FOOL CONFERENCE CALL SYNOPSIS*
By Debora Tidwell (TMF Debit)

Motorola Corporation
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1303 E. Algonquin Road
Schaumburg, IL 60196
(847) 576-5000
http://www.mot.com

ALEXANDRIA, VA (September 12, 1997)/FOOLWIRE/ --- Motorola Corporation held an analyst conference call this morning regarding yesterday's pre-earnings announcement that it would not meet expectations this quarter.

THE MACINTOSH BUSINESS. The Macintosh OS compatible business, which Motorola is exiting, represents less than 50% of the total sales of Motorola's Computer Group. The Technical Products Division, which accounts for over 50% of the sales of the Group and which manufactures embedded computer parts and OEM systems, remains an ongoing profitable business which Motorola intends to continue to invest in and grow. Relative to Apple and the semiconductor business, their relationship with Apple as a semiconductor supplier is entirely separate from their relationship with Apple as a licensee of the Macintosh operating system. They foresee no change in their relationship with Apple as a semiconductor supplier. The company was asked why they renewed their license with Apple earlier this year if that business was under review. They responded that their belief at that time was that they thought this business had a future for them and could become a profitable part of the Computer Group. Unfortunately, circumstances with Apple and their change in management and other factors made that conclusion impossible. So they decided to make the decision announced yesterday to exit the Mac clone business.

PAGING MARKET INVENTORY CORRECTION IN CHINA. Regarding the portion of yesterday's announcement related to the paging market, Motorola is experiencing a greater than normal seasonal downturn in the China market. They believe this is the result of an inventory correction underway in the paging distribution channels which could continue into the fourth quarter as well. The US paging market, while still depressed, has remained stable since the second quarter and is not expected to be a source of sequential weakness in the third quarter 1997 versus the second quarter. However, paging sales in the China market, which is now the largest paging market in the world, may experience twice the rate of sequential seasonal sales decline experienced last year from the second quarter to the third quarter.

CHINESE MARKET CHARACTERISTICS. The China market, even though it is now the world's largest market for paging, is still a relatively young market with relatively young distribution channels. It is also a very large country and has quite a fragmented distribution system. It is very difficult for Motorola to monitor what is going on in the distribution channels there. Motorola had orders and sales in the first half of 1997 in China (which is the seasonally strong period) which were up significantly from the prior year. They reported that in each of the first two quarters of this year. But, they have no way right now of monitoring how much volatility to expect in the second half of the year as the seasonal downturn takes hold.

OUTLOOK/POTENTIAL STILL GOOD. They do believe this is an inventory correction. The China market is still an extremely attractive market for paging. Paging penetration in China is in the 3-4% range right now and has a long way to go. Many of the countries have penetration rates that are a good deal higher than that. The paging penetration rate in the US is in the range of about 15% or so, maybe a little higher now. In other places around the world, penetration rates (especially in Asia) are somewhat higher. Taiwan is at 20%, for example. Hong Kong is probably close to 25%. South Korea is at 30%. Singapore is at about 35%. These penetration rates are all as of the end of 1996. Paging is extremely successful in Asia. That has been the main driver of growth for paging over the past five years or so. They see no reason not to expect significant additional penetration in China in the long run. There are other countries in Asia such as India and Indonesia where the penetration rate isn't even at 1% yet because these services are just being introduced. They are suffering right now from some short-term volatility that is very difficult to predict, but a long term market that remains very attractive. Motorola remains very positive about the China market, it's just a difficult market to call in terms of short-term volatility.

IRIDIUM & FLAT PANEL ANNOUNCEMENT RESTATED. Also included in yesterday's press release was a reiteration of comments made previously that Motorola's share of Iridium LLC's net losses, as well as Motorola's level of expenses in commercializing their flat-panel display business, will be increasing on a sequential basis. Now that the first two months of the quarter have passed and additional Iridium satellites have been successfully launched, they are better able to estimate the amount of expense increase on these two programs at $20 million higher in the third quarter 1997 than in the second quarter.

LOSSES & EXPENSES AS PLANNED. As far as the expenses related to flat-panel and the Iridium losses, those are occurring essentially as planned. The reason they have reiterated them in this press release is to remind people that this is a factor that will adversely affect their third quarter results and they have talked about it before and because they now have completed two months of the quarter and had at least two additional satellite launches with Iridium. They have a much more accurate handle on the amount of depreciation that Iridium LLC will record in the quarter and how much of that will flow through to Motorola through their use of the equity method of accounting. But these expenses are not higher than expected. They are as planned. The launches have been occurring as planned. They are just in a better position right now to define the impact more specifically.

OUTLOOK FOR FLAT PANEL EXPENSES. Expenses in their flat-panel display business will continue to increase quarter by quarter until that business enters the commercialization of its technology. They think first product shipments are expected some time in the second quarter of 1998. Those expenses will be rising gradually.

OUTLOOK FOR IRIDIUM LLC LOSSES. The losses they will be recognizing from Iridium LLC, however, will be rising quite rapidly, largely driven by the further launch of satellites and a rapidly growing rate of depreciation that Iridium LLC will be recording. Their full satellite constellation right now is scheduled to be in orbit late in the second quarter. So, Iridium will be recording a full level of depreciation by month sometime probably starting in June. As they said at the conclusion of their Q2 earnings release, while they expected a $65 billion loss this year, that number will be several times higher than that in 1998 because of this building depreciation. They think they will be a bit more specific about these numbers on October 7th when they have their earnings conference call.

WILL MISS ESTIMATES BY 25% OR MORE. Their review of underperforming business and development programs continues and could result in additional charges against earnings in the third or fourth quarters of 1997. The present earnings consensus for Motorola for the third quarter of 1997 in the First Call network is $0.60 per share. The combined effect of the factors mentioned in the release is likely to result in earnings that are significantly lower than that consensus. By "significantly" they mean that earnings are likely to be 25% or more lower than the consensus estimates.

UPDATE ON COMMENTS AT ANALYST MEETING. At a recent analyst meeting, Motorola indicated that the paging market in China might be a problem but is not mentioning other issues that were brought up at the meeting such as mix shift in the China market for handsets, pricing of certain infrastructure projects that are going to be declared as revenues this quarter, etc. Those elements are still there, but are not worse than earlier anticipated now. The third month of every quarter is critical to any quarter's results and they will have to see what happens in September. But, as of the end of August, the rest of Motorola's businesses are behaving essentially as described earlier in the quarter in their July analyst meeting and the earnings conference call that preceded it. Their view of their paging marketshare worldwide through the end of 1996 is that the marketshare is not only stable but has risen slightly in the last year or two.

* A Fool conference call synopsis represents an effort to highlight the salient points of a conference call and should not be taken as an authoritative accounting or transcription of the entire event. Note: Statements made by a company other than historical information may constitute forward-looking statements for which the company can claim protection under the Safe Harbor Act. Please consult the company's filings with the SEC for information on risk factors which might cause actual results to differ materially from the information contained in these forward-looking statements.