10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)
þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the period ended June 30, 2007
	or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from          to

Commission file number: 1-7221

MOTOROLA, INC.

(Exact name of registrant as specified in its charter)

DELAWARE	36-1115800
(State of Incorporation)	(I.R.S. Employer Identification No.)
1303 E. Algonquin Road Schaumburg, Illinois	60196
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code:
(847) 576-5000

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 þ     No o

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

Large accelerated filer þ     Accelerated filer o      Non-accelerated filer o

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

The number of shares outstanding of each of the issuer’s classes of common stock as of the close of business on June 30, 2007:

Class	Number of Shares
Common Stock; $3 Par Value	2,293,588,732

INDEX

		Page
PART I FINANCIAL INFORMATION
Item 1	Financial Statements		1
	Condensed Consolidated Statements of Operations (Unaudited) for the Three Months and Six Months Ended June 30, 2007 and July 1, 2006		1
	Condensed Consolidated Balance Sheets (Unaudited) as of June 30, 2007 and December 31, 2006		2
	Condensed Consolidated Statement of Stockholders’ Equity (Unaudited) for the Six Months Ended June 30, 2007		3
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 2007 and July 1, 2006		4
	Notes to Condensed Consolidated Financial Statements (Unaudited)		5
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations		23
Item 3	Quantitative and Qualitative Disclosures About Market Risk		45
Item 4	Controls and Procedures		47
PART II OTHER INFORMATION
Item 1	Legal Proceedings		47
Item 1A	Risk Factors		49
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds		49
Item 3	Defaults Upon Senior Securities		49
Item 4	Submission of Matters to Vote of Security Holders		50
Item 5	Other Information		50
Item 6	Exhibits		50
2006 Incentive Plan
Elected Officers Supplementary Retirement Plan
Employment Agreement
Section 302 Certification
Section 302 Certification
Section 906 Certification
Section 906 Certification

Part I — Financial Information

Motorola, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations
(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,			July 1,			June 30,			July 1,
(In millions, except per share amounts)	2007			2006			2007			2006
Net sales	$	8,732		$	10,820		$	18,165		$	20,452
Costs of sales		6,279			7,463			13,258			14,164
Gross margin		2,453			3,357			4,907			6,288
Selling, general and administrative expenses		1,296			1,154			2,609			2,223
Research and development expenditures		1,115			1,035			2,232			1,999
Other charges (income)		200			(354	)		590			(305	)
Operating earnings (loss)		(158	)		1,522			(524	)		2,371
Other income:
Interest income, net		32			70			73			137
Gains on sales of investments and businesses, net		5			5			4			156
Other		17			126			16			107
Total other income		54			201			93			400
Earnings (loss) from continuing operations before income taxes		(104	)		1,723			(431	)		2,771
Income tax expense (benefit)		(66	)		374			(175	)		766
Earnings (loss) from continuing operations		(38	)		1,349			(256	)		2,005
Earnings from discontinued operations, net of tax		10			35			47			65
Net earnings (loss)	$	(28	)	$	1,384		$	(209	)	$	2,070
Earnings (loss) per common share:
Basic:
Continuing operations	$	(0.02	)	$	0.55		$	(0.11	)	$	0.81
Discontinued operations		0.01			0.01			0.02			0.03
	$	(0.01	)	$	0.56		$	(0.09	)	$	0.84
Diluted:
Continuing operations	$	(0.02	)	$	0.54		$	(0.11	)	$	0.79
Discontinued operations		0.01			0.01			0.02			0.03
	$	(0.01	)	$	0.55		$	(0.09	)	$	0.82
Weighted average common shares outstanding:
Basic		2,296.3			2,464.4			2,337.1			2,477.7
Diluted		2,296.3			2,522.0			2,337.1			2,538.8
Dividends paid per share	$	0.05		$	0.04		$	0.10		$	0.08

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

1

Motorola, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

	June 30,			December 31,
(In millions, except per share amounts)	2007			2006
ASSETS
Cash and cash equivalents	$	2,770		$	2,816
Sigma Funds		4,858			12,204
Short-term investments		1,063			620
Accounts receivable, net		5,492			7,509
Inventories, net		3,016			3,162
Deferred income taxes		1,930			1,731
Other current assets		2,680			2,933
Total current assets		21,809			30,975
Property, plant and equipment, net		2,586			2,267
Investments		952			895
Deferred income taxes		2,157			1,325
Goodwill		4,589			1,706
Other assets		2,520			1,425
Total assets	$	34,613		$	38,593
LIABILITIES AND STOCKHOLDERS’ EQUITY
Notes payable and current portion of long-term debt	$	1,775		$	1,693
Accounts payable		3,493			5,056
Accrued liabilities		7,608			8,676
Total current liabilities		12,876			15,425
Long-term debt		2,590			2,704
Other liabilities		4,184			3,322
Stockholders’ Equity
Preferred stock, $100 par value		—			—
Common stock, $3 par value		6,885			7,197
Issued shares: 06/30/07 — 2,294.9; 12/31/06 — 2,399.1
Outstanding shares: 06/30/07 — 2,293.6; 12/31/06 — 2,397.4
Additional paid-in capital		950			2,509
Retained earnings		8,665			9,086
Non-owner changes to equity		(1,537	)		(1,650	)
Total stockholders’ equity		14,963			17,142
Total liabilities and stockholders’ equity	$	34,613		$	38,593

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

2

Motorola, Inc. and Subsidiaries

Condensed Consolidated Statement of Stockholders’ Equity

(Unaudited)

							Non-Owner Changes to Equity
							Fair Value
				Common			Adjustment		Foreign
				Stock and			to Available		Currency			Retirement			Other
				Additional			for Sale		Translation			Benefits			Items,
				Paid-in			Securities,		Adjustments,			Adjustments,			Net of			Retained			Comprehensive
(In millions, except per share amounts)	Shares			Capital			Net of Tax		Net of Tax			Net of Tax			Tax			Earnings			Earnings (Loss)
Balances at December 31, 2006 (as reported)		2,399.1		$	9,706		$	37	$	(126	)	$	(1,577	)	$	16		$	9,086
Cumulative effect — FIN 48					93														27
Balances at January 1, 2007		2,399.1			9,799			37		(126	)		(1,577	)		16			9,113
Net loss																			(209	)	$	(209	)
Net unrealized gain on securities (net of tax of $34)								57														57
Foreign currency translation adjustments (net of tax of $2)										33												33
Amortization of retirement benefits adjustments (net of tax of $19)													42									42
Issuance of common stock and stock options exercised		17.2			240
Share repurchase program		(121.4	)		(2,360	)
Excess tax benefits from share-based compensation					17
Stock option and employee stock purchase plan expense					139
Net loss on derivative instruments (net of tax of $9)																(19	)					(19	)
Dividends declared ($0.10 per share)																			(239	)
Balances at June 30, 2007		2,294.9		$	7,835		$	94	$	(93	)	$	(1,535	)	$	(3	)	$	8,665		$	(96	)

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

3

Motorola, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Six Months Ended
	June 30,			July 1,
(In millions)	2007			2006
Operating
Net earnings (loss)	$	(209	)	$	2,070
Less: Earnings from discontinued operations		47			65
Earnings (loss) from continuing operations		(256	)		2,005
Adjustments to reconcile earnings (loss) from continuing operations to net cash provided by (used for) operating activities:
Depreciation and amortization		446			261
Non-cash other charges		132			(85	)
Share-based compensation expense		157			140
Gains on sales of investments and businesses, net		(4	)		(156	)
Deferred income taxes		(375	)		574
Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:
Accounts receivable		2,416			(776	)
Inventories		431			(286	)
Other current assets		190			(66	)
Accounts payable and accrued liabilities		(3,413	)		(458	)
Other assets and liabilities		249			46
Net cash provided by (used for) operating activities from continuing operations		(27	)		1,199
Investing
Acquisitions and investments, net		(4,237	)		(249	)
Proceeds from sales of investments and businesses		61			238
Capital expenditures		(270	)		(249	)
Proceeds from sale of property, plant and equipment		73			55
Proceeds from sales of Sigma Funds investments, net		7,346			66
Purchases of short-term investments, net		(443	)		(44	)
Net cash provided by (used for) investing activities from continuing operations		2,530			(183	)
Financing
Net proceeds from commercial paper and short-term borrowings		97			42
Repayment of debt		(172	)		(3	)
Issuance of common stock		212			336
Purchase of common stock		(2,360	)		(1,653	)
Excess tax benefits from share-based compensation		17			66
Payment of dividends		(239	)		(199	)
Distribution from (to) discontinued operations		(62	)		8
Net cash used for financing activities from continuing operations		(2,507	)		(1,403	)
Effect of exchange rate changes on cash and cash equivalents from continuing operations		(42	)		14
Discontinued Operations
Net cash provided by (used for) operating activities from discontinued operations		(62	)		8
Net cash used for investing activities from discontinued operations		—			(13	)
Net cash provided by (used for) financing activities from discontinued operations		62			(8	)
Effect of exchange rate changes on cash and cash equivalents from discontinued operations		—			13
Net cash provided by (used for) discontinued operations		—			—
Net decrease in cash and cash equivalents		(46	)		(373	)
Cash and cash equivalents, beginning of period		2,816			3,774
Cash and cash equivalents, end of period	$	2,770		$	3,401
Cash Flow Information
Cash paid during the period for:
Interest, net	$	158		$	156
Income taxes, net of refunds		212			199

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

4

Motorola, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Dollars in millions, except per share amounts or as noted)

1. Basis of Presentation

The condensed consolidated financial statements as of June 30, 2007 and for the three and six months ended June 30, 2007 and July 1, 2006, 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 consolidated financial statements and notes thereto included in the Company’s Form 10-K for the year ended December 31, 2006 and the Form 8-K filed on July 17, 2007. The results of operations for the three and six months ended June 30, 2007 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 2007 presentation, including those described in Note 11, “Immaterial Adjustments.”

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.

2. Other Financial Data

Statements of Operations Information

Other Charges (Income)

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

	Three Months Ended					Six Months Ended
	June 30,		July 1,			June 30,		July 1,
	2007		2006			2007		2006
Other charges (income):
Intangible assets amortization	$	95	$	20		$	190	$	39
Reorganization of businesses		78		36			163		66
Legal settlements and related insurance matters		25		—			140		—
In-process research and development charges		2		—			97		1
Telsim collection settlement		—		(410	)		—		(411	)
	$	200	$	(354	)	$	590	$	(305	)

5

Other Income

Interest income, net, and Other included in Other income consist of the following:

	Three Months Ended						Six Months Ended
	June 30,			July 1,			June 30,			July 1,
	2007			2006			2007			2006
Interest income, net:
Interest income	$	114		$	158		$	248		$	306
Interest expense		(82	)		(88	)		(175	)		(169	)
	$	32		$	70		$	73		$	137
Other:
Investment impairments	$	(12	)	$	(12	)	$	(31	)	$	(18	)
Foreign currency gains, net		32			15			47			36
Gain on Sprint Nextel derivative		—			105			—			72
Other		(3	)		18			—			17
	$	17		$	126		$	16		$	107

Earnings (Loss) Per Common Share

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

	Continuing Operations					Net Earnings (Loss)
	June 30,			July 1,		June 30,			July 1,
Three Months Ended	2007			2006		2007			2006
Basic earnings (loss) per common share:
Earnings (loss)	$	(38	)	$	1,349	$	(28	)	$	1,384
Weighted average common shares outstanding		2,296.3			2,464.4		2,296.3			2,464.4
Per share amount	$	(0.02	)	$	0.55	$	(0.01	)	$	0.56
Diluted earnings per common share:
Earnings (loss)	$	(38	)	$	1,349	$	(28	)	$	1,384
Weighted average common shares outstanding		2,296.3			2,464.4		2,296.3			2,464.4
Add effect of dilutive securities:
Share-based awards and other		—			57.6		—			57.6
Diluted weighted average common shares outstanding		2,296.3			2,522.0		2,296.3			2,522.0
Per share amount	$	(0.02	)	$	0.54	$	(0.01	)	$	0.55

	Continuing Operations					Net Earnings (Loss)
	June 30,			July 1,		June 30,			July 1,
Six Months Ended	2007			2006		2007			2006
Basic earnings (loss) per common share:
Earnings (loss)	$	(256	)	$	2,005	$	(209	)	$	2,070
Weighted average common shares outstanding		2,337.1			2,477.7		2,337.1			2,477.7
Per share amount	$	(0.11	)	$	0.81	$	(0.09	)	$	0.84
Diluted earnings per common share:
Earnings (loss)	$	(256	)	$	2,005	$	(209	)	$	2,070
Weighted average common shares outstanding		2,337.1			2,477.7		2,337.1			2.477.7
Add effect of dilutive securities:
Share-based awards and other		—			61.1		—			61.1
Diluted weighted average common shares outstanding		2,337.1			2,538.8		2,337.1			2,538.8
Per share amount	$	(0.11	)	$	0.79	$	(0.09	)	$	0.82

6

In the computation of diluted earnings (loss) per common share from both continuing operations and on a net earnings (loss) basis for the three and six months ended July 1, 2006, 79.5 million and 78.8 million, respectively, out-of-the-money stock options were excluded because their inclusion would have been antidilutive. For the three and six months ended June 30, 2007, the Company was in a loss position and accordingly, the basic and diluted weighed average shares outstanding are equal because any increase to the basic shares would be antidilutive. Once the Company returns to profitability, the diluted impact of stock options, restricted stock, and restricted stock units will be evaluated for their impact on the weighted average shares outstanding for purposes of computing diluted earnings (loss) per common share.

Balance Sheet Information

Accounts Receivable

Accounts receivable, net, consists of the following:

	June 30,			December 31,
	2007			2006
Accounts receivable	$	5,629		$	7,587
Less allowance for doubtful accounts		(137	)		(78	)
	$	5,492		$	7,509

Inventories

Inventories, net, consist of the following:

	June 30,			December 31,
	2007			2006
Finished goods	$	1,954		$	1,796
Work-in-process and production materials		1,577			1,782
		3,531			3,578
Less inventory reserves		(515	)		(416	)
	$	3,016		$	3,162

Other Current Assets

Other current assets consists of the following:

	June 30,		December 31,
	2007		2006
Contractor receivables	$	625	$	1,349
Contract related deferred costs		752		369
Costs in excess of billings		618		505
Other		685		710
	$	2,680	$	2,933

7

Property, Plant, and Equipment

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

	June 30,			December 31,
	2007			2006
Land	$	152		$	129
Building		1,820			1,705
Machinery and equipment		6,246			5,885
		8,218			7,719
Less accumulated depreciation		(5,632	)		(5,452	)
	$	2,586		$	2,267

Depreciation expense for the three months ended June 30, 2007 and July 1, 2006 was $134 million and $113 million, respectively. Depreciation expense for the six months ended June 30, 2007 and July 1, 2006 was $258 million and $221 million, respectively.

Investments

Investments consist of the following:

	June 30,			December 31,
	2007			2006
Available-for-sale securities:
Cost basis	$	358		$	70
Gross unrealized gains		152			68
Gross unrealized losses		(1	)		(8	)
Fair value		509			130
Other securities, at cost		392			676
Equity method investments		51			89
	$	952		$	895

For both the three months ended June 30, 2007 and July 1, 2006, the Company recorded impairment charges of $12 million. For the six months ended June 30, 2007 and July 1, 2006, the Company recorded impairment charges of $31 million and $18 million, respectively. These impairment charges represent other-than-temporary declines in the value of its investment portfolio.

During the three and six months ended June 30, 2007, the Company recorded net gains on sales of investments of $5 million and $4 million, respectively. During the three and six months ended July 1, 2006, the Company recorded gains on sales of investments of $5 million and $156 million, respectively, primarily comprised of a $141 million gain on the sale of the Company’s remaining shares in Telus Corporation in the first quarter of 2006.

Other Assets

Other assets consist of the following:

	June 30,		December 31,
	2007		2006
Intangible assets, net of accumulated amortization of $726 and $536	$	1,463	$	354
Royalty license arrangements		399		439
Contract related deferred costs		204		200
Long-term finance receivables, net of allowances of $9 and $10		62		145
Other		392		287
	$	2,520	$	1,425

8

Accrued Liabilities

Accrued liabilities consist of the following:

	June 30,		December 31,
	2007		2006
Deferred revenue	$	1,321	$	730
Customer reserves		1,177		1,305
Contractor payables		540		1,481
Compensation		649		777
Customer downpayments		496		532
Warranty reserves		452		530
Tax liabilities		283		444
Other		2,690		2,877
	$	7,608	$	8,676

Other Liabilities

Other liabilities consist of the following:

	June 30,		December 31,
	2007		2006
Defined benefit plans	$	1,912	$	1,882
Unrecognized tax benefits		869		—
Deferred revenue		342		273
Royalty license arrangement		287		300
Postretirement health care benefit plan		214		214
Other		560		653
	$	4,184	$	3,322

Stockholders’ Equity Information

Comprehensive Earnings (Loss)

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

	Three Months Ended					Six Months Ended
	June 30,		July 1,			June 30,			July 1,
	2007		2006			2007			2006
Gross unrealized gains (losses) on securities, net of tax	$	33	$	(94	)	$	50		$	(48	)
Less: Realized gains (losses) on securities, net of tax		—		—			(7	)		82
Net unrealized gains (losses) on securities, net of tax	$	33	$	(94	)	$	57		$	(130	)

Share Repurchase Programs

In July 2006, the Board of Directors authorized the Company to repurchase up to $4.5 billion of its outstanding shares of common stock over a period of up to 36 months ending in June 2009, subject to market conditions (the “2006 Stock Repurchase Program”). In March 2007, the Board of Directors authorized a $3.0 billion increase in the 2006 Stock Repurchase Program, over the same timeframe. This increased the total size of the 2006 Stock Repurchase Program to an aggregate of $7.5 billion.

In March 2007, the Company announced that it had entered into an accelerated stock buyback agreement to repurchase $2.0 billion of its outstanding shares of common stock (the “March 2007 ASB”). In connection with the March 2007 ASB, the Company received 68 million shares in the first quarter of 2007 and an additional 34.4 million shares in the second quarter of 2007. The 102.4 million shares received to date represents the minimum number of shares to be

9

received under the March 2007 ASB. The number of additional shares the Company may receive over the remaining term of the March 2007 ASB, which expires in the fourth quarter of 2007, will generally be based upon the volume-weighted average price of the Company’s common stock during that term, subject to the collar provisions that establish the minimum and maximum number of shares.

During the first half of 2007, the Company spent an aggregate of $2.4 billion, including transaction costs, to repurchase approximately 121.4 million common shares (including the 102.4 million shares received to date under the March 2007 ASB) at an average price of $19.41.

Since announcing its first-ever share repurchase program in May 2005, the Company has repurchased a total of 335 million common shares for an aggregate cost of $7.1 billion, including transaction costs. All repurchased shares have been retired. As of June 30, 2007, the Company had remaining authorization for approximately $4.4 billion of future share repurchases under the 2006 Stock Repurchase Program.

3. Income Taxes

The Company adopted the provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”) on January 1, 2007. As a result of the adoption of FIN 48, the Company reduced its unrecognized tax benefits and related interest accrual by $120 million. The change to unrecognized tax benefits and interest are reflected as a cumulative-effect adjustment to January 1, 2007 Retained earnings and Additional paid-in capital in the amounts of $27 million and $93 million, respectively, in the Company’s condensed consolidated statement of stockholders’ equity.

As of January 1, 2007, the Company had $1.3 billion in unrecognized tax benefits of which $877 million was reclassified from Deferred income taxes to Other liabilities in the Company’s condensed consolidated balance sheets. If the $1.3 billion in unrecognized tax benefits were recognized, approximately $560 million, net of federal tax benefits, would benefit the Company’s effective tax rate.

For the three and six months ended June 30, 2007, the Company recognized net tax benefits of $10 million and $42 million, respectively, relating to the settlement of tax positions of discontinued operations. Additionally, for the three and six months ended June 30, 2007, the Company recognized net tax benefits of $12 million relating to the settlement of tax positions, partially offset by an increase in unrecognized tax benefits for tax positions taken in previously filed tax returns.

A summary of open tax years by major jurisdiction is presented below:

Jurisdiction:
United States(1)	1996 — 2006
Brazil	2002 — 2006
China	2004 — 2006
Germany(1)	2002 — 2006
India	1995 — 2006
Israel	2002 — 2006
Japan	2002 — 2006
Malaysia	1997 — 2006
Singapore	1997 — 2006
United Kingdom	1998 — 2006

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

The Internal Revenue Service (“IRS”) began its field examination of the Company’s 2004 and 2005 tax returns in March 2007. In April 2007, the IRS completed its field examinations of the Company’s 2001 through 2003 tax returns and issued a revenue agent’s report that proposes certain adjustments to the Company’s income and tax credits that would result in additional tax. It includes proposed adjustments received in June 2006 for the 2001 and 2002 taxable years relating to transfer pricing. These proposed adjustments are similar to those previously made by the IRS for the

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Company’s 1996-2000 taxable years. The Company is currently contesting the 1996 through 2002 adjustments at the appellate level of the IRS. The Company disagrees with all of these proposed transfer pricing-related adjustments and intends to vigorously dispute them through applicable IRS and judicial procedures, as appropriate. However, if the IRS were to ultimately prevail on these transfer pricing matters, it could result in: (i) additional taxable income for the years 1996 through 2000 of approximately $1.4 billion, which could result in additional income tax liability for the Company of approximately $500 million, and (ii) additional taxable income for the years 2001 and 2002 of approximately $800 million, which could result in additional income tax liability for the Company of approximately $300 million. Although the final resolution of these matters is uncertain, based on current information, in the opinion of the Company’s management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s consolidated financial position, liquidity or results of operations. However, an unfavorable resolution could have a material adverse effect on the Company’s consolidated financial position, liquidity or results of operations in the periods in which the matter is ultimately resolved.

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

Based on the outcome of these examinations, or as a result of the expiration of statute of limitations for specific jurisdictions, it is reasonably possible that the related unrecognized tax benefits for tax positions taken regarding previously filed tax returns will materially change from those recorded as liabilities for uncertain tax positions in our financial statements at January 1, 2007. The Company anticipates that it is reasonably possible that within the next 12 months several of the audits may be finalized resulting in a reduction in unrecognized tax benefits of approximately $35 million. However, based on the number of tax years currently under audit by the relevant federal, state and foreign tax authorities, the status of these examinations, and the protocol of finalizing audits by the relevant tax authorities, which could include formal legal proceedings, it is not possible to estimate the impact of any other amounts of such changes, if any, to previously recorded uncertain tax positions.

The Company records interest accrued relating to unrecognized tax benefits in Interest expense within Other income and penalties in Selling, general and administrative expenses, both included in the Company’s condensed consolidated statements of operations. Accrued interest and penalties were $71 million and $13 million, respectively, as of the transition date of January 1, 2007.

4. Retirement Benefits

Pension Benefit Plans

The net periodic pension cost for the Regular Pension Plan, Officers’ Plan, the Motorola Supplemental Pension Plan (“MSPP”), and Non-U.S. plans was as follows:

	June 30, 2007									July 1, 2006
	Regular			Officers’			Non			Regular			Officers’			Non
Three Months Ended	Pension			and MSPP			U.S.			Pension			and MSPP			U.S.
Service cost	$	29		$	2		$	10		$	37		$	3		$	12
Interest cost		77			2			22			76			2			18
Expected return on plan assets		(85	)		(1	)		(18	)		(82	)		(1	)		(14	)
Amortization of:
Unrecognized net loss		29			1			5			28			2			4
Unrecognized prior service cost		(7	)		—			—			(1	)		—			—
Settlement/curtailment loss		—			1			—			—			1			—
Net periodic pension cost	$	43		$	5		$	19		$	58		$	7		$	20

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	June 30, 2007									July 1, 2006
	Regular			Officers’			Non			Regular			Officers’			Non
Six Months Ended	Pension			and MSPP			U.S.			Pension			and MSPP			U.S.
Service cost	$	58		$	4		$	20		$	74		$	6		$	23
Interest cost		154			4			43			152			4			34
Expected return on plan assets		(170	)		(2	)		(36	)		(164	)		(2	)		(27	)
Amortization of:
Unrecognized net loss		58			2			10			56			4			8
Unrecognized prior service cost		(14	)		—			—			(3	)		—			—
Settlement/curtailment loss		—			3			—			—			2			—
Net periodic pension cost	$	86		$	11		$	37		$	115		$	14		$	38

The Company contributed an aggregate of $69 million and $71 million to the U.S. pension plans for the three and six months ended June 30, 2007, respectively. Additionally, the Company contributed an aggregate of $9 million and $17 million for the three and six months ended June 30, 2007, respectively, to the Non-U.S. pension plans.

Postretirement Health Care Benefit Plans

Net postretirement health care expenses consist of the following:

	Three Months Ended						Six Months Ended
	June 30,			July 1,			June 30,			July 1,
	2007			2006			2007			2006
Service cost	$	2		$	2		$	4		$	4
Interest cost		6			7			13			14
Expected return on plan assets		(4	)		(4	)		(8	)		(8	)
Amortization of:
Unrecognized net loss		2			4			4			8
Unrecognized prior service cost		(1	)		(1	)		(2	)		(2	)
Net postretirement health care expense	$	5		$	8		$	11		$	16

Contributions made to the postretirement health care fund for the three and six months ended June 30, 2007 were an aggregate of $6 million.

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5. Share-Based Compensation Plans

Stock Options and Employee Stock Purchase Plan

A summary of share-based compensation expense related to employee stock options and employee stock purchases was as follows:

	Three Months Ended						Six Months Ended
	June 30,			July 1,			June 30,			July 1,
	2007			2006			2007			2006
Share-based compensation expense included in:
Costs of sales	$	9		$	7		$	16		$	15
Selling, general and administrative expenses		39			33			76			72
Research and development expenditures		25			20			47			43
Share-based compensation expense related to employee stock options and employee stock purchases included in operating earnings		73			60			139			130
Tax benefit		23			18			42			41
Share-based compensation expense related to employee stock options and employee stock purchases, net of tax	$	50		$	42		$	97		$	89
Decrease in Basic earnings per share	$	(0.02	)	$	(0.02	)	$	(0.04	)	$	(0.04	)
Decrease in Diluted earnings per share	$	(0.02	)	$	(0.02	)	$	(0.04	)	$	(0.04	)

The Company calculates the value of each employee stock option, estimated on the date of grant, using the Black-Scholes option pricing model. The weighted-average estimated value of employee stock options granted during the three months ended June 30, 2007 and July 1, 2006 was $5.94 per share and $9.27 per share, respectively. The weighted-average estimated value of employee stock options granted during the six months ended June 30, 2007 and July 1, 2006 was $5.96 per share and $9.25 per share, respectively, using the following weighted-average assumptions:

	Three Months Ended						Six Months Ended
	June 30,			July 1,			June 30,			July 1,
	2007			2006			2007			2006
Expected volatility		28.2	%		36.5	%		28.2	%		36.4	%
Risk-free interest rate		4.5	%		5.0	%		4.6	%		5.0	%
Dividend yield		1.1	%		0.8	%		1.1	%		0.8	%
Expected life (years)		6.5			6.5			6.5			6.5

Stock options activity was as follows:

				Wtd. avg.		Wtd. avg.		Aggregate
	Shares Subject			exercise		contractual		Intrinsic
	to Options			price		life		Value
	(In thousands)					(In yrs)		(In millions)
Options outstanding at January 1, 2007		233,445		$	18		7	$	1,161
Options granted		38,336			18				8
Options exercised		(12,394	)		11				85
Options terminated, cancelled or expired		(6,871	)		19				—
Options outstanding at June 30, 2007		252,516			18		7		618
Options exercisable at June 30, 2007		160,298			19		6		555

At June 30, 2007 and July 1, 2006, 76.8 million and 106.6 million shares, respectively, were available for future grants under the terms of the 2006 Motorola Omnibus Plan.

At June 30, 2007 the Company had approximately $470 million of total unrecognized compensation expense, net of estimated forfeitures, related to stock option plans that will be recognized over the weighted average period of three years.

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Restricted Stock and Restricted Stock Units

Restricted stock (“RS”) and restricted stock unit (“RSU”) activity was as follows:

				Wtd. Avg.		Aggregate
				Grant Date		Intrinsic
	RS and RSU			Fair Value		Value
	(In thousands)					(In millions)
RS and RSU balance at January 1, 2007		6,016		$	19	$	123
Granted		3,909			18
Vested		(367	)		20
Terminated, cancelled or expired		(1,004	)		19
RS and RSU balance at June 30, 2007		8,554			19		151

At June 30, 2007, the Company had approximately $92 million of total unrecognized compensation expense related to RS and RSU grants that will be recognized over the weighted average period of three years. The Company recognized $7 million and $4 million of expense, net of tax, related to RS and RSU grants, during the three months ended June 30, 2007 and July 1, 2006, respectively. The Company recognized $12 million and $6 million of expense, net of tax, related to RS and RSU grants, during the six months ended June 30, 2007 and July 1, 2006, respectively.

6. Financing Arrangements

Finance receivables consist of the following:

	June 30,			December 31,
	2007			2006
Gross finance receivables	$	131		$	279
Less allowance for losses		(9	)		(10	)
		122			269
Less current portion		(60	)		(124	)
Long-term finance receivables, net	$	62		$	145

Current finance receivables are included in Accounts receivable and long-term finance receivables are included in Other assets in the Company’s condensed consolidated balance sheets. Interest income recognized on finance receivables was $2 million for both the three months ended June 30, 2007 and July 1, 2006 and $4 million for both the six months ended June 30, 2007 and July 1, 2006.

From time to time, the Company sells short-term receivables, long-term loans and lease receivables under sales-type leases (collectively, “finance receivables”) to third parties in transactions that qualify as “true-sales.” Certain of these finance receivables are sold to third parties on a one-time, non-recourse basis, while others are sold to third parties under committed facilities that involve contractual commitments from these parties to purchase qualifying receivables up to an outstanding monetary limit. Committed facilities may be revolving in nature. Certain sales may be made through separate legal entities that are also consolidated by the Company. The Company may or may not retain the obligation to service the sold finance receivables.

In the aggregate, at both June 30, 2007 and December 31, 2006, these committed facilities provided for up to $1.3 billion to be outstanding with the third parties at any time. As of June 30, 2007, $662 million of these committed facilities were utilized, compared to $817 million utilized at December 31, 2006. Certain events could cause one of these facilities to terminate. In addition, before receivables can be sold under certain of the committed facilities, they may need to meet contractual requirements, such as credit quality or insurability.

Total finance receivables sold by the Company were $1.3 billion and $2.8 billion for the three and six months ended June 30, 2007, respectively (including $1.3 billion and $2.7 billion, respectively, of short-term receivables), compared to $1.6 billion and $2.8 billion sold for the three and six months ended July 1, 2006, respectively (including $1.5 billion and $2.7 billion, respectively, of short-term receivables). As of June 30, 2007, there were $1.0 billion of these sold receivables outstanding for which the Company retained servicing obligations (including $709 million of short-term receivables), compared to $1.1 billion outstanding at December 31, 2006 (including $789 million of short-term receivables).

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Under certain of the receivables programs, the value of the receivables sold is covered by credit insurance obtained from independent insurance companies, less deductibles or self-insurance requirements under the policies (with the Company retaining credit exposure for the remaining portion). The Company’s total credit exposure to outstanding short-term receivables that have been sold was $20 million and $19 million at June 30, 2007 and December 31, 2006, respectively. Reserves of $2 million and $4 million were recorded for potential losses on sold receivables at June 30, 2007 and December 31, 2006, respectively.

Certain purchasers of the Company’s infrastructure equipment continue to request that suppliers provide financing in connection with equipment purchases. These requests may include all or a portion of the purchase price of the equipment. Periodically, the Company makes commitments to provide financing to purchasers in connection with the sale of equipment. However, the Company’s obligation to provide financing is often conditioned on the issuance of a letter of credit in favor of the Company by a reputable bank to support the purchaser’s credit or a pre-existing commitment from a reputable bank to purchase the receivable from the Company. The Company had outstanding commitments to extend credit to third-parties totaling $330 million at June 30, 2007, compared to $398 million at December 31, 2006. Of these amounts, $262 million was supported by letters of credit or by bank commitments to purchase receivables at both June 30, 2007 and December 31, 2006.

