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Executives

Shep Dunlap - Vice President of Investor Relations

Gregory Q. Brown - Chairman, Chief Executive Officer and Chairman of Executive Committee

Mark F. Moon - Executive Vice President and President of Sales & Product Operations

Bob Schassler

Girish Rishi

Bruce Brda - Senior Vice President and General Manager of Networks

James Welch - Senior Vice President for the Americas Region

Manuel Torres

Edward J. Fitzpatrick - Chief Financial Officer and Executive Vice President

Analysts

Kulbinder Garcha - Crédit Suisse AG, Research Division

Keith M. Housum - Northcoast Research

Jim Suva - Citigroup Inc, Research Division

Stanley Kovler - Morgan Stanley, Research Division

Simona Jankowski - Goldman Sachs Group Inc., Research Division

Tavis C. McCourt - Raymond James & Associates, Inc., Research Division

Andrew Spinola - Wells Fargo Securities, LLC, Research Division

Michael Genovese - MKM Partners LLC, Research Division

Motorola Solutions, Inc. (MSI) Financial Analyst Meeting May 21, 2013 9:00 AM ET

Operator

Ladies and gentlemen, please welcome, Vice President, Investor Relations, Shep Dunlap.

Shep Dunlap

Good morning, and welcome. I'll read the Safe Harbor and the non-GAAP statements and then just introduce the agenda. A number of forward-looking statements will be made during this presentation.

Forward-looking statements are any statements that are not historical facts. These forward-looking statements are based on the current expectations of Motorola Solutions, and we can give no assurance that any future results or events discussed in these statements will be achieved. Any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. Forward-looking statements are subject to a variety of risks and uncertainties that could cause our actual results to differ materially from the statements contained in the presentation. In addition, there will be a number of non-GAAP references today, and we have those posted out on the Web and at the back of your presentation.

Flip one more. So today's agenda. We've got a pretty packed agenda. You're going to hear from a number of key business leaders. And we've allotted a significant amount of time for Q&A. We've got 2 Q&A sessions. And then I would ask you at the end, were going to have interactive product demonstrations. You'll have a number on the back of your badge, and we'll call you in order to go through those, about 20 minutes a pop. But you'll get to see a lot of our solutions, including the Real-Time Crime Center, supply chain solutions, professional and commercial radio business and various other items, so I encourage you to stay around for that piece as well.

And with that, we'll get started.

[Presentation]

Operator

Ladies and gentlemen, please welcome, Chairman and Chief Executive Officer, Greg Brown.

Gregory Q. Brown

Hello, good morning. Quiet. I know it's an early morning. Welcome to our third Motorola Solutions Financial Analyst Meeting. First one, you may recall was in the fall of actually 2010. Right before we separated, we had one in March of last year. And this is our third one. We've obviously had a very, very strong performance since separation, a great year, a great series of years on the revenue and operating margin and operating cash flow and EPS growth. And while Q1 was a bit more challenging on the revenue side, we still feel very good about our competitive position and the long-standing drivers for growth in our business, which you'll hear the team go through.

The other thing I wanted to mention and thank you for is coming to Chicago, or the suburbs of Chicago. I know it's not the most convenient thing, but we were very deliberate in having it here so you can touch, feel and see the product portfolio in a way that we really can't do in New York. And while New York would have a higher level of attendance, I think the applications, the product pods, the general managers, the product experts and for you to see and feel the use cases up close and personal is more valuable and impactful, which is why we decided to have it here.

I wanted to start with the most important thing from a priority standpoint for me. And you've probably heard me say the 2 most important things that I do are develop people and deploy capital. In addition to that, we'll talk about driving the value of the 2 core businesses, and then on the operating leverage side.

On the people side, this is also a forum annually for you to see beyond just the senior team, beyond Moon or Brown or Fitzpatrick. I want you to see and touch the regional sales leaders and general managers. I want you to understand from Bob Schassler on Government, and Girish Rishi on Enterprise, and as well this year, Bruce Brda on our Services organization, and let you see the general managers and take a deeper dive from their perspective and what they run.

People, I still think, is the most important thing I do. We structure this company. We restructured it in January that combined the go-to-market with the product operations. I think that improves speed, decision-making, alignment and will help with the prioritization and clarity of the R&D spend because you have the inevitable tension of the sales guys never think the product's good enough and the product guys always think the sales guys could sell more. And by unifying that and putting in discipline metrics around portfolio management, led by Kelly Mark, and doing a little bit more of a stringent review of the organic spend, I think the organization will be better for it.

Second thing on people is we launched about 1 year ago what's called the CEO Leadership Forum. So there are about 100 executives at Motorola out of our 21,500 people. There's approximately 100 VPs and above. I pay diligent attention to all of those people. I know where they are, who they are, who they're working for, how long they've been in their position, what their development needs are. And we as an executive committee continually review that top 100 should someone be promoted. Is it time to move someone to a different region? Does somebody need international experience? We and I spend a lot of time on the top 100.

Out of that, we've identified 2 dozen, the top 24, which have high potential, which have significant runway. So we put them into formal leadership training. We, as an executive committee, stay in close touch with them. We expose them to the Board of Directors a couple of times a year, 2 or 3x a year, in informal setting so the board understands the layer of management and the depth of expertise below me and the Executive Committee. So as we get into things around succession planning or further development in need, we management and we of the board have a very coherent and good understanding of the bench strength inside the firm.

The other thing I'd say is while we remain co., if you will, we're 85 years old in September, this separation has been an awesome opportunity to redefine the value proposition of the company and redefine the values and the kind of people we want inside the firm. Not just legacy, not just continuity. We want and I want performance, drive, people in every part of the team that have an insatiable appetite to learn and grow, that are critical of themselves first, that want to individually grow and stretch and get better. Not people who are entitled. Very important, I mean, you may think this is kind of, I don't know, HR fluff. I take it very personally and seriously. And I tell the team and the senior executives for the company, the people I want in the jobs, some feel they've made it when they get the job. I want people that want to do the job. Getting it is Day 1 and entry-level. I want them to perform, grow, stretch, challenge the status quo, disagree with me, have a point of view, come with facts and make the debate and the discussion rigorous and rich so we collectively make better decisions.

Sorry, can you go back? I shouldn't click that. On capital, I think we're very good stewards of capital. We've returned $3.9 billion of share repurchases and dividends in just 18 months. Obviously, I'm not going to talk about anything within the quarter. But you'll see over time, I think we've been very good stewards of capital. We've contracted the shareholder base, approximately net -- sorry, the shareholder -- the shares outstanding, approximately 20%, and we continue to put a high priority on returning capital to shareholders. And you'll hear more about that later on from Ed.

The value of the 2 core businesses. We have 2 core businesses: Government and Public Safety and the enterprise mobile computing and data capture business. We feel very good about both course. It's their product portfolio and the state of the portfolio where it stands today, our go-to-market or organic spend and priorities. And we're continually looking at the structure of those businesses to see if we're optimizing it, getting the most out of it from a go-to-market standpoint and R&D spend standpoint and the like

Lastly, yes, we're focused on top line growth, but we equally are more interested in growing operating earnings, expanding free cash flow, driving strong EPS performance and continuing to demonstrate to you the operating leverage in the business and operating margin expansion, which Ed will talk about that we're targeting for continued expansion in 2014.

At the end of the day, we feel good about the state of Motorola Solutions. Now the top 3 product categories are Government and Public Safety; ASTRO, TETRA; professional and commercial radio. And then enterprise mobile computing and data capture make up the anchor tenant and nucleus portion of the Enterprise. We continue to be the #1 provider the markets that we serve.

Domain expertise, partnership, relationships, innovation. We feel good about the size of the addressable market for the core business, for core growth and the expansion growth opportunities. And Mark Moon will talk and dimensionalize the size of the addressable market, its growth characteristics for both core and expansion and why we feel pretty good about it.

Over time, we will also with Schassler and Girish talk about some of the expansion growth opportunities beyond the core that we're spending R&D on and we're positioning ourselves for expanded and future growth opportunities beyond the core elements. When I look out at the business and there's a number of expansion growth opportunities in Enterprise and there's expansion growth opportunities in Government and Public Safety, I continue to believe the strongest one for this company is Public Safety LTE, not just domestically, and what's being done here in the U.S., overseen by FirstNet, but internationally. You heard us say on the second quarter -- sorry, first quarter earnings call that we continue to believe that the international Public Safety LTE opportunities will be more predominant this year. It'll likely stay that way next year as well. And Bob Schassler and Manuel Torres and Mohammad Akhtar continue to engage in a number of live pilots as well as pursue closing international opportunities for Public Safety LTE.

So we had a more challenging Q1. And I wanted to just show this to knowledge that we have heard a number of themes, and this morning is not mentioned -- is not meant just to give you an update of the business, but it's meant to address head-on some of the things I've heard you tell us and tell me. Number one is the Enterprise business. Is it cyclical or is it structural? We continue to believe it's cyclical, and we'll go through why that is. But it's a fair question. And we'll get into the use cases and the dimensions of Enterprise and why we think it cyclical and why we think we can return to growth in a strong way.

We've heard you on WLAN. I said on the earnings call I was disappointed. We didn't perform well. It's not a market issue. It's a Motorola Solutions issue. Having said that, there's some very good opportunities in front of us, and we're working hard with Bruce Brda's team through the services organization to change the value proposition to go from product to more around managed wireless LAN services. But we acknowledge that point. We have to do better.

The full year outlook. We grew 1% as a company in Q1. We guided Q2 to flat to down 2%. So I heard a number of you say, "I'm not sure we regen the full year guidance to 3% to 4%." And a number of people still think that's too bullish and optimistic. Obviously, we and I spend a lot of time thinking deeply about that, and we'll take you through why we continue to believe the 3% to 4% full year revenue guidance is the appropriate goalpost for the business.

Embedded in that is will Enterprise turn around to the degree that you expect in the second half? And can Government continue to grow at such strong growth rates, particularly coming off of a record year last year? So Q1 of last year, Government grew 11%. Q2 of last year, I believe, was our best Government quarter ever at 14%.

So these are some of the things. And lastly, capital return, not that there was any dissatisfaction about it, but are you still committed to getting to a net debt position in 2014? And as we extrapolate your share repurchase and a few other assumptions, is it still management's plan to get to net debt in '14? And as you'll hear from Ed, the answer is yes.

