Other, net		(5)		(0.1)%		(6)		(0.2)%		(22)		(0.3)%		(22)		(0.4)%
Total other income (expense)		6		0.2%		(24)		(0.9)%		(9)		(0.1)%		(51)		(1.0)%
Earnings (loss) before income taxes		(17)		(0.5)%		92		3.5%		(68)		(1.1)%		(107)		(2.1)%
Income tax expense		39		1.2%		15		0.5%		69		1.1%		27		0.5%
Net earnings (loss)		(56)		(1.7)%		77		3.0%		(137)		(2.2)%		(134)		(2.6)%
Less: Loss attributable to non-controlling interests		—		—%		(3)		(0.1)%		—		—%		(2)		(0.0)%
Net earnings (loss) attributable to Motorola Mobility Holdings, Inc.		$(56)		(1.7)%		$80		3.1%		$(137)		(2.2)%		$(132)		(2.6)%

Three months ended July 2, 2011 compared to three months ended July 3, 2010

Net Revenues

Net revenues were $3.3 billion in the second quarter of 2011, up 28% compared to net revenues of $2.6 billion in the second quarter of 2010. The increase in net revenues reflects: (i) a $707 million, or 41%, increase in net revenues in the Mobile Devices segment, and (ii) a $21 million, or 2%, increase in net revenues in the Home segment. The 41% increase in net revenues in the Mobile Devices segment was primarily driven by an 8% increase in average selling price (“ASP”) and by a 33% increase in unit shipments. The 2% increase in net revenues in the Home business was primarily driven by a 10% increase in net revenues from sales of set-top boxes, partially offset by a 10% decline in net revenues from sales of video and access infrastructure equipment.

Gross Margin

Gross margin was $864 million, or 25.9% of net revenues, in the second quarter of 2011, compared to $664 million, or 25.5% of net revenues, in the second quarter of 2010. The increase in gross margin reflects higher gross margin in both segments. The increase in gross margin in the Mobile Devices segment was primarily driven by the 41% increase in net revenues. The increase in gross margin in the Home segment was primarily due to the 2% increase in net revenues and a favorable product mix shift. The increase in gross margin as a percentage of net sales in the second quarter of 2011 compared to the second quarter of 2010 reflects an increase in gross margin percentage in the Home segment partially offset by a decrease in gross margin percentage in the Mobile Devices segment. The Company’s overall gross margin as a percentage of net revenues can be impacted by the proportion of overall net revenues generated by its two businesses.

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Selling, General and Administrative Expenses

SG&A expenses increased 18% to $456 million, or 13.7% of net revenues, in the second quarter of 2011, compared to $385 million, or 14.8% of net revenues, in the second quarter of 2010. The increase in SG&A expenses reflects higher SG&A expenses in the Mobile Devices segment, partially offset by a slight decrease in SG&A expenses in the Home segment. The increase in the Mobile Devices segment was to support the growth in smartphone volumes. SG&A expenses as a percentage of net revenues decreased in both segments.

Research and Development Expenditures

R&D expenditures increased 6% to $395 million, or 11.8% of net revenues, in the second quarter of 2011, compared to $372 million, or 14.3% of net revenues, in the second quarter of 2010. The increase in R&D expenditures reflects higher R&D expenditures in both segments. R&D expenditures as a percentage of net revenues increased in the Home segment and decreased in the Mobile Devices segment. The Company participates in very competitive industries with constant changes in technology and, accordingly, the Company continues to believe that a strong commitment to R&D is required to drive long-term growth.

Other Charges (Income)

The Company recorded other charges of $36 million in the second quarter of 2011, compared to other income of $209 million in the second quarter of 2010. The charges in the second quarter of 2011 were primarily comprised of $20 million of charges related to a legal claim provision and $16 million of charges relating to the amortization of intangibles. The other income in the second quarter of 2010 included a $228 million gain related to a legal settlement, partially offset by: (i) $14 million of charges relating to the amortization of intangibles and (ii) $5 million of net reorganization of business charges. The net reorganization of business charges are discussed in further detail in the section entitled “Reorganization of Businesses” included elsewhere within this document.

Interest Income (Expense), Net

Net interest income was $1 million in the second quarter of 2011, compared to net interest expense of $18 million in the second quarter of 2010. Net interest income in the second quarter of 2011 includes interest income of $6 million, partially offset by interest expense of $5 million. Net interest expense in the second quarter of 2010 included interest expense of $25 million, partially offset by interest income of $7 million. Prior to separation, our interest income and expense primarily represents amounts allocated from our Former Parent.

Gains on Sales of Investments

Gains on sales of investments were $10 million in the second quarter of 2011. We did not have gains on sales of investments in the second quarter of 2010. In the second quarter of 2011, the net gain was primarily comprised of gains related to sales of certain of the Company’s available-for-sale securities.

Other, Net

Net expense classified as Other, net, as presented in Other income (expense), was $5 million in the second quarter of 2011, compared to $6 million in the second quarter of 2010. The net expense in the second quarter of 2011 was primarily comprised of $10 million of foreign currency costs. The net expense in the second quarter of 2010 was primarily comprised of $10 million of foreign currency costs.

Income Tax Expense

The Company recorded income tax expense of $39 million in the second quarter of 2011 as compared to $15 million in the second quarter of 2010. The expense for both the second quarters of 2011 and 2010 was comprised of taxes on foreign earnings and foreign withholding taxes on royalty and other income. The Company has not recorded a tax benefit on its U.S. losses due to its recent history of cumulative U.S. losses.

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The Company’s tax provision may change from period to period based on non-recurring events, such as the settlement of tax audits, changes in valuation allowances and the tax impact of significant unusual or extraordinary items. The Company’s tax provision will also change due to the level of pre-tax income or loss and its geographic mix.

Net Earnings (Loss)

The Company incurred a loss before income taxes of $17 million in the second quarter of 2011, compared with earnings before income taxes of $92 million in the second quarter of 2010. After taxes, and excluding Loss attributable to non-controlling interests, the Company incurred a net loss of $56 million in the second quarter of 2011, compared to net earnings of $80 million in the second quarter of 2010.

The change to a loss before income taxes in the second quarter of 2011 compared to earnings before income taxes in the second quarter of 2010 was primarily attributable to: (i) a $245 million change in Other charges (income), primarily due to the absence in 2011 of a comparable $228 million gain related to a legal settlement in 2010, and (ii) a $71 million increase in SG&A expenses, partially offset by a $200 million increase in gross margin, primarily due to an increase in revenues.

Six months ended July 2, 2011 compared to six months ended July 3, 2010

Net Revenues

Net revenues were $6.4 billion in the first half of 2011, up 25% compared to net revenues of $5.1 billion in the first half of 2010. The increase in net revenues reflects: (i) a $1.2 billion, or 35%, increase in net revenues in the Mobile Devices segment, and (ii) an $87 million, or 5%, increase in net revenues in the Home segment. The 35% increase in net revenues in the Mobile Devices segment was primarily driven by a 14% increase in ASP and by a 20% increase in unit shipments. The 5% increase in net revenues in the Home business was primarily driven by a 10% increase in net revenues from sales of set-top boxes, partially offset by a 5% decline in net revenues from sales of video and access infrastructure equipment.

Gross Margin

Gross margin was $1.6 billion, or 25.4% of net revenues, in the first half of 2011, compared to $1.3 billion, or 24.7% of net revenues, in the first half of 2010. The increase in gross margin reflects higher gross margin in both segments. The increase in gross margin in the Mobile Devices segment was primarily driven by (i) the 35% increase in net revenues and (ii) a favorable product mix, specifically due to increased volume of smartphone devices. The increase in gross margin in the Home segment was primarily due to the 5% increase in net revenues and a favorable product mix shift. The increase in gross margin as a percentage of net sales in the first half of 2011 compared to the first half of 2010 reflects an increase in gross margin percentage in both segments. The Company’s overall gross margin as a percentage of net revenues can be impacted by the proportion of overall net revenues generated by its two businesses.

Selling, General and Administrative Expenses

SG&A expenses increased 15% to $873 million, or 13.7% of net revenues, in the first half of 2011, compared to $756 million, or 14.8% of net revenues, in the first half of 2010. The increase in SG&A expenses reflects higher SG&A expenses in the Mobile Devices segment. The increase in the Mobile Devices segment was to support the growth in smartphone volumes. SG&A expenses as a percentage of net revenues decreased in both segments.

Research and Development Expenditures

R&D expenditures increased 2% to $752 million, or 11.8% of net revenues, in the first half of 2011, compared to $739 million, or 14.5% of net revenues, in the first half of 2010. The increase in R&D expenditures

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reflects slightly higher R&D expenditures in both segments. R&D expenditures as a percentage of net revenues decreased in both 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 other charges of $53 million in the first half of 2011, compared to other income of $180 million in the first half of 2010. The charges in the first half of 2011 were primarily comprised of $32 million of charges relating to the amortization of intangibles and $20 million of charges related to a legal claim provision. The other income in the first half of 2010 included a $228 million gain related to a legal settlement, partially offset by: (i) $27 million of charges relating to the amortization of intangibles and (ii) $21 million of net reorganization of business charges.

Interest Income (Expense), Net

Net interest income was $3 million in the first half of 2011, compared to net interest expense of $29 million in the first half of 2010. Net interest income in the first half of 2011 includes interest income of $10 million, partially offset by interest expense of $7 million. Net interest expense in the first half of 2010 included interest expense of $41 million, partially offset by interest income of $12 million.

Gains on Sales of Investments

Gains on sales of investments were $10 million in the first half of 2011. We did not have gains on sales of investments in the first half of 2010. In the first half of 2011, the net gain was primarily comprised of gains related to sales of certain of the Company’s available-for-sale securities.

Other, Net

Net expense classified as Other, net, as presented in Other income (expense), was $22 million in the first half of 2011 and the first half of 2010. The net expense in the first half of 2011 was primarily comprised of $22 million of foreign currency costs. The net expense in the first half of 2010 was primarily comprised of (i) $19 million of foreign currency costs and (ii) $8 million of investment impairment charges.

Income Tax Expense

The Company recorded income tax expense of $69 million in the first half of 2011 as compared to $27 million in the first half of 2010. The expense for both the first halves of 2011 and 2010 was comprised of taxes on foreign earnings and foreign withholding taxes on royalty and other income. The Company has not recorded a tax benefit on its U.S. losses due to its recent history of cumulative U.S. losses.

The Company’s tax provision may change from period to period based on non-recurring events, such as the settlement of tax audits, changes in valuation allowances and the tax impact of significant unusual or extraordinary items. The Company’s tax provision will also change due to the level of pre-tax income or loss and its geographic mix.

Net Earnings (Loss)

The Company incurred a loss before income taxes of $68 million in the first half of 2011, compared with a loss before income taxes of $107 million in the first half of 2010. After taxes, and excluding Loss attributable to non-controlling interests, the Company incurred a net loss of $137 million in the first half of 2011, compared to a net loss of $132 million in the first half of 2010.

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The improvement in the loss before income taxes in the first half of 2011 compared to the first half of 2010 was primarily attributable to a $360 million increase in gross margin, primarily due to an increase in revenues. The increase in gross margin was partially offset by (i) a $233 million change in Other charges (income), primarily due to the absence in 2011 of a comparable $228 million gain related to a legal settlement in 2010, and (ii) a $117 million increase in SG&A expenses.

Segment Results

The following commentary should be read in conjunction with the financial results of each operating business segment as detailed in Note 11, “Segment Information,” to the Company’s condensed consolidated financial statements as of and for the three months and six months ended July 2, 2011. Net revenues and operating results for the Company’s two operating business segments for the three months and six months ended July 2, 2011 and July 3, 2010, are presented below.

Mobile Devices Segment

The Mobile Devices segment designs, manufactures, sells and services wireless mobile devices, including smartphones and media tablets, with integrated software and accessory products, and licenses intellectual property. For the second quarter of 2011, the segment’s net revenues represented 73% of the Company’s consolidated net revenues, compared to 66% for the second quarter of 2010. For the first half of 2011, the segment’s net revenues represented 72% of the Company’s consolidated net revenues, compared to 66% for the first half of 2010.

	Three Months Ended						Six Months Ended				% Change
	July 2, 2011		July 3, 2010		% Change		July 2, 2011		July 3, 2010
Segment net revenues		$2,430		$1,723		41%		$4,558		$3,365		35%
Operating earnings (loss)		(85)		87		(198)%		(174)		(105)		66%

Three months ended July 2, 2011 compared to three months ended July 3, 2010

In the second quarter of 2011, the segment’s net revenues were $2.4 billion, an increase of 41% compared to net revenues of $1.7 billion in the second quarter of 2010. The increase in net revenues was primarily driven by a 8% increase in ASP and by a 33% increase in unit shipments. On a geographic basis, net revenues increased substantially in Asia, Latin America, and the Europe, Middle East and Africa region (“EMEA”), and decreased in North America.

The segment incurred an operating loss of $85 million in the second quarter of 2011, compared to operating earnings of $87 million in the second quarter of 2010. The change from operating earnings to an operating loss was primarily due to the absence in 2011 of a comparable $228 million gain related to a legal settlement in 2010, partially offset by an increase in gross margin driven by the 41% increase in net revenues. Selling, general and administrative (“SG&A”) expenses also increased to support the growth in smartphone volumes. As a percentage of net revenues in the second quarter of 2011 as compared to the second quarter of 2010, gross margin, SG&A and research and development (“R&D”) expenditures decreased.

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 continually introduced. Accordingly, a strong commitment to R&D is required and, even amidst challenging global economic conditions, the segment expects to continue to make the appropriate investments to develop a differentiated product portfolio and fuel long-term growth.

Handset unit shipments in the second quarter of 2011 were 10.6 million units, a 28% increase compared to shipments of 8.3 million units in the second quarter of 2010 and an 18% increase sequentially compared to

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shipments of 9.0 million units in the first quarter of 2011. Smartphone shipments in the second quarter of 2011 were 4.4 million, a 63% increase compared to shipments of 2.7 million smartphones in the second quarter of 2010 and a 7% increase sequentially compared to shipments of 4.1 million smartphones in the first quarter of 2011. In addition to handsets, we also shipped 440 thousand media tablet units in the second quarter of 2011, a 72% increase sequentially compared to shipments of over 250 thousand units in the first quarter of 2011.

In the second quarter of 2011, segment ASP increased approximately 8% compared to the second quarter of 2010 and decreased approximately 3% compared to the first quarter of 2011. The increase in ASP in the second quarter of 2011 as compared to the second quarter of 2010 was driven by the launch and shipment of media tablets in 2011. ASP is impacted by numerous factors, including product mix, market conditions and competitive product offerings, and ASP trends often vary over time.

Six months ended July 2, 2011 compared to six months ended July 3, 2010

In the first half of 2011, the segment’s net revenues were $4.6 billion, an increase of 35% compared to net revenues of $3.4 billion in the first half of 2010. The increase in net revenues was primarily driven by a 14% increase in ASP and by a 20% increase in unit shipments. On a geographic basis, net revenues increased in all regions, and increased substantially in Asia, Latin America, and EMEA.

The segment incurred an operating loss of $174 million in the first half of 2011, compared to an operating loss of $105 million in the first half of 2010. The increase in the operating loss was primarily due to the absence in 2011 of a comparable $228 million gain related to a legal settlement in 2010, partially offset by an increase in gross margin. The increase in gross margin in the Mobile Devices segment was primarily driven by (i) the 35% increase in net revenues and (ii) a favorable product mix, specifically due to increased volume of smartphone devices. Also contributing to the increase in operating loss were higher SG&A expenses to support the growth in smartphone volumes. As a percentage of net revenues in the first half of 2011 as compared to the first half of 2010, gross margin increased and SG&A and R&D expenditures decreased.

Handset unit shipments in the first half of 2011 were 19.6 million units, a 16% increase compared to shipments of 16.9 million units in the first half of 2010. Smartphone shipments in the first half of 2011 were 8.5 million, a 70% increase compared to shipments of 5.0 million smartphones in the first half of 2010. In addition to handsets, we also shipped nearly 700 thousand media tablet units in the first half of 2011.

In the first half of 2011, segment ASP increased approximately 14% compared to the first half of 2010. The increase in ASP in the first half of 2011 as compared to the first half of 2010 was driven by increased shipments of smartphones and the launch and shipment of media tablets in the first half of 2011. ASP is impacted by numerous factors, including product mix, market conditions and competitive product offerings, and ASP trends often vary over time.

Home Segment

The Home segment designs, manufactures, sells, installs and services set-top boxes for digital video, Internet protocol (“IP”) video, satellite and terrestrial broadcast networks, end-to-end digital video and Internet protocol television (“IPTV”) distribution systems, broadband access network infrastructure platforms, and associated data and voice customer premises equipment and associated software solutions to cable TV and telecommunication service providers. For the second quarter of 2011, the segment’s net revenues represented 27% of the Company’s consolidated net revenues, compared to 34% for the second quarter of 2010. For the first half of 2011, the segment’s net revenues represented 28% of the Company’s consolidated net revenues, compared to 34% for the first half of 2010.

	Three Months Ended						Six Months Ended
	July 2, 2011		July 3, 2010		% Change		July 2, 2011		July 3, 2010		% Change
Segment net revenues		$907		$886		2%		$1,811		$1,724		5%
Operating earnings		62		29		114%		115		49		135%

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Three months ended July 2, 2011 compared to three months ended July 3, 2010

In the second quarter of 2011, the segment’s net revenues were $907 million, an increase of 2% compared to net revenues of $886 million in the second quarter of 2010. The 2% increase in net revenues was primarily driven by a 10% increase in net revenues from sales of set-top boxes, reflecting a 12% increase in shipments of set-top boxes, partially offset by lower ASP. Net revenues of video and access infrastructure equipment declined 10%.

Revenues from high definition (“HD”) set-top boxes increased primarily due to higher shipments to large telecommunication and cable operators in North America as a result of higher demand. On a geographic basis, net revenues increased in North America and Latin America, partially offset by decreased net revenues in EMEA and Asia. Net revenues in North America continued to comprise a significant portion of the segment’s business, accounting for approximately 73% of the segment’s net revenues in the second quarter of 2011, compared to approximately 71% in the second quarter of 2010.