In addition to providing direct financing to certain equipment customers, the Company also assists customers in obtaining financing directly from banks and other sources to fund equipment purchases. The Company had committed to provide financial guarantees relating to customer financing totaling $28 million and $122 million at June 30, 2007 and December 31, 2006, respectively (including $20 million and $19 million, respectively, relating to the sale of short-term receivables). Customer financing guarantees outstanding were $4 million and $47 million at June 30, 2007 and December 31, 2006, respectively (including $2 million relating to the sale of short-term receivables at both June 30, 2007 and December 31, 2006).

7. Commitments and Contingencies

Legal

Iridium Program:  The Company has been named as one of several defendants in putative class action securities lawsuits arising out of alleged misrepresentations or omissions regarding the Iridium satellite communications business, which on March 15, 2001 were consolidated in the federal district court in the District of Columbia under Freeland v. Iridium World Communications, Inc., et al., originally filed on April 22, 1999. Plaintiffs’ motion for class certification was granted on January 9, 2006 and the trial is scheduled to begin on May 22, 2008.

The Company was sued by the Official Committee of the Unsecured Creditors of Iridium in the United States Bankruptcy Court for the Southern District of New York (the “Iridium Bankruptcy Court”) on July 19, 2001. In re Iridium Operating LLC, et al. v. Motorola asserts claims for breach of contract, warranty and fiduciary duty and fraudulent transfer and preferences, and seeks in excess of $4 billion in damages. Trial began on the solvency portion of these claims on October 23, 2006 and concluded on June 5, 2007. As of the date hereof, no decision has been rendered.

The Company has not reserved for any potential liability that may arise as a result of the litigation described above related to the Iridium program. While the still pending cases are in various stages and the outcomes are not predictable, an unfavorable outcome in one or more of these cases could have a material adverse effect on the Company’s consolidated financial position, liquidity or results of operations.

Telsim Class Action Securities:  In April 2007, the Company entered into a settlement agreement for $190 million in regards to In re Motorola Securities Litigation, a class action lawsuit relating to the Company’s disclosure of its relationship with Telsim Mobil Telekomunikasyon Hizmetleri A.S. In June 2007, the Illinois District Court issued an order preliminarily approving the settlement and set a hearing for September 2007 to consider final approval and any objection to the settlement. Payment of the $190 million has been made into Illinois District Court-controlled escrow accounts.

In the first quarter of 2007, the Company recorded a charge of $190 million for the legal settlement, partially offset by $75 million of estimated insurance recoveries, of which $50 million had been tendered by certain insurance carriers. During the second quarter of 2007, the Company commenced actions against the non-tendering insurance carriers. As of June 2007, in response to these actions, each insurance carrier who has responded denied coverage citing various policy provisions. As a result of this denial of coverage and related actions, the Company has recorded a reserve of $25 million against the receivable from insurance carriers.

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

Other

The Company is also a party to a variety of agreements pursuant to which it is obligated to indemnify the other party with respect to certain matters. Some of these obligations arise as a result of divestitures of the Company’s assets or businesses and require the Company to hold the other party harmless against losses arising from the settlement of these pending obligations. The total amount of indemnification under these types of provisions is $170 million, with the Company accruing $95 million as of June 30, 2007 for certain claims that have been asserted under these provisions.

In addition, the Company may provide indemnifications for losses that result from the breach of general warranties contained in certain commercial, intellectual property and divestiture agreements. Historically, the Company has not made significant payments under these agreements, nor have there been significant claims asserted against the Company.

In all indemnification cases, payment by the Company is conditioned on the other party making a claim pursuant to the procedures specified in the particular contract, which procedures typically allow the Company to challenge the other party’s claims. Further, the Company’s obligations under these agreements for indemnification based on breach of representations and warranties are generally limited in terms of duration, typically not more than 24 months, and for amounts not in excess of the contract value, and in some instances, the Company may have recourse against third parties for certain payments made by the Company.

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

8. Segment Information

As a result of the previously announced realignment, the Company now reports financial results for the following business segments:

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

•   The Home and Networks Mobility segment designs, manufactures, sells, installs and services: (i) end-to-end digital video system solutions and interactive set-tops (“digital entertainment devices”), (ii) voice and data modems for digital subscriber line and cable networks (“broadband gateways”), (iii) wireline broadband access systems, and (iv) wireless access systems (“wireless networks”), including cellular infrastructure systems, to cable and satellite television operators, wireline carriers and wireless service providers.

•   The Enterprise Mobility Solutions segment designs, manufactures, sells, installs and services analog and digital two-way radio, voice and data communications products and systems for private networks, wireless broadband systems and end-to-end enterprise mobility solutions to a wide range of enterprise markets, including government and public safety (which, together with all sales to distributors of two-way communication products, is referred to as the “government and public safety market”), as well as utility, transportation, retail and other commercial customers (which, collectively are referred to as the “commercial enterprise market”).

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Summarized below are the Company’s segment Net sales and Operating earnings (loss) for the three and six months ended June 30, 2007 and July 1, 2006.

	Three Months Ended									Six Months Ended
	June 30,			July 1,			%			June 30,			July 1,			%
	2007			2006			Change			2007			2006			Change
Segment Net Sales:
Mobile Devices	$	4,273		$	7,140			(40	)%	$	9,681		$	13,543			(29	)%
Home and Networks Mobility		2,564			2,343			9			4,901			4,458			10
Enterprise Mobility Solutions		1,920			1,355			42			3,637			2,492			46
		8,757			10,838						18,219			20,493
Other and Eliminations		(25	)		(18	)					(54	)		(41	)
	$	8,732		$	10,820			(19	)	$	18,165		$	20,452			(11	)

	Three Months Ended											Six Months Ended
	June 30,			% of			July 1,		% of			June 30,			% of			July 1,		% of
	2007			Sales			2006		Sales			2007			Sales			2006		Sales
Segment Operating Earnings (Loss):
Mobile Devices	$	(332	)		(8	)%	$	804		11	%	$	(565	)		(6	)%	$	1,506		11	%
Home and Networks Mobility		191			7			222		9			358			7			383		9
Enterprise Mobility Solutions		303			16			239		18			434			12			381		15
		162						1,265					227						2,270
Other and Eliminations		(320	)					257					(751	)					101
Operating earnings (loss)		(158	)		(2	)		1,522		14			(524	)		(3	)		2,371		12
Total other income		54						201					93						400
Earnings (loss) from continuing operations before income taxes	$	(104	)				$	1,723				$	(431	)				$	2,771

Other and Eliminations is primarily comprised of: (i) amortization of intangible assets, (ii) acquisition-related in-process research and development charges, (iii) general corporate related expenses, including stock option and employee stock purchase plan expenses, (iv) various corporate programs representing developmental businesses and research and development projects, which are not included in any other segment, and (v) the Company’s wholly-owned finance subsidiary. Additionally, included in Other and Eliminations are net charges relating to the Telsim class action securities legal settlement, partially offset by estimated insurance recoveries, totaling $25 million and $140 million for the three and six months ended June 30, 2007, respectively, and income of $410 million and $411 million for the three and six months ended July 1, 2006, respectively, for payments relating to the Telsim collection settlement.

9. Reorganization of Businesses

The Company maintains a formal Involuntary Severance Plan (the “Severance Plan”) which permits the Company to offer to eligible employees severance benefits based on years of service and employment grade level in the event that employment is involuntarily terminated as a result of a reduction-in-force or restructuring. Each separate reduction-in-force has qualified for severance benefits under the Severance Plan and therefore, such benefits are accounted for in accordance with Statement No. 112, “Accounting for Postemployment Benefits” (“SFAS 112”). Under the provisions of SFAS 112, the Company recognizes termination benefits based on formulas per the Severance Plan at the point in time that future settlement is probable and can be reasonably estimated based on estimates prepared at the time a restructuring plan is approved by management. Exit costs primarily consist of future minimum lease payments on vacated facilities. At each reporting date, the Company evaluates its accruals for exit costs and employee separation costs to ensure that the accruals are still appropriate. In certain circumstances, accruals are no longer required because of efficiencies in carrying out the plans or because employees previously identified for separation resigned from the Company and did not receive severance or were redeployed due to circumstances not foreseen when the original plans were initiated. The Company reverses accruals through the income statement line item where the original charges were recorded when it is determined they are no longer required.

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2007 Charges

During the first half of 2007, the Company committed to implement various productivity improvement plans aimed at achieving long-term, sustainable profitability by driving efficiencies and reducing operating costs. All three of the Company’s business segments, as well as corporate functions, are impacted by these plans.

For the three months ended June 30, 2007, the Company recorded net reorganization of business charges of $101 million, including $23 million of charges in Costs of sales and $78 million of charges under Other charges (income) in the Company’s condensed consolidated statements of operations. Included in the aggregate $101 million are charges of $115 million for employee separation costs, offset by reversals for accruals no longer needed.

For the six months ended June 30, 2007, the Company recorded net reorganization of business charges of $179 million, including $16 million of charges in Costs of sales and $163 million of charges under Other charges (income) in the Company’s condensed consolidated statements of operations. Included in the aggregate $179 million are charges of $221 million for employee separation costs and $5 million for exit costs, offset by reversals for accruals no longer needed.

The following table displays the net charges incurred by segment for the three and six months ended June 30, 2007:

	Three Months			Six Months
	Ended			Ended
Segment	June 30, 2007			June 30, 2007
Mobile Devices	$	68		$	97
Home and Networks Mobility		16			50
Enterprise Mobility Solutions		(1	)		7
		83			154
General Corporate		18			25
	$	101		$	179

The following table displays a rollforward of the reorganization of businesses accruals established for exit costs and employee separation costs from January 1, 2007 to June 30, 2007:

	Accruals at		2007					2007			Accruals at
	January 1,		Additional		2007(1)(2)			Amount			June 30,
	2007		Charges		Adjustments			Used			2007
Exit costs—lease terminations	$	54	$	5	$	2		$	(19	)	$	42
Employee separation costs		104		221		(44	)		(115	)		166
	$	158	$	226	$	(42	)	$	(134	)	$	208

(1)	Includes translation adjustments.
(2)	Includes accruals assumed through business acquisitions.

Exit Costs—Lease Terminations

At January 1, 2007, the Company had an accrual of $54 million for exit costs attributable to lease terminations. The 2007 additional charges of $5 million are primarily related to the planned exit of certain activities in Ireland by the Home and Networks Mobility segment. The 2007 adjustments of $2 million represent accruals for exit costs assumed through business acquisitions. The $19 million used in 2007 reflects cash payments. The remaining accrual of $42 million, which is included in Accrued liabilities in the Company’s condensed consolidated balance sheet at June 30, 2007, represents future cash payments for lease termination obligations.

Employee Separation Costs

At January 1, 2007, the Company had an accrual of $104 million for employee separation costs, representing the severance costs for approximately 2,300 employees. The 2007 additional charges of $221 million represent severance

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costs for approximately an additional 4,100 employees, of which 1,100 were direct employees and 3,000 were indirect employees.

The adjustments of $44 million reflect $46 million of reversals of accruals no longer needed, partially offset by $2 million of accruals for severance plans assumed through business acquisitions. The $46 million of reversals represent 1,000 employees, and primarily relates to a strategic change regarding a plant closure and specific employees previously identified for separation who resigned from the Company and did not receive severance or were redeployed due to circumstances not foreseen when the original plans were approved. The $2 million of accruals represents severance plans for 300 employees assumed through business acquisitions.

During the first half of 2007, approximately 2,700 employees, of which 1,100 were direct employees and 1,600 were indirect employees, were separated from the Company. The $115 million used in 2007 reflects cash payments to these separated employees. The remaining accrual of $166 million, which is included in Accrued liabilities in the Company’s condensed consolidated balance sheet at June 30, 2007, is expected to be paid to approximately 3,000 separated employees.

2006 Charges

For the three months ended July 1, 2006, the Company recorded net reorganization of business charges of $37 million, including $1 million of charges in Costs of sales and $36 million of charges under Other charges (income) in the Company’s condensed consolidated statements of operations. Included in the aggregate $37 million are charges of $44 million, primarily for employee separation costs, partially offset by $7 million of reversals for accruals no longer needed.

For the six months ended July 1, 2006, the Company recorded net reorganization of business charges of $108 million, including $42 million of charges in Costs of sales and $66 million of charges under Other charges (income) in the Company’s condensed consolidated statement of operations. Included in the aggregate $108 million are charges of $116 million, primarily for employee separation costs and $6 million for fixed asset adjustments, partially offset by $14 million of reversals for reserves no longer needed.

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

	Accruals at		2006					2006			Accruals at
	January 1,		Additional		2006(1)			Amount			July 1,
	2006		Charges		Adjustments			Used			2006
Exit costs—lease terminations	$	50	$	—	$	(6	)	$	(11	)	$	33
Employee separation costs		53		116		(8	)		(65	)		96
	$	103	$	116	$	(14	)	$	(76	)	$	129

(1) Includes translation adjustments.

Exit Costs—Lease Terminations

At January 1, 2006, the Company had an accrual of $50 million for exit costs attributable to lease terminations. The 2006 adjustments of $6 million represent reversals of accruals no longer needed. The $11 million used in 2006 reflected cash payments. The remaining accrual of $33 million was included in Accrued liabilities in the Company’s condensed consolidated balance sheet at July 1, 2006.

Employee Separation Costs

At January 1, 2006, the Company had an accrual of $53 million for employee separation costs, representing the severance costs for approximately 1,600 employees. The 2006 additional charges of $116 million represented additional costs for approximately 3,200 employees. The adjustments of $8 million represented reversals of accruals no longer needed.

19

During the first half of 2006, approximately 1,900 employees were separated from the Company. The $65 million used in 2006 reflects cash payments to these separated employees. The remaining accrual of $96 million relating to 2,700 employees was included in Accrued liabilities in the Company’s condensed consolidated balance sheet at July 1, 2006. Since that time, $48 million has been paid to approximately 1,800 separated employees and $43 million was reversed. The reversals were due to accruals no longer needed, primarily relating to a strategic change regarding a plant closure and specific employees previously identified for separation who resigned from the Company and did not receive severance or were redeployed due to circumstances not foreseen when the original plans were approved, as described earlier under “2007 Charges.”

10. Acquisitions and Related Intangibles

A summary of significant acquisitions during the six months ended June 30, 2007 is as follows:

							In-Process
							Research and
	Quarter				Form of		Development
2007 Acquisitions	Acquired		Consideration		Consideration		Charge
Symbol Technologies, Inc.		Q1	$	3,528		Cash	$	95
Good Technology, Inc.		Q1		438		Cash		—
Netopia, Inc.		Q1		183		Cash		—

The following table summarizes net tangible and intangible assets acquired and the consideration provided for the acquisitions identified above:

Tangible net assets	$	12
Goodwill		2,778
Other intangibles		1,264
In-process research and development		95
	$	4,149
Consideration:
Cash	$	4,149
Stock		—
	$	4,149

Amortization expense on intangible assets and acquisition-related in-process research and development charges are excluded from the respective segments operating results. These charges are reported as corporate charges and are included in Other and Eliminations.

Symbol Technologies, Inc.

On January 9, 2007, the Company acquired, for $3.5 billion in net cash, the outstanding common stock of Symbol Technologies, Inc. (“Symbol”), a leader in designing, developing, manufacturing and servicing products and systems used in end-to-end enterprise mobility solutions featuring rugged mobile computing, advanced data capture, radio frequency identification (“RFID”), wireless infrastructure and mobility management.

The estimated fair value of acquired in-process research and development is $95 million. The acquired in-process research and development will have no alternative future uses if the products are not feasible and as such costs were expensed at the date of acquisition. At the date of acquisition, 31 projects were in process and are expected to be completed in 2008. The average risk adjusted rate used to value these projects is 15-16%. The allocation of value to in-process research and development was determined using expected future cash flows discounted at average risk adjusted rates reflecting both technological and market risk as well as the time value of money.

The estimated fair value of the acquired intangible assets is $1.0 billion. The intangible assets are being amortized over periods ranging from 1 to 8 years on a straight-line basis. The Company recorded $2.3 billion of goodwill, none of which is expected to be deductible for tax purposes.

20

The results of the operations of Symbol have been included in the Enterprise Mobility Solutions segment in the Company’s condensed consolidated financial statements subsequent to the date of acquisition. The pro forma effects of this acquisition on the Company’s financial statements were not significant.

Good Technology, Inc.

On January 5, 2007, the Company acquired Good Technology, Inc. (“Good”), a leader in enterprise mobile computing software and service, for $438 million in net cash. The Company recorded $384 million in goodwill, none of which is expected to be deductible for tax purposes and $158 million in identifiable intangible assets. Intangible assets are included in Other assets in the Company’s condensed consolidated balance sheets. The intangible assets are being amortized over periods ranging from 2 to 10 years on a straight-line basis.

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

The results of operations of Good have been included in the Enterprise Mobility Solutions segment in the Company’s condensed consolidated financial statements subsequent to the date of acquisition. The pro forma effects of this acquisition on the Company’s financial statements were not significant.

Netopia, Inc.

On February 6, 2007, the Company acquired Netopia, Inc. (“Netopia”), a broadband equipment provider for DSL customers, which allows for phone, TV and fast Internet connections, for $183 million in net cash. The Company recorded $122 million in goodwill, none of which is expected to be deductible for tax purposes and $100 million in identifiable intangible assets. Intangible assets are included in Other assets in the Company’s condensed consolidated balance sheets. The intangible assets are being amortized over a period of 7 years on a straight-line basis.

The results of operations of Netopia have been included in the Home and Networks Mobility segment in the Company’s condensed consolidated financial statements subsequent to the date of acquisition. The pro forma effects of this acquisition on the Company’s financial statements were not significant.

Intangible Assets

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

	June 30, 2007				December 31, 2006
	Gross				Gross
	Carrying		Accumulated		Carrying		Accumulated
	Amount		Amortization		Amount		Amortization
Intangible assets:
Completed technology	$	1,264	$	433	$	486	$	334
Patents		291		40		27		12
Customer-related		269		47		65		21
Licensed technology		129		108		119		107
Other intangibles		236		98		193		62
	$	2,189	$	726	$	890	$	536

Amortization expense on intangible assets, which is presented in Other and Eliminations for segment reporting purposes, was $95 million and $190 million for the three and six months ended June 30, 2007, respectively and $20 million and $39 million for the three and six months ended July 1, 2006, respectively. As of June 30, 2007, amortization expense is estimated to be $372 million for 2007, $340 million in 2008, $298 million in 2009, $276 million in 2010, and $256 million in 2011.

21

Amortized intangible assets, excluding goodwill by business segment:

	June 30, 2007				December 31, 2006
	Gross				Gross
	Carrying		Accumulated		Carrying		Accumulated
Segment	Amount		Amortization		Amount		Amortization
Mobile Devices	$	154	$	63	$	154	$	41
Home and Networks Mobility		707		464		588		430
Enterprise Mobility Solutions		1,328		199		148		65
	$	2,189	$	726	$	890	$	536

The following table displays a rollforward of the carrying amount of goodwill from January 1, 2007 to June 30, 2007, by business segment:

	January 1,							June 30,
Segment	2007		Acquired		Adjustments(1)			2007
Mobile Devices	$	69	$	—	$	(14	)	$	55
Home and Networks Mobility		1,266		246		1			1,513
Enterprise Mobility Solutions		371		2,657		(7	)		3,021
	$	1,706	$	2,903	$	(20	)	$	4,589

(1) Includes translation adjustments.

11. Immaterial Adjustments

As described in a Form 8-K filed on July 17, 2007, the Company has made two immaterial adjustments to our previously filed consolidated financial statements. The Form 8-K filed on July 17, 2007 presented the Company’s 2004, 2005, 2006 and first quarter 2007 financial information reflecting the recently identified immaterial adjustments. The impact of these adjustments to the condensed financial statements and related notes reported in this Form 10-Q are detailed below:

•   The first adjustment has a minor offsetting impact on the Condensed Consolidated Statements of Operations. The immaterial adjustment relates solely to the elimination of inter-segment sales relating to a business in our Home and Networks Mobility segment. The impact of the immaterial adjustment was $56 million and $32 million for the three and six months ended July 1, 2006, respectively, between Net sales and Costs of sales and has no impact on Gross margin, Operating earnings or any other financial statement line items. The adjustment has no impact on the Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Stockholders’ Equity or Condensed Consolidated Statements of Cash Flows.

•   The second adjustment has a minor impact on the Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Cash Flows. The immaterial adjustment relates solely to a $396 million change in classification of certain deposits between Cash and cash equivalents and Short-term investments at December 31, 2006. The resulting impact on the Condensed Consolidated Statements of Cash Flows for the six months ending June 30, 2007 was a $396 million adjustment to Purchases of short-term investments, which resulted in a change to the Net decrease in cash and cash equivalents for the period, but has no impact on net cash provided by operating activities. The adjustment has no impact on the Company’s Condensed Consolidated Statements of Operations or Condensed Consolidated Statements of Stockholders’ Equity.

22

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 the Company’s condensed consolidated financial statements for the three and six months ended June 30, 2007 and July 1, 2006, as well as the Company’s consolidated financial statements and related notes thereto and management’s discussion and analysis of financial condition and results of operations in the Company’s Form 10-K for the year ended December 31, 2006 and Form 8-K filed on July 17, 2007.

Executive Overview

Our Business

Effective beginning in the second quarter of 2007, we have realigned our three operating business segments in order to better align our operations with the evolving nature of our customers and served markets. We now report financial results for the following business segments:

•   The Mobile Devices segment designs, manufactures, sells and services wireless handsets with integrated software and accessory products, and licenses intellectual property. In the second quarter of 2007, the segment’s net sales represented 49% of the Company’s consolidated net sales.*

•   The Home and Networks Mobility segment designs, manufactures, sells, installs and services: (i) end-to-end digital video system solutions and interactive set-tops (“digital entertainment devices”), (ii) voice and data modems for digital subscriber line and cable networks (“broadband gateways”), (iii) wireline broadband access systems, and (iv) wireless access systems (“wireless networks”), including cellular infrastructure systems, to cable and satellite television operators, wireline carriers and wireless service providers. In the second quarter of 2007, the segment’s net sales represented 29% of the Company’s consolidated net sales.*

•   The Enterprise Mobility Solutions segment designs, manufactures, sells, installs and services analog and digital two-way radio, voice and data communications products and systems for private networks, wireless broadband systems and end-to-end enterprise mobility solutions to a wide range of enterprise markets, including government and public safety (which, together with all sales to distributors of two-way communication products, is referred to as the “government and public safety market”), as well as utility, transportation, retail and other commercial customers (which, collectively are referred to as the “commercial enterprise market”). In the second quarter of 2007, the segment’s net sales represented 22% of the Company’s consolidated net sales.*

Second-Quarter Summary

•   Net Sales were $8.7 Billion:  Our net sales were $8.7 billion in the second quarter of 2007, down 19% from $10.8 billion in the second quarter of 2006. Net sales decreased 40% in the Mobile Devices segment, increased 9% in the Home and Networks Mobility segment and increased 42% in the Enterprise Mobility Solutions segment.

•   Operating Loss of $158 Million:  We incurred an operating loss of $158 million in the second quarter of 2007, compared to operating earnings of $1.5 billion in the second quarter of 2006. Operating margin was (1.8)% of net sales in the second quarter of 2007, compared to 14.1% of net sales in the second quarter of 2006.

•   Loss from Continuing Operations of $38 Million, or $0.02 per Share:  We incurred a loss from continuing operations of $38 million, or $0.02 per diluted common share, in the second quarter of 2007, compared to earnings from continuing operations of $1.3 billion, or $0.54 per diluted common share, in the second quarter of 2006.

•   Handset Shipments were 35.5 Million Units:  We shipped 35.5 million handsets in the second quarter of 2007, a 31% decrease compared to shipments of 51.9 million handsets in the second quarter of 2006.

*  When discussing the net sales of each of our three segments, we express the segment’s net sales as a percentage of the Company’s consolidated net sales. Because certain of our segments sell products to other Motorola businesses, our intracompany sales were eliminated as part of the consolidation process in second quarter of 2007. As a result, the percentages of consolidated net sales for each of our business segments does not always equal 100% of the Company’s consolidated net sales.

23

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

•   Global Handset Market Share Estimated at 13%:  We estimate our global handset market share in the second quarter of 2007 to be approximately 13%, a decrease of approximately 9 percentage points versus the second quarter of 2006 and a sequential decrease of approximately 4 percentage points versus the first quarter of 2007.

•   Digital Entertainment Device Shipments Increased 74%:  We shipped 4.2 million digital entertainment devices, an increase of 74% compared to shipments of 2.4 million units in the second quarter of 2006.

Net sales for each of our operating business segments were as follows:

•   In Mobile Devices:  Net sales were $4.3 billion in the second quarter of 2007, a decrease of $2.9 billion, or 40%, compared to the second quarter of 2006. These results reflect a 31% decrease in unit shipments and a 14% decrease in average selling price (“ASP”) compared to the year-ago quarter. Mobile Devices was negatively affected by a difficult pricing environment and the segment’s limited portfolio of 3G and multimedia products. During the second quarter of 2007, Mobile Devices continued its efforts to rebalance its market share and profitability objectives and place a greater emphasis on improved profitability. These efforts were initiated in the first quarter of 2007.

•   In Home and Networks Mobility:  Net sales were $2.6 billion in the second quarter of 2007, an increase of $221 million, or 9%, compared to the second quarter of 2006. These results were primarily driven by a 74% increase in shipments of digital entertainment devices, reflecting increased demand for digital set-tops, including high-definition/digital video recorder (“HD/DVR”) set-tops, and Internet Protocol television (“IPTV”) devices, partially offset by lower demand for iDEN infrastructure equipment in North America.

•   In Enterprise Mobility Solutions:  Net sales were $1.9 billion in the second quarter of 2007, an increase of $565 million, or 42%, compared to the second quarter of 2006. These results were primarily driven by the net sales from the recently acquired Symbol business, as well as higher net sales in the government and public safety market.

Looking Forward

The strategy for each of our three segments: Mobile Devices, Home and Networks Mobility, and Enterprise Mobility Solutions; is driven by our vision of seamless mobility. As the boundaries between the home, work, and leisure activities continue to dissolve, we believe seamless mobility will deliver compelling, rich experiences wherever consumers go and whatever they do. To achieve our vision, we are leveraging our position as a thought leader in digital convergence by developing products and services that will meet consumer needs around the world. This includes developing innovative products and services based on technologies that go beyond 3G, including WiMAX and long-term evolution (“LTE”). We remain strongly committed to quality, an unrelenting focus on innovation and profitable growth.

Although the Company no longer expects our Mobile Devices segment to be profitable for the full year 2007, the management team remains committed to improving the financial performance of our Mobile Devices segment for the second half of 2007 compared to the first half of 2007. Mobile Devices is currently executing on a comprehensive plan to reduce costs and improve financial performance. Aggressive actions already underway include:

•  streamlining and enhancing our product portfolio;

•  implementing workforce reduction initiatives;

•  utilizing multiple silicon providers;

•  introducing more devices based on improved software platforms; and

•  rationalizing the business’s product pricing structure and distribution strategy.

Our Home and Networks Mobility segment is growing both organically and through acquisitions. Numerous recent acquisitions have expanded our leadership position in wireless and wireline broadband products and services for video, voice and data. These enable us to continue capitalizing on the convergence of services and applications across delivery platforms and mobile devices. In addition, we made further progress in our efforts to be the leading infrastructure provider of WiMAX, a next-generation wireless broadband technology. By delivering complete end-to-end solutions that enable delivery of next-generation services, together with the opportunities in WiMAX, our Home and Networks Mobility segment is poised for profitable growth in the markets we serve.

24

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In our Enterprise Mobility Solutions segment, our key objective is expansion across the broad array of enterprise markets. With the acquisitions of Symbol Technologies, Inc., the second largest acquisition in Motorola’s history, and Good Technology, Inc., we now have a stronger presence in the commercial enterprise mobility market, including retail, transportation, utility and other commercial customers. We believe that this stronger presence, together with our leading position in the government and public safety market, makes our Enterprise Mobility Solutions segment well positioned for continued success.

We are on track to achieve the $400 million in annualized cost savings announced in January 2007 and we now expect to achieve an additional $600 million in cost savings in 2008 through a combination of additional workforce reductions, prioritization of investments, continuing discretionary-spending controls, reduced general and administrative expenses and site rationalization.

As we execute on these initiatives, our strategy remains unchanged — to drive our vision of seamless mobility. Therefore, we will continue to make the strategic investments that build on that vision and position Motorola for success over the long term.

Results of Operations

	Three Months Ended												Six Months Ended
	June 30,						July 1,						June 30,						July 1,
(Dollars in millions, except per share amounts)	2007			% of Sales			2006			% of Sales			2007			% of Sales			2006			% of Sales
Net sales	$	8,732					$	10,820					$	18,165					$	20,452
Costs of sales		6,279			71.9	%		7,463			69.0	%		13,258			73.0	%		14,164			69.3	%
Gross margin		2,453			28.1	%		3,357			31.0	%		4,907			27.0	%		6,288			30.7	%
Selling, general and administrative expenses		1,296			14.8	%		1,154			10.7	%		2,609			14.4	%		2,223			10.9	%
Research and development expenditures		1,115			12.8	%		1,035			9.6	%		2,232			12.3	%		1,999			9.8	%
Other charges (income)		200			2.3	%		(354	)		(3.4	)%		590			3.2	%		(305	)		(1.6	)%
Operating earnings (loss)		(158	)		(1.8	)%		1,522			14.1	%		(524	)		(2.9	)%		2,371			11.6	%
Other income:
Interest income, net		32			0.4	%		70			0.6	%		73			0.4	%		137			0.7	%
Gains on sales of investments and businesses, net		5			0.1	%		5			0.0	%		4			0.0	%		156			0.8	%
Other		17			0.2	%		126			1.2	%		16			0.1	%		107			0.4	%
Total other income		54			0.6	%		201			1.8	%		93			0.5	%		400			1.9	%
Earnings (loss) from continuing operations before income taxes		(104	)		(1.2	)%		1,723			15.9	%		(431	)		(2.4	)%		2,771			13.5	%
Income tax expense (benefit)		(66	)		(0.8	)%		374			3.4	%		(175	)		(1.0	)%		766			3.7	%
Earnings (loss) from continuing operations		(38	)		(0.4	)%		1,349			12.5	%		(256	)		(1.4	)%		2,005			9.8	%
Earnings from discontinued operations, net of tax		10			0.1	%		35			0.3	%		47			0.2	%		65			0.3	%
Net earnings (loss)	$	(28	)		(0.3	)%	$	1,384			12.8	%	$	(209	)		(1.2	)%	$	2,070			10.1	%
Earnings (loss) per diluted common share:
Continuing operations	$	(0.02	)				$	0.54					$	(0.11	)				$	0.79
Discontinued operations		0.01						0.01						0.02						0.03
	$	(0.01	)				$	0.55					$	(0.09	)				$	0.82

Results of Operations—Three months ended June 30, 2007 compared to three months ended July 1, 2006

Net Sales

Net sales were $8.7 billion in the second quarter of 2007, down 19% compared to net sales of $10.8 billion in the second quarter of 2006. The decrease in net sales reflects a $2.9 billion decrease in net sales in the Mobile Devices segment, partially offset by a $565 million increase in net sales in the Enterprise Mobility Solutions segment and a $221 million increase in net sales in the Home and Networks Mobility segment. The 40% decrease in net sales in the

25

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Mobile Devices segment was primarily driven by a 31% decrease in unit shipments and a 14% decrease in average selling price (“ASP”) compared to the year-ago quarter. The 42% increase in net sales in the Enterprise Mobility Solutions segment was primarily driven by net sales from the recently acquired Symbol business, as well as higher net sales in the government and public safety market. The 9% increase in net sales in the Home and Networks Mobility segment was primarily driven by a 74% increase in shipments of digital entertainment devices, particularly digital set-tops, including HD/DVR set-tops, and IPTV devices, partially offset by lower demand for iDEN infrastructure equipment in North America.