So today's themes: first, talk about reeducating and reaffirming and going into more detail about the 2 core businesses that we have. Now it's interesting because we feel good about both core businesses. It's important for me to tell you that. Having said that, there's very few businesses that I've seen that are as strong as the Government and Public Safety business. So sometimes, in Motorola Solutions, the Enterprise core, which is more cyclical, as you've seen, less stable and predictable, has different characteristics. Sometimes, falls prey to being the less attractive core when compared to the gold standard of Government and Public Safety. Irrespective of that comparison, we still believe firmly in this business on the enterprise and the industrial mobile computing side and the data capture characteristics, in particular, in why we think we can grow that.

We're going to go through Girish and Bob, and Bruce and Mark the demand drivers, why we think we can continue to grow both core and pursue the expansion growth opportunities as well. And we'll also have 2 different Q&A panels. One, which will be product and go-to-market led in the middle of the morning, and then one by me at the end with Ed and Mark Moon to capture everything. So please, I'm sure you will, feel free to stress test and challenge us around our beliefs around while we believe these demand drivers are strong.

Differentiation is really, really, really important. So all the time, I mean, I like the businesses. We feel very good about the spend, our domain expertise, the partnerships, the return on capital, the return on invested capital of these businesses. When you think Government and Public Safety, people think about the radios or the walkie-talkies. That's not the way we think about the Government business. Because we provide -- it's a systems orientation. We provide infrastructure. We provide the radios, and we provide the glue or the system or app software to interconnect an end-to-end system. Really, really, important.

In particular, this morning, and I don't talk enough about it, and I should, when Bob Schassler gives you the update on the Government and Public Safety business, I'd like you to pay particular attention to the investment and expansion of new product around infrastructure.

So we always talk about the radio, the XTS 5000, the APX 7000 for police or fire, because that's what the end user sees and that's the visible instantiation of the business you. You see the radio. You don't see the infrastructure. You don't see the system software. You don't see the backward and forward compatibility of legacy applications. So when we approach this Government business, it is through an end-to-end perspective. We want best-in-class infrastructure to pursue heavy applications and entry tier, which Bob Schassler has done. We want tiered radio subscribers of affordability, entry tier to high end sophistication encryption security. And we want the applications to be backwards compatible with legacy, really, really, really important. And oftentimes, when we Motorola Solutions compete in public safety, particularly in ASTRO and TETRA, we are embedded in the customer's business processes.

So the differentiation opportunity and the differentiation impact that we have is substantial. It's not just whether somebody comes out with a more spectrally efficient radio. We actually have the benefit of both worlds. I believe we have the best-in-class portfolio on infrastructure, best-in-class portfolio on radio, provide a systems orientation with partnerships, domain expertise, incumbency and software that will provide interoperability for backward legacy applications to a customer embedded in their workflow management and show them a path to migration on next-generation public safety or smart policing.

On the Enterprise side, we differentiate as well. It's a little different. I want you to think in terms of use cases. So the big question is, is Apple or consumer Android devices going to cannibalize or deteriorate the core enterprise mobile computing business? We think the answer is no. Now there are 4 or 5 customers. By the way, most of them that made the decision in 2011 to try the Apple product, and without speaking at a school, we continue to talk to, and in 1 or 2 cases, they may return to Motorola -- may. But you have to think, it's not -- we're not, believe me, you -- we got out of the mobile devices business. I have no interest in a commodity business. That's not what this is. So I want you to think more about the use case of what Girish talks about. And what I say by that is when these characteristics are present, we win oftentimes and do a very good job. Heavy need for data capture, vertically specific applications, integration with enterprise legacy applications or back-office data base or CRM. OS enterprise features plus. So what Girish has done on Android is we take off the shelf Android and put Enterprise features on top of it.

When we've taken 6.5.3 or Windows CE, oftentimes, Girish's team extend it for Enterprise features around security or power management. So the use case is very different in Enterprise mobile computing or industrial mobile computing.

So when data capture is there and require vertical specific applications, interconnection or interoperability with legacy applications, a standard OS is not enough for enterprise-grade security and power management, the optimization of voice, given Motorola and our background and domain expertise and mobility. Oftentimes, these mobile computers have to be optimize to run on 802.11, and voice is not easy to consistently deliver. So when those use cases are present, whether it's a warehouse, a forklift truck, blue-collar, a gray-collar, we win oftentimes. There are times when we'll hear American Airlines picked Apple iPads for its pilots. That's something we wouldn't compete with anyway.

So I'm not saying we're not diligent or looking at the potential and the evolution of consumer devices. But I would reorient us this morning around the use case of what our business really is and where we're strong. And we'll be aware and diligent on the periphery for continued evolutions. But at the end of the day, we see think the substitutability is small, and we think the areas that continue to differentiate, win and compete and return to growth in the second half are pretty good.

You'll also hear about services aligned to the core. Now we're going to spend time this morning with Bruce Brda because we're not going to try to be CSE. We don't want to be IBM Global Services. Everybody -- not everybody. Oftentimes, companies say services, services. We're sticking to our core knitting: integration, systems integration, support services. And when we get outside of that, we think that the deployment of success-based capital around Managed Services, around managing public safety systems, or doing life-cycle management for enterprise mobile computing i.e. close to the core, not a bridge too far. And I think Bruce has done a very good job on getting us launched on that front.

You'll hear us through Ed talk about the continued commitment to get net debt by the end of 2014. And also today he will talk about a pretty significant benefit to 2013 and benefit through 2017. But the finance team has worked on a holding company for tax structure that will provide significant earnings per share benefit that we're announcing today for 2013. And we'll also reduce our effective tax rate going forward -- it's in your deck -- 3 years, approximately 2017. So we think that's good news. And I like the fact that we've taken the next step around optimizing our taxes and doing the best we can on the preservation of capital so we can deploy it appropriately property. So that's what you'll see today in themes.

At this point, I'm going to introduce Mark Moon, our new President of Sales Operations and Product Operations, who will take you through the context setter for the segment leaders for Enterprise, Government and Services. Mark, you're up. Thanks.

Mark F. Moon

Good morning. I'm happy to be standing before you today talking about sales and product operations as opposed to just sales and field operations last year. We made this change at the beginning of the year to really take what has been a really good operation and take it further.

In fact, Greg was very clear that it's all about prioritization, speed and then extending our collaboration, innovation and execution. I'm excited still, my self enthusiasm will come forward, for the business and what we're doing. But I'm dead serious about where the business is and what we've got to go and do as we go forward. I'm also excited about having the sales leaders, the product leaders, the service leader, the supply chain, strategy leaders, all sitting at one table focused on a customer, focused on what we can do to be better to serve our customers better. And I'm excited that you'll get a chance to meet most of those leaders today because I'm fortunate to have a great team.

When we think about our success and our strength, it really comes down to 3 buckets, the same 3 things we've been talking about. We truly have an unparalleled product portfolio. And we're going to get a chance to talk about not only where we're at today at the core, but we're going as we extend it to expansion in the future.

We also have a great Services business, long legacy with these customers, customers that we've been with, 30, 40, 50 years. They trust us, they believe in us, and quite honestly, they are asking us to do more. And when we think about solutions, service is going to be at the core of it, and Bruce will talk more about that.

And then at the end, what brings it to get it is really go-to-market capabilities, a very strong direct sales team with go-to-market expertise, but really, domain expertise, but an extended partner community.

So when I think about each of those 3 pillars, any one of them alone I would very eagerly stack up against our competitors as being the best. But when you put them together, it really gives us a chance to do something really special and be really successful.

Last year -- and Greg has talked about our 2 core businesses. You know them well: Government and Enterprise. We obviously had a great year in Government last year. Enterprise, not as strong as we talked about cyclical. You also -- and as we talked about in the past, 2/3 Government, 1/3 Enterprise, with Services overlaid across them. The fact of the matter is it's not really about what we've done last year. It's about executing today. It's about where we're going. It's about what is our growth strategy for the future?

And when we think about that, it really starts with the core business. We've got to continue to grow the core. And we've got a phenomenal core business. And those new products that are new core products, we talked about them a lot last year, particularly in the Government business, when we talked about new product introductions. And Girish is going to talk later about the many products he introduced last year that we're hoping to get real traction with this year.

But then that growth strategy is also about leveraging what's been really good about that core, leveraging it, and what I mean by that is not going to reinvest in brand-new areas, but extending things that are very close to the core -- adjacencies, like geographical penetration and coverage areas that were not prevalent today, vertical expansion. You want to get to hear about advanced enterprise devices, and as Greg mentioned earlier, public safety and something that we're terming as smart policing. We often talked about next-generation public safety. We've kind of refined that down to smart policing now, which will be about Real-Time Crime Center, which you'll see today, or the connected officer and things of that. And then ultimately truly bringing solutions together and expanding our services capability. I think a real strong story for leverage growth, but as Greg mentioned, one of the drivers to ensure that customers continue to need for this growth to happen. And our Public Safety and Government business, they're still at the top quarter. Safety and security remains a priority. We get reminded of it all the time.

Coming off of Boston, both that top safety and security issue and the uses around video and new applications came to the forefront, and customers really rally around how can Motorola help us be better? At a time when we don't have more officers, we don't have more budget, how can technology help us with situation awareness and help us to be more effective?

We've also talked in the past and we'll talk today about the analog-to-digital transition. That transition is real. It's not just driven by narrow banding in the U.S., which we were able to catch the tailwinds from last year. But around the world, you see a big convergence, and quite honestly, a big convergence to come, both for aging infrastructure, but more importantly, for the advantages you can get out of digital.

And then, finally, we've been very, very successful in North America. I'm going to talk about it a little bit later. And we continue that success, which I'm very proud of. But we have an opportunity to really grow in these emerging and expanding markets. They're adopting technology. When we think about in Eastern Europe or in Africa, or in Asia, we've got to continue to leverage the fact that these economies are asking for technology. And sometimes, it's even easier to move with this new expanded technology, and as we talked about, the tiering infrastructure that we've done, to move ahead in these kinds of economies.

On the Enterprise side, there is no doubt -- Greg mentioned consumer devices -- the growing mobile workforce continues. There's clearly an expansion there. There's an acknowledgment around the industry. And the reality is that's continuing to push the business up. There's also a technology migration that's occurring there. And as we think and hear a lot about the omni-channel activities, at one point, that was, is that a danger to you? Is that brick-and-mortar going away? Does that mean that that's a different piece and that's going to slow your business down? What we actually believe is, it brings more emphasis around supply chain, logistics, how do you really enhance the customer experience? And that's all technology-driven. Quite honestly, it's all in our sweet spot that Girish will talk about later.