The segment had operating earnings of $62 million in the second quarter of 2011, compared to operating earnings of $29 million in the second quarter of 2010. The increase in operating earnings was primarily due to (i) an increase in gross margin, driven by the 2% increase in net revenues and a favorable product mix shift and (ii) a slight decrease in SG&A expenses, partially offset by an increase in research and development (“R&D”) expenditures. As a percentage of net revenues in the second quarter of 2011 as compared to the second quarter of 2010, gross margin and R&D expenditures increased and SG&A expenses decreased.

Six months ended July 2, 2011 compared to six months ended July 3, 2010

In the first half of 2011, the segment’s net revenues were $1.8 billion, an increase of 5% compared to net revenues of $1.7 billion in the first half of 2010. The 5% increase in net revenues was primarily driven by a 10% increase in net revenues from sales of set-top boxes, reflecting an 18% increase in shipments of set-top boxes, partially offset by lower ASP. Net revenues of video and access infrastructure equipment declined 5%.

Revenues from high definition (“HD”) set-top boxes increased primarily due to higher shipments to large telecommunication and cable operators in North America as a result of higher demand. On a geographic basis, net revenues increased in North America, Latin America and Asia, partially offset by decreased net revenues in EMEA. Net revenues in North America continued to comprise a significant portion of the segment’s business, accounting for approximately 75% of the segment’s net revenues in the first half of 2011, compared to approximately 71% in the first half of 2010.

The segment had operating earnings of $115 million in the first half of 2011, compared to operating earnings of $49 million in the first half of 2010. The increase in operating earnings was primarily due to an increase in gross margin, driven by the 5% increase in net revenues and a favorable product mix shift. The increase in gross margin was partially offset by an increase in R&D expenditures. As a percentage of net revenues in the first half of 2011 as compared to the first half of 2010, gross margin increased and SG&A and R&D expenditures decreased.

Reorganization of Businesses

2011 Activity

During the three months ended July 2, 2011, the Company recorded $1 million of additional charges related to restructuring actions under Other charges in the Company’s condensed consolidated statements of operations, and $1 million of reversals of reorganization of business charges for accruals no longer needed.

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During the six months ended July 2, 2011, the Company recorded $6 million of net reversals of reorganization of business charges, including $3 million of Separation-related adjustments for employees that remained with the Former Parent and $4 million of reversals for accruals no longer needed, partially offset by $1 million of additional charges related to restructuring actions under Other charges in the Company’s condensed consolidated statements of operations.

July 2, 2011	Three Months Ended		Six Months Ended
Mobile Devices		$—		$(3)
Home		—		—
		$—		$(3)

Cash payments for exit costs and employee separations in connection with reorganization plans were $25 million during the six months ended July 2, 2011. The $13 million reorganization of businesses accrual at July 2, 2011, includes (i) $3 million relating to employee separation costs that are expected to be paid in 2011 and (ii) $10 million relating to lease termination obligations that are expected to be paid over a number of years.

2010 Activity

During the three months ended July 3, 2010, the Company recorded net reorganization of business charges of $7 million, including $2 million of charges in Costs of sales and $5 million of charges under Other charges in the Company’s condensed consolidated statements of operations. Included in the aggregate $7 million are charges of $12 million for employee separation costs, partially offset by $5 million of reversals for accruals no longer needed.

During the six months ended July 3, 2010, the Company recorded net reorganization of business charges of $27 million, including $6 million of charges in Costs of sales and $21 million of charges under Other charges in the Company’s condensed consolidated statements of operations. Included in the aggregate $27 million are charges of $36 million for employee separation costs, partially offset by $9 million of reversals for accruals no longer needed.

July 3, 2010	Three Months Ended		Six Months Ended
Mobile Devices		$2		$17
Home		5		10
		$7		$27

Cash payments for exit costs and employee separations in connection with reorganization plans were $50 million during the six months ended July 3, 2010.

Liquidity and Capital Resources

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

Cash and Cash Equivalents and Cash Deposits

The Company’s cash and cash equivalents (which are highly-liquid investments with an original maturity of three months or less) were $3.0 billion at July 2, 2011. At July 2, 2011, $2.0 billion of this amount was held in the U.S. and $1.0 billion was held by the Company or its subsidiaries in other countries. Our intent is

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to indefinitely reinvest a portion of our earnings from foreign operations. The Company has sufficient U.S. cash and cash equivalents to fund its U.S. operations, without the need for funds from foreign operations. In the event funds from foreign operations are needed to fund operations or other strategic initiatives in the U.S., the Company may incur foreign withholding tax costs in order to distribute the earnings and cash back to the U.S. The Company would not incur a U.S. tax liability as a result of the distribution given its available U.S. tax attributes.

At July 2, 2011, Cash deposits were $203 million. At July 2, 2011, $23 million of this amount was current and included in Other current assets in the Company’s condensed consolidated balance sheet (all of which was held in the U.S.) and $180 million of this amount was non-current (including $171 million held outside the U.S.).

Prior to separation, the Company participated in our Former Parent’s cash management program. Our Former Parent primarily used a worldwide, centralized approach to cash management in which cash accounts are principally consolidated on a daily basis. Therefore, the financing of the Company’s operations and the related activity between the Company and our Former Parent prior to the separation is reflected as Net transfers from (to) Motorola, Inc. in our combined statements of business equity and of cash flows. As a result, the Company has recorded no cash, cash equivalents or cash deposits on its combined balance sheet prior to separation.

Deferred Contribution from Former Parent

Additional contributions totaling $300 million from our Former Parent are due in cash if and when our Former Parent receives cash distributions as a result of the reduction in registered capital of an overseas subsidiary (the “Deferred Contribution”). On July 22, 2011 we received $75 million of the Deferred Contribution from our Former Parent. This contribution will be presented as cash provided by financing activities in the third quarter of 2011. Our Former Parent has notified us that they do not currently know when or if the remaining distribution will be completed.

Operating Activities

The net cash generated from operating activities in the first half of 2011 was $107 million, compared to $57 million of cash generated from operating activities in the first half of 2010. The primary contributors to the net cash generation in the first half of 2011 were: (i) a $99 million decrease in net inventories (ii) a $95 million increase in accounts payable and accrued liabilities, (iii) a $80 million net increase in other assets and liabilities, (iv) the net loss (adjusted for non-cash items) of $51 million, and (v) a $45 million decrease in net other current assets, partially offset by a $263 million increase in net accounts receivable. The primary contributors to the net cash generation in the first half of 2010 were: (i) a $79 million decrease in other current assets, (ii) a $60 million decrease in net inventories, (iii) the net loss (adjusted for non-cash items) of $53 million, and (iv) a $51 million decrease in net accounts receivable, partially offset by (i) a $97 million net decrease in other assets and liabilities, and (ii) a $89 million decrease in accounts payable and accrued liabilities.

Accounts Receivable: The Company’s net accounts receivable was $1.8 billion at July 2, 2011, compared to $1.6 billion at December 31, 2010. Compared to December 31, 2010, net accounts receivable at July 2, 2011 were higher in the Mobile Devices segment and lower in the Home segment. The Company’s businesses sell their products in a variety of markets throughout the world and payment terms can vary by market type and geographic location. Accordingly, the Company’s levels of net accounts receivable can be impacted by the timing and level of sales that are made by its various businesses and by the geographic locations in which those sales are made.

As further described below under “Sales of Receivables,” from time to time, the company elects to sell accounts receivable to third-parties. The Company’s levels of net accounts receivable can be impacted by the timing and amount of such sales, which can vary by period and can be impacted by numerous factors.

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Inventories: The Company’s net inventories were $744 million at July 2, 2011, compared to $843 million at December 31, 2010. The decrease in the Company’s net inventories was reflective of a decrease in both segments. Inventory reserves decreased by $120 million in the first half of 2011 primarily due to the scrapping of excess and obsolete inventory. Inventory management continues to be an area of focus as the Company balances the need to maintain strategic inventory levels to ensure delivery to its customers against the risk of inventory excess and obsolescence due to rapidly changing technology and customer demand.

Accounts Payable: The Company’s accounts payable were $1.7 billion at July 2, 2011 and December 31, 2010. Accounts payable decreased in the Home segment and increased in the Mobile Devices segment. The Company buys products in a variety of markets throughout the world and payment terms can vary by market type and geographic location. Accordingly, the Company’s levels of accounts payable can be impacted by the timing and level of purchases made by its various businesses and by the geographic locations in which those purchases are made.

Reorganization of Businesses: The Company has implemented reorganization of businesses plans. Cash payments for exit costs and employee separations in connection with a number of these plans were $25 million in the first half of 2011, as compared to $50 million in the first half of 2010. Of the $13 million reorganization of businesses accrual at July 2, 2011, $3 million relates to employee separation costs and is expected to be paid over the remainder of 2011. The remaining $10 million in accruals relate to lease termination obligations that are expected to be paid over a number of years.

Investing Activities

Net cash used for investing activities was $145 million in the first half of 2011, compared to net cash used of $56 million in the first half of 2010. The $89 million increase in net cash used for investing activities was primarily due to a $54 million increase in capital expenditures.

Strategic Acquisitions and Investments: The Company used $44 million of cash for acquisitions and new investment activities in the first half of 2011, compared to cash used of $20 million in the first half of 2010. The cash used in the first half of 2011 was for small strategic acquisitions and investments across the Company. The cash used in the first half of 2010 was primarily for small strategic investments across the Company.

Capital Expenditures: Capital expenditures were $96 million in the first half of 2011, compared to $42 million in the first half of 2010. The Company’s emphasis in making capital expenditures is to focus on strategic investments driven by customer demand, new design capability and process improvements, including IT systems.

Cash deposits: The Company made cash deposits of $23 million in the first half of 2011, compared to no cash deposits in the first half of 2010. The cash deposits made in the first half of 2011 were primarily related to supply chain activities.

Investments: The Company views its investments as an additional source of liquidity. The majority of these securities are available-for-sale and cost-method investments in technology companies. The fair market values of these securities are subject to substantial price volatility. In addition, the realizable values of these securities are subject to market and other conditions. At July 2, 2011, the Company did not have an available-for-sale equity securities portfolio. At December 31, 2010, the Company’s available-for-sale equity securities portfolio had an approximate fair market value of $21 million, comprised of a cost basis of $7 million and a net unrealized gain of $14 million. The Company’s available-for-sale investments are included in Investments in the Company’s condensed consolidated balance sheets.

Financing Activities

Net cash provided by financing activities was $3.0 billion in the first half of 2011, compared to $28 million of net cash used in the first half of 2010. Cash provided by financing activities in the first half of 2011 was primarily comprised of $3.0 billion of cash and cash equivalents received from our Former Parent at the time of the Distribution. The contribution from our Former Parent also included $168 million of cash deposits,

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primarily related to various legal disputes, which are included in Cash deposits in the Company’s condensed consolidated balance sheet at July 2, 2011. Cash used for financing activities in the first half of 2010 was due to the net cash transfers to our Former Parent.

Our Former Parent primarily used a worldwide centralized approach to cash management and the financing of its operations with all related activity, prior to separation, between the Company and our Former Parent reflected as equity transactions in Owner’s net investment in the Company’s combined balance sheets. When necessary, our Former Parent had provided the Company funds for its operating cash needs. The Company’s funds in excess of working capital needs had been advanced to our Former Parent. Intercompany accounts were maintained for such borrowings that occur between the Company’s operations and our Former Parent. Types of intercompany transactions between the Company and our Former Parent included: (i) cash deposits from the Company’s businesses which were transferred to our Former Parent on a regular basis, (ii) cash borrowings from our Former Parent used to fund operations, capital expenditures or acquisitions, (iii) charges (benefits) for income taxes, and (iv) allocations of our Former Parent’s corporate expenses described elsewhere in this document. For purposes of the combined statements of cash flows prior to the separation, the Company reflected intercompany activity as a financing activity. The net cash transferred to our Former Parent was $28 million in the first half of 2010.

Credit Facilities

On January 4, 2011, the Company entered into a $500 million unsecured three-year credit agreement (the “Credit Agreement”) with a syndicate of lenders. The Credit Agreement provides for a revolving credit facility and a letter of credit facility, is guaranteed by certain of the Company’s subsidiaries, and contains restrictive covenants. The Company may use any borrowings under the Credit Agreement for general corporate purposes. No obligations are outstanding under the Credit Agreement as of July 2, 2011.

Our ability to obtain standby letters of credit, performance bonds, surety bonds (collectively referred to as “Letters of Credit”), credit facilities, and foreign exchange lines primarily depends upon our capitalization, working capital, past performance, management expertise and reputation, and certain external factors, including the condition of the capital markets, the overall capacity of Letters of Credit and foreign exchange markets. Financial institutions providing these instruments consider such factors in relationship to their underwriting/credit standards, which may change from time to time.

Sales of Receivables

Prior to separation, our Former Parent sold accounts receivable generated from its business units to third-parties in transactions that qualified as “true-sales.” Through separation, the Company’s businesses participated in this activity by transferring certain of their accounts receivable balances to our Former Parent. The Company also has agreements under which the Company sells its accounts receivable directly to a third party in transactions that qualify as “true sales.”

For the three months ended July 2, 2011 and July 3, 2010, total accounts receivable sold by the Company were $66 million and $45 million, respectively. For the six months ended July 2, 2011 and July 3, 2010, total accounts receivable sold by the Company were $97 million and $116 million, respectively. As of July 2, 2011, there were $66 million of accounts receivable outstanding under these programs for which the Company retained servicing obligations, compared to $43 million at December 31, 2010.

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 Motorola Mobility receives from the contract. Contracts with these types of uncapped damage provisions are fairly rare, but individual contracts could still represent meaningful risk. There is a possibility that a damage claim by a counterparty to one of these

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contracts could result in expenses to Motorola Mobility that are far in excess of the revenue received from the counterparty in connection with the contract.

Indemnification Provisions:    Motorola Mobility may provide indemnifications for losses associated with indemnification and/or warranty provisions contained in certain commercial and intellectual property agreements. Historically, Motorola Mobility has not made significant payments under these indemnifications. However, there is an increasing risk in relation to intellectual property indemnities given the current legal climate. In particular, two customers of the Company have made indemnification demands of the Company related to patent infringement claims by TiVo, Inc. against our products.

Generally, in indemnification cases, payment by Motorola Mobility is conditioned on the other party making a claim pursuant to the procedures specified in the particular contract, which procedures typically allow Motorola Mobility to challenge the other party’s claims. Further, Motorola Mobility’s obligations under these agreements for indemnification are generally limited in terms of duration, typically not more than 24 months, and for amounts not in excess of the contract value, except with respect to certain intellectual property infringement claims. In some instances, Motorola Mobility may have recourse against third-parties for certain payments made by Motorola Mobility.

Furthermore, pursuant to the Master Separation and Distribution Agreement and certain other agreements with our Former Parent, Motorola Mobility agreed to indemnify our Former Parent for certain liabilities, and our Former Parent agreed to indemnify Motorola Mobility for certain liabilities, in each case for uncapped amounts.

Legal Matters:    The Company is involved in various lawsuits, claims and investigations arising in the normal course of business and relating to our business. In the opinion of management, the ultimate disposition of these matters is not expected to have a material adverse effect on Motorola Mobility’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 matters are ultimately resolved. See “Item 1. Legal Proceedings” for more details.

Tax and Regulatory Proceedings in Brazil:    The Company had approximately $166 million of cash deposits, including accrued interest, related to various legal disputes in Brazil. This amount may increase before the end of the year because a trade compliance matter is pending in the intermediate administrative level and may be resolved at that level as early as the third quarter of this year. If we receive an adverse ruling and are forced to continue to dispute the matter in Brazil’s judicial system, we would be required to deposit approximately $360 million, based on the exchange rate in effect at July 2, 2011, of additional collateral with the Brazil judicial system, which could be in the form of cash, bank or insurance bonds or pledged assets.

Significant Accounting Policies

Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses the Company’s condensed 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

— Warranty reserves

— Inventory valuation

— Income taxes

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— Restructuring activities

— Valuation and recoverability of goodwill

— Valuation and recoverability of long-lived assets

Recently Issued Accounting Pronouncements

In May 2011, the FASB issued authoritative guidance that changes the wording used to describe many of the requirements for measuring fair value and for disclosing information about fair value measurements to ensure consistency between U.S. GAAP and IFRS. The guidance also expands the disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. This new guidance is to be applied prospectively during interim and annual periods beginning after December 15, 2011. The Company anticipates that the adoption of this standard will not materially expand its consolidated financial statement footnote disclosures or change the way it measures fair value.

In June 2011, the FASB issued authoritative guidance which amends current comprehensive income guidance. This guidance eliminates the option to present the components of comprehensive income as part of the statement of stockholders’ equity. Instead, the Company must report comprehensive income in either a single continuous statement of comprehensive income which contains two sections, net income and other comprehensive income, or in two separate but consecutive statements. This guidance will be effective for the Company during the interim and annual periods beginning after December 15, 2011. The adoption of this guidance will not have an impact on the Company’s consolidated statements of operations, balance sheets or cash flows as it only requires a change in the format of the current presentation.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Derivative Financial Instruments

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 exchange rate price fluctuations, trading in currencies for which there are no underlying exposures, or entering into transactions for any currency to intentionally increase the underlying exposure. Instruments that are designated as part of a hedging relationship must be effective at reducing the risk associated with the exposure being hedged and are designated as part of a hedging relationship at the inception of the contract. Accordingly, changes in the market values of hedge instruments must be highly correlated with changes in market values of the underlying hedged items both at the inception of the hedge and over the life of the hedge contract.

The Company’s strategy related to foreign exchange exposure management is to offset the gains or losses on the financial instruments against losses or gains on the underlying operational cash flows or investments based on the operating business units’ assessment of risk. The Company enters into derivative contracts for some of the Company’s non-functional currency receivables and payables, which are primarily denominated in major currencies that can be traded on open markets. The Company typically 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 the authoritative accounting guidance for derivative instruments and hedging activities. A portion of the Company’s exposure is from currencies that are not traded in liquid markets and these are addressed, to the extent reasonably possible, by managing net asset positions, product pricing and component sourcing.