Gross Margin

Gross margin was $2.5 billion, or 28.1% of net sales, in the second quarter of 2007, compared to $3.4 billion, or 31.0% of net sales, in the second quarter of 2006. The decrease in gross margin reflects decreases in gross margin in the Mobile Devices and Home and Networks Mobility segments, partially offset by an increase in gross margin in the Enterprise Mobility Solutions segment. The large decrease in gross margin in the Mobile Devices segment was primarily due to the 40% decrease in net sales and an unfavorable shift in product mix, partially offset by savings from supply chain cost-reduction initiatives. The decrease in gross margin in the Home and Networks segment was primarily due to continuing competitive pricing pressure on GSM infrastructure equipment and lower demand for iDEN infrastructure equipment in North America, partially offset by increased demand for digital entertainment devices. The increase in gross margin in the Enterprise Mobility Solutions segment was primarily due to the 42% increase in net sales, driven by net sales from the recently acquired Symbol business.

Gross margin as a percentage of net sales decreased in the second quarter of 2007 compared to the second quarter of 2006, reflecting decreases in all three of the Company’s operating business segments. The Company’s overall gross margin as a percentage of net sales can be impacted by the proportion of overall net sales generated by its various businesses.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses increased 12% to $1.3 billion, or 14.8% of net sales, in the second quarter of 2007, compared to $1.2 billion, or 10.7% of net sales, in the second quarter of 2006. In the second quarter of 2007 compared to the second quarter of 2006, SG&A expenses increased in the Enterprise Mobility Solutions and Home and Networks Mobility segments and decreased in the Mobile Devices segment. The increase in the Enterprise Mobility Solutions segment was due to expenses of recently acquired businesses. The increase in the Home and Networks Mobility segment was primarily due to expenses of recently acquired businesses, partially offset by savings from cost-reduction initiatives. The decrease in the Mobile Devices segment was primarily driven by lower marketing expenses. SG&A expenses as a percentage of net sales increased in the Mobile Devices and Enterprise Mobility Solutions segments and decreased in the Home and Networks Mobility segment.

Research and Development Expenditures

Research and development (“R&D”) expenditures increased 8% to $1.1 billion, or 12.8% of net sales, in the second quarter of 2007, compared to $1.0 billion, or 9.6% of net sales, in the second quarter of 2006. In the second quarter of 2007 compared to the second quarter of 2006, R&D expenditures increased in the Mobile Devices and Enterprise Mobility Solutions segments and decreased in the Home and Networks Mobility segment. The increase in the Mobile Devices segment was primarily due to developmental engineering expenditures for new product development and investment in next-generation technologies. The increase in the Enterprise Mobility Solutions segment was due to expenditures of recently acquired businesses. The decrease in the Home and Networks Mobility segment was primarily due to savings from cost-reduction initiatives, partially offset by expenditures of recently acquired businesses and continued investment in digital entertainment devices and WiMAX. R&D expenditures as a percentage of net sales increased in the Mobile Devices segment and decreased in the Home and Networks Mobility and Enterprise Mobility Solutions 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.

26

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Other Charges (Income)

The Company recorded net charges of $200 million in Other charges (income) in the second quarter of 2007, compared to net income of $354 million in the second quarter of 2006. The net charges of $200 million in the second quarter of 2007 include: (i) $95 million of charges relating to the amortization of intangibles, (ii) $78 million of net reorganization of business charges, and (iii) $25 million for an insurance reserve relating to a legal settlement. The net income of $354 million in the second quarter of 2006 included $410 million in income for a payment received relating to the Telsim collection settlement, partially offset by: (i) $36 million of net reorganization of business charges, and (ii) $20 million of charges relating to the amortization of intangibles. The net reorganization of business charges are discussed in further detail in the “Reorganization of Businesses” section.

Net Interest Income

Net interest income was $32 million in the second quarter of 2007, compared to net interest income of $70 million in the second quarter of 2006. Net interest income in the second quarter of 2007 included interest income of $114 million, partially offset by interest expense of $82 million. Net interest income in the second quarter of 2006 included interest income of $158 million, partially offset by interest expense of $88 million. The decrease in net interest income was primarily attributed to the decrease in average cash, cash equivalents and Sigma Funds balances in the second quarter of 2007 compared to the second quarter of 2006, partially offset by higher interest rates.

Gains on Sales of Investments and Businesses

Gains on sales of investments and businesses were $5 million in the second quarter of both 2007 and 2006. For both periods, the gains related to the sale of a number of small investments.

Other

Income classified as Other, as presented in Other income, was $17 million in the second quarter of 2007, compared to net income of $126 million in the second quarter of 2006. The net income of $17 million in the second quarter of 2007 was primarily comprised of $32 million of foreign currency gains, partially offset by $12 million of investment impairment charges. The net income of $126 million in the second quarter of 2006 was primarily comprised of: (i) a $105 million gain on a zero-cost collar derivative entered into to protect the Company’s investment in Sprint Nextel Corporation, and (ii) $15 million of foreign currency gains, partially offset by $12 million of investment impairment charges.

Effective Tax Rate

The effective tax rate was 63% in the second quarter of 2007, representing a $66 million net tax benefit, compared to 22% in the second quarter of 2006, representing a $374 million net tax expense. During the second quarter of 2007, the effective tax rate was favorably impacted by the settlement of tax positions, tax incentives received and the revaluation of deferred taxes in non-U.S. locations, partially offset by an increase in unrecognized tax benefits. The effective tax rate for the second quarter of 2007 excluding these items was 36%.

The 22% effective tax rate for the second quarter of 2006 was favorably impacted by $252 million of net tax benefits relating to the reduction of valuation allowances, incremental tax benefits related to 2005 cash repatriations, favorable tax settlements reached with foreign jurisdictions and tax benefits for foreign earnings permanently reinvested. The effective tax rate for the second quarter of 2006 excluding these items was 36%.

Earnings (Loss) from Continuing Operations

The Company incurred a net loss from continuing operations before income taxes of $104 million in the second quarter of 2007, compared with earnings from continuing operations before income taxes of $1.7 billion in the second quarter of 2006. After taxes, the Company incurred a loss from continuing operations of $38 million, or $0.02 per diluted share, in the second quarter of 2007, compared with earnings from continuing operations of $1.3 billion, or $0.54 per diluted share, in the second quarter of 2006.

27

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The decrease in earnings (loss) from continuing operations before income taxes in the second quarter of 2007 compared to the second quarter of 2006 is primarily attributed to: (i) a $904 million decrease in gross margin, driven by decreases in gross margin in the Mobile Devices and Home and Networks Mobility segments, partially offset by an increase in gross margin in the Enterprise Mobility Solutions segment, (ii) a $554 million increase in Other charges (income), (iii) a $142 million increase in SG&A expenses, (iv) a $109 million decrease in income classified as Other, as presented in Other income (expense), (v) an $80 million increase in R&D expenditures, and (vi) a $38 million decrease in net interest income.

Results of Operations—Six months ended June 30, 2007 compared to six months ended July 1, 2006

Net Sales

Net sales were $18.2 billion in the first half of 2007, down 11% compared to net sales of $20.5 billion in the first half of 2006. The decrease in net sales reflects a $3.9 billion decrease in net sales in the Mobile Devices segment, partially offset by a $1.1 billion increase in net sales in the Enterprise Mobility Solutions segment and a $443 million increase in net sales in the Home and Networks Mobility segment. The 29% decrease in net sales in the Mobile Devices segment was primarily driven by a 17% decrease in unit shipments and a 14% decrease in ASP. The 46% increase in net sales in the Enterprise Mobility Solutions segment was primarily driven by net sales from the recently acquired Symbol business, as well as higher net sales in the government and public safety market. The 10% increase in net sales in the Home and Networks Mobility segment was primarily driven by an increase in shipments of digital entertainment devices, particularly digital set-tops, including HD/DVR set-tops, and IPTV devices, partially offset by lower demand for iDEN infrastructure equipment in North America and continuing competitive pricing pressure on GSM infrastructure equipment.

Gross Margin

Gross margin was $4.9 billion, or 27.0% of net sales, in the first half of 2007, compared to $6.3 billion, or 30.7% of net sales, in the first half of 2006. The decrease in gross margin reflects decreases in gross margin in the Mobile Devices and Home and Networks Mobility segments, partially offset by an increase in gross margin in the Enterprise Mobility Solutions segment. The decrease in gross margin in the Mobile Devices segment was primarily due to the 29% decrease in net sales and an unfavorable shift in product mix, partially offset by savings from supply chain cost-reduction initiatives. The decrease in gross margin in the Home and Networks segment was primarily due to continuing competitive pricing pressure on GSM infrastructure equipment and lower demand for iDEN infrastructure equipment in North America, partially offset by increased demand for digital entertainment devices. The increase in gross margin in the Enterprise Mobility Solutions segment was primarily due to the 46% increase in net sales, driven by net sales from the recently acquired Symbol business.

Gross margin as a percentage of net sales decreased in the first half of 2007 compared to the first half of 2006, reflecting decreases in all three of the Company’s operating business segments.

Selling, General and Administrative Expenses

SG&A expenses increased 17% to $2.6 billion, or 14.4% of net sales, in the first half of 2007, compared to $2.2 billion, or 10.9% of net sales, in the first half of 2006. All three of the Company’s operating segments had higher SG&A expenses in the first half of 2007 compared to the first half of 2006. The increase in the Enterprise Mobility Solutions segment was due to expenses of newly acquired businesses. The increase in the Home and Networks Mobility segment was primarily due to expenses of newly acquired businesses, partially offset by savings from cost-reduction initiatives. The increase in the Mobile Devices segment was primarily due to increased expenditures on information technology upgrades and increased selling expenses. SG&A expenses as a percentage of net sales increased in the Mobile Devices and Enterprise Mobility Solutions segments and decreased in the Home and Networks Mobility segment.

Research and Development Expenditures

R&D expenditures increased 12% to $2.2 billion, or 12.3% of net sales, in the first half of 2007, compared to $2.0 billion, or 9.8% of net sales, in the first half of 2006. In the first half of 2007 compared to the first half of 2006, R&D expenditures increased in the Mobile Devices and Enterprise Mobility Solutions segments and decreased in the Home and Networks Mobility segment. The increase in the Mobile Devices segment was primarily due to developmental engineering expenditures for new product development and investment in next-generation technologies. The increase in the Enterprise Mobility Solutions segment was due to expenditures of recently acquired businesses. The decrease in the Home and Networks Mobility segment was primarily due to savings from cost-reduction initiatives, partially offset by expenditures of

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MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

recently acquired businesses and continued investment in digital entertainment devices and WiMAX. R&D expenditures as a percentage of net sales increased in the Mobile Devices segment and decreased in the Enterprise Mobility Solutions and Home and Networks Mobility segments.

Other Charges (Income)

The Company recorded net charges of $590 million in Other charges (income) in the first half of 2007, compared to net income of $305 million in the first half of 2006. The net charges of $590 million in the first half of 2007 include: (i) $190 million of charges relating to the amortization of intangibles, (ii) $163 million of net reorganization of business charges, (iii) $140 million for legal settlements and related insurance reserves, and (iv) $97 million of in-process research and development charges (“IPR&D”) relating to 2007 acquisitions. The net income of $305 million in the first half of 2006 included $411 million in income for payments received relating to the Telsim collection settlement, partially offset by: (i) $66 million of net reorganization of business charges, and (ii) $39 million of charges relating to the amortization of intangibles. The net reorganization of business charges are discussed in further detail in the “Reorganization of Businesses” section.

Net Interest Income

Net interest income was $73 million in the first half of 2007, compared to net interest income of $137 million in the first half of 2006. Net interest income in the first half of 2007 included interest income of $248 million, partially offset by interest expense of $175 million. Net interest income in the first half of 2006 included interest income of $306 million, partially offset by interest expense of $169 million. The decrease in net interest income was primarily attributed to the decrease in average cash, cash equivalents and Sigma Funds balances in the first half of 2007 compared to the first half of 2006, partially offset by higher interest rates.

Gains on Sales of Investments and Businesses

Gains on sales of investments and businesses were $4 million in the first half of 2007, compared to gains of $156 million in the first half of 2006. In the first half of 2007, the net gain relates to the sale of a number of small investments. In the first half of 2006, the net gains primarily related to a $141 million gain on the sale of the Company’s remaining shares in Telus Corporation.

Other

Income classified as Other, as presented in Other income, was $16 million in the first half of 2007, compared to net income of $107 million in the first half of 2006. The net income of $16 million in the first half of 2007 was primarily comprised of $47 million of foreign currency gains, partially offset by $31 million of investment impairment charges. The net income of $107 million in the first half of 2006 was primarily comprised of: (i) a $72 million gain on a zero-cost collar derivative entered into to protect the Company’s investment in Sprint Nextel Corporation, and (ii) $36 million of foreign currency gains, partially offset by $18 million of investment impairment charges.

Effective Tax Rate

The effective tax rate was 41% in the first half of 2007, representing a $175 million net tax benefit, compared to 28% in the first half of 2006, representing a $766 million net tax expense. During the first half of 2007, the effective tax rate was favorably impacted by the settlement of tax positions, tax incentives received and the revaluation of deferred taxes in non-U.S. locations, partially offset by an increase in unrecognized tax benefits and a non-deductible IPR&D charge relating to the acquisition of Symbol. The effective tax rate for the first half of 2007 excluding these items was 39%. The increase in the effective tax rate is primarily due to the change in pre-tax income levels and changes in the mix of income and loss by region.

The 28% effective tax rate for the first half of 2006 was favorably impacted by $252 million of net tax benefits relating to the reduction of valuation allowances, incremental tax benefits related to 2005 cash repatriations, favorable tax settlements reached with foreign jurisdictions and tax benefit for foreign earnings permanently reinvested. The effective tax rate for the first half of 2006 excluding these items was 37%.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Earnings (Loss) from Continuing Operations

The Company incurred a net loss from continuing operations before income taxes of $431 million in the first half of 2007, compared with earnings from continuing operations before income taxes of $2.8 billion in the first half of 2006. After taxes, the Company incurred a loss from continuing operations of $256 million, or $0.11 per diluted share, in the first half of 2007, compared with earnings from continuing operations of $2.0 billion, or $0.79 per diluted share, in the first half of 2006.

The decrease in earnings (loss) from continuing operations before income taxes in the first half of 2007 compared to the first half of 2006 is primarily attributed to: (i) a $1.4 billion decrease in gross margin, driven by decreases in gross margin in the Mobile Devices and Home and Network Mobility segments, partially offset by an increase in gross margin in the Enterprise Mobility Solutions segment, (ii) an $895 million increase in Other charges (income), (iii) a $386 million increase in SG&A expenses, (iv) a $233 million increase in R&D expenditures, (v) a $152 million decrease in gains on the sale of investments and businesses, (vi) a $91 million decrease in income classified as Other, as presented in Other income (expense), and (vii) a $64 million decrease in net interest income.

Reorganization of Businesses

The Company maintains a formal Involuntary Severance Plan (the “Severance Plan”) which permits the Company to offer to eligible employees severance benefits based on years of service and employment grade level in the event that employment is involuntarily terminated as a result of a reduction-in-force or restructuring. Each separate reduction-in-force has qualified for severance benefits under the Severance Plan and therefore, such benefits are accounted for in accordance with Statement No. 112, “Accounting for Postemployment Benefits” (“SFAS 112”). Under the provisions of SFAS 112, the Company recognizes termination benefits based on formulas per the Severance Plan at the point in time that future settlement is probable and can be reasonably estimated based on estimates prepared at the time a restructuring plan is approved by management. Exit costs primarily consist of future minimum lease payments on vacated facilities. At each reporting date, the Company evaluates its accruals for exit costs and employee separation costs to ensure that the accruals are still appropriate. In certain circumstances, accruals are no longer required because of efficiencies in carrying out the plans or because employees previously identified for separation resigned from the Company and did not receive severance or were redeployed due to circumstances not foreseen when the original plans were initiated. The Company reverses accruals through the income statement line item where the original charges were recorded when it is determined they are no longer required.

The Company expects to realize payroll and lease cost-saving benefits of approximately $128 million during the remaining six months of 2007 from the plans that were initiated during the first half of 2007, representing $22 million of savings in Costs of sales, $76 million of savings in R&D expenditures, and $30 million of savings in SG&A expenditures. Beyond 2007, the Company expects the reorganization plans implemented during the first half of 2007 to provide annualized cost savings of approximately $369 million, representing $77 million of savings in Cost of sales, $214 million of savings in R&D expenditures, and $78 million of savings in SG&A expenditures.

2007 Charges

During the first half of 2007, the Company committed to implement various productivity improvement plans aimed at achieving long-term, sustainable profitability by driving efficiencies and reducing operating costs. All three of the Company’s business segments, as well as corporate functions, are impacted by these plans.

For the three months ended June 30, 2007, the Company recorded net reorganization of business charges of $101 million, including $23 million of charges in Costs of sales and $78 million of charges under Other charges (income) in the Company’s condensed consolidated statements of operations. Included in the aggregate $101 million are charges of $115 million for employee separation costs, offset by reversals for accruals no longer needed.

For the six months ended June 30, 2007, the Company recorded net reorganization of business charges of $179 million, including $16 million of charges in Costs of sales and $163 million of charges under Other charges (income) in the Company’s condensed consolidated statements of operations. Included in the aggregate $179 million are charges of $221 million for employee separation costs and $5 million for exit costs, offset by reversals for accruals no longer needed.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following table displays the net charges incurred by segment for the three and six months ended June 30, 2007:

	Three Months			Six Months
	Ended			Ended
Segment	June 30, 2007			June 30, 2007
Mobile Devices	$	68		$	97
Home and Networks Mobility		16			50
Enterprise Mobility Solutions		(1	)		7
		83			154
General Corporate		18			25
	$	101		$	179

The following table displays a rollforward of the reorganization of businesses accruals established for exit costs and employee separation costs from January 1, 2007 to June 30, 2007:

	Accruals at		2007					2007			Accruals at
	January 1,		Additional		2007(1)(2)			Amount			June 30,
	2007		Charges		Adjustments			Used			2007
Exit costs—lease terminations	$	54	$	5	$	2		$	(19	)	$	42
Employee separation costs		104		221		(44	)		(115	)		166
	$	158	$	226	$	(42	)	$	(134	)	$	208

(1)	Includes translation adjustments.
(2)	Includes accruals assumed through business acquisitions.

Exit Costs—Lease Terminations

At January 1, 2007, the Company had an accrual of $54 million for exit costs attributable to lease terminations. The 2007 additional charges of $5 million are primarily related to the planned exit of certain activities in Ireland by the Home and Networks Mobility segment. The 2007 adjustments of $2 million represent accruals for exit costs assumed through business acquisitions. The $19 million used in 2007 reflects cash payments. The remaining accrual of $42 million, which is included in Accrued liabilities in the Company’s condensed consolidated balance sheet at June 30, 2007, represents future cash payments for lease termination obligations.

Employee Separation Costs

At January 1, 2007, the Company had an accrual of $104 million for employee separation costs, representing the severance costs for approximately 2,300 employees. The 2007 additional charges of $221 million represent severance costs for approximately an additional 4,100 employees, of which 1,100 were direct employees and 3,000 were indirect employees.

The adjustments of $44 million reflect $46 million of reversals of accruals no longer needed, partially offset by $2 million of accruals for severance plans assumed through business acquisitions. The $46 million of reversals represent 1,000 employees, and primarily relates to a strategic change regarding a plant closure and specific employees previously identified for separation who resigned from the Company and did not receive severance or were redeployed due to circumstances not foreseen when the original plans were approved. The $2 million of accruals represents severance plans for 300 employees assumed through business acquisitions.

During the first half of 2007, approximately 2,700 employees, of which 1,100 were direct employees and 1,600 were indirect employees, were separated from the Company. The $115 million used in 2007 reflects cash payments to these separated employees. The remaining accrual of $166 million, which is included in Accrued liabilities in the Company’s condensed consolidated balance sheet at June 30, 2007, is expected to be paid to approximately 3,000 separated employees.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

2006 Charges

For the three months ended July 1, 2006, the Company recorded net reorganization of business charges of $37 million, including $1 million of charges in Costs of sales and $36 million of charges under Other charges (income) in the Company’s condensed consolidated statements of operations. Included in the aggregate $37 million are charges of $44 million, primarily for employee separation costs, partially offset by $7 million of reversals for accruals no longer needed.

For the six months ended July 1, 2006, the Company recorded net reorganization of business charges of $108 million, including $42 million of charges in Costs of sales and $66 million of charges under Other charges (income) in the Company’s condensed consolidated statement of operations. Included in the aggregate $108 million are charges of $116 million, primarily for employee separation costs and $6 million for fixed asset adjustments, partially offset by $14 million of reversals for reserves no longer needed.

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

	Accruals at		2006					2006			Accruals at
	January 1,		Additional		2006(1)			Amount			July 1,
	2006		Charges		Adjustments			Used			2006
Exit costs—lease terminations	$	50	$	—	$	(6	)	$	(11	)	$	33
Employee separation costs		53		116		(8	)		(65	)		96
	$	103	$	116	$	(14	)	$	(76	)	$	129

(1) Includes translation adjustments.

Exit Costs—Lease Terminations

At January 1, 2006, the Company had an accrual of $50 million for exit costs attributable to lease terminations. The 2006 adjustments of $6 million represent reversals of accruals no longer needed. The $11 million used in 2006 reflected cash payments. The remaining accrual of $33 million was included in Accrued liabilities in the Company’s condensed consolidated balance sheet at July 1, 2006.

Employee Separation Costs

At January 1, 2006, the Company had an accrual of $53 million for employee separation costs, representing the severance costs for approximately 1,600 employees. The 2006 additional charges of $116 million represented additional costs for approximately 3,200 employees. The adjustments of $8 million represented reversals of accruals no longer needed.

During the first half of 2006, approximately 1,900 employees were separated from the Company. The $65 million used in 2006 reflects cash payments to these separated employees. The remaining accrual of $96 million relating to 2,700 employees was included in Accrued liabilities in the Company’s condensed consolidated balance sheet at July 1, 2006. Since that time, $48 million has been paid to approximately 1,800 separated employees and $43 million was reversed. The reversals were due to accruals no longer needed, primarily relating to a strategic change regarding a plant closure and specific employees previously identified for separation who resigned from the Company and did not receive severance or were redeployed due to circumstances not foreseen when the original plans were approved, as described earlier under “2007 Charges.”

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) current cash and cash equivalents, (ii) operating activities, (iii) investing activities, and (iv) financing activities.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cash and Cash Equivalents

At June 30, 2007, the Company’s cash and cash equivalents (which are highly-liquid investments with an original maturity of three months or less) aggregated $2.8 billion, a decrease of $46 million compared to $2.8 billion at December 31, 2006. At June 30, 2007, $539 million of this amount was held in the U.S. and $2.2 billion was held by the Company or its subsidiaries in other countries. Repatriation of some of these funds could be subject to delay and could have potential adverse tax consequences. At June 30, 2007, restricted cash was $166 million, compared to $131 million at December 31, 2006.

Operating Activities

In the first half of 2007, the Company used $27 million in net cash for operating activities, compared to $1.2 billion of net cash provided by operating activities in the first half of 2006. The primary contributor to operating cash flow usage was a $3.4 billion decrease in accounts payable and accrued liabilities, partially offset by: (i) a $2.4 billion decrease in accounts receivable, (ii) a $431 million decrease in inventories, (iii) $249 million of cash inflow due to changes in other assets and liabilities, (iv) a $190 million decrease in other current assets, and (v) earnings (loss) (adjusted for non-cash items) of $100 million.

Accounts Receivable:  The Company’s net accounts receivable were $5.5 billion at June 30, 2007, compared to $7.5 billion at December 31, 2006. The Company’s days sales outstanding (“DSO”), including net long-term receivables, were 57 days at June 30, 2007, compared to 58 days at December 31, 2006 and 54 days at July 1, 2006. The Company’s businesses sell their products in a variety of markets throughout the world. Payment terms can vary by market type and geographic location. Accordingly, the Company’s levels of accounts receivable and DSO can be impacted by the timing and level of sales that are made by its various businesses and by the geographic locations in which those sales are made.

Inventory:  The Company’s net inventory was $3.0 billion at June 30, 2007, compared to $3.2 billion at December 31, 2006. The Company’s inventory turns were 8.3 at June 30, 2007, compared to 11.0 at December 31, 2006 and 11.0 at July 1, 2006. Inventory turns were calculated using an annualized rolling three months of cost of sales method. The significant decrease in inventory turns reflects lower than expected sales volumes in the Mobile Devices business during the first half of 2007. Inventory management continues to be an area of focus as the Company balances the need to maintain strategic inventory levels to ensure competitive delivery performance to its customers against the risk of inventory obsolescence due to rapidly changing technology and customer spending requirements.

Cash Conversion Cycle:  The Company’s cash conversion cycle (“CCC”) was 50 days at June, 30, 2007, compared to 38 days at December 31, 2006 and 36 days at July 1, 2006. CCC is calculated by adding DSO and days inventory outstanding (“DIO”) and subtracting days payable outstanding (“DPO”). DIO is calculated by dividing net inventory by the average daily cost of sales. DPO is calculated by dividing accounts payable by the average daily cost of sales. The significant increase in CCC was driven by higher CCC in the Mobile Devices segment, partially offset by lower CCC in the Home and Networks Mobility and Enterprise Mobility Solutions segments.

Reorganization of Business:  The Company has implemented various reorganization of businesses plans. Cash payments for employee separations and exit costs in connection with these plans were $134 million in the first half of 2007, as compared to $76 million in the first half of 2006. Of the $208 million reorganization of businesses accrual at June 30, 2007, $166 million relates to employee separation costs and is expected to be paid in 2007. The remaining $42 million in accruals relate to lease termination obligations that are expected to be paid over a number of years.

Defined Benefit Plan Contributions:  The Company expects to make cash contributions totaling approximately $280 million to its U.S. pension plans and $120 million to its non-U.S. pension plans during 2007. The Company also expects to make cash contributions totaling approximately $24 million to its postretirement healthcare fund during 2007. During the first half of 2007, the Company has contributed an aggregate of $71 million and $17 million to its U.S. and non-U.S. pension plans, respectively, and $6 million to its post-retirement healthcare fund.

Investing Activities

The most significant components of the Company’s investing activities include: (i) Sigma Fund investments, (ii) strategic acquisitions and investments, (iii) short-term investments, (iv) capital expenditures, (v) sales of property, plant and equipment, and (vi) sales of investments and businesses.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Net cash provided by investing activities was $2.5 billion for the first half of 2007, compared to net cash used of $183 million in the first half of 2006. This $2.7 billion increase in cash provided was primarily due to: (i) a $7.3 billion increase in cash received from the net sale of Sigma Fund investments, and (ii) an $18 million increase in proceeds received from the disposition of property, plant and equipment, partially offset by: (i) a $4.0 billion increase in cash used for acquisitions and investments, (ii) a $399 million increase in net purchases of short-term investments, (iii) a $177 million decrease in proceeds from the sales of investments and businesses, and (iv) a $21 million increase in capital expenditures.

Sigma Fund:  The Company and its wholly-owned subsidiaries invest most of their excess cash in a fund (the “Sigma Fund”) that is similar to a money market fund. During the second quarter of 2007, the Company liquidated a similar fund, Sigma Fund II, resulting in a single remaining fund. The Company received $7.3 billion in net cash from the proceeds of the sales of Sigma Funds investments in the first half of 2007, compared to $66 million in net cash from the proceeds of the sales of Sigma Funds investments in the first half of 2006. The Sigma Fund balance was $4.9 billion at June 30, 2007, compared to $12.2 billion at December 31, 2006. At June 30, 2007, $1.5 billion of the Sigma Fund investments were held in the U.S. and $3.4 billion were held by the Company or its subsidiaries in other countries.

The Sigma Fund portfolio is managed by four major outside investment management firms and includes investments in high quality (rated at least A/A-1 by S&P or A2/P-1 by Moody’s at purchase date), U.S. dollar-denominated debt obligations including certificates of deposit, bankers’ acceptances and fixed time deposits, government obligations, asset-backed securities and commercial paper or short-term corporate obligations. The Sigma Fund investment policies require that floating rate instruments acquired must have a maturity at purchase date that does not exceed thirty-six months with an interest rate reset at least annually. The average maturity of the investments held by the fund must be 120 days or less with the actual average maturity of the investments being 56 days and 53 days at June 30, 2007 and December 31, 2006, respectively. Certain investments with maturities beyond one year have been classified as short-term based on their highly-liquid nature and because such marketable securities represent the investment of cash that is available for current operations.

Strategic Acquisitions and Investments:  The Company used cash for acquisitions and new investment activities of $4.2 billion in the first half of 2007, compared to cash used of $249 million in the first half of 2006. During the first half of 2007, the Company completed five strategic acquisitions for an aggregate of approximately $4.2 billion in net cash, including the acquisitions of: (i) Symbol Technologies, Inc. (part of the Enterprise Mobility Solutions segment) in January 2007 for approximately $3.5 billion, (ii) Good Technology, Inc. (part of the Enterprise Mobility Solutions segment) in January 2007 for approximately $438 million, (iii) Netopia, Inc. (part of the Home and Networks Mobility segment) in February 2007 for approximately $183 million, (iv) Tut Systems, Inc. (part of the Home and Networks Mobility segment) in March 2007, and (v) Modulus Video, Inc. (part of the Home and Networks Mobility segment) in June 2007. The largest components of the $249 million in cash used during the first half of 2006 were: (i) $108 million for the acquisition of Kreatel Communications AB (part of the Home and Networks Mobility segment), and (ii) the acquisition of Orthogon Systems (part of the Enterprise Mobility Solutions segment).

Short-Term Investments:  At June 30, 2007, the Company had $1.1 billion in short-term investments (which are highly-liquid fixed-income investments with an original maturity greater than three months but less than one year), compared to $620 million of short-term investments at December 31, 2006.

Capital Expenditures:  Capital expenditures in the first half of 2007 were $270 million, compared to $249 million in the first half of 2006. The Company’s emphasis in making capital expenditures is to focus on strategic investments driven by customer demand and new design capability.

Sales of Investments and Businesses:  The Company received $61 million in proceeds from the sales of investments and businesses in the first half of 2007, compared to proceeds of $238 million in the first half of 2006. The $61 million in proceeds in the first half of 2007 was primarily comprised of $39 million of net proceeds received in connection with the prior sale of the automotive electronics business upon the satisfaction of certain closing conditions. The $238 million in proceeds in the first half of 2006 was primarily comprised of $175 million from the sale of the Company’s remaining shares in Telus Corporation.

Available-For-Sale Securities:  In addition to available cash and cash equivalents, Sigma Fund investments and short-term investments, the Company views its available-for-sale securities as an additional source of liquidity. The majority of these securities represent investments in technology companies and, accordingly, the fair market values of these securities are subject to substantial price volatility. In addition, the realizable value of these securities is subject to market and other conditions. At June 30, 2007, the Company’s available-for-sale securities portfolio had an approximate fair market value of $509 million, which represented a cost basis of $358 million and a net unrealized gain of

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MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

$151 million, predominantly representing the Company’s investment in Clearwire Corporation. At December 31, 2006, the Company’s available-for-sale securities portfolio had an approximate fair market value of $130 million, which represented a cost basis of $70 million and a net unrealized gain of $60 million.