And again, emerging markets. We have an opportunity to grow our business, where technology is moving forward in emerging markets. And we've recognized that in those emerging markets, it's not the same portfolio that we sell in North America and in Europe, particularly Western Europe. It's a new entry tier, value tier portfolio. We're excited that we've got new products coming there. And equally, when we think about new mobile use cases, around Psion and around our new devices that are very customer-facing and meeting consumer devices, we think that's a driver for business as we go forward.

So what about the business? First, I've always said and we always talk about, our core business is still strong. A lot of people would be very pleased with the SAM [ph] that's growing at 5% and the market share that we have across these 2 core businesses. And that's still what we see as we go forward.

So what we have to do is make sure, as I first said, continue to grow the core and extend the core as we go forward.

But the exciting piece is around the expansion areas. And we talked last year about growth and expansion, and we quickly talked about LTE. But there's other things to talk about as well. When you think about smart policing that I just mentioned or our new devices in the Enterprise side, that's new categories for us. When you think about other things with associated services, that's SAM,[ph] if you look at, it's growing at a much faster rate. And we don't have big share there. In fact, some of those areas are completely greenfield, places for us to establish ourselves in new markets that we have not served to date. Bob and Girish will talk more about that as we go forward.

So the issue is, execute today, as I've just said, execute where we are, but it's also about laying the foundation for the future. When we think about our success, it has started in the very history of Motorola. It's continued throughout to be around innovation.

We have innovated to make our customers more successful. But as you saw in the film earlier, it's also about a domain expertise that we have and we believe, and I know it sounds like I'm bragging when I stand here, but we put a real focus and our customers. We know the environments that they work in. We know the challenges that they have. We know what trends are impacting the way they do business today. And we take that domain knowledge when we think about many of the expansion products and projects that we just talked about. It germinated out of that domain knowledge, working with customers, our smart engineers and technologies, designing systems to meet those things.

Also, as you saw in the video, it said something that's very catchy to me and I think very meaningful as I think about bringing the product organization, our services organization, our sales organization together and closer to customers. It said, "Customers do not always tell you what they want. But if you watch them closely, they'll show you." That's what we've been trying to do, and I think that's what our customers expect from us. That's what they expect from us as a market leader.

Can we have some video now? I don't need it if we want to go. The other piece is important is around, as you think about investing in these new places, it's about the R&D. Our customers, our partners are very proud that we spend $1 billion in R&D. Now it's not just about the dollars that you spend. It's about how -- what do you do with it? Are you effectively utilizing it?

But first, when we think about that $1 billion, about 70% of it spent in Government, about 30% in Enterprise. Interestingly enough, and not necessarily by complete design, but we monitor very closely how much of that spend is around core products versus expansion products. And it's also about 70% towards the core of our business and 30% towards new innovation, new expansion, future growth, laying the groundwork for the future. We watch it very closely because at the end of the day, it's not just about the $1 billion that you spend, but it's about the effectiveness of maintaining and growing your position and pushing the industry. As the industry leaders, we push the industry forward. We've watched it over the last number of years, and I'm proud to say that we kept our R&D line flat. We continue to leverage it. And what we've done working with Girish and Bob and their teams, in particular, is work on things like platforming. How do we get faster to market? How do we do things differently? How do we not say it's flat and say that we can afford to go introduce new things? We've got to be better in what we do and produce more products with the same dollars.

And as you see, our leverage trend continues to improve it. It will continue to improve. Greg is very clear about that, and we are, that we're continue to be more operationally effective as we go forward. But that does not mean not producing more and better products. In fact, we've often talked about the chart on the right that says, we're pretty proud of the fact that for every dollar we spend in R&D, we produce $4 in margin. And that's what's it's about as we go forward.

So as we move to the next step, I'm going to ask Bob Schassler to come up and talk about Government. Girish Rishi will then follow him and talk about Enterprise, then followed Bruce Brda with Services. I'll return at the end to kind of summarize with go-to-market and bring it all back together. Thank you for being here, and I look forward to talking more.

[Presentation]

Operator

Ladies and gentlemen, please welcome to the stage Senior Vice President, Government Solutions, Bob Schassler.

Bob Schassler

Thank you. So I'd like to start my discussion with you by really just sharing some of the key design criteria that go into the products that we develop for the Government segment. some of that design criteria and if you've paid attention to the opening video, it covered a little bit of it. But you guys know that our customers work under extreme harsh conditions, some of the harshest environments out there, life and death situations. So we make sure that our products are very, very intuitive to use, make sure that our products are extremely resilient, highest level of quality and make sure that they last for a long, long time. So those are some of the attributes. And this might sound a little bit corny to some, but it really is what drives us, drives our thousands of engineers around the world to continue to do what we do and serve the marketplace that we serve every day.

Our Government business, $6 billion in 2012, made up of 5 categories: our public safety radio system business, 37%, being the largest; our ASTRO and TETRA portfolio, our professional and commercial radio business, or our PCR business, as we refer to it, 20%. And that serves public safety, but also other verticals, like hospitality, manufacturing, construction, health care. And by the way, our ASTRO portfolio and TETRA portfolio also serve other verticals aside from just public safety, and I'll cover that a little bit later.

Our Services business, you heard it mentioned a couple of times by both Greg and Mark, continue to be more and more strategic for us, 30% of the revenue in services. Last year, very, very strategic. You'll hear from Bruce Brda later on this morning about our Services business across the company.

And the last 2 segments, Accessories and Applications, although smaller in terms of top dollar revenue, very, very strategic for us and really helping us drive and enable some of the other businesses in the other categories.

So in the time I have with you today, I'm going to speak about a lot of the core growth, how really, we've really refreshed and rebuilt the foundation for our core business and some of the growth that we're seeing there. And really, what's allowed us now to move on and do some of the other areas some of the geographical penetrations, get into some other verticals and really areas that are not 3 or 4 steps away from the core, very, very close to what we do as a result of our digital migrations, our digital systems that we have out there, really being able to get into much more of a solutions oriented -- orientation, not just selling 2-way radios, but really, a solution to solve customer problems, and Public Safety LTE updates and, Mark mentioned it, smart policing. And you're going to hear that term not just from us, but really an industry term. Many of our customers are getting into what's called smart policing. And really what that means is public safety just trying to take all of the information out there. There's so much data and information, but now try and turn it to intelligence, take all of the social media information, the streaming video, the multimedia information, package it and use it in a way to help them do their jobs better. And our Public Safety LTE solution helps drive that.

You saw some great examples of smart policing in a tragedy in Boston several weeks ago, where they really did take social media, take video, package it up to really do their jobs much, much more effectively.

We've never been more efficient or effective at developing products than we are today. Past 3 years, 196 new major products that we've developed and $720 million of R&D. And we leverage that R&D. Mark mentioned it, but our leverage in R&D has never been stronger than it is today. We're investing very, very smartly, and I'll cover that and get into the details of it. But we really rebuilt the foundation with this new portfolio, and I'll cover some of it.

We look at our device portfolio. Back in 2009, we really looked at our device portfolio and felt, we have to refresh it. Many of our products were over 10 years old. We're receiving some pressures on entry tier, some pressures in really mid-tier as well, ASP pressures. So we really refreshed our entire portfolio across all of the business lines and have a very clear tiering strategy. And we've been able to do this very, very effectively. Dozens of product out there that we've developed over the past couple of years, but very, very effectively through a platforming strategy. Platforming is something for a technology company that's really easy to say, but really difficult to do and practice. So we've developed both the hardware and software platform strategy, and you're going to hear us reference that through the day here, both myself and Girish. It's critical to get the right leverage and efficiency, but that's really allowed us to develop some of the products as quickly as we've been able to develop it. So now we have a tiered portfolio in each business line, but really across the entire business. So now we can effectively serve the very low, smallest municipalities, other government agencies, not just public safety, public works, transportation and really tier it so we can serve the entire global marketplace as well.

I look at our infrastructure business, very, very similar situation. In our infrastructure business for ASTRO and TETRA, we were probably a little too focused on high tier, large metros, countrywide, statewide kind of systems and really receiving some pressures on entry and mid-tier type product portfolio. In our PCR space, we really didn't have a very significant infrastructure business. Refreshed the entire portfolio. And again, tier that very, very much like we did on our device portfolio. Now we can serve the smallest municipalities to nationwide-type systems. In our ASTRO and TETRA systems, we've shipped, deployed over 500 systems really in that low and mid-tier category with our new portfolio.

In our PCR space, we've shipped over 2,000 MOTOTRBO systems, our product name for our digital platform in PCR. Again, being able to serve that low to mid-tier customer very, very effectively, much more effectively than we were able to do in the past because some of the products we had really didn't scale down as effectively as we needed them to really scale them.

Greg mentioned the fact that this really is what drives our business. We have a wonderful, wonderful device portfolio, wonderful services business, application business. But it all starts right here. It starts with us having infrastructure systems that really drive the ongoing grassroots business for many, many years to come. Ongoing Service business, device add-ons. And we have the most robust product portfolio. I've been around the business in this business for the past 23 years. We have never had a portfolio like this. Many of my years with the company were actually out in the field in the sales organization. And we never had this type of portfolio that we really have to go serve the marketplace, again, on a very global basis, from the smallest, all the way up to nationwide networks.

For those of you who were with us last year, one of the comments I made was that the most important attribute or factor to really compete effectively in a government segment is you must have a large scale, large footprint of customers in order to make the right investments, the on-going innovation that's required. We have deployed over 10,000 systems in over 100 different countries. So we have that presence and scale, very, very diverse customer base, to help us really have that scale to make those proper investments that we need to make to serve this marketplace.

Our migration strategy remains spot on. I'll just take a minute to set this slide up for you, a little bit complicated slide, but very, very important to our strategy. If you think about those horizontal bars as technology types or platforms, as you move up the stack, the next level of technology or platform. And if I use the vernacular analogy, the public carrier networks, 1G, 2G, 3G move up the stack to the next level of technology, but the difference, the big difference in public safety systems is historically, those systems were incompatible with one another. So if a customer wanted to migrate from a 1G to a 2G, they were required a forklift change out. You'd spend a lot of time and energy making sure that those systems can migrate over time so they are completely compatible with one another, so customers can actually migrate from a 1G kind of a level technology to a 2G gradually over their own time cycle. Those systems are completely interoperable. So we have systems that you can have an analog system and a digital system that are compatible with one another, a 1G, 2G, 3G, using that vernacular, that are compatible with one another. You can have a mix, P25 Phase 1 interoperable with P25 Phase 2, for instance. Very, very powerful to those 10,000 systems so we can allow those customers to migrate over their timelines.

