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Announcement:

Moody's changes Motorola's ratings outlook to positive

19 Jul 2010

New York, July 19, 2010 -- Moody's Investors Service changed the ratings outlook on Motorola, Inc.'s debt to positive from negative following the company's announcement that it has reached an agreement to sell the majority of its networks infrastructure division to Nokia Siemens Networks ("NSN") for $1.2 billion in gross cash proceeds, The transaction is expected to be completed by the end of 2010. The change to a positive outlook reflects Motorola's improving credit profile as a result of the significant cash balances that Moody's expects the company will have following completion of the transaction and the progress that the company has made in stemming the cash losses in its mobile devices unit, and the increasing likelihood that the mobile devices separation will happen as scheduled.

The sale of the Networks business is the latest step in Motorola's plan to separate itself into two independent publicly traded companies through a spin-off of its Mobile Devices and Home businesses. Proforma for the sale of the Networks unit, the remaining entity, Enterprise Mobility Solutions ("Motorola Solutions"), will focus on public safety, enterprise systems and solutions, rugged devices and security. Moody's anticipates that once the separation is complete, Motorola Solutions will be the entity that will hold the remaining legacy Motorola public debt.

Outlook Actions:

..Issuer: Motorola, Inc.

....Outlook, Changed To Positive From Negative

Motorola's investment-grade rating is currently supported chiefly by the company's liquidity and by its non-handset businesses, which together brought in $3.4 billion of the company's $5 billion in revenues in 1Q 2010. The current ratings already contemplate that the company will spin off the handset business debt-free and will attempt to capitalize the remaining Motorola Solutions business with a strong balance sheet. Moody's maintained a negative outlook on the ratings because of the potential for the handset business turnaround to take much longer than expected or not happen at all, and for the macroeconomic environment to pressure the company's overall operations. As the company has made strides in improving the profitability of the handset unit and has publicly detailed more of the separation plans, Moody's expects that the separation will proceed as planned by 1Q 2011.

Although the company has not disclosed how much cash will be infused into the handset and set-top box unit following the separation, Moody's estimates that the company has the flexibility to leave up to $4 billion at those units and still retain financial metrics at Mobility Solutions that are in line with Baa technology issuers, despite the smaller than initially contemplated size of the remaining company and the loss of industry diversification that the combined Motorola had across its business units.

As a separate unit, Motorola Solutions generated $1.7 billion in revenues and $141 million in operating income in 1Q 2010, making it the largest operating unit at the company. Funded debt at Motorola is expected to be approximately $2.9 billion at year end 2010, following the redemption of $500 million of debt in 2Q 2010, and the scheduled $527 million amortization in 4Q 2010. Motorola had $8.4 billion of cash and short term investments as of 4/3/10 and is expected to be free cash flow positive in 2010 on a combined basis. Moody's estimates that post-separation, Mobility Solutions' adjusted debt/EBITDA leverage could trend to about 2.5x by the end of 2011, with ample cash and equivalents balances supporting the debt load.

Moody's continues to monitor the progress of the planned separation of the Mobile Devices and Home businesses and the operating improvements in all of Motorola's segments. Upward rating pressure could occur upon the company's announcement of the final separation plan if Moody's determines that the final capital structure of Mobility Solutions, and the company's long term fiscal policies including cash balance targets, dividend payouts and share repurchase plans are supportive of a higher rating.

Moody's most recent rating action for Motorola was on February 3, 2009. At that time Moody's downgraded Motorola's senior unsecured rating to Baa3 from Baa2, due to the ongoing deterioration of the mobile devices business.

The principal methodology used in rating Motorola was Moody's Global Communications Equipment Industry rating methodology, which can be found at www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab (June 2008, document #109298). Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Rating Methodologies sub-directory on Moody's website.

Motorola, Inc. with FY2009 revenues of $22 billion provides technologies, products and services that make a broad range of mobile experiences possible. Their product portfolio includes wireless handsets, wireless accessories, digital entertainment devices, set-top boxes and video distribution systems, analog and digital two- way radios, wireless and wireline broadband network products and end-to-end enterprise mobility products. The company is headquartered in Schaumburg, Illinois.

New York
Alexandra S. Parker
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Gerald Granovsky
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's changes Motorola's ratings outlook to positive
No Related Data.
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