Financing Activities

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

Net cash used for financing activities was $2.5 billion in the first half of 2007, compared to net cash used for financing activities of $1.4 billion in the first half of 2006. Cash used for financing activities in the first half of 2007 was primarily: (i) $2.4 billion of cash used for the purchase of the Company’s common stock under the share repurchase program, (ii) $239 million of cash used to pay dividends, (iii) $172 million of cash used for the repayment of debt, and (iv) $62 million in distributions to discontinued operations, partially offset by proceeds of: (i) $212 million received from the issuance of common stock in connection with the Company’s employee stock option plans and employee stock purchase plan, (ii) $97 million in net cash received from the issuance of commercial paper and short-term borrowings, and (iii) $17 million in excess tax benefits from stock-based compensation.

Cash used for financing activities in the first half of 2006 was primarily: (i) $1.7 billion of cash used for the purchase of the Company’s common stock under the share repurchase program, and (ii) $199 million of cash used to pay dividends, partially offset by proceeds of: (i) $336 million received from the issuance of common stock in connection with the Company’s employee stock option plans and employee stock purchase plan, (ii) $66 million in excess tax benefits from stock-based compensation, and (iii) $42 million in net cash received from the issuance of commercial paper and short-term borrowings.

Short-term Debt:  At June 30, 2007, the Company’s outstanding notes payable and current portion of long-term debt was $1.8 billion, compared to $1.7 billion at December 31, 2006. During the first half of 2007, $114 million of 6.50% Senior Notes due March 1, 2008 (the “2008 6.50% Notes”) were reclassified to the current portion of long-term debt. Net cash proceeds from commercial paper and short-term borrowings were $97 million in the first half of 2007, compared to net cash proceeds of $42 million in the first half of 2006. At June 30, 2007 and December 31, 2006, the Company had $300 million of outstanding commercial paper. The Company currently expects its outstanding commercial paper balances to average approximately $300 million throughout 2007.

Long-term Debt:  At June 30, 2007, the Company had outstanding long-term debt of $2.6 billion compared to $2.7 billion outstanding at December 31, 2006. The change can be primarily attributed to the reclassification of the $114 million of 2008 6.50% Notes to the current portion of long-term debt. Given the Company’s cash position, it may from time to time seek to opportunistically retire certain of its outstanding debt through open market cash purchases, privately-negotiated transactions or otherwise. Such repurchases, if any, will depend on prevailing market conditions, the Company’s liquidity requirements, contractual restrictions and other factors.

Redemptions and Repurchases of Outstanding Debt Securities:   In January 2007, the Company repaid, at maturity, all $118 million aggregate principal amount outstanding of its 7.6% Notes due January 1, 2007.

Share Repurchase Programs:  In July 2006, the Board of Directors authorized the Company to repurchase up to $4.5 billion of its outstanding shares of common stock over a period of up to 36 months ending in June 2009, subject to market conditions (the “2006 Stock Repurchase Program”). In March 2007, the Board of Directors authorized a $3.0 billion increase in the 2006 Stock Repurchase Program, over the same timeframe. This increased the total size of the 2006 Stock Repurchase Program to an aggregate of $7.5 billion.

In March 2007, the Company announced that it had entered into an accelerated stock buyback agreement to repurchase $2.0 billion of its outstanding shares of common stock (the “March 2007 ASB”). In connection with the March 2007 ASB, the Company received 68 million shares in the first quarter of 2007 and an additional 34.4 million shares in the second quarter of 2007. The 102.4 million shares received to date represents the minimum number of shares to be received under the March 2007 ASB. The number of additional shares the Company may receive over the remaining term of the March 2007 ASB, which expires in the fourth quarter of 2007, will generally be based upon the volume-weighted average price of the Company’s common stock during that term, subject to the collar provisions that establish the minimum and maximum number of shares.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

During the first half of 2007, the Company spent an aggregate of $2.4 billion, including transaction costs, to repurchase approximately 121.4 million common shares (including the 102.4 million shares received to date under the March 2007 ASB) at an average price of $19.41.

Since announcing its first-ever share repurchase program in May 2005, the Company has repurchased a total of 335 million common shares for an aggregate cost of $7.1 billion, including transaction costs. All repurchased shares have been retired. As of June 30, 2007, the Company had remaining authorization for approximately $4.4 billion of future share repurchases under the 2006 Stock Repurchase Program.

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

Name of					Commercial		Date of
Agency	Rating		Outlook		Paper		Last Action	Last Action Taken
Fitch		BBB+		negative		F-2	March 22, 2007	Downgraded long-term debt to BBB+ (negative outlook), from A− (stable outlook); Downgraded commercial paper to F-2 from F-1
Moody’s		Baa1		negative		P-2	July 13, 2007	Changed outlook to negative from stable
S&P		A−		credit watch negative		A-2	July 12, 2007	Long-term debt put on credit watch negative

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

The Company continues to have access to the commercial paper and long-term debt markets. The Company has generally maintained commercial paper balances of between $300 million and $400 million for the past four years.

As further described under “Customer Financing Arrangements” below, for many years the Company has utilized a number of receivables programs to sell a broadly-diversified group of short-term receivables to third parties. Certain of the short-term receivables are sold to a multi-seller commercial paper conduit. This program provides for up to $500 million of short-term receivables to be outstanding with the conduit at any time. The obligations of the conduit to continue to purchase receivables under this short-term receivables program could be terminated if the Company’s long-term debt was rated lower than “BB+” by S&P or “Ba1” by Moody’s (which would be a decline of four levels from the current Moody’s rating). If this short-term receivables program were terminated, the Company would no longer be able to sell its short-term receivables to the conduit in this manner, but it would not have to repurchase previously-sold receivables.

Credit Facilities

At June 30, 2007, the Company’s total domestic and non-U.S. credit facilities totaled $4.1 billion, of which $316 million was considered utilized. These facilities are principally comprised of: (i) a $2.0 billion five-year revolving domestic credit facility maturing in December 2011 (the “5-Year Credit Facility”) which is not utilized, and (ii) $2.1 billion of non-U.S. credit facilities (of which $316 million was considered utilized at June 30, 2007). Unused availability under the existing credit facilities, together with available cash, cash equivalents, Sigma Fund balances, short-term investments and other sources of liquidity, are generally available to support outstanding commercial paper, which was $300 million at June 30, 2007.

In order to borrow funds under the 5-Year Credit Facility, the Company must be in compliance with various conditions, covenants and representations contained in the agreements. Important terms of the 5-Year Credit Facility include a covenant relating to the ratio of total debt to EBITDA. The Company was in compliance with the terms of the 5-Year Credit Facility at June 30, 2007. The Company has never borrowed under its domestic revolving credit facilities. Utilization of the non-U.S. credit facilities may also be dependent on the Company’s ability to meet certain conditions at the time a borrowing is requested.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Customer Financing Commitments and Guarantees

Outstanding Commitments  Certain purchasers of the Company’s infrastructure equipment continue to request that suppliers provide financing in connection with equipment purchases. These requests may include all or a portion of the purchase price of the equipment. Periodically, the Company makes commitments to provide financing to purchasers in connection with the sale of equipment. However, the Company’s obligation to provide financing is often conditioned on the issuance of a letter of credit in favor of the Company by a reputable bank to support the purchaser’s credit or a pre-existing commitment from a reputable bank to purchase the receivable from the Company. The Company had outstanding commitments to extend credit to third-parties totaling $330 million at June 30, 2007, compared to $398 million at December 31, 2006. Of these amounts, $262 million was supported by letters of credit or by bank commitments to purchase receivables at both June 30, 2007 and December 31, 2006.

Guarantees of Third-Party Debt:  In addition to providing direct financing to certain equipment customers, the Company also assists customers in obtaining financing directly from banks and other sources to fund equipment purchases. The Company had committed to provide financial guarantees relating to customer financing totaling $28 million and $122 million at June 30, 2007 and December 31, 2006, respectively (including $20 million and $19 million, respectively, relating to the sale of short-term receivables). Customer financing guarantees outstanding were $4 million and $47 million at June 30, 2007 and December 31, 2006, respectively (including $2 million relating to the sale of short-term receivables at both June 30, 2007 and December 31, 2006).

Customer Financing Arrangements

Outstanding Finance Receivables:  The Company had net finance receivables of $122 million at June 30, 2007, compared to $269 million at December 31, 2006 (net of allowances for losses of $9 million at June 30, 2007 and $10 million at December 31, 2006). These finance receivables are generally interest bearing, with rates ranging from 4% to 14%. Interest income recognized on finance receivables was $2 million for the second quarters of both 2007 and 2006 and $4 million for the first halves of both 2007 and 2006.

Sales of Receivables and Loans:  From time to time, the Company sells short-term receivables, long-term loans and lease receivables under sales-type leases (collectively, “finance receivables”) to third parties in transactions that qualify as “true-sales.” Certain of these finance receivables are sold to third parties on a one-time, non-recourse basis, while others are sold to third parties under committed facilities that involve contractual commitments from these parties to purchase qualifying receivables up to an outstanding monetary limit. Committed facilities may be revolving in nature. Certain sales may be made through separate legal entities that are also consolidated by the Company. The Company may or may not retain the obligation to service the sold finance receivables.

In the aggregate, at both June 30, 2007 and December 31, 2006, these committed facilities provided for up to $1.3 billion to be outstanding with the third parties at any time. As of June 30, 2007, $662 million of these committed facilities were utilized, compared to $817 million utilized at December 31, 2006. Certain events could cause one of these facilities to terminate. In addition, before receivables can be sold under certain of the committed facilities they may need to meet contractual requirements, such as credit quality or insurability.

Total finance receivables sold by the Company were $1.3 billion and $2.8 billion for the three and six months ended June 30, 2007, respectively (including $1.3 billion and $2.7 billion, respectively, of short-term receivables), compared to $1.6 billion and $2.8 billion sold for the three and six months ended July 1, 2006, respectively (including $1.5 billion and $2.7 billion, respectively, of short-term receivables). As of June 30, 2007, there were $1.0 billion of these sold receivables outstanding for which the Company retained servicing obligations (including $709 million of short-term receivables), compared to $1.1 billion outstanding at December 31, 2006 (including $789 million of short-term receivables).

Under certain of the receivables programs, the value of the receivables sold is covered by credit insurance obtained from independent insurance companies, less deductibles or self-insurance requirements under the policies (with the Company retaining credit exposure for the remaining portion). The Company’s total credit exposure to outstanding short-term receivables that have been sold was $20 million and $19 million at June 30, 2007 and December 31, 2006, respectively. Reserves of $2 million and $4 million were recorded for potential losses on sold receivables at June 30, 2007 and December 31, 2006, respectively.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Other Contingencies

Potential Contractual Damage Claims in Excess of Underlying Contract Value:  In certain circumstances, our businesses may enter into contracts with customers pursuant to which the damages that could be claimed by the other party for failed performance might exceed the revenue the Company receives from the contract. Contracts with these sorts of uncapped damage provisions are fairly rare, but individual contracts could still represent meaningful risk. There is a possibility that a damage claim by a counterparty to one of these contracts could result in expenses to the Company that are far in excess of the revenue received from the counterparty in connection with the contract.

Legal Matters:  The Company has several lawsuits filed against it relating to the Iridium program, as further described under Part II, Item 1: Legal Proceedings of this document. The Company has not reserved for any potential liability that may arise as a result of U.S. litigation related to the Iridium program. While the still pending cases are in preliminary stages and the outcomes are not predictable, an unfavorable outcome in one or more of these cases could have a material adverse effect on the Company’s consolidated financial position, liquidity or results of operations.

The Company is a defendant in various other lawsuits, including product-related suits, and is subject to various claims which arise in the normal course of business. In the opinion of management, and other than discussed above with respect to the still pending Iridium cases, the ultimate disposition of these matters will not have a material adverse effect on the Company’s consolidated financial position, liquidity or results of operations.

Segment Information

The following commentary should be read in conjunction with the financial results of each reporting segment for the three and six months ended June 30, 2007 and July 1, 2006 as detailed in Note 8, “Segment Information,” of the Company’s condensed consolidated financial statements.

Mobile Devices Segment

The Mobile Devices segment designs, manufactures, sells and services wireless handsets with integrated software and accessory products, and licenses intellectual property. For the second quarter of 2007, the segment’s net sales represented 49% of the Company’s consolidated net sales, compared to 66% in the second quarter of 2006. For the first half of 2007, the segment’s net sales represented 53% of the Company’s consolidated net sales, compared to 66% in the first half of 2006.

	Three Months Ended								Six Months Ended
	June 30,			July 1,					June 30,			July 1,
(Dollars in millions)	2007			2006		% Change			2007			2006		% Change
Segment net sales	$	4,273		$	7,140		(40	)%	$	9,681		$	13,543		(29	)%
Operating earnings (loss)		(332	)		804		***			(565	)		1,506		***

*** Percentage change is not meaningful.

Three months ended June 30, 2007 compared to three months ended July 1, 2006

In the second quarter of 2007, the segment’s net sales were $4.3 billion, a decrease of 40% compared to net sales of $7.1 billion in the second quarter of 2006. The 40% decrease in net sales was primarily driven by a 31% decrease in unit shipments and a 14% decrease in average selling price (“ASP”) compared to the year-ago quarter. Mobile Devices was negatively affected by a difficult pricing environment and the segment’s limited portfolio of third-generation (“3G”) and multimedia products. On a product technology basis, net sales of products for GSM, CDMA and iDEN technologies decreased and net sales of products for 3G technologies increased. On a geographic basis, net sales decreased in all regions. During the second quarter of 2007, Mobile Devices continued its efforts to rebalance its market share and profitability objectives and placed a greater emphasis on improved profitability. These efforts were initiated in the first quarter of 2007.

The segment incurred an operating loss of $332 million in the second quarter of 2007, compared to operating earnings of $804 million in the second quarter of 2006. The operating loss was primarily due to the decrease in gross margin, driven by: (i) the 40% decline in net sales, and (ii) an unfavorable shift in product mix, partially offset by savings from supply chain cost-reduction initiatives. Also contributing to the decrease in operating earnings were increases in: (i) research and development (“R&D”) expenditures, as a result of an increase in developmental engineering for new

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MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

products and software, as well as ongoing investment in next-generation technologies, and (ii) reorganization of business charges relating to employee severance costs, partially offset by a decrease in selling, general and administrative (“SG&A”) expenses, driven primarily by lower marketing expenses. As a percentage of net sales in the second quarter of 2007 as compared to the second quarter of 2006, gross margin and operating margin decreased, and SG&A expenses and R&D expenditures increased. The segment’s industry typically experiences short life cycles for new products. Therefore, it is vital to the segment’s success that new, compelling products are constantly introduced. Accordingly, a strong commitment to R&D is required to fuel long-term growth.

Unit shipments in the second quarter of 2007 were 35.5 million units, a 31% decrease compared to shipments of 51.9 million units in the second quarter of 2006. With the decrease in the segment’s unit shipments, the segment estimates its worldwide market share to be approximately 13% in the second quarter of 2007, a decrease of approximately 9 percentage points versus the second quarter of 2006 and a decrease of approximately 4 percentage points versus the first quarter of 2007.

In the second quarter of 2007, ASP decreased approximately 14% compared to the second quarter of 2006 and remained relatively flat compared to the first quarter of 2007. 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 June 30, 2007 compared to six months ended July 1, 2006

In the first half of 2007, the segment’s net sales were $9.7 billion, a decrease of 29% compared to net sales of $13.5 billion in the first half of 2006. The 29% decrease in net sales was primarily driven by a 17% decrease in unit shipments and a 14% decrease in ASP. Mobile Devices was negatively affected by a difficult pricing environment and the segment’s limited portfolio of 3G and multimedia products. On a product technology basis, net sales of products for GSM and iDEN technologies decreased and net sales of products for CDMA and 3G technologies increased. On a geographic basis, net sales decreased in all regions.

The segment incurred an operating loss of $565 million in the first half of 2007, compared to operating earnings of $1.5 billion in the first half of 2006. The operating loss was primarily due to the decrease in gross margin, driven by: (i) the 29% decline in net sales, and (ii) an unfavorable shift in product mix, partially offset by savings from supply chain cost-reduction initiatives. Also contributing to the decrease in operating earnings were increases in: (i) R&D expenditures, as a result of an increase in developmental engineering for new products and software, as well as ongoing investment in next-generation technologies, (ii) SG&A expenses, primarily due to increased expenditures on information technology upgrades and increased selling expenses, and (iii) reorganization of business charges relating to employee severance costs. As a percentage of net sales in the first half of 2007 as compared to the first half of 2006, gross margin and operating margin decreased, and SG&A expenses and R&D expenditures increased.

Home and Networks Mobility Segment

The Home and Networks Mobility segment designs, manufactures, sells, installs and services: (i) end-to-end digital video system solutions and interactive set-tops (“digital entertainment devices”), (ii) voice and data modems for digital subscriber line and cable networks (“broadband gateways”), (iii) wireline broadband access systems, and (iv) wireless access systems (“wireless networks”), including cellular infrastructure systems, to cable and satellite television operators, wireline carriers and wireless service providers. For the second quarter of 2007, the segment’s net sales represented 29% of the Company’s consolidated net sales, compared to 22% in the second quarter of 2006. For the first half of 2007, the segment’s net sales represented 27% of the Company’s consolidated net sales, compared to 22% in the first half of 2006.

	Three Months Ended							Six Months Ended
	June 30,		July 1,					June 30,		July 1,
(Dollars in millions)	2007		2006		% Change			2007		2006		% Change
Segment net sales	$	2,564	$	2,343		9	%	$	4,901	$	4,458		10	%
Operating earnings (loss)		191		222		(14	)%		358		383		(7	)%

Three months ended June 30, 2007 compared to three months ended July 1, 2006

In the second quarter of 2007, the segment’s net sales increased 9% to $2.6 billion, compared to $2.3 billion in the second quarter of 2006. The 9% increase in net sales primarily reflects higher net sales of digital entertainment devices

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MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

and broadband gateways, partially offset by lower net sales of wireless networks. Net sales of digital entertainment devices increased 51%, reflecting increased demand for digital set-tops, including high-definition/digital video recorder (“HD/DVR”) set-tops, and Internet Protocol television (“IPTV”) devices, partially offset by a decline in ASPs due to a product mix shift towards all digital set-tops. Unit shipments of digital entertainment devices increased 74% to 4.2 million units. During the second quarter, the segment began shipping digital set-tops that support the Federal Communication Commission (“FCC”) — mandated separable security requirement. Also contributing to the increase in net sales was a 20% increase in net sales of broadband gateways, primarily due to: (i) higher demand for voice modems, and (ii) higher net sales of data modems, driven by net sales from the recently acquired Netopia business. The segment continues to be the worldwide leader in market share for digital entertainment devices and broadband data gateways. These increases were partially offset by a 7% decrease in net sales of wireless networks, primarily driven by lower demand for iDEN infrastructure equipment in North America.

On a geographic basis, the 9% increase in net sales was primarily driven by higher net sales in North America and Asia, partially offset by lower net sales in the Europe, Middle East and Africa region (“EMEA”). The increase in net sales in North America was driven primarily by higher net sales of digital entertainment devices, partially offset by lower demand for iDEN infrastructure equipment. The increase in net sales in Asia was primarily due to higher demand for GSM infrastructure equipment despite the continuing competitive pricing pressure. The decrease in net sales in EMEA was primarily due to continuing competitive pricing pressure on GSM infrastructure equipment. Net sales in North America continue to comprise a significant portion of the segment’s business, accounting for approximately 55% of the segment’s total net sales in the second quarter of 2007, compared to approximately 54% of the segment’s total net sales in the second quarter of 2006.

The segment reported operating earnings of $191 million in the second quarter of 2007, compared to operating earnings of $222 million in the second quarter of 2006. The decrease in operating earnings was primarily due to the decrease in gross margin, driven by: (i) continued competitive pricing pressure on GSM infrastructure equipment, and (ii) lower demand for iDEN infrastructure equipment in North America, partially offset by the increase in demand for digital entertainment devices. SG&A expenses increased, primarily due to expenses of recently acquired businesses, partially offset by savings from cost-reduction initiatives. R&D expenditures decreased primarily due to savings from cost-reduction initiatives, partially offset by expenditures of recently acquired businesses and continued investment in digital entertainment devices and WiMAX. As a percentage of net sales in the second quarter of 2007 as compared to the second quarter of 2006, gross margin, SG&A expenses, R&D expenditures and operating margin decreased. The segment’s gross margin percentages differ among its services, software and equipment products. Accordingly, the aggregate gross margin of the segment can fluctuate from period to period depending upon the relative mix of sales in the given period.

During the second quarter of 2007, the segment completed the acquisition of Modulus Video, Inc., a provider of MPEG-4 Advanced Coding (“AVC”) compression systems designed for delivery of high value video content in the IPTV, cable, broadcast and satellite marketplace.

After the end of the second quarter of 2007, the segment: (i) announced its intention to acquire Leapstone Systems, Inc., a provider of intelligent multimedia service delivery and content management solutions to networks operators, and (ii) completed the acquisition of Terayon Communication Systems, Inc., a provider of real-time digital video networking applications to cable, satellite and telecommunication service providers worldwide.

Six months ended June 30, 2007 compared to six months ended July 1, 2006

In the first half of 2007, the segment’s net sales increased 10% to $4.9 billion, compared to $4.5 billion in the first half of 2006. The 10% increase in net sales primarily reflects higher net sales of digital entertainment devices and broadband gateways, partially offset by lower net sales of wireless networks. Net sales of digital entertainment devices increased 54%, reflecting increased demand for digital set-tops, including HD/DVR set-tops, and IPTV devices, partially offset by a decline in ASP due to a product mix shift towards all-digital set-tops. Unit shipments of digital entertainment devices increased 104% to 9.1 million units. Also contributing to the increase in net sales was an 11% increase in net sales of broadband gateways, primarily due to: (i) higher demand for voice modems, and (ii) higher net sales of data modems, driven by net sales from the recently acquired Netopia business. These increases were partially offset by a 6% decrease in net sales of wireless networks, primarily driven by lower demand for iDEN infrastructure equipment in North America and continuing competitive pricing pressure on GSM infrastructure equipment.

FCC regulations mandating the separation of security functionality from set-tops went into effect on July 1, 2007. As a result of these regulations, many cable service providers accelerated their purchases of set-tops in the first half of 2007.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Accordingly, although the segment expects continued growth in net sales of digital entertainment devices, it expects the pace of that growth to be slower in the second half of 2007 than it was in the first half of 2007.

On a geographic basis, the 10% increase in net sales was primarily driven by higher net sales in North America and Asia, partially offset by lower net sales in EMEA. The increase in net sales in North America was driven primarily by higher sales of digital entertainment devices, partially offset by lower demand for iDEN infrastructure equipment. The increase in net sales in Asia was primarily due to increased demand for GSM infrastructure equipment despite the continuing competitive pricing pressure. The decrease in EMEA was primarily due to continuing competitive pricing pressure on GSM infrastructure equipment. Net sales in North America continue to comprise a significant portion of the segment’s business, accounting for approximately 58% of the segment’s total net sales in the first half of 2007, compared to approximately 55% of the segment’s total net sales in the first half of 2006.

The segment reported operating earnings of $358 million in the first half of 2007, compared to operating earnings of $383 million in the first half of 2006. The decrease in operating earnings was primarily due to the decrease in gross margin, driven by: (i) continued competitive pricing pressure on GSM infrastructure equipment, and (ii) lower demand for iDEN infrastructure equipment in North America, partially offset by: (i) the increase in demand for digital entertainment devices, and (ii) the reversal of reorganization of business accruals recorded in 2006 relating to employee severance which are no longer needed. SG&A expenses increased, primarily due to expenses of recently acquired businesses, partially offset by savings from cost-reduction initiatives. R&D expenditures decreased, primarily due to savings from cost-reduction initiatives, partially offset by expenditures of recently acquired businesses and continued investment in digital entertainment devices and WiMAX. As a percentage of net sales in the first half of 2007 as compared to the first half of 2006, gross margin, SG&A expenses, R&D expenditures and operating margin decreased.

In addition to the 2007 acquisitions noted above, during the first quarter of 2007 the segment completed the acquisitions of: (i) Netopia, Inc., a broadband equipment provider for DSL customers, which allows for phone, TV and fast Internet connections, and (ii) Tut Systems, Inc., a leading developer of edge routing and video encoders. These acquisitions enhance our ability to provide a complete end-to-end solution for the delivery of advanced video, voice and data services.

Enterprise Mobility Solutions Segment

The Enterprise Mobility Solutions segment designs, manufactures, sells, installs and services analog and digital two-way radio, voice and data communications products and systems for private networks, wireless broadband systems and end-to-end enterprise mobility solutions to a wide range of enterprise markets, including government and public safety (which, together with all sales to distributors of two-way communications products, is referred to as the “government and public safety market”), as well as utility, transportation, retail and other commercial customers (which, collectively are referred to as the “commercial enterprise market”). For the second quarter of 2007, the segment’s net sales represented 22% of the Company’s consolidated net sales, compared to 13% in the second quarter of 2006. For the first half of 2007, the segment’s net sales represented 20% of the Company’s consolidated net sales, compared to 12% in the first half of 2006.

	Three Months Ended							Six Months Ended
	June 30,		July 1,					June 30,		July 1,
(Dollars in millions)	2007		2006		% Change			2007		2006		% Change
Segment net sales	$	1,920	$	1,355		42	%	$	3,637	$	2,492		46	%
Operating earnings (loss)		303		239		27	%		434		381		14	%

Three months ended June 30, 2007 compared to three months ended July 1, 2006

In the second quarter of 2007, the segment’s net sales increased 42% to $1.9 billion, compared to $1.4 billion in the second quarter of 2006. The net sales in the commercial enterprise market have increased significantly, driven by net sales from the recently acquired Symbol business. The net sales in the government and public safety market increased 5%, primarily due to increased net sales to U.S. government agencies. The 42% increase in net sales reflects higher net sales in all geographic regions. Net sales in North America continue to comprise a significant portion of the segment’s business, accounting for 63% of the segment’s total net sales in the second quarter of 2007, compared to 64% in the second quarter of 2006.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The segment reported operating earnings of $303 million in the second quarter of 2007, compared to operating earnings of $239 million in the second quarter of 2006. The increase in operating earnings was primarily due to the increase in gross margin from the commercial enterprise market, which was driven by net sales from the recently acquired Symbol business. This improvement in gross margin was partially offset by increases in SG&A and R&D expenses, primarily due to expenses from recently acquired businesses. As a percentage of net sales in the second quarter of 2007 as compared to the second quarter of 2006, gross margin, R&D expenditures and operating margin decreased, and SG&A expenses increased.

Six months ended June 30, 2007 compared to six months ended July 1, 2006

In the first half of 2007, the segment’s net sales increased 46% to $3.6 billion, compared to $2.5 billion in the first half of 2006. The net sales in the commercial enterprise market have increased significantly, driven by the net sales from the recently acquired Symbol business. The net sales in the government and public safety market increased 9%, primarily due to increased net sales to U.S. government agencies. The 46% increase in net sales reflects higher net sales in all geographic regions. Net sales in North America continue to comprise a significant portion of the segment’s business, accounting for approximately 62% of the segment’s total net sales in the first half of 2007, compared to approximately 64% in the first half of 2006.

The segment reported operating earnings of $434 million in the first half of 2007, compared to operating earnings of $381 million in the first half of 2006. The increase in operating earnings was primarily due to the increase in gross margin from the commercial enterprise market, which was driven by net sales from the recently acquired Symbol business. This improvement in gross margin was partially offset by: (i) an inventory-related charge in connection with the acquisition of Symbol, and (ii) an increase in SG&A and R&D expenses, primarily due to expenses from recently acquired businesses. As a percentage of net sales in the first half of 2007 as compared to the first half of 2006, gross margin, R&D expenditures and operating margin decreased, and SG&A expenses increased.

During the first quarter of 2007, the Company completed the acquisition of Symbol Technologies, Inc. (“Symbol”), a leader in designing, developing, manufacturing and servicing products and systems used in end-to-end enterprise mobility solutions. Symbol’s offerings feature rugged mobile computing, advanced data capture, radio frequency identification (“RFID”), wireless infrastructure and mobility management. Symbol has become the cornerstone of the segment’s strategy to enable the mobile enterprise within the commercial enterprise market. Key elements in the segment’s enterprise mobility strategy include offering a comprehensive portfolio of products and services to help businesses: (i) streamline their supply chains, (ii) improve customer service in the field, (iii) increase data collection accuracy, and (iv) enhance worker productivity. Results of operations of Symbol have been included in the segment’s results since the acquisition date.

During the first quarter of 2007, the Company also completed the acquisition of Good Technology, Inc., a leader in enterprise mobile computing software and service, to extend the segment’s mobile computing capabilities while also increasing the segment’s client base.

Significant Accounting Policies

Management’s Discussion and Analysis of Financial Condition and Results of Operations addresses 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

— Allowance for losses on finance receivables

42

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

— Inventory valuation reserves

— Taxes on income

— Valuation of investments and long-lived assets

— Restructuring activities

— Retirement-related benefits

In the second quarter of 2007, there has been no change in the above critical accounting policies or the underlying accounting assumptions and estimates used in the above critical accounting policies.

Recent Accounting Pronouncements

The Company adopted Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”) effective January 1, 2007. Among other things FIN 48 prescribes a “more-likely-than-not” threshold to the recognition and derecognition of tax positions, provides guidance on the accounting for interest and penalties relating to tax positions and requires that the cumulative effect of applying the provisions of FIN 48 shall be reported as an adjustment to the opening balance of retained earnings or other appropriate components of equity or net assets in the statement of financial position. The adoption of FIN 48 resulted in an increase in the opening balance of retained earnings of $27 million and additional paid in capital of $93 million. Upon adoption of FIN 48 the Company also reclassified unrecognized tax benefits of $877 million from Deferred income taxes to Other liabilities.

In June 2006, the FASB issued EITF 06-3, “How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross versus Net Presentation)” (“EITF 06-3”). EITF 06-3 concluded that the presentation of taxes imposed on revenue-producing transactions (sales, use, value added and excise taxes) on either a gross (included in revenues and costs) or a net (excluded from revenues) basis is an accounting policy that should be disclosed pursuant to Accounting Principles Board Opinion No. 22. As of January 1, 2007, the Company has adopted pursuant to EITF 06-3 a policy that revenue-producing transactions are recorded on a net basis. The adoption of this policy has not changed the way the Company has historically recorded such taxes.

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

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans” (“SFAS 158”). SFAS 158 has certain recognition and disclosure requirements which the Company adopted as of December 31, 2006. Additionally, SFAS 158 requires employers to measure defined benefit plan assets and obligations as of the date of the statement of financial position. This measurement date provision is effective for fiscal years ending after December 31, 2008. The Company does not believe the impact of the change in measurement date will be material to its consolidated financial statements.

In September 2006, the FASB issued EITF 06-4, “Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements” (“EITF 06-4”). EITF 06-4 requires that endorsement split-dollar life insurance arrangements which provide a benefit to an employee beyond the postretirement period be recorded in accordance with SFAS No. 106, “Employer’s Accounting for Postretirement Benefits Other Than Pensions” or APB Opinion No. 12, “Omnibus Opinion—1967” based on the substance of the agreement with the employee. Under the provisions of these Statements, a liability should be accrued equal to the actuarial present value of the future death benefit over the service period. EITF 06-4 is effective for fiscal years beginning after December 15, 2007. The effects of applying EITF 06-4 may be reflected either as a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption or through retrospective application to all prior periods. The Company is currently assessing the impact of EITF 06-4 on its consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value as required by other accounting pronouncements and expands

43

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

fair value measurement disclosures. SFAS 157 is effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating the impact of SFAS 157 on the Company’s consolidated financial statements.

Realignment of Segments

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

Reclassifications and Immaterial Adjustments

As described in a Form 8-K filed on July 17, 2007, the Company has made two immaterial adjustments to our previously filed consolidated financial statements. The Form 8-K filed on July 17, 2007 presented the Company’s 2004, 2005, 2006 and first quarter 2007 financial information reflecting the recently identified immaterial adjustments. The impact of these adjustments to the condensed consolidated financial statements and related notes reported in this Form 10-Q are detailed below:

•  The first adjustment has a minor offsetting impact on the Condensed Consolidated Statements of Operations. The immaterial adjustment relates solely to the elimination of inter-segment sales relating to a business in our Home and Networks Mobility segment. The impact of the immaterial adjustment was $56 million and $32 million for the three and six months ended July 1, 2006, respectively, between Net sales and Costs of sales and has no impact on Gross margin, Operating earnings or any other financial statement line items. The adjustment has no impact on the Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Stockholders’ Equity or Condensed Consolidated Statements of Cash Flows.