And also, very important, our devices have all of those protocols that are software upgradable so they work in an analog mode and in a digital mold. So our customers can roam across those various networks and don't always have to change all of their devices. They can software upgrade those devices to the next level of technology.

Also, last point on this slide, I made it to the group last year, if you were here, the majority of our customers, those 10,000 systems, they're in what we will refer you using this analogy, in a 2G level or below, the vast majority. Last year at this time, we had 21 customers that were in a P25 Phase 2 technology or what we would refer to as a 3G technology. This year, we have 42. So we're doing good. We've doubled it. But lots of opportunity to go after that market and migrate these customers, again, with the most robust portfolio that we have ever had in our history.

If I take those 10,000 systems and I was to parse those out, take those 10,000 systems, parse those out over the ages of those systems, over 45% of those systems are over 10 years old. 45% over 10 years old. It will take us the next 12 years plus to migrate those systems to the next level of technology. And then, guess what, the process and cycle repeats itself. That's why it's so critical that we have that migration strategy and have that robust product portfolio and continue to innovate for our customers.

One of the statistics that is very, very surprising to many is that 60% of our 10,000 systems deployed are still analog. So if you recall from my slide using that analogy of 1G, 2G, 3G, still in a 1G level category. So again, tremendous, tremendous opportunity for long-term sustained growth with the most robust product portfolio that we've ever had in our history.

So up to this point, I really talked to you about our core business and how we really have rebuilt that foundation of our core business, replenish the product portfolio. But now that's allowed us with the solid foundation to really move on and move on and solutions orientation that we have and we're able to get into the solutions orientation really because of some of the digital upgrades, some of those systems that we've deployed. And I'll speak to you again about Public Safety LTE and about smart policing.

We can get the slides up. I'll give you some visuals. I'll keep going, okay. So if you look at, first, I'll talk about solutions. In the solution space, as we've evolved and we have digital systems out there and we deploy digital systems, what our customers are able to take advantage of is a lot of the features and functionality that we can embed in our products. So we've developed a lot of features differentiating for customers around the world. But not only embedded features to go after solutions orientation. And so now we're not just selling 2-way radios. We've developed a very large third-party ecosystem of ISVs or software vendors. 450 ISVs in that space right now. If you think about it, we've developed -- I like to think of it as an Android-like application ecosystem for 2-way radio vendors. So now, we've made it very easy for small companies application developers to develop applications that really operate and really work on our systems so our customers can really take advantage of the full solution, not just our embedded features and functionality, but also third-party applications. So again, complete end-to-end solutions, very, very powerful and not just trying to sell a customer a product. We're really trying to solve their problems, what are their challenges and issues and really, taking our embedded features, our third-party partners and really trying to come up with a full solution end-to-end for our customers.

If we look at our business, we were probably, historically a little too focused on North America, in North America requirements. We put product management teams in place in-region to really help us identify the requirements that each country have in-region. And by making really some modest -- making some modest R&D investments, really having a big impact, making sure that we support all the right language packs for both the voice and data perspective, the form factors of the devices, feature sets that were important to customers in-regions, colors of the devices, price points of the devices, all those things, and really, again, just making some modest R&D investments, understanding with our product management teams in-region, what are those right investments to make and having a very, very big impact. And we're able to do this and do this effectively really because of our platforming strategy. We can really leverage and create very, very quickly derivatives of our core-based products.

A similar situation on verticals. Very, very focused on different verticals. Again, these are not verticals that are 3, 4 steps away from the core and what we do. These are vertical that are very close to what we do in our core public safety business. But by just tailoring the products, making some modest R&D investments as a result of our platforming strategy, we can have a big, big impact on the business. I'll share a few examples with you.

Hospitality. Big, big user. Big, big user of 2-way radios. But they came to us and said, "You know what, we really would like of a different form factor. We really need more data, more software applications." We've partnered up with some of our ISVs and developed a solution set. We've developed our SL Series products specifically, and we launched last year specifically with hospitality market in mind.

For petro chem type customers, mining customers that are in environments with hazardous materials, explosive materials, we've developed an intrinsically safe product portfolio. For those customers that require the highest level of classified security devices and a discrete type of a package or device, we've developed our shared mobile environment technology, working very, very closely with many of those customers and developed the cadre of accessories to go along with those products. So as I said, when I first started that Accessories business [indiscernible] and solutions, it's absolutely critical. We took our APX line, worked with a lot of our MODs around the world to understand, what are the military requirements? How we can we tailor those products to meet some of those requirements? We've developed a set of features and functionality that met a lot of the military or MOD requirements around the world and also tailored some accessories to go along with those products, having a big, big impact. So again, modest R&D investments, big impact, and do it very effectively because of our platforming strategy.

Our Public Safety LTE solution remains very, very strong. Significant demand and interest around the world. Gregg mentioned some of the pilots. We have 5 live pilots outside of the U.S. today. And we also have 150 sites deployed in the United states today. So we're getting closer and closer to our vision of next-generation public safety, which drives smart policing in the marketplace, which really, in my opinion, will forever change the way public safety works and does their operations every single day. So we're really at an inflection point in our business, and that's why we're so focused on it and we've really invested significantly in this space.

We're still the only vendor out there that has the complete end-to-end solution from devices, infrastructure, application services that really uses a standard base public -- standard LTE technology, but really taking an application layer and specific devices tailored for public safety for the way that they operate.

We look at our device portfolio, it'll be very, very similar to our radio portfolio in terms of platforming, but we'll have it complete tiered product portfolio from tablets to mobile workstations, to handheld devices, that will operate on both public carrier networks, as well as our customers' private/public safety networks. So the devices that we'll develop will have 2G, 3G, 4G, public carrier type networks, as well as public safety LTE networks. So as we are waiting for lots of the networks to get built out here in the U.S. with FirstNet, for instance, our customers can deploy devices and work on those public carrier networks. And as the network gets deployed, we'll be able to migrate and roll them on to their private networks. But it's our belief that globally, most of our customers will have a need to really have a mixed public/private interoperability and really have those kind of shared networks to be able to leverage both. And we're very, very well positioned to take advantage of that.

We were able to showcase our technology in 2012 at the NATO Summit that was held here in Chicago. We integrated over 18,000 camera feeds into their command-and-control center. We deployed our Public Safety LTE solution. We equipped commanders with tablet devices. So they were able to get real-time streaming video of all of the dozens and dozens of demonstrations out there and be able to really manage the resources much, much more effectively. They could deploy resources where they needed them most. And that's one of the challenges that all of our public safety leaders talked to us about, "Help us with technology to deploy our resources more effectively."

This was a great example of really Public Safety LTE, enabling smart policing. This event will be quickly became a model of how to really manage such large-scale events around the world, very, very effective. And by the way, our public safety LTE network operated when the public network that was operating in that area really got congested and it became inoperable. When you have large scale events like that, the public area networks just aren't designed for that, aren't designed for that kind of demand. And that's really why public safety has been driving for these private LTE networks getting private spectrum. Because whenever you have these type of events, and you can go on and on, Hurricane Sandy, Katrina, other events. And they don't have to be kind of those major events. They just can't rely on those public carrier networks to really do the jobs and do the things that they need to go and do.

So a few closing comments for you. The foundation that we have for our business has never been stronger than it is today. We've really worked hard at rebuilding that foundation, which has really allowed us to get into some other areas and other growth areas, but really very, very close to what we do, very, very close to our core business and what we do. And we're investing very, very smartly and looking at how do we grow in those areas, again, very, very close to the core.

So thank you for your time. You guys enjoy the rest of the meeting. Thank you very much.

Operator

At this time, ladies and gentlemen. We will take a 10-minute coffee break. Thank you. 10 minutes.

[Break]

Operator

Ladies and gentlemen, if you'll please find your seats, our program is about to begin. Please find your seats. Thank you. Ladies and gentlemen, please welcome, Senior Vice President Enterprise Solutions, Girish Rishi.

Girish Rishi

Good morning. Welcome back from the break. I'll talk about 3 things, number one, a very familiar theme that you have heard already, around domain knowledge, use cases, core and expansion and our differentiation in our portfolio. The second thing I will talk about is the dynamics around the recent quarters. To say that I and my team are disappointed with the recent quarters would be an understatement. But our excitement about growth opportunities far exceeds our disappointment with the past quarters. The third thing I will talk to you about are select growth initiatives that the sales and product teams are executing upon, and we are optimistic about those.

So what is Enterprise within Motorola? What do we do? There's a lot of conversation, discussion around consumer devices and other sensors that are coming in. So at a high-level, we provide asset and people visibility. Enterprises, retailer, logistics companies, postal and courier companies, manufacturing and health care companies worldwide engage us to get visibility of people and assets. We do that by our solutions blending into workflows of customers' processes, ultimately providing business intelligence to the information systems of our customers.

Think about Henry Schein, that is a medical distribution company, that scans its items and packages, some very high-value drugs through its supply chain processes, or across the Atlantic at Tesco or a Carrefour who manages its products, its items to ensure that the retail shelves are filled with what they anticipate the customers' needs will be. Think about that data populating SAP and Oracle in these Enterprise Systems.

Now I still believe we're in the dawn of Enterprise Mobility. With primarily barcode scanning one sensor, you'll see where we are from an industry standpoint. We have seen RFID adoption happen. 7 of the leading textile and apparel manufacturers are using RFID in concert with barcoding. We are deploying NFC, we are deploying smartcards, voice over IP and other sensor mechanisms. Imagine the world over the next 5 and 10 years as these sensor mechanisms come in with an Enterprise Solutions that blend into Enterprise workflows to provide business intelligence as Big Data drives analytics and most smarter decisions for our customers going forward.

The way we will do that and the way we do that is through a portfolio of businesses. But out of all the businesses, there are 2 that I will focus on, the 2 category leading businesses that we have: Data capture solutions and mobile computing.

Data capture solutions is where barcode scanning started. It comprises of RFID. It's not about one feature, it is not about one technology. It's a confluence of factors. It is about best-in-class imaging. It is about high-performance laser scanning. It is about robust decoding. It is about providing Enterprise software tools that has made our scanners leading portfolio candidates in the industry with the confluence of all of that.

