motorola mobility 2010 ANNUAL REPORT a letter from the chairman and chief executive officer Dear Fellow Shareholders: After more than two years of planning and a lot of hard work by employees around the world, Motorola, Inc. separated into two publicly traded companies on January 4, 2011, giving rise to Motorola Mobility. As an independent company, we have an exciting future full of opportunity. With world- sanjay class talent, a strong patent portfolio, solid jha balance sheet and a global brand, we are now positioned better than ever to pursue our strategies for growth as we address we reduced working capital, resulting in opportunities in smartphones, media tablets, signifi cant operating cash fl ow generation the digital home and converged experiences. compared to operating cash outfl ows in prior years. At separation, we received $3.2 billion Our brand, recognized around the world, in cash from Motorola, Inc. This positions us represents our unifying mission – to well to capitalize our global operations, invest simplify and enrich people’s lives by making in research and development and provide for technology intuitive and easy to use and strategic and operating fl exibility. enabling consumers to connect with people and things that matter. We believe our Mobile Devices commitment to this mission, along with Our Mobile Devices business executed well consistent innovation, execution and delivery amidst an intensely competitive marketplace. of differentiated products and services, We generated solid momentum with the will provide the path to continued fi nancial introduction of 23 new smartphones in markets improvement and enhanced shareholder value. around the world. In 2010, revenues grew year-over-year driven by smartphone unit business review shipments that increased to 13.7 million from In 2010, total revenues were $11.5 billion, 2.0 million in 2009. By shifting our product up four percent from 2009. Our total net loss portfolio to higher margin smartphones from was $0.29 per share compared to a net loss lower margin feature phones, improving our of $4.56 per share in 2009, a reduction of supply chain effectiveness and reducing 94 percent. These results are attributable to costs, we signifi cantly reduced the operating our enhanced product portfolio, particularly loss in the Mobile Devices business compared in smartphones, increased effi ciency in our to 2009. This year we expect continued growth supply chain and tight control over our costs. in demand for our portfolio of smartphones, From a balance sheet and cash perspective, media tablets and accessories, which address the needs of both consumers and enterprise result, we expect increased demand for users. With continued focus on a differentiated integrated devices, accessories, applications product portfolio, operational effi ciency and services that provide anywhere, anytime and cost management, we expect further communication, collaboration and content improvement in the fi nancial performance consumption. of the Mobile Devices business. We have growing markets, a strategy to Home address the evolving needs of consumers, After a challenging start to the year due to industry-leading intellectual property and a macroeconomic conditions, demand for set- global brand. Our employees are dedicated to top boxes stabilized in the second half of and passionate about innovation and product 2010. In infrastructure, revenues grew last excellence. Together, we are committed year as operators invested to provide network to providing innovative and differentiated capacity and advanced services. Overall, in products and experiences that deliver intuitive, the Home business, we performed well in our personalized multi-screen experiences that key markets, introduced innovative products simplify, connect and enrich people’s lives. and software solutions, reduced costs and signifi cantly improved operating profi tability. Sincerely, In 2011, we expect industry demand to be comparable to 2010. Our focus will include prioritizing our investments in products, software and services that enable future growth, expanding our business outside Sanjay Jha of North America, managing our costs and Chairman and Chief Executive Offi cer further improving our operating profi tability. Motorola Mobility Holdings, Inc. the convergence opportunity The relationship between consumers, devices and the world around them is evolving due to the convergence of the wireless, media and computing industries and the Internet. This convergence is enabling new digital lifestyles for both consumers and enterprise users, characterized by expanding adoption of broadband Internet connectivity, increased usage of social networking across multiple devices and growth in content consumption and commerce, both online and on mobile devices. In addition, the use of one device for both personal and business applications is becoming increasingly prevalent. As a UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2010 or ‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File number 001-34805 MOTOROLA MOBILITY HOLDINGS, INC. (Exact name of registrant as specified in its charter) DELAWARE 27-2780868 (State of Incorporation) (I.R.S. Employer Identification No.) 600 N. U.S. Highway 45, Libertyville, Illinois 60048 (Address of principal executive offices) (847) 523-5000 (Registrant’s telephone number) Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which Registered Common Stock, $.01 Par Value per Share New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ‘ No È Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ‘ No È Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ‘ No È Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes È No ‘ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. È Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer ‘ Accelerated filer ‘ Non-accelerated filer È Smaller reporting company ‘ (Do not check if a smaller reporting company) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ‘ No È As of June 30, 2010, the registrant’s common stock was not publicly traded. The number of shares of the registrant’s Common Stock, $.01 par value per share, outstanding as of January 31, 2011 was 294,528,536. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant’s definitive Proxy Statement to be delivered to stockholders in connection with its Annual Meeting of Stockholders to be held on May 9, 2011, are incorporated by reference into Part III. Table of Contents Page PART I .................................................................................. 1 Item 1. Business ............................................................................ 1 Business Segments ......................................................................... 2 Mobile Devices Segment .................................................................. 2 Home Segment ......................................................................... 6 Other Information ........................................................................ 9 Financial Information About Segments ...................................................... 9 Customers ............................................................................. 9 Intellectual Property ..................................................................... 10 Environmental .......................................................................... 11 Employees ............................................................................. 11 Payment Terms ......................................................................... 11 Backlog ............................................................................... 11 Regulatory Matters ...................................................................... 11 Inventory, Raw Materials, Right of Return and