•  The second adjustment has a minor impact on the Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Cash Flows. The immaterial adjustment relates solely to a $396 million change in classification of certain deposits between Cash and cash equivalents and Short-term investments at December 31, 2006. The resulting impact on the Condensed Consolidated Statements of Cash Flows for the six months ending June 30, 2007 was a $396 million adjustment to Purchases of short-term investments, which resulted in a change to the Net decrease in cash and cash equivalents for the period, but has no impact on net cash provided by operating activities. The adjustment has no impact on the Company’s Condensed Consolidated Statements of Operations or Condensed Consolidated Statements of Stockholders’ Equity.

Effective in the fourth quarter 2006, the Company reflects costs associated with the amortization of intangible assets and in-process research and development at the corporate level rather than at the business segment level. Accordingly, these costs have been reclassified in prior period financial statements from the corresponding business segment to Other and Eliminations to conform to the current period presentation. In addition, certain costs associated with amortization of intangible assets, information technology development and new product introduction costs have been reclassified between statement lines in the consolidated statements of operations in the prior period financial statements to conform to the current period presentation.

44

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency Risk

As a multinational company, the Company’s transactions are denominated in a variety of currencies. The Company uses financial instruments to reduce its overall exposure to the effects of currency fluctuations on cash flows. The Company’s policy prohibits speculation in financial instruments for profit on the exchange rate price fluctuation, trading in currencies for which there are no underlying exposures, or entering into trades for any currency to intentionally increase the underlying exposure. Instruments that are designated as part of a hedging relationship must be effective at reducing the risk associated with the exposure being hedged and are designated as a part of a hedging relationship at the inception of the contract. Accordingly, changes in market values of hedge instruments must be highly correlated with changes in market values of underlying hedged items both at the inception of the hedge and over the life of the hedge contract. During the second quarter, certain hedged forecasted transactions were no longer probable. As a result, the hedging relationship was de-designated on the underlying instruments, resulting in a gain of $8 million which was included in Foreign currency gain in Other within Other income in the Company’s condensed consolidated statements of operations.

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

At June 30, 2007 and December 31, 2006, the Company had net outstanding foreign exchange contracts totaling $4.0 billion and $4.8 billion, respectively. Management believes that these financial instruments should not subject the Company to undue risk due to foreign exchange movements because gains and losses on these contracts should offset losses and gains on the underlying assets, liabilities and transactions, except for the ineffective portion of the instruments, which are charged to Other within Other income in the Company’s condensed consolidated statements of operations. The following table shows the five largest net foreign exchange contract positions as of June 30, 2007 and December 31, 2006:

	June 30,			December 31,
Buy (Sell)	2007			2006
Chinese Renminbi	$	(1,821	)	$	(1,195	)
Euro		(793	)		(2,069	)
Brazilian Real		(259	)		(466	)
Japanese Yen		310			143
Taiwan Dollar		173			87

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

Interest Rate Risk

At June 30, 2007, the Company’s short-term debt consisted primarily of $300 million of commercial paper, priced at short-term interest rates. The Company has $3.9 billion of long-term debt, including the current portion of long-term debt, which is primarily priced at long-term, fixed interest rates.

45

In order to manage the mix of fixed and floating rates in its debt portfolio, the Company has entered into interest rate swaps to change the characteristics of interest rate payments from fixed-rate payments to short-term LIBOR-based variable rate payments. The following table displays these outstanding interest rate swaps at June 30, 2007:

	Notional Amount		Underlying Debt
Date Executed	Hedged		Instrument
August 2004	$	1,200	4.608% notes due 2007
September 2003		457	7.625% debentures due 2010
September 2003		600	8.0% notes due 2011
May 2003		114	6.5% notes due 2008
May 2003		84	5.8% debentures due 2008
May 2003		69	7.625% debentures due 2010
	$	2,524

The weighted average short-term LIBOR-based variable rate payments on each of the above interest rate swaps was 8.0% for the three months ended June 30, 2007. The fair value of the above interest rate swaps at June 30, 2007 and December 31, 2006, was $(52) million and $(47) million, respectively. Except as noted below, the Company had no outstanding commodity derivatives, currency swaps or options relating to debt instruments at June 30, 2007 or December 31, 2006.

The Company designated the above interest rate swap agreements as part of a fair value hedging relationship. As such, changes in the fair value of the hedging instrument, as well as the hedged debt are recognized in earnings, therefore adjusting the carrying amount of the debt. Interest expense on the debt is adjusted to include the payments made or received under such hedge agreements. In the event the underlying debt instrument matures or is redeemed or repurchased, the Company intends to terminate the corresponding interest rate swap contracts.

Additionally, effective December 31, 2006, one of the Company’s European subsidiaries entered into interest rate agreements (“Interest Agreements”) relating to a Euro-denominated loan. The interest on the Euro-denominated loan is floating based on 3-month EURIBOR plus a spread. The Interest Agreements change the characteristics of interest rate payments from short-term EURIBOR based variable payments to maximum fixed-rate payments. The Interest Agreements are not accounted for as part of a hedging relationship and accordingly the changes in the fair value of the Interest Agreements are included in Other income in the Company’s condensed consolidated statements of operations. The fair value of the Interest Agreements at June 30, 2007 and December 31, 2006 was $4 million and $1 million, respectively. The weighted average fixed rate payments on these EURIBOR interest rate agreements was 6.0%.

The Company is exposed to credit loss in the event of nonperformance by the counterparties to its swap contracts. The Company minimizes its credit risk on these transactions by only dealing with leading, creditworthy financial institutions having long-term debt ratings of “A” or better and, does not anticipate nonperformance. In addition, the contracts are distributed among several financial institutions, thus minimizing credit risk concentration.

Forward-Looking Statements

Except for historical matters, the matters discussed in this Form 10-Q are forward-looking statements that involve risks and uncertainties. Forward-looking statements include, but are not limited to, statements under the following headings: (1) “Looking Forward”, about benefits from realigning our businesses, profitability and performance of our operating business segments, and cost savings from our cost-reduction initiatives; (2) “Management’s Discussion and Analysis,” about: (a) future payments, charges, use of accruals and expected cost-saving benefits associated with our reorganization of business programs, (b) the Company’s ability and cost to repatriate funds, (c) future cash contributions to pension plans or retiree health benefit plans, (d) outstanding commercial paper balances, (e) the Company’s ability and cost to access the capital markets, (f) the Company’s plans with respect to the level of outstanding debt, (g) expected payments pursuant to commitments under long-term agreements, (h) the outcome of ongoing and future legal proceedings, (i) the completion and impact of pending acquisitions and divestitures, and (j) the impact of recent accounting pronouncements on the Company; (3) “Legal Proceedings,” about the ultimate disposition of pending legal matters and the resulting impact on the Company, and (4) “Quantitative and Qualitative Disclosures about Market Risk,” about: (a) the impact of foreign currency exchange risks, (b) future hedging activity and expectations of the Company, and (c) the ability of counterparties to financial instruments to perform their obligations.

46

Some of the risk factors that affect the Company’s business and financial results are discussed in “Item 1A: Risk Factors” on pages 16 through 24 of our 2006 Annual Report on Form 10-K, on pages 43 through 44 of our first quarter 2007 Form 10-Q and on page 49 of this Form 10-Q. 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, 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, including our consolidated subsidiaries, required to be disclosed in our Securities and Exchange Commission (“SEC”) reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to Motorola’s management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

(b) Changes in internal control over financial reporting.  There have been no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2007 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

Part II—Other Information

Item 1. Legal Proceedings

Personal Injury Cases

Cases relating to Wireless Telephone Usage

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

In 2005, as a result of a decision of the United States Court of Appeals for the Fourth Circuit, the Farina case was remanded to the Pennsylvania state courts. In late 2005 and early 2006, Plaintiffs in Farina amended their complaints to add allegations that cellular telephones sold without headsets are defective because they present a safety risk when used while driving and to seek punitive damages. Farina also seeks declaratory relief and treble and statutory damages. After the Farina complaint was amended, on February 17, 2006, a newly-added defendant to the Farina case removed the case to federal court. After initial consolidation with the MDL Proceeding, on June 11, 2007, the MDL Panel transferred Farina back to the federal district court in Philadelphia. Plaintiffs’ motion to remand and defendants’ motions to dismiss are pending.

Brower v. Motorola, Inc., et al., filed April 19, 2001 in the Superior Court of the State of California, County of San Diego, was dismissed on May 18, 2007, following the plaintiff’s Motion to Dismiss the action without prejudice. This case had alleged that plaintiff’s brain cancer was caused by use of a cellular phone and also alleged deceptive and misleading actions by defendants falsely stating that cellular phones are safe and by failing to disclose studies that allegedly show cellular phones can cause harm.

47

Iridium Bankruptcy Court Lawsuit

Motorola was sued by the Official Committee of the Unsecured Creditors of Iridium in the United States Bankruptcy Court for the Southern District of New York (the “Iridium Bankruptcy Court”) on July 19, 2001. In re Iridium Operating LLC, et al. v. Motorola asserts claims for breach of contract, warranty and fiduciary duty and fraudulent transfer and preferences, and seeks in excess of $4 billion in damages. Trial began on the solvency portion of these claims on October 23, 2006 and concluded on June 5, 2007. As of the date hereof, no decision has been rendered.

Previously, in March 2001, the Iridium Bankruptcy Court approved a settlement between the unsecured creditors of the Iridium Debtors and the Iridium Debtors’ pre-petition secured lenders that created and funded a vehicle for pursuing litigation against Motorola. Motorola appealed the approval of the settlement, first to the United States District Court for the Southern District of New York and thereafter to the United States Court of Appeals for the Second Circuit. On March 5, 2007, the Court of Appeals vacated the District Court order approving the settlement and directed that the case be remanded to the Iridium Bankruptcy Court for further proceedings.

Telsim Class Action Securities Lawsuits

A purported class action lawsuit, Barry Family LP v. Carl F. Koenemann, was filed against the former chief financial officer of Motorola on December 24, 2002 in the United States District Court for the Southern District of New York, alleging breach of fiduciary duty and violations of Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5. In 2003, it was consolidated with a number of related cases as In re Motorola Securities Litigation in the United States District Court for the Northern District of Illinois (the “Illinois District Court”). During 2005, the Illinois District Court certified the case as a class action.

On April 12, 2007, the parties entered into a settlement agreement, pursuant to which, upon final approval by the court, Motorola is obligated to pay $190 million to the class and all claims against Motorola by the class will be dismissed and released. On June 12, 2007, the Illinois District Court issued an order preliminarily approving of the settlement and set a hearing for September 7, 2007 to consider final approval and any objections to the settlement. In the first quarter of 2007, the Company recorded a charge of $190 million for the legal settlement, partially offset by $75 million of estimated insurance recoveries, of which $50 million had been tendered by certain insurance carriers. Motorola paid $190 million into an escrow account as required by the settlement agreement. During the second quarter of 2007, the Company commenced actions against the non-tendering insurance carriers. As of June 2007, in response to these actions, each insurance carrier who has responded denied coverage, citing various policy provisions. As a result of this denial of coverage and related actions, the Company has recorded a reserve of $25 million against the receivable from insurance carriers. The Company intends to vigorously pursue collection of the settlement amounts against the non-tendering insurance carriers.

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

48

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 16 through 24 of the Company’s 2006 Annual Report on Form 10-K and on page 43 through 44 of the Company’s first quarter 2007 Form 10-Q. These factors could cause our actual results to differ materially from those stated in forward-looking statements contained in this document and elsewhere. In addition to the factors included in the Form 10-K and in the first quarter 2007 Form 10-Q, the reader should also consider the following risk factor:

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

Motorola is a purchaser of CDMA EV-DO baseband processor chips and chipsets from Qualcomm Incorporated (“Qualcomm”). Qualcomm and Broadcom Corporation (“Broadcom”) are engaged in several patent-related legal actions. In these cases, Broadcom is seeking orders to ban the importation into the U.S. of Qualcomm’s EV-DO baseband processor chipsets and certain “downstream” products that contain them (including Motorola CDMA handsets) and/or limit Qualcomm’s ability to provide certain services or take certain actions in the U.S. relating to the chipsets.

Unless there are intervening events, on August 6, 2007 an order of the U.S. International Trade Commission (the “ITC”) will go into effect excluding (among other things) the importation of new model CDMA handsets that contain Qualcomm’s EV-DO baseband processor chip. A final outcome adverse to Qualcomm in the ITC action and/or other actions pending in Federal courts could have a negative impact on Motorola’s performance, particularly if the outcome extends to Motorola’s products by making it impossible, difficult or more expensive to make and/or import our products into the U.S. While Motorola continues to work with Qualcomm and others on contingency plans relating to these cases, there is no guarantee that such plans will prove successful or be immune from further legal challenge.

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

(c) The following table provides information with respect to acquisitions by the Company of shares of its common stock during the quarter ended June 30, 2007.

ISSUER PURCHASES OF EQUITY SECURITIES

						(d) Maximum Number
				(c) Total Number of		(or Approximate Dollar
				Shares Purchased		Value) of Shares that
	(a) Total Number			as Part of Publicly		May Yet be Purchased
	of Shares		(b) Average Price	Announced Plans or		Under the Plans or
Period	Purchased(3)		Paid per Share(3)	Programs(1)(2)(3)		Programs(1)(2)(3)
04/01/07 to 04/28/07		0			0		4,440,908,130
04/29/07 to 05/26/07		0			0		4,440,908,130
05/27/07 to 06/30/07		0			0		4,440,908,130
Total		0			0

(1)	The Company announced on July 24, 2006, that its Board of Directors authorized the Company to repurchase up to $4.5 billion of its outstanding shares of common stock over a 36-month period ending in June 2009, subject to market conditions (the “2006 Stock Repurchase Program”). On March 21, 2007, the Company announced that its Board of Directors authorized an increase in the aggregate size of the 2006 Stock Repurchase Program to $7.5 billion to be completed over the same time period.
(2)	The Company also announced on March 21, 2007, that it entered into an agreement to repurchase $2.0 billion of its outstanding shares of common stock, through an accelerated stock buyback agreement (“ASB”). Under the ASB, the Company immediately paid $2.0 billion and received an initial 68 million shares in March. In April, the Company received an additional 34.4 million shares under the ASB. The 102.4 million shares represents the minimum number of shares to be received under the ASB. The number of additional shares the Company may receive over the remaining term of the ASB, which expires in the fourth quarter of 2007, will generally be based upon the volume-weighted average price of the Company’s common stock during the term of the ASB, subject to collar provisions that establish the minimum and maximum number of shares.
(3)	The 34.4 million shares delivered under the ASB that were delivered in April, but paid for in March, were previously reported as purchases during the 2/24/07 to 3/31/07 time period.

Item 3. Defaults Upon Senior Securities.

Not applicable

49

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

The Company held its annual meeting of stockholders on May 7, 2007, and the following matters were voted on at that meeting:

1. The election of the following 11 directors, who will serve until their respective successors are elected and qualified or until their earlier death or resignation:

Director	For		Withheld
Edward J. Zander		1,620,602,691		55,487,272
David W. Dorman		1,613,736,279		62,353,684
Judy C. Lewent		1,623,884,303		52,205,660
Thomas J. Meredith		1,637,477,877		38,612,086
Nicholas Negroponte		1,625,939,520		50,150,443
Samuel C. Scott III		1,618,221,801		57,868,162
Ron Sommer		1,626,712,582		49,377,381
James R. Stengel		1,627,496,588		48,593,375
Douglas A. Warner III		1,627,459,163		48,630,800
Dr. John A. White		931,713,895		17,090,451
Miles D. White		1,622,320,998		53,768,965

Carl C. Icahn who received 717,072,378 votes For and 10,213,239 votes Withheld, was not elected to the Board.

2. The amendment to the Motorola Employee Stock Purchase Plan of 1999 was approved by the following vote: For, 1,542,814,260; Against, 56,234,151; Abstain, 76,970,821.

3. A shareholder proposal regarding a shareholder vote on executive compensation was approved by the following vote: For, 867,789,506; Against, 739,065,945; Abstain, 69,229,463.

4. A shareholder proposal regarding recouping unearned management bonuses was approved by the following vote: For, 992,501,606; Against, 605,303,175; Abstain, 78,214,460.

Item 5. Other Information.

Not applicable

Item 6. Exhibits

Exhibit No.			Description
	*10	.26	2006 Motorola Incentive Plan, as amended through July 5, 2007.
	*10	.29	Motorola Elected Officers Supplementary Retirement Plan amended effective as of June 30, 2005, reflecting amendments through May 8, 2007.
	*10	.35	Employment Agreement between Motorola, Inc. and Edward J. Zander dated as of December 15, 2003, as amended through May 11, 2007.
	10	.40	Motorola, Inc. Award Document for the Motorola Omnibus Incentive Plan of 2006, Terms and Conditions Related to Employee Nonqualified Stock Options Granted to Edward J. Zander on May 8, 2007 (incorporated by reference to Exhibit 10.40 to Motorola’s Report on Form 8-K filed on May 14, 2007 (File No. 1-7221)).
	*31	.1	Certification of Edward J. Zander pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	*31	.2	Certification of Thomas J. Meredith pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	*32	.1	Certification of Edward J. Zander pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	*32	.2	Certification of Thomas J. Meredith pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* filed herewith

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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, INC.

By:  /s/  Marc E. Rothman

Marc E. Rothman

Senior Vice President, Finance and Corporate Controller

(Duly Authorized Officer and

Chief Accounting Officer of the Registrant)

Date: August 2, 2007

51

EXHIBIT INDEX

Exhibit No.			Description
	*10	.26	2006 Motorola Incentive Plan, as amended through July 5, 2007.
	*10	.29	Motorola Elected Officers Supplementary Retirement Plan amended effective as of June 30, 2005, reflecting amendments through May 8, 2007.
	*10	.35	Employment Agreement between Motorola, Inc. and Edward J. Zander dated as of December 15, 2003, as amended through May 11, 2007.
	10	.40	Motorola, Inc. Award Document for the Motorola Omnibus Incentive Plan of 2006, Terms and Conditions Related to Employee Nonqualified Stock Options Granted to Edward J. Zander on May 8, 2007 (incorporated by reference to Exhibit 10.40 to Motorola’s Report on Form 8-K filed on May 14, 2007 (File No. 1-7221)).
	*31	.1	Certification of Edward J. Zander pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	*31	.2	Certification of Thomas J. Meredith pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	*32	.1	Certification of Edward J. Zander pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	*32	.2	Certification of Thomas J. Meredith pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* filed herewith

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EX-10.26

Exhibit 10.26

2006 Motorola Incentive Plan

(As Amended Through July 5, 2007)

Overview

     The 2006 Motorola Incentive Plan has been established to retain Employees through competitive rewards, attract premier talent, align individual efforts with business goals, and reward Employees for strong business performance. The Plan is based on successive calendar-year performance periods commencing 1 January 2006. The Plan is being implemented pursuant to the terms and conditions of the Omnibus Plan. Capitalized terms are defined in the “Definitions” section below.

Eligibility

     To be eligible to participate in this Plan, an individual must be:

• A full-time or part-time Employee of Motorola assigned to a Participating Organization;

• Not a participant in any other annual group incentive or bonus plan (e.g., sales commission plans, etc.); and

• The Employee must meet one of the following conditions:

• The Employee is active on a Company payroll as of the end of the Plan Year;

• The Employee is on a Leave of Absence as of the end of the Plan Year;

• The Employee Retired from the Company during the Plan Year while actively employed or from a Leave of Absence; or

• The Employee died during the Plan Year while actively employed by the Company or while on a Leave of Absence.

The MIP Committee may modify the foregoing eligibility provisions to exclude groups of employees on a country-wide or business unit/organizational basis as the MIP Committee deems necessary or appropriate.

Award Calculation

Awards will be calculated and paid after the close of each Plan Year on which the awards are based. The award amount will be based on Eligible Earnings, the Target Award Percentage, and the Business and Individual Performance Factors, as follows:

		Eligible		Target Award		Business		Individual
Award	=	Earnings	*	Percentage	*	Performance Factor	*	Performance Factor

Target Award Percentages, Business Performance Factors and Individual Performance Factors for each Plan Year shall be determined by the Compensation Committee. Business Performance Factors shall be based on Operating Earnings, Operating Cash Flow, Revenue Growth, Quality and such other factors as may be determined by the Compensation Committee in its complete discretion.

Payout Process

• All earned awards will be paid in cash. Payment will be made as soon as administratively practical following the close of a Plan Year.

• A Participant shall have no right to any award until that award is paid.

Administration

• The Compensation Committee has the overall responsibility for administering and amending this Plan, subject to the following:

• The Compensation Committee, in its discretion, can include or exclude individual items from the calculation of the Business Performance Factors for good reason.

• The Compensation Committee has delegated to the MIP Committee the authority to manage the day-to-day administration of the Plan including without limitation the discretionary authority to (i) administer and interpret the terms of the Plan, and (ii) amend the Plan only as necessary to reflect any ministerial, administrative or managerial functions; provided

	that any such amendment does not alter the Business Performance Factor once established for any Participating Organization or the Motorola-Wide Business Performance Factor for any Plan Year and provided that any such amendment does not increase the total payout under the Plan unless such increase is minor and due to increased Target Award Percentages, additional Participants, or other administrative changes.
•	The Compensation Committee has delegated certain responsibilities to the Chief Executive Officer of the Company, the exercise of which cannot result in an increased aggregate cost of the Plan in any Plan Year.
•	The Compensation Committee specifically reserves to itself the authority to set the initial Target Award Percentage and to determine any final award payment for any Participant who is (i) subject to Section 162(m), (ii) subject to Section 16, or (iii) designated as a member of the Motorola Senior Leadership Team.

• Any claims for payments under the Plan or any other matter relating to the Plan must be presented in writing to the MIP Committee within 60 days after the event that is the subject of the claim. The MIP Committee will then provide a response within 60 days, which shall be final and binding.

General Provisions

• Awards are subject to all applicable withholding taxes and other required deductions.

• The Plan will not be available to Employees who are subject to the laws of any jurisdiction which prohibits any provisions of this Plan or in which tax or other business considerations make participation impracticable in the judgment of the MIP Committee.

• This Plan does not constitute a guarantee of employment nor does it restrict the Company’s rights to terminate employment at any time or for any reason.

• The Plan and any individual award is offered as a gratuitous award at the sole discretion of the Company. The Plan does not create vested rights of any nature nor does it constitute a contract of employment or a contract of any other kind. The Plan does not

create any customary concession or privilege to which there is any entitlement from year-to-year, except to the extent required under applicable law. Nothing in the Plan entitles an Employee to any remuneration or benefits not set forth in the Plan nor does it restrict the Company’s rights to increase or decrease the compensation of any Employee, except as otherwise required under applicable law.

• Except as explicitly provided by law, the awards shall not become a part of any employment condition, regular salary, remuneration package, contract or agreement, but shall remain gratuitous in all respects. Awards are not to be taken into account for determining overtime pay, severance pay, termination pay, pay in lieu of notice, or any other form of pay or compensation.

• Except as explicitly provided by law, this Plan is provided at the Company’s sole discretion and the Compensation Committee may modify or terminate it at any time, prospectively or retroactively, without notice or obligation for any reason. In addition, there is no obligation to extend the Plan or establish a replacement plan in subsequent years.

• The Plan shall not be funded in any way. The Company shall not be required to establish any special or separate fund or to make any other segregation of assets to assure the payment of awards. To the extent any person acquires a right to receive payment under the Plan, such right will be no greater than the right of an unsecured general creditor of the Company.

• Award opportunities may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution.

• The Compensation Committee establishes the following administrative provisions reflecting changes in Employee status during the Plan Year:

§ Because employee retention is an important objective of this Plan and awards do not bear a precise relationship to time worked within the calendar year or length of service with the Company, Participants who separate from employment (payroll) prior to the end of the Plan Year (for reasons other than death or Retirement) shall not receive any award attributable to that Plan Year.

§

In the event a Participant (i) remains on payroll as an active Employee or is on a Leave of Absence at the end of a Plan Year, but is not actually working, (ii) Retires or dies prior to the end of the Plan Year while actively employed or on a Leave of Absence, any award received by the Participant shall be based solely on the Participant’s Eligible Earnings for the time the Participant actually worked during the Plan Year. Any such award payable on behalf of a deceased Participant shall be paid to the decedent’s estate. A Participant on any type of leave of absence shall not be considered to be actually working for purposes of this Plan.

§

Awards for transferred, promoted or demoted Participants will be calculated using (i) the Individual Performance Factor assigned at the end of the Plan Year and (ii) the Target Award Percentages and Business Performance Factors prorated for the portions of the Plan Year the Participant was assigned different target awards or was in different Participating Organizations during the Plan Year; provided, however, that the Target Award Percentage may not be increased without Compensation Committee approval for any Participant who is (i) subject to Section 162(m), (ii) subject to Section 16, or (iii) designated as a member of the Motorola Senior Leadership Team.

The MIP Committee may modify the foregoing provisions as it deems necessary or appropriate to apply to groups of employees on a country-wide or business unit/organizational basis as the MIP Committee deems necessary or appropriate.

Definitions

Company: Motorola, Inc. and its subsidiaries.

Compensation Committee: the Compensation and Leadership Committee of the Board of Directors.

Divested: the sale, lease, outsourcing arrangement, spin-off or similar transaction wherein a subsidiary is sold or whose shares are distributed to the Motorola stockholders, or any other type of asset transfer or transfer of any portion of a facility or any portion of a discrete organizational unit of Company or a subsidiary.

Eligible Earnings: the MIP Committee will determine Eligible Earnings for each country, consistent with their respective legal and practical requirements. The MIP Committee may determine inclusions and exclusions from Eligible Earnings to apply to groups of employees on a country-wide or business unit/organizational basis as the MIP Committee deems necessary or appropriate.

Employee: a person in an employee-employer relationship with the Company whose base wage or base salary is processed for payment by the payroll department(s) of the Company or a subsidiary and not by any other department of the Company. The term Employee shall exclude the following:

• Any independent contractor, consultant, or individual performing services for the Company who has entered into an independent contractor or consultant agreement;

• Any individual performing services under an independent contractor or consultant agreement, a purchase order, a supplier agreement or any other agreement that the Company enters into for services;

• Any person classified by the Company as a temporary or contract labor (such as black badges, brown badges, contractors, contract employees, job shoppers) regardless of the length of service; and

• Any “leased employee” as defined in Section 414(n) of the U.S. Internal Revenue Code of 1986, as amended.

Such individuals shall be precluded from retroactive participation in the Plan even if a court or governmental or regulatory entity subsequently reclassifies such individuals as common law employees of the Company on a retroactive basis.

Gross Margin: net sales minus the cost of goods sold, calculated according to GAAP.

Leave of Absence: an approved leave of absence.

MIP Committee: a committee to which the Compensation Committee may delegate certain powers and duties as described above. Unless otherwise determined, the MIP Committee will consist of the Senior Human Resources Officer, a senior Compensation Officer, and a senior Finance Officer. The MIP Committee may establish self-governance procedures such as by-laws, and shall keep minutes regarding all actions taken by the MIP Committee.

Omnibus Plan: the Motorola Omnibus Incentive Plan of 2006, or any successor plan.

Operating Earnings: calculated according to GAAP, excluding one-time events called out in earnings releases, such as restructuring activities and sales of marketable securities. It also excludes stock compensation expense. It will be adjusted for the impact of mergers, acquisitions, and divestitures material to the business segment.

Operating Cash Flow: calculated according to GAAP, which excludes gains on sales of investments and securities, and the following acquisition-related costs: intangible amortization and in-process research and development. It will be adjusted for the impact of mergers, acquisitions, and divestitures material to the business segment.

Participant: an Employee who meets the eligibility requirements set forth above.

Plan: the 2006 Motorola Incentive Plan, as amended from time to time.

Plan Year: calendar-year performance periods commencing each 1 January.

Quality: combination of measures of customer advocacy, reliability, flawless launch, and/or cost of poor quality, as defined by the MIP Committee. The MIP Committee may add or delete quality measures to reflect changing business requirements.

Retired or Retirement: this Plan utilizes the definition of “retiree” and retirement that appears in the primary retirement plan covering the Participant.

Revenue Growth: calculated as the year-over-year percentage increase in net sales after discounts according to GAAP. It will be adjusted for the impact of mergers, acquisitions, and divestitures material to the business segment.

Section 16: Section 16 of the Securities Exchange Act of 1934, as amended.

Section 162(m): Section 162(m) of the Internal Revenue Code, as amended.

If a term is used but not defined in the Plan, it has the meaning given such term in the Omnibus Plan.

Applicable Law

To the extent not preempted by federal law, or otherwise provided by local law, the Plan will be construed in accordance with, and governed by, the laws of the state of Illinois without regard to any state’s conflicts of laws principles. Any legal action related to this Plan shall be brought only in a federal or state court located in Illinois.

EX-10.29

Exhibit 10.29

MOTOROLA ELECTED OFFICERS SUPPLEMENTARY RETIREMENT PLAN
AS AMENDED EFFECTIVE AS OF JUNE 30, 2005

(Reflecting Amendments through May 8, 2007)

     Motorola, Inc. (the “Company”) heretofore established the Elected Officers Supplementary Retirement Plan (the “Plan”). Effective November 9, 1988, the Board of Directors of the Company approved extensive amendments to the Plan. This document sets forth the Plan as amended on November 9, 1988 and includes all additional amendments effective through June 30, 2005, along with such technical conforming changes as are deemed necessary in order to designate this document as an amendment and complete restatement of the Plan effective as of said date. The Plan and the Trust created to fund the Company’s obligations under the Plan are not intended to be qualified under Sections 401(a) and 501(a) of the Internal Revenue Code. Amounts accrued or vested under the Plan on and after January 1, 2005 are subject to the provisions of Section 409A of the Internal Revenue Code; accordingly, as applied to those amounts, the Plan shall at all times be interpreted and administered so that it is consistent with such Internal Revenue Code Section notwithstanding any provision of the Plan to the contrary.

     Section 1. Definitions. Where the following words and phrases appear in this Plan, they shall have the respective meanings set forth below, unless the context clearly indicates to the contrary:

     1.1 Actuarial (or Actuarially) Equivalent: Equality in value of the aggregate amounts expected to be received under different forms of payment, and except as provided below, based on the actuarial assumptions, tables and interest rates which are adopted by the Committee from time to time for this purpose and are set forth in Appendix A hereto.

     1.2 Affiliated Employer: Any corporation which is a member of a controlled group of corporations (as defined in Section 414 (b) of the Internal Revenue Code) which includes the Company.

     1.3 Annuity Starting Date: As defined in Section 8.1 hereof.

     1.4 Average MIP Award: As defined in Section 6 hereof.

     1.5 Board of Directors: The Board of Directors of the Company, and shall also mean any committee of the Board of Directors which has been delegated authority to exercise the powers and authority of the Board of Directors with respect to the Plan.

     1.6 Change in Control: The occurrence of any of the following events: a change in control of the Company of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (“Exchange Act”), or any successor provision thereto, whether or not the Company is then subject to such reporting requirement; provided that, without limitation, such a Change in Control shall be deemed to have occurred if (A) any “person” or “group” (as

such terms are used in Section 13(d) and 14(d) of the Exchange Act) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company’s then outstanding securities (other than the Company or any employee benefit plan of the Company; and, for purposes of the Plan, no Change in Control shall be deemed to have occurred as a result of the “beneficial ownership,” or changes therein, of the Company’s securities by either of the foregoing), (B) there shall be consummated (i) any consolidation or merger of the Company in which the Company is not the surviving or continuing corporation or pursuant to which shares of the Company’s common stock would be converted into or exchanged for cash, securities or other property, other than a merger of the Company in which the holders of the Company’s common stock immediately prior to the merger have, directly or indirectly, at least a 65% ownership interest in the outstanding common stock of the surviving corporation immediately after the merger, or (ii) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company, other than any such transaction with entities in which the holders of the Company’s common stock, directly or indirectly, have at least a 65% ownership interest, (C) the shareholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company, or (D) as the result of, or in connection with, any cash tender offer, exchange offer, merger or other business combination, sale of assets, proxy or consent solicitation (other than by the Board), contested election or substantial stock accumulation (a “Control Transaction”), the members of the Board immediately prior to the first public announcement relating to such Control Transaction shall thereafter cease to constitute a majority of the Board.