Similarly, in mobile computing, it is not about packaging a mobile computer in form factors that you don't see in the marketplace. It's about taking high-performance, tiered data capture element, blending that with mobile computing and enabling that with wireless access within indoors or outside the 4 walls, packaging those up in different tiers, surrounding that with software solutions, application development solutions that apply end-to-end in the supply chain for raw materials tracking, finished goods tracking, in the warehouse, through the trucks, out into the backroom of a retail store and out to the shelves and across through retail point-of-sale scanners. And by the way, we are expanding our data capture marketplace by getting into a space we haven't been into, in bioptics, and there's a lot of good interest on that portfolio.

We are very deliberate on how we spend our R&D. We spend about $300 million on our portfolio. What we've done for many years, we continue to refine our capabilities, that's why 2012 was interesting. In 2012, we launched more products than we ever have, not for the sake of it, but to address different application-specific domains in enterprises. We have launched a number of core products in the core space. But as an industry leader, year after year, we pushed the boundaries of what we provide and we take a lot of risks.

The form factors, the products that you see in the Enterprise categories, a few select of those, we are the innovators of those products. We have provided those products to the industry for the first time by observing workflows and designing products that blend into the workflow. Some of the products in the core space, the gun-shaped product, the wearable system were expansion products a few years ago, and expansion products year after year, we know it's the same thing. They are designed with anchor customers and customer input. And when you launch the product, they go through testing, they go through piloting, customers come back and say refine the application, build me another accessory, and that's the stage we are in.

But you know, I'm pretty pleased, cautiously pleased on some of our new products. The SB1, the Smart Badge that we have talked to you about in the past, which you'll see in the showcase later on, it's in pilot and different stages of rollout in a number of our customers. One leading shoe retailer has 53 stores deployed with this technology.

Shoe retailing for me has been the same as long as shoes have been around. I go in to buy shoes, typically the size there on the shelf is 7, I'm 9.5. I always pick up the shoe, I say I need a 9.5 size. They go in there, they said, "We don't have it in the black color that you want, but we have it in the brown color." That's 10 minutes gap. Sometimes, I walk away. I know you do the same thing.

With Smart Badge, the shoe retailer scans that shoe and says, "Sir, we only have brown color in the shoe, but we do have a black color in a nearby store. Can I order that for you right now and have it shipped to your house?" That is taking customer service and retailing to the next level. It is not just about buying from online retailers, it is how do you combine the experience for the customer from an online, website, warehouse facility to a retail store facility, that's what our customers are talking about.

Mark Moon mentioned I will talk to you about use cases. We've further simplified the view of use cases for you this time. The 3 categories I'll talk about: Industrial mobility, that has, historically, we've -- in the past, we've called line worker; field mobility, outside the 4 walls; and customer facing, the exciting, growing opportunity that we are seeing that we have a whole portfolio out.

I will talk about the entire Enterprise portfolio across those 3 segments, but I know a question of serious interest and curiosity for you is, what is happening in the mobile computing business? How is that categorized? Where does it sit in these 3 areas? What portion of the mobile computing business is exposed to consumer devices? I know some of you, if not all of you, are coming with that question to this meeting.

So industrial mobility is what we've called line worker before. These are the rugged, robust devices, aggressive data capture, push-to-talk capability, a diverse accessory base, legacy applications, long battery life, high throughput, wide-ranging temperature specs. We are not seeing consumer device interest in that segment.

Field mobility is -- and I'll talk about the use case a little bit more. But if you think about a FedEx driver or if you think about a softdrink manufacturing -- manufacturer shipping goods to a 7-Eleven or to a retail store, being able to manage that, similar profile of applications as industrial mobility, we're seeing field mobility.

Now customer facing is where -- segments of customer facing is where we are seeing interest from our customers, that I give my sales clerks a consumer device type of experience. Over the last couple of years, they have tried to cobble enterprise capability, mostly hardware, some software, to meet those needs. Greg Brown talked about that. Some of those decisions were made in 2011, and we are engaged with those customers.

So what I want you to walk away from this slide is, the consumer device interest coming largely exists in the customer facing segment of mobile computing. I look at that as an area for us to execute with our current and forthcoming generation of products, because we are combining the best of consumer capability with the stack of enterprise features, software and hardware. I will come back and talk about that segment again. Let me pull it back and take you to industrial mobility.

We acquired Psion just about 10 months ago, and a new use case was brought to us. Maersk, the big intermodal container company, had port about [ph] Denmark. They've deployed Telxon's XT15. It's a freezer product that we have never built in our portfolio before. And this product lasts the challenging journey across the oceans. And intermodal containers that are carrying refrigerated goods with perishable items, they manage all those items and those intermodal containers with a product that can withstand the journey that happens across the oceans. The liability cost, the claims that our liability costs for that application come down drastically when you deploy a technology like that.

In warehouse, the customers I mentioned to you, Tesco or Carrefour and other retailers here, distribution centers, FedEx and other companies use our custom design, custom for the application, application design, application-specific, domain-specific portfolio that rides on a forklift or is worn on a handheld or is a gun-shaped device for all the capabilities that you need in logistics, and that's what industrial mobility is.

Field mobility, Grupo Bimbo is a customer out of Latin America and they have deployed our MC65 that offers you aggressive data capture capability, long battery life as you're in a truck delivering items and serving foreign-based rich graphic user interface applications and fulfilling those capabilities. FedEx is a customer we have talked to you about before. We work with them very closely and we have deployed across their couriers our handheld field mobile products. New form factors, wireless access, LAN and WiFi, accessory for portfolio security policy management, all those capabilities go here.

Now there are certain customers who are certain [ph] use cases in the periphery of this space that require 35% to 50% of the application to be emailing or calendar management or messaging or accessing the corporate pages of Facebook, while the remaining 50% of the use case is light data capture. It is -- the need for ceiling or drop is not as required, and we've seen a couple of those customers go -- prefer a consumer device. Folks, we don't get up in the morning and design products primarily for email and calendaring. We design for enterprise workflows. That's the stark differentiation between what we do and what consumer device companies do.

Customer facing, really exciting segment of the market. Let me talk about a specific use case here that's driving the need for Enterprise customer facing products. If you go to the Apple Store, you see the sales clerk there using an Apple iPhone or an iTouch around a sleeve. That person primarily if not only does mobile sale. He checks you out.

So if you are a retailer, if you are a customer and you have a unitary application, you want to mobilize your sales force to do one application and you want to spend the money on a mobile technology to do unitary application and argument can be made, let me deploy a consumer device. Although some of us sincerely believe, you'd be better with an Enterprise offering. But the vast majority of the customers on a Friday evening want to deploy mobile technology for mobile point-of-sale. But on a Tuesday morning, when most people are at farm [ph] or at work or other places, when the traffic is not as much in the retail store, they want to use the same tool to do inventory management, light inventory management, cycle counting.

So where we differentiate ourselves is, we design products through customer input for a multiple [indiscernible]. An MC40 type of a product, that's built with a consumer user experience, an Android operating system, Gorilla Glass, pocketable, gives you a consumer device type of experience. But it also encapsulates inventory management application, aggressive data capture, as well as mission-critical voice communications within a high-interference retail environment or a warehouse environment. So as we engage with some of these customers, we have tried Apple products, they have talked to us about their needs to have voice working all the time, to have in-built capability in data capture, to be able to run inventory applications as well as modern web applications.

One of the customers, a large pharmacy company, who chose to go with Apple in 2011 came back to us, in fact to Greg, and said, "We would like to engage with you on [indiscernible] that you're developing." When we took MC40 to them, Jobs [ph] one day told us to Jim Welch and [indiscernible], make inventory applications run on this product before you do mobile point-of-sale or voice. Once we passed the threshold of acceptable inventory applications, we are delivering phenomenal voice experience as well as mobile computing -- as well as mobile point-of-sale capability. In addiction, web applications.

The difference is, customers were saying, "I need consumer experience. Let me start with a consumer device, add a sled to it." So Apple iPad for $180. A sled, $250 to $450 depending on what capability you need, let me add a rubber boot, let me buy additional accessories. That's before I start all the application work on it.

Now I know this room can add numbers. If you add that math up, that starts to be very close to in deployments where we take our products to the marketplace, and that's before we've started talking total cost of ownership. That's with an assumption that, that iPod with all the bells and whistles and rubber boot and other things attached will last 3 years. I don't think Steve Jobs ever designed products that would last for 3 years.

So that's an assumption that you will buy -- that you'll use the same iPod for the next 3 years, you'll have the same accessories that you will source from different places and you'll be able to port applications, and you'll use the same device and some of -- I've seen some reports that say that Enterprise products are 3x to 4x of a consumer device. Not true, folks. When you look at cost of ownership, not only just the buying price -- when you look at cost of ownership, the cost of ownership with Enterprise offering slides down and it's much lower. Don't listen to me, listen to Gartner. Pick up the chart, the study that was provided by Venture Development Corporation that talks about the price products and a comparison to consumer devices and how the cost of ownership with an Enterprise offering is much lower.

You still don't believe me? Let's look at Best Buy Canada. Best Buy Canada took ET1 with Android, Enterprise Android, everything that Greg and Mark said, what I call naked Android with all the Enterprise capability. MC40 with Android, with all the Enterprise capabilities around security, encryption, multi-user and with both applications around a bet we had made in 2011, around Rhomobile when we acquired it because we see -- we saw the world going [indiscernible]. They built this application, they have it deployed in a number of stores and they are expanding into 20 more stores. Their basket size compared to fixed point-of-sale has increased by up 200%. Very proud of this customer what they've done. There are other customers doing similar things. In due time, we will come out and talk to you about those.

So as you step back, I've told you about industrial mobility. I've told to you about field mobility. I've talked to you about customer facing. One last word on customer facing. There are 2 classifications of workers, generally speaking: There is the guy who does inventory in a retail store and there's the guy who's the sales clerk. Generally speaking, our community, our industry was not serving the sales clerk. Our line worker, our industrial mobility products were not right for the sales clerk. So we see that growing pool of sales clerks who could use devices like Best Buy is deploying and do inventory or cycle counting, that person or somebody else is a growing pool of mobile workers in Enterprise, in retail and hospitality.

So let me go back to why do customers buy phones, and that's a question we had a good curiosity question in our engineering labs and we say, "Let's find out. I'd love to hear something about a processor or an application or a data capture engine." The first thing the customer said is, "We buy it for business continuity." When we are rolling out 10,000, 20,000, 30,000 units and within the course of rolling out, we want the same product with the same software drill [ph]. We want to be able to use this for 3 to 5 years, and we want support. That's the #1 reason that came out.