As of July 2, 2011 and December 31, 2010, the Company had outstanding foreign exchange contracts with notional values totaling $362 million and $608 million, respectively. Management believes that these financial instruments should not subject the Company to undue risk due to foreign exchange movements because

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gains and losses on these contracts should generally offset losses and gains on the underlying assets, liabilities and transactions, except for the ineffective portion of the instruments, which are charged to Other within Other income (expense) in the Company’s condensed consolidated statements of operations.

The following table shows the five largest net notional amounts of the positions to buy or sell foreign currency as of July 2, 2011 and the corresponding positions as of December 31, 2010:

	Notional Amount
Net Buy (Sell) by Currency	July 2, 2011			December 31, 2010
Chinese Yuan		$101			$14
Indian Rupee		(26	)		(43	)
Brazilian Real		(26	)		(394	)
Korean Won		(40	)		(30	)
Euro		(58	)		(54	)

Brazil Functional Currency

Effective July 3, 2011, based on cumulatively significant changes in economic facts and circumstances, the Company has determined that for purposes of financial statement translation the local Brazilian currency should be the functional currency of the Company’s wholly owned Brazilian subsidiary, Motorola Industrial Ltda. Prior to July 3, 2011, the functional currency was the U.S. dollar. As a result of this change, the Company anticipates an adjustment to the previously reported values of non-monetary assets which will be offset by an adjustment in the Cumulative translation adjustment, a component of accumulated other comprehensive loss in Stockholders’ equity in the Consolidated Balance Sheets. As a result of this change in the functional currency, for financial periods beginning on or after July 3, 2011, changes in the Brazilian exchange rates will result in gains or losses, which will be recorded in Other, net in the Consolidated Statements of Operations related to the revaluation of U.S. dollar denominated monetary assets and liabilities, such as cash and cash equivalents and accounts payable held by our Brazilian subsidiary.

Interest Rate Risk

At July 2, 2011 and December 31, 2010, the Company did not have any interest rate agreements in place.

Counterparty Risk

The use of derivative financial instruments exposes the Company to counterparty credit risk in the event of nonperformance by counterparties. However, the risk is limited to the fair value of the instruments when the derivative is in an asset position. At the present time, all of the counterparties have investment grade credit ratings. The Company is not exposed to material credit risk with any single counterparty.

Fair Value of Financial Instruments

The Company’s financial instruments include short-term investments, accounts receivable, accounts payable, accrued liabilities, derivative financial instruments and other financing commitments. The Company’s available-for-sale investment portfolios and derivative financial instruments are recorded in the Company’s condensed consolidated balance sheets at fair value. All other financial instruments are carried at cost, which is not materially different than the instruments’ fair values.

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Forward-Looking Statements

Except for historical matters, the matters discussed in this Form 10-Q are forward-looking statements within the meaning of applicable federal securities law. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and generally include words such as “believes”, “expects”, “intends”, “anticipates”, “estimates” and similar expressions. We can give no assurance that any future results or events discussed in these statements will be achieved. Any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. Readers are cautioned that such forward-looking statements are subject to a variety of risks and uncertainties that could cause our actual results to differ materially from the statements contained in this Form 10-Q. Forward-looking statements include, but are not limited to, for example: (1) our business strategies, plans and objectives, including the anticipated impact of such strategies, plans and objectives; (2) our future operating and financial performance; (3) remaining cash that our Former Parent is expected to contribute to Motorola Mobility upon repatriation; (4) future levels of revenues, operating margins, income from operations, net income, earnings per share and other financial information; (5) expectations regarding the Company’s ability to finance its operations and its ability to obtain, and the cost of, letters of credit, credit facilities and foreign exchange lines; (6) future hedging activities; (7) anticipated levels of demand for our products and services; (8) expectations regarding our research and development activities and intellectual property, including expectations regarding the competitiveness of the patent portfolio; (9) expectations regarding patent litigation, including trends and the impact and timing of a potentially negative result for the Company; (10) the success or timing of completion of ongoing or anticipated capital or maintenance projects; (11) expectations regarding opportunities for growth; (12) expectations regarding availability of materials and components, energy supplies and labor; (13) the resolution, potential effects and timing of judicial or other proceedings on our business, financial condition, results of operations, cash flows and liquidity; (14) the potential effect of the financial markets on our business, financial condition, results of operations, cash flows and liquidity; and (15) the anticipated effects of actions of third-parties such as competitors, counterparties, or federal, foreign, state or local regulatory authorities, or plaintiffs in litigation. Motorola Mobility undertakes no obligation to publicly update any forward-looking statement or risk factor, whether as a result of new information, future events or otherwise.

Some of the risk factors that affect the Company’s business and financial results are discussed in “Item 1A: Risk Factors” on pages 13 through 34 of our 2010 Annual Report on Form 10-K. We wish to caution the reader that the risk factors discussed in each of these documents and those described in our other Securities and Exchange Commission filings, could cause our actual results to differ materially from those stated in the forward-looking statements.

Item 4. Controls and Procedures

(a) 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 quarterly 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 Mobility, including our consolidated subsidiaries, required to be disclosed in our Securities and Exchange Commission (“SEC”) reports, is (i) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) accumulated and communicated to Motorola Mobility’s management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

(b) Changes in internal control over financial reporting.    Except as described below, there have been no changes in our internal control over financial reporting that occurred during the quarter ended July 2, 2011, that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

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The Company has an ongoing initiative to upgrade its enterprise resource planning (ERP) system. The upgrade, which began during 2010, will be implemented in stages over multiple years. Management believes that necessary procedures are in place to maintain effective internal control over financial reporting during the upgrade process. The procedures include pre-implementation planning, design and testing, as well as extensive planned post-implementation monitoring and testing of the effectiveness of internal control over financial reporting in the upgraded ERP environment. To date, the Company has not identified any significant internal control issues in connection with the implementation or operation of the ERP system upgrade.

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Part II—Other Information

Item 1. Legal Proceedings

Patent Related Cases

Personalized Media Communications, L.L.C. v. Motorola, Inc. et al.,

On February 19, 2008, Personalized Media Communications, L.L.C. filed an action for patent infringement against Motorola, Inc. and two other defendants in Personalized Media Communications, L.L.C. v. Motorola, Inc. et al., in the U.S. District Court for the Eastern District of Texas. The amended complaint alleged infringement of five patents by Motorola, Inc. The complaint alleged that Motorola, Inc. directly infringed, contributorily infringed or induced others to infringe the patents-in-suit by marketing, making, using and/or selling broadband transmission products, content origination products, head end products, digital set-top products and software products and services used in conjunction with digital set-top boxes. The complaint sought unspecified monetary damages and injunctive relief. On April 13, 2011, Motorola Mobility, Inc. was substituted for Motorola, Inc. On June 7, 2011, the court ordered that all claims against Motorola Mobility, Inc. be dismissed with prejudice as a result of a settlement agreement between Motorola Mobility, Inc. and Personalized Media Communications, L.L.C.

Microsoft Corporation v. Motorola, Inc.

On October 1, 2010, Microsoft Corporation (“Microsoft”) filed complaints against Motorola, Inc. in the International Trade Commission (“ITC”) and the United States District Court for the Western District of Washington (“District Court”) alleging patent infringement based on products manufactured and sold by Motorola, Inc. The ITC matter is entitled In the Matter of Mobile Devices, Associated Software, and Components Thereof (Inv. No. 337-TA-744). On October 6, 2010 and October 12, 2010, Microsoft amended the District Court and ITC complaints, respectively, to add Motorola Mobility, Inc. as a defendant. The complaints, as amended, allege infringement of claims in nine patents based on Motorola, Inc.’s and Motorola Mobility, Inc.’s manufacture and sale of Android-based mobile phones. The ITC complaint seeks exclusion and cease and desist orders. On November 5, 2010, the ITC instituted the investigation. The District Court complaint seeks unspecified monetary damages and injunctive relief.

On November 9, 2010, Microsoft filed a complaint in the United States District Court for the Western District of Washington against Motorola, Inc. and Motorola Mobility, Inc. (the “Motorola Defendants”) alleging that the Motorola Defendants breached a contractual obligation to license certain patents related to 802.11 wireless networking technology and H.264 video coding technology on reasonable and non-discriminatory terms and conditions. The complaint seeks unspecified monetary damages and injunctive relief including a declaration that the Motorola Defendants have not offered royalties to Microsoft under reasonable rates with reasonable terms and conditions that are demonstrably free of any unfair discrimination. On February 23, 2011, Microsoft amended the complaint to add General Instrument Corporation (our indirect wholly-owned subsidiary) as a defendant.

In November 2010, Motorola Mobility, Inc. and General Instrument Corporation (our indirect wholly-owned subsidiary) filed complaints alleging patent infringement against Microsoft in the ITC and in the U.S. District Courts for the Southern District of Florida, Motorola Mobility, Inc. v. Microsoft Corporation, and the Western District of Wisconsin, Motorola Mobility, Inc. and General Instrument Corporation v. Microsoft Corporation and Motorola Mobility, Inc. and General Instrument Corporation v. Microsoft Corporation. The ITC matter is entitled In the Matter of Certain Gaming and Entertainment Consoles, Related Software, and Components Thereof (Inv. No. 337-TA-752). Among the complaints, Motorola Mobility, Inc. and General Instrument Corporation are asserting infringement of claims in seventeen patents by Microsoft’s PC and Server software, Windows mobile software and Xbox products. The ITC complaint seeks exclusion and cease and desist orders. On December 23, 2010, the ITC instituted the investigation. The District Court complaints seek monetary damages and injunctive relief. In December 2010 and February 2011, Motorola Mobility, Inc. subsequently asserted claims of four additional patents in the Western District of Wisconsin, Motorola Mobility, Inc. v. Microsoft Corporation.

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Between December 23, 2010 and January 25, 2011, Microsoft filed counterclaims against Motorola Mobility, Inc. in these actions, alleging infringement of a total of fourteen additional Microsoft patents. Two of the complaints filed by Motorola Mobility, Inc. and General Instrument Corporation in the Western District of Wisconsin have been transferred to the U.S. District Court for the Western District of Washington.

On June 24, 2011, Motorola Mobility, Inc. filed counterclaims against Microsoft Corporation in the ITC proceeding which we subsequently removed to the Northern District of California, and instituted a new action in the Northern District of California, Motorola Mobility, Inc. v. Microsoft Corporation, alleging that Microsoft Corporation breached commitments to license certain patents. The counterclaims include breach of contract, promissory estoppel, violation of Section 2 of the Sherman Act and unfair competition.

Motorola Mobility, Inc. v. Apple Inc.

On October 6, 2010, Motorola Mobility, Inc. filed a complaint alleging patent infringement against Apple Inc. with the ITC. The matter is entitled In the Matter of Certain Wireless Communication Devices, Portable Music and Data Processing Devices, Computers and Components Thereof (Inv. No. 337-TA-745). The complaint alleges that Apple Inc. directly infringes, contributorily infringes and/or induces others to infringe claims of six patents by importing and selling in the United States after importation certain wireless communication devices, portable music and data processing devices, computers, and components thereof without the authorization of Motorola Mobility, Inc. The complaint seeks the issuance of an exclusion order barring from entry into the United States certain products and a cease and desist order prohibiting Apple from importing, marketing and distributing certain products and other related activities. On November 8, 2010, the ITC instituted the investigation.

On October 6, 2010, Motorola Mobility, Inc. also filed two complaints for patent infringement against Apple Inc., Motorola Mobility, Inc. v. Apple Inc , in the United States District Court for the Northern District of Illinois (the “Illinois Complaints”). Motorola Mobility, Inc. filed another complaint for patent infringement against Apple Inc., Motorola Mobility, Inc. v. Apple Inc , in the United States District Court for the Southern District of Florida (the “Florida Complaint”). The complaints allege that Apple Inc. directly and/or indirectly infringes eighteen Motorola Mobility patents by making, using, offering for sale and selling in the United States certain products and services. On November 9, 2010, Motorola Mobility, Inc. voluntarily dismissed the Illinois Complaints, which are now being asserted as counterclaims in the actions brought by Apple Inc. on October 29, 2010 in the United States District Court for the Western District of Wisconsin, as described below. On November 18, 2010, Apple counterclaimed in the Southern District of Florida, alleging infringement of six Apple patents by Motorola Mobility, Inc.’s manufacture and sale of mobile devices, set-top boxes and digital video recorders.

On October 8, 2010, Motorola Mobility, Inc. filed a complaint for declaratory relief against Apple Inc. and NeXT Software, Inc. in Motorola Mobility, Inc. v. Apple Inc. and NeXT Software, Inc., in the United States District Court for the District of Delaware. The complaint seeks a judgment declaring that Motorola Mobility, Inc. has not infringed, induced the infringement of, or contributed to the infringement of any valid, enforceable claim of twelve patents owned by Apple Inc. and NeXT Software, Inc. On December 2, 2010, Apple asserted these twelve patents against Motorola, Inc. and Motorola Mobility, Inc. in the Western District of Wisconsin, seeking to transfer the Delaware action to Wisconsin.

On October 29, 2010, Apple Inc. filed two complaints alleging patent infringement against Motorola, Inc. and Motorola Mobility, Inc. in Apple Inc. v. Motorola, Inc. and Motorola Mobility, Inc. , in the United States District Court for the Western District of Wisconsin. The complaints allege infringement of six patents by Motorola, Inc. and Motorola Mobility, Inc. The complaints allege that Motorola, Inc. and Motorola Mobility, Inc. directly infringe, contributorily infringe and/or induce others to infringe the patents-in-suit by making, using, offering for sale and selling in the United States certain mobile devices and related software. The complaint seeks unspecified monetary damages and injunctive relief. On November 9, 2010, Motorola Mobility, Inc. filed counterclaims against Apple Inc. to their complaints alleging infringement by Apple Inc. of twelve Motorola Mobility, Inc. patents originally asserted by Motorola Mobility, Inc. in the Northern District of Illinois as above.

On October 29, 2010, Apple Inc. filed a complaint alleging patent infringement against Motorola, Inc. and Motorola Mobility, Inc. with the United States International Trade Commission. The matter is entitled In

44

the Matter of Certain Mobile Devices and Related Software (Inv. No. 337-TA-750). The complaint alleges infringement of three patents by Motorola, Inc. and Motorola Mobility, Inc. The complaint alleges that Motorola, Inc. and Motorola Mobility, Inc. directly infringe, contributorily infringe and/or induce others to infringe the three patents by manufacturing, marketing and selling in the United States mobile devices, such as smartphones, and associated software, including operating systems, user interfaces, and other application software designed for use on, and loaded onto, such devices. The complaint seeks the issuance of an exclusion order barring from entry into the United States certain mobile devices and related software and a cease and desist order prohibiting Motorola from importing, selling, transporting, and other related activities of certain mobile devices and related software. On November 30, 2010, the ITC instituted the investigation.

On March 11, 2011, Apple filed counterclaims against Motorola Mobility, Inc. in the ITC proceeding which were subsequently removed to the United States District Court for the Western District of Wisconsin, and instituted a new action in the Western District of Wisconsin, Apple Inc. v. Motorola Mobility, Inc., alleging that Motorola Mobility, Inc. breached commitments to various standards setting organizations. The counterclaims include equitable estoppel, waiver, breach of contract, violation of Section 2 of the Sherman Act, unfair competition and interference with contract. Apple seeks declaratory judgments that Motorola Mobility, Inc.’s license offers involving standards essential patents have not been on reasonable and non-discriminatory terms and conditions, that Motorola Mobility, Inc. is not entitled to injunctive relief and that Motorola Mobility, Inc. has committed patent misuse.

In March and April 2011, Motorola Mobility, inc. filed patent infringement complaints in Mannheim, Germany alleging that Apple Retail Germany GmbH, Apple Sales International, and Apple Inc. infringe three patents owned by Motorola Mobility, Inc.

In May and July 2011, Apple Inc. filed patent infringement complaints in Munich and Düsseldorf, Germany alleging that Motorola Mobility, Inc. and Motorola Mobility Germany GmbH infringe four utility patents and three design patents owned by Apple Inc. The design patents are being asserted against Motorola Mobility’s tablet products.

ITC Matters Generally

In our rapidly evolving and highly competitive industry, companies invest heavily in developing and acquiring intellectual property rights to seek incremental advantages in the marketplace. Such companies also vigorously pursue and protect their intellectual property rights with patent litigation. The ITC (U.S. International Trade Commission) has increasingly become an important forum to litigate intellectual property disputes because an ultimate loss for a company or its suppliers in an ITC action could result in a prohibition on importing infringing products into the U.S.

As discussed above, we are currently engaged in significant patent litigation with Microsoft and Apple in many different forums within and outside the U.S., including in the ITC. We expect results on Microsoft and Apple matters at the ITC in March 2012 with a sixty-day presidential review period thereafter. The Company and several of our chip suppliers are also facing an ITC matter brought by Rambus, as discussed in the Company’s Annual Report on Form 10-K, and a result is expected at the ITC in May 2012 with a sixty-day presidential review period thereafter. An ultimate loss for the Company or its suppliers in an ITC action could result in a prohibition on importing infringing products or products incorporating infringing components into the U.S. In light of the U.S. being a very important market and our substantial manufacturing operations overseas, a prohibition on importation could have a significant negative impact on the Company, including the inability to import many important products into the U.S. The impact also could necessitate workarounds to shift to non-infringing products or limit certain features of our products. Such patent litigation could also result in increased costs for the Company associated with damages, development of non-infringing products, licenses to the subject intellectual property or, when applicable, difficulties seeking indemnification from suppliers. It may also result in our competitors obtaining additional freedom of action. Intellectual property risks are further discussed in “Part I. Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K.

45

TiVo Matters

In August 2009, TiVo, Inc. (“TiVo”) commenced litigation against two customers of our Home business in TiVo, Inc. v. Verizon Comms., Inc. et. al. and TiVo, Inc. v. AT&T Inc. in the U.S. District Court for the Eastern District of Texas alleging patent infringement related to certain digital video recording (“DVR”) equipment sold by Motorola Mobility to these customers. The complaints seek damages and injunctions against our customers related to our DVR equipment. Verizon and AT&T have made indemnification demands to us based on the lawsuits.

On February 25, 2011, Motorola Mobility, Inc. and General Instrument Corporation (our indirect wholly-owned subsidiary) filed a patent infringement complaint against TiVo in the U.S. District Court for the Eastern District of Texas, Motorola Mobility, Inc. and General Instrument Corporation v. TiVo, Inc. The complaint alleges infringement of three patents by TiVo DVR products, and requests a declaration that two patents of TiVo are invalid and not infringed by certain DVR products of Motorola Mobility, Inc. and General Instrument Corporation. Our complaint asserts that an actual controversy exists between TiVo and Motorola Mobility, Inc./General Instrument Corporation based on TiVo’s accusations of infringement related to our Home business’ DVR products in the TiVo-Verizon lawsuit, Verizon’s indemnification demand to Motorola Mobility, Inc./General Instrument Corporation, and subsequent discovery in the TiVo-Verizon lawsuit directed at our Home business’ DVR products. On July 6, 2011, defendant’s motion to stay Motorola Mobility, Inc. and General Instrument Corporation v. TiVo, Inc. for a six month period was granted.

Tax Proceedings in Brazil

Brazilian tax authorities have proposed assessments against the Company’s Brazilian subsidiary relating to various technology transfer taxes, duties, value added taxes, certain other taxes and labor related matters related to the subsidiary’s operations for calendar years 1997 through 2010. As of July 2, 2011, these assessments collectively represent reasonably possible loss contingencies under the applicable accounting standards of up to approximately $530 million, based on the exchange rate in effect at July 2, 2011, including interest and penalties. However, the Company is vigorously disputing these matters, believes it has valid defenses that are supported by the law, and believes that this amount is not a meaningful indicator of liability. These matters are progressing through the multiple levels of administrative and judicial review available in Brazil. Although we are vigorously disputing these matters, in the event of a loss of these matters at the intermediate administrative level, in order to continue to dispute the matters in Brazil’s judicial system, the Company may be required to deposit additional cash, bank or insurance bonds or pledge assets while the underlying matter is pending judicial review to cover an amount equal to the full value of the alleged tax assessment plus penalties and interest, which may negatively impact the Company’s cash liquidity, potentially significantly in some cases. Due to the complexities and uncertainty surrounding the administrative and judicial process in Brazil and the nature of the claims asserted, we do not expect a final resolution of these matters for several years.

For additional information regarding litigation and its potential impact on the Company, see “Part I. Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K.

The Company is involved in various other lawsuits, claims and investigations arising in the normal course of business and relating to our business, such as intellectual property disputes, contractual disputes, and employment matters. In the opinion of management, the ultimate disposition of these matters is not expected to have a material adverse effect on Motorola Mobility’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 matters are ultimately resolved.

Item 1A. Risk Factors

The reader should carefully consider, in connection with the other information in this report, the factors discussed in Part I, “Item 1A: Risk Factors” on pages 13 through 34 of the Company’s 2010 Annual Report on Form 10-K. These factors could cause our actual results to differ materially from those stated in forward-looking statements contained in this document and elsewhere.

46

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None

Item 3. Defaults Upon Senior Securities.

None

Item 4. (Removed and Reserved)

Item 5. Other Information.

None

Item 6. Exhibits

Exhibit No.	Exhibits
*10.1	Motorola Mobility Holdings, Inc. Change in Control Severance Plan, which replaces Exhibit 10.2 to Motorola Mobility Holdings, Inc.’s Report on Form 10-Q for the quarter ended April 2, 2011 to correct certain cross references.
*31.1	Certification of Dr. Sanjay K. Jha pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*31.2	Certification of Marc E. Rothman pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*32.1	Certification of Dr. Sanjay K. Jha pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*32.2	Certification of Marc E. Rothman pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
**101.INS	XBRL Instance Document
**101.SCH	XBRL Taxonomy Extension Scheme Document
**101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
**101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
**101.LAB	XBRL Taxonomy Extension Label Linkbase Document
**101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

MOTOROLA and the Stylized M Logo are trademarks or registered trademarks of Motorola Trademark Holdings, LLC.

All other product or service names are the property of their respective owners. ^© 2011 Motorola Mobility, Inc. All rights reserved.

47

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Motorola Mobility Holdings, Inc.
By:	/S/ MARK R. VALENTINE
	Mark R. Valentine Vice President and Controller (Principal Accounting Officer)

Date: July 28, 2011

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EXHIBIT INDEX

Exhibit No.	Exhibits
*10.1	Motorola Mobility Holdings, Inc. Change in Control Severance Plan, which replaces Exhibit 10.2 to Motorola Mobility Holdings, Inc.’s Report on Form 10-Q for the quarter ended April 2, 2011 to correct certain cross references.
*31.1	Certification of Dr. Sanjay K. Jha pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*31.2	Certification of Marc E. Rothman pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*32.1	Certification of Dr. Sanjay K. Jha pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*32.2	Certification of Marc E. Rothman pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
**101.INS	XBRL Instance Document
**101.SCH	XBRL Taxonomy Extension Scheme Document
**101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
**101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
**101.LAB	XBRL Taxonomy Extension Label Linkbase Document
**101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

EX-10.1

Exhibit 10.1

MOTOROLA MOBILITY HOLDINGS, INC.

CHANGE IN CONTROL SEVERANCE PLAN

INTRODUCTION

The Board of Directors of Motorola Mobility Holdings, Inc. considers the maintenance of a sound management to be essential to protecting and enhancing the best interests of the Company (as hereinafter defined) and its stockholders. In this connection, the Company recognizes that the possibility of a Change in Control (as hereinafter defined) may exist from time to time, and that this possibility, and the uncertainty and questions it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders. Accordingly, the Board (as hereinafter defined) has determined that appropriate steps should be taken to encourage the continued attention and dedication of members of the Company’s management to their assigned duties without the distraction which may arise from the possibility of a Change in Control.

This Plan does not alter the status of Participants (as hereinafter defined) as at-will employees of the Company. Just as Participants remain free to leave the employ of the Company at any time, so too does the Company retain its right to terminate the employment of Participants without notice, at any time, for any reason. However, the Company believes that, both prior to and at the time a Change in Control is anticipated or occurring, it is necessary to have the continued attention and dedication of Participants to their assigned duties without distraction, and this Plan is intended as an inducement for Participants’ willingness to continue to serve as employees of the Company (subject, however, to either party’s right to terminate such employment at any time). Therefore, should a Participant still be an employee of the Company at such time, the Company agrees that such Participant shall receive the severance benefits hereinafter set forth in the event the Participant’s employment with the Company terminates under the circumstances described below.

ARTICLE I

ESTABLISHMENT OF PLAN

As of February 15, 2011, the Company establishes the Motorola Mobility Holdings, Inc. Change in Control Severance Plan, as set forth in this document.

ARTICLE II

DEFINITIONS

As used herein the following words and phrases shall have the following respective meanings unless the context clearly indicates otherwise.

(a) Affiliate. Any entity which controls, is controlled by or is under common control with the Company.

(b) Annual Bonus.

(i) With respect to any Legacy Plan Participant (as defined in Section 2(d)), the Highest Annual Bonus.

(ii) With respect to any Participant who is not a Legacy Plan Participant, the Average Annual Bonus.

(c) Annual Base Salary. The Participant’s annual base salary paid or payable, including any base salary that is subject to deferral, to the Participant by the Company or any of its Affiliates at the rate in effect (or required to be in effect before any diminution that is a basis of the Participant’s termination for Good Reason) on the Date of Termination or immediately prior to the Change in Control if the Participant’s annual base salary was higher at such time.

(d) Applicable Multiple.

(i) With respect to any Participant who is at or above the level of Senior Vice President and who became a Senior Vice President (or higher) prior to January 5, 2011, three (3).

(ii) With respect to any Participant who is at or above the level of Corporate Vice President, but below the level of Senior Vice President, and who became a Corporate Vice President (or higher) after May 9, 2001 and prior to January 5, 2011, two (2).

(iii) With respect to any Participant, other than a Participant identified in clause (i) or (ii) of this Section 2(d), two (2).

The Participants described in clauses (i) and (ii) of this Section 2(d) are referred to as “Legacy Plan Participants.”

(e) Average Annual Bonus. The Participant’s average annual bonus, including any bonus or portion thereof that has been earned but deferred (and annualized for any fiscal year consisting of less than twelve (12) full months or during which the Participant was employed for less than twelve (12) full months), the Participant received from the Company or any of its Affiliates during (i) the three (3) full fiscal years of the Company immediately preceding the Change in Control, or (ii) the three (3) full fiscal years of the Company immediately preceding the Date of Termination, if greater, or in the event of a termination of employment prior to a Change in Control. If included in the applicable three (3) year period, the calculation of Average Annual Bonus shall include annual bonus amounts relating to service to Motorola Solutions, Inc. (formerly known as Motorola, Inc.) or any of its Affiliates prior to the spin-off of the Company from Motorola Solutions, Inc. (formerly known as Motorola, Inc.).

(f) Board. The Board of Directors of the Company.

(g) Cause. With respect to any Participant: (i) the Participant’s conviction, or entering into a plea of either guilty or nolo contendere to, any felony, or any misdemeanor involving material acts of moral turpitude, embezzlement, theft, or other similar act, (ii) the Participant’s willful engagement in gross misconduct in the performance of the Participant’s

duties, (iii) the Participant’s willful and material violation of any policy or Code of Business Conduct of the Company or any of its Affiliates, or (iv) the Participant’s unauthorized use or disclosure of confidential information or trade secrets.

(h) Change in Control. The occurrence of any of the following events:

(i) Any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) becomes the beneficial owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (A) the then-outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (B) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that, for purposes of this Section 2(h), the following acquisitions shall not constitute a Change in Control: (1) any acquisition directly from the Company, (2) any acquisition by the Company, (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its Affiliates or (4) any acquisition pursuant to a transaction that complies with Sections 2(h)(iii)(A), 2(h)(iii)(B) and 2(h)(iii)(C);

(ii) Individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual was a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board;

(iii) Consummation of a reorganization, merger, statutory share exchange or consolidation or similar transaction involving the Company or any of its subsidiaries, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or securities of another entity by the Company or any of its subsidiaries (each, a “Business Combination”), in each case unless, following such Business Combination, (A) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, at least 65% of the then-outstanding shares of common stock (or, for a non-corporate entity, equivalent securities) and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors (or, for a non-corporate entity, equivalent governing body), as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity that, as a result of such transaction, owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any entity resulting from such Business Combination or

any employee benefit plan (or related trust) of the Company or such entity resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then-outstanding shares of common stock (or, for a non-corporate entity, equivalent securities) of the entity resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such entity, except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors (or, for a non-corporate entity, equivalent governing body) of the entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or

(iv) Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

(i) Code. The Internal Revenue Code of 1986, as amended from time to time.

(j) Company. Motorola Mobility Holdings, Inc. and any successor thereto.

(k) Date of Termination. (i) if the Participant’s employment is terminated by the Company for Cause, or by the Participant for Good Reason, the date of receipt of the Notice of Termination or such later date specified in the Notice of Termination, as the case may be, (ii) if the Participant’s employment is terminated by the Company other than for Cause or Disability, the date on which the Company notifies the Participant of such termination, (iii) if the Participant resigns without Good Reason, the date on which the Participant notifies the Company of such termination, and (iv) if the Participant’s employment is terminated by reason of death or Disability, the date of death of the Participant or the 30^th day after receipt of such notice by the Participant, as the case may be. Notwithstanding the foregoing, in no event shall the Date of Termination occur until the Participant experiences a “separation from service” within the meaning of Section 409A of the Code, and the date on which such separation from service takes place shall be the “Date of Termination.”

(l) Disability. A condition such that the Participant by reason of physical or mental disability becomes unable to perform Participant’s normal duties for more than one-hundred eighty (180) days in the aggregate (excluding infrequent or temporary absence due to ordinary transitory illness) during any twelve-month period.

(m) Effective Date. The Effective Date shall be February 15, 2011.

(n) Employee. Any full-time, regular-benefit, non-bargaining employee of the Company.

(o) ERISA. The Employee Retirement Income Security Act of 1974, as amended from time to time.

(p) Good Reason. Actions taken by the Company resulting in a material negative change in the employment relationship. For these purposes, with respect to any Participant, a “material negative change in the employment relationship” shall include, without

limitation, without such Participant’s written consent, (i) the Participant is assigned duties materially inconsistent with such Participant’s position, duties, responsibilities and status with the Company during (A) the 90-day period immediately preceding a Change in Control or (B) the 90-day period immediately preceding the Date of Termination in the event of a termination of employment prior to a Change in Control, (ii) the Participant’s position, authority, duties or responsibilities are materially diminished from those in effect during (A) the 90-day period immediately preceding a Change in Control (whether or not occurring solely as a result of the Company ceasing to be a publicly traded entity) or (B) the 90-day period immediately preceding the Date of Termination in the event of a termination of employment prior to a Change in Control, (iii) a material reduction in the Participant’s (x) annual base salary or (y) total annual compensation opportunity, from such total annual compensation opportunity as in effect during (A) the 90-day period immediately prior to the Change in Control, or as the same may be increased from time to time or (B) the 90-day period immediately preceding the Date of Termination in the event of a termination of employment prior to a Change in Control, (iv) the Company requires the Participant regularly to perform such Participant’s duties of employment beyond a fifty (50) mile radius from the location of the Participant’s employment immediately prior to the Change in Control, (v) the Company fails to obtain a satisfactory agreement from any successor to assume and perform this Plan, as contemplated by Article V hereof, or (vi) any other action or inaction that constitutes a material breach by the Company of this Plan with respect to such Participant.

In order to invoke a termination of employment for Good Reason, the Participant shall provide a Notice of Termination pursuant to Section 7.5 to the Company’s General Counsel of the existence of one or more of the conditions described in clauses (i) through (v) within 90 days following the initial existence of such condition or conditions, specifying in reasonable detail the conditions constituting Good Reason (hereinafter, “Notice of Good Reason”), and the Company shall have 30 days following receipt of such written notice (the “Cure Period”) during which it may remedy the condition. In the event that the Company fails to remedy the condition constituting Good Reason during the applicable Cure Period, the Participant’s “separation from service” (within the meaning of Section 409A) must occur, if at all, within two years following the initial existence of the condition or conditions constituting Good Reason (or, if earlier, prior to the two year anniversary of the Change in Control) in order for such termination as a result of such condition to constitute a termination for Good Reason. The Participant’s mental or physical incapacity following the occurrence of an event described above in clauses (i) through (vi) shall not affect the Participant’s ability to terminate employment for Good Reason and the Participant’s death following delivery of a Notice of Good Reason shall not affect the Participant’s estate’s entitlement to Separation Benefits provided hereunder.

(q) Highest Annual Bonus. The Participant’s highest annual bonus, including any bonus or portion thereof that has been earned but deferred (and annualized for any fiscal year consisting of less than twelve (12) full months or during which the Participant was employed for less than twelve (12) full months), the Participant received from the Company or any of its Affiliates during the five (5) full fiscal years of the Company immediately preceding the Date of Termination, including for this purpose annual bonus amounts relating to service to Motorola Solutions, Inc. (formerly known as Motorola, Inc.) or any of its Affiliates prior to the spin-off of the Company from Motorola Solutions, Inc. (formerly known as Motorola, Inc.).

(r) Notice of Termination. A written notice that (i) indicates the specific termination provision in this Plan relied upon, and (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Participant’s employment under the provision so indicated. The failure by the Participant or the Company to set forth in the Notice of Termination any fact or circumstance that contributes to a showing of Good Reason or Cause shall not waive any right of the Participant or the Company, respectively, hereunder or preclude the Participant or the Company, respectively, from asserting such fact or circumstance in enforcing the Participant’s or the Company’s respective rights hereunder.

(s) Participant. An individual who qualifies as such pursuant to Section 3.1.

(t) Plan. The Motorola Mobility Holdings, Inc. Change in Control Severance Plan.

(u) Qualifying Termination.

(i) At any time following a Change in Control and prior to the second anniversary of the Change in Control, the Participant’s employment is terminated (A) involuntarily for any reason other than Cause, death, Disability or retirement under a mandatory retirement policy of the Company or any of its Subsidiaries as in effect prior to such time as negotiations or discussions with a third party which ultimately lead to a Change in Control have commenced or (B) by the Participant for Good Reason; or

(ii) At any time prior to a Change in Control, but subsequent to such time as negotiations or discussions with a third party relating to a Change in Control have commenced, the Participant’s employment is terminated (A) involuntarily for any reason other than Cause, death, Disability or retirement under a mandatory retirement policy of the Company or any of its Subsidiaries as in effect prior to such time as negotiations or discussions with a third party regarding a Change in Control have commenced or (B) by the Participant for Good Reason; provided, however, that in the case of each of clauses (A) and (B), the affected Participant demonstrates that such termination or circumstance leading to such termination (1) was at the request of a third party with which the Company had entered into negotiations or an agreement with regard to a Change in Control; or (2) otherwise occurred in connection with a potential Change in Control.

(v) Section 409A. Section 409A of the of the Code, and the rules and regulations issued thereunder.

(w) Separation Benefits. The benefits described in Section 4.2 that are provided to qualifying Participants under the Plan.

(x) Subsidiary. Any corporation in which the Company, directly or indirectly, holds a majority of the voting power of such corporation’s outstanding shares of capital stock.

ARTICLE III

ELIGIBILITY

3.1 Participation. Each Employee who has been designated by the Compensation Committee of the Board (the “Committee”) in writing as a Participant shall be a Participant in the Plan. Appendix A of this Plan, as it may be updated from time to time by the Committee, shall at all times contain a current list of Participants. Notwithstanding the foregoing, a Participant shall not be entitled to receive Separation Benefits (or any other benefits under the Plan) if the Participant has entered into an agreement with the Company that provides for benefits similar to the Separation Benefits in the event of a termination of employment following (or prior to and in connection with) a Change in Control, unless such agreement specifically provides otherwise.