     1.7 Committee: The persons appointed pursuant to Section 12 to assist the Company in the administration of the Plan in accordance with said Section.

     1.8 Company: Motorola, Inc., a corporation organized and existing under the laws of the State of Delaware or its successor or successors.

     1.9 Disability, Disabled: The Committee shall determine, in its reasonable discretion, whether any Participant has a Disability or is Disabled.

     1.10 Early Retirement Date: The first day of the calendar month coincident with or immediately following the Participant’s 60th birthday.

     1.11 Early Retirement Age: The Participant’s 60th birthday.

     1.12 Effective Date: November 9, 1988, the date on which the provisions of this Plan as amended on November 9, 1988 become effective.

     1.13 ERISA: The Employee Retirement Income Security Act of 1974, as amended from time to time.

     1.14 ERISA Excess Formula: As defined in Section 6 hereof.

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     1.15 Hour of Service:

(a) each hour for which an employee is paid, or entitled to payment, for the performance of duties for the Company. These hours will be credited to the employee for the computation period in which the duties are performed;

(b) each hour for which an employee is paid, or entitled to payment, by the Company on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including Disability), layoff, jury duty, military duty or leave of absence. No more than 501 Hours of Service will be credited under this paragraph for a single computation period (whether or not the period of time during which no duties are performed occurs in a single computation period). Hours under this paragraph will be calculated and credited pursuant to section 2530.200b-2 of the Department of Labor Regulations which are incorporated herein by this reference; and

(c) each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by the Company. The same Hours of Service will not be credited both under paragraph (a) or paragraph (b), as the case may be, and under this paragraph (c). These hours will be credited to the employee for the computation period or periods to which the award or agreement pertains rather than the computation period in which the award, agreement, or payment is made. Solely for purposes of determining whether a One Year Break in Service for vesting purposes has occurred in a computation period, an employee who is absent from work for maternity or paternity reasons shall receive credit for the Hours of Service which would otherwise have been credited to such employee but for such absence, or in any case in which such hours cannot be determined, 8 hours of service per day of such absence. For purposes of this paragraph, an absence from work for maternity or paternity reasons means an absence (1) by reason of the pregnancy of the employee, (2) by reason of a birth of a child of the employee, (3) by reason of the placement of a child with the employee in connection with the adoption of such child by such employee, or (4) for purposes of caring for such child for a period beginning immediately following such birth or placement. The Hours of Service credited under this paragraph shall be credited (1) in the computation period in which the absence begins if the crediting is necessary to prevent a One Year Break in Service in that period, or (2) in all other cases, in the following computation period. The total Hours of Service Required to be credited for maternity or paternity reasons shall not exceed 501 hours. As used in this definition, the term Company includes all Affiliated Employers.

     1.16 Normal Formula: As defined in Section 6 hereof.

     1.17 Normal Retirement Age: The Participant’s 65th birthday.

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     1.18 Normal Retirement Date: A Participant’s Normal Retirement date is the first day of the calendar month coincident with or immediately following the Participant’s 65th birthday.

     1.19 Officer: An officer of the Company elected by the Board of Directors, or designated by the Chief Executive Officer of the Company and deemed having been so elected in accordance with powers delegated by the Board of Directors.

     1.20 One Year Break in Service: An employee shall incur a One Year Break in Service if in any computation period, as described in the definition of a Year of Service, he does not complete more than five hundred (500) Hours of Service. In the case of an employee who is absent from work for maternity or paternity reasons, as described in Section 1.15, Hours of Service shall be credited to such employee in accordance with Section 1.15.

     1.21 PBGC: Pension Benefit Guaranty Corporation, a body corporate within the Department of Labor established under the provisions of Title IV of ERISA.

     1.22 Participant: An officer participating in the Plan in accordance with the provisions of Section 3.

     1.23 Pension Plan: The Motorola, Inc. Pension Plan.

     1.24 Plan: Motorola Elected Officers Supplementary Retirement Plan, the plan set forth herein, as amended from time to time.

     1.25 Plan Year: The 12-month period commencing on January 1 and ending on December 31.

     1.26 Qualified Joint and Survivor Annuity: As defined in Section 8.1 hereof.

     1.27 Qualified Pre-Retirement Annuity: As defined in Section 8.2 hereof.

     1.28 Retirement Benefit: As defined in Section 6 hereof.

     1.29 Salary: The amount paid to an Officer by the Company as annual basic compensation, excluding awards under the Motorola Incentive Plan (MIP) (as well as any prior awards under the Motorola Executive Incentive Plan (MEIP) and the Performance Excellence=Rewards (PE=R) program), Mid Range Incentive Plan and Long Range Incentive Program, moving expense reimbursements, the imputed fair market value of a Company provided automobile or excess group-term life insurance coverage and similar imputed income items, and including the officer’s elective contributions to the Motorola Management Deferred Compensation Plan of amounts that would otherwise meet the above definition of Salary but for their contribution to the Motorola Management Deferred Compensation Plan.

     1.30 SCRP: The Motorola Supplementary Contributory Retirement Plan.

     1.31 Service Credit: As defined in Section 6 hereof.

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     1.32 Subsidiary: Any corporation more than fifty percent (50%) of the outstanding voting stock of which (other than directors’ qualifying shares) is at the time directly or indirectly owned by the Company or by one or more Subsidiaries or by the Company and one or more Subsidiaries.

     1.33 Survivor Annuity Starting Date: As defined in Section 8.2 hereof.

     1.34 Trust: Any trust established for receiving, holding, investing and disposing of the Trust Fund and for implementing and carrying out the provisions of the Plan.

     1.35 Trustee: The person or entity named as trustee herein or in any separate Trust forming part of this Plan, and any successors.

     1.36 Trust Agreement: As defined in Section 14.1 hereof.

     1.37 Trust Fund: The Plan assets held by the Trustee under the Trust.

     1.38 Year of Service: A twelve (12) consecutive month period (computation period) during which period the employee has completed at least one thousand (1,000) Hours of Service. The computation period of an employee shall begin with the date he commences employment with the Company and additional computation periods shall begin on each succeeding anniversary of the date the employee commences employment with the Company. In the event an employee’s employment with the Company is terminated and such employee has a One Year Break in Service following the termination of his employment, and if such employee is later reemployed by the Company, the computation period shall begin with the date such employee is reemployed by the Company, and additional computation periods shall begin on each succeeding anniversary of the date the employee was reemployed by the Company. All Years of Service (both pre-break and post-break) will be counted for vesting purposes and for calculating the Retirement Benefit under the Normal Formula. Years of Service with any Affiliated Employer shall be counted as Years of Service with the Company.

     Section 2. Construction. The masculine gender, where appearing in the Plan, shall be deemed to include the feminine gender, and the singular may include the plural, unless the context clearly indicates to the contrary. The words “hereof,” “herein,” “hereunder,” and other similar compounds of the word “here” shall mean and refer to the entire Plan, not to any particular provision or Section. Section headings are included for convenience of reference and are not intended to add to, or subtract from, the terms of the Plan.

     Section 3. Participation. Each officer who is age 55 or older on the Effective Date shall become a Participant in the Plan, as amended, on the Effective Date. After the Effective Date, an Officer shall become a Participant in the Plan upon the earlier of (i) his designation as a Participant by the Committee at any age under age 55, (ii) attaining age 55, (iii) his election as an officer if age 55 or older at that time, (iv) a Change in Control or (v) his Disability; provided, however, that there shall be no new Participants in the Plan after December 31, 1999. A Participant whose right to a Retirement Benefit was not vested on

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December 31, 1999, shall no longer participate in the Plan upon the Participant’s acceptance of the offer to exchange his or her’s interest in the Plan for other consideration from Motorola.

     Section 4. Vesting. A Participant’s right to a Retirement Benefit shall be vested and nonforfeitable as follows:

(a) For a Participant who has not attained age 60, when he has completed at least five Years of Service;

(b) For a Participant who is age 60 or older but who has not attained age 65, when he has completed at least two Years of Service;

(c) Upon attainment of age 65 (Normal Retirement Age) regardless of his Years of Service;

(d) Upon a Change in Control of the Company regardless of the Participant’s age or number of Years of Service;

(e) At the time he becomes Disabled regardless of the Participant’s age or number of Years of Service.

     Section 5. Eligibility for Retirement Benefits. To be eligible for a Retirement Benefit under the Plan, a Participant must also be a participant in the Pension Plan if eligible for participation, or the pension plan of a Subsidiary if the Subsidiary has a pension plan and the Participant is eligible to participate in it, and he must meet the other eligibility requirements stated herein. A Participant who is vested and who retires on or after age 60 shall be eligible to receive an unreduced Retirement Benefit upon retirement. A Participant who retires at any age because of Disability shall be eligible to receive an unreduced Retirement Benefit upon retirement. A Participant whose employment with the Company terminates at any age because of a Change in Control shall be eligible to receive an unreduced Retirement Benefit upon retirement at or after age 55. A Participant who is vested and ceases to be an Officer or ceases to be employed by the Company for any reason (other than Disability or a Change in Control) before he has attained age 57 shall be eligible to receive a deferred unreduced Retirement Benefit upon retirement at or after age 60 or, subject to the condition stated hereinbelow, a deferred actuarially reduced Retirement Benefit determined as provided in this Section 5 upon retirement at or after age 57. A Participant who is vested and who retires at or after age 57 but prior to age 60 shall, subject to the condition stated hereinbelow, be eligible to receive an actuarially reduced Retirement Benefit upon retirement determined as follows:

     (a) With respect to the lump sum payment option, the lump sum amount to be paid to the Participant will be equal to the cost to purchase (from an insurance company selected by the Company) a deferred annuity for the Participant at retirement which would provide the full Retirement Benefit with payments commencing at age 60.

     (b) With respect to the lifetime income payments option, such payments will be determined by the amount of lifetime income which could be provided by purchasing an

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annuity with the lump sum amount determined in (a) above. The other optional forms of payment under the Plan will also be available to the Participant on an actuarially reduced basis.

     Notwithstanding the foregoing, as a condition to the availability of a Retirement Benefit at or after age 57 but prior to age 60, the Participant shall enter into an agreement not to compete with the Company.

     Section 6. Determination of Amount of Retirement Benefit. A benefit for each Participant shall be calculated under the Normal Formula. A benefit for each Participant who participates in the Pension Plan shall also be calculated under the ERISA Excess Formula. The formula which produces the greater benefit will be the applicable formula for Participants who participate in the Pension Plan. The benefit so calculated for each Participant, whether determined under the Normal Formula or the ERISA Excess Formula, shall be reduced by the amount (computed on a life annuity basis) payable to such Participant under the Pension Plan (but not including SCRP payments), the pension plan of any Subsidiary, the Company’s Long Term Disability Plan, and the disability plan of any Subsidiary, whichever plan or plans is or are at the time applicable to such Participant. The results obtained shall be the Participant’s “Retirement Benefit,” provided, however, that the Retirement Benefit payable annually to any Participant shall not exceed seventy percent (70%) of the lesser of (i) his Salary as of the date immediately prior to retirement, or (ii) his Salary as of June 30, 2005 if he was an officer on said date.

     Normal Formula. The monthly benefit under the Normal Formula expressed as lifetime income shall be calculated as follows: One-Twelfth (1/12) times the sum of (i) Salary as of the date immediately prior to retirement (or as of such earlier date as may be mutually agreed upon by the Company and the Officer affected) or in the case of a deferred vested Retirement Benefit, as of the date of the Participant’s termination of employment; provided, that in no event shall a Participant’s Salary for purposes of this clause (i) be greater than the Participant’s Salary as of June 30, 2005 if he was an Officer on said date, plus (ii) the five year Average MIP Award paid to the Officer under the Motorola Incentive Plan (MIP) (and taking into account for this purpose any previous awards under the Motorola Executive Incentive Plan (MEIP) or Performance Excellence = Rewards program (PE=R) as provided in the definition of “Average MIP Award” below) times forty percent (40%) plus an additional percentage (“Service Credit”) equal to one-fourth (1/4) of one percent (1%) for each Year of Service of the Officer in excess of ten (10) Years of Service, subject to the following maximums:

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Age At		Age At
Retirement	Maximum	Retirement	Maximum
55	42.50%	61	44.00%
56	42.75%	62	44.25%
57	43.00%	63	44.50%
58	43.25%	64	44.75%
59	43.50%	65 & over	45.00%
60	43.75%

If the Service Credit determined as above is less than the Early Service Credit calculated under the Plan as it existed prior to the Effective Date for any Participant, the Early Service Credit shall be used for such Participant in lieu of the Service Credit determined as above.

     “Average MIP Award” shall mean and shall be calculated as follows:

(i) For each of the eight full calendar years prior to retirement, each year’s MIP award (which term shall include any prior MEIP and/or PE=R awards during the applicable period), including any portion thereof which the officer elects to contribute under the Motorola Management Deferred Compensation Plan) is calculated as a percentage of that year’s actual earnings from Salary.

(ii) The five calendar years which produce the highest percentages are then determined.

(iii) The average of the percentages for those five years is then determined.

(iv) The average of the percentages so determined is then applied to the Officer’s Salary at retirement (or at such earlier date as may be mutually agreed upon by the Company and the officer affected) to determine the Average MIP Award amount for purposes of this Plan.

     Following is an example of the calculation:

		Actual				MIP Award as %
		Earnings from		MIP		of Actual Earnings
Year		Salary		Award		from Salary
	1	$	190,000	$	57,000		30.0	%
	2	$	180,000		36,000		20.0	%
	3	$	170,000		30,600		18.0	%
	4	$	160,000		20,800		13.0	%
	5	$	150,000		48,000		32.0	%
	6	$	140,000		-0-		0
	7	$	130,000		28,600		22.0	%
	8	$	110,000		17,600		16.0	%

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* Average MIP rate for five years which produces the highest percentage 24.4%

Final Salary = $200,000

Average MIP Award (24.4% of $200,000 final Salary) = $48,800

     Payments made under the Mid Range Incentive Plan and Long Range Incentive Plan shall not be taken into account in determining the Average MIP Award.

     ERISA Excess Formula. The monthly benefit under the ERISA Excess Formula expressed as lifetime income shall be calculated in the same manner as the Normal Retirement Benefit is calculated under Section 6.1 of the Pension Plan. The benefit calculated under this formula shall not be subject to the limitations of Sections 401(a)(17) and 415 of the Internal Revenue Code and shall be calculated without giving effect to any reduction in earnings attributable to the Participant’s elective contributions to the Motorola Management Deferred Compensation Plan.

     Notwithstanding the method prescribed above for calculating Average MIP Award, if, under extraordinary circumstances which are in the interest of the Company, as determined by the Company (acting through the Board of Directors or any committee thereof to whom authority has been delegated) in its sole discretion, an officer extends his or her employment beyond his or her planned retirement date at the request of the Company, the Company may, with the consent of the Officer affected, calculate the Officer’s Average MIP Award by using the MIP awards for the calendar years that would have been used if the officer had retired on the date originally planned.

     Section 7. Payment of Retirement Benefit. A Participant’s Retirement Benefit shall be paid in monthly installments commencing as follows: (i) in the case of a vested Participant who retires prior to or on or after his Early Retirement Age, on the first day of the month coinciding with or immediately following the date of his retirement, (ii) in the case of a Participant who retires before his Early Retirement Age because of Disability, on the first day of the month coinciding with or immediately following the date of Disability, and (iii) in the case of a Participant who has a deferred vested Retirement Benefit, on the first day of the month selected by the Participant after he has attained his Early Retirement Age, or if a Change in Control has occurred, after he has attained age 55 rather than his Early Retirement Age. Such payments shall continue on the first day of each succeeding month until the benefit terminates as provided in the Plan for the type of benefit being paid to the Participant. Unless the Participant elects otherwise, in writing, payment of benefits under the Plan will begin not later than the 60th day after the latest of the close of the Plan Year in which:

(1) the Participant attains Normal Retirement Age;

(2) occurs the 10th anniversary of the year in which the Participant commenced participation in the Plan; or

(3) the Participant terminates his service with the Company.

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     Benefits under the Plan that accrued or vested on and after January 1, 2005 are subject to the provisions of Section 409A of the Code and the provisions of Appendix C of the Plan; accordingly, as applied to those amounts, the Plan shall at all times be interpreted and administered so that it is consistent with such Internal Revenue Code Section notwithstanding any provision of the Plan to the contrary.

     7.1 Facility of Payment: If, in the Committee’s judgment, any person to whom benefits are payable hereunder is under a legal disability or unable to care for his affairs because of illness, accident, or other incapacity, any payment due (unless prior claim therefor shall have been made by a duly qualified guardian, committee, or other legal representative) may be paid to his spouse, parent, brother or sister, or any other person as the Committee may determine. Any such payment shall be a payment for the account of such person and shall, to the extent thereof, be a complete discharge of any liability under the Plan to such person.

     Section 8. Qualified Joint and Survivor Annuity and Qualified Pre-Retirement Survivor Annuity.

      8.1 Qualified Joint and Survivor Annuity.

(a) Unless otherwise elected as provided below, a Participant who is married on the Annuity Starting Date and who does not die before the Annuity Starting Date shall receive the value of his benefit in the form of a Qualified Joint and Survivor Annuity. An unmarried Participant shall receive the value of his benefit in the form of a life annuity. Such unmarried Participant, however, may elect in writing to waive the life annuity. The election must comply with the provisions of this Section as if it were an election to waive the joint and survivor annuity by a married Participant, but without the spousal consent requirement. The joint and survivor annuity and the life annuity form of distribution shall be the Actuarial Equivalent of the benefits due the Participant.

(b) Any election to waive the Qualified Joint and Survivor Annuity must be made by the Participant in writing during the election period, must be consented to in writing by the Participant’s spouse and must indicate that the Participant alone is to receive the benefit or designate a specific beneficiary or beneficiaries, including any class of beneficiaries or a contingent beneficiary and a form of benefit payment which may not be changed (except back to a Qualified Joint and Survivor Annuity) without spousal consent, unless the consent of the spouse expressly permits designations by the Participant without any requirement of further consent by the spouse. Such spouse’s consent shall be irrevocable and must acknowledge the effect of such election and be witnessed by a Plan representative or a notary public. A consent that permits designations by the Participant without any requirement of further consent by such spouse must acknowledge that the spouse has the right to limit consent to a specific beneficiary and a specific form of benefit, where applicable and that the spouse voluntarily elects to relinquish either or both of such rights. Such

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consent shall not be required if it is established to the satisfaction of the Committee that the required consent cannot be obtained because there is no spouse, the spouse cannot be located, or other circumstances that may be prescribed by Treasury regulations. The election made by the Participant and consented to by his spouse may be revoked by the Participant in writing without the consent of the spouse at any time during the election period. The number of revocations shall not be limited. Any new election must comply with the requirements of this paragraph. A former spouse’s waiver shall not be binding on a new spouse.

(c) The election period to waive the joint and survivor annuity and to revoke an election shall be the one hundred and eighty (180) day period ending on the Annuity Starting Date.

(d) “Annuity Starting Date” means the first day of the first period for which an amount is paid as an annuity, or, in the case of a Retirement Benefit not payable in the form of an annuity, the first day on which all events have occurred which entitles the Participant to such Retirement Benefit.

(e) “Qualified Joint and Survivor Annuity” means a reduced annuity for the life of the Participant with a survivor annuity for the life of the spouse which is either 50 percent (50%), 75 percent (75%) or 100 percent (100%) (as selected by the Participant, and if no selection is made, it will be 50%) of the amount of the annuity which is payable during the joint lives of the Participant and the spouse and which is the Actuarial Equivalent of the normal form of benefit.

(f) With regard to the election, the Committee shall provide the Participant no less than thirty (30) days and no more than one hundred and eighty (180) days prior to the Annuity Starting Date (and consistent with Treasury regulations), a written explanation of:

(i) the terms and conditions of the Qualified Joint and Survivor Annuity,

(ii) the Participant’s right to make and the effect of an election to waive the Qualified Joint and Survivor Annuity,

(iii) the right of the Participant’s spouse to consent to any election to waive the qualified Joint and Survivor Annuity,

(iv) the right of the Participant to revoke such election, and the effect of such revocation, and

(v) the relative values of the various optional forms of benefit under the Plan.

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(g) The distribution of a benefit in the form of a Qualified Joint and Survivor Annuity shall not require the consent of the Participant’s spouse if such distribution commences prior to the later of his Normal Retirement Age or age 62.

     8.2 Qualified Pre-Retirement Survivor Annuity. In the case of a vested Participant who dies before the Annuity Starting Date, whether or not separated from service with the Company at the time of death, and who has a surviving spouse, a Qualified Pre-Retirement Survivor Annuity shall be paid to the surviving spouse of such Participant. This form of benefit may not be waived nor may another beneficiary be selected. Under this form of benefit, the Participant’s surviving spouse will receive a lifetime annuity payable in monthly installments equal to fifty percent (50%) of the Retirement Benefit calculated for the deceased Participant as of the date immediately prior to his death. For purposes of this Section 8.2, a surviving spouse will begin to receive payments on the first day of the month immediately following the date of the Participant’s death unless such surviving spouse elects a later date. A surviving spouse’s benefit will be paid in a lump sum upon such spouse’s written request made prior to the date benefit payments begin. The date on which a surviving spouse begins to receive payments as an annuity or receive a lump sum payment under this Section 8.2 shall be referred to as the “Survivor Annuity Starting Date.”

     8.3 Non-Qualified Pre-Retirement Survivor Annuity. In addition to the Qualified Pre-Retirement Survivor Annuity provided for in Section 8.2 hereof, in the case of a vested Participant who dies before his of her Annuity Starting Date, whether or not separated from service with the Company at the time of death, and who has a surviving spouse, a Non-Qualified Pre-Retirement Survivor Annuity shall be paid to the surviving spouse of such Participant. This form of benefit may not be waived nor may another beneficiary be selected. Under this form of benefit, the Participant’s surviving spouse will receive a lifetime annuity payable in monthly installments equal to fifty percent (50%) of the Retirement Benefit calculated for the deceased Participant as of the date immediately prior to his of her death. For purposes of this Section 8.3, a surviving spouse will begin to receive payments on the first day of the month immediately following the date of the Participant’s death unless such surviving spouse elects a later date. A surviving spouse`s benefit will be paid in a lump sum upon such spouse’s written request made prior to the date benefit payments begin. The date on which a surviving spouse begins to receive payments as an annuity or receive a lump sum payment under this Section 8.3 shall be referred to as the “Survivor Annuity Starting Date.”

     Section 9. Optional Methods of Payment. If a married Participant has duly waived the Qualified Joint and Survivor Annuity form of benefit or if an unmarried Participant has duly waived the life annuity form of benefit in accordance with the requirements of Section 8.1, upon the written request of such a Participant filed with the Committee before the Annuity Starting Date in accordance with the rules governing such requests, the Committee shall provide for him an optional form of Retirement Benefit, in one of the forms set forth below, which shall be the Actuarial Equivalent of the Retirement Benefit to which he would be otherwise entitled hereunder except that no optional form shall be granted which would

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reduce the value of the Participant’s Retirement Benefit payable to him personally by more than fifty percent (50%):

     (i) a lump sum payment;

     (ii) in the case of a married Participant, in the form of a life annuity; or

     (iii) a life-ten years certain form as set forth in Section 6.7(b) of the Pension Plan.

     Section 10. Limitations on Benefits. All rights and benefits, including elections, provided to a Participant in the Plan shall be subject to the rights afforded to any alternate payee under a qualified domestic relations order as those terms are defined in Section 206(d) of ERISA.

     Section 11. Nonalienation of Benefits. No benefit which shall be payable out of the Trust Fund to any person (including a Participant or his beneficiary), or any other amount or asset set aside or purchased under Section 13 to fund a Participant’s Retirement Benefit, shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge, and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge the same shall be void; and no such benefit shall in any manner be liable for, or subject to, the debts, contracts, liabilities, engagements, or torts of any such person, nor shall it be subject to attachment or legal process for or against such person, and the same shall not be recognized by the Trustee, except to such extent as may be required by law. This provision shall also apply to the creation, assignment or recognition of a right to a benefit payable with respect to a Participant pursuant to a domestic relations order as defined in Section 206(d) of ERISA: unless such order is determined to be a qualified domestic relations order as defined in Section 206(d) of ERISA; provide, however, a domestic relations order entered prior to January 1, 1985 may, in the discretion of the Officers Plan Committee or its delegate, be treated as a Qualified Domestic Relations Order, even though the order does not satisfy the requirement of Section 206(d) of ERISA. The Committee shall establish a written procedure to determine the qualified status of domestic relations orders and to administer distributions under such qualified orders.

     Section 12. Administration.

     12.1 Officers Plan Committee: The Board of Directors shall appoint a committee to be known as the Officers Plan Committee to administer the Plan. The Committee shall be the Named Fiduciary for purposes of Section 402 (a) of ERISA. The Committee shall consist of one or more persons appointed by the Board of Directors, and each member shall serve until his resignation or removal or until his successor is appointed. Each member may, but need not, be a director, officer or employee of the Company. A member of the Committee may resign by delivering his written resignation to the Board of Directors. Any member of the Committee may be removed, with or without cause, by the Board of Directors.

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     12.2 Powers and Duties of the Committee: The Committee shall carry out the duties assigned to it under the Plan and shall administer the Plan in accordance with its terms. The Committee shall have all powers as may be necessary to carry out its duties under the Plan, including, but not by way of limitation, the following: to construe and interpret the provisions of the Plan; to decide any disputes which may arise under the Plan; to decide all questions that shall arise under the Plan, including questions as to the eligibility to become Participants, and the amount, manner and time of payment of any benefits under the Plan; to decide questions submitted by the Trustee on all matters necessary for it to properly discharge its duties, powers and obligations; to employ or appoint legal counsel, accountants, actuaries, consultants or any person to assist in the administration of the Plan and any other agents it deems advisable. The Committee shall also have the power to allocate and delegate fiduciary responsibilities. The Committee shall have the power and authority to direct the investment of the Trust Fund, and in connection with such power, may delegate in writing authority to manage assets of the Trust Fund to one or more investment managers. The Committee may adopt from time to time written investment policies and guidelines which shall govern the manner in which the assets of the Trust Fund are to be invested, which policies and guidelines shall be followed by the investment managers. With respect to Retirement Benefits funded under Section 13.1(b) or (c) hereof, the Committee shall have the discretion to appoint such agents as are necessary to act on its behalf and shall have the authority to direct the investment of amount held to fund such Retirement Benefits.

     12.3 Meetings of the Committee: The Committee shall act by a majority of its members at the time in office, and such action may be taken either by a vote at a meeting or in writing without a meeting. The Committee may authorize any person or persons, who may but need not be a member or members of the Committee, to execute any document or documents on behalf of the Committee, in which event the Committee shall notify the Trustee in writing of such action and the name or names of such person or persons so designated. The Trustee thereafter may accept and rely upon any document executed by such person or persons as representing action by the Committee until the Committee shall file with the Trustee a written revocation of such designation.

     12.4 Adoption of Rules by the Committee: The Committee may adopt such rules as it deems necessary, desirable or appropriate. All rules and decisions of the Committee shall be uniformly and consistently applied to all Participants in similar circumstances. When making a determination or calculation, the Committee shall be entitled to rely upon information furnished by a Participant or beneficiary, the Company, the legal counsel of the Company, or the Trustee.

     12.5 Instructions to Trustee: The Committee shall advise the Trustee in writing with respect to all benefits which become payable under the terms of the Plan and shall direct the Trustee to pay such benefits from the Trust Fund.

     12.6 Reports and Records: The Committee shall keep a record of all its proceedings and acts and shall keep all such books of account, records, and other data as may be necessary for the proper administration of the Plan. The Committee shall file or cause to be filed all

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such annual reports, financial and other statements as may be required by any federal or state statute, agency or authority within the time prescribed by the law or regulations for filing said documents. The Committee shall furnish such reports, statements and other documents to Participants and Beneficiaries of the Plan as may be required by any federal or state statute or regulation within the time prescribed for furnishing such documents.

     12.7 Inspection of Records of the Committee: The Committee’s records and books of account shall be open to inspection at all reasonable times by the Company or the Board of Directors, or both, or any person designated from time to time by the Company or Board of Directors.

     12.8 Indemnification: The Company shall indemnify each member of the Committee, and the directors, officers and employees of the Company involved in the operation and administration of the Plan against any and all claims, losses, damages, expenses and liabilities arising from any action or failure to act, except when the same is determined by the Board of Directors to be due to gross negligence or willful misconduct of such member.

     12.9 Claims Procedure: The Committee shall make all determinations as to the right of any person to a benefit. Any denial by the Committee of the claim for benefits under the Plan by a Participant or beneficiary shall be stated in writing by the Committee and delivered or mailed to the Participant or beneficiary. Such notice shall set forth the specific reasons for the denial, written in a manner that may be understood without legal or actuarial counsel. In addition, the Committee shall afford a reasonable opportunity to any Participant or beneficiary whose claim for benefits has been denied for a review of the decision denying the claim.

     Section 13. Funding of Retirement Benefits.

     13.1 Discretion of Committee on Form of Funding: The Plan is intended to be a funded plan for purposes of ERISA, and is intended to be a permanent as distinguished from a temporary program. Provided that the minimum funding standards of ERISA are met, the Committee shall have the discretion to fund the payment of each Participant’s vested Retirement Benefit through one or more of the following:

(a) making contributions on such Participant’s behalf to the Trust;

(b) purchasing a commercial annuity contract or contracts and, to the extent the Committee deems advisable, transferring the annuity contract or contracts to such Participant; or

(c) implementing any other funding method which the Committee, in its sole discretion, shall consider appropriate.

     The Committee’s decision to use one method for funding one Participant’s Retirement Benefit shall not in any way limit the Committee’s discretion to use any other method for funding another Participant’s Retirement Benefit. Similarly, the Committee’s decision to use one method for funding a portion of a particular Participant’s Retirement Benefit shall not

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limit the Committee’s discretion with respect to the funding of the remainder of such Participant’s Retirement Benefit. Moreover, the Committee shall have the discretion to change, to the extent practicable, the method for funding any Participant’s Retirement Benefit. If at any time a Participant’s Retirement Benefit is funded through one or more methods which do not require the use of the Trust, all references herein to the Trust, the Trust Fund and the Trustee shall, with respect to such Participant, be disregarded.

     13.2 Early Distribution: Under Section 13.1, the Committee may select a method of funding that provides for distributions to be made to a Participant or beneficiary before the Annuity Starting Date or the Survivor Annuity Starting Date, as the case may be; provided, however, that to the extent ERISA requires the consent of the Participant, his spouse, a beneficiary, or any combination thereof, to any such distribution, no distribution shall be made unless such consent or consents have been given.

     13.3 Employee Contributions: Under Section 13.1, the Committee may select a method of funding that permits Participants to make contributions to fund Retirement Benefits.

     13.4 Payment’s for Taxes: To the extent that the Committee’s funding of a Participant’s Retirement Benefit pursuant to Section 13.1 results in adverse foreign (non-United States), federal, state or local tax consequences to such Participant which would not have resulted if such Participant’s Retirement Benefit had not been funded, the Committee may, in its discretion, authorize the payment to such Participant, either by the Company or out of the Trust Fund, of an amount sufficient to indemnify such Participant against some or all of such adverse tax consequences.