The second one was being able to bridge legacy application with modern applications. Key point, folks. Unlike consumers like you and I, when we go to the latest version of Angry Birds, enterprises don't throw their information systems away. They're still running mainframes. So to be able to deploy fully paid off inventory application systems on your modern Android operating system environment, but still be able to deploy an HTML5 application is what we do, enterprise class support across the portfolio.

This is the conversation I've had with some folks. It's not about a new RAZR or iPhone. We build the whole portfolio, a product that goes on a forklift. If you don't have that, you don't play in the warehouse. A gun form factor product with the battery life and aggressive long-range imaging that if you don't have it, you don't play in the warehouse. Wearable system for order picking so that your hands aren't occupied. If you have that, you are more competitive. And solutions like that, it's the portfolio that comes into play end-to-end from supply chain all the way to point-of-sale.

Partner and developer community, we are not outbuilding consumer marketplace with hundreds and thousands of applications. We are out there building sensible [indiscernible] built application ecosystems, and we take these application providers in concert with us with our roadmap. That's a key function of what we do. This inventory application that I talked to you about, as a partner -- ecosystem partner, we had a strategic partner for the last 2 decades. Their name is Wavelength [ph], they were acquired by Landisk [ph]. So that's an example of a partner. Stella Nova is an application provider for Best Buy. So we take these application-specific partners and we walk them through a roadmap and we introduce products together.

And the final one is integrated solutions. Last year, I talked to you about the Home Depot application which we deployed. MC75s on Cisco Access Point, Avaya Voice over IP client, push-to-talk client for Motorola that talks to 2-way radios over a radio link server, an attachment that enables mobile point-of-sale, a web browser application running on MC75, while they're running an inventory legacy application.

We do those things. So we believe in our values in the need of Enterprise Solutions. That hasn't wavered. So what has happened in the recent quarters? In the recent quarters, and this has been talked about, there's been cyclical aspects that have impacted us. If you look at data, IT, hardware spend in 2012 was anemic. The growth of overall IT spend in 2011 was 6.3%; in 2012, it was 0.3%, within that, hardward, IT hardware demand [ph]. Retail spending has been challenged. Comparables in the transportation and logistics space, we deployed one of the largest deployments in our history, one of the handful of largest of deployments in our history through the second quarter last year. Foreign exchange impacted us.

Another factor variable that has impacted the industry and us is operating system and the user experience around it, especially in customer facing segments and some of field mobility. Remember, I talked about business continuity. When customers deploy Enterprise Solutions, they want to be able to see roadmap. Enterprise companies provide roadmap, consumer companies do not provide roadmap. So when CIOs and heads of operations are looking to deploy technology, they want to be able to see that this product, this portfolio, this operating system shall be supported.

The whole industry has depended on Windows Embedded Handheld and Windows CE. The last version of Windows Embedded handheld, which was an upgrade, came out in 2009. And customers had that questions around, "Should I go Android. I'm trying out Apple." And for some large deals, there has been a stalling factor with operating systems, but we have been responding to that. And on various fronts, the Rhomobile acquisition, HTML5, right ones on a layer, run on multiple operating environments. Even I have written an application in a developer conference. When I wrote the application on an MC75 Windows Embedded Handheld and immediately ran it on an ET1 Android as well as on an iPad. Customers and Facilities Management outside the 4 walls, customers and retail have started embracing Rhomobile. That's a choice we give to our customers, it's not a mandate.

From an operating system standpoint, Windows Embedded Handheld and Windows CE continues to be a robust OS, and we will support it until 2019. Customers want that. But in parallel, we started investing in Android and adding capabilities, things like whitelisting. Here's a term that's important for you to understand. When you deploy enterprise tools in enterprise workflows, enterprises do not want you downloading applications and games through the firewall into these devices. You do not want a portion of who's doing picking in the warehouse playing Angry Birds, to have a very simple example. So they asked us to block the capability to download third-party applications. Even those customers who have deployed consumer devices are asking us to do that on the MC40. These subtleties get lost when we start talking at macro levels, when we start looking at an iTouch or an iPhone and start looking at our products, the encryption of the device level, the policy management that we provide.

So we've souped up Android. We have ET1 and MC40 out, we have another beautiful, magical looking product being launched in the second half. I'm very proud to share with you that Hallmark, an iconic brand, is one of our Lighthouse customers. We are doing walk-throughs with them, we are traveling with their people, we will be -- as we go forward further. And they will deploy that product on an Enterprise operating system on Android for Motorola Solutions in more than 10,000 units as we transition from 2013 to 2014.

We continue to be strategic partners with Microsoft. It's been a long good relationship. We are hearing about the new operating system coming out in due time, and we'll have that product launched sometime in 2014.

Let me keep moving forward, talk to you about select growth initiatives that we are optimistic will drive growth in the Enterprise business. Transitioning the install base, there are $25 million upwards of -- 20 million units of data capture scanners, barcode scanners installed. You have to capture market transition. And our data capture team, taking from laser to imaging, is capturing that. Similarly, in mobile computing, the opportunity for the product and sales team is to transition our customers from one generation to another generation, similar to what we did with Target. Target is in our third-generation mobile computer.

Now this is not about product, folks. I don't want you to focus on the product when I talk about this. This is about the customer relationships that our sales teams, our services team have been [indiscernible] job and the hard job they do in managing the service contracts that enables us to bring roadmap in. Roadmap is critical in Enterprise. Customers' enterprise, customers like roadmaps. We bring the roadmap in and we deploy new-generation core and expansion products.

New verticals. The Psion acquisition further embellished our capabilities in manufacturing. We have taken our core product and walked into a near adjacency in health care. We are taking them [indiscernible] adding disinfectant-ready material to it, so that you can wipe it and still work. Blood spillage, and you can wipe it and still deploy that product. So we are managing, entering near adjacencies with that.

Geographical penetration, with our entry to your portfolio, we have seen an emergence of small, low-tier providers in emerging markets. No, we are not going to chase each of them down or put a whole portfolio to go after that, but we will -- we do have targeted entry-tier products. We will be very smart and deliberate about which opportunities we pursue. And when we go and win those opportunities, as we are with our entry-tier product in the hub of value tier in China, we not only expand our footprint, we also protect our mid-tier and performance-tier product that gets sold in that market place.

As we do all of that, we continue pushing on the boundaries. SB1 is market expansion in terms of served available market, MP6000 product that ships here very soon. This is where we are taking our core DNA of data capture and getting into a space that is long waiting for a refresh. And getting great reception on the MP6000.

Concierge, again, another workflow-driven offering that we created, combining smart device with a digital display, and you'll be able to see that demonstration later on.

As I start wrapping up my presentation to you, I want you to think about a few things that are on the slide and one or 2 other things. Domain-rich comprehensive portfolio, same thing that my colleague Bob Schassler talked about. Customer intimacy and enterprise system, phenomenal work being done by the sales leadership teams across the 3 regions. It's about managing market transition. What I tell my -- what I tell folks who ask me is do not confuse market transition, analog-to-digital, laser to imaging from one operating system to customer facing operating system for a segment of our portfolio with structural challenges and leverage growth strategy. Think about the use case I talked to you about. Think about the benefit importance of roadmap if you were the CIO, if you were the head of operations.

Thank you for listening to me. I'd like to now introduce Bruce Brda, who heads over services.

Bruce Brda

Good morning. I'm here to talk to you about services and solutions today. We formed the organization Global Services and Solutions roughly 2 years ago just after separation. And really, the intent was to increase our focus on services and solutions as a company. There are a number of things that our customers are struggling with that create the need for us to do more for them. You heard Mark mentioned customers asking us to do more. Customers are struggling with technology, with the complexity of these technology changes, with the explosion of mobility and the need to move fast. Customers want to focus more on their core emission or their customers rather than the enabling technology. All of these things have created an opportunity for us to double down in this area and grow our revenues.

While this is a new organization for us as a company, it is not new to the business. We generated roughly $2.3 billion of revenue or about 27% of the total company's revenues in 2012. You saw that on Bob Schassler's pie chart as 30% of his total and on Girish Rishi's pie chart as 19% of his total revenue. We believe we can grow this business at a rate of roughly twice the rate of our product growth as a company.

From a regional perspective, those of you familiar with the regional distribution of our revenues at the company level will recognize the distributions here as almost identical. So our service business closely mirrors that of our total business from a revenue distribution perspective.

From a segment perspective, we over-indexed a bit in the Government segment because of the system nature of this business, which really requires a lot of integration activity to enable those systems and networks that Bob spoke about earlier. As we do more and more from a solution perspective in the Enterprise space, I would expect the Enterprise component to grow incrementally from 22%.

We measure the business in what we call 3 lines of business: Integration, support and managed services. Obviously, support and managed services represent the bulk of that revenue, and those are both annuity revenue streams for us, they typically are multiyear agreements, so 60% of that $2.3 billion will repeat year over year over year, and I'll talk about that more in just a moment.

So my job is really to leverage the 2 great businesses that we have, Government and Enterprise, and capture a bigger share of wallet from our customers by providing services that support those products and by generating highly targeted solutions that will pull through product and generate new revenue streams for Motorola. The priorities for the organization are pretty simple: Optimize our integration and support business, expand our managed services business and deliver targeted solutions. In the core and expansion vernacular, you can really think of optimized integration and support as core, and you can really think of expand managed services and deliver targeted solutions as expansion.

Let me now double-click into each of the lines of business, the first of which is integration. Think of this as the design, install and commission of primarily Motorola radio systems, data systems and command centers. That's the bulk of our revenue today, $900 million of revenue in this category in 2012.

We, at any point in time, have over 1,200 major projects going simultaneously. This is project work, so it has a definitive start and definitive end date. And when I say major projects, let me explain the range here. On the small end, it might be a radio system that we would deploy in a small city or a plant environment that would take months to deploy and commission. Or on the far end, the large end, it could be a very, very complex statewide or even nationwide communications system that takes several years to deploy. The point is, we have a variety of projects, 1,200 major projects at any one point in time going simultaneously. We have a Motorola-badged workforce that does this work of about 1,500 employees, and they're supplemented by about 2,500 service partners positioned around the globe.

This is an opportunity for us though to grow this business. As I said, the vast majority of this business is really directly related to our Government systems business. But on both Government and Enterprise, we have the ability to throw slightly bigger net over our customers and do more for them from an integration perspective, for example, integrating the things that touch our systems and not end our activities at our system boundaries.

