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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

Commission file number: 1-7221

MOTOROLA, INC.
(Exact name of registrant as specified in its charter)

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 ý    No o

        The number of shares outstanding of each of the issuer's classes of common stock as of the close of business on March 29, 2003:

Index

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Part I—Financial Information

Motorola, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)

(In millions, except per share amounts)

See accompanying notes to condensed consolidated financial statements.

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Motorola, Inc. and Subsidiaries


Condensed Consolidated Balance Sheets

(In millions)

See accompanying notes to condensed consolidated financial statements.

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Motorola, Inc. and Subsidiaries

Condensed Consolidated Statement of Stockholders' Equity

(Unaudited)

(In millions)

See accompanying notes to condensed consolidated financial statements.

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Motorola, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In millions)

See accompanying notes to condensed consolidated financial statements.

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Motorola, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(Dollars in millions, except as noted)

1.     Basis of Presentation

        The condensed consolidated financial statements as of March 29, 2003 and for the three months ended March 29, 2003 and March 30, 2002, include, in the opinion of management, all adjustments (consisting of normal recurring adjustments and reclassifications) necessary to present fairly the financial position, results of operations and cash flows as of March 29, 2003 and for all periods presented.

        Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto incorporated by reference in the Company's Form 10-K for the year ended December 31, 2002. The results of operations for the three months ended March 29, 2003 are not necessarily indicative of the operating results to be expected for the full year. Certain amounts in prior periods' financial statements and related notes have been reclassified to conform to the 2003 presentation.

        The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 period. Actual results could differ from those estimates.

2.     Other Financial Data

Statement of Operations Information

Other Charges (Income)

        Other Charges (Income) included in Operating Earnings (Loss) consist of the following:

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Other Income (Expense)

        The following table displays the amounts comprising Interest Expense, net, and Other included in Other Income (Expense) in the Company's condensed consolidated statements of operations:

Earnings (Loss) Per Common Share

        The following table presents the computation of basic and diluted earnings (loss) per common share:

        In the computation of diluted earnings per common share for the three months ended March 29, 2003, the assumed conversions of the zero coupon notes due 2009, the equity security units and out-of-the-money stock options were excluded because their inclusion would have been antidilutive. In the computation of diluted earnings (loss) per common share for the three months ended March 30, 2002, the assumed conversions of the zero coupon notes due 2009 and 2013, all stock options, restricted stock and the equity security units were excluded because their inclusion would have been antidilutive.

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Balance Sheet Information

Accounts Receivable

        Accounts Receivable, net, consists of the following:

Inventories

        Inventories, net, consist of the following:

Property, Plant, and Equipment

        Property, Plant and Equipment, net, consists of the following:

        For the three months ended March 29, 2003 and March 30, 2002, impairment charges were $62 million and $155 million, respectively, for certain buildings and equipment that were deemed to be impaired, primarily in connection with facility consolidations undertaken by the Semiconductor Products and Personal Communications segments. Depreciation expense for the three months ended March 29, 2003 and March 30, 2002 was $406 million and $525 million, respectively.

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Investments

        Investments consist of the following:

        For the three months ended March 29, 2003, and March 30, 2002, the Company recorded impairment charges of $47 million and $188 million, respectively, representing other-than-temporary declines in the value of its investment portfolio. The $47 million charge was primarily comprised of a $29 million charge to write down to zero the Company's debt security holding in a European cable operator. The $188 million charge was primarily comprised of a $95 million charge to write down to zero the Company's investment in an Argentine cellular operating company and $63 million in charges related to the write down of investments in cable operating companies. Investment impairment charges are included in Other within Other Income (Expense) in the Company's condensed consolidated statements of operations.

        Gains on Sales of Investments and Businesses, net, consist of the following:

        For the three months ended March 29, 2003, the gains primarily resulted from a $255 million gain on the sale of 25 million shares in Nextel Communications, Inc. in March 2003. At that time, the Company also entered into three agreements to hedge up to 25 million of additional shares of Nextel common stock. Under these agreements, the Company received no initial proceeds, but has retained the right to receive, at any time during the contract periods, the present value of the aggregate contract "floor" price. The three agreements are to be settled over periods of three, four and five years, respectively. Pursuant to these agreements and exclusive of any present value discount, Motorola is entitled to receive aggregate proceeds of approximately $333 million. The precise number of shares of Nextel common stock that Motorola would deliver to satisfy the contracts is dependent upon the price of Nextel common stock on the various settlement dates. The maximum aggregate number of shares Motorola would be required to deliver under these agreements is 25 million and the minimum number of shares is 18.5 million. Alternatively, Motorola has the exclusive option to settle the contracts in cash. Motorola will retain all voting rights associated with the up to 25 million hedged Nextel shares, although, pursuant to customary market practice, the covered shares are pledged to secure the hedge contracts.

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Other Assets

        Other Assets consist of the following: