Motorola Solutions 8K Other Events | MSI 12 May 11

Exhibit 99.2

Item 8: Financial Statements and Supplementary Data

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

Motorola Solutions, Inc.:

We have audited the accompanying consolidated balance sheets of Motorola Solutions, Inc. and subsidiaries (the Company) as of December 31, 2010 and 2009, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2010. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Motorola Solutions, Inc. and subsidiaries as of December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2010, in conformity with U.S. generally accepted accounting principles.

As discussed in Note 2 to the consolidated financial statements, in 2010, the Company adopted revenue recognition guidance for multiple-deliverable revenue arrangements and certain revenue arrangements that include software elements.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Motorola Solutions, Inc.’s internal control over financial reporting as of December 31, 2010, based on criteria established inInternal Control– Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 18, 2011 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

LOGO

Chicago, Illinois

February 18, 2011, except as it relates to the presentation of Motorola Mobility Holdings, Inc. as a discontinued operation and the sale of certain assets and liabilities of the Networks business as discussed in Notes 1 and 2 and the related change in segment information discussed in Note 1, as to which the date is May 12, 2011

Motorola Solutions, Inc. and Subsidiaries

Consolidated Statements of Operations


	Years Ended December 31
(In millions, except per share amounts)	*2010*			2009			2008
Net sales from products	$	5,870		$	5,259		$	6,306
Net sales from services		2,001			1,921			1,834

Net sales		7,871			7,180			8,140
Costs of product sales		2,673			2,374			2,880
Costs of service sales		1,281			1,237			1,171

Costs of sales		3,954			3,611			4,051

Gross margin		3,917			3,569			4,089

Selling, general and administrative expenses		1,910			1,703			1,845
Research and development expenditures		1,079			1,041			1,106
Other charges		150			255			1,817

Operating earnings (loss)		778			570			(679	)

Other income (expense):
Interest income (expense), net		(129	)		(133	)		35
Gains on sales of investments and businesses, net		49			108			64
Other		(7	)		92			(417	)

Total other income (expense)		(87	)		67			(318	)

Earnings (loss) from continuing operations before income taxes		691			637			(997	)
Income tax expense		415			191			2,481

Earnings (loss) from continuing operations		276			446			(3,478	)
Earnings (loss) from discontinued operations, net of tax		374			(474	)		(762	)

Net earnings (loss)		650			(28	)		(4,240	)

Less: Earnings attributable to noncontrolling interests		17			23			4

Net earnings (loss) attributable to Motorola Solutions, Inc.	$	633		$	(51	)	$	(4,244	)

Amounts attributable to Motorola Solutions, Inc. common stockholders:
Earnings (loss) from continuing operations, net of tax	$	259		$	423		$	(3,482	)
Earnings (loss) from discontinued operations, net of tax		374			(474	)		(762	)

Net earnings (loss)	$	633		$	(51	)	$	(4,244	)

Earnings (loss) per common share:
Basic:
Continuing operations	$	0.78		$	1.29		$	(10.76	)
Discontinued operations		1.12			(1.45	)		(2.35	)

	$	1.90		$	(0.16	)	$	(13.11	)

Diluted:
Continuing operations	$	0.77		$	1.28		$	(10.76	)
Discontinued operations		1.10			(1.43	)		(2.35	)

	$	1.87		$	(0.15	)	$	(13.11	)

Weighted average common shares outstanding:
Basic		333.3			327.9			323.6
Diluted		338.1			329.9			323.6
Dividends paid per share	$	—		$	0.35		$	1.40

Presentation gives effect to the Reverse Stock Split, which occurred on January 4, 2011.

See accompanying notes to consolidated financial statements.

Motorola Solutions, Inc. and Subsidiaries

Consolidated Balance Sheets


	December 31
(In millions, except per share amounts)	*2010*			2009
ASSETS
Cash and cash equivalents	$	4,208		$	2,869
Sigma Fund and short-term investments		4,655			5,094
Accounts receivable, net		1,547			1,353
Inventories, net		521			409
Deferred income taxes		871			680
Other current assets		748			705
Current assets held for disposition		4,604			4,922

Total current assets		17,154			16,032

Property, plant and equipment, net		922			1,012
Sigma Fund		70			66
Investments		172			398
Deferred income taxes		1,920			2,633
Goodwill		1,429			1,429
Other assets		734			849
Non-current assets held for disposition		3,176			3,184

Total assets	$	25,577		$	25,603

LIABILITIES AND STOCKHOLDERS’ EQUITY
Notes payable and current portion of long-term debt	$	605		$	536
Accounts payable		731			569
Accrued liabilities		2,574			2,269
Current liabilities held for disposition		4,800			4,887

Total current liabilities		8,710			8,261

Long-term debt		2,098			3,258
Other liabilities		3,045			3,490
Non-current liabilities held for disposition		737			711
Stockholders’ Equity
Preferred stock, $100 par value		—			—
Common stock: 12/31/10—$.01 par value; 12/31/09—$.01 par value Authorized shares: 12/31/10—600.0; 12/31/09—600.0 Issued shares: 12/31/10—337.2; 12/31/09—330.6 Outstanding shares: 12/31/10—336.3; 12/31/09—330.3		3			3
Additional paid-in capital		8,644			8,231
Retained earnings		4,460			3,827
Accumulated other comprehensive loss		(2,222	)		(2,286	)

Total Motorola Solutions, Inc. stockholders’ equity		10,885			9,775
Noncontrolling interests		102			108

Total stockholders’ equity		10,987			9,883

Total liabilities and stockholders’ equity	$	25,577		$	25,603

Presentation gives effect to the Reverse Stock Split, which occurred on January 4, 2011.

See accompanying notes to consolidated financial statements.

Motorola Solutions, Inc. and Subsidiaries

Consolidated Statements of Stockholders’ Equity


	Motorola Solutions, Inc. Stockholders
							Accumulated Other Comprehensive Income (Loss)
(In millions, except per share amounts)	Shares			Common Stock and Additional Paid-In Capital			Fair Value Adjustment To Available For Sale Securities, Net of Tax			Foreign Currency Translation Adjustments, Net of Tax			Retirement Benefits Adjustments, Net of Tax			Other Items, Net of Tax				Retained Earnings			Noncontrolling Interests			Comprehensive Earnings (Loss)
Balances at January 1, 2008		323.4		$	7,574		$	(59	)	$	16		$	(704	)	$	—			$	8,575		$	78

Net earnings (loss)																					(4,244	)		4		$	(4,240	)
Net unrealized gains on securities, net of tax of $36								61																			61
Foreign currency translation adjustments, net of tax of $39											(149	)															(149	)
Purchases of a Noncontrolling interest equity																								6
Amortization of retirement benefit adjustments net of tax of $10														19													19
Effect of U.S. pension plan freeze curtailment, net of tax of $(25)														(42	)												(42	)
Year-end and other retirement adjustments, net of tax of $(793)														(1,340	)												(1,340	)
Issuance of common stock and stock options exercised		3.2			134
Share repurchase program		(1.3	)		(138	)
Tax shortfalls from share-based compensation					(6	)
Share-based compensation expense					270
Net loss on derivative instruments, net of tax of $(5)																	(7	)									(7	)
Dividends declared $(1.40 per share)																					(453	)

Balances at December 31, 2008		325.3		$	7,834		$	2		$	(133	)	$	(2,067	)	$	(7	)		$	3,878		$	88		$	(5,698	)

Net earnings (loss)																					(51	)		23		$	(28	)
Net unrealized gain on securities, net of tax of $40								68																			68
Foreign currency translation adjustments, net of tax of $(17)											70																70
Amortization of retirement benefit adjustments, net of tax of $(33)														(65	)												(65	)
Year-end and other retirement adjustments, net of tax of $(22)														(163	)												(163	)
Issuance of common stock and stock options exercised		5.3			111
Tax shortfalls from stock-based compensation					(12	)
Share-based compensation expense					301
Net gain on derivative instruments, net of tax of $6																	9										9
Dividends paid to noncontrolling interest on subsidiary common stock																								(3	)

Balances at December 31, 2009		330.6		$	8,234		$	70		$	(63	)	$	(2,295	)	$	2		��	$	3,827		$	108		$	(109	)

Net earnings																					633			17		$	650
Net unrealized loss on securities, net of tax of $(35)								(58	)																		(58	)
Foreign currency translation adjustments, net of tax of $46											(63	)															(63	)
Amortization of retirement benefit adjustments, net of tax of $57														112													112
Plan amendment, net of tax of $0														22													22
Remeasurement of retirement benefits, net of tax of $(13)														(28	)												(28	)
Year-end and other retirement adjustments, net of tax of $(14)														81													81
Issuance of common stock and stock options exercised		6.6			144
Tax shortfalls from stock-based compensation					(63	)
Share-based compensation expense					308
Net loss on derivative instruments, net of tax of $(1)																	(2	)									(2	)
Dividends paid to noncontrolling interest on subsidiary common stock																								(23	)
Reclassification of share-based awards from liability to equity					24

Balances at December 31, 2010		337.2		$	8,647		$	12		$	(126	)	$	(2,108	)	$	—			$	4,460		$	102		$	714

Presentation gives effect to the Reverse Stock Split, which occurred on January 4, 2011.

See accompanying notes to consolidated financial statements.

Motorola Solutions, Inc. and Subsidiaries

Consolidated Statements of Cash Flows


	Years Ended December 31
(In millions)	*2010*			2009			2008
Operating
Net earnings (loss) attributable to Motorola Solutions, Inc.	$	633		$	(51	)	$	(4,244	)
Earnings attributable to noncontrolling interests		17			23			4

Net earnings (loss)		650			(28	)		(4,240	)
Earnings (loss) from discontinued operations		374			(474	)		(762	)

Earnings (loss) from continuing operations		276			446			(3,478	)
Adjustments to reconcile loss from continuing operations to net cash provided by operating activities:
Depreciation and amortization		342			388			403
Non-cash other charges (income)		(74	)		(72	)		2,279
Share-based compensation expense		144			137			131
Gain on sales of investments and businesses, net		(49	)		(108	)		(64	)
Loss (gain) from extinguishment of long-term debt		12			(67	)		(14	)
Deferred income taxes		384			47			2,573
Changes in assets and liabilities, net of effects of acquisitions and dispositions:
Accounts receivable		(83	)		102			13
Inventories		(111	)		111			(64	)
Other current assets		(48	)		276			(40	)
Accounts payable and accrued liabilities		333			(621	)		(222	)
Other assets and liabilities		(308	)		(11	)		(633	)

Net cash provided by operating activities		818			628			884

Investing
Acquisitions and investments, net		(23	)		(17	)		(208	)
Proceeds from sales of investments and businesses, net		264			357			113
Capital expenditures		(192	)		(136	)		(257	)
Proceeds from sales of property, plant and equipment		27			1			119
Proceeds from sales (purchases) of Sigma Fund investments, net		453			(922	)		853
Proceeds from sales (purchases) of short-term investments, net		(6	)		186			424

Net cash provided by (used for) investing activities		523			(531	)		1,044

Financing
Repayment of short-term borrowings, net		(5	)		(86	)		(50	)
Repayment of debt		(1,011	)		(132	)		(225	)
Issuance of common stock		179			116			145
Repurchase of common stock		—			—			(138	)
Proceeds from settlement of financial instruments		—			—			158
Payment of dividends		—			(114	)		(453	)
Distributions from (to) discontinued operations		782			(68	)		(838	)
Other, net		—			6			8

Net cash used for financing activities		(55	)		(278	)		(1,393	)

Net cash provided by (used for) operating activities from discontinued operations		1,154			1			(658	)
Net cash used for investing activities from discontinued operations		(343	)		(137	)		(324	)
Net cash provided by (used for) financing activities from discontinued operations		(782	)		68			838
Effect of exchange rate changes on cash and cash equivalents from discontinued operations		(29	)		68			144

Net cash provided by (used for) discontinued operations		—			—			—

Effect of exchange rate changes on cash and cash equivalents from continuing operations		53			(14	)		(223	)

Net increase (decrease) in cash and cash equivalents		1,339			(195	)		312
Cash and cash equivalents, beginning of year		2,869			3,064			2,752

Cash and cash equivalents, end of year	$	4,208		$	2,869		$	3,064

Cash Flow Information
Cash paid during the year for:
Interest, net	$	240		$	320		$	252
Income taxes, net of refunds		259			159			407

See accompanying notes to consolidated financial statements.

Motorola Solutions, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in millions, except as noted)

1.	Summary of Significant Accounting Policies

Principles of Consolidation: The consolidated financial statements include the accounts of the Company and all controlled subsidiaries. All intercompany transactions and balances have been eliminated.

The consolidated financial statements as of December 31, 2010 and 2009 and for the years ended December 31, 2010, 2009 and 2008, include, in the opinion of management, all adjustments (consisting of normal recurring adjustments and reclassifications) necessary to present fairly Motorola Solutions, Inc.’s (the “Company” or “Motorola Solutions”) consolidated financial position, results of operations and cash flows for all periods presented.

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.

Changes in Presentation

Motorola Mobility Distribution

On January 4, 2011, the distribution by the Company of all the common stock of Motorola Mobility Holdings, Inc. (“Motorola Mobility”) was completed (the “Distribution”). The stockholders of record as of the close of business on December 21, 2010 received one (1) share of Motorola Mobility common stock for each eight (8) shares of the Company’s common stock held as of the record date. The Distribution was structured to be tax-free to Motorola Solutions and its stockholders for U.S. tax purposes (other than with respect to any cash received in lieu of fractional shares). The historical financial results of Motorola Mobility are reflected in the Company’s consolidated financial statements and footnotes as discontinued operations for all periods presented.

Reverse Stock Split and Name Change

On November 30, 2010, Motorola Solutions announced the timing and details regarding the Distribution and the approval of a reverse stock split at a ratio of 1-for-7. On January 4, 2011, immediately following the Distribution of Motorola Mobility common stock, the Company completed a 1-for-7 reverse stock split (“the Reverse Stock Split”) and changed its name to Motorola Solutions, Inc. All consolidated per share information presented gives effect to the Reverse Stock Split.

Networks Transaction

On July 19, 2010, the Company announced an agreement to sell certain assets and liabilities of the Networks business to Nokia Siemens Networks B.V. (“NSN”) (the “Transaction”). On April 13, 2011, the Company announced that it and NSN amended this agreement to, among other things, reduce the cash portion of the purchase price from $1.2 billion to $975 million. On April 29, 2011, the Company completed the Transaction, as amended. Based on the terms and conditions of the amended sale agreement, certain assets including $150 million of accounts receivable were excluded from the Transaction. The results of operations of the portions of the Networks business included in the Transaction are reported as discontinued operations for all periods presented.

Certain Corporate and general costs which have historically been allocated to the Networks business will remain with the Company after the sale of the Networks business. Additionally, the results of operations of previously disposed businesses, which were deemed to be immaterial at the time of their disposition, have been reclassified from continuing operations to discontinued operations. These businesses include: (i) an Israel-based wireless network operator, (ii) the biometrics business, and (iii) Good Technology. The assets and liabilities of the Networks business which were sold to NSN, as well as the assets and liabilities of the previously disposed businesses recorded by the Company prior to the closing of the underlying transactions, are reported as assets and liabilities held for disposition. All previously reported financial information has been revised to conform to the current presentation.

Change in Segmentation

Following the Distribution, Motorola Solutions reports financial results for the following two segments:

•

Government: Our Government segment includes sales from two-way radios and public safety systems. Service revenues included in the Government segment are primarily those associated with the design, installation, maintenance and optimization of equipment for public safety networks.

•

Enterprise: Our Enterprise segment includes sales of enterprise mobile computing devices, scanning devices, wireless broadband systems, RFID data capture solutions and iDEN infrastructure. Service revenues included in the Enterprise segment are primarily maintenance contracts associated with the above products.

Revenue Recognition

In October 2009, the Financial Accounting Standards Board (“FASB”) issued new guidance which amended the accounting standards for revenue arrangements with multiple deliverables. The new guidance changes the criteria required to separate deliverables into separate units of accounting when they are sold in a bundled arrangement and requires an entity to allocate an arrangement’s consideration using estimated selling prices (“ESP”) of deliverables if a vendor does not have vendor-specific objective evidence of selling price (“VSOE”) or third-party evidence of selling price (“TPE”). The new guidance also eliminates the use of the residual method to allocate an arrangement’s consideration.

In October 2009, the FASB also issued new guidance to remove from the scope of software revenue recognition guidance tangible products containing software components and non-software components that function together to deliver the tangible product’s essential functionality.

The new accounting guidance is effective for revenue arrangements entered into or materially modified after June 15, 2010. The standards permit prospective or retrospective adoption as well as early adoption. The Company elected to early adopt this guidance at the beginning of its first quarter of fiscal 2010 on a prospective basis for applicable arrangements that were entered into or materially modified after January 1, 2010.

The Company’s material revenue streams are the result of a wide range of activities, from the delivery of stand-alone equipment to custom design and installation over a period of time to bundled sales of devices, equipment, software and services. The Company enters into revenue arrangements that may consist of multiple deliverables of its product and service offerings due to the needs of its customers. Additionally, many of the Company’s products have both software and non-software components that function together to deliver the product’s essential functionality. The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, and collectibility of the sales price is reasonably assured. In addition to these general revenue recognition criteria, the following specific revenue recognition policies are followed:

Products and Equipment—For product and equipment sales, revenue recognition generally occurs when products or equipment have been shipped, risk of loss has transferred to the customer, objective evidence exists that customer acceptance provisions have been met, no significant obligations remain and allowances for discounts, price protection, returns and customer incentives can be reliably estimated. Recorded revenues are reduced by these allowances. The Company bases its estimates of these allowances on historical experience taking into consideration the type of products sold, the type of customer, and the specific type of transaction in each arrangement. Where customer incentives cannot be reliably estimated, the Company recognizes revenue at the time the product sells through the distribution channel to the end customer.

Long-Term Contracts—For long-term contracts that involve customization of the Company’s equipment or software, the Company generally recognizes revenue using the percentage of completion method based on the percentage of costs incurred to date compared to the total estimated costs to complete the contract. In certain instances, when revenues or costs associated with long-term contracts cannot be reliably estimated or the contract contains other inherent uncertainties, revenues and costs are deferred until the project is complete and customer acceptance is obtained. When current estimates of total contract revenue and contract costs indicate a contract loss, the loss is recognized in the period it becomes evident.

Services—Revenue for services is generally recognized ratably over the contract term as services are performed.

Software and Licenses—Revenue from pre-paid perpetual licenses is recognized at the inception of the arrangement, presuming all other relevant revenue recognition criteria are met. Revenue from non-perpetual licenses or term licenses is recognized ratably over the period that the licensee uses the license. Revenue from software maintenance, technical support and unspecified upgrades is generally recognized over the period that these services are delivered.

Multiple-Element Arrangements—Arrangements with customers may include multiple deliverables, including any combination of products, equipment, services and software. These multiple element arrangements could also include an element accounted for as a long-term contract coupled with other products, equipment, services and software. For the Company’s multiple-element arrangements where at least one of the deliverables is not subject to existing software revenue recognition guidance, deliverables are separated into more than one unit of accounting when (i) the delivered element(s) have value to the customer on a stand-alone basis, and (ii) delivery of the undelivered element(s) is probable and substantially in the control of the Company. Based on the new accounting guidance adopted January 1, 2010, revenue is then allocated to each unit of accounting based on the relative selling price of each unit of accounting based first on VSOE if it exists, based next on TPE if VSOE does not exist, and, finally, if both VSOE and TPE do not exist, based on ESP.

•

VSOE—In many instances, products are sold separately in stand-alone arrangements as customers may support the products themselves or purchase support on a time and materials basis. Additionally, advanced services such as general consulting, network management or advisory projects are often sold in stand-alone engagements. Technical support services are also often sold separately through renewals of annual contracts. The Company determines VSOE based on its normal pricing and discounting practices for the specific product or service when sold separately. In determining VSOE, the Company requires that a substantial majority of the selling prices for a product or service fall within a reasonably narrow pricing range, generally evidenced by the pricing rates of approximately 80% of such historical stand-alone transactions falling within plus or minus 15% of the median rate. In addition, the Company considers the geographies in which the products or services are sold, major product and service groups, customer classification, and other environmental or marketing variables in determining VSOE.

•

TPE—VSOE generally exists only when the Company sells the deliverable separately. When VSOE does not exist, the Company attempts to determine TPE based on competitor prices for similar deliverables when sold separately. Generally, the Company’s go-to-market strategy for many of its products differs from that of its peers and its offerings contain a significant level of customization and differentiation such that the comparable pricing of products with similar functionality sold by other companies cannot be obtained. Furthermore, the Company is unable to reliably determine what similar competitor products’ selling prices are on a stand-alone basis. Therefore, the Company is typically not able to determine TPE.

•

ESP—The objective of ESP is to determine the price at which the Company would transact a sale if the product or service were sold on a stand-alone basis. When both VSOE and TPE do not exist, the Company determines ESP for the arrangement element by first collecting all reasonably available data points including sales, cost and margin analysis of the product, and other inputs based on the Company’s normal pricing practices. Second, the Company makes any reasonably required adjustments to the data based on market and Company-specific factors. Third, the Company stratifies the data points, when appropriate, based on customer, magnitude of the transaction and sales volume.

Once elements of an arrangement are separated into more than one unit of accounting, revenue is recognized for each separate unit of accounting based on the nature of the revenue as described above.

The Company’s arrangements with multiple deliverables may also contain a stand-alone software deliverable that is subject to the existing software revenue recognition guidance. The revenue for these multiple-element arrangements is allocated to the software deliverable and the non-software deliverable(s) based on the relative selling prices of all of the deliverables in the arrangement using the hierarchy in the new revenue accounting guidance. In circumstances where the Company cannot determine VSOE or TPE of the selling price for all of the deliverables in the arrangement, including the software deliverable, ESP is used for the purpose of allocating the arrangement consideration.

The Company’s arrangements with multiple deliverables may be comprised entirely of deliverables that are all still subject to the existing software revenue recognition guidance. For these arrangements, revenue is allocated to the deliverables based on VSOE. Should VSOE not exist for the undelivered software element, revenue is deferred until either the undelivered element is delivered or VSOE is established for the element, whichever occurs first. When the fair value of a delivered element has not been established, but fair value exists for the undelivered elements, the Company uses the residual method to recognize revenue if the fair value of all undelivered elements is determinable. Under the residual method, the fair value of the undelivered elements is deferred and the remaining portion of the arrangement consideration is allocated to the delivered elements and is recognized as revenue.

Net sales as reported and pro forma net sales that would have been reported during the year ended December 31, 2010, if the transactions entered into or materially modified after January 1, 2010 were still subject to the previous accounting guidance are shown in the following table (in millions):


Year Ended December 31, 2010	As Reported		Pro Forma Basis
Net sales	$	7,871	$	7,832

The difference in the as reported revenue as compared to the pro forma basis revenue for the year ended December 31, 2010 is due to the Company no longer using the residual method for allocating revenue to the delivered products in a multiple-element arrangement when VSOE exists for the undelivered element but not the delivered element. This situation is most prevalent for system solutions that were sold with additional deliverables that are not in the scope of contract accounting. Under the prior accounting guidance for revenue recognition, the Company would ascribe the residual value to the contract accounting deliverable only when VSOE for the undelivered services or other products in the arrangement could be determined.

Based on the Company’s current sales strategies, the newly adopted accounting guidance for revenue recognition is not expected to have a significant effect on the timing and pattern of revenue recognition for sales in periods after the initial adoption when applied to multiple-element arrangements. However, the Company expects that this new accounting guidance will facilitate the Company’s efforts to optimize its product and service offerings due to better alignment of the economics of an arrangement and the related

accounting treatment. This may lead to the Company engaging in new sales practices in the future. As these go-to-market strategies evolve, the Company may modify its pricing practices in the future, which could result in changes in selling prices, including both VSOE and ESP. As a result, the Company’s future revenue recognition for multiple-element arrangements could differ materially from the results reported in the current period.

Changes in cost estimates and the fair values of certain deliverables could negatively impact the Company’s operating results. In addition, unforeseen conditions could arise over the contract term that may have a significant impact on operating results.

Sales and Use Taxes—The Company records taxes imposed on revenue-producing transactions, including sales, use, value added and excise taxes, on a net basis with such taxes excluded from revenue.

Cash Equivalents: The Company considers all highly-liquid investments purchased with an original maturity of three months or less to be cash equivalents. At December 31, 2010, and 2009, restricted cash was $226 million and $206 million, respectively.

Sigma Fund: The Company and its wholly-owned subsidiaries invest a significant portion of their U.S. dollar-denominated cash in a fund (the “Sigma Fund”) that allows the Company to efficiently manage its cash around the world. The Sigma Fund portfolio is managed by four independent investment management firms. The investment guidelines of the Sigma Fund require that purchased investments must be in high-quality, investment grade (rated at least A/A-1 by Standard & Poor’s or A2/P-1 by Moody’s Investors Service), U.S. dollar-denominated debt obligations, including certificates of deposit, commercial paper, government bonds, corporate bonds and asset- and mortgage-backed securities. Under the Sigma Fund’s investment policies, except for debt obligations of the U.S. government, agencies and government-sponsored enterprises, no more than 5% of the Sigma Fund portfolio is to consist of debt obligations of any one issuer. The Sigma Fund’s investment policies further require that floating rate investments must have a maturity at purchase date that does not exceed thirty-six months with an interest rate that is reset at least annually. The average interest rate reset of the investments held by the funds must be 120 days or less.

Investments in the Sigma Fund are carried at fair value. The Company primarily relies on valuation pricing models and broker quotes to determine the fair value of investments in the Sigma Fund. The valuation models are developed and maintained by third-party pricing services and use a number of standard inputs to the valuation models, including benchmark yields, reported trades, broker/dealer quotes where the counterparty is standing ready and able to transact, issuer spreads, benchmark securities, bids, offers and other reference data. For each asset class, quantifiable inputs related to perceived market movements and sector news may be considered in addition to the standard inputs.

Investments: Investments in equity and debt securities classified as available-for-sale are carried at fair value. Debt securities classified as held-to-maturity are carried at amortized cost. Equity securities that are restricted for more than one year or that are not publicly traded are carried at cost. Certain investments are accounted for using the equity method if the Company has significant influence over the issuing entity.

The Company assesses declines in the fair value of investments to determine whether such declines are other-than-temporary. This assessment is made considering all available evidence, including changes in general market conditions, specific industry and individual company data, the length of time and the extent to which the fair value has been less than cost, the financial condition and the near-term prospects of the entity issuing the security, and the Company’s ability and intent to hold investment until recovery. Other-than-temporary impairments of investments are recorded to Other within Other income (expense) in the Company’s consolidated statements of operations in the period in which they become impaired.

Inventories:Inventories are valued at the lower of average cost (which approximates cost on a first-in, first-out basis) or market (net realizable value or replacement cost).

Property, Plant and Equipment: Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is recorded using straight-line and declining-balance methods, based on the estimated useful lives of the assets (buildings and building equipment, 5-40 years; machinery and equipment, 2-10 years) and commences once the assets are ready for their intended use.

Goodwill and Intangible Assets: Goodwill is not amortized, but instead is tested for impairment at least annually. The goodwill impairment test is performed at the reporting unit level and is a two-step analysis. First, the fair value of each reporting unit is compared to its book value. If the fair value of the reporting unit is less than its book value, the Company performs a hypothetical purchase price allocation based on the reporting unit’s fair value to determine the fair value of the reporting unit’s goodwill. Fair value is determined using a combination of present value techniques and market prices of comparable businesses.

Intangible assets are generally amortized on a straight line basis over their respective estimated useful lives ranging from one to 13 years. The Company has no intangible assets with indefinite useful lives.

Impairment of Long-Lived Assets: Long-lived assets, which include intangible assets, held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. The Company evaluates recoverability of assets to be held and used by comparing the carrying amount of an asset (group) to future net undiscounted cash flows to be generated by the asset (group). If an asset is considered to be impaired, the

impairment to be recognized is equal to the amount by which the carrying amount of the asset exceeds the asset’s fair value calculated using a discounted future cash flows analysis or market comparables. Assets held for sale, if any, are reported at the lower of the carrying amount or fair value less cost to sell.

Income Taxes: Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities from a change in tax rates is recognized in the period that includes the enactment date.

Deferred tax assets are reduced by valuation allowances if, based on the consideration of all available evidence, it is more likely than not that some portion of the deferred tax asset will not be realized. Significant weight is given to evidence that can be objectively verified. The Company evaluates deferred income taxes on a quarterly basis to determine if valuation allowances are required by considering available evidence. Deferred tax assets are realized by having sufficient future taxable income to allow the related tax benefits to reduce taxes otherwise payable. The sources of taxable income that may be available to realize the benefit of deferred tax assets are future reversals of existing taxable temporary differences, future taxable income exclusive of reversing temporary differences and carryforwards, taxable income in carry-back years and tax planning strategies that are both prudent and feasible.

The Company recognizes the effect of income tax positions only if sustaining those positions is more likely than not. Changes in recognition or measurement are reflected in the period in which a change in judgment occurs. The Company records interest related to unrecognized tax benefits in Interest expense and penalties in Selling, general and administrative expenses in the Company’s consolidated statements of operations.

Long-term Receivables: Long-term receivables include trade receivables where contractual terms of the note agreement are greater than one year. Long-term receivables are considered impaired when management determines collection of all amounts due according to the contractual terms of the note agreement, including principal and interest, is no longer probable. Impaired long-term receivables are valued based on the present value of expected future cash flows, discounted at the receivable’s effective rate of interest, or the fair value of the collateral if the receivable is collateral dependent. Interest income and late fees on impaired long-term receivables are recognized only when payments are received. Previously impaired long-term receivables are no longer considered impaired and are reclassified to performing when they have performed under a workout or restructuring for four consecutive quarters.

Foreign Currency: Certain of the Company’s non-U.S. operations use their respective local currency as their functional currency. Those operations that do not have the U.S. dollar as their functional currency translate assets and liabilities at current rates of exchange in effect at the balance sheet date and revenues and expenses using rates that approximate those in effect during the period. The resulting translation adjustments are included as a component of Accumulated other comprehensive income (loss) in the Company’s consolidated balance sheets. For those operations that have the U.S. dollar as their functional currency, transactions denominated in the local currency are measured in U.S. dollars using the current rates of exchange for monetary assets and liabilities and historical rates of exchange for nonmonetary assets. Gains and losses from remeasurement of monetary assets and liabilities are included in Other within Other income (expense) within the Company’s consolidated statements of operations.

Derivative Instruments: Gains and losses on hedges of existing assets or liabilities are marked-to-market and the result is included in Other within Other income (expense) within the Company’s consolidated statements of operations. Gains and losses on financial instruments that qualify for hedge accounting and are used to hedge firm future commitments or forecasted transactions are deferred until such time as the underlying transactions are recognized or recorded immediately when the transaction is no longer expected to occur. Gains or losses on financial instruments that do not qualify as hedges are recognized immediately as income or expense.

Earnings (Loss) Per Share: The Company calculates its basic earnings (loss) per share based on the weighted-average effect of all common shares issued and outstanding. Net earnings (loss) attributable to Motorola Solutions, Inc. is divided by the weighted average common shares outstanding during the period to arrive at the basic earnings (loss) per share. Diluted earnings (loss) per share is calculated by dividing net earnings (loss) attributable to Motorola Solutions, Inc. by the sum of the weighted average number of common shares used in the basic earnings (loss) per share calculation and the weighted average number of common shares that would be issued assuming exercise or conversion of all potentially dilutive securities, excluding those securities that would be anti-dilutive to the earnings (loss) per share calculation. Both basic and diluted earnings (loss) per share amounts are calculated for earnings (loss) from continuing operations and net earnings (loss) attributable to Motorola Solutions, Inc. for all periods presented. All earnings (loss) per share information presented gives effect to the Reverse Stock Split, which occurred on January 4, 2011.

Share-Based Compensation Costs: The Company has incentive plans that reward employees with stock options, stock appreciation rights, restricted stock and restricted stock units, as well as an employee stock purchase plan. The amount of compensation cost for these share-based awards is measured based on the fair value of the awards, as of the date that the share-based awards are issued and adjusted to the estimated number of awards that are expected to vest. The fair value of stock options, stock appreciation rights and the employee stock purchase plan is generally determined using a Black-Scholes option pricing model which incorporates assumptions about expected volatility, risk free rate, dividend yield, and expected life. Compensation cost for share-based awards is recognized on a straight-line basis over the vesting period.

Retirement Benefits: The Company records annual expenses relating to its pension benefit and postretirement plans based on calculations which include various actuarial assumptions, including discount rates, assumed asset rates of return, compensation increases, turnover rates and health care cost trend rates. The Company reviews its actuarial assumptions on an annual basis and makes modifications to the assumptions based on current rates and trends. The effects of the gains, losses, and prior service costs and credits are amortized over future service periods. The funding status, or projected benefit obligation less plan assets, for each plan, is reflected in the Company’s consolidated balance sheets using a December 31 measurement date.

Advertising Expense: Advertising expenses, which are the external costs of marketing the Company’s products, are expensed as incurred. Advertising expenses were $109 million, $123 million and $184 million for the years ended December 31, 2010, 2009 and 2008, respectively.

Use of Estimates: The preparation of the accompanying consolidated financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. Such estimates include the valuation of accounts receivable and long-term receivables, inventories, Sigma Fund, investments, goodwill, intangible and other long-lived assets, legal contingencies, guarantee obligations, indemnifications and assumptions used in the calculation of income taxes, retirement and other post-employment benefits and allowances for discounts, price protection, product returns and customer incentives, among others. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. The Company adjusts such estimates and assumptions when facts and circumstances dictate. Illiquid credit markets, volatile equity, foreign currency, energy markets and declines in consumer spending have combined to increase the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in those estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods.

2.	Discontinued Operations

On January 4, 2011, the distribution by the Company of all the common stock of Motorola Mobility Holdings, Inc. (“Motorola Mobility”) was completed (the “Distribution”). The stockholders of record as of the close of business on December 21, 2010 received one (1) share of Motorola Mobility common stock for each eight (8) shares of the Company’s common stock held as of the record date. Immediately following the Distribution, the Company changed its name to Motorola Solutions, Inc. The Distribution was structured to be tax-free to Motorola Solutions and its stockholders for U.S. tax purposes (other than with respect to any cash received in lieu of fractional shares). The historical financial results of Motorola Mobility are reflected in the Company’s consolidated financial statements and footnotes as discontinued operations for all periods presented.

During the second quarter of 2010, the Company completed the sale of its Israel-based wireless network operator business formerly included as part of the Government segment. The Company received $170 million in net cash and recorded a gain on sale of the business of $20 million before income taxes, which is included in Earnings from discontinued operations, net of tax, in the Company’s consolidated statements of operations.

During the first quarter of 2009, the Company completed the sale of: (i) Good Technology, and (ii) the biometrics business, which includes its Printrak trademark. Collectively, the Company received $163 million in net cash and recorded a net gain on sale of the businesses of $175 million before income taxes, which is included in Earnings from discontinued operations, net of tax, in the Company’s consolidated statements of operations.

The results of operations of Motorola Mobility, and the portions of the Networks business included in the transaction with NSN, as well as the results of operations of the previously disposed businesses discussed above, which were deemed to be immaterial for presentation as discontinued operations at the time of their disposition, are reported as discontinued operations. All previously reported financial information has been revised to conform to the current presentation.

The following table displays summarized activity in the Company’s consolidated statements of operations for discontinued operations during the years ended December 31, 2010, 2009 and 2008.


Years Ended December 31	*2010*		2009			2008
Net sales	$	15,002	$	14,967		$	22,147
Operating earnings (loss)		574		(728	)		(1,711	)
Gains on sales of investments and businesses, net		19		156			17
Earnings (loss) before income taxes		572		(640	)		(1,636	)
Income tax expense (benefit)		198		(166	)		(874	)
Earnings (loss) from discontinued operations, net of tax		374		(474	)		(762	)

The following table displays a summary of the assets and liabilities held for disposition as of December 31, 2010 and December 31, 2009.


December 31	*2010*		2009
Assets
Accounts receivable, net	$	2,072	$	2,142
Inventories, net		1,040		900
Other current assets		1,492		1,880
Property, plant and equipment, net		1,013		1,143
Investments		145		60
Goodwill		1,504		1,394
Other assets		514		587

	$	7,780	$	8,106

Liabilities
Accounts payable	$	2,060	$	1,860
Accrued liabilities		2,740		3,027
Other liabilities		737		711

	$	5,537	$	5,598

3.	Other Financial Data

Statement of Operations Information

Other Charges

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


Years Ended December 31	*2010*			2009			2008
Other charges (income):
Intangibles amortization	$	203		$	218		$	227
Reorganization of businesses		54			88			60
IP settlements and reserve adjustments		(78	)		—			—
Legal settlements and related insurance matters, net		(29	)		(75	)		14
Environmental reserve charge		—			24			—
Asset impairments charges		—			—			1,564
Gain on sale of property, plant and equipment		—			—			(48	)

	$	150		$	255		$	1,817

During 2010, the Company entered into a settlement agreement with another company to resolve certain intellectual property disputes between the two companies. As a result of the settlement agreement, the Company received $65 million in cash and was assigned certain patent properties. As a result of this agreement, the Company recorded a pre-tax gain of $39 million (and $55 million was recorded within discontinued operations) during the year ended December 31, 2010, related to the settlement of the outstanding litigation between the parties.

Other Income (Expense)

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


Years Ended December 31	*2010*			2009			2008
Interest income, net:
Interest expense	$	(217	)	$	(207	)	$	(210	)
Interest income		88			74			245

	$	(129	)	$	(133	)	$	35

Other:
Investment impairments	$	(21	)	$	(75	)	$	(333	)
Gain (loss) from the extinguishment of the Company’s outstanding long-term debt		(12	)		67			14
Foreign currency gain (loss)		12			14			(69	)
Gain (loss) on Sigma Fund investments		11			80			(101	)
Impairment charges on Sigma Fund investments		—			—			(186	)
U.S. pension plan freeze curtailment gain		—			—			237
Gain on interest rate swaps		—			—			24
Other		3			6			(3	)

	$	(7	)	$	92		$	(417	)

Earnings (Loss) Per Common Share

Basic and diluted earnings (loss) per common share from both continuing operations and net earnings (loss) attributable to Motorola Solutions, Inc., including discontinued operations, is computed as follows:


	Earnings (loss) from Continuing Operations							Net Earnings (loss) attributable to Motorola Solutions, Inc.
Years Ended December 31	*2010*		2009		2008			*2010*		2009			2008
Basic earnings (loss) per common share:
Earnings (loss)	$	259	$	423	$	(3,482	)	$	633	$	(51	)	$	(4,244	)
Weighted average common shares outstanding		333.3		327.9		323.6			333.3		327.9			323.6

Per share amount	$	0.78	$	1.29	$	(10.76	)	$	1.90	$	(0.16	)	$	(13.11	)

Diluted earnings (loss) per common share:
Earnings (loss)	$	259	$	423	$	(3,482	)	$	633	$	(51	)	$	(4,244	)

Weighted average common shares outstanding		333.3		327.9		323.6			333.3		327.9			323.6
Add effect of dilutive securities:
Share-based awards and other		4.8		2.0		—			4.8		2.0			—

Diluted weighted average common shares outstanding		338.1		329.9		323.6			338.1		329.9			323.6

Per share amount	$	0.77	$	1.28	$	(10.76	)	$	1.87	$	(0.15	)	$	(13.11	)

Presentation gives effect to the Reverse Stock Split, which occurred on January 4, 2011.

In the computation of diluted earnings per common share from both continuing operation and on a net earnings basis for the years ended December 31, 2010 and 2009, 14.6 million and 22.7 million, respectively, out-of-the-money stock options and the assumed vesting of 0.7 million and 2.2 million, respectively, restricted stock units were excluded because their inclusion would have been antidilutive. For the year ended December 31, 2008, the Company was in a net loss position and, accordingly, the assumed exercise of 33.2 million stock options and the assumed vesting of 3.7 million restricted stock units were excluded from diluted weighted averages outstanding because their inclusion would have been antidilutive.

Pursuant to the completion of the Distribution on January 4, 2011, 8.0 million stock options and 3.8 million unvested restricted stock units held by the employees of Motorola Mobility were cancelled. Upon the completed divestiture of the Networks business on April 29, 2011, approximately 0.2 million stock options and 1.4 million unvested restricted stock units were cancelled.

Balance Sheet Information

Sigma Fund

Sigma Fund consists of the following:


	*December 31, 2010*				December 31, 2009
Fair Value	*Current*		*Non-current*		Current		Non-current
Cash	$	2,355	$	—	$	202	$	—
Securities:
U.S. government and agency obligations		2,291		—		4,408		—
Corporate bonds		—		58		367		63
Asset-backed securities		—		1		66		—
Mortgage-backed securities		—		11		49		3

	$	4,646	$	70	$	5,092	$	66

During the years ended December 31, 2010 and 2009, the Company recorded gains related to the Sigma Fund investments of $11 million and $80 million, respectively, in Other income (expense) in the consolidated statement of operations. During the year ended December 31, 2008, the Company recorded total charges related to Sigma Fund investments, including temporary unrealized losses and impairment charges, of $287 million in its consolidated statement of operations.

During the fourth quarter of 2008, the Company changed its accounting for changes in the fair value of investments in the Sigma Fund. Prior to the fourth quarter of 2008, the Company distinguished between declines it considered temporary and declines it considered permanent. When it became probable that the Company would not collect all amounts it was owed on a security according to its contractual terms, the Company considered the security to be impaired and recorded the permanent decline in fair value in earnings. During 2008, the Company recorded $186 million of permanent impairments of Sigma Fund investments in the consolidated statement of operations. Beginning in the fourth quarter of 2008, the Company began recording all changes in the fair value of investments in the Sigma Fund in the consolidated statements of operations. In its stand-alone financial statements, the Sigma Fund uses “investment company” accounting practices and records all changes in the fair value of the underlying investments in earnings, whether such changes are considered temporary or permanent. The Company determined the underlying accounting practices of the Sigma Fund in its stand-alone financial statements should be retained in the Company’s consolidated financial statements. Accordingly, the Company recorded the cumulative loss of $101 million on investments in the Sigma Fund investments in its consolidated statement of operations during the fourth quarter of 2008. The Company determined amounts that arose in periods prior to the fourth quarter of 2008 were not material to the consolidated results of operations in those periods.

Securities with a significant temporary unrealized loss and a maturity greater than 12 months and defaulted securities have been classified as non-current in the Company’s consolidated balance sheets. At December 31, 2010, $70 million of the Sigma Fund investments were classified as non-current, and the weighted average maturity of the Sigma Fund investments classified as non-current (excluding defaulted securities) was 164 months. At December 31, 2009, $66 million of the Sigma Fund investments were classified as non-current.

Investments

Investments consist of the following:


	Recorded Value				Less
December 31, 2010	Short-term Investments		Investments		Unrealized Gains		Unrealized Losses		Cost Basis
Certificates of deposit	$	7	$	—	$	—	$	—	$	7
Available-for-sale securities:
U.S. government, agency and government-sponsored enterprise obligations		—		17		—		—		17
Corporate bonds		2		11		—		—		13
Mortgage-backed securities		—		3		—		—		3
Common stock and equivalents		—		12		4		—		8

		9		43		4		—		48
Other securities, at cost		—		113		—		—		113
Equity method investments		—		16		—		—		16

	$	9	$	172	$	4	$	—	$	177


	Recorded Value				Less
December 31, 2009	Short-term Investments		Investments		Unrealized Gains		Unrealized Losses			Cost Basis
Available-for-sale securities:
U.S. government, agency and government-sponsored enterprise obligations	$	—	$	23	$	1	$	—		$	22
Corporate bonds		2		10		—		—			12
Mortgage-backed securities		—		3		—		—			3
Common stock and equivalents		—		126		97		(1	)		30

		2		162		98		(1	)		67
Other securities, at cost		—		209		—		—			209
Equity method investments		—		27		—		—			27

	$	2	$	398	$	98	$	(1	)	$	303

During the years ended December 31, 2010, 2009 and 2008, the Company recorded investment impairment charges of $21 million, $75 million and $333 million, respectively, representing other-than-temporary declines in the value of the Company’s available-for-sale investment portfolio. Investment impairment charges are included in Other within Other income (expense) in the Company’s consolidated statements of operations.

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


Years Ended December 31	*2010*		2009		2008
Gains on sales of investments, net	$	49	$	91	$	64
Gain on sales of businesses, net		—		17		—

	$	49	$	108	$	64

During the year ended December 31, 2010, the $49 million of net gains primarily related to sales of a number of the Company’s equity investments, of which $31 million of gain was attributable to a single investment. During the year ended December 31, 2009, the $108 million of net gains primarily relates to: (i) sales of certain of the Company’s equity investments, of which $32 million of gain was attributable to a single investment, and (ii) a net gain on the sales of specific businesses. During the year ended December 31, 2008, the $64 million of net gains primarily related to sales of a number of the Company’s equity investments, of which $29 million of gain was attributable to a single investment.

Accounts Receivable, Net

Accounts receivable, net, consists of the following:


December 31	*2010*			2009
Accounts receivable	$	1,596		$	1,369
Less allowance for doubtful accounts		(49	)		(16	)

	$	1,547		$	1,353

Inventories, Net

Inventories, net, consist of the following:


December 31	*2010*			2009
Finished goods	$	386		$	341
Work-in-process and production materials		292			208

		678			549
Less inventory reserves		(157	)		(140	)

	$	521		$	409

Other Current Assets

Other current assets consist of the following:

		$1,012		$1,012
December 31	*2010*		2009
Costs and earnings in excess of billings	$	291	$	257
Contract-related deferred costs		160		123
Tax-related refunds receivable		116		100
Other		181		225

	$	748	$	705

Property, Plant and Equipment, Net

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


December 31	*2010*			2009
Land	$	71		$	78
Building		804			852
Machinery and equipment		2,094			1,881

		2,969			2,811
Less accumulated depreciation		(2,047	)		(1,799	)

	$	922		$	1,012

Depreciation expense for the years ended December 31, 2010, 2009 and 2008 was $139 million, $170 million and $176 million, respectively.

Other Assets

Other assets consist of the following:

		$1,012		$1,012
December 31	*2010*		2009
Long-term receivables, net of allowances of $1 and $7	$	251	$	102
Intangible assets, net of accumulated amortization of $947 and $757		246		453
Other		237		294

	$	734	$	849

Accrued Liabilities

Accrued liabilities consist of the following:

		$1,012		$1,012
December 31	*2010*		2009
Deferred revenue	$	746	$	556
Compensation		558		376
Billings in excess of costs and earnings		226		253
Tax liabilities		179		192
Customer reserves		117		97
Other		748		795

	$	2,574	$	2,269

Other Liabilities

Other liabilities consist of the following:


December 31	*2010*		2009
Defined benefit plans, including split dollar life insurance policies	$	2,113	$	2,386
Postretirement health care benefits plan		277		287
Deferred revenue		272		274
Unrecognized tax benefits		70		170
Other		313		373

	$	3,045	$	3,490

Stockholders’ Equity Information

Share Repurchase Program: During the years ended December 31, 2010 and 2009, the Company did not repurchase any of its common shares. During the year ended December 31, 2008, the Company repurchased 1.3 million of its common shares at an aggregate cost of $138 million, or an average cost of $107.24 per share, all of which were repurchased during the three months ended March 29, 2008. These amounts give effect to the Reverse Stock Split, which occurred on January 4, 2011.

The repurchase of common shares took place under programs approved by the Board of Directors, authorizing the Company to repurchase an aggregate amount of up to $7.5 billion of its outstanding shares of common stock over a period of time. This authorization expired in June 2009 and was not renewed. The Company has not repurchased any shares since the first quarter of 2008. All repurchased shares have been retired.

Payment of Dividends: During the year ended December 31, 2010, the Company did not pay cash dividends to holders of its common stock. During the year ended December 31, 2009, the Company paid $114 million in cash dividends to holders of its common stock, all of which was paid during the first quarter of 2009, related to the payment of a dividend declared in November 2008. In February 2009, the Company announced that its Board of Directors suspended the declaration of quarterly cash dividends on the Company’s common stock.

Par Value Change: On May 4, 2009, the Company’s stockholders approved a change in the par value of Motorola Solutions common stock from $3.00 per share to $.01 per share. The change did not have an impact on the amount of the Company’s Total stockholders’ equity, but it did result in a reclassification of $6.9 billion between Common stock and Additional paid-in capital.

Motorola Mobility Distribution: On January 4, 2011, the distribution of Motorola Mobility from Motorola Solutions was completed. On January 4, 2011, the stockholders of record as of the close of business on December 21, 2010 received one (1) share of Motorola Mobility common stock for each eight (8) shares of Motorola, Inc. common stock held as of the Record Date. The Distribution was completed pursuant to an Amended and Restated Master Separation and Distribution Agreement, effective as of July 31, 2010, among Motorola, Inc., Motorola Mobility Holdings and Motorola Mobility, Inc.

Reverse Stock Split: On November 30, 2010, the Company announced the timing and details regarding the Distribution and the approval of a reverse stock split at a ratio of 1-for-7. Immediately following the Distribution of Motorola Mobility common stock, the Company completed a 1-for-7 reverse stock split. All consolidated per share information presented gives effect to the Reverse Stock Split.

4.	Debt and Credit Facilities

Long-Term Debt


December 31	*2010*			2009
7.625% notes due 2010	$	—		$	527
8.0% notes due 2011		600			600
5.375% senior notes due 2012		400			400
6.0% senior notes due 2017		399			399
6.5% debentures due 2025		313			377
7.5% debentures due 2025		346			346
6.5% debentures due 2028		209			283
6.625% senior notes due 2037		224			444
5.22% debentures due 2097		89			196
Other long-term debt		53			107

		2,633			3,679
Adjustments, primarily unamortized gains on interest rate swap terminations		70			110
Less: current portion		(605	)		(531	)

Long-term debt	$	2,098		$	3,258

Other Short-Term Debt


December 31	*2010*			2009
Notes to banks	$	—		$	5
Add: current portion of long-term debt		605			531

Notes payable and current portion of long-term debt	$	605		$	536

Weighted average interest rates on short-term borrowings throughout the year		3.1	%		3.1	%

In November 2010, the Company repaid, at maturity, the entire $527 million aggregate principal amount outstanding of its 7.625% Notes due November 15, 2010. During the year ended December 31, 2010, the Company repurchased approximately $500 million of its outstanding long-term debt for a purchase price of $477 million, excluding approximately $5 million of accrued interest, all of which occurred during the three months ended July 3, 2010. The $500 million of long-term debt repurchased included principal amounts of: (i) $65 million of the $379 million then outstanding of the 6.50% Debentures due 2025 (the “2025 Debentures”), (ii) $75 million of the $286 million then outstanding of the 6.50% Debentures due 2028 (the “2028 Debentures”), (iii) $222 million of the $446 million then outstanding of the 6.625% Senior Notes due 2037 (the “2037 Senior Notes”), and (iv) $138 million of the $252 million then outstanding of the 5.22% Debentures due 2097. After accelerating the amortization of debt issuance costs and debt discounts, the Company recognized a loss of approximately $12 million related to this debt tender in Other within Other income (expense) in the consolidated statements of operations.

During the year ended December 31, 2009, the Company repurchased $199 million of its outstanding long-term debt for an aggregate purchase price of $133 million, including $4 million of accrued interest, all of which occurred during the three months ended April 4, 2009. The $199 million of long-term debt repurchased included principal amounts of: (i) $11 million of the $358 million then outstanding of the 7.50% Debentures due 2025, (ii) $20 million of the $399 million then outstanding 2025 Debentures, (iii) $14 million of the $299 million then outstanding 2028 Debentures, and (iv) $154 million of the $600 million then outstanding 2037 Senior Notes. The Company recognized a gain of approximately $67 million related to these open market purchases in Other within Other income (expense) in the consolidated statements of operations.

Aggregate requirements for long-term debt maturities during the next five years are as follows: 2011—$605 million; 2012—$405 million; 2013—$5 million; 2014—$4 million; and 2015—$4 million.

Credit Facilities

The Company had a domestic syndicated revolving credit facility (as amended from time to time, the “Credit Facility”), scheduled to mature in December 2011. The size of the Credit Facility was the lesser of: (1) $1.5 billion, or (2) an amount determined based on eligible domestic accounts receivable and inventory. If the Company elected to borrow under the Credit Facility, only then and not before, it would be required to pledge its domestic accounts receivables and, at its option, domestic inventory. The Credit Facility did not require the Company to meet any financial covenants unless remaining availability under the Credit Facility was less than $225 million. As of and during the year ended December 31, 2010, there were no outstanding borrowings under this Credit Facility.

At December 31, 2010, the commitment fee assessed against the daily average unused amount was 75 basis points.

On January 4, 2011, the Company terminated the Credit Facility and entered into a new $1.5 billion unsecured syndicated revolving credit facility (the “2011 Motorola Solutions Credit Agreement”) that is scheduled to expire on June 30, 2014. The 2011 Motorola Solutions Credit Agreement includes a provision pursuant to which the Company can increase the aggregate credit facility size up to a maximum of $2.0 billion by adding lenders or having existing lenders increase their commitments. The Company must comply with certain customary covenants, including maintaining maximum leverage and minimum interest coverage ratios as defined in the 2011 Motorola Solutions Credit Agreement. The Company has no outstanding borrowings under the 2011 Motorola Solutions Credit Agreement.

5.	Risk Management

Derivative Financial Instruments

Foreign Currency Risk

The Company uses financial instruments to reduce its overall exposure to the effects of currency fluctuations on cash flows. The Company’s policy prohibits speculation in financial instruments for profit on exchange rate price fluctuations, trading in currencies for which there are no underlying exposures, or entering into transactions for any currency to intentionally increase the underlying exposure. Instruments that are designated as part of a hedging relationship must be effective at reducing the risk associated with the exposure being hedged and are designated as part of a hedging relationship at the inception of the contract. Accordingly, changes in the market values of hedge instruments must be highly correlated with changes in market values of the underlying hedged items both at the inception of the hedge and over the life of the hedge contract.

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

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

The Company had outstanding foreign exchange notional contracts totaling $1.5 billion at December 31, 2010, compared to $1.7 billion at December 31, 2009, (of which $520 million and $560 million, respectively, was related to discontinued operations). Management believes that these financial instruments should not subject the Company to undue risk due to foreign exchange movements because gains and losses on these contracts should generally offset losses and gains on the underlying assets, liabilities and transactions, except for the ineffective portion of the instruments, which are charged to Other within Other income (expense) in the Company’s consolidated statements of operations.

The following table shows the five largest net notional amounts of the positions to buy or sell foreign currency as of December 31, 2010 and the corresponding positions as of December 31, 2009:


	Notional Amount
Net Buy (Sell) by Currency	December 31, 2010			December 31, 2009
Chinese Renminbi	$	(423	)	$	(297	)
Euro		(195	)		(350	)
Brazilian Real		(43	)		(35	)
Malaysian Ringgit		64			16
British Pound		187			143

For the year ended December 31, 2010, income representing the ineffective portions of changes in the fair value of cash flow hedge positions was $1 million compared to de minimus income for the year ended December 31, 2009 and expense of $2 million for the year ended December 31, 2008. These amounts are included in Other within Other income (expense) in the Company’s consolidated statements of operations. The above amounts include the change in the fair value of derivative contracts related to the changes in the difference between the spot price and the forward price. These amounts are excluded from the measure of effectiveness. Expense (income) related to cash flow hedges that were discontinued for the years ended December 31, 2010, 2009 and 2008 are included in the amounts noted above.

During the years ended December 31, 2010, 2009 and 2008, on a pre-tax basis, income (expense) of $1 million, $(1) million and $(2) million, respectively, was reclassified from equity to earnings in the Company’s consolidated statements of operations.

At December 31, 2010, the maximum term of derivative instruments that hedge forecasted transactions was 12 months. The weighted average duration of the Company’s derivative instruments that hedge forecasted transactions was six months.

Interest Rate Risk

At December 31, 2010, the Company has $2.7 billion of long-term debt, including the current portion of long-term debt, which is primarily priced at long-term, fixed interest rates.

As part of its liability management program, one of the Company’s European subsidiaries has an outstanding interest rate agreement (“Interest Agreement”) relating to a Euro-denominated loan. The interest on the Euro-denominated loan is variable. The Interest Agreement changes the characteristics of interest rate payments from variable to maximum fixed-rate payments. The Interest Agreement is not accounted for as a part of a hedging relationship and, accordingly, the changes in the fair value of the Interest Agreement is included in Other income (expense) in the Company’s consolidated statements of operations. The weighted average fixed rate payment on the Interest Agreement was 5.18%. At December 31, 2010 and 2009, the fair value of the Interest Agreement put the Company in a liability position of $3 million and $4 million, respectively.

Counterparty Risk

The use of derivative financial instruments exposes the Company to counterparty credit risk in the event of nonperformance by counterparties. However, the Company’s risk is limited to the fair value of the instruments when the derivative is in an asset position. The Company actively monitors its exposure to credit risk. At present time, all of the counterparties have investment grade credit ratings. The Company is not exposed to material credit risk with any single counterparty. As of December 31, 2010, the Company was exposed to an aggregate credit risk of approximately $2 million with all counterparties.

The following tables summarize the fair values and location in the consolidated balance sheets of all derivative financial instruments held by the Company, including amounts included in held for disposition, at December 31, 2010 and 2009:


	Fair Values of Derivative Instruments
	Assets			Liabilities
December 31, 2010	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location
Derivatives designated as hedging instruments:
Foreign exchange contracts	$	1	Other assets	$	—	Other liabilities
Derivatives not designated as hedging instruments:
Foreign exchange contracts		4	Other assets		15	Other liabilities
Interest agreement contracts		—	Other assets		3	Other liabilities

Total derivatives not designated as hedging instruments		4			18

Total derivatives	$	5		$	18


	Fair Values of Derivative Instruments
	Assets			Liabilities
December 31, 2009	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location
Derivatives designated as hedging instruments:
Foreign exchange contracts	$	5	Other assets	$	1	Other liabilities
Derivatives not designated as hedging instruments:
Foreign exchange contracts		10	Other assets		16	Other liabilities
Interest agreement contracts		—	Other assets		4	Other liabilities

Total derivatives not designated as hedging instruments		10			20

Total derivatives	$	15		$	21

The following table summarizes the effect of derivative instruments in our consolidated statements of operations, including amounts related to discontinued operations, for the year ended December 31, 2010 and 2009:


	December 31,						Statement of Operations Location
Gain (Loss) on Derivative Instruments	*2010*			2009			Statement of Operations Location
Derivatives not designated as hedging instruments:
Interest rate contracts		(16	)		(16	)	Other income (expense)
Foreign exchange contracts		(33	)		(166	)	Other income (expense)

Total derivatives not designated as hedging instruments	$	(49	)	$	(182	)

The following table summarizes the gains and losses recognized in the consolidated financial statements, including amounts related to discontinued operations, for the years ended December 31, 2010 and 2009:


	December 31,						Financial Statement
Foreign Exchange Contracts	*2010*			2009			Location
Derivatives in cash flow hedging relationships:
Gain/(Loss) recognized in Accumulated��other comprehensive loss (effective portion)	$	(9	)	$	—		Accumulated other comprehensive loss
Loss reclassified from Accumulated other comprehensive loss into Net earnings (loss) (effective portion)		(6	)		(18	)	Cost of sales/Sales
Gain (loss) recognized in Net earnings (loss) on derivative (ineffective portion and amount excluded from effectiveness testing)		1			—		Other income (expense)

Stockholders’ Equity

Derivative instruments activity, net of tax, included in Accumulated other comprehensive income (loss) within the consolidated statements of stockholders’ equity for the years ended December 31, 2010, 2009 and 2008 is as follows:


	*2010*			2009			2008
Balance at January 1	$	2		$	(7	)	$	—
Increase (decrease) in fair value		3			21			(9	)
Reclassifications to earnings, net of tax		(5	)		(12	)		2

Balance at December 31	$	—		$	2		$	(7	)

6.	Income Taxes

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


Years Ended December 31	*2010*		2009		2008
United States	$	402	$	377	$	(1,440	)
Other nations		289		260		443

	$	691	$	637	$	(997	)

Components of income tax expense (benefit) are as follows:


Years Ended December 31	*2010*			2009			2008
United States	$	(45	)	$	66		$	(453	)
Other nations		183			78			348
States (U.S.)		74			6			(5	)

Current income tax expense (benefit)		212			150			(110	)

United States		385			(38	)		2,559
Other nations		(55	)		103			42
States (U.S.)		(127	)		(24	)		(10	)

Deferred income tax expense		203			41			2,591

Total income tax expense	$	415		$	191		$	2,481

Deferred tax charges that were recorded within Accumulated other comprehensive income (loss) in the Company’s consolidated balance sheets resulted from retirement benefit adjustments, currency translation adjustments, net gains (losses) on derivative instruments and fair value adjustments to available-for-sale securities. The adjustments were $41 million, $(26) million and $(738) million for the years ended December 31, 2010, 2009 and 2008, respectively.

The Company evaluates its permanent reinvestment assertions with respect to foreign earnings at each reporting period and, except for certain earnings that the Company intends to reinvest indefinitely due to the capital requirements of the foreign subsidiaries or due to local country restrictions, accrues for the U.S. federal income taxes applicable to the foreign earnings. Undistributed foreign earnings that the Company intends to reinvest indefinitely, and for which no U.S. federal income taxes have been provided, aggregate to $1.3 billion, $2.4 billion and $2.9 billion at December 31, 2010, 2009 and 2008, respectively. The portion of earnings not reinvested indefinitely may be distributed without an additional U.S. federal income tax charge given the U.S. federal tax accrued on undistributed earnings and the utilization of available foreign tax credits. In 2010, the Company recognized deferred income tax expense of $287 million related to undistributed foreign earnings; including a charge for certain prior foreign earnings the Company concluded are no longer considered to be permanently reinvested and for a reduction of the invested capital of certain of its foreign subsidiaries. The capital reduction is part of the Company’s plan to realign its investment in foreign subsidiaries and is pending approval by certain governmental agencies.

In the first quarter of 2010, the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 were signed into law, which eliminated the favorable income tax treatment of Medicare Part D Subsidy receipts effective for tax years starting in 2013. As a result of the tax law change, the Company recorded an $18 million non-cash tax charge to reduce its deferred tax asset associated with Medicare Part D subsidies currently estimated to be received after 2012.

Differences between income tax expense (benefit) computed at the U.S. federal statutory tax rate of 35% and income tax expense (benefit) as reflected in the Consolidated Statements of Operations are as follows:


Years Ended December 31	*2010*			2009			2008
Income tax expense (benefit) at statutory rate	$	242		$	223		$	(349	)
Taxes on non-U.S. earnings		(11	)		(22	)		40
State income taxes		(34	)		(11	)		(10	)
Valuation allowances		(18	)		(28	)		2,321
Goodwill impairment		—			—			555
Tax on undistributed non-U.S. earnings		287			45			15
Other provisions		(44	)		(6	)		(91	)
Research credits		(6	)		(6	)		(1	)
Tax law changes		18			—			—
Section 199 deduction		(20	)		(7	)		—
Other		1			3			1

	$	415		$	191		$	2,481

Gross deferred tax assets were $5.7 billion and $8.3 billion at December 31, 2010 and 2009, respectively. Deferred tax assets, net of valuation allowances, were $5.2 billion and $6.4 billion at December 31, 2010 and 2009, respectively. Gross deferred tax liabilities were $2.4 billion and $3.2 billion at December 31, 2010 and 2009, respectively.

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


December 31	*2010*			2009
Inventory	$	114		$	117
Accrued liabilities and allowances		231			247
Employee benefits		1,083			1,336
Capitalized items		386			426
Tax basis differences on investments		40			63
Depreciation tax basis differences on fixed assets		66			19
Undistributed non-U.S. earnings		(481	)		(235	)
Tax carryforwards		1,617			2,881
Business reorganization		24			30
Warranty and customer reserves		56			85
Deferred revenue and costs		242			166
Valuation allowances		(508	)		(1,893	)
Deferred charges		37			51
Other		(118	)		(12	)

	$	2,789		$	3,281

The Company accounts for income taxes by recognizing deferred tax assets and liabilities using enacted tax rates for the effect of the temporary differences between the book and tax basis of recorded assets and liabilities. The Company makes estimates and judgments with regard to the calculation of certain income tax assets and liabilities. Deferred tax assets are reduced by valuation allowances if, based on the consideration of all available evidence, it is more-likely-than-not that some portion of the deferred tax asset will not be realized. Significant weight is given to evidence that can be objectively verified.

The Company evaluates deferred income taxes on a quarterly basis to determine if a valuation allowance is required by considering available evidence, including historical and projected taxable income and tax planning strategies that are both prudent and feasible. As of December 31, 2010, the Company’s U.S. operations had generated cumulative pre-tax losses over the most recent three year period as a result of the pre-tax losses of Motorola Mobility. Because of the losses at Motorola Mobility, the Company believes that the weight of negative historical evidence precludes it from considering any forecasted income from the Motorola Mobility in its analysis of the recoverability of deferred tax assets. However, based on the sustained profits of other businesses, the Company believes that the weight of positive historical evidence allows it to include forecasted income from the other businesses in its analysis of the recoverability of its deferred tax assets. The Company also considered in its analysis tax planning strategies that are prudent and can be reasonably implemented. During 2008, the Company recorded a partial valuation allowance of $2.1 billion against a portion of its U.S. tax carryforwards that were more likely than not to expire. During 2009, the Company increased its U.S. valuation allowance by $90 million, primarily relating to capital losses realized from the disposition of a subsidiary, which is accounted for as

part of discontinued operations, offset by a decrease in the valuation allowance for refundable general business credits. During 2010, the U.S. valuation allowance was reduced by $39 million, primarily related to certain of the Company’s state tax carryforwards that the Company expects to utilize.

At December 31, 2010 and 2009, the Company had valuation allowances of $508 million and $1.9 billion, respectively, against its deferred tax assets, including $187 million and $253 million, respectively, relating to deferred tax assets for non-U.S. subsidiaries. The Company’s valuation allowances for its non-U.S. subsidiaries had a net decrease of $66 million during 2010. The decrease is primarily caused by exchange rate variances and adjustments to the valuation allowance based on current year activity. The U.S. valuation allowance relates primarily to tax carryforwards, including foreign tax credits, general business credits and tax carryforwards of acquired businesses which have limitations upon their use, state tax carryforwards and future capital losses related to certain investments. The Company believes that the remaining deferred tax assets are more-likely-than-not to be realizable based on estimates of future taxable income and the implementation of tax planning strategies.

Tax carryforwards are as follows:


December 31, 2010	Gross Tax Loss		Tax Effected		Expiration Period
United States:
U.S. tax losses	$	131	$	46		2018-2027
Foreign tax credits		n/a		843		2017-2019
General business credits		n/a		277		2021-2030
Minimum tax credits		n/a		109		Unlimited
State tax losses		1,676		51		2011-2030
State tax credits		n/a		21		2011-2025
Non-U.S. Subsidiaries:
China tax losses		208		52		2012-2015
Japan tax losses		79		32		2015-2017
United Kingdom tax losses		55		15		Unlimited
Germany tax losses		252		72		Unlimited
Singapore tax losses		101		17		Unlimited
Other subsidiaries tax losses		40		10		Various
Spain tax credits		n/a		29		2018-2022
Other subsidiaries tax credits		n/a		43		Various

			$	1,617

The Company had unrecognized tax benefits of $198 million and $417 million at December 31, 2010 and December 31, 2009, respectively, of which approximately $20 million and $50 million, respectively, if recognized, would affect the effective tax rate, net of resulting changes to valuation allowances.

A roll-forward of unrecognized tax benefits is as follows:


	*2010*			2009
Balance at January 1	$	417		$	858
Additions based on tax positions related to current year		25			27
Additions for tax positions of prior years		59			53
Reductions for tax positions of prior years		(157	)		(96	)
Settlements		(142	)		(423	)
Lapse of statute of limitations		(4	)		(2	)

Balance at December 31	$	198		$	417

During 2010, the Company recorded $157 million of tax benefits related to reductions in unrecognized tax benefits relating to facts that indicate the extent to which certain tax positions are more-likely-than-not of being sustained. Additionally, the Company reduced its unrecognized tax benefits by $142 million for settlements with tax authorities, of which $45 million resulted in cash tax payments and the remainder of which reduced tax carryforwards and other deferred tax assets.

During 2010, the Internal Revenue Service concluded its audit of Symbol Technologies, Inc.’s 2004 through January 9, 2007 pre-acquisition tax years and Motorola Solutions’ 2004 through 2007 tax years. The IRS is currently examining the Company’s 2008 and 2009 tax years. The Company also has several state and non-U.S. audits pending. A summary of open tax years by major jurisdiction is presented below:


Jurisdiction		Tax Years
United States		2007—2010
China		2001—2010
France		2004—2010
Germany		2008—2010
India		1996—2010
Israel		2007—2010
Japan		2004—2010
Malaysia		1998—2010
Singapore		1999—2010
United Kingdom		2004—2010

Although the final resolution of the Company’s global tax disputes is uncertain, based on current information, in the opinion of the Company’s management, the ultimate disposition of these matters does not expect to have a material adverse effect on the Company’s consolidated financial position, liquidity or results of operations. However, an unfavorable resolution of the Company’s global tax disputes could have a material adverse effect on the Company’s consolidated results of operations in the periods in which the matters are ultimately resolved.

Based on the potential outcome of the Company’s global tax examinations or the expiration of the statute of limitations for specific jurisdictions, it is reasonably possible that the unrecognized tax benefits will change within the next 12 months. The associated net tax impact on the effective tax rate, exclusive of valuation allowance changes, is estimated to be in the range of a $50 million tax charge to a $75 million tax benefit, with cash payments in the range of $0 to $100 million.

At December 31, 2010, the Company had $25 million and $20 million accrued for interest and penalties, respectively, on unrecognized tax benefits. At December 31, 2009, the Company had $25 million and $15 million accrued for interest and penalties, respectively, on unrecognized tax benefits.

7.	Retirement Benefits

Pension Benefit Plans

The Company’s noncontributory pension plan (the “Regular Pension Plan”) covers U.S. employees who became eligible after one year of service. The benefit formula is dependent upon employee earnings and years of service. Effective January 1, 2005, newly-hired employees were not eligible to participate in the Regular Pension Plan. The Company also provides defined benefit plans which cover non-U.S. employees in certain jurisdictions, principally the United Kingdom, Germany, Japan and Korea (the “Non-U.S. Plans”). Other pension plans are not material to the Company either individually or in the aggregate.

The Company has a noncontributory supplemental retirement benefit plan (the “Officers’ Plan”) for its officers elected prior to December 31, 1999. The Officers’ Plan contains provisions for vesting and funding the participants’ expected retirement benefits when the participants meet the minimum age and years of service requirements. Elected officers who were not yet vested in the Officers’ Plan as of December 31, 1999 had the option to remain in the Officers’ Plan or elect to have their benefit bought out in restricted stock units. Effective December 31, 1999, newly elected officers are not eligible to participate in the Officers’ Plan. Effective June 30, 2005, salaries were frozen for this plan.

The Company has an additional noncontributory supplemental retirement benefit plan, the Motorola Supplemental Pension Plan (“MSPP”), which provides supplemental benefits to individuals by replacing the Regular Pension Plan benefits that are lost by such individuals under the retirement formula due to application of the limitations imposed by the Internal Revenue Code. However, elected officers who are covered under the Officers’ Plan or who participated in the restricted stock buy-out are not eligible to participate in MSPP. Effective January 1, 2007, eligible compensation was capped at the IRS limit plus $175,000 (the “Cap”) or, for those already in excess of the Cap as of January 1, 2007, the eligible compensation used to compute such employee’s MSPP benefit for all future years will be the greater of: (i) such employee’s eligible compensation as of January 1, 2007 (frozen at that amount), or (ii) the relevant Cap for the given year. Additionally, effective January 1, 2009, the MSPP was closed to new participants unless such participation was required under a prior contractual entitlement.

In February 2007, the Company amended the Regular Pension Plan and the MSPP, modifying the definition of average earnings. For the years ended prior to December 31, 2007, benefits were calculated using the rolling average of the highest annual earnings in any five years within the previous ten calendar year period. Beginning in January 2008, the benefit calculation was based on the set of the five highest years of earnings within the ten calendar years prior to December 31, 2007, averaged with earnings from each year after 2007. In addition, effective January 2008, the Company amended the Regular Pension Plan, modifying the vesting period from five years to three years.

In December 2008, the Company amended the Regular Pension Plan, the Officers’ Plan and the MSPP. Effective March 1, 2009, (i) no participant shall accrue any benefit or additional benefit on and after March 1, 2009, and (ii) no compensation increases earned by a participant on and after March 1, 2009 shall be used to compute any accrued benefit. Additionally, no service performed on and after March 1, 2009, shall be considered service for any purpose under the MSPP. The Company recognized a $237 million curtailment gain associated with this plan amendment in 2008.

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

Regular Pension Plan


Years Ended December 31	*2010*			2009			2008
Service cost	$	—		$	14		$	98
Interest cost		341			336			323
Expected return on plan assets		(377	)		(380	)		(391	)
Amortization of:
Unrecognized net loss		148			78			52
Unrecognized prior service cost		—			—			(31	)
Curtailment gain		—			—			(232	)

Net periodic pension cost (benefit)	$	112		$	48		($	181	)

Officers’ Plan and MSPP


Years Ended December 31	*2010*			2009			2008
Service cost	$	—		$	—		$	3
Interest cost		3			6			7
Expected return on plan assets		(1	)		(2	)		(2	)
Amortization of:
Unrecognized net loss		3			3			1
Unrecognized prior service cost		—			—			(1	)
Curtailment gain		—			—			(5	)
Settlement loss		2			17			5

Net periodic pension cost	$	7		$	24		$	8

Non-U.S. Plans


Years Ended December 31	*2010*			2009			2008
Service cost	$	24		$	26		$	34
Interest cost		84			77			87
Expected return on plan assets		(81	)		(69	)		(84	)
Amortization of:
Unrecognized net loss		19			7			1
Unrecognized prior service cost		(4	)		1			1
Settlement/curtailment gain		(4	)		(1	)		(7	)

Net periodic pension cost	$	38		$	41		$	32

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


	*2010*									2009
	*Regular*			Officers’ and MSPP			Non U.S.			Regular			Officers’ and MSPP			Non U.S.
Change in benefit obligation:
Benefit obligation at January 1	$	5,821		$	52		$	1,576		$	5,110		$	116		$	1,221
Service cost		—			—			24			14			—			26
Interest cost		341			3			84			336			6			77
Plan amendments		—			—			(115	)		—			—			2
Settlement/curtailment		—			—			2			—			—			(7	)
Actuarial (gain) loss		173			4			54			592			(20	)		214
Foreign exchange valuation adjustment		—			—			(71	)		—			—			87
Employee contributions		—			—			5			—			—			6
Tax payments		—			(3	)		—			—			(1	)		—
Benefit payments		(206	)		(12	)		(54	)		(231	)		(49	)		(50	)

Benefit obligation at December 31		6,129			44			1,505			5,821			52			1,576

Change in plan assets:
Fair value at January 1		3,898			17			1,147			3,295			56			957
Return on plan assets		466			1			124			754			1			123
Company contributions		150			7			47			80			10			39
Employee contributions		—			—			5			—			—			6
Foreign exchange valuation adjustment		—			—			(43	)		—			—			72
Tax payments from plan assets		—			(1	)		—			—			(1	)		—
Benefit payments from plan assets		(206	)		(12	)		(54	)		(231	)		(49	)		(50	)

Fair value at December 31		4,308			12			1,226			3,898			17			1,147

Funded status of the plan		(1,821	)		(32	)		(279	)		(1,923	)		(35	)		(429	)
Unrecognized net loss		2,799			11			323			2,863			13			342
Unrecognized prior service cost		—			—			(99	)		—			—			6

Prepaid (accrued) pension cost	$	978		$	(21	)	$	(55	)	$	940		$	(22	)	$	(81	)

Components of prepaid (accrued) pension cost:
Non-current benefit liability	$	(1,821	)	$	(32	)	$	(279	)	$	(1,923	)	$	(35	)	$	(429	)
Deferred income taxes		1,033			4			35			1,062			6			24
Accumulated other comprehensive income (loss)		1,766			7			189			1,801			7			324

Prepaid (accrued) pension cost	$	978		$	(21	)	$	(55	)	$	940		$	(22	)	$	(81	)

It is estimated that the net periodic cost for 2011 will include amortization of the unrecognized net loss and prior service costs for the Regular Plan, Officers’ and MSPP Plans, and Non-U.S. Plans, currently included in Accumulated other comprehensive loss, of $187 million, $2 million, and $4 million, respectively.

The Company uses a five-year, market-related asset value method of amortizing asset-related gains and losses. Prior service costs are being amortized over periods ranging from 10 to 12 years. Benefits under all pension plans are valued based upon the projected unit credit cost method.

During March of 2010, the Company recognized a curtailment gain in one of its Non-U.S. plans resulting in a reduction of the amounts recognized in Accumulated other comprehensive loss of $22 million. No gain or loss was recognized in the Company’s consolidated statement of operations as a result of the curtailment.

In August 2010, the Company created separate Non-U.S. plans in certain locations, pursuant to the Company’s separation into two independent, publicly traded companies. The portion of existing pension assets and benefit obligations relating to employees covered by the newly-created plans were transferred to those plans. Prior to this transfer the pension assets and benefit obligations were remeasured resulting in an adjustment to Accumulated other comprehensive loss of $28 million, net of taxes of $13 million.

As a result of the Company’s separation into two independent, publicly traded companies, during the three months ended December 31, 2010, the Company recognized a curtailment gain in one of its Non-U.S. plans, resulting in the recognition of a gain in the Company’s consolidated statement of operations of $4 million. During the same period, as a result of legislative changes that were finalized in December 2010, the Company changed the index used to estimate cost of living increases. As a result, the Company recorded a $55 million gain in Accumulated other comprehensive loss, net of tax. No gain or loss was recognized in the Company’s consolidated statement of operations as a result of the amendment.

Certain actuarial assumptions such as the discount rate and the long-term rate of return on plan assets have a significant effect on the amounts reported for net periodic cost and benefit obligation. The assumed discount rates reflect the prevailing market rates of a universe of high-quality, non-callable, corporate bonds currently available that, if the obligation were settled at the measurement

date, would provide the necessary future cash flows to pay the benefit obligation when due. The long-term rates of return on plan assets represents an estimate of long-term returns on an investment portfolio consisting of a mixture of equities, fixed income, cash and other investments similar to the actual investment mix. In determining the long-term return on plan assets, the Company considers long-term rates of return on the asset classes (both historical and forecasted) in which the Company expects the plan funds to be invested.

Weighted average actuarial assumptions used to determine costs for the plans were as follows:


	2010						2009
December 31	U.S.			Non U.S.			U.S.			Non U.S.
Discount rate		6.00	%		5.39	%		6.75	%		6.23	%
Investment return assumption (Regular Plan)		8.25	%		6.86	%		8.25	%		6.86	%
Investment return assumption (Officers’ Plan)		6.00	%		N/A			6.00	%		N/A

Weighted average actuarial assumptions used to determine benefit obligations for the plans were as follows:


	2010						2009
December 31	U.S.			Non U.S.			U.S.			Non U.S.
Discount rate		5.75	%		5.07	%		6.00	%		5.46	%
Future compensation increase rate (Regular Plan)		0.00	%		2.61	%		0.00	%		4.28	%
Future compensation increase rate (Officers’ Plan)		0.00	%		N/A			0.00	%		N/A

The accumulated benefit obligations for the plans were as follows:


	*2010*						2009
December 31	*Regular*		Officers’ and MSPP		Non U.S.		Regular		Officers’ and MSPP		Non U.S.
Accumulated benefit obligation	$	6,129	$	44	$	1,482	$	5,821	$	52	$	1,527

The Company has adopted a pension investment policy designed to meet or exceed the expected rate of return on plan assets assumption. To achieve this, the pension plans retain professional investment managers that invest plan assets in equity and fixed income securities and cash. In addition, some plans invest in insurance contracts. The Company’s measurement date of its plan assets and obligations is December 31. The Company has the following target mixes for these asset classes, which are readjusted periodically, when an asset class weighting deviates from the target mix, with the goal of achieving the required return at a reasonable risk level:


	Target Mix
Asset Category	*2010*			2009
Equity securities		63	%		63	%
Fixed income securities		35	%		35	%
Cash and other investments		2	%		2	%

The weighted-average pension plan asset allocation by asset categories:


	Actual Mix
December 31	*2010*			2009
Equity securities		66	%		65	%
Fixed income securities		32	%		32	%
Cash and other investments		2	%		3	%

Within the equity securities asset class, the investment policy provides for investments in a broad range of publicly-traded securities including both domestic and international stocks. Within the fixed income securities asset class, the investment policy provides for investments in a broad range of publicly-traded debt securities ranging from U.S. Treasury issues, corporate debt securities, mortgage and asset-backed securities, as well as international debt securities. In the cash and other investments asset class, investments may be in cash, cash equivalents or insurance contracts.

The Company expects to make cash contributions of approximately $240 million to its U.S. pension plans and approximately $40 million to its non-U.S. pension plans in 2011.

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:


Year	Regular		Officer’s and MSPP		Non U.S.
2011	$	250	$	8	$	52
2012		261		2		54
2013		272		5		56
2014		310		2		58
2015		319		2		61
2016-2020		1,803		19		341

Postretirement Health Care Benefits Plan

Certain health care benefits are available to eligible domestic employees meeting certain age and service requirements upon termination of employment (the “Postretirement Health Care Benefits Plan”). For eligible employees hired prior to January 1, 2002, the Company offsets a portion of the postretirement medical costs to the retired participant. As of January 1, 2005, the Postretirement Health Care Benefits Plan has been closed to new participants. The benefit obligation and plan assets for the Postretirement Health Care Benefits Plan have been measured as of December 31, 2010.

The assumptions used were as follows:


December 31	*2010*			2009
Discount rate for obligations		5.25	%		5.75	%
Investment return assumptions		8.25	%		8.25	%

Net Postretirement Health Care Benefits Plan expenses were as follows:


Years Ended December 31	*2010*			2009			2008
Service cost	$	6		$	6		$	6
Interest cost		23			27			26
Expected return on plan assets		(16	)		(18	)		(20	)
Amortization of:
Unrecognized net loss		7			7			5
Unrecognized prior service cost		(2	)		(2	)		(2	)

Net postretirement health care expense	$	18		$	20		$	15

The funded status of the plan is as follows:


	2010			2009
Change in benefit obligation:
Benefit obligation at January 1	$	461		$	429
Service cost		6			6
Interest cost		23			27
Actuarial (gain) loss		(17	)		32
Benefit payments		(26	)		(33	)

Benefit obligation at December 31		447			461

Change in plan assets:
Fair value at January 1		174			168
Return on plan assets		20			35
Company contributions		—			—
Benefit payments made with plan assets		(24	)		(29	)

Fair value at December 31		170			174

Funded status of the plan		(277	)		(287	)
Unrecognized net loss		204			231
Unrecognized prior service cost		(1	)		(3	)

Accrued postretirement health care cost	$	(74	)	$	(59	)

Components of accrued postretirement health care cost:


Years Ended December 31	*2010*			2009
Non-current liability	$	(277	)	$	(287	)
Tax impact of Medicare Part D subsidy law change		18			—
Deferred income taxes		72			101
Accumulated other comprehensive income		113			127

Accrued postretirement health care cost	$	(74	)	$	(59	)

During the first quarter of 2010, the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 were signed into law, which eliminated the favorable income tax treatment of Medicare Part D Subsidy receipts effective for tax years starting in 2013. As a result of the tax law change, the Company recorded an $18 million non-cash tax charge to reduce its deferred tax asset associated with Medicare Part D subsidies currently estimated to be received after 2012.

It is estimated that the net periodic cost for the Postretirement Health Care Benefits Plan in 2011 will include amortization of the unrecognized net loss and prior service costs, currently included in Accumulated other comprehensive loss, of $11 million.

The Company has adopted an investment policy for plan assets designed to meet or exceed the expected rate of return on plan assets assumption. To achieve this, the plan retains professional investment managers that invest plan assets in equity and fixed income securities and cash. The Company uses long-term historical actual return experience with consideration of the expected investment mix of the plans’ assets, as well as future estimates of long-term investment returns, to develop its expected rate of return assumption used in calculating the net periodic cost and the net retirement healthcare expense. The Company has the following target mixes for these asset classes, which are readjusted at least periodically, when an asset class weighting deviates from the target mix, with the goal of achieving the required return at a reasonable risk level:


	Target Mix
Asset Category	*2010*			2009
Equity securities		65	%		65	%
Fixed income securities		34	%		34	%
Cash and other investments		1	%		1	%

The weighted-average asset allocation for plan assets by asset categories:


	Actual Mix
December 31	*2010*			2009
Equity securities		65	%		67	%
Fixed income securities		33	%		30	%
Cash and other investments		2	%		3	%

Within the equity securities asset class, the investment policy provides for investments in a broad range of publicly-traded securities including both domestic and international stocks. Within the fixed income securities asset class, the investment policy provides for investments in a broad range of publicly-traded debt securities ranging from U.S. Treasury issues, corporate debt securities, mortgages and asset-backed issues, as well as international debt securities. In the cash asset class, investments may be in cash and cash equivalents.

The Company expects to make no cash contributions to the Postretirement Health Care Benefits Plan in 2011. The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:


Year
2011	$	33
2012		32
2013		31
2014		30
2015		29
2016-2020		152

The health care cost trend rate used to determine the December 31, 2010 accumulated postretirement benefit obligation is 7.25% for 2011. This rate is expected to remain flat thru 2013, with a decline in years 2014 and 2015 until it reaches 5% in 2016. Beyond 2016, this rate is expected to remain flat at 5%. The health care trend rate used to determine the December 31, 2009 accumulated postretirement benefit obligation was 8.5%.

Changing the health care trend rate by one percentage point would change the accumulated postretirement benefit obligation and the net retiree health care expense as follows:


	1% Point Increase		1% Point Decrease
Increase (decrease) in:
Accumulated postretirement benefit obligation	$	14	$	(13	)
Net retiree health care expense		1		(1	)

The Company maintains a lifetime cap on postretirement health care costs, which reduces the liability duration of the plan. A result of this lower duration is a decreased sensitivity to a change in the discount rate trend assumption with respect to the liability and related expense.

The Company has no significant Postretirement Health Care Benefit Plans outside the United States.

Other Benefit Plans

The Company maintains a number of endorsement split-dollar life insurance policies that were taken out on now-retired officers under a plan that was frozen prior to December 31, 2004. The Company had purchased the life insurance policies to insure the lives of employees and then entered into a separate agreement with the employees that split the policy benefits between the Company and the employee. Motorola Solutions owns the policies, controls all rights of ownership, and may terminate the insurance policies. To effect the split-dollar arrangement, Motorola Solutions endorsed a portion of the death benefits to the employee and upon the death of the employee, the employee’s beneficiary typically receives the designated portion of the death benefits directly from the insurance company and the Company receives the remainder of the death benefits.

The Company adopted new accounting guidance on accounting for split-dollar life insurance arrangements as of January 1, 2008. This guidance requires that a liability for the benefit obligation be recorded because the promise of postretirement benefit had not been settled through the purchase of an endorsement split-dollar life insurance arrangement. As a result of the adoption of this new guidance, the Company recorded a liability representing the actuarial present value of the future death benefits as of the employees’ expected retirement date of $45 million with the offset reflected as a cumulative-effect adjustment to January 1, 2008 Retained earnings and Accumulated other comprehensive income (loss) in the amounts of $4 million and $41 million, respectively, in the Company’s consolidated statement of stockholders’ equity. It is currently expected that minimal cash payments will be required to fund these policies.

The net periodic pension cost for these split-dollar life insurance arrangements was $5 million and $6 million for the years ended December 31, 2010 and 2009, respectively. The Company has recorded a liability representing the actuarial present value of the future death benefits as of the employees’ expected retirement date of $51 million and $48 million as of December 31, 2010 and December 31, 2009, respectively.

Defined Contribution Plan

The Company and certain subsidiaries have various defined contribution plans, in which all eligible employees participate. In the U.S., the 401(k) plan is a contributory plan. Matching contributions are based upon the amount of the employees’ contributions. Effective January 1, 2005, newly hired employees have a higher maximum matching contribution at 4% on the first 5% of employee contributions, compared to 3% on the first 6% of employee contributions for employees hired prior to January 2005. Effective January 1, 2009, the Company temporarily suspended all matching contributions to the Motorola Solutions 401(k) plan. Matching contributions were reinstated as of July 1, 2010 at a rate of 4% on the first 4% of employee contributions. The maximum matching contribution for 2010 was pro-rated to account for the number of months remaining after the reinstatement. The Company’s expenses, primarily relating to the employer match, for all defined contribution plans, for the years ended December 31, 2010, 2009 and 2008 were $23 million, $8 million and $49 million, respectively.

8.	Share-Based Compensation Plans and Other Incentive Plans

All share and per share information presented gives effect to the Reverse Stock Split, which occurred on January 4, 2011. The Company also completed the Distribution of Motorola Mobility on January 4, 2011, however, the share and per share information presented does not reflect the Distribution of Motorola Mobility.

Stock Options, Stock Appreciation Rights and Employee Stock Purchase Plan

The Company grants options to acquire shares of common stock to certain employees, and existing option holders in connection with the merging of option plans following an acquisition. Each option granted and stock appreciation right has an exercise price of no less than 100% of the fair market value of the common stock on the date of the grant. The awards have a contractual life of five to ten years and vest over two to four years. Stock options and stock appreciation rights assumed or replaced with comparable stock options or stock appreciation rights in conjunction with a change in control only become exercisable if the holder is also involuntarily terminated (for a reason other than cause) or resigns for good reason within 24 months of a change in control.

The employee stock purchase plan allows eligible participants to purchase shares of the Company’s common stock through payroll deductions of up to 10% of eligible compensation on an after-tax basis. Plan participants cannot purchase more than $25,000 of stock in any calendar year. The price an employee pays per share is 85% of the lower of the fair market value of the Company’s stock on the close of the first trading day or last trading day of the purchase period. The plan has two purchase periods, the first one from October 1 through March 31 and the second one from April 1 through September 30. For the years ended December 31, 2010, 2009 and 2008, employees purchased 2.7 million, 4.2 million and 2.7 million shares, respectively, at purchase prices of $41.79 and $42.00, $25.20 and $25.76, and $55.37 and $42.49, respectively.

The Company calculates the value of each employee stock option, estimated on the date of grant, using the Black-Scholes option pricing model. The weighted-average estimated fair value of employee stock options granted during 2010, 2009 and 2008 was $21.43, $19.43 and $24.30, respectively, using the following weighted-average assumptions:


	*2010*			2009			2008
Expected volatility		41.7	%		57.1	%		56.4	%
Risk-free interest rate		2.1	%		1.9	%		2.4	%
Dividend yield		0.0	%		0.0	%		2.7	%
Expected life (years)		6.1			3.9			5.5

The Company uses the implied volatility for traded options on the Company’s stock as the expected volatility assumption required in the Black-Scholes model. The selection of the implied volatility approach was based upon the availability of actively traded options on the Company’s stock and the Company’s assessment that implied volatility is more representative of future stock price trends than historical volatility.

The risk-free interest rate assumption is based upon the average daily closing rates during the year for U.S. treasury notes that have a life which approximates the expected life of the option. The dividend yield assumption is based on the Company’s future expectation of dividend payouts. The expected life of employee stock options represents the average of the contractual term of the options and the weighted-average vesting period for all option tranches.

The Company has applied forfeiture rates, estimated based on historical data, of 13%-50% to the option fair values calculated by the Black-Scholes option pricing model. These estimated forfeiture rates are applied to grants based on their remaining vesting term and may be revised in subsequent periods if actual forfeitures differ from these estimates.

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


	*2010*					2009					2008
Years Ended December 31	Shares Subject to Options			Wtd. Avg. Exercise Price		Shares Subject to Options			Wtd. Avg. Exercise Price		Shares Subject to Options			Wtd. Avg. Exercise Price
Options outstanding at January 1		23,061		$	84		32,592		$	120		32,036		$	131
Options granted		1,630			50		8,939			45		5,681			58
Options exercised		(1,559	)		42		(206	)		42		(274	)		50
Options terminated, canceled or expired		(3,518	)		104		(18,264	)		128		(4,851	)		123

Options outstanding at December 31		19,614			81		23,061			84		32,592			120

Options exercisable at December 31		12,429			99		11,037			121		21,153			134
Approx. number of employees granted options		529					22,095					3,300

At December 31, 2010, the Company had $100 million of total unrecognized compensation expense, net of estimated forfeitures, related to stock option plans and the employee stock purchase plan that will be recognized over the weighted average period of approximately two years. Cash received from stock option exercises and the employee stock purchase plan was $179 million, $116 million and $145 million for the years ended December 31, 2010, 2009 and 2008, respectively. The total intrinsic value of options exercised during the years ended December 31, 2010, 2009 and 2008 was $17 million, $1 million and $2 million, respectively. The aggregate intrinsic value for options outstanding and exercisable as of December 31, 2010 was $213 million and $111 million, respectively, based on a December 31, 2010 stock price of $63.49 per share. Pursuant to the completion of the Distribution on January 4, 2011, approximately 8.0 million stock options held by the employees of Motorola Mobility were cancelled. Upon the completed divestiture of the Networks business on April 29, 2011, approximately 0.2 million stock options were cancelled.

At December 31, 2010 and 2009, 6.6 million shares and 8.6 million shares, respectively, were available for future share-based award grants under the current share-based compensation plan, covering all equity awards to employees and non-employee directors.

The following table summarizes information about stock options outstanding and exercisable at December 31, 2010 (in thousands, except exercise price and years):


	Options Outstanding						Options Exercisable
Exercise price range	No. of options		Wtd. avg. Exercise Price		Wtd. avg. contractual life (in yrs.)		No. of options		Wtd. avg. Exercise Price
Under $49		9,059	$	43		7		3,856	$	41
$49-$97		6,801		65		5		4,914		65
$98-$146		1,537		116		4		1,442		115
$147-$195		233		149		5		233		149
$196-$244		—		—		—		—		—
$245-$293		1,983		275		4		1,983		275
$294-$330		1		313		4		1		313

		19,614						12,429

As of December 31, 2010, the weighted average contractual life for options outstanding and exercisable was six and five years, respectively.

Stock Option Exchange

On May 14, 2009, the Company initiated a tender offer for certain eligible employees (excluding executive officers and directors) to exchange certain out-of-the-money options for new options with an exercise price equal to the fair market value of the Company’s stock as of the grant date. In order to be eligible for the exchange, the options had to have been granted prior to June 1, 2007, expire after December 31, 2009 and have an exercise price equal to or greater than $84.00. The offering period closed on June 12, 2009. On that date, 14 million options were tendered and exchanged for 6 million new options with an exercise price of

$47.11 and a ratable annual vesting period over two years. The exchange program was designed so that the fair market value of the new options would approximate the fair market value of the options exchanged. The resulting incremental compensation expense was not material to the Company’s consolidated financial statements.

Restricted Stock and Restricted Stock Units

Restricted stock (“RS”) and restricted stock unit (“RSU”) grants consist of shares or the rights to shares of the Company’s common stock which are awarded to employees and non-employee directors. The grants are restricted such that they are subject to substantial risk of forfeiture and to restrictions on their sale or other transfer by the employee. Shares of RS and RSUs assumed or replaced with comparable shares of RS or RSUs in conjunction with a change in control will only have the restrictions lapse if the holder is also involuntarily terminated (for a reason other than cause) or resigns for good reason within 24 months of a change in control.

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


	*2010*					2009					2008
Years Ended December 31	*RSU*			*Wtd. Avg.* Grant Date Fair Value		RSU			Wtd Avg. Grant Date Fair Value		RS and RSU			Wtd Avg. Grant Date Fair Value
RS and RSU outstanding at January 1		8,061		$	55		4,604		$	76		1,536		$	119
Granted		4,772			49		5,478			43		3,872			64
Vested		(2,407	)		58		(988	)		80		(330	)		121
Terminated, canceled or expired		(867	)		56		(1,033	)		60		(474	)		94

RSU outstanding at December 31		9,559			51		8,061			55		4,604			76
Approx. number of employees granted RSUs		29,973					26,969					28,981

At December 31, 2010, the Company had unrecognized compensation expense related to RSUs of $301 million, net of estimated forfeitures, expected to be recognized over the weighted average period of approximately two years. The total fair value of RS and RSU shares vested during the years ended December 31, 2010, 2009 and 2008 was $114 million, $44 million and $19 million, respectively. The aggregate fair value of outstanding RSUs as of December 31, 2010 was $607 million. Pursuant to the completion of the Distribution on January 4, 2011, approximately 3.8 million unvested restricted stock units held by the employees of Motorola Mobility were cancelled. Upon the completed divestiture of the Networks business on April 29, 2011, approximately 1.4 million unvested restricted stock units were cancelled.

Total Share-Based Compensation Expense

Compensation expense for the Company’s employee stock options, stock appreciation rights, employee stock purchase plans, RS and RSUs was as follows:


Year Ended December 31	2010			2009			2008
Share-based compensation expense included in:
Costs of sales	$	19		$	16		$	16
Selling, general and administrative expenses		82			80			73
Research and development expenditures		43			41			42

Share-based compensation expense included in Operating earnings (loss)		144			137			131
Tax benefit		43			43			41

Share-based compensation expense, net of tax	$	101		$	94		$	90

Decrease in basic earnings per share	$	(0.30	)	$	(0.29	)	$	(0.28	)
Decrease in diluted earning per share	$	(0.30	)	$	(0.29	)	$	(0.28	)
Share-based compensation expense in discontinued operations	$	164		$	159		$	149

Motorola Solutions Incentive Plan

Our incentive plan provides eligible employees with an annual payment, calculated as a percentage of an employee’s eligible earnings, in the year after the close of the current calendar year if specified business goals and individual performance targets are met. The expense for awards under these incentive plans for the years ended December 31, 2010, 2009 and 2008 were $201 million, $109 million and $106 million, respectively.

Long-Range Incentive Plan

The Long-Range Incentive Plan (“LRIP”) rewards participating elected officers for the Company’s achievement of specified business goals during the period, based on two performance objectives measured over three-year cycles. The expense for LRIP (net of the reversals of previously recognized reserves) for the years ended December 31, 2010, 2009 and 2008 was $11 million, $5 million and $(9) million, respectively.

9.	Fair Value Measurements

The Company holds certain fixed income securities, equity securities and derivatives, which must be measured using the fair value hierarchy and related valuation methodologies. The guidance specifies a hierarchy of valuation techniques based on whether the inputs to each measurement are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s assumptions about current market conditions. The prescribed fair value hierarchy and related valuation methodologies are as follows:

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

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

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

The fair values of the Company’s financial assets and liabilities by level in the fair value hierarchy as of December 31, 2010 and 2009 were as follows:


December 31, 2010	Level 1		Level 2		Level 3		*Total*
Assets:
Sigma Fund securities:
U.S. government, agency and government-sponsored enterprise obligations	$	—	$	2,291	$	—	$	2,291
Corporate bonds		—		43		15		58
Asset-backed securities		—		1		—		1
Mortgage-backed securities		—		11		—		11
Available-for-sale securities:
U.S. government, agency and government-sponsored enterprise obligations		—		17		—		17
Corporate bonds		—		11		—		11
Mortgage-backed securities		—		3		—		3
Common stock and equivalents		2		10		—		12
Foreign exchange derivative contracts*		—		5		—		5
Liabilities:
Foreign exchange derivative contracts*		—		15		—		15
Interest agreement derivative contracts		—		3		—		3

*	Includes amounts included in held for disposition businesses.


December 31, 2009	Level 1		Level 2		Level 3		*Total*
Assets:
Sigma Fund securities:
U.S. government, agency and government-sponsored enterprise obligations	$	—	$	4,408	$	—	$	4,408
Corporate bonds		—		411		19		430
Asset-backed securities		—		66		—		66
Mortgage-backed securities		—		52		—		52
Available-for-sale securities:
U.S. government, agency and government-sponsored enterprise obligations		—		23		—		23
Corporate bonds		—		10		—		10
Mortgage-backed securities		—		3		—		3
Common stock and equivalents		115		11		—		126
Foreign exchange derivative contracts*		—		15		—		15
Liabilities:
Foreign exchange derivative contracts*		—		17		—		17
Interest agreement derivative contracts		—		4		—		4

*	Includes amounts included in held for disposition businesses.

The following table summarizes the changes in fair value of our Level 3 assets:


	2010			2009
Balance at January 1	$	19		$	134
Transfers to (from) Level 3		3			(16	)
Payments received and securities sold		(11	)		(78	)
Permanent impairments		—			(2	)
Mark-to-market gain (loss) on Sigma Fund investments included in Other income (expense)		4			(19	)

Balance at December 31	$	15		$	19

Pension and Postretirement Health Care Benefits Plan Assets

The fair value of the various pension and postretirement health care benefits plans’ assets by level in the fair value hierarchy as of December 31, 2010 were as follows:

Regular Plan


December 31, 2010	Level 1		Level 2		Level 3		*Total*
Common stock and equivalents	$	1,222	$	3		—	$	1,225
Commingled equity funds		—		1,597		—		1,597
Preferred stock		9		—		—		9
U.S. government and agency obligations		—		100		—		100
Other government bonds		—		5		—		5
Corporate bonds		—		185		—		185
Mortgage-backed bonds		—		197		—		197
Asset-backed bonds		—		40		—		40
Commingled bond funds		—		850		—		850
Commingled short-term investment funds		—		76		—		76
Invested cash		—		16		—		16

Total investment securities	$	1,231	$	3,069	$	—	$	4,300
Accrued income receivable								8

Fair value plan assets							$	4,308

The table above includes securities on loan as part of a securities lending arrangement of $92 million of common stock and equivalents, $41 million of U.S. government and agency obligations and $34 million of corporate bonds. All securities on loan are fully cash collateralized.

The following table summarizes the changes in fair value of the Regular Plan assets measured using Level 3 inputs:


	2010
Balance at January 1	$	7
Gain on assets held		1
Sales		(1	)
Transfers out, net		(7	)

Balance at December 31	$	—

Officers’ Plan


December 31, 2010	Level 1		Level 2		Level 3		*Total*
U.S. government and agencies	$	—	$	9	$	—	$	9
Corporate bonds		—		1		—		1
Mortgage-backed bonds		—		1		—		1
Commingled short-term investment funds		—		1		—		1

Fair value plan assets	$	—	$	12	$	—	$	12

Non-U.S. Plans


December 31, 2010	Level 1		Level 2		Level 3		*Total*
Common stock and equivalents	$	339	$	—	$	—	$	339
Commingled equity funds		—		389		—		389
Corporate bonds		—		98		—		98
Government and agency obligations		—		91		—		91
Commingled bond funds		—		236		—		236
Short-term investment funds		—		1		—		1
Insurance contracts		—		—		61		61

Total investment securities	$	339	$	815	$	61	$	1,215
Cash								8
Accrued income receivable								3

Fair value plan assets							$	1,226

The following table summarizes the changes in fair value of the Non-U.S. pension plan assets measured using Level 3 inputs:


	2010
Balance at January 1	$	65
Gain on assets held		1
Foreign exchange valuation adjustment		(5	)

Balance at December 31	$	61

Postretirement Health Care Benefits Plan


December 31, 2010	Level 1		Level 2		Level 3		*Total*
Common stock and equivalents	$	48	$	—	$	—	$	48
Commingled equity funds		—		62		—		62
U.S. government and agency obligations		—		4		—		4
Corporate bonds		—		7		—		7
Mortgage-backed bonds		—		8		—		8
Asset-backed bonds		—		2		—		2
Commingled bond funds		—		34		—		34
Commingled short-term investment funds		—		4		—		4
Invested cash		—		1		—		1

Fair value plan assets	$	48	$	122		—	$	170

The table above includes securities on loan as part of a securities lending arrangement of $4 million of common stock and equivalents, $2 million of U.S. government and agency obligations and $1 million of corporate bonds. All securities on loan are fully cash collateralized.

Valuation Methodologies

Level 1—Quoted market prices in active markets are available for investments in common and preferred stock and common stock equivalents. As such, these investments are classified within Level 1.

Level 2—The securities classified as Level 2 are comprised primarily of corporate, government, agency and government-sponsored enterprise bonds. The Company primarily relies on valuation pricing models, recent bid prices, and broker quotes to determine the fair value of these securities. The valuation models for Level 2 assets are developed and maintained by third party pricing services and use a number of standard inputs to the valuation model including benchmark yields, reported trades, broker/dealer quotes where the party is standing ready and able to transact, issuer spreads, benchmark securities, bids, offers and other reference data. The valuation model may prioritize these inputs differently at each balance sheet date for any given security, based on the market conditions. Not all of the standard inputs listed will be used each time in the valuation models. For each asset class, quantifiable inputs related to perceived market movements and sector news may be considered in addition to the standard inputs.

In determining the fair value of the Company’s foreign currency derivatives, the Company uses forward contract and option valuation models employing market observable inputs, such as spot currency rates, time value and option volatilities. Since the Company primarily uses observable inputs in its valuation of its derivative assets and liabilities, they are classified as Level 2 assets.

Level 3—Fixed income securities are debt securities that do not have actively traded quotes as of the financial statement date. Determining the fair value of these securities requires the use of unobservable inputs, such as indicative quotes from dealers, extrapolated data, proprietary models and qualitative input from investment advisors. As such, these securities are classified within Level 3.

At December 31, 2010, the Company has $1.0 billion of investments in money market mutual funds classified as Cash and cash equivalents in its consolidated balance sheet. The money market funds have quoted market prices that are generally equivalent to par.

10.

Long-term Customer Financing and Sales of Receivables

Long-term Customer Financing

Long-term receivables consist of trade receivables with payment terms greater than twelve months, long-term loans and lease receivables under sales-type leases. Long-term receivables consist of the following:


December 31	*2010*			2009
Long-term receivables	$	265		$	137
Less allowance for losses		(1	)		(7	)

		264			130
Less current portion		(13	)		(28	)

Non-current long-term receivables, net	$	251		$	102

The current portion of long-term receivables is included in Accounts receivable and the non-current portion of long-term receivables is included in Other assets in the Company’s consolidated balance sheets. Interest income recognized on long-term receivables for the years ended December 31, 2010, 2009 and 2008 was $14 million, $2 million and $3 million, respectively.

Certain purchasers of the Company’s infrastructure equipment may request that the Company provide long-term financing (defined as financing with a term of greater than one year) in connection with the sale of equipment. These requests may include all or a portion of the purchase price of the equipment. The Company’s obligation to provide long-term financing may be 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 long-term receivables from the Company. The Company had outstanding commitments to provide long-term financing to third parties totaling $333 million at December 31, 2010, compared to $406 million at December 31, 2009 (including $168 million and $321 million at December 31, 2010 and December 31, 2009, respectively, relating to discontinued operations). Of these amounts, $27 million was supported by letters of credit or by bank commitments to purchase long-term receivables at December 31, 2010, compared to $13 million supported at December 31, 2009 (including $25 million at December 31, 2010 and no amounts at December 31, 2009, relating to the Networks business). The majority of the outstanding commitments at December 31, 2010 are to a small number of network operators in the Middle East region. The Company retains the funded portion of the financing arrangements related to the Networks business following the sale to NSN, which totaled approximately $235 million at December 31, 2010.

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 $10 million at both December 31, 2010 and 2009 (including $6 million and $7 million at December 31, 2010 and 2009, respectively, relating to the sale of short-term receivables). Customer financing guarantees outstanding were $1 million at December 31, 2010, compared to $2 million at December 31, 2009 (including de minimus amounts at December 31, 2010 and 2009, respectively, relating to the sale of short-term receivables).

Sales of Receivables

From time to time, the Company sells accounts receivable and long-term receivables on a non-recourse basis to third parties under one-time arrangement while others are sold to third parties under committed facilities that involve contractual commitments from these parties to purchase qualifying receivables up to an outstanding monetary limit. Committed facilities may be revolving in nature and, typically, must be renewed annually. The Company may or may not retain the obligation to service the sold accounts receivable and long-term receivables.

As of December 31, 2010, the Company had a $200 million revolving receivable sales facility, maturing June 2011, for the sale of accounts receivable, which was fully available. The initial cash proceeds received by the Company for the sale of these receivables is capped at the lower of $200 million or eligible receivables less reserves. At December 31, 2009, the Company had a $200 million

committed revolving credit facility for the sale of accounts receivable, of which $140 million was available. The Company had no significant committed facilities for the sale of long-term receivables at December 31, 2010 and 2009, respectively.

The following table summarizes the proceeds received from non-recourse sales of accounts receivable and long-term receivables for the years ended December 31, 2010, 2009 and 2008:


Years Ended December 31	*2010*		2009		2008
Cumulative annual proceeds received from one-time sales:
Accounts receivable sales proceeds	$	30	$	46	$	53
Long-term receivables sales proceeds		67		72		113

Total proceeds from one-time sales		97		118		166
Cumulative annual proceeds received from sales under committed facilities		70		234		563

Total proceeds from receivables sales	$	167	$	352	$	729

At December 31, 2010, the Company retained servicing obligations for $329 million of sold accounts receivables and $277 million of long-term receivables, compared to $141 million of accounts receivables and $297 million of long-term receivables at December 31, 2009.

Under certain arrangements, the value of accounts receivable sold is supported by credit insurance purchased from third-party insurance companies, less deductibles or self-insurance requirements under the insurance policies. Under these arrangements, the Company’s total credit exposure, less insurance coverage, to outstanding accounts receivable that have been sold was de minimus at both at December 31, 2010 and 2009.

Credit Quality of Customer Financing Receivables and Allowance for Credit Losses

An aging analysis of financing receivables at December 31, 2010 and December 31, 2009 is as follows:


December 31, 2010	Total Long-term Receivable		Current Billed Due		Past Due Under 90 Days		Past Due Over 90 Days
Municipal leases secured tax exempt	$	16	$	—	$	—	$	—
Commercial loans and leases secured		67		1		—		—
Commercial loans unsecured		182		—		—		—

Total long-term receivables	$	265	$	1	$	—	$	—


December 31, 2009	Total Long-term Receivable		Current Billed Due		Past Due Under 90 Days		Past Due Over 90 Days
Municipal leases secured tax exempt	$	8	$	—	$	—	$	—
Commercial loans and leases secured		72		—		5		—
Commercial loans unsecured		57		—		—		2

Total long-term receivables	$	137	$	—	$	5	$	2

The Company uses an internally developed credit risk rating system for establishing customer credit limits. This system is aligned and comparable to the rating systems utilized by independent rating agencies.

The Company policy for valuing the allowance for credit losses is on an individual review basis. All customer financing receivables with past due balances greater than 90 days are reviewed for collectibility. The value of impairment is calculated based on the net present value of anticipated future cash streams from the customer. At December 31, 2010, there were a de minimus number of loans and leases which were impaired with an allowance for credit loss totaling $1 million, compared to an allowance for credit loss of $7 million at December 31, 2009.

11.

Commitments and Contingencies

Legal

Iridium Program: The Company was 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 underFreeland v. Iridium World Communications, Inc., et al., originally filed on April 22, 1999. In April 2008, the parties reached an agreement in principle, subject to court approval, to settle all claims against Motorola in exchange for Motorola’s payment of $20 million. During the three months ended March 29, 2008, the Company recorded a charge associated with this settlement. On October 23, 2008, the court granted final approval of the settlement and dismissed the claims with prejudice.

The Company was sued by the Official Committee of the Unsecured Creditors of Iridium (the “Committee”) in the United States Bankruptcy Court for the Southern District of New York (the “Iridium Bankruptcy Court”) on July 19, 2001.In re Iridium Operating LLC, et al. v. Motorola, plaintiffs asserted claims for breach of contract, warranty and fiduciary duty and fraudulent transfer and preferences, and sought in excess of $4 billion in damages. On May 20, 2008, the Bankruptcy Court approved a settlement in which Motorola is not required to pay anything, but released its administrative, priority and unsecured claims against the Iridium estate and withdrew its objection to the 2001 settlement between the unsecured creditors of the Iridium Debtors and the Iridium Debtors’ pre-petition secured lenders. This settlement, and its approval by the Bankruptcy Court, extinguished Motorola’s financial exposure and concluded Motorola’s involvement in the Iridium bankruptcy proceedings.

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, 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

Leases: The Company owns most of its major facilities and leases certain office, factory and warehouse space, land, information technology and other equipment under principally non-cancelable operating leases. Rental expense, net of sublease income, for the years ended December 31, 2010, 2009, and 2008 was $123 million, $140 million, and $151 million, respectively. At December 31, 2010, future minimum lease obligations, net of minimum sublease rentals, for the next five years and beyond are as follows: 2011—$124 million; 2012—$86 million; 2013—$52 million; 2014—$37 million; 2015—$21 million; beyond—$23 million.

Indemnifications: The Company is 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 provision was $135 million as of December 31, 2010. Subsequent to December 31, 2010 as a result of the divestiture of the Networks business, the total amount of indemnification was approximately $335 million. The Company had accrued $9 million as of December 31, 2010 for potential claims under these provisions.

In addition, the Company may provide indemnifications for losses that result from the breach of general warranties contained in certain commercial and intellectual property agreements. Historically, the Company has not made significant payments under these agreements. However, there is an increasing risk in relation to patent indemnities given the current legal climate.

In indemnification cases, payment by the Company is conditioned on the other party making a claim pursuant to the procedures specified in the particular contract, which procedures typically allow the Company to challenge the other party’s claims. Further, the Company’s obligations under these agreements for indemnification based on breach of representations and warranties are generally limited in terms of duration, 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.

In addition, pursuant to the Master Separation and Distribution Agreement and certain other agreements with Motorola Mobility, Motorola Mobility agreed to indemnify the Company for certain liabilities, and the Company agreed to indemnify Motorola Mobility for certain liabilities, in each case for uncapped amounts.

Intellectual Property Matters: During 2010, the Company entered into a settlement agreement with another company to resolve certain intellectual property disputes between the two companies. As a result of the settlement agreement, the Company received $65 million in cash and was assigned certain patent properties. As a result of this agreement, the Company recorded a pre-tax gain of $39 million (and $55 million was allocated to discontinued operations) during the year ended December 31, 2010, related to the settlement of the outstanding litigation between the parties.

12.

Information by Segment and Geographic Region

Following the Distribution, Motorola Solutions reports financial results for the following two segments:

•

Government: Our Government segment includes sales from two-way radios and public safety networks. Service revenues included in the Government segment are primarily those associated with the design, installation, maintenance and optimization of equipment for public safety networks.

•

Enterprise: Our Enterprise segment includes sales of enterprise mobile computing devices, scanning devices, wireless broadband systems, RFID data capture solutions and iDEN infrastructure. Service revenues included in the Enterprise segment are primarily maintenance contracts associated with the above products.

Segment operating results are measured based on operating earnings adjusted, if necessary, for certain segment-specific items and corporate allocations. Identifiable assets (excluding intersegment receivables) are the Company’s assets that are identified with classes of similar products or operations in each geographic region.

For the years ended December 31, 2010, 2009 and 2008, no single customer accounted for more than 10% of net sales.