An example on the Government side would be an example that was mentioned by Bob Schassler earlier, the City of Chicago that hosted the NATO event. The City of Chicago has selected Motorola as the prime contractor to design, install and support their citywide video network. This is north of 20,000 cameras owned by the city, as well as public, that have been pulled together into a single city safety video network and integrated for the city. This is a multi-year project for us, but we've leveraged the same sales force and same service force that we had serving that customer for many decades. We've leveraged our relationship to throw a slightly bigger net over the customer and do more with the resources that we have.

On the Enterprise side, Girish mentioned a customer that was deploying a large retail customer in the United States that is using MC40s with a voice-heavy application. Getting voice to work on devices in a unique customer environment is a project. It's not trivial. So think of the customer's unique wireless network, the customer's unique voice client, VOIP client, the, customer's unique PBX and legacy applications. Bringing that altogether and work as one seamless device in a seamless system is a project, and it allows us to leverage the voice experience we've had for decades in our Government side with our Enterprise customers. This is a great differentiator for us from consumer device manufacturers. They simply don't have the technology or the experience to deliver this kind of solution to our customers.

The largest business that we have is support, and you can think of support as typically starting when warranty stops on a product or system, but it's technical support, it's break-fix, it's network optimization, it's software upgrade services, all that build together in a building block format, generates $1.2 billion for us. This is typically multi-year agreements. We deliver support services through 2 entities: One, centralized support centers, which we have in North America, Latin America, Europe and Asia, and we have about 800 people who perform that work; and then a field support workforce that is made up of both Motorolan and partner employees that numbers about 3,200 people. The 2 of these team together to deliver services to our support services to our customers around the globe.

While this is the biggest area for us of revenue, it's also an area that we can continue to grow. From a revenue growth perspective, driving up attached rates and driving up tiers of support is a key opportunity for us. Bob Schassler mentioned that 40% of our systems on a global basis are digital. Only 5% of those systems have software upgrade agreements in place. While most of them have some level of basic support, only 5% subscribe to software upgrades. This is a huge opportunity for us to push that penetration rate up, sell them more support on an annuity basis and actually increase the satisfaction of those customers.

From a margin improvement perspective, I'll talk about 2 opportunities that we have. One is structuring our support portfolio in a building block fashion, so customers can add support modules in a way where the price reflects the value of the service they're receiving. And then secondly is increasing the efficiency of our delivery teams. I said we have 800 people in the core and 3,200 people in the field. The more that we can do from the core, the more cost-effective we can be.

So increasing the capabilities of our solution support centers is a key cost-reduction effort we have, as well as the more issues that can be resolved from the core and not require an escalation to engineering or an escalation to the field also drives down our cost. My team is working directly with Girish's team and Bob's team on a daily basis to pareto the defects that we see, to identify the cost drivers in resolving those defects and drive those defects out. Minimally, we want to be able to debug and remedy those from the core and not have to dispatch. But again, real significant opportunities for us to grow attached rates, push to higher tiers and take cost out of the delivery.

The smallest segment that we have is managed services, and you can think of managed services as the high high-end of support, where Motorola takes on operational responsibility for the product or service on our customers' behalf. So typically, we would operate under a Service Level Agreement or SLA with the customer. We have 10,000 systems worldwide, as Bob mentioned. Only 26 of those are under managed services agreements today. It's a very modest number. But those 26 systems have generated $1.4 billion of backlog. These are very long agreements that we have with our customers. A typical managed service agreement is between 5 and 25 years, some as long as 25, typical is 10 years.

Let me give an example. Right here in Illinois, Motorola built, owns and operates the statewide network called STARCOM21, and we have 35,000 subscribers, public safety and public servants who pay us an annual subscription fee for the use of that network. That would be a managed service.

Similarly, in Australia, a large mining customer of ours called Rio Tinto uses our radio networks to communicate throughout their mining environments. A year ago, they outsourced the operation of all of those systems to Motorola. Again, we use the same practices, the same procedures, same technology, same resources to manage both Government and Enterprise radio applications. In the case of the State of Illinois, we own the asset. In the case of Rio Tinto, they own the asset, we operate it for them.

Again, complexity, technology transitions, explosion of mobility are driving many of our customers to ask others to do work for them, do work on their behalf, and Managed Services is one of the ways that, that instantiates itself with our customers. If you look at -- when customers migrate from one platform to another or one technology to another, it creates a logical breakpoint for us to try to upsell to a managed services environment.

We've created a concept called MAP or Migration Assurance Program for our Government customers, which combines upgrade of the network, capacity enhancements, ongoing support and the operation of that network into one fixed fee multi-year agreement. Our customers tend to love this because it's highly predictable. They know how to budget, they know how to get the funding, and it will be consistent for multiple years. That's a way that we can use a technology transition to flip a customer into a managed services environment.

On the Enterprise side, we also have significant opportunities. The last slide showed 740,000 devices under management. Those are all Enterprise devices from Girish's portfolio. But recognize that we ship millions of devices a year, and Girish just showed you a chart that has over 30 million units in the install base. Those are -- every unit we ship and every unit in the install base is an opportunity for us to attach a managed service to that or mobility life cycle management, which you'll see in one of the demos in the retail area after the presentations are completed. In both of these cases, though, it's about creating stickiness with the customer and annuity revenue streams for Motorola.

I spoke about support and managed services as 2 lines of business and it is how we measure, but you can really think of support and managed services as one continuum. This chart tries to depict that. On the left of the chart, what you'll see is a, from a customer's perspective, a capital-heavy OpEx-light environment. They buy the product and they buy some modest level of support from us.

As you migrate across the chart to the right, you'll see we kick in the managed services and at the far right, the opposite extreme, an OpEx-heavy and CapEx-light model from a customer's perspective. In the 2 cases on the right, build, own, operate and communications as a service, we actually own the asset and provide a pure service to the customers.

With respect to support and managed service, wherever they fit on this continuum, we have an opportunity to upsell them and move them one tier to the right. It they have a bronze support platform, sell them silver. If they have silver, sell them gold. If they have gold, sell them monitoring. Monitoring, field support. All the way up until they enter into a managed services environment.

We don't want or expect every customer to be on the right where we own the asset, but we are prepared to do that for customers where it makes sense, and Ed will talk later this afternoon about success base capital, the method by which we use to evaluate whether or not those investments make sense for us. But the point is, the further we move customers to the right, the stickier they become and the larger our annuity revenue.

So we do have activities beyond services and into solutions. Again, services support the products that we sell. Solutions generate new revenue streams for us, and our combinations of Motorola hardware, software and services, combined with third-party hardware, software and services, that meet some unique customer need or customer business problem. All of these solutions, as you've heard throughout the day, stay close to our core and are really designed to pull through Motorola product content.

To pull this off, to sell complex solutions, though, we actually need to make some changes in our structure. So we've reallocated resources and budget to build a solution sales force, which is a light overlay sales force that overlays the global go-to-market teams under Jim Welch, Manuel and Mohammad. We've also started to use those solution sellers and some subject matter experts we have within our organization to incubate a professional services business. And that is really to enable us to engage in a consultant-like manner with our customers, not because we want to generate a consulting business, but because that's how we can generate thought leadership with our customers, very key as we differentiate ourselves from our competitors. We've also implemented a solution development process, so that we can ensure predictability and repeatability with these solutions that we develop.

Let me give a couple of examples. You heard a lot today about smart policing, and we've created a solution that leverages the shift from voice to data and video and allows us to participate heavily in this voice space while leveraging the incumbent position we have with our public safety customers and a lot of the product content we've either developed or is currently installed with our customers. That solution is called RTCC, Real Time Crime Center. It's one of the demos you'll see after the presentations, and it combines city safety video with multiple other data sources that are relevant like criminal databases, crime history databases, combines those together into a single platform and then also combines environmental triggers to make that information more usable.

And let me explain. So picture a Motorola 2-way radio that has a man down button, officer in distress button. When an officer hits that button, we instantly know the location of that officer. That, combined with video and combined with the criminal databases, is incredibly powerful. You now know out of the 20,000 video streams exactly where to look, and you can pull up criminal history on the address that the activity is taking place. So instantly now, you can take incredible amounts of information and make it very actionable and relevant to that activity.

A similar environmental trigger would be gunshot detection. It's another great way. We've partnered with a company who has leading gunshot technology -- gunshot detection technology. We've partnered with them again to identify the location so that we know what video and data information to harvest and present it to the officers. That can be pushed through a broadband pipe down to the police as well, again improving the efficiency and effectiveness of our police forces.

In the Enterprise space, I'll highlight another example of a solution that we focused on, and you'll see bits and pieces of this in the retail environment. We won't demo the full thing, but you will see components of it. It's called staff communications and management. Picture Motorola devices with legacy applications from the retailer, inventory as well as pricing databases. Video information in the store that's historically been used for security purposes but now can be used for other purposes, knowledge of the location of the shopper within a retail environment, and this solution allows, through the use of Motorola devices, store management to stay in touch with store associates, provide better support for the customers within the store, drive efficiencies within the store and more importantly, drive up sales. So this is a case where, again, we've leverage our system integration capabilities, primarily develop through the Government business and they have pulled those together in a way that we can uniquely differentiate Motorola and pull through Motorola content into a retail environment.

So instantly now, you can take incredible amounts of information and make it very actionable and relevant to that activity. A similar environmental trigger would be gunshot detection. That's another great way, we've partnered with a company who has leading gunshot technology -- gunshot detection technology. We've partnered with them, again, to identify the location so that we know what video and data information to harvest, and present it to the officers that can be pushed through a broadband pipe down to the police as well, again, improving the efficiency and effectiveness of our police forces.

In the Enterprise space, I'll highlight another example of a solution that we focus on, and you'll see bits and pieces of this in the retail environment. We won't demo the full thing, but you will see components of it. It's called staff communications and management. Picture Motorola devices with legacy applications from the retailer -- I'm sorry, inventory, as well as pricing databases, video information in the store that's historically been used for security purposes but now can be used for other purposes, knowledge of the location of the shopper within a retail environment. And this solution allows, through the use of Motorola devices, store management to stay in touch with store associates; provide better support for the customers within the store; drive efficiencies within the store; and more importantly, drive up sales. So this is a case where, again, we've leveraged our system integration capabilities, primarily developed through the Government business, and they pulled those together in a way that we can uniquely differentiate Motorola and pull-through Motorola content into a retail environment. Again, this is a key differentiator from us between us and consumer device suppliers.

So to wrap up, the services opportunity that we face as a company is a great growth opportunity, $2.3 billion today, and we believe it can grow at a rate of about 2x our product business. You should think of the Support and Managed Services lines of business as great annuity revenue streams for us as a company, and you should think of highly targeted entry into the solutions space as new revenue streams for Motorola, all designed to pull through more Motorola content, new products and new technologies into those solutions. That's the message I'd like to leave you with. Thank you very much for the time, and I will introduce back to the stage, Mr. Mark Moon.