3.2 Duration of Participation. The Committee may remove an Employee as a Participant by removing the Employee from Appendix A of this Plan, as it may be updated from time to time by the Committee, and by providing written notice of removal to such Employee; provided that no such removal shall be effective (a) during the two year period following a Change in Control, (b) if effectuated in connection with a potential Change in Control or (c) at such time as the Participant is entitled to payment of a Separation Benefit or any other amounts payable under the Plan. In addition, a Participant shall cease to be a Participant in the Plan as a result of an amendment or termination of the Plan complying with Article VI of the Plan, or when the Participant ceases to be an Employee or no longer qualifies as a Participant under Section 3.1, unless, at the time the Participant ceases to be an Employee or no longer qualifies as a Participant under Section 3.1, such Participant is entitled to payment of a Separation Benefit or any other amounts payable under the Plan or there has been an event or occurrence constituting Good Reason that would enable the Participant to terminate employment and receive a Separation Benefit. A Participant entitled to payment of a Separation Benefit or any other amounts payable under the Plan shall remain a Participant in the Plan until the full amount of the Separation Benefit and any other amounts payable under the Plan have been paid to the Participant.

ARTICLE IV

SEPARATION BENEFITS

4.1 Terminations of Employment Which Give Rise to Separation Benefits Under This Plan. A Participant shall be entitled to Separation Benefits as set forth in Section 4.2 below if the Participant experiences a Qualifying Termination. For purposes of this Plan, any purported termination by the Company or by the Participant shall be communicated by written Notice of Termination to the other in accordance with Section 7.5 hereof and, to the extent applicable, Section 2(p) hereof.

4.2 Separation Benefits.

(a) If a Participant experiences a Qualifying Termination, then the Company shall pay to the Participant, in a lump sum in cash within ten (10) days after the Date of Termination, the aggregate of the following amounts which benefits, except as provided in Section 7.4 below, shall be in addition to any other benefits to which the Participant is entitled other than by reason of this Plan:

(i) unpaid salary with respect to any paid time off accrued but not taken as of the Date of Termination;

(ii) accrued but unpaid salary through the Date of Termination;

(iii) any earned but unpaid annual incentive bonuses from the fiscal year immediately preceding the year in which the Date of Termination occurs (unless (x) such annual incentive bonus is “nonqualified deferred compensation” within the meaning of Section 409A, in which case such bonus shall be paid at the time that bonuses with respect to such fiscal year are or otherwise would be paid in accordance with the terms of the applicable plan or (y) the Participant has made an irrevocable election under any deferred compensation arrangement subject to Section 409A to defer any portion of such annual incentive bonuses, in which case any such deferred bonuses shall be paid in accordance with such election);

(iv) an amount equal to the Applicable Multiple times the Participant’s Annual Base Salary; and

(v) an amount equal to the Applicable Multiple times the Participant’s Annual Bonus.

(b) In addition, in the event of a Qualifying Termination, the Participant shall be entitled to a pro-rated bonus determined as follows:

(i) if the Participant participates in the Motorola Mobility Holdings, Inc. Incentive Plan (“MIP Plan”) during the year in which the Qualifying Termination occurs, the Company shall, on the first payroll date following July 1 of the year following the year in which the Qualifying Termination occurs (unless the Participant has made an irrevocable election under any deferred compensation arrangement subject to Section 409A to defer any portion of the Participant’s annual incentive bonus in respect of the year in which the Qualifying Termination occurs, in which case such deferred bonus shall be paid in accordance with such election) (the “MIP Pro-Rata Bonus Payment Date”), pay the Participant in a lump sum an amount equal to the product of (A) the Participant’s annual target bonus for the fiscal year in which the Date of Termination occurs (which for purposes of this Section 4.2 in no event shall be less than the Participant’s target bonus for the fiscal year in which the Change in Control occurs) and (B) a fraction, the numerator of which is the number of days in the then current fiscal year that have elapsed through the Date of Termination and the denominator of which is 365 (the “MIP Pro-Rata Bonus”);

(ii) if the Participant participates in a sales incentive plan pursuant to which the Participant is eligible for an incentive award with respect to monthly or quarterly performance periods during the year in which the Qualifying Termination occurs, the Company shall pay the Participant, at the time set forth in the applicable sales incentive plan, an amount equal to the product of (A) the Participant’s monthly or quarterly target incentive under the applicable sales incentive plan (which for purposes of this Section 4.2 in no event shall be less than the Participant’s target bonus for the performance period in which the Change in Control occurs), and (B) a fraction, the numerator of which is the number of days that have elapsed in the then current monthly or quarterly performance period through the Date of Termination and the denominator of which is the full number of days in the then current monthly or quarterly performance period; and

(iii) if the Participant participates in a sales incentive plan pursuant to which the Participant is eligible for an incentive award (or a portion of an incentive award) with respect to an annual performance period during the year in which the Qualifying Termination occurs, the Company shall pay the Participant, on the MIP Pro-Rata Bonus Payment Date, for such award (or portion of award) an amount equal to the product of (A) the Participant’s annual target bonus for the fiscal year in which the Date of Termination occurs (which for purposes of this Section 4.2 in no event shall be less than the Participant’s target bonus for the fiscal year in which the Change in Control occurs) and (B) a fraction, the numerator of which is the number of days in the then current fiscal year that have elapsed through the Date of Termination and the denominator of which is 365.

(c) If the Participant’s employment is terminated under circumstances which entitle the Participant to Separation Benefits under this Section 4.2, for a number of years following the Date of Termination equal to the Applicable Multiple (such period, the “Benefit Continuation Period”), the Company shall provide the Participant and the Participant’s eligible dependents with continued health care, dental and life insurance benefits under the Company’s health care, dental and life insurance benefits programs, provided that the Participant complies with all terms and conditions of the applicable plans, including paying the necessary employee contributions; and provided, further, that, if the Participant becomes reemployed with another employer and becomes eligible to receive health care, dental or life insurance benefits under another employer provided plan, the benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. The difference between the cost for such health care and dental benefits under Section 4980B of the Code and the amount of the necessary contributions that the Participant is required to pay for such coverage as provided above will be paid by the Company and considered imputed income to the Participant. The Participant is responsible for the payment of income tax due as a result of such imputed income. Following the end of the Benefit Continuation Period, the Participant shall be eligible for continued medical and dental coverage as required by Section 4980B of the Code or other applicable law, as if the Participant’s employment with the Company had terminated as of the end of such period.

(d) Except as provided in Section 4.2(c), the Participant shall not be required to mitigate the amount of any payment provided for in this Section 4.2 by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this

Section 4.2 be reduced by any compensation earned by the Participant as the result of employment by another employer or by retirement benefits paid by the Company after the Date of Termination, or otherwise, or by any set-off, counterclaim, recoupment, or other claim, right or action the Company may have against the Participant or others.

4.3 Certain Additional Payments by the Company. This Section 4.3 shall apply solely with respect to any Legacy Plan Participant.

(a) Anything in this Plan to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any Payment (as hereinafter defined) would be subject to the Excise Tax (as hereinafter defined), then the Participant shall be entitled to receive an additional payment (the “Gross-Up Payment”) in an amount such that, after payment by the Participant of all taxes (and any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto), employment taxes and Excise Tax imposed upon the Gross-Up Payment, but excluding any income taxes and penalties imposed pursuant to Section 409A, the Participant retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 4.3(a), if it shall be determined that the Participant is entitled to the Gross-Up Payment, but that the Parachute Value (as hereinafter defined) of all Payments do not exceed 110% of the Safe Harbor Amount (as hereinafter defined), then no Gross-Up Payment shall be made to the Participant and the amounts payable under this Plan shall be reduced so that the Parachute Value of all Payments, in the aggregate, equals the Safe Harbor Amount. The reduction of the amounts payable hereunder, if applicable, shall be made by reducing the payments and benefits under the following sections in the following order: (i) Section 4.2(a)(v), (ii) Section 4.2(a)(iv) and (iii) Section 4.2(c). For purposes of reducing the Payments to the Safe Harbor Amount, only amounts payable under this Plan (and no other Payments) shall be reduced. If the reduction of the amount payable under this Plan would not result in a reduction of the Parachute Value of all Payments to the Safe Harbor Amount, no amounts payable under the Plan shall be reduced pursuant to this Section 4.3(a). The Company’s obligation to make Gross-Up Payments under this Section 4.3(a) shall not be conditioned upon the Participant’s termination of employment.

(b) Subject to the provisions of Section 4.3(c), all determinations required to be made under this Section 4.3, including whether and when a Gross-Up Payment is required, the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by a nationally recognized accounting firm as may be selected by the Company prior to a Change in Control (the “Accounting Firm”). The Accounting Firm shall provide detailed supporting calculations both to the Company and the Participant within fifteen (15) business days of the receipt of notice from the Participant that there has been a Payment or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, the Company shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-

Up Payments that will not have been made by the Company should have been made (the “Underpayment”), consistent with the calculations required to be made hereunder. In the event the Company exhausts its remedies pursuant to Section 4.3(c) and the Participant thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Participant.

(c) The Participant shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable, but no later than ten (10) business days after the Participant is informed in writing of such claim. The Participant shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Participant shall not pay such claim prior to the expiration of the 30-day period following the date on which the Participant gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Participant in writing prior to the expiration of such period that the Company desires to contest such claim, the Participant shall:

(1) give the Company any information reasonably requested by the Company relating to such claim,

(2) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company,

(3) cooperate with the Company in good faith in order effectively to contest such claim, and

(4) permit the Company to participate in any proceedings relating to such claim;

provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest, and shall indemnify and hold the Participant harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties) imposed as a result of such representation and payment of costs and expenses. Without limitation of the foregoing provisions of this Section 4.3(c), the Company shall control all proceedings taken in connection with such contest, and, at its sole discretion, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the applicable taxing authority in respect of such claim and may, at its sole discretion, either pay the tax claimed to the appropriate taxing authority on behalf of the Participant and direct the Participant to sue for a refund or contest the claim in any permissible manner, and the Participant agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one (1) or more appellate courts, as the Company shall determine; provided, however, that, if the Company pays such claim and directs the Participant to sue for a refund, the Company shall indemnify and hold the Participant harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or

penalties) imposed with respect to such payment or with respect to any imputed income in connection with such payment; and provided, further, that any extension of the statute of limitations relating to payment of taxes for the Participant’s taxable year with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company’s control of the contest shall be limited to issues with respect to which the Gross-Up Payment would be payable hereunder, and the Participant shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

(d) If, after the receipt by the Participant of a Gross-Up Payment or payment by the Company of an amount on the Participant’s behalf pursuant to Section 4.3(c), the Participant becomes entitled to receive any refund with respect to the Excise Tax to which such Gross-Up Payment relates or with respect to such claim, the Participant shall (subject to the Company’s complying with the requirements of Section 4.3(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after payment by the Company of an amount on the Participant’s behalf pursuant to Section 4.3(c), a determination is made that the Participant shall not be entitled to any refund with respect to such claim and the Company does not notify the Participant in writing of its intent to contest such denial of refund prior to the expiration of thirty (30) days after such determination, then the amount of such payment shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.

(e) Any Gross-Up Payment, as determined pursuant to this Section 4.3, shall be paid by the Company to the Participant within ten (10) days of the receipt of the Accounting Firm’s determination; provided that, the Gross-Up Payment shall in all events be paid no later than the end of the Participant’s taxable year next following the Participant’s taxable year in which the Excise Tax (and any income or other related taxes or interest or penalties thereon) on a Payment are remitted to the Internal Revenue Service or any other applicable taxing authority or, in the case of amounts relating to a claim described in Section 4.3(c) that does not result in the remittance of any federal, state, local and foreign income, excise, social security and other taxes, the calendar year in which the claim is finally settled or otherwise resolved.

(f) Notwithstanding any other provision of this Section 4.3, the Company may, in its sole discretion, withhold and pay over to the Internal Revenue Service or any other applicable taxing authority, for the benefit of the Participant, all or any portion of the Gross-Up Payment, and the Participant hereby consents to such withholding; provided, that, such withholding and payment shall in no event place the Participant in a less favorable tax position than had such payments been made to the Participant by the Company.

(g) Definitions. The following terms shall have the following meanings for purposes of this Section 4.3 and for purposes of Section 4.4.

(i) “Excise Tax” shall mean the excise tax imposed by Section 4999 of the Code, together with any interest or penalties imposed with respect to such excise tax.

(ii) “Net After-Tax Amount” of a Payment shall mean the Parachute Value of a Payment net of all taxes imposed on the Participant with respect thereto under Sections 1 and 4999 of the Code and applicable state and local law, determined by applying the highest marginal rates that are expected to apply to Participant’s taxable income for the taxable year in which the Payment is made.

(iii) “Parachute Value” of a Payment shall mean the present value as of the date of the change of control for purposes of Section 280G of the Code of the portion of such Payment that constitutes a “parachute payment” under Section 280G(b)(2), as determined by the Accounting Firm for purposes of determining whether and to what extent the Excise Tax will apply to such Payment.

(iv) “Payment” shall mean any payment or distribution in the nature of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for the benefit of the Participant, whether paid or payable pursuant to this Plan or otherwise.

(v) “Safe Harbor Amount” means the maximum Parachute Value of all Payments that the Participant can receive without any Payments being subject to the Excise Tax.

4.4 Limitation on Payments Under Certain Circumstances. This Section 4.4 shall apply to any Participant who is not a Legacy Plan Participant.

(a) In the event the Accounting Firm shall determine that receipt of all Payments would subject the Participant to the Excise Tax, the Accounting Firm shall determine whether to reduce any of the Payments paid or payable pursuant to this Plan (the “Plan Payments”) so that the Parachute Value of all Payments, in the aggregate, equals the Safe Harbor Amount. The Plan Payments shall be so reduced only if the Accounting Firm determines that the Participant would have a greater Net After-Tax Amount of aggregate Payments if the Plan Payments were so reduced. If the Accounting Firm determines that the Participant would not have a greater Net After-Tax Amount of aggregate Payments if the Plan Payments were so reduced, the Participant shall receive all Plan Payments to which the Participant is entitled hereunder.

(b) If the Accounting Firm determines that aggregate Plan Payments should be reduced so that the Parachute Value of all Payments, in the aggregate, equals the Safe Harbor Amount, the Company shall promptly give the Participant notice to that effect and a copy of the detailed calculation thereof. All determinations made by the Accounting Firm under this Section 4.4 shall be binding upon the Company and the Participant and shall be made as soon as reasonably practicable and in no event later than 5 days following the Date of Termination. For purposes of reducing the Plan Payments so that the Parachute Value of all Payments, in the aggregate, equals the Safe Harbor Amount, only amounts payable under this Plan (and no other Payments) shall be reduced. The reduction of the amounts payable hereunder, if applicable, shall be made by reducing the payments and benefits under the following sections in the following order: (i) Section 4.2(a)(v), (ii) Section 4.2(a)(iv) and (iii) Section 4.2(c). All fees and expenses of the Accounting Firm shall be borne solely by the Company.

(c) As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that amounts will have been paid or distributed by the Company to or for the benefit of the Participant pursuant to this Agreement which should not have been so paid or distributed (“Overpayment”) or that additional amounts which will have not been paid or distributed by the Company to or for the benefit of the Participant pursuant to this Agreement could have been so paid or distributed (“Section 4.4 Underpayment”), in each case, consistent with the calculation of the Safe Harbor Amount hereunder. In the event that the Accounting Firm, based upon the assertion of a deficiency by the Internal Revenue Service against either the Company or the Participant which the Accounting Firm believes has a high probability of success, determines that an Overpayment has been made, the Participant shall pay promptly (and in no event later than 60 days following the date on which the Overpayment is determined) pay any such Overpayment to the Company together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code; provided, however, that no amount shall be payable by the Participant to the Company if and to the extent such payment would not either reduce the amount on which the Participant is subject to tax under Section 1 and Section 4999 of the Code or generate a refund of such taxes. In the event that the Accounting Firm, based upon controlling precedent or substantial authority, determines that a Section 4.4 Underpayment has occurred, any such Section 4.4 Underpayment shall be paid promptly (and in no event later than 60 days following the date on which the Section 4.4 Underpayment is determined) by the Company to or for the benefit of the Participant together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code.

ARTICLE V

SUCCESSOR TO COMPANY

This Plan shall inure to the benefit of and be binding upon the Company and its successors. The Company shall require any corporation, entity, individual or other person who is the successor (whether direct or indirect by purchase, merger, consolidation, reorganization or otherwise) to all or substantially all the business and/or assets of the Company to expressly assume and agree to perform, by a written agreement in form and in substance satisfactory to the Company, all of the obligations of the Company under this Plan. As used in this Plan, the term “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid that assumes and agrees to perform this Plan by operation of law, written agreement or otherwise. It is a condition of this Plan, and all rights of each person eligible to receive benefits under this Plan shall be subject hereto, that no right or interest of any such person in this Plan shall be assignable or transferable in whole or in part, except by operation of law, including, but not by way of limitation, lawful execution, levy, garnishment, attachment, pledge, bankruptcy, alimony, child support or qualified domestic relations order.

ARTICLE VI

DURATION, AMENDMENT AND TERMINATION

6.1 Duration. Unless earlier terminated pursuant to Section 6.2, if a Change in Control has not occurred, this Plan shall expire three (3) years from the Effective Date; provided, that upon each annual anniversary of the Effective Date (each such annual anniversary a

“Renewal Date”), the Plan shall be extended for an additional year, unless pursuant to a resolution adopted by the Board prior to the Renewal Date the Company determines not to so extend the Plan. If a Change in Control occurs while this Plan is in effect, this Plan shall continue in full force and effect for at least two (2) years following such Change in Control, and shall not terminate or expire until after all Participants who become entitled to any payments or benefits hereunder shall have received such payments and benefits in full.