Segment information


	Net Sales						Operating Earnings (Loss)
Years Ended December 31	*2010*		2009		2008		2010			2009		2008
Government	$	5,135	$	4,876	$	5,259	$	566		$	542	$	630
Enterprise		2,736		2,304		2,881		212			28		(1,309	)

	$	7,871	$	7,180	$	8,140

Operating earnings (loss)								778			570		(679	)
Total other income (expense)								(87	)		67		(318	)

Earnings (loss) from continuing operations before income taxes							$	691		$	637	$	(997	)


	Assets						Capital Expenditures						Depreciation Expense
Years Ended December 31	*2010*		2009		2008		*2010*		2009		2008		*2010*		2009		2008
Government	$	3,427	$	2,884	$	3,263	$	172	$	115	$	194	$	110	$	115	$	113
Enterprise		2,721		2,842		2,778		20		21		63		29		55		63

		6,148		5,726		6,041	$	192	$	136	$	257	$	139	$	170	$	176
Other		11,649		11,771		11,729

		17,797		17,497		17,770
Discontinued operations		7,780		8,106		10,099

	$	25,577	$	25,603	$	27,869

Assets in Other include primarily cash and cash equivalents, Sigma Fund and short-term investments, deferred income taxes, investments and the administrative headquarters of the Company.

Geographic area information


	Net Sales						Assets						Property, Plant, and Equipment, net
Years Ended December 31	*2010*		2009		2008		*2010*		2009		2008		*2010*		2009		2008
United States	$	3,679	$	3,470	$	3,742	$	10,501	$	10,063	$	9,324	$	484	$	351	$	413
China		322		257		275		1,823		1,716		1,899		9		13		16
United Kingdom		589		533		752		850		1,084		1,011		23		26		23
Israel		229		242		318		1,366		1,321		1,264		40		172		139
Japan		112		110		100		724		684		741		61		56		61
Other nations, net of eliminations		2,940		2,568		2,953		2,533		2,629		3,531		305		394		386

	$	7,871	$	7,180	$	8,140	$	17,797	$	17,497	$	17,770	$	922	$	1,012	$	1,038

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

13.

Reorganization of Businesses

The Company maintains a formal Involuntary Severance Plan (the “Severance Plan”), which permits the Company to offer eligible employees severance benefits based on years of service and employment grade level in the event that employment is involuntarily terminated as a result of a reduction-in-force or restructuring. The Company recognizes termination benefits based on

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

2010 Charges

During 2010, the Company continued to implement various productivity improvement plans aimed at achieving long-term, sustainable profitability by driving efficiencies and reducing operating costs. Both of the Company’s segments were impacted by these plans. The employees affected were located in all geographic regions.

During 2010, the Company recorded net reorganization of business charges of $73 million, including $19 million of charges in Costs of sales and $54 million of charges under Other charges in the Company’s consolidated statements of operations. Included in the aggregate $73 million are charges of $73 million for employee separation costs and $16 million for exit costs, partially offset by $16 million of reversals for accruals no longer needed.

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


Year Ended December 31,	2010
Government	$	57
Enterprise		16

	$	73

The following table displays a rollforward of the reorganization of businesses accruals established for exit costs and employee separation costs from January 1, 2010 to December 31, 2010:


	Accruals at January 1, 2010		Additional Charges		Adjustments			Amount Used			Accruals at December 31, 2010
Exit costs	$	16	$	16	$	(3	)	$	(12	)	$	17
Employee separation costs		31		73		(13	)		(41	)		50

	$	47	$	89	$	(16	)	$	(53	)	$	67

Exit Costs

At January 1, 2010, the Company had an accrual of $16 million for exit costs attributable to lease terminations. The additional 2010 charges were $16 million. The adjustment of $3 million primarily reflects $3 million of reversals of accruals no longer needed. The $12 million used in 2010 reflects cash payments. The remaining accrual of $17 million, which is included in Accrued liabilities in the Company’s consolidated balance sheets at December 31, 2010, primarily represents future cash payments for lease termination obligations that are expected to be paid over a number of years.

Employee Separation Costs

At January 1, 2010, the Company had an accrual of $31 million for employee separation costs, representing the severance costs for approximately 1,400. The 2010 additional charges of $73 million represent severance costs for approximately an additional 1,600 employees, of which 800 were direct employees and 800 were indirect employees. The adjustments of $13 million reflect reversals of accruals no longer needed.

During 2010, approximately 1,000 employees, of which 700 were direct employees and 300 were indirect employees, were separated from the Company. The $41 million used in 2010 reflects cash payments to separated employees. The remaining accrual of $50 million, which is included in Accrued liabilities in the Company’s consolidated balance sheets at December 31, 2010, is expected to be paid, generally, within one year to: (i) severed employees who have already begun to receive payments, and (ii) approximately 2,000 employees to be separated in 2011.

2009 Charges

During 2009, in light of the macroeconomic decline that adversely affected sales, the Company continued to implement various productivity improvement plans aimed at achieving long-term, sustainable profitability by driving efficiencies and reducing operating costs. Both of the Company’s segments were impacted by these plans. The employees affected are located in all geographic regions.

During 2009, the Company recorded net reorganization of business charges of $102 million, including $14 million of charges in Costs of sales and $88 million of charges under Other charges in the Company’s consolidated statements of operations. Included in the aggregate $102 million are charges of $114 million for employee separation costs and $6 million for exit costs, partially offset by $18 million of reversals for accruals no longer needed.

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


Year Ended December 31,	2009
Government	$	67
Enterprise		35

	$	102

The following table displays a rollforward of the reorganization of businesses accruals established for exit costs and employee separation costs from January 1, 2009 to December 31, 2009:


2009	Accruals at January 1		Additional Charges		Adjustments			Amount Used			Accruals at December 31
Exit costs	$	14	$	6	$	(1	)	$	(3	)	$	16
Employee separation costs		42		114		(17	)		(108	)		31

	$	56	$	120	$	(18	)	$	(111	)	$	47

Exit Costs

At January 1, 2009, the Company had an accrual of $14 million for exit costs attributable to lease terminations. The additional 2009 charges of $6 million were primarily related to the exit of leased facilities and contractual termination costs. The adjustment of $1 million reflects reversals of accruals no longer needed. The $3 million used in 2009 reflects cash payments. The remaining accrual of $16 million, which is included in Accrued liabilities in the Company’s consolidated balance sheets at December 31, 2009, represented future cash payments, primarily for lease termination obligations.

Employee Separation Costs

At January 1, 2009, the Company had an accrual of $42 million for employee separation costs, representing the severance costs for approximately 900 employees. The additional 2009 charges of $114 million represent severance costs for approximately an additional 2,000 employees, of which 500 are direct employees and 1,500 are indirect employees. The adjustment of $17 million reflects reversals of accruals no longer required.

During 2009, approximately 1,500 employees, of which 200 were direct employees and 1,300 were indirect employees, were separated from the Company. The $108 million used in 2009 reflects cash payments to these separated employees. The remaining accrual of $31 million is included in Accrued liabilities in the Company’s consolidated balance sheets at December 31, 2009.

2008 Charges

During 2008, the Company committed to implement various productivity improvement plans aimed at achieving long-term, sustainable profitability by driving efficiencies and reducing operating costs. Both of the Company’s segments were impacted by these plans. The employees affected were located in all regions. The Company recorded net reorganization of business charges of $65 million, including $5 million of charges in Costs of sales and $60 million of charges under Other charges in the Company’s consolidated statements of operations. Included in the aggregate $65 million are charges of $80 million for employee separation costs, partially offset by $15 million of reversals for accruals no longer needed.

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


Year Ended December 31,	2008
Government	$	45
Enterprise		20

	$	65

The following table displays a rollforward of the reorganization of businesses accruals established for exit costs and employee separation costs from January 1, 2008 to December 31, 2008:


2008	Accruals at January 1		Additional Charges		Adjustments			Amount Used			Accruals at December 31
Exit costs	$	24	$	—	$	(3	)	$	(7	)	$	14
Employee separation costs		56		80		(12	)		(82	)		42

	$	80	$	80	$	(15	)	$	(89	)	$	56

Exit Costs

At January 1, 2008, the Company had an accrual of $24 million for exit costs attributable to lease terminations. The adjustments of $3 million reflect reversals of accruals no longer needed. The $7 million used in 2008 reflected cash payments. The remaining accrual of $14 million, which was included in Accrued liabilities in the Company’s consolidated balance sheets at December 31, 2008, represented future cash payments, primarily for lease termination obligations.

Employee Separation Costs

At January 1, 2008, the Company had an accrual of $56 million for employee separation costs, representing the severance costs for approximately 1,000 employees. The additional 2008 charges of $80 million were severance costs for approximately an additional 1,500 employees, of which 200 were direct employees and 1,300 were indirect employees. The adjustments of $12 million reflected reversals of accruals no longer required.

During 2008, approximately 1,600 employees, of which 200 were direct employees and 1,300 were indirect employees, were separated from the Company. The $82 million used in 2008 reflected cash payments to these separated employees. The remaining accrual of $42 million was included in Accrued liabilities in the Company’s consolidated balance sheets at December 31, 2008.

14.

Intangible Assets and Goodwill

The Company accounts for acquisitions using purchase accounting with the results of operations for each acquiree included in the Company’s consolidated financial statements for the period subsequent to the date of acquisition. The pro forma effects of these acquisitions on the Company’s consolidated financial statements were not significant individually nor in the aggregate. The Company did not have any significant acquisitions during the years ended December 31, 2010, 2009 and 2008.

Intangible Assets

Amortized intangible assets were comprised of the following:


	2010				2009
December 31	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Intangible assets:
Completed technology	$	642	$	532	$	645	$	412
Patents		277		211		277		157
Customer-related		148		90		162		82
Licensed technology		25		18		25		16
Other intangibles		101		96		101		90

	$	1,193	$	947	$	1,210	$	757

Amortization expense on intangible assets, which is included within Other charges in the consolidated statement of operations, was $203 million, $218 million and $227 million for the years ended December 31, 2010, 2009 and 2008, respectively. As of December 31, 2010 future amortization expense is estimated to be $181 million in 2011, $39 million in 2012, $19 million in 2013 and $2 million in 2014 and $2 million in 2015.

Amortized intangible assets, excluding goodwill, by business segment:


	*2010*				2009
December 31	*Gross* *Carrying* *Amount*		*Accumulated* *Amortization*		Gross Carrying Amount		Accumulated Amortization
Government	$	140	$	130	$	156	$	135
Enterprise		1,053		817		1,054		622

	$	1,193	$	947	$	1,210	$	757

Goodwill

The following table displays a rollforward of the carrying amount of goodwill by reportable segment from January 1, 2008 to December 31, 2010:


	Government		Enterprise			Total Company
Balances as of January 1, 2008:
Aggregate goodwill acquired	$	335	$	2,581		$	2,916
Accumulated impairment losses		—		—			—

Goodwill, net of impairment losses		335		2,581			2,916

Goodwill acquired		—		60			60
Impairment losses		—		(1,564	)		(1,564	)
Adjustments		15		13			28

Balance as of December 31, 2008:
Aggregate goodwill acquired		350		2,654			3,004
Accumulated impairment losses		—		(1,564	)		(1,564	)

Goodwill, net of impairment losses		350		1,090			1,440

Goodwill acquired		—		—			—
Impairment losses		—		—			—
Adjustments		—		(11	)		(11	)

Balance as of December 31, 2009:
Aggregate goodwill acquired		350		2,643			2,993
Accumulated impairment losses		—		(1,564	)		(1,564	)

Goodwill, net of impairment losses		350		1,079			1,429
Goodwill acquired		—		—			—
Impairment losses		—		—			—
Adjustments		—		—			—

Balance as of December 31, 2010:
Aggregate goodwill acquired		350		2,643			2,993
Accumulated impairment losses		—		(1,564	)		(1,564	)

Goodwill, net of impairment losses	$	350	$	1,079		$	1,429

During the year ended December 31, 2008, the Company finalized its assessment of the Internal Revenue Code Section 382 Limitations (“IRC Section 382”) relating to the pre-acquisition tax loss carryforwards of its 2007 acquisitions. As a result of the IRC Section 382 studies, the Company recorded additional deferred tax assets and a corresponding reduction in goodwill, which is reflected in the adjustment line above.

The Company conducts its annual assessment of goodwill for impairment in the fourth quarter of each year. The goodwill impairment test is performed at the reporting unit level. A reporting unit is an operating segment or one level below an operating segment. In 2010, 2009 and 2008, the Company’s segments, Government and Enterprise, were each tested as reporting units. The Company performs extensive valuation analyses, utilizing both income and market-based approaches, in its goodwill assessment process. The determination of the fair value of the reporting units and other assets and liabilities within the reporting units requires the Company to make significant estimates and assumptions. These estimates and assumptions primarily include, but are not limited to, the discount rate, terminal growth rate, earnings before depreciation and amortization, and capital expenditures forecasts specific to each reporting unit. Due to the inherent uncertainty involved in making these estimates, actual results could differ from those estimates.

The Company has weighted the valuation of its reporting units at 75% based on the income approach and 25% based on the market-based approach, consistent with prior periods. The Company believes that this weighting is appropriate since it is often difficult to find other appropriate market participants that are similar to our reporting units and it is the Company’s view that future discounted cash flows are more reflective of the value of the reporting units.

Based on the results of the 2009 and 2010 annual assessments of the recoverability of goodwill, the fair values of all reporting units exceeded their book values, indicating that there was no impairment of goodwill.

In 2008, the fair value of the Enterprise reporting unit was below its respective book values, indicating a potential impairment of goodwill and the requirement to perform step two of the analysis for the reporting unit. The Company acquired the main components of the Enterprise reporting unit in 2007 at which time the book and fair value of the reporting unit was the same. Because of this fact,

the Enterprise reporting unit was most likely to experience a decline in its fair value below its book value as a result of lower values in the overall market due to the deteriorating macroeconomic environment and the market’s view of its near term impact on the reporting unit. For the year ended December 31, 2008, the Company determined that the goodwill relating to the Enterprise reporting unit was impaired, resulting in a charge of $1.6 billion in the Enterprise segment.

15.

Valuation and Qualifying Accounts

The following table presents the valuation and qualifying account activity for the years ended December 31, 2010, 2009 and 2008:


	Balance at January 1		Charged to Earnings		Used			Adjustments			Balance at December 31
2010
Allowance for Doubtful Accounts	$	16	$	41	$	(2	)	$	(6	)	$	49
Allowance for Losses on Long-term Receivables		7		—		(6	)		—			1
Inventory Reserves		140		67		(34	)		(16	)		157
Customer Reserves		97		427		(374	)		(33	)		117
2009
Allowance for Doubtful Accounts	$	17	$	9	$	(3	)	$	(7	)	$	16
Allowance for Losses on Long-term Receivables		3		5		(1	)		—			7
Inventory Reserves		150		51		(43	)		(18	)		140
Customer Reserves		119		313		(323	)		(12	)		97
2008
Allowance for Doubtful Accounts	$	26	$	10	$	(12	)	$	(7	)	$	17
Allowance for Losses on Long-term Receivables		3		2		(2	)		—			3
Inventory Reserves		131		54		(43	)		8			150
Customer Reserves		128		133		(107	)		(35	)		119

Adjustments include translation adjustments.

16.

Quarterly and Other Financial Data (unaudited)*


	2010									2009
	*1st*		*2nd*		*3rd*			*4th*		1st			2nd		3rd		4th
Operating Results
Net sales	$	1,740	$	1,936	$	1,949		$	2,246	$	1,668		$	1,732	$	1,797	$	1,983
Costs of sales		887		971		964			1,132		865			891		890		965

Gross margin		853		965		985			1,114		803			841		907		1,018

Selling, general and administrative expenses		454		471		462			523		432			415		415		441
Research and development expenditures		258		269		270			282		266			256		253		266
Other charges		21		64		34			31		103			12		79		61

Operating earnings (loss)		120		161		219			278		2			158		160		250

Earnings (loss) from continuing operations**		97		3		(8	)		166		33			134		65		217
Net earnings (loss)**		69		162		110			291		(231	)		26		12		142
Per Share Data (in dollars)
Continuing Operations:
Basic earnings (loss) per common share	$	0.29	$	0.01	$	(0.02	)	$	0.49	$	0.10		$	0.41	$	0.20	$	0.66
Diluted earnings (loss) per common share		0.29		0.01		(0.02	)		0.49		0.10			0.41		0.20		0.66
Net Earnings:
Basic earnings (loss) per common share		0.21		0.49		0.33			0.87		(0.71	)		0.08		0.04		0.43
Diluted earnings (loss) per common share		0.21		0.48		0.33			0.85		(0.71	)		0.08		0.04		0.43
Dividends declared		—		—		—			—		—			—		—		—
Dividends paid		—		—		—			—		0.35			—		—		—
Stock prices
High		57.82		54.25		61.18			64.26		34.65			48.65		66.15		65.52
Low		42.28		43.75		45.43			53.55		20.86			29.75		41.37		53.69

*	Certain amounts in prior years’ financial statements and related notes have been reclassified to conform to the 2010 presentation.

**	Amounts attributable to Motorola Solutions, Inc. common stockholders.

Presentation gives effect to the Reverse Stock Split, which occurred on January 4, 2011.

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