     13.5 Overfunding of Benefits: The funding of Retirement Benefits under Section 13.1 is intended solely to allow the Committee to establish a fund from which the Company’s liability to pay Retirement Benefits to Participants may be satisfied, and not to increase in any way the Retirement Benefit to which a Participant is entitled. Accordingly, to the extent the Committee funds a Participant’s Retirement Benefit pursuant to Section 13.1 based on certain assumptions, but the actual payments resulting from such funding would exceed such Participant’s Retirement Benefit as determined under Section 6, the Committee may, in its discretion, reallocate the excess among other Participants who are presently covered by the Plan or who may be so covered in the future. The Company shall have no right, title or interest in or to amounts or assets used to fund Retirement Benefits, and no part of any such amounts or assets shall revert to the Company except that any amounts or assets remaining, because of overpayments, after satisfaction of all liabilities of the Plan with regard to Participants may revert to the Company. Any amounts or assets contributed to fund Retirement Benefits under a mistake of fact shall be returned to the Company, to the extent practicable, upon request within one (1) year after such funding.

     13.6 Underfunded Benefits: The Committee’s funding of some or all of a Participant’s Retirement Benefit under Section 13.1 shall not reduce the Company’s liability to provide to a Participant the Retirement Benefit to which he is entitled under Section 6; provided, however, that if as a result of the funding method adopted by the Committee any

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Participant or his beneficiary (i) receives any distribution of cash from the Trust or any other entity prior to the Annuity Starting Date or the Survivor Annuity Starting Date, as the case may be, and (ii) fails to recontribute the after-tax amount of such distribution (as defined in the following sentence) in order to fund a portion of such Participant’s Retirement Benefit, then the Committee may reduce such Participant’s Retirement Benefit by the sum of such after-tax amounts not recontributed and the investment income the Trust would have earned thereon. For purposes of this Section 13.6, the after-tax amount of a distribution shall be the amount of such distribution reduced by the amount of any federal, state and local taxes incurred by the Participant because of such distribution; provided, however, that no such reduction will be made to the extent that the Participant receives a payment from the Company indemnifying him for such taxes.

     Section 14. Trust Fund.

     14.1 Trust Agreement: As a part of the Plan, the Company may enter into a Trust Agreement under which the Trustee would receive contributions of the Company to the Trust Fund. The provisions of and benefits under the Plan are subject to the terms and provisions of such Trust Agreement.

     14.2 Contributions to the Trust Fund: Subject to Section 13.4 hereof, no contribution shall be required from any Participant. An individual account will be established in the Trust Fund for each Participant whose Retirement Benefit is funded, in whole or in part, through the Trust.

     Section 15. Benefits of Retired Officers and Spouses of Deceased Officers.

     15.1 Funding of Benefits: The benefits payable to Officers who retired prior to the Effective Date shall continue to be paid by the Company under the Plan provisions as they existed prior to the Effective Date; provided, however, that on or before December 31, 1988, the Retirement Benefit of each retired Officer shall be funded through the Trust; and, provided further, that effective January 1, 1989, the Retirement Benefit of each retired officer will be recalculated under the formulas set forth in Section 6 of the Plan. Each retired Officer will be given the right to elect, within a time period to be set by the Committee, payment of the recalculated Retirement Benefit in a lump sum or in the form of a Qualified Joint and Survivor Annuity or one of the optional methods of payment specified in Section 9 of the Plan. If a retired Officer elects to receive payment other than in a lump sum, the Committee will direct the Trustee to purchase an annuity contract from the Trust Fund to fund the benefit. The benefit currently being paid to a spouse of a deceased Officer shall remain the same except that (i) on or before December 31, 1988 the benefit payable to each such spouse shall be funded through the Trust and (ii) each such spouse shall, within a reasonable time period to be set by the Committee, be allowed to elect to receive a lump sum payment from the Trust or to continue to receive installment payments. If a surviving spouse elects to continue to receive installment payments, the Committee will direct the Trustee to purchase an annuity contract from the Trust Fund to fund the benefit.

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     15.2 Underfunding of Benefits: The Committee’s funding of some or all of a retired officer’s or surviving spouse’s benefit under Section 15.1 shall not reduce the Company’s liability to provide such retired Officer or surviving spouse with the benefit to which he otherwise is entitled.

     15.3 Payment for Taxes: To the extent the funding of a retired Officer’s or surviving spouse’s benefit (either through the funding of the Trust or the purchase of an annuity) results in adverse federal, state, or local tax consequences to such retired Officer or surviving spouse which would not have resulted if such retired officer’s or surviving spouse’s benefit had not been funded, the Committee may, in its discretion, authorize the payment to such retired officer or surviving spouse, either by the Company or out of the Trust Fund, of an amount sufficient to indemnify such retired officer or surviving spouse against some or all of such adverse tax consequences.

     Section 16. Merger or Consolidation of Plan; Transfer of Assets. In the event of any merger or consolidation of the Plan with another retirement or pension plan, or in the event of any transfer of assets or liabilities from the Plan to another retirement or pension plan, provision shall be made so that each Participant in the Plan on the date thereof (if the Plan then terminated), would receive a benefit immediately after the merger, consolidation or transfer which is equal to or greater than the benefit he would have been entitled to receive immediately prior to the merger, consolidation or transfer (if the Plan had then terminated).

     Section 17. Amendments. The Board of Directors shall have the right at any time to amend the Plan, the Trust Agreement and any other document entered into as a result of a funding method adopted by the Committee under Section 13.1 hereof. However, no such amendment shall authorize or permit any part of the Trust Fund or any other asset purchased or amount set aside to fund Participants’ Retirement Benefits (other than such part as is required to pay administration expenses) to be used for or diverted to purposes other than for the exclusive benefit of the Participants, either current or future, or their beneficiaries or estates. No such amendment shall cause any reduction in the vested accrued benefit of any Participant. The Company further reserves the right to discontinue or suspend the payment of contributions to any fund held under the Trust Agreement or under any other funding method adopted under Section 13.1 hereof.

     Section 18. Termination. The Board of Directors shall have the right to terminate the Plan at any time. Upon termination the amount credited to the account of each Participant shall become fully vested and shall not thereafter be subject to forfeiture. Upon termination of the Plan, the Company, by written notice to the Trustee, may direct either:

(i) continuation of the Trust and the distribution of benefits at such time and in such manner as though the Plan had not been terminated; or

(ii) complete distribution of the assets in the Trust Fund to the Participants in a manner consistent with the Plan. In such case, the Trustee shall distribute to each Participant in the Plan and to each retired Participant, the amount then

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credited to his account in the Trust Fund, subject to provision for expenses of administration or liquidation.

The balance, if any, of the assets due to erroneous actuarial computation held by the Trust Fund after such distribution shall be returned to the Company, but only after satisfaction of all liabilities with respect to Participants and Retirement Benefits under the Plan.

     Section 19. Miscellaneous.

     19.1 No Enlargement of Rights: The Plan is strictly a voluntary undertaking on the part of the Company and shall not be deemed to constitute a contract between the Company and any Officer, or to be consideration for, or an inducement to, or condition of, the employment of any Officer. Nothing contained in the Plan shall be deemed to give any Officer the right to be retained in the employment of the Company or to interfere with the right of the Company to discharge any Officer at any time regardless of the effect which such discharge shall have upon him as a Participant of the Plan. No officer, prior to his retirement under conditions of eligibility for retirement benefits or prior to his acquiring vested rights, shall have any right or interest in or to any portion of any funds arising from Company contributions under the Plan, and no person shall have any right to Retirement Benefits, except to the extent provided in the Plan.

     19.2 Notice of Address: Each person entitled to benefits under the Plan must file with the Committee, in writing, his post office address and each change of post office address. Any communication, statement, or notice addressed to such a person at his latest post office address as filed with the Committee will be binding upon such person for all purposes of the Plan, and neither the Trustee nor the Company shall be obliged to search for or ascertain the whereabouts of any such person.

     19.3 Data: All persons entitled to benefits under the Plan must furnish to the Committee or Trustee such documents, evidence, or information as the Committee or Trustee considers necessary or desirable for the purpose of administering the Plan, or to protect the Committee or Trustee, and it shall be a condition of the Plan that each such person must furnish promptly true and complete data, evidence, or information and sign such documents as the Committee or Trustee may require before any benefits become payable under the Plan. In the event that any data so furnished is found by the Company to be incorrect, any payments thereafter due shall be adjusted on an actuarial basis to correct for any previous overpayments or underpayments, as the case may be. After such adjustment is made, all future payments shall be based on the corrected data.

     19.4 Governing Law: The Plan shall be governed by and construed in accordance with ERISA and the laws of the State of Illinois to the extent not preempted by ERISA.

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APPENDIX A

Actuarial Equivalence

     The purpose of this Appendix A is to specify the assumptions and tables to be used to determine Actuarial Equivalence as provided in Section 1.1 thereof.

Section 1.1

     Except as specifically stated elsewhere in this Appendix A, Actuarial Equivalence shall be based on the 1984 Unisex Pension Mortality Table as published, setback 2 years, and 6% interest.

Optional Payment Forms

     The normal form benefit (payable as a life annuity) is to be multiplied by the factor shown in the table to obtain the reduced benefit payable under the applicable optional payment form.

1. Joint and Survivor Option Factors

Joint Annuitant’s Age As	Percentage of Participant’s
Related to Participant’s	Reduced Benefit Continued to
Age	Joint Annuitant
		50	%	75	%	100	%
5 or more years older		.91		.87		.83
Difference less than 5 years		.87		.82		.77
5, less than 10, younger		.84		.78		.73
10, less than 15, younger		.82		.75		.69
15, less than 20, younger		.80		.72		.66
20 or more years younger		.76		.67		.60

Example: Participant is 65 years old with normal pension of $300 per month. He elects 50% continuation for his wife, aged 62. Since the difference in age is less than five years, the reduction factor is .87. The Participant receives $261.00 per month under the Option (.87 x $300), and his wife will receive 50% of $261.00, or $130.00 per month, if she survives him. If the wife were 57 years old (5 but less than 10 years younger than the Participant), the reduction factor would be .84 instead of .87.

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2. Life — Ten Years Certain Option Factor

Retiree’s Age When
Pension Payments Begin	Reduction Factor
Age 66 & older		.90
Age 61 – 65		.94
Age 55 – 60		.96

Example: Participant is 65 years with normal pension of $300 per month. The participant receives $282.00 (.94 x $300) per month for his or her life. If the Participant becomes deceased before 120 monthly payments are made, the beneficiary will receive $282.00 per month until the total monthly payments to the Participant and the beneficiary equal 120. If the Participant would have been age 60 rather than age 65, he or she would have received $288.00 monthly (.96 x $300).

3. Increase Factors for Postponed Retirement

Age at	Increase		Age at		Increase
Retirement	Factor		Retirement		Factor
65		1.00		70		1.55
66		1.09		71		1.69
67		1.19		72		1.84
68		1.30		73		2.00
69		1.42		74		2.17
				75		2.35

Factors should be interpolated to completed months of age.

Lump Sum Cashout Amounts

For purposes of determining the present value of accrued benefits upon lump sum distribution, Actuarial Equivalence shall be based on the 1984 Unisex Pension Mortality Table, as published , setback 2 years, and 6% interest.

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APPENDIX B

Early Retirement Open Window

     B-1. Purpose. The purpose of this Appendix B is to set forth the terms of a special involuntary retirement benefit extended to certain Participants in the Plan by the Company. All terms and provisions of the Plan shall apply to this Appendix B, except that where the terms and provisions of the Plan and this Appendix B conflict, the terms and provisions of this Appendix B shall control.

     B-2. Eligibility. Each Participant who is involuntarily retired (i) between January 1, 2002 and December 31, 2003 (inclusive) and (ii) after the Participant has attained age 57 years, shall be eligible for benefits under this Appendix B; provided, that as a condition of receiving such Appendix B Benefits, the Participant must execute a separation agreement (containing a release) prepared by the Company prior to his retirement date. If an eligible Participant revokes that separation agreement or the release contained therein, no Appendix B benefits shall be payable to him nor shall additional Service be granted to him for vesting purposes under this Appendix B. A Participant eligible for benefits under this Appendix B who timely executes (and does not revoke) such separation agreement shall be known as an ‘Appendix B Participant.’

     B-3. Vesting. An Appendix B Participant who at his retirement date has not yet completed sufficient Years of Service to be vested in accordance with Section 4 of the Plan, shall be granted the amount of additional service credit necessary to be vested in his Retirement Benefit hereunder at his retirement date.

     B-4. Appendix B Benefits. The benefit payable to an Appendix B Participant shall be equal to the Retirement Benefit otherwise payable to such Participant under Sections 5, 6, and 7 of the Plan, except that the actuarial reduction provided in Article 5 of the Plan for early commencement of benefits prior to age 60, shall not apply.

-B1-

APPENDIX C

Amounts Accrued or Vested After December 31, 2004

     C-1. Purpose. The purpose of this Appendix C to the Motorola Elected Officers Supplementary Retirement Plan is to clarify the treatment of Plan benefits accrued or vested on or after January 1, 2005 (“Appendix C Benefits”). Appendix C Benefits are subject to the provisions of Section 409A of the Internal Revenue Code, and this Appendix C shall at all times be interpreted and administered so that it is consistent with such Internal Revenue Code section.

     C-2. Funding. In lieu of the provisions set forth in Section 13 of the Plan, Appendix C Benefits shall be funded by making a contribution on such Participant’s behalf to the Trust as follows:

(a) When the Participant first becomes vested in Plan benefits, an initial contribution shall be made to the Trust in the amount of an estimated age 60 benefit paid in a lump sum and discounted back to the later of age 55 or vesting age, using the following assumptions:

• The mortality factor used calculated based on the 1994 Uninsured Pensioners Mortality Table (Appendix D), with generational projected improvements from 1994 using Scale AA and a further mortality improvement factor of 0.837.

• An interest rate of 7%.

(b) When the Participant retires, a final contribution shall be made to the Trust in an amount equal to difference between (1) the amount necessary to purchase an annuity from: MetLife, Inc. equal to the Retirement Benefit attributable to the Participant’s Appendix C Benefits, less (2) contributions previously made under Section C-2(a) above (increased to include actual earnings on the contributions within the Trust from the date of contribution to the date of the Participant’s retirement); provided, however, that any contribution under this Section C-2(b) made on behalf of a Specified Employee (as defined in Internal Revenue Code Section 409A(a)(2)(B)(i)) on or after his termination of employment shall not be made before the date that is 6 months after the Specified Employee’s termination of employment.

     C-3. Optional Form of Payment. With respect to any benefit funded per Section C-2 above, in lieu of the form of payment described in Section 8 of the Plan, upon completion of funding, a Participant may elect an optional form of payment in accordance with the provisions of Section 9 of the Plan. Any such optional form of benefit must comply with the provisions set forth in Treasury Regulation Section 409A-2(b)(2)(ii).

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     C-4. Disability. For purposes of determining whether a Participant’s retirement is due to a Disability under this Appendix C, a Participant shall be “Disabled” if either (A) the Participant’s inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (B) the Participant’s receipt, by reason of any medically determinable physical or mental impairment which can be expected to last for a continuous period of not less than 12 months, of income replacement benefits for a period of not less than 3 months under the Motorola Disability Income Plan, as amended, or any other accident and health plan covering employees of the Company.

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APPENDIX D

1994 Uninsured Pensioners Mortality Table

	Mortality Table				Projection Scale AA
Age	M		F		M		F
15		0.000371		0.000233		0.019		0.016
16		0.000421		0.000261		0.019		0.015
17		0.000463		0.000281		0.019		0.014
18		0.000495		0.000293		0.019		0.014
19		0.000521		0.000301		0.019		0.015
20		0.000545		0.000305		0.019		0.016
21		0.000570		0.000308		0.018		0.017
22		0.000598		0.000311		0.017		0.017
23		0.000633		0.000313		0.015		0.016
24		0.000671		0.000313		0.013		0.015
25		0.000711		0.000313		0.010		0.014
26		0.000749		0.000316		0.006		0.012
27		0.000782		0.000324		0.005		0.012
28		0.000811		0.000338		0.005		0.012
29		0.000838		0.000356		0.005		0.012
30		0.000862		0.000377		0.005		0.010
31		0.000883		0.000401		0.005		0.008
32		0.000902		0.000427		0.005		0.008
33		0.000912		0.000454		0.005		0.009
34		0.000913		0.000482		0.005		0.010
35		0.000915		0.000514		0.005		0.011
36		0.000927		0.000550		0.005		0.012
37		0.000958		0.000593		0.005		0.013
38		0.001010		0.000643		0.006		0.014
39		0.001075		0.000701		0.007		0.015
40		0.001153		0.000763		0.008		0.015
41		0.001243		0.000826		0.009		0.015
42		0.001346		0.000888		0.010		0.015
43		0.001454		0.000943		0.011		0.015
44		0.001568		0.000992		0.012		0.015
45		0.001697		0.001046		0.013		0.016
46		0.001852		0.001111		0.014		0.017
47		0.002042		0.001196		0.015		0.018
48		0.002260		0.001297		0.016		0.018

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	Mortality Table				Projection Scale AA
Age	M		F		M		F
49		0.002501		0.001408		0.017		0.018
50		0.002773		0.001536		0.018		0.017
51		0.003088		0.001686		0.019		0.016
52		0.003455		0.001864		0.020		0.014
53		0.003854		0.002051		0.020		0.012
54		0.004278		0.002241		0.020		0.010
55		0.004758		0.002466		0.019		0.008
56		0.005322		0.002755		0.018		0.006
57		0.006001		0.003139		0.017		0.005
58		0.006774		0.003612		0.016		0.005
59		0.007623		0.004154		0.016		0.005
60		0.008576		0.004773		0.016		0.005
61		0.009663		0.005476		0.015		0.005
62		0.010911		0.006271		0.015		0.005
63		0.012335		0.007179		0.014		0.005
64		0.013914		0.008194		0.014		0.005
65		0.015629		0.009286		0.014		0.005
66		0.017462		0.010423		0.013		0.005
67		0.019391		0.011574		0.013		0.005
68		0.021354		0.012648		0.014		0.005
69		0.023364		0.013665		0.014		0.005
70		0.025516		0.014763		0.015		0.005
71		0.027905		0.016079		0.015		0.006
72		0.030625		0.017748		0.015		0.006
73		0.033549		0.019724		0.015		0.007
74		0.036614		0.021915		0.015		0.007
75		0.040012		0.024393		0.014		0.008
76		0.043933		0.027231		0.014		0.008
77		0.048570		0.030501		0.013		0.007
78		0.053991		0.034115		0.012		0.007
79		0.060066		0.038024		0.011		0.007
80		0.066696		0.042361		0.010		0.007
81		0.073780		0.047260		0.009		0.007
82		0.081217		0.052853		0.008		0.007
83		0.088721		0.058986		0.008		0.007
84		0.096358		0.065569		0.007		0.007
85		0.104559		0.072836		0.007		0.006
86		0.113755		0.081018		0.007		0.005
87		0.124377		0.090348		0.006		0.004
88		0.136537		0.100882		0.005		0.004

-D2-

	Mortality Table				Projection Scale AA
Age	M		F		M		F
89		0.149949		0.112467		0.005		0.003
90		0.164442		0.125016		0.004		0.003
91		0.179849		0.138442		0.004		0.003
92		0.196001		0.152660		0.003		0.003
93		0.213325		0.167668		0.003		0.002
94		0.231936		0.183524		0.003		0.002
95		0.251189		0.200229		0.002		0.002
96		0.270441		0.217783		0.002		0.002
97		0.289048		0.236188		0.002		0.001
98		0.306750		0.255605		0.001		0.001
99		0.323976		0.276035		0.001		0.001
100		0.341116		0.297233		0.001		0.001
101		0.358560		0.318956		0.000		0.000
102		0.376699		0.340960		0.000		0.000
103		0.396884		0.364586		0.000		0.000
104		0.418855		0.389996		0.000		0.000
105		0.440585		0.415180		0.000		0.000
106		0.460043		0.438126		0.000		0.000
107		0.475200		0.456824		0.000		0.000
108		0.485670		0.471493		0.000		0.000
109		0.492807		0.483473		0.000		0.000
110		0.497189		0.492436		0.000		0.000
111		0.499394		0.498054		0.000		0.000
112		0.500000		0.500000		0.000		0.000
113		0.500000		0.500000		0.000		0.000
114		0.500000		0.500000		0.000		0.000
115		0.500000		0.500000		0.000		0.000
116		0.500000		0.500000		0.000		0.000
117		0.500000		0.500000		0.000		0.000
118		0.500000		0.500000		0.000		0.000
119		0.500000		0.500000		0.000		0.000
120		1.000000		1.000000		0.000		0.000

-D3-

EX-10.35

EXHIBIT 10.35

EMPLOYMENT AGREEMENT

     AGREEMENT by and between Motorola, Inc. (the “Company”), and Edward J. Zander (the “Executive”) dated as of the 15th day of December 2003, as amended as of the 19th day of February 2004, the 27th day of July, 2005, the 2nd day of May, 2006, and the 11th day of May, 2007.

     WHEREAS, the Board of Directors of the Company (the “Board”) has determined that it is in the best interests of the Company and its shareholders to employ the Executive as the Company’s Chief Executive Officer and to have the Executive serve as Chairman of the Board;

     WHEREAS, the Company desires to employ the Executive and to enter into an agreement embodying the terms of such employment; and

     WHEREAS, the Executive desires to enter into this Agreement and to accept such employment, subject to the terms and provisions of this Agreement;

     NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and for other good and valuable consideration, the receipt of which is mutually acknowledged, the Company and the Executive (individually a “Party” and together the “Parties”) agree as follows:

     1. Effective Date. The “Effective Date” shall mean January 5, 2004.

     2. Employment Period. The Company hereby agrees to employ the Executive, and the Executive hereby agrees to be employed by the Company, subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the fifth anniversary thereof (the “Initial Term”), provided that, on the fourth anniversary and each anniversary of the Effective Date thereafter, the employment period shall be extended by one year unless at least 30 days prior to such anniversary, the Company or the Executive delivers a written notice (a “Notice of Non-Renewal”) to the other Party that the employment period shall not be extended (the Initial Term as so extended, the “Employment Period”).

     3. Terms of Employment. (a) Position and Duties. (i) During the Employment Period, (A) the Executive shall serve as the Chief Executive Officer, with such duties and responsibilities as are commensurate with such positions, reporting directly to the Board, and (B) the Executive’s principal location of employment shall be at the principal headquarters of the Company; provided, that the Executive may be required under reasonable business circumstances to travel outside of such location in connection with performing his duties under this Agreement. In addition, the Company shall cause the Executive to be elected as Chairman of the Board as of the Effective Date, and during the Employment Period, the Executive shall remain on the Board and as Chairman of the Board, subject to Section 4(g), and shall perform his duties as a director of the Company conscientiously and faithfully.

          (ii) The Executive agrees that during the Employment Period, he shall devote substantially all of his business time, energies and talents to serving as the Company’s

Chief Executive Officer and Chairman of the Board, perform his duties conscientiously and faithfully subject to the lawful directions of the Board, and in accordance with each of the Company’s corporate governance and ethics guidelines, conflict of interests policies and code of conduct (collectively, the “Company Policies”). During the Employment Period, it shall not be a violation of this Agreement for the Executive, subject to the requirements of Section 7, to (A) serve on corporate, civic or charitable boards or committees, provided, that, without the written approval of the Board, the Executive shall be permitted to serve on no more than one such corporate board, (B) deliver lectures or fulfill speaking engagements and (C) manage personal investments, so long as such activities do not interfere with the performance of the Executive’s responsibilities as the Chief Executive Officer or as Chairman of the Board of the Company or violate any Company Policies.

          (iii) The Executive acknowledges and agrees that he shall at all times during his service with the Company be subject to the Motorola Stock Ownership Requirements, as may be in effect from time to time, which currently require that the Executive maintain holdings of the Company’s common stock (“Common Stock”) in an amount at least equal to four times the Executive’s Annual Base Salary (as defined below). In connection with such requirements, the Executive shall purchase 75,000 shares of Common Stock on or prior to July 31, 2005, provided, that, 25,000 of such shares shall be purchased on or prior to July 31, 2004 and another 25,000 of such shares shall be purchased on or prior to January 31, 2005.

     (b) Compensation.

          (i) Base Salary. During the Employment Period, the Executive shall receive an annualized base salary (“Annual Base Salary”) of not less than $1,500,000, payable pursuant to the Company’s normal payroll practices. During the Employment Period, the current Annual Base Salary shall be reviewed for increase only at such time as the salaries of senior officers of the Company are reviewed generally, provided that, the Executive’s first such review shall occur no earlier than calendar year 2005.

          (ii) Annual Bonus. For each fiscal year completed during the Employment Period, the Executive shall be eligible to receive an annual cash bonus (“Annual Bonus”) based upon performance targets that are established by the Compensation and Leadership Committee of the Board (the “Committee”), provided that, the Executive’s target Annual Bonus shall be not less than 135% of his Annual Base Salary (the “Target Bonus”). Payment of the Target Bonus shall be guaranteed for fiscal year 2004 (the “Guaranteed Bonus”). The Executive has agreed to defer receipt of the Guaranteed Bonus pursuant to the terms of the Company’s Management Deferred Compensation Plan until after the Executive’s Date of Termination (as defined below). However, notwithstanding the immediately preceding sentence, the Executive shall not be required to defer receipt of the Guaranteed Bonus beyond the first day on which the deductibility of the Guaranteed Bonus by the Company is no longer precluded by the provisions of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), and in no event shall the Executive be required to defer receipt beyond January 1 of the year following the year in which his Date of Termination (as defined below) occurs.

          (iii) Mid-Range Incentive Plan. For each multi-year period (as recommended by management and determined by the Committee) completed during the Employment

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Period, the Executive shall be eligible to receive an award (“Mid-Range Incentive Plan Award”) based upon performance targets that are established by the Committee, provided that, the Executive’s target Mid-Range Incentive Plan Award shall be not less than 250% of his Annual Base Salary.

          (iv) Long-Term Incentive Awards. As determined by the Committee, the Executive shall be eligible for grants of equity compensation awards under the Company’s long term incentive compensation arrangements in accordance with the Company’s policies, as in effect from time to time. Except for grants with respect to fiscal year 2004 as set forth below, all grants of equity compensation awards shall be made in the discretion of the Committee based upon performance of the Executive and the Company and the Company’s compensation philosophy.

     A. 2004 Stock Option. In May 2004, the Executive shall be granted an option (the “2004 Stock Option”) to purchase a number of shares of common stock of the Company (the “Common Stock”) for fiscal year 2004 pursuant to the Company’s Omnibus Incentive Plan of 2003 (the “Incentive Plan”) having an aggregate Black-Scholes value of $6,250,000. The Black-Scholes value to be calculated under this Section 3(b)(iv)(A) shall be determined on the 2004 Stock Option grant date in a manner consistent with the methodology used by Hewitt Associates for valuing stock options granted to employees of its publicly traded clients during the year 2003. The 2004 Stock Option shall have a per share exercise price equal to the closing price of a share of Common Stock on the last trading day prior to the date of grant as reported in the Wall Street Journal (the “Fair Market Value”), a ten-year term and a vesting schedule such that the 2004 Stock Option will become exercisable in four equal annual installments commencing on the first anniversary of the date of grant, provided that, the Executive remains in the employ of the Company through each such date. Except as specifically provided herein, the terms and conditions of the 2004 Stock Option shall be subject to the terms of the Incentive Plan and the award agreement evidencing the grant of the 2004 Stock Option, as provided to senior executives of the Company generally.

     B. 2004 Restricted Stock Units. In May 2004, the Executive shall be granted an award of a number of restricted stock units (the “Restricted Stock Units”) based on shares of Common Stock for fiscal year 2004 pursuant to the Incentive Plan equal to the quotient obtained by dividing (i) $2,000,000 by (ii) the Fair Market Value on the date of grant. The Restricted Stock Units shall vest 10% on the first anniversary of the date of grant, 20% on the second anniversary of the date of grant, 30% on the third anniversary of the date of grant and 40% on the fourth anniversary of the date of grant, provided that, the Executive remains in the employ of the Company through each such date. The Executive has agreed to defer receipt of the settlement of any Restricted Stock Units until the later of (i) the first day on which the deductibility of the settlement by the Company is no longer precluded by the provisions of Section 162(m) of the Code, or (ii) the six-month anniversary of the date of the Executive’s Separation from Service (as defined in Section 409A(a)(2)(A)(i) of the Code), if deferral to such anniversary date is required to comply with the provisions of Section 409A of the Code. Except as specifically provided herein, the terms and conditions of the Restricted Stock Units shall be subject to the terms of the Incentive Plan and the award agreement evidencing the grant of the Re-

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stricted Stock Units, as provided to senior executives of the Company generally. Notwithstanding anything in this Section 3(b)(iv)(B) to the contrary, the Executive shall be entitled to immediate settlement of any outstanding Restricted Stock Units to the extent such Restricted Stock Units are required to be included in the Executive’s income pursuant to Section 409A of the Code.

     C. Effective Date Stock Option. On the Effective Date, the Company shall grant to the Executive a stock option pursuant to the Incentive Plan to purchase 1,350,000 shares of Common Stock (the “Effective Date Stock Option”). The Effective Date Stock Option shall have a per share exercise price equal to the Fair Market Value on the Effective Date, a ten-year term and will vest in four equal annual installments commencing on the first anniversary of the date of grant, provided that, the Executive remains in the employ of the Company through each such date. Except as specifically provided herein, the terms and conditions of the Effective Date Stock Option shall be subject to the terms of the Incentive Plan and the award agreement evidencing the grant of the Effective Date Stock Option, as provided to senior executives of the Company generally.

     D. Effective Date Restricted Stock Units. On the Effective Date, the Company shall grant to the Executive 400,000 Restricted Stock Units under the Incentive Plan (the “Effective Date Restricted Stock Units”). The restrictions with respect to the Effective Date Restricted Stock Units shall lapse 50% on the second anniversary of the Effective Date and the remainder shall lapse on the fourth anniversary of the Effective Date, provided that, the Executive remains in the employ of the Company through each such date. The Executive has agreed to defer receipt of the settlement of any Effective Date Restricted Stock Units until the later of (i) the first day on which the deductibility of the settlement by the Company is no longer precluded by the provisions of Section 162(m) of the Code, or (ii) the six-month anniversary of the date of the Executive’s Separation from Service, if deferral to such anniversary date is required to comply with the provisions of Section 409A. Except as specifically provided herein, the terms and conditions of the Effective Date Restricted Stock Units shall be subject to the terms of the Incentive Plan and the award agreement evidencing the grant of the Effective Date Restricted Stock Units, as provided to senior executives of the Company generally. Notwithstanding anything in this Section 3(b)(iv)(D) to the contrary, the Executive shall be entitled to immediate settlement of any outstanding Restricted Stock Units to the extent such Restricted Stock Units are required to be included in the Executive’s income pursuant to Section 409A of the Code.

          (v) Pension Plans. During the Employment Period, the Executive shall be eligible for participation in the qualified pension plans, practices, policies and programs of the Company, as may be in effect from time to time, for senior executives of the Company generally.

          (vi) Other Benefits. During the Employment Period, the Executive shall be eligible for participation in the welfare, perquisites, fringe benefit, and other benefit plans, practices, policies and programs, as may be in effect from time to time, for senior executives of the Company generally; provided, that, any severance payments or benefits to be received under any severance benefit plans, practices, policies and programs shall be offset and

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reduced by any severance benefits or payments received under this Agreement. The fringe benefits and perquisites described in the preceding sentence shall include: reasonable use of Company aircraft for personal and business purposes (not less than 100 flight hours annually for personal use); participation in the Company’s Elected Officer Life Insurance Program; relocation benefits on a tax-neutral basis (including, but not limited to, providing a suitable, furnished apartment to the Executive for transition housing for up to 12 months); and, at the level generally provided for the chief executive officer of the Company, financial planning; an automobile allowance; personal security; and a home security system.