6.2 Amendment or Termination. The Company reserves the right to amend, modify, suspend or terminate the Plan at any time by action of a majority of the Board; provided that no such amendment, modification, suspension or termination that has the effect of reducing or diminishing the right of any Participant shall be effective without the written consent of such Participant for a period of two years following the Change in Control if adopted after a Change in Control or in anticipation of a Change in Control. Any amendment, modification, suspension or termination of this Plan adopted after a Change in Control or in anticipation of a Change in Control shall not affect the right of any Participant to payments or benefits to be paid or provided as a result of events that occur prior to the second anniversary of the Change in Control.

6.3 Procedure for Extension, Amendment or Termination. Any extension, amendment or termination of this Plan by the Board in accordance with this Article VI shall be made by action of the Board in accordance with the Company’s charter and by-laws and applicable law.

ARTICLE VII

MISCELLANEOUS

7.1 Default in Payment. Any payment not made within ten (10) days after it is due in accordance with this Plan shall thereafter bear interest, compounded annually, at the prime rate from time to time in effect at JPMorgan Chase & Co. or any successor thereto.

7.2 No Assignment. No interest of any Participant or spouse of any Participant or any other beneficiary under this Plan, or any right to receive payment hereunder, shall be subject in any manner to sale, transfer, assignment, pledge, attachment, garnishment, or other alienation or encumbrance of any kind, nor may such interest or right to receive a payment or distribution be taken, voluntarily or involuntarily, for the satisfaction of the obligations or debts of, or other claims against, a Participant or spouse of a Participant or other beneficiary, including for alimony.

7.3 Disputes. The Company shall upon request pay from time to time a Participant’s reasonable out-of-pocket expenses, including legal fees and expenses, incurred by the Participant or on the Participant’s behalf (within 10 days following the Company’s receipt of an invoice from the Participant), at any time from the occurrence of a Change in Control through the Participant’s remaining lifetime (or, if longer, through the 20^th anniversary of the occurrence of such Change in Control) in connection with any action taken by the Participant or on the Participant’s behalf (including any judicial proceeding) to enforce this Plan or to construe, or to determine or defend the validity of, this Plan or otherwise in connection herewith; provided, however, that, in the case of any judicial proceeding in which a Participant and the Company are

adverse parties or any dispute under Section 4.3 or Section 4.4 hereof, the Company shall not be required to pay such expenses (and shall have the right to recover such expenses from the Participant if previously advanced) with respect to any position or claim on which the Company ultimately prevails against the Participant in all material respects. In order to comply with Section 409A, in no event shall the payments by the Company under this Section 7.3 be made later than the end of the calendar year next following the calendar year in which such fees and expenses were incurred, provided, that the Participant shall have submitted an invoice for such fees and expenses at least ten (10) days before the end of the calendar year next following the calendar year in which such fees and expenses were incurred. The amount of such legal fees and expenses that the Company is obligated to pay in any given calendar year shall not affect the legal fees and expenses that the Company is obligated to pay in any other calendar year, and the Participant’s right to have the Company pay such legal fees and expenses may not be liquidated or exchanged for any other benefit. In any judicial or other proceeding in which the Participant’s rights to, or the amount of, benefits hereunder is disputed, the ultimate burden of proof shall be on the Company.

7.4 Effect on Other Plans, Agreements and Benefits. Except to the extent expressly set forth herein, any benefit or compensation to which a Participant is entitled under any agreement between the Participant and the Company or any of its Subsidiaries or under any plan maintained by the Company or any of its Subsidiaries in which the Participant participates or participated shall not be modified or lessened in any way, but shall be payable according to the terms of the applicable plan or agreement. Notwithstanding the foregoing, any benefits received by a Participant pursuant to this Plan shall be in lieu of any severance benefits to which the Participant would otherwise be entitled under any general severance policy or other severance plan maintained by the Company for its management personnel and, upon consummation of a Change in Control, Participants in this Plan shall in no event be entitled to participate in any such severance policy or other severance plan maintained by the Company for its management personnel. In the event of a Participant’s termination of employment entitling the Participant to Separation Benefits under Section 4.2, any non-competition or non-solicitation provisions applicable to the Participant with respect to the Company or any of its Affiliates shall cease to apply as of the Participant’s Date of Termination.

7.5 Notice. For the purpose of this Plan, notices and all other communications provided for in this Plan shall be in writing and shall be deemed to have been duly given when actually delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the Company’s General Counsel at the Company’s corporate headquarters address, and to the Participant (at the last address of the Participant on the Company’s books and records), provided, that all notices to the Company shall be directed to the attention of the Board with a copy to the Secretary.

7.6 Employment Status. This Plan does not constitute a contract of employment or impose on the Participant or the Company any obligation for the Participant to remain an Employee or change the status of the Participant’s employment or the policies of the Company and its Affiliates regarding termination of employment.

7.7 Plan Administration. This Plan shall be administered by the Committee; provided that in the event of an impending Change in Control, the Committee may appoint a person (or persons) independent of the third-party effectuating the Change in Control to be the Committee effective upon the occurrence of a Change in Control and such Committee shall not be removed or modified following a Change in Control, other than at its own initiative (the “Independent Committee”). Except as otherwise provided in this Plan, the decision of the Committee (including the Independent Committee) upon all matters within the scope of its authority shall be conclusive and binding on all parties, provided that in the event that no Independent Committee is appointed, any determination by the Committee of whether “Cause” or “Good Reason” exists shall be subject to de novo review.

7.8 Unfunded Plan Status. This Plan is intended to be an unfunded plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees, within the meaning of Section 401 of ERISA. All payments pursuant to the Plan shall be made from the general funds of the Company and no special or separate fund shall be established or other segregation of assets made to assure payment. No Participant or other person shall have under any circumstances any interest in any particular property or assets of the Company as a result of participating in the Plan. Notwithstanding the foregoing, the Company may (but shall not be obligated to) create one (1) or more grantor trusts, the assets of which are subject to the claims of the Company’s creditors, to assist it in accumulating funds to pay its obligations under the Plan.

7.9 Validity and Severability. The invalidity or unenforceability of any provision of the Plan shall not affect the validity or enforceability of any other provision of the Plan, which shall remain in full force and effect, and any prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

7.10 Section 409A.

(a) General. The Plan is intended to comply with the requirements of Section 409A or an exemption or exclusion therefrom and, with respect to amounts that are subject to Section 409A, shall in all respects be administered in accordance with Section 409A. Any payments that qualify for the “short-term deferral” exception or another exception under Section 409A shall be paid under the applicable exception. Each payment of compensation under this Plan shall be treated as a separate payment of compensation for purposes of Section 409A. All payments to be made upon a termination of employment under this Plan may only be made upon a “separation from service” under Section 409A. In no event may the Participant, directly or indirectly, designate the calendar year of any payment under this Plan.

(b) In-Kind Benefits and Reimbursements. Notwithstanding anything to the contrary in this Plan, all reimbursements and in-kind benefits provided under this Plan shall be made or provided in accordance with the requirements of Section 409A, including, where applicable, the requirement that (a) any reimbursement is for expenses incurred during the Participant’s lifetime (or during a shorter period of time specified in this Plan); (b) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during a calendar year may not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other

calendar year, except, if such benefits consist of the reimbursement of expenses referred to in Section 105(b) of the Code, a maximum, if provided under the terms of the plan providing such medical benefit, may be imposed on the amount of such reimbursements over some or all of the period in which such benefit is to be provided to the Participant as described in Treasury Regulation Section 1.409A-3(i)(iv)(B); (c) the reimbursement of an eligible expense will be made no later than the last day of the calendar year following the year in which the expense is incurred, provided that the Participant shall have submitted an invoice for such fees and expenses at least ten (10) days before the end of the calendar year next following the calendar year in which such fees and expenses were incurred; and (d) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.

(c) Delay of Payments. Notwithstanding any other provision of this Plan to the contrary, if the Participant is considered a “specified employee” for purposes of Section 409A (as determined in accordance with the methodology established by the Company as in effect on the Date of Termination), any payment that constitutes nonqualified deferred compensation within the meaning of Section 409A that is otherwise due to the Participant under this Plan during the six-month period following the Participant’s separation from service (as determined in accordance with Section 409A) on account of the Participant’s separation from service shall be accumulated and paid to the Participant on the first business day after the date that is six months following the Participant’s separation from service (the “Delayed Payment Date”). The Participant shall be entitled to Interest (at the applicable rate in effect for the month in which the separation from service occurs) on any cash payments so delayed from the scheduled date of payment to the Delayed Payment Date. If the Participant dies during the postponement period, the amounts and entitlements delayed on account of Section 409A shall be paid to the personal representative of the Participant’s estate on the first to occur of the Delayed Payment Date or thirty (30) days after the date of the Participant’s death.

7.11 Governing Law. The validity, interpretation, construction and performance of the Plan shall in all respects be governed by the laws of Delaware, without reference to principles of conflict of law, except to the extent pre-empted by Federal law.

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Dr. Sanjay K. Jha, Chief Executive Officer, Motorola Mobility Holdings, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Motorola Mobility Holdings, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 28, 2011

/s/ Dr. Sanjay K. Jha

Dr. Sanjay K. Jha

Chief Executive Officer

Motorola Mobility Holdings, Inc.

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Marc E. Rothman, Senior Vice President and Chief Financial Officer, Motorola Mobility Holdings, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Motorola Mobility Holdings, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 28, 2011

/s/ Marc E. Rothman

Marc E. Rothman

Senior Vice President and Chief Financial Officer

Motorola Mobility Holdings, Inc.

EX-32.1

Exhibit 32.1

CERTIFICATION

I, Dr. Sanjay K. Jha, Chief Executive Officer, Motorola Mobility Holdings, Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (“Section 906”), that, to my knowledge:

(1) the quarterly report on Form 10-Q for the period ended July 2, 2011 (the “Quarterly Report”), which this statement accompanies fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and

(2) the information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of Motorola Mobility Holdings, Inc.

This certificate is being furnished solely for purposes of Section 906.

Dated: July 28, 2011

/s/ Dr. Sanjay K. Jha

Dr. Sanjay K. Jha

Chief Executive Officer

Motorola Mobility Holdings, Inc.

EX-32.2

Exhibit 32.2

CERTIFICATION

I, Marc E. Rothman, Senior Vice President, Chief Financial Officer, Motorola Mobility Holdings, Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (“Section 906”), that, to my knowledge:

(1) the quarterly report on Form 10-Q for the period ended July 2, 2011 (the “Quarterly Report”), which this statement accompanies fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and

(2) the information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of Motorola Mobility Holdings, Inc.

This certificate is being furnished solely for purposes of Section 906.

Dated: July 28, 2011

/s/ Marc E. Rothman

Marc E. Rothman

Senior Vice President, Chief Financial Officer

Motorola Mobility Holdings, Inc.

XML



Document And Entity Information	6 Months Ended
	Jul. 02, 2011
Document And Entity Information
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jul. 02, 2011
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2011
Entity Registrant Name	Motorola Mobility Holdings, Inc
Entity Central Index Key	0001495569
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding	296,939,608

XML



Relationship With The Former Parent

6 Months Ended

Jul. 02, 2011

Relationship With The Former Parent

Relationship With The Former Parent

2. Relationship with the Former Parent

In connection with the Separation, the Company entered into a series of agreements with the Former Parent which are intended to govern the relationship between the Company and the Former Parent going forward. These agreements include a Master Separation and Distribution Agreement, intellectual property agreements, a trademark license agreement, a tax sharing agreement and an employee matters agreement. The Company also entered into other related agreements with the Former Parent including transition services agreements. During the three months and six months ended July 2, 2011, the net expense to the Company related to these agreements was not material. See Note 10, "Commitments and Contingencies", regarding indemnifications to and from the Former Parent.

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Other Financial Data

6 Months Ended

Jul. 02, 2011

Other Financial Data

Other Financial Data

3. Other Financial Data

Statement of Operations Information

Other Charges (Income)

Other charges (income) included in Operating earnings (loss) consist of the following:

	Three Months Ended		Six Months Ended
	July 2, 2011	July 3, 2010	July 2, 2011	July 3, 2010
Legal claim provision	$20	$—	$20	—
Intangible asset amortization	16	14	32	$27
Intangible asset impairment	—	—	4	—
Reorganization of businesses	—	5	(3)	21
Legal settlement	—	(228)	—	(228)
	$36	$(209)	$53	$(180)

In June 2010, the Company announced that it had entered into a settlement and license agreement with another company, which resolved all outstanding litigation between the two companies. The agreement includes provisions for an upfront payment of $175 million from the other company to the Company, future royalties to be paid by the other company to the Company for the license of certain intellectual property, and the transfer of certain patents between the companies. As a result of this agreement and the valuation of the patents exchanged, the Company recorded a pre-tax gain of $228 million during the three months ended July 3, 2010, related to the settlement of the outstanding litigation between the parties.

Other Income (Expense)

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

	Three Months Ended				Six Months Ended
	July 2, 2011		July 3, 2010		July 2, 2011		July 3, 2010
Interest income (expense), net:
Interest income		$6		$7		$10		$12
Interest expense		(5)		(25)		(7)		(41)
		$1		$(18)		$3		$(29)
Other, net:
Foreign currency costs		(10)		(10)		(22)		(19)
Investment impairments		—		(1)		—		(8)
Other		5		5		—		5
		$(5)		$(6)		$(22)		$(22)

Earnings (Loss) Per Common Share

The computation of basic and diluted earnings (loss) per common share attributable to Motorola Mobility Holdings, Inc. common stockholders is as follows:

	Amounts attributable to Motorola Mobility Holdings, Inc.common stockholders
	Three Months Ended				Six Months Ended
	July 2, 2011		July 3, 2010		July 2, 2011		July 3, 2010
Basic earnings (loss) per common share:
Net earnings (loss)		$(56)		$80		$(137)		$(132)
Weighted average common shares outstanding		295.8		294.3		295.3		294.3
Per share amount		$(0.19)		$0.27		$(0.46)		$(0.45)
Diluted earnings (loss) per common share:
Net earnings (loss)		$(56)		N/A		$(137)		N/A
Weighted average common shares outstanding		295.8		N/A		295.3		N/A
Add effect of dilutive securities:
Share-based awards and other		—		N/A		—		N/A
Diluted weighted average common shares outstanding		295.8		N/A		295.3		N/A
Per share amount		$(0.19)		N/A		$(0.46)		N/A

For the three months and six months ended July 2, 2011, the Company was in a net loss position and, accordingly, the assumed exercise of 0.6 million and 1.1 million stock options, respectively, and the assumed vesting of 1.7 million and 2.2 million restricted stock units, respectively, were excluded from diluted weighted average shares outstanding because their inclusion would have been anti-dilutive.

The computation of basic earnings (loss) per common share for all periods through December 31, 2010, is calculated using the number of shares of Motorola Mobility common stock outstanding on January 4, 2011, following the Distribution. No measure of diluted loss per common share is presented since there were no actual shares outstanding prior to Separation.

Balance Sheet Information

Cash and Cash Equivalents and Cash Deposits

The Company's cash and cash equivalents (which are highly-liquid investments with an original maturity of three months or less) were $3.0 billion at July 2, 2011. In addition, the Company had $203 million of cash deposits, primarily related to various legal disputes, at July 2, 2011. At July 2, 2011, $23 million of this amount was current and included in Other current assets in the Company's condensed consolidated balance sheet (all of which was held in the U.S.) and $180 million of this amount was non-current (including $171 million held outside the U.S.). Prior to Separation, the Company participated in the Former Parent's cash management program. As a result, the Company has recorded no cash, cash equivalents or cash deposits on its balance sheet prior to Separation.

Accounts Receivable

Accounts receivable, net, consists of the following:

	July 2, 2011		December 31, 2010
Accounts receivable		$1,889		$1,620
Less allowance for doubtful accounts		(46)		(49)
		$1,843		$1,571

Inventories

Inventories, net, consists of the following:

	July 2, 2011		December 31, 2010
Work-in-process and production materials		$559		$724
Finished goods		454		508
		1,013		1,232
Less inventory reserves		(269)		(389)
		$744		$843

Other Current Assets

Other current assets consists of the following:

	July 2, 2011		December 31, 2010
Contractor receivables		$228		$239
Deferred costs		125		163
Tax refunds receivable		71		103
Royalty license arrangements		51		44
Cash deposits		23		—
Other		122		46
		$620		$595

Property, Plant and Equipment

Property, plant and equipment, net, consists of the following:

	July 2, 2011		December 31, 2010
Land		$44		$44
Building		712		716
Machinery and equipment		1,728		1,665
		2,484		2,425
Less accumulated depreciation		(1,678)		(1,619)
		$806		$806

Depreciation expense for the three months ended July 2, 2011 and July 3, 2010 was $40 million and $48 million, respectively. Depreciation expense for the six months ended July 2, 2011 and July 3, 2010 was $78 million and $84 million, respectively.

Investments

Investments consists of the following:

July 2, 2011	Recorded Value		Less				CostBasis
			Unrealized Gains		Unrealized Losses
Available-for-sale securities:
Common stock and equivalents		$—		$—		$—		$—
Other securities, at cost		95		—		—		95
Equity method investments		27		—		—		27
		$122		$—		$—		$122

December 31, 2010	Recorded Value		Less				CostBasis
			Unrealized Gains		Unrealized Losses
Available-for-sale securities:
Common stock and equivalents		$21		$14		$—		$7
Other securities, at cost		89		—		—		89
Equity method investments		27		—		—		27
		$137		$14		$—		$123

During the three months ended July 2, 2011, the Company disposed of Available-for-sale common stock and equivalents resulting in a gain on sale of investments of $10 million.

During the three months and six months ended July 2, 2011, investment impairment charges recorded by the Company were de minimis. During the three months and six months ended July 3, 2010, the Company recorded investment impairment charges of $1 million and $8 million, respectively, representing other-than-temporary declines in the value of the Company's investment portfolio, primarily related to other securities recorded at cost. Investment impairment charges are included in Other within Other income (expense) in the Company's condensed consolidated statements of operations.

Other Assets

Other assets consists of the following:

	July 2, 2011		December 31, 2010
Royalty license arrangements		$224		$228
Intangible assets, net of accumulated amortization of $646 and $614		176		205
Deferred costs		145		180
Value-added tax refunds receivable		29		48
Other		40		36
		$614		$697

Accrued Liabilities

Accrued liabilities consists of the following:

	July 2, 2011		December 31, 2010
Customer reserves		$360		$256
Deferred revenue		334		325
Warranty reserves		258		206
Royalty license arrangements		242		211
Compensation		226		246
Contractor payables		159		179
Tax liabilities		102		140
Other		595		552
		$2,276		$2,115

Other Liabilities

Other liabilities consists of the following:

	July 2, 2011		December 31, 2010
Deferred revenue		$194		$224
Defined benefit pension plans		99		93
Facility financing obligation		98		96
Deferred income taxes		79		79
Unrecognized tax benefits		7		18
Other		171		93
		$648		$603

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Risk Management

6 Months Ended

Jul. 02, 2011

Risk Management

Risk Management

4. Risk Management

Derivative Financial Instruments

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 exchange rate price fluctuations, trading in currencies for which there are no underlying exposures, or entering into transactions for any currency to intentionally increase the underlying exposure. Instruments that are designated as part of a hedging relationship must be effective at reducing the risk associated with the exposure being hedged and are designated as part of a hedging relationship at the inception of the contract. Accordingly, changes in the market values of hedge instruments must be highly correlated with changes in market values of the underlying hedged items both at the inception of the hedge and over the life of the hedge contract.

The Company's strategy related to foreign exchange exposure management is to offset the gains or losses on the financial instruments against losses or gains on the underlying operational cash flows or investments based on the operating business units' assessment of risk. The Company enters into derivative contracts for some of the Company's non-functional currency receivables and payables, which are primarily denominated in major currencies that can be traded on open markets. The Company typically 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 the authoritative accounting guidance for derivative instruments and hedging activities. A portion of the Company's exposure is from currencies that are not traded in liquid markets and these are addressed, to the extent reasonably possible, by managing net asset positions, product pricing and component sourcing.

As of July 2, 2011 and December 31, 2010, the Company had outstanding foreign exchange contracts with notional values totaling $362 million and $608 million, respectively. Management believes that these financial instruments should not subject the Company to undue risk due to foreign exchange movements because gains and losses on these contracts should generally offset losses and gains on the underlying assets, liabilities and transactions, except for the ineffective portion of the instruments, which are charged to Other within Other income (expense) in the Company's condensed consolidated statements of operations.

The following table shows the five largest net notional amounts of the positions to buy or sell foreign currency as of July 2, 2011 and the corresponding positions as of December 31, 2010:

	Notional Amount
Net Buy (Sell) by Currency	July 2, 2011		December 31, 2010
Chinese Yuan		$101		$14
Indian Rupee		(26)		(43)
Brazilian Real		(26)		(394)
Korean Won		(40)		(30)
Euro		(58)		(54)

Counterparty Risk

The use of derivative financial instruments exposes the Company to counterparty credit risk in the event of nonperformance by counterparties. However, the risk is limited to the fair value of the instruments when the derivative is in an asset position. At the present time, all of the counterparties have investment grade credit ratings. The Company is not exposed to material credit risk with any single counterparty.

Fair Value of Financial Instruments

                    The Company's financial instruments include short-term investments, accounts receivable, accounts payable, accrued liabilities, derivative financial instruments and other financing commitments. The Company's available-for-sale investment portfolios and derivative financial instruments are recorded in the Company's condensed consolidated balance sheets at fair value. All other financial instruments are carried at cost, which is not materially different than the instruments' fair values.

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Income Taxes

6 Months Ended

Jul. 02, 2011

Income Taxes

Income Taxes

5. Income Taxes

Basis of Presentation

For purposes of the Company's historical financial statements pre-Separation, income tax expense and deferred income tax balances were recorded as if the Company had filed tax returns on a separate return basis ("hypothetical carve-out basis") from the Former Parent. Post-Separation, income tax expense and deferred income tax balances are recorded in accordance with the Company's stand-alone income tax positions.

Income Tax Expense

For the three months ended July 2, 2011 and July 3, 2010, the Company recorded net income tax expense of $39 million and $15 million, respectively, primarily comprised of taxes on foreign earnings and foreign withholding taxes on royalty and other income.

For the six months ended July 2, 2011 and July 3, 2010, the Company recorded net income tax expense of $69 million and $27 million, respectively, primarily comprised of taxes on foreign earnings and foreign withholding taxes on royalty and other income.

The Company has not recorded a tax benefit on its U.S. losses due to its recent history of cumulative U.S. losses.

Deferred Income Taxes

As of July 2, 2011, the Company's net deferred tax assets, exclusive of valuation allowances, were $2.5 billion, compared to $2.9 billion as of December 31, 2010. As of July 2, 2011, the valuation allowance against the net deferred tax assets was $2.4 billion, as compared to $2.8 billion as of December 31, 2010.

Included in the net deferred tax assets of $2.5 billion as of July 2, 2011 are: (i) approximately $1.0 billion of deferred tax assets related to capitalized R&D costs that may be amortized for tax purposes through 2019; (ii) approximately $600 million of deferred tax assets related to U.S. and foreign tax loss and credit carry forwards; and (iii) approximately $900 million of deferred taxes related to other temporary differences.

Unrecognized Tax Benefits

                    The Company had unrecognized tax benefits of $25 million and $101 million, at July 2, 2011 and December 31, 2010, respectively. The decrease in unrecognized tax benefits is attributable to a $76 million decrease relating to post-Separation adjustments.

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Share-Based Compensation Plans

6 Months Ended

Jul. 02, 2011

Share-Based Compensation Plans

Share-Based Compensation Plans

6. Share-Based Compensation Plans

Upon Separation, all outstanding Former Parent stock options, stock appreciation rights and restricted stock units ("RSU") for the Company's employees were replaced with awards in the Company using a formula designed to preserve the intrinsic value and fair value of the award immediately prior to Separation. There was no incremental compensation expense to the Company related to the replacement of the Former Parent share-based compensation awards. Any unrecognized compensation expense related to the replaced awards will be recognized by the Company over the remaining vesting period of the awards. During the six months ended July 2, 2011, the Company began to grant share based compensation to employees and non-employee directors under the Company's incentive plans.

Stock Options

During the six months ended July 2, 2011, the Company granted 9.7 million stock options. The weighted-average estimated fair value of employee stock options granted during the six months ended July 2, 2011 was $11.70. As of July 2, 2011, the Company had 23.9 million stock options and stock appreciation rights outstanding.

Restricted Stock and Restricted Stock Units

During the six months ended July 2, 2011, the Company granted 4.4 million restricted stock ("RS") and RSUs with a weighted-average fair market value of $29.33 per RS and RSU. As of July 2, 2011, the Company had 9.2 million RS and RSUs outstanding.

Employee Stock Purchase Plan

During the three months ended July 2, 2011, employees began to participate in the Company's new employee stock purchase plan. 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 May 1 through October 31 and the second one from November 1 through April 30. During the three months ended July 2, 2011, there was no purchase of the Company's stock under the plan as the initial offering period had not yet closed.

Compensation expense related to the Company's employee stock options, stock appreciation rights, restricted stock, restricted stock units and employee stock purchase plan was as follows (prior to Separation, compensation expense included the Company's employees, as well as allocated compensation expense from the Former Parent's corporate functions):

	Three Months Ended				Six Months Ended
	July 2, 2011		July 3, 2010		July 2, 2011		July 3, 2010
Share-based compensation expense included in:
Costs of sales		$4		$4		$8		$7
Selling, general and administrative expenses		28		23		49		46
Research and development expenditures		14		13		29		25
Share-based compensation expense included in Operating earnings (loss)		46		40		86		78
Tax benefit		—		—		—		—
Share-based compensation expense, net of tax		$46		$40		$86		$78

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Fair Value Measurements

6 Months Ended

Jul. 02, 2011

Fair Value Measurements

Fair Value Measurements

7. Fair Value Measurements

The Company had no non-financial assets or liabilities that are required to be measured at fair value on a recurring basis as of July 2, 2011.

Applicable accounting standards specify a hierarchy of valuation techniques based on whether the inputs to each measurement are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's assumptions about current market conditions. The prescribed fair value hierarchy and related valuation methodologies are as follows:

Level 1—Quoted prices for identical instruments in active markets.

Level 2—Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations, in which all significant inputs are observable in active markets.

Level 3—Valuations derived from valuation techniques, in which one or more significant inputs are unobservable.

The fair values of the Company's financial assets and liabilities by level in the fair value hierarchy as of July 2, 2011 were as follows:

July 2, 2011	Level 1		Level 2		Level 3		Total
Assets:
Foreign exchange derivative contracts		$—		$2		$—		$2
Liabilities:
Foreign exchange derivative contracts		$—		$6		$—		$6

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Sales Of Receivables

6 Months Ended

Jul. 02, 2011

Sales Of Receivables

Sales Of Receivables

8. Sales of Receivables

Prior to Separation, the Former Parent sold accounts receivable generated from its business units to third-parties in transactions that qualified as "true-sales." Until Separation, the Company's businesses participated in this activity by transferring certain of their accounts receivable balances to the Former Parent. The Company also has agreements under which the Company sells its accounts receivable directly to a third party in transactions that qualify as "true-sales."

Total sales of accounts receivable were $66 million and $45 million during the three months ended July 2, 2011 and July 3, 2010, respectively, and $97 million and $116 million for the six months ended July 2, 2011 and July 3, 2010, respectively. As of July 2, 2011, there were $66 million of accounts receivable outstanding under these programs for which the Company retained servicing obligations, compared to $43 million at December 31, 2010.

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Credit Facilities

6 Months Ended

Jul. 02, 2011

Credit Facilities

Credit Facilities

9. Credit Facilities

On January 4, 2011, the Company entered into a $500 million unsecured three-year credit agreement (the "Credit Agreement") with a syndicate of lenders. The Credit Agreement provides for a revolving credit facility and a letter of credit facility, is guaranteed by certain of the Company's subsidiaries, and contains restrictive covenants. The Company may use any borrowings under the Credit Agreement for general corporate purposes. No obligations are outstanding under the Credit Agreement as of July 2, 2011.

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Commitments And Contingencies

6 Months Ended

Jul. 02, 2011

Commitments And Contingencies

Commitments And Contingencies

10. Commitments and Contingencies

Legal

The Company is involved in various lawsuits, claims and investigations arising in the normal course of business and relating to the Company's business. In the opinion of management, the ultimate disposition of these matters is not expected to 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 matters are ultimately resolved.

Tax and Regulatory Proceedings in Brazil

In connection with the Company's operations in Brazil, Brazilian tax authorities have proposed assessments against the Company's Brazilian subsidiary relating to various technology transfer taxes, duties, value added taxes, certain other taxes and labor related matters related to the subsidiary's operations for calendar years 1997 through 2010. As of July 2, 2011, these assessments collectively represent reasonably possible loss contingencies under the applicable accounting standards of up to approximately $530 million, based on the exchange rate in effect at July 2, 2011, including interest and penalties. However, the Company is vigorously disputing these matters, believes it has valid defenses that are supported by the law, and believes that this amount is not a meaningful indicator of liability. These matters are progressing through the multiple levels of administrative and judicial review available in Brazil. Due to the complexities and uncertainty surrounding the administrative and judicial process in Brazil and the nature of the claims asserted, the Company does not expect a final resolution of these matters for several years.

The Company routinely assesses the probability of ultimately incurring a loss in each of these matters and records the Company's best estimate of the ultimate loss in situations where the Company assesses the likelihood of an ultimate loss as probable. Based on the Company's assessment of these matters, the Company has recorded accruals on only a small portion of the total exposure. It is, however, very difficult to predict the outcome of legal disputes and controversies, including litigation, in Brazil and our ultimate loss may be significantly greater than our current assessments and related accruals.

As of July 2, 2011, the Company had approximately $166 million of cash deposits, including accrued interest, for these matters, which are included in Cash deposits in the Company's condensed consolidated balance sheet as of July 2, 2011.

Indemnifications

The Company may provide indemnifications for losses associated with indemnification and/or warranty provisions contained in certain commercial and intellectual property agreements. Historically, the Company has not made significant payments under these indemnifications. However, there is an increasing risk in relation to intellectual property indemnities given the current legal climate. In particular, two customers of the Company have made indemnification demands of the Company related to patent infringement claims by TiVo, Inc. against our products.

Furthermore, pursuant to the Master Separation and Distribution Agreement and certain other agreements with the Former Parent, the Company agreed to indemnify the Former Parent for certain liabilities, and the Former Parent agreed to indemnify the Company for certain liabilities, in each case for uncapped amounts.

                   Generally, in indemnification cases, payment by the Company is conditioned on the other party making a claim pursuant to the procedures specified in the particular contract, which procedures typically allow the Company to challenge the other party's claims. Further, the Company's obligations under these agreements for indemnification are generally limited in terms of duration and are for amounts not in excess of the contract value, except with respect to certain intellectual property infringement claims. In some instances, the Company may have recourse against third-parties for certain payments made by the Company.

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Segment Information

6 Months Ended

Jul. 02, 2011

Segment Information

Segment Information

11. Segment Information

The Company reports financial results for the following business segments:

• The Mobile Devices segment designs, manufactures, sells and services wireless mobile devices, including smartphones and media tablets, with integrated software and accessory products, and licenses intellectual property.

• The Home segment designs, manufactures, sells, installs and services set-top boxes for digital video, Internet Protocol ("IP") video, satellite and terrestrial broadcast networks, end-to-end digital video and Internet Protocol Television ("IPTV") distribution systems, broadband access network infrastructure platforms, and associated data and voice customer premises equipment and associated software solutions to cable television ("TV") and telecommunication service providers.

Summarized below are the Company's net revenues and operating earnings (loss) by segment for the three months and six months ended July 2, 2011 and July 3, 2010:

	Net Revenues				Operating Earnings (Loss)
Three Months Ended	July 2, 2011		July 3, 2010		July 2, 2011		July 3, 2010
Mobile Devices		$2,430		$1,723		$(85)		$87
Home		907		886		62		29
		$3,337		$2,609
Operating earnings (loss)						(23)		116
Total other income (expense)						6		(24)
Earnings (loss) before income taxes						$(17)		$92
	Net Revenues				Operating Earnings (Loss)
Six Months Ended	July 2, 2011		July 3, 2010		July 2, 2011		July 3, 2010
Mobile Devices		$4,558		$3,365		$(174)		$(105)
Home		1,811		1,724		115		49
		$6,369		$5,089
Operating loss						(59)		(56)
Total other expense						(9)		(51)
Loss before income taxes						$(68)		$(107)

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Condensed Consolidated Statements Of Operations (USD $) In Millions, except Per Share data	3 Months Ended		6 Months Ended
	Jul. 02, 2011	Jul. 03, 2010	Jul. 02, 2011	Jul. 03, 2010
Condensed Consolidated Statements Of Operations
Net revenues	$ 3,337	$ 2,609	$ 6,369	$ 5,089
Costs of sales	2,473	1,945	4,750	3,830
Gross margin	864	664	1,619	1,259
Selling, general and administrative expenses	456	385	873	756
Research and development expenditures	395	372	752	739
Other charges (income)	36	(209)	53	(180)
Operating earnings (loss)	(23)	116	(59)	(56)
Other income (expense):
Interest income (expense), net	1	(18)	3	(29)
Gains on sales of investments	10		10
Other, net	(5)	(6)	(22)	(22)
Total other income (expense)	6	(24)	(9)	(51)
Earnings (loss) before income taxes	(17)	92	(68)	(107)
Income tax expense	39	15	69	27
Net earnings (loss)	(56)	77	(137)	(134)
Less: Loss attributable to non-controlling interests		(3)		(2)
Net earnings (loss) attributable to Motorola Mobility Holdings, Inc.	$ (56)	$ 80	$ (137)	$ (132)
Earnings (loss) per common share (Note 3):
Basic	$ (0.19)	$ 0.27	$ (0.46)	$ (0.45)
Diluted	$ (0.19)		$ (0.46)
Weighted average common shares outstanding:
Basic	295.8	294.3	295.3	294.3
Diluted	295.8		295.3

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Reorganization Of Businesses

6 Months Ended

Jul. 02, 2011

Reorganization Of Businesses

Reorganization Of Businesses

12. 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. Prior to Separation, the Company participated in the Former Parent's Severance Plan. The Company recognizes termination benefits based on formulas per the Severance Plan at the point in time that future settlement is probable and can be reasonably estimated based on estimates prepared at the time a restructuring plan is approved by management. Exit costs consist of future minimum lease payments on vacated facilities and other contractual terminations. At each reporting date, the Company evaluates its accruals for employee separation and exit costs to ensure the accruals are still appropriate. In certain circumstances, accruals are no longer needed because of efficiencies in carrying out the plans or because employees previously identified for separation resigned from the Company and did not receive severance or were redeployed due to circumstances not foreseen when the original plans were initiated. In these cases, the Company reverses accruals through the condensed consolidated statements of operations where the original charges were recorded when it is determined they are no longer needed.

2011 Activity

During the three months ended July 2, 2011, the Company recorded $1 million of additional charges related to restructuring actions under Other charges in the Company's condensed consolidated statements of operations, and $1 million of reversals of reorganization of business charges for accruals no longer needed.

During the six months ended July 2, 2011, the Company recorded $6 million of net reversals of reorganization of business charges, including $3 million of Separation-related adjustments for employees that remained with the Former Parent and $4 million of reversals for accruals no longer needed, partially offset by $1 million of additional charges related to restructuring actions under Other charges in the Company's condensed consolidated statements of operations.

The following table displays the net charges (reversals of accruals) incurred by business segment:

July 2, 2011	Three Months Ended		Six Months Ended
Mobile Devices		$—		$(3)
Home		—		—
		$—		$(3)

The following table displays a rollforward of the reorganization of businesses accruals established for exit costs and employee separation costs from January 1, 2011 to July 2, 2011:

	Accruals at January 1, 2011		Additional Charges		Adjustments		Amount Used		Accruals at July 2, 2011
Exit costs		$12		$—		$—		$(2)		$10
Employee separation costs		32		1		(7)		(23)		3
		$44		$1		$(7)		$(25)		$13

Adjustments include foreign currency translation adjustments.