          (vii) Change in Control Benefits. The Executive shall be eligible for participation in the Motorola, Inc. Senior Officer Change in Control Severance Plan or any successor change in control plan or program (the “Change in Control Plan”), as may be in effect from time to time, for senior executives of the Company generally. At all times during the Employment Period, the Company will maintain the Change in Control Plan as in effect on the Effective Date, or provide the Executive with no less favorable benefits and protection under an alternative program or arrangement. Additionally, upon a Change in Control (as defined in the Change in Control Plan), all equity-based awards granted to the Executive on or after the Effective Date (including, without limitation, the 2004 Stock Option, the Restricted Stock Units, the Effective Date Stock Option and the Effective Date Restricted Stock Units) shall become fully vested and exercisable (or, if applicable, all restrictions shall lapse), all performance goals shall be deemed achieved at target levels, all Performance Stock (as defined in the Incentive Plan) shall be delivered as promptly as practicable and all performance units, restricted stock units and other incentive awards shall be paid out as promptly as practicable; provided, however, that the treatment of outstanding awards set forth above (referred to herein as “Accelerated Treatment”) shall not apply if and to the extent that such awards are assumed by the successor corporation (or parent thereof) or are replaced with awards that preserve the existing value of such awards at the time of the Change in Control and provide for subsequent payout in accordance with the same vesting schedule applicable to the original awards; provided, further, that with respect to any awards that are assumed or replaced, such assumed or replaced awards shall provide for the Accelerated Treatment if the Executive is involuntarily terminated (for a reason other than Cause) or if the Executive quits for Good Reason within 24 months of the Change in Control; provided, further, that the Accelerated Treatment shall not apply to any performance-based equity award granted on or after May 8, 2007, so that the treatment of such award shall be determined solely under the terms of such award agreement). Notwithstanding the foregoing, if the Company adopts an equity incentive plan with Change in Control benefits more generous than the benefits provided in this Section 3(b)(vii) or a Change in Control severance plan for senior executives generally with more generous benefits than the Change in Control Plan, the Executive will be entitled to those more generous benefits to the extent Executive’s awards are granted under such plan or such Change in Control severance plan is adopted, as applicable.

          (viii) Expenses. During the Employment Period, the Executive shall be eligible for prompt reimbursement for business expenses reasonably incurred by the Executive in accordance with the Company’s policies, as may be in effect from time to time, for its senior executives generally.

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          (ix) Vacation. During the Employment Period, the Executive shall be eligible for paid vacation in accordance with the Company’s policies, as may be in effect from time to time, for its senior executives generally.

          (x) Signing Bonus. In connection with the replacement of outstanding amounts at his current employer that will be forfeited, on the Effective Date, the Company shall pay to the Executive a lump sum cash payment of $600,000. In addition, on the Effective Date, the Company shall grant to the Executive the number of restricted shares of Company Common Stock under the Incentive Plan (the “Effective Date Restricted Stock”) determined by dividing (a) $1,400,000 by (b) the per-share fair market value of Company Common Stock as of the close of market on the Effective Date, rounded up to the nearest whole share. The restrictions with respect to the Effective Date Restricted Stock shall lapse 100% on the second anniversary of the Effective Date, provided that, the Executive remains in the employ of the Company through such date. Except as specifically provided herein, the terms and conditions of the Effective Date Restricted Stock shall be subject to the terms of the Incentive Plan and the award agreement evidencing the grant of the Effective Date Restricted Stock, as provided to senior executives of the Company generally.

     (c) Other Entities. The Executive agrees to serve, without additional compensation, as an officer and director for each of the Company’s subsidiaries, partnerships, joint ventures, limited liability companies and other affiliates, including entities in which the Company has a significant investment (collectively, the Company and such entities, the “Affiliated Group”), as determined by the Company. As used in this Agreement, the term “affiliates” shall include any entity controlled by, controlling, or under common control with the Company.

     4. Termination of Employment. (a) Death or Disability. The Executive’s employment shall terminate automatically upon the Executive’s death during the Employment Period. If the Company determines in good faith that the Disability of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may provide the Executive with written notice in accordance with Section 9(b) of this Agreement of its intention to terminate the Executive’s employment. In such event, the Executive’s employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the “Disability Effective Date”), provided that, within the 30-day period after such receipt, the Executive shall not have returned to full time performance of the Executive’s duties. For purposes of this Agreement, “Disability” shall mean the inability of the Executive to perform his duties with the Company on a full-time basis for 120 consecutive days or for 180 intermittent days in any one-year period as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a licensed physician selected by the Company or its insurers and reasonably acceptable to the Executive or the Executive’s legal representative. If the Parties cannot agree on a licensed physician, each Party shall select a licensed physician and the two physicians shall select a third who shall be the approved licensed physician for this purpose.

     (b) Cause. The Company may terminate the Executive’s employment during the Employment Period with or without Cause. For purposes of this Agreement, “Cause” shall mean:

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          (i) the Executive’s willful and continued failure to substantially perform his duties under this Agreement, other than any such failure resulting from incapacity due to physical or mental illness, which failure has continued for a period of at least 30 days following delivery to the Executive of a written demand for substantial performance specifying the manner in which the Executive has failed to substantially perform; or

          (ii) the Executive’s willful engagement in (A) in any malfeasance, dishonesty or fraud that is intended to or does result in the Executive’s substantial personal enrichment or a material detrimental effect on the Company’s reputation or business; or (B) gross misconduct;

          (iii) the Executive’s indictment for, or plea of guilty or nolo contendere to (A) a felony in the United States or (B) to a felony outside the United States, which, regardless of where such felony occurs, the Board reasonably believes has had or will have a detrimental effect on the Company’s reputation or business or the Executive’s reputation; or

          (iv) the Executive’s material breach of Section 7 or Section 12 of this Agreement.

A termination of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the entire membership of the Board (not including the Executive) at a meeting of the Board called and held for such purpose (after at least ten days’ written notice is provided to the Executive and the Executive is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in one or more of the clauses of Section 4(b) above, and specifying the particulars thereof in detail.

     (c) Good Reason. The Executive’s employment may be terminated by the Executive for Good Reason if (x) an event or circumstance set forth in the clauses of this Section 4(c) below shall have occurred and the Executive provides the Company with written notice thereof within 15 days after the Executive has knowledge of the occurrence or existence of such event or circumstance, which notice shall specifically identify the event or circumstance that the Executive believes constitutes Good Reason, (y) the Company fails to correct the circumstance or event so identified within 30 days after the receipt of such notice, and (z) the Executive resigns within 90 days after the date of delivery of the notice referred to in clause (x) above. For purposes of this Agreement, “Good Reason” shall mean, in the absence of the Executive’s written consent (and except in consequence of a prior termination of the Executive’s employment), the occurrence of any of the following:

          (i) a reduction by the Company in the Executive’s Annual Base Salary or a reduction in the Executive’s Target Bonus as a percentage of the Executive’s Annual Base Salary; or

          (ii) a material reduction in the aggregate level of employee benefits made available to the Executive when compared to the benefits made available to the Executive

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at any time during the Employment Period, unless such reduction is applicable to senior executives of the Company generally; or

          (iii) the failure of the Executive to be appointed as Chief Executive Officer or Chairman of the Board or, except as required by applicable law or regulation, his removal from either of such positions (other than pursuant to Section 4(g) or pursuant to a termination of the Executive’s employment for death, Disability or Cause); or

          (iv) the failure of the Company to elect or reelect the Executive to the Board; or

          (v) a material diminution in the Executive’s duties or responsibilities (other than as required by applicable law or regulation or as a result of the Executive’s physical or mental incapacity which impairs his ability to materially perform his duties or responsibilities as confirmed by a doctor reasonably acceptable to the Executive or his representative and such diminution lasts only for so long as such doctor determines such incapacity impairs the Executive’s ability to materially perform his duties or responsibilities) as Chief Executive Officer of the Company; or

          (vi) except as required by applicable law or regulation, a material change in the Executive’s reporting relationship so that the Executive no longer reports solely to the Board in his position as Chief Executive Officer; or

          (vii) the Company requiring the Executive’s principal location of employment to be at any office or location more than 35 miles from the principal headquarters of the Company (other than to the extent agreed to or requested by the Executive).

     (d) Voluntary Termination. The Executive may voluntarily terminate his employment without Good Reason (other than due to death, Disability or retirement), and such termination shall not be deemed to be a breach of this Agreement.

     (e) Notice of Termination. Any termination by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other Party hereto given in accordance with Section 9(b) of this Agreement. For purposes of this Agreement, a “Notice of Termination” means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than thirty days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive’s or the Company’s rights hereunder.

     (f) Date of Termination. “Date of Termination” means (i) if the Executive’s employment is terminated by the Company for Cause, or by the Executive for Good Reason, the

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date of receipt of the Notice of Termination or any later date specified therein within 30 days of such notice, as the case may be, (ii) if the Executive’s employment is terminated by the Company other than for Cause or Disability, or if the Executive voluntarily resigns without Good Reason, the date on which the terminating Party notifies the other Party of such termination, (iii) if the Executive’s employment is terminated by reason of death, the date of death of the Executive, (iv) if the Executive’s employment is terminated by the Company due to Disability, the Disability Effective Date, or (v) if the Executive’s employment is terminated by the Executive or the Company as a result of a Notice of Non-Renewal, the end of the applicable Employment Period.

     (g) Resignation from All Positions. Notwithstanding any other provision of this Agreement, upon the termination of the Executive’s employment for any reason, unless otherwise requested by the Board, the Executive shall immediately resign as of the Date of Termination from all positions that he holds or has ever held with the Company and any other member of the Affiliated Group (and with any other entities with respect to which the Company has requested the Executive to perform services), including, without limitation, the Board and all boards of directors of any member of the Affiliated Group. The Executive hereby agrees to execute any and all documentation to effectuate such resignations upon request by the Company, but he shall be treated for all purposes as having so resigned upon termination of his employment, regardless of when or whether he executes any such documentation.

     5. Obligations of the Company upon Termination. (a) Good Reason; Other Than for Cause. If, during the Employment Period, (1) the Company shall terminate the Executive’s employment other than for Cause, death or Disability, or (2) the Executive shall terminate employment for Good Reason:

          (i) the Company shall pay to the Executive in a lump sum in cash within 30 days (except as specifically provided in Section 5(a)(i)(A)(3)) after the Date of Termination the aggregate of the following amounts; provided that, part or all of such lump sum payment shall be deferred until the six-month anniversary of the date of the Executive’s Separation from Service, if deferral to such anniversary date is required to comply with the provisions of Section 409A of the Code:

     A. the sum of (1) the Executive’s Annual Base Salary and any accrued vacation pay through the Date of Termination, (2) the Executive’s business expenses that are reimbursable pursuant to Section 3(b)(viii) but have not been reimbursed by the Company as of the Date of Termination, and (3) the Executive’s Annual Bonus for the fiscal year immediately preceding the fiscal year in which the Date of Termination occurs if such bonus has been determined but not paid as of the Date of Termination (at the time such Annual Bonus would otherwise have been paid); and

     B. the amount equal to the product of (x) two and (y) the sum of (I) the Executive’s Annual Base Salary and (II) the Target Bonus; and

          (ii) for two years after the Executive’s Date of Termination (the “Continuation Period”), the Company shall continue medical and life insurance benefits to the Executive and, if applicable, the Executive’s family at least equal to those that would have been pro-

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vided to them in accordance with the plans, programs, practices and policies of the Company if the Executive’s employment had not been terminated; provided, that the Executive continues to make all required contributions; provided, however, that, if the Executive becomes re-employed with another employer and is eligible to receive substantially equivalent health or life insurance benefits under another employer-provided plan, the health benefits or life insurance described herein, whichever is applicable, shall no longer be provided by the Company; and

          (iii) the 2004 Stock Option, the Effective Date Stock Option, the Restricted Stock Units, the Effective Date Restricted Stock Units, the Effective Date Restricted Stock and all other outstanding equity-based awards granted to the Executive on or after the Effective Date, (other than any performance-based equity award granted on or after May 8, 2007, the treatment of which shall be determined under the terms of such award agreement), shall continue to vest and, with respect to stock options and other awards that are not immediately exercisable, become exercisable pursuant to their respective terms on the applicable scheduled vesting dates, so long as the Executive complies with the provisions of Section 7 of this Agreement and any other applicable provisions of the applicable award agreement and the Incentive Plan (other than continued service). Subject to the immediately preceding sentence, all such awards, (other than any performance-based equity award granted on or after May 8, 2007, the treatment of which shall be determined under the terms of such award agreement), shall remain exercisable by the Executive following vesting until the earlier of (A) eighteen months following the later to occur of (x) the applicable vesting date of such award or (y) the Executive’s Date of Termination or (B) the expiration of the scheduled term of such award, as applicable; and

          (iv) to the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement (other than any severance plan, program, policy or practice or contract or agreement) of the Company and its affiliates (such amounts and benefits, the “Other Benefits”) in accordance with the terms and normal procedures of each such plan, program, policy or practice, based on accrued benefits through the Date of Termination.

Except with respect to payments and benefits under Sections 5(a)(i)(A)(1), 5(a)(i)(A)(2) and 5(a)(iv), all payments and benefits to be provided under this Section 5(a) shall be subject to the Executive’s execution and non-revocation of a release substantially in the form attached hereto as Exhibit A.

     (b) Cause; Other than for Good Reason. If the Executive’s employment shall be terminated for Cause or the Executive terminates his employment without Good Reason during the Employment Period, or the Executive’s employment terminates by reason of either Party providing to the other Party a Notice of Non-Renewal, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay or provide to the Executive an amount equal to the amount set forth in clauses (1), (2) and (3) of Section 5(a)(i)(A) above, and the timely payment or provision of the Other Benefits, in each case to the extent theretofore unpaid, and provide to the Executive the opportunity to continue to exercise outstanding equity awards, granted on or after the Effective Date, to the extent vested on the date of such termination, pursuant to the provisions of the applicable award agreement.

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     (c) Death. If the Executive’s employment is terminated by reason of the Executive’s death during the Employment Period, this Agreement shall terminate without further obligations to the Executive’s legal representatives under this Agreement, other than the obligation to pay or provide to the Executive’s beneficiaries an amount equal to the amount set forth in clauses (1), (2) and (3) of Section 5(a)(i)(A) above, the vesting of each stock option (other than any performance-based equity award granted on or after May 8, 2007, the treatment of which shall be determined under the terms of such award agreement), restricted share and restricted stock unit award that is outstanding as of the Date of Termination and continued exercisability of each stock option by the Executive’s beneficiaries until the earlier of (i) one year after the Date of Termination or (ii) the end of the scheduled term of such option (the “Stock Benefits”).

     (d) Disability. If the Executive’s employment is terminated by reason of the Executive’s Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than the obligation to pay or provide to the Executive an amount equal to the amount set forth in clauses (1), (2) and (3) of Section 5(a)(i)(A) above, the provision of the Stock Benefits and the timely payment or provision of Other Benefits, including any applicable disability benefits.

     6. Full Settlement. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and such amounts shall not be reduced as a result of a mitigation duty whether or not the Executive obtains other employment. To the extent permitted by applicable law, the Company shall pay directly to the Executive all reasonable legal fees and expenses reasonably incurred by the Executive in connection with the negotiation and preparation of this Agreement, subject to a maximum of $50,000, and the Company shall reimburse the Executive for all legal costs and expenses reasonably incurred (and documented in invoices) in connection with any dispute under this Agreement, so long as the Executive prevails in such dispute on at least one material issue. In addition, the Company shall indemnify and hold the Executive, harmless on an after-tax basis, for any income tax, and all other applicable taxes imposed as a result of the Company’s payment of any legal fees contemplated herein in connection with the preparation and negotiation of this Agreement.

     7. Covenants.

     (a) Confidential Information. The Executive shall hold in a fiduciary capacity for benefit of the Affiliated Group, all secret or confidential information, knowledge or data relating to the Affiliated Group and its businesses (including, without limitation, any proprietary and not publicly available information concerning any processes, methods, trade secrets, research or secret data, costs, names of users or purchasers of their respective products or services, business methods, operating procedures or programs or methods of promotion and sale) that the Executive obtains during the Executive’s employment by the Affiliated Group that is not public knowledge (other than as a result of the Executive’s violation of this Section 7(a)) (“Confidential Information”). The Executive shall not communicate, divulge or disseminate Confidential Information at any time during or after the Executive’s employment with the Affiliated Group, except with prior written consent of the Company, or as otherwise required by law or legal process or as such disclosure or use may be required in the course of the Executive performing his duties and responsibilities as the Chief Executive Officer and Chairman of the Board of the Company.

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Notwithstanding the foregoing provisions, if the Executive is required to disclose any such confidential or proprietary information pursuant to applicable law or a subpoena or court order, the Executive shall promptly notify the Company in writing of any such requirement so that the Company or the appropriate member of the Affiliated Group may seek an appropriate protective order or other appropriate remedy or waive compliance with the provisions hereof. The Executive shall reasonably cooperate with the Affiliated Group to obtain such a protective order or other remedy. If such order or other remedy is not obtained prior to the time the Executive is required to make the disclosure, or the Company waives compliance with the provisions hereof, the Executive shall disclose only that portion of the confidential or proprietary information which he is advised by counsel in writing (either his or the Company’s) that he is legally required to so disclose. Upon his termination of employment with the Company for any reason, the Executive shall promptly return to the Company, all records, files, memoranda, correspondence, notebooks, notes, reports, customer lists, drawings, plans, documents, and other documents and the like relating to the business of the Affiliated Group or containing any trade secrets relating to the Affiliated Group or that the Executive uses, prepares or comes into contact with during the course of the Executive’s employment with the Company, and all keys, credit cards and passes, and such materials shall remain the sole property of the Company and/or the Affiliated Group, as applicable. For purposes of the preceding sentence, the term “trade secrets” shall have the meaning ascribed to it under the Illinois Trade Secrets Act or, if such act is repealed, the Uniform Trade Secrets Act (on which the Illinois Trade Secrets Act is based). The Executive agrees to represent in writing to the Company upon termination of employment that he has complied with the foregoing provisions.

     (b) Non-Recruitment of Affiliated Group Employees. The Executive shall not, at any time during the Restricted Period (as defined in this Section 7(b)), without the prior written consent of the Company, directly or indirectly, solicit, recruit, or employ (whether as an employee, officer, agent, consultant or independent contractor) any person who is or was at any time during the 120 days prior to Executive’s termination of employment, an employee, representative, officer or director of any member of the Affiliated Group and who possesses confidential information of the Affiliated Group. Further, during the Restricted Period, the Executive shall not take any action that could reasonably be expected to have the effect of directly encouraging or inducing any person to cease their relationship with any member of the Affiliated Group for any reason, except for terminations of employment in the ordinary course of business. This Section 7(b) shall not apply to (i) recruitment of employees for the Affiliated Group, (ii) the Executive’s personal administrative staff who perform secretarial-type functions or (iii) the hiring of any person (in the absence of a solicitation or recruitment by the Executive) unless (A) the person was one of the Executive’s direct reports, (B) the Executive had material or frequent contact with such person in furtherance of the performance of the duties of such person or the Executive, or (C) the Executive, prior to the Date of Termination, actively participated in the recruitment or hiring of such person at the Company other than merely approving any of the terms of such person’s employment. Additionally, a general employment advertisement by an entity of which the Executive is a part will not constitute solicitation or recruitment. The “Restricted Period” shall mean the period of the Executive’s employment with the Company and its subsidiaries through the second anniversary of the Date of Termination for any reason.

     (c) No Competition — Solicitation of Business. During the Restricted Period, the Executive shall not, either directly or indirectly, compete with the business of the Company

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by (i) becoming an officer, agent, employee, partner or director of any other corporation, partnership or other entity, or otherwise render services to or assist or hold an interest (except as a less than 3-percent shareholder of a publicly traded corporation or as a less than 5-percent shareholder of a corporation that is not publicly traded) in any Competitive Business (as defined below), or (ii) soliciting, servicing, or accepting the business of (A) any active customer of any member of the Affiliated Group, or (B) any person or entity who is or was at any time during the previous twelve months a customer of any member of the Affiliated Group, provided that such business is competitive with any significant business of any member of the Affiliated Group. “Competitive Business” shall mean any person or entity (including any joint venture, partnership, firm, corporation, or limited liability company) that engages in any principal or significant business of the Company or any of its subsidiaries as of the Date of Termination for any reason (or any material or significant business being actively pursued as of the Date of Termination that the Company or any of its subsidiaries enter during the Restricted Period).

     (d) Assistance. The Executive agrees that during and after his employment by the Company, the Executive will assist the Affiliated Group in the defense of any claims, or potential claims that may be made or threatened to be made against any member of the Affiliated Group in any action, suit or proceeding, whether civil, criminal, administrative, investigative or otherwise (a “Proceeding”), and will assist the Affiliated Group in the prosecution of any claims that may be made by any member of the Affiliated Group in any Proceeding, to the extent that such claims may relate to the Executive’s employment or the period of the Executive’s employment by the Company. The Executive agrees, unless precluded by law, to promptly inform the Company if the Executive is asked to participate (or otherwise become involved) in any Proceeding involving such claims or potential claims. The Executive also agrees, unless precluded by law, to promptly inform the Company if the Executive is asked to assist in any investigation (whether governmental or otherwise) of any member of the Affiliated Group (or their actions), regardless of whether a lawsuit has then been filed against any member of the Affiliated Group with respect to such investigation. The Company agrees to reimburse the Executive for all of the Executive’s reasonable out-of-pocket expenses associated with such assistance, including travel expenses and any attorneys’ fees and shall pay a reasonable per diem fee for the Executive’s service. In addition, the Executive agrees to provide such services as are reasonably requested by the Company to assist any successor to the Executive in the transition of duties and responsibilities to such successor. Any services or assistance contemplated in this Section 7(d) shall be at mutually agreed to and convenient times.

     (e) Remedies. The Executive acknowledges and agrees that the terms of Section 7: (i) are reasonable in geographic and temporal scope, (ii) are necessary to protect legitimate proprietary and business interests of the Company in, inter alia, near permanent customer relationships and confidential information. The Executive further acknowledges and agrees that in addition to all other remedies at law and/or equity, (x) the Executive’s breach of the provisions of Section 7 will cause the Company irreparable harm, which cannot be adequately compensated by money damages, and (y) if the Company elects to prevent the Executive from breaching such provisions by obtaining an injunction against the Executive, there is a reasonable probability of the Company’s eventual success on the merits. The Executive consents and agrees that if the Executive commits any such breach or threatens to commit any breach, the Company shall be entitled to temporary and permanent injunctive relief from a court of competent jurisdiction, in addition to, and not in lieu of, such other remedies as may be available to the Company for such

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breach, including the recovery of money damages. The Parties further acknowledge and agree that the provisions of Section 7(a) below are accurate and necessary because (A) this Agreement is entered into in the State of Illinois, (B) as of the Effective Date, Illinois will have a substantial relationship to the Parties and to this transaction, (C) as of the Effective Date, Illinois will be the headquarters state of the Company, which has operations nationwide and has a compelling interest in having its employees treated uniformly within the United States, (D) the use of Illinois law provides certainty to the Parties in any covenant litigation in the United States, and (E) enforcement of the provision of this Section 7 would not violate any fundamental public policy of Illinois or any other jurisdiction. If any of the provisions of Section 7 are determined to be wholly or partially unenforceable, the Executive hereby agrees that this Agreement or any provision hereof may be reformed so that it is enforceable to the maximum extent permitted by law. If any of the provisions of this Section 7 are determined to be wholly or partially unenforceable in any jurisdiction, such determination shall not be a bar to or in any way diminish the Company’s right to enforce any such covenant in any other jurisdiction.

     (f) The covenants in this Section 7 apply in the countries in which Executive has physically been present performing work for the Company at any time during the two years preceding termination of his employment.

     8. Successors. (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive other than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive’s legal representatives. This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.

     (b) The Company shall cause any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all or a substantial portion of its business and/or assets to assume expressly and agree to perform this Agreement immediately upon such succession in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.

     9. Miscellaneous. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Illinois, without reference to principles of conflict of laws. The Parties hereto irrevocably agree to submit to the jurisdiction and venue of the courts of the State of Illinois, in any action or proceeding brought with respect to or in connection with this Agreement. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the Parties hereto or their respective successors and legal representatives.

     (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other Party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

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If to the Executive:

At the most recent address on file for the Executive at the Company.

With a copy to:

Larry Sonsini, Esq.
John Aguirre, Esq.
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304

If to the Company:

Motorola, Inc.
1303 East Algonquin Road
Schaumberg, IL 60196
Attention: General Counsel

With a copy to:

Michael S. Katzke, Esq.
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019

or to such other address as either Party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.

     (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

     (d) Notwithstanding any other provision of this Agreement, the Company may withhold from any amounts payable or benefits provided under this Agreement any Federal, state, and local taxes as shall be required to be withheld pursuant to any applicable law or regulation.

     (e) Subject to the provisions of Section 4(c), the Executive’s or the Company’s failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.

     (f) From and after the Effective Date, this Agreement shall supersede any other employment agreement or understanding between the Parties, provided that, notwithstanding any other provision of this Agreement to the contrary, in the event of a Change in Control (as

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defined in the Change in Control Plan), the Change in Control Plan shall supersede this Agreement; provided, that, the provisions in Section 3(b)(vii) will continue to apply.

     (g) The Company may not issue a press release or otherwise publicly disclose the Executive’s employment or potential employment with the Company without Executive’s consent as to the content and timing of such disclosure, which approval shall not be unreasonably withheld.

     10. Director’s and Officer’s Insurance. The Company shall provide the Executive with reasonable Director’s and Officer’s insurance coverage that is at least as favorable as the coverage provided to other directors and officers of the Company. Such insurance coverage shall continue in effect both during the Employment Period and, while potential liability exists, thereafter.

     11. Indemnification. The Company shall indemnify the Executive and hold him harmless to the fullest extent permitted by law and under the by-laws of the Company against, and in respect to, any and all actions, suits, proceedings, claims, demands, judgments, costs, expenses (including reasonable attorney fees), losses and damages resulting from the Executive’s good faith performance of his duties and obligations with the Company.

     12. Representations. The Executive hereby represents and warrants to the Company that the Executive is not party to any contract, understanding, agreement or policy, whether or not written, with his current employer (or any other previous employer) or otherwise, that would be breached by the Executive’s entering into, or performing services under, this Agreement. The Executive further represents that he has disclosed to the Company in writing all material threatened, pending, or actual claims that are unresolved and still outstanding as of the Effective Date, in each case, against the Executive of which he is aware, if any, as a result of his employment with his current employer (or any other previous employer) or his membership on any boards of directors. Executive agrees that he has not, will not and cannot rely on any representations not expressly made herein and the only consideration for signing this Employment Agreement are the terms stated herein and no other promises or representations of any kind have been made by any person or entity whatsoever to cause him to sign this Employment Agreement.

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     IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and, pursuant to the authorization from its Board of Directors, the Company has caused these presents to be executed in its name and on its behalf, all as of the day and year first above written.

/s/ Edward J. Zander
EXECUTIVE
MOTOROLA, INC.
By:	/s/ Samuel C. Scott III
Name: Samuel C. Scott III
Chair, Compensation & Leadership Committee

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EXHIBIT A
Form of Release

     (a) In consideration for the payment of the severance described in the Executive employment agreement with the Company (the “Employment Agreement”), dated as of [ ], the Executive for himself, and for his heirs, administrators, representatives, executors, successors and assigns (collectively “Releasers”) does hereby irrevocably and unconditionally release, acquit and forever discharge the Company, its subsidiaries, affiliates and divisions and their respective, current and former, trustees, officers, directors, partners, shareholders, agents, employees, consultants, independent contractors and representatives, including without limitation all persons acting by, through under or in concert with any of them (collectively, “Releasees”), and each of them from any and all charges, complaints, claims, liabilities, obligations, promises, agreements, controversies, damages, remedies, actions, causes of action, suits, rights, demands, costs, losses, debts and expenses (including attorneys’ fees and costs) of any nature whatsoever, known or unknown, whether in law or equity and whether arising under federal, state or local law and in particular including any claim for discrimination based upon race, color, ethnicity, sex, age (including the Age Discrimination in Employment Act of 1967), national origin, religion, disability, or any other unlawful criterion or circumstance, which the Executive and Releasers had, now have, or may have in the future against each or any of the Releasees, including under the Illinois Law Against Discrimination (collectively “Executive/Releaser Actions”) from the beginning of the world until the date hereof.

     (b) The Executive acknowledges that: (i) this entire Release is written in a manner calculated to be understood by him; (ii) he has been advised to consult with an attorney before executing this Release; (iii) he was given a period of twenty-one days within which to consider this Release; and (iv) to the extent he executes this Release before the expiration of the twenty-one day period, he does so knowingly and voluntarily and only after consulting his attorney. The Executive shall have the right to cancel and revoke this Release by delivering notice to the Company pursuant to the notice provision of Section 9 of the Employment Agreement prior to the expiration of the seven-day period following the date hereof, and the severance benefits under the Employment Agreement shall not become effective, and no payments or benefits shall be made or provided thereunder, until the day after the expiration of such seven-day period (the “Revocation Date”). Upon such revocation, this Release and the severance provisions of the Employment Agreement shall be null and void and of no further force or effect.

     (c) Notwithstanding anything herein to the contrary, the sole matters to which the Release do not apply are: (i) the Executive’s rights of indemnification and directors and officers liability insurance coverage to which he was entitled immediately prior to ___with regard to his service as an officer of the Company; (ii) the Executive’s rights under any tax-qualified pension or claims for accrued vested benefits or rights under any other employee benefit plan, policy or arrangement (whether tax-qualified or not) maintained by the Company or under COBRA; or (iii) the Executive’s rights under Section 5 of the Employment Agreement which is intended to survive termination of employment.

     (d) This Release is the complete understanding between the Executive and the Company in respect of the subject matter of this Release and supersedes all prior agreements relating

to the same subject matter. The Executive has not relied upon any representations, promises or agreements of any kind except those set forth herein in signing this Release.

     (e) In the event that any provision of this Release should be held to be invalid or unenforceable, each and all of the other provisions of this Release shall remain in full force and effect. If any provision of this Release is found to be invalid or unenforceable, such provision shall be modified as necessary to permit this Release to be upheld and enforced to the maximum extent permitted by law.

     (f) This Release shall be governed by and construed in accordance with the laws of the State of Illinois, without reference to principles of conflict of laws.

     (g) This Release inures to the benefit of the Company and its successors and assigns.

EXECUTIVE

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EX-31.1

Exhibit 31.1

CERTIFICATION

I, Edward J. Zander, Chairman of the Board and Chief Executive Officer of Motorola, Inc., certify that:

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

/s/  Edward J. Zander

Edward J. Zander

Chairman of the Board and Chief Executive Officer,

Motorola, Inc.

Date: August 2, 2007

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Thomas J. Meredith, Executive Vice President and Acting Chief Financial Officer of Motorola, Inc., certify that:

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

/s/  Thomas J. Meredith

Thomas J. Meredith

Executive Vice President and Acting Chief Financial Officer,

Motorola, Inc.

Date: August 2, 2007

EX-32.1

Exhibit 32.1

CERTIFICATION

I, Edward J. Zander, Chairman of the Board and Chief Executive Officer of Motorola, Inc., certify, 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 June 30, 2007 (the “Quarterly Report”), which this statement accompanies fully complies with the requirements of Section 13(a) for 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, Inc.

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

/s/  Edward J. Zander

Edward J. Zander

Chairman of the Board and Chief Executive Officer,

Motorola, Inc.

Dated: August 2, 2007

EX-32.2

Exhibit 32.2

CERTIFICATION

I, Thomas J. Meredith, Executive Vice President and Acting Chief Financial Officer of Motorola, Inc., certify, 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 June 30, 2007 (the “Quarterly Report”), which this statement accompanies fully complies with the requirements of Section 13(a) for 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, Inc.

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

/s/  Thomas J. Meredith

Thomas J. Meredith

Executive Vice President and Acting Chief Financial Officer,

Motorola, Inc.

Dated: August 2, 2007