Exit Costs

At January 1, 2011, the Company had an accrual of $12 million for exit costs attributable to lease terminations. The $2 million used reflects cash payments. The remaining accrual of $10 million, which is included in Accrued liabilities in the Company's condensed consolidated balance sheet at July 2, 2011, represents future cash payments, primarily for lease termination obligations that are expected to be paid over a number of years.

Employee Separation Costs

At January 1, 2011, the Company had an accrual of $32 million for employee separation costs, representing the severance costs for approximately 1,100 employees. The adjustments of $7 million reflect reversals of accruals no longer needed and the additional charges of $1 million relate to restructuring actions taken by the Company. During the six months ended July 2, 2011, approximately 600 employees, of which 100 were direct employees and 500 were indirect employees, were separated from the Company. The $23 million used reflects cash payments to these separated employees. The remaining accrual of $3 million is included in Accrued liabilities in the Company's condensed consolidated balance sheet at July 2, 2011.

2010 Activity

During the three months ended July 3, 2010, the Company recorded net reorganization of business charges of $7 million, including $2 million of charges in Costs of sales and $5 million of charges under Other charges in the Company's condensed consolidated statements of operations. Included in the aggregate $7 million are charges of $12 million for employee separation costs, partially offset by $5 million of reversals for accruals no longer needed.

During the six months ended July 3, 2010, the Company recorded net reorganization of business charges of $27 million, including $6 million of charges in Costs of sales and $21 million of charges under Other charges in the Company's condensed consolidated statements of operations. Included in the aggregate $27 million are charges of $36 million for employee separation costs, partially offset by $9 million of reversals for accruals no longer needed.

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

July 3, 2010	Three Months Ended		Six Months Ended
Mobile Devices		$2		$17
Home		5		10
		$7		$27

The following table displays a rollforward of the reorganization of businesses accruals established for exit costs and employee separation costs from January 1, 2010 to July 3, 2010:

	Accruals at January 1, 2010		Additional Charges		Adjustments		Amount Used		Accruals at July 3, 2010
Exit costs		$39		$—		$(3)		$(15)		$21
Employee separation costs		33		36		(8)		(35)		26
		$72		$36		$(11)		$(50)		$47

Adjustments include foreign currency translation adjustments.

Exit Costs

At January 1, 2010, the Company had an accrual of $39 million for exit costs attributable to lease terminations. There were no material additional charges related to exit costs. The adjustments of $3 million reflect: (i) $2 million of reversals of accruals no longer needed, and (ii) $1 million of foreign currency translation adjustments. The $15 million used reflects cash payments. The remaining accrual of $21 million was included in Accrued liabilities in the Company's condensed combined balance sheet at July 3, 2010.

Employee Separation Costs

                             At January 1, 2010, the Company had an accrual of $33 million for employee separation costs, representing the severance costs for approximately 400 employees. The additional charges of $36 million represent severance costs for approximately an additional 1,000 employees, of which 400 were direct employees and 600 were indirect employees. The adjustments of $8 million reflect: (i) $7 million of reversals of accruals no longer needed and (ii) $1 million of foreign currency translation adjustments. During the six months ended July 3, 2010, approximately 700 employees, of which 200 were direct employees and 500 were indirect employees, were separated from the Company. The $35 million used reflects cash payments to these separated employees. The remaining accrual of $26 million was included in Accrued liabilities in the Company's combined balance sheet at July 3, 2010.

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Intangible Assets And Goodwill

6 Months Ended

Jul. 02, 2011

Intangible Assets And Goodwill

Intangible Assets And Goodwill

13. Intangible Assets and Goodwill

Intangible Assets

Amortized intangible assets were comprised of the following:

	July 2, 2011				December 31, 2010
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Completed technology		$511		$441		$507		$418
Licensed technology		106		106		105		105
Patents		97		20		97		16
Customer-related		64		41		62		37
In-process research and development		6		—		10		—
Other intangibles		38		38		38		38
		$822		$646		$819		$614

Amortization expense on intangible assets, which is included within Other charges, was $16 million and $14 million for the three months ended July 2, 2011 and July 3, 2010, respectively. Amortization expense on intangible assets, which is included within Other charges, was $32 million and $27 million for the six months ended July 2, 2011 and July 3, 2010, respectively. As of July 2, 2011, annual amortization expense is estimated to be $60 million in 2011, $43 million in 2012, $33 million in 2013, $19 million in 2014 and $11 million in 2015.

During the three months ended April 2, 2011, the Company recorded an impairment of $4 million related to the abandonment of previously acquired in-process research and development.

Amortized intangible assets, excluding goodwill, by business segment were as follows:

	July 2, 2011				December 31, 2010
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Mobile Devices		$150		$59		$153		$53
Home		672		587		666		561
		$822		$646		$819		$614

Goodwill

The following table displays a rollforward of the carrying amount of goodwill by reportable segment from January 1, 2011 to July 2, 2011:

	Mobile Devices		Home		Total
Balances as of January 1, 2011:
Aggregate goodwill acquired		$133		$1,391		$1,524
Accumulated impairment losses		(55)		(73)		(128)
Goodwill, net of impairment losses		78		1,318		1,396
Goodwill acquired		—		25		25
Adjustments		2		—		2
Balances as of July 2, 2011:
Aggregate goodwill acquired		135		1,416		1,551
Accumulated impairment losses		(55)		(73)		(128)
Goodwill, net of impairment losses		$80		$1,343		$1,423

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Condensed Consolidated Balance Sheets (USD $) In Millions	Jul. 02, 2011	Dec. 31, 2010
ASSETS
Cash and cash equivalents	$ 3,026
Accounts receivable, net	1,843	1,571
Inventories, net	744	843
Deferred income taxes	80	110
Other current assets	620	595
Total current assets	6,313	3,119
Cash deposits	180
Property, plant and equipment, net	806	806
Investments	122	137
Deferred income taxes	98	49
Goodwill	1,423	1,396
Other assets	614	697
Total assets	9,556	6,204
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable	1,728	1,731
Accrued liabilities	2,276	2,115
Total current liabilities	4,004	3,846
Other liabilities	648	603
Stockholders' Equity
Common stock: $.01 par value; Authorized shares: 900.0; Issued shares: 297.6; Outstanding shares: 296.9	3
Additional paid-in capital	5,051
Accumulated other comprehensive loss	(13)	(345)
Retained earnings (accumulated deficit)	(137)
Owner's net investment, prior to Separation		2,077
Total Motorola Mobility Holdings, Inc. stockholders' equity	4,904	1,732
Non-controlling interests		23
Total stockholders' equity	4,904	1,755
Total liabilities and stockholders' equity	$ 9,556	$ 6,204

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $)	Jul. 02, 2011
Condensed Consolidated Balance Sheets
Common stock, par value	$ 0.01
Common stock, shares authorized	900,000,000
Common stock, shares issued	297,600,000
Common stock, shares outstanding	296,900,000

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Condensed Consolidated Statement Of Stockholders' Equity (USD $) In Millions	Shares [Member]	Common Stock And Additional Paid-In Capital [Member] USD ($)	Fair Value Adjustment To Available For Sale Securities, Net Of Tax [Member] USD ($)	Foreign Currency Translation Adjustments, Net Of Tax [Member] USD ($)	Retirement Benefits Adjustments, Net Of Tax [Member] USD ($)	Retained Earnings (Accumulated Deficit) [Member] USD ($)	Owner's Net Investment, Prior To Separation [Member] USD ($)	Non-Controlling Interests [Member] USD ($)	Comprehensive Earnings (Loss) [Member] USD ($)	Total USD ($)
Balances at Dec. 31, 2010			$ 14	$ (349)	$ (10)		$ 2,077	$ 23		$ 1,755
Balances, shares at Dec. 31, 2010
Capital contribution from Former Parent							3,200
Separation-related adjustments			(5)	346	(4)		(311)	(23)
Reclassification of Owner's Net Investment to Common Stock and Additional Paid-in Capital in connection with Separation		4,966					(4,966)
Reclassification of Owner's Net Investment to Common Stock and Additional Paid-in Capital in connection with Separation, shares	294.3
Net loss						(137)			(137)	(137)
Impact of sale of securities, net of tax of $5			(9)						(9)
Foreign currency translation adjustments				4					4
Issuance of common stock and stock options exercised		2
Issuance of common stock and stock options exercised, shares	2.6
Share-based compensation expense		86								86
Balances at Jul. 02, 2011		$ 5,054		$ 1	$ (14)	$ (137)			$ (142)	$ 4,904
Balances, shares at Jul. 02, 2011	296.9									296.9

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Condensed Consolidated Statement Of Stockholders' Equity (Parenthetical) (USD $) In Millions	6 Months Ended
	Jul. 02, 2011
Condensed Consolidated Statement Of Stockholders' Equity
Net unrealized loss on securities, tax	$ 5

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Condensed Consolidated Statements Of Cash Flows (USD $) In Millions	6 Months Ended
	Jul. 02, 2011	Jul. 03, 2010
Operating
Net loss attributable to Motorola Mobility Holdings, Inc.	$ (137)	$ (132)
Loss attributable to non-controlling interests		(2)
Net loss	(137)	(134)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	110	111
Share-based compensation expense	86	78
Non-cash other charges	17	1
Gains on sales of investments	(10)
Deferred income taxes	(15)	(3)
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable, net	(263)	51
Inventories	99	60
Other current assets	45	79
Accounts payable and accrued liabilities	95	(89)
Other assets and liabilities	80	(97)
Net cash provided by operating activities	107	57
Investing
Acquisitions and investments	(44)	(20)
Proceeds from sales of investments	17
Capital expenditures	(96)	(42)
Cash deposits	(23)
Other, net	1	6
Net cash used for investing activities	(145)	(56)
Financing
Share-based compensation activity	2
Capital contribution from Former Parent, net of cash deposits of $168	3,032
Other, net	15
Net transfers to Former Parent		(28)
Net cash provided by (used for) financing activities	3,049	(28)
Effect of exchange rate changes on cash and cash equivalents	15	27
Net increase in cash and cash equivalents	3,026
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period	3,026
Cash paid during the period for:
Interest, net	1
Income taxes, net of refunds	$ 89

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Condensed Consolidated Statements Of Cash Flows (Parenthetical) (USD $) In Millions	Jul. 02, 2011
Cash deposits	$ 180
Former Parent Capital Contribution [Member]
Cash deposits	$ 168

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Background And Basis Of Presentation

6 Months Ended

Jul. 02, 2011

Background And Basis Of Presentation

Background And Basis Of Presentation

1. Background and Basis of Presentation

Background

Motorola Mobility Holdings, Inc. ("Motorola Mobility" or "the Company") is a provider of innovative technologies, products and services that enable a broad range of mobile and wireline, digital communication, information and entertainment experiences. The Company's integrated products and platforms deliver rich multimedia content, such as voice, video, messaging and Internet-based applications and services to multiple screens, such as mobile devices, televisions and personal computers ("multi screens"). Our product portfolio primarily includes mobile devices, wireless accessories, set-top boxes and video distribution systems, and wireline broadband infrastructure products and associated customer premises equipment. We are focused on developing differentiated, innovative products to meet the expanding needs of consumers to communicate, to collaborate and to discover, consume, create and share content at a time and place of their choosing on multiple devices.

On January 4, 2011 (the "Distribution Date"), the separation of Motorola Mobility from Motorola, Inc., which effective January 4, 2011 changed its name to Motorola Solutions, Inc. (hereinafter, the "Former Parent") (the "Separation"), was completed. Motorola Mobility is now an independent public company trading under the symbol "MMI" on the New York Stock Exchange. On January 4, 2011, Former Parent stockholders of record as of the close of business on December 21, 2010 (the "Record Date") received one (1) share of Motorola Mobility common stock for each eight (8) shares of Motorola, Inc. common stock held as of the Record Date (the "Distribution"). Motorola Mobility did not issue fractional shares of its common stock in the Distribution. Fractional shares that Former Parent stockholders would otherwise have been entitled to receive were aggregated and sold in the public market by the distribution agent and aggregate net cash proceeds of these sales were distributed ratably to those stockholders who would otherwise have been entitled to receive fractional shares.

At the time of the Distribution, the Former Parent contributed $3.2 billion in cash, cash equivalents and cash deposits to the Company (the "Distribution Date Contribution"). Additional contributions totaling $300 million from the Former Parent are due in cash if and when the Former Parent receives cash distributions as a result of the reduction in registered capital of an overseas subsidiary (the "Deferred Contribution"). On July 22, 2011, the Company received $75 million of the Deferred Contribution due from the Former Parent.

Basis of Presentation

The condensed consolidated financial statements include the accounts of the Company and all controlled subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. The condensed consolidated financial statements as of July 2, 2011 and December 31, 2010 and for the three months and six months ended July 2, 2011 and July 3, 2010 include, in the opinion of management, all adjustments (consisting of normal recurring adjustments and reclassifications) necessary to present fairly the Company's consolidated financial position, results of operations and cash flows for all periods presented.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the combined financial statements and notes thereto included in the Company's Form 10-K for the year ended December 31, 2010. The results of operations for the three months and six months ended July 2, 2011 are not necessarily indicative of the operating results to be expected for the full year. Certain amounts in prior period financial statements and related notes have been reclassified to conform to the 2011 presentation.

The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Prior to Separation, the historical financial statements were derived from the consolidated financial statements and accounting records of the Former Parent principally representing the Mobile Devices and Home business segments, using the historical results of operations and historical basis of assets and liabilities of the Company's businesses. The historical financial statements also include allocations of certain Former Parent general corporate expenses. Management believes the assumptions and methodologies underlying the allocation of general corporate expenses to the historical results of operations were reasonable. However, such expenses may not be indicative of the actual level of expenses that would have been incurred by the Company if it had operated as an independent, publicly traded company or of the costs expected to be incurred in the future. As such, the results of operations prior to Separation, included herein, may not necessarily reflect the Company's results of operations, financial position or cash flows in the future or what its results of operations, financial position or cash flows would have been had the Company been an independent, publicly traded company during the historical periods presented. Because a direct ownership relationship did not exist among all the various worldwide entities comprising the Company, the Former Parent's net investment in the Company is presented as Owner's net investment, rather than stockholders' equity, in the combined balance sheets for periods prior to the Separation. Transactions between the Mobile Devices and Home business segments and other Former Parent businesses have been identified in the historical financial statements as transactions between related parties for periods prior to the Separation.

The following table presents the expense (income) allocations reflected in the Company's statements of operations:

July 3, 2010	Three Months Ended		Six Months Ended
Leveraged services expenses		$ 138		$ 267
Employee benefits and incentives		129		208
Basic research		2		5
Interest expense (income), net		15		26
		$ 284		$ 506

The Company and the Former Parent considered these leveraged services expenses, employee benefits and incentives, basic research and interest expense (income) allocations to be a reasonable reflection of the services provided to the Company by the Former Parent. For the three months and six months ended July 2, 2011, there are no allocations from the Former Parent in the statement of operations.

The Former Parent used a worldwide centralized approach to cash management and the financing of its operations with all related activity between the Company and the Former Parent reflected as equity transactions in Owner's net investment in the Company's historical balance sheets for periods prior to Separation. Types of intercompany transactions between the Company and the Former Parent prior to Separation included: (i) cash receipts from the Company's businesses, which were transferred to the Former Parent on a regular basis, (ii) cash injections from the Former Parent used to fund operations, capital expenditures, or acquisitions, (iii) charges (benefits) for income taxes, and (iv) allocations of the Former Parent's corporate expenses, as discussed above.

Prior to Separation, the historical financial statements included a manufacturing joint venture that primarily benefited the Company. Activity in the joint venture for the benefit of the Company began to wind down prior to Separation. Upon Separation, the Company did not retain any ownership in the joint venture and the Company is no longer receiving any manufactured goods from the joint venture. As such, after Separation, the joint venture is no longer included in the consolidated financial statements of the Company. In addition, because the historical financial statements were derived from the Former Parent's accounting records, included in the Separation-related adjustments are adjustments to foreign currency translation adjustments, net of tax, in Accumulated other comprehensive loss, to reflect the appropriate opening balances related to the Company's legal entities at Separation.

For purposes of the Company's historical financial statements, income tax expense and deferred income tax balances were recorded as if the Company filed tax returns on a separate return basis ("hypothetical carve-out basis") from the Former Parent. The Company's historical income tax balances reflected tax losses and tax credits generated by the Company while divisions within the Former Parent's legal entities which were available for use by the Former Parent's other businesses. Additionally, as part of the Separation, the Former Parent entered into taxable transactions when separating the Company's non-U.S. assets and liabilities into separate non-U.S. subsidiaries of the Company. As a result of these taxable transactions and the use of certain tax losses and credits by the Former Parent, the Company's income tax balances, as presented on the hypothetical carve-out basis, at December 31, 2010 were adjusted after the Separation to reflect the Company's post-Separation income tax positions, including unrecognized tax benefits, tax loss and credit carry forwards, other deferred tax assets and valuation allowances. The adjustment resulted in a decrease in the hypothetical carve-out income tax balances with an offsetting $32 million increase in Stockholders' Equity.

Recently Issued Accounting Pronouncements

In May 2011, the FASB issued authoritative guidance that changes the wording used to describe many of the requirements for measuring fair value and for disclosing information about fair value measurements to ensure consistency between U.S. GAAP and IFRS. The guidance also expands the disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. This new guidance is to be applied prospectively during interim and annual periods beginning after December 15, 2011. The Company anticipates that the adoption of this standard will not materially expand its consolidated financial statement footnote disclosures or change the way it measures fair value.  

                  In June 2011, the FASB issued authoritative guidance which amends current comprehensive income guidance. This guidance eliminates the option to present the components of comprehensive income as part of the statement of stockholders' equity. Instead, the Company must report comprehensive income in either a single continuous statement of comprehensive income which contains two sections, net income and other comprehensive income, or in two separate but consecutive statements. This guidance will be effective for the Company during the interim and annual periods beginning after December 15, 2011. The adoption of this guidance will not have an impact on the Company's consolidated statements of operations, balance sheets or cash flows as it only requires a change in the format of the current presentation.