Mark F. Moon

Okay. Glad to be back, and I'll wrap up with a little go-to-market piece and a quick summary. But as proud as I am of the product story that we just told, the services story that I think really wraps the products and really provides us some entrée into the future solutions business that we're going at, I'm also equally proud of the go-to-market, kind of that third leg of the stool that we talked about when we started off. And it's easy for any vendor to put up a list of great customers, so I decided not to do that and just put up faces. But I think as you heard everyone talk, we try to serve the smallest customer, be it a plumber with a few people being dispatched out, to the largest nationwide network. And when you step back and think about that, it's pretty awesome. We don't just want to serve the largest customers, we want to serve all of them. And when we think about how do we do that, we think about the many markets that we also have to go across and cover. In fact, I think this chart was interesting, I intentionally wanted to put it up because I think many times, even we talk about ourselves as being government and public safety and retail, 2 verticals, 2 markets. But as you look, we actually have a presence much deeper than that. If you look at last year's results, transportation and logistics was equal the size of retail. And I think as you heard Bob talk about expanding verticals and geographies, and you heard Girish talk about expanding verticals and geographies, I think it makes us stronger that we're leveraging our current spend to take our core growth in public safety and retail and spread it to additional verticals. The other thing that I'm proud off is the go-to-market organization itself. 1,800 Motorola badge salespeople that carry a quota every day, and I think we talked about not just in the film, but throughout, you can see all of our passion around our customer and the domain knowledge, and what it takes to work everyday and understand the challenges that we have to do to make our customers better. But you can't serve all of those great customers, from the small guy to the big guy, without a whole lot of additional reach. And that's where our 20,000 partners come in. We cover over 100 countries. In fact, we talked about, Bruce mentioned, systems in over 100 countries. So we value this partnership. In fact, our channel partners are critical to our success, I think a key differentiator. It's easy to talk about the Motorola salespeople, but our channel partners and our channel partner program, I think, really, is a key to our success. It gives us scale, reach, domain expertise. So we extend that because it's not just the direct customers that need a knowledge of their marketplace, their competitors, what we can do to help them be successful, it's all customers. And it gives us differentiation. The last couple of years, in fact, several years ago, we announced a new umbrella partner program called PartnerEmpower. And it was really about not just having a good radio program or a good enterprise program or good networking program, but it's about providing an umbrella that attracts an ecosystem of partners that want to work with Motorola. It rewards differentiation, it rewards investment in new markets or new technologies. It created a certification system so that we can indeed peer partners and reward accordingly. And at the end of the day, we realized the importance of this partner community and we wanted to invest in them. And I think this is a key as we think about expanding, as we go forward into these new areas, we have to bring our partners along with us. And we've been spending a lot of effort to indeed do that.

We also announced at the beginning of this year that we were going into 3 new reporting regions, the Americas, Europe and Africa, and Asia-Pacific and the Middle East. And in fact, when you look last year at the results, not very much different for North America as far as the size of the business, 58%, Latin America, 8%. So the America's comprising 2/3 of our total business led by Jim Welch who's here and will join me in a little bit. Europe and Africa, 20% of our business led by Manuel Torres who just joined us and will also be joining us for Q&A. And I think we talked a lot about Europe last year. To be flat year-on-year in that environment, we were really proud. In fact, most of the FX that we talked about that really hurt us hard last year was in the euro as we started the year in the 1.40s and went to the 1.20s before it was over with. But we continue to deliver to our customers. And I think you'll see as we go forward this year, despite the things that still are going on particularly in Western Europe, we'll have good growth in that region as we go into this year.

And then Asia-Pacific and the Middle East comprising 14% of our business, 8% growth last year. As you remember, we talked a lot about Asia-Pacific last year being 5% growth, and we said we must do better. In fact, we made a number of changes to continue to do better. But I think a lot of people would still be proud of 8% growth, we're not. We want to grow that region more and we look at that region as a growth region for us as we go forward. And Latin America, while it looks like it was down, and it was indeed down in what we reported, you see it was 16% growth if you take out the impact of our iDen business with Nextel International. But again, as I said it first, it's not about what we did last year, it's about executing and what are we going to go do this year.

So as I stop to think about the Americas and what we've got to do, first and foremost, you saw the performance last year, 9% growth in North America, 16% growth without iDEN in Latin America. We've got to continue that growth. In fact, the Government business in North America last year grew 14%. First quarter, we grew 6% again. It's important we continue to grow that Government business. We've got a lot of big customers and that's a big marketplace for us. So we got to continue to execute there.

We also have a big opportunity that we had hoped would have taken hold before now with Public Safety LTE and FirstNet. We were excited 1 year or so ago when we talked about our BTOP awardees and the early adopters, if you will. That program has not taken off at the pace that we would like, but we're working closely with FirstNet. They've announced that they want to move forward with some early adopters and the BTOP grantees. They're in a lot of discussions about spectrum leasing and what can we do, and we're encouraging that process to move forward. We're working, as I said, closely with FirstNet, but one thing will be very solid though is we're going to continue to support our public safety customers to get a nationwide interoperability -- interoperable network built out.

We've also got to improve our Enterprise business growth in North America. We mentioned it earlier, and Gary's talked about the macroeconomics and the other things that were happening. But if you just step back for a second and we look at the business in first quarter for North America, it was really the lack of large projects. Our business under $1 million grew 1%, but our large project business in North America and in Europe was down 25%. Now that was a good for first quarter, but a good thing is we've got a good funnel, we've got good activity and we got to continue to execute on that as we go forward. The other piece, and we talked about expanding verticals, but in North America in particular, and Jim and his team have put a real new focus both organizationally and with kind of an intense scrutiny to expand beyond the retail vertical in Enterprise.

In Latin America, a number of large deals, Latin America came off a big year last year. They had a good first quarter with a big announcement from Ecuador. We've got big projects that we're working again this quarter and beyond. So we expect Latin America to continue to execute in public safety. We also have a couple of early interest in adopters in LTE in Brazil and Colombia, and we got to continue to expand our Enterprise business. It was really a coverage issue in Latin America. We didn't have a number of salespeople in the largest accounts like we did in other areas, and Miguel, overall, has put a real effort in doing that as we go forward. And as you expect with anybody, we got to continue to penetrate Brazil and Mexico.

Europe and Africa, and Manuel's business. Tremendous, tremendous strong double-digit growth in the TETRA business last year, and we will have strong double-digit growth again this year. We've got to continue that piece and continue to subscribe a refresh cycle. The Psion business and the integration. The Psion model, unlike ours where the majority of the business was in North America, the majority of the Psion business was in Europe. We got to execute on that piece and let that be an entrée into new enterprise markets in Europe. And we talked about maintaining our position in Western Europe, which is kind of a funny word, but really, what it means is we've had a good run in Western Europe, even given the microeconomics that were going on there. But the reality is we can do better in certain countries in Western Europe. Manuel is driving his team hard in Germany, we've made some changes, we continue to do better. But as we hold our position in Western Europe and do better in these couple of countries, we must indeed grow in the emerging economies of Eastern Europe, Russia and Africa. And we have been reallocating investment to open offices in Africa, get headcount in Eastern Europe, and we believe that, that's a big opportunity for that region as we focus going forward.

And finally, in Asia-Pacific and the Middle East, again, we've talked about it a lot. I think a big opportunity for us. We've got a new leadership team there. We've expanded our sales coverage model to really get focused on the countries and not just on the biggest countries where we've been doing business, but on the countries where we think we've got a big opportunity like Indonesia, some of the smaller countries. But we've been working quite honestly out of Singapore, we need in-country experience, we need people there and we got to further develop our channels so that we can get growth there.

We also have to continue to drive our Government business. That was the piece we were unhappy with in the first quarter, and last year, I felt like we should be growing our Government business more, particularly in Asia. We've got to do that, and I think we will see good activities this quarter. And as we go forward in the future, that Government business will indeed, as we've mentioned on the earnings call, turn around and have a good year. But we've got big opportunities particularly in Public Safety LTE in the Middle East. And we got to execute on some of those as we go forward. So I still look to that region as a region that we see that have strong growth. And as we're working for that growth, there's a big push for Bruce to go develop our service delivery capabilities. As you would imagine, we're very dependent on partners in some of those regions, which will firm up, but we also, as we sell some of these projects, we will see us ramp up so that we can execute on the deals that we get.

So in summary, Greg mentioned it early, I said it, 2 core businesses in what I believe is growing markets. We're clearly well positioned to continue to lead in those markets. I mentioned earlier when we talked about the organization, the goal is about speed, collaboration, innovation and execution. We're committed to go do that, and we're focused on not just doing that in the core, but leveraging what we've done well in the past to new expansion markets as we go forward. And as I think about those pieces, I think exactly about that theme. When I stand up here and say that we're committed to it, I don't say it just for Mark Moon, I say it that the team has really come together. I think collaboration is better than ever. But as I said early, when you're sitting around the table as an operating team, you look at each other and say, what do we have to go do differently? It's not about my business or my region, it's about how do we drive MSI to be successful as we grow forward. We're continuing our customer focus, and I think more than ever, it's not just the sales guy who says, I've got the customer. It's not just the product guy that says, I've got my view of what's going on with the customer. It's all of us saying everything we got to do has got to be to make our customers better. And that's what will drive us to the winning proposition. And I'll close by saying, that's exactly where I think we are. We're clearly positioned in a good place to have our customers continue to choose Motorola. And with that, we're going to go to the Q&A. I would like to invite back up Bob Schassler, Girish Rishi, Bruce Brda, and I would also like to invite up, Jim Welch, who leads our Americas team, and Manuel Torres. I didn't mention as I went through, but Mohammad Akhtar runs Asia-Pacific and the Middle East who's actually in the Middle East with the big customers, so he won't be here for the Q&A.

Question-and-Answer Session

Mark F. Moon

If you raise your hand, we got people on each side with mics, we'll try to get through them. I will try to not do all the talking. I'll try to moderate here and let these folks talk. We'll see how well I do at the end of the day. So #4.

Kulbinder Garcha - Crédit Suisse AG, Research Division

It's Kulbinder from Crédit Suisse. A question for Mark and Bob on the Government business. If I listen to some of the things you're saying on the vertical side, the newer verticals, can you quantify how big that is in the Government business today? Exact -- the reason why I'm asking is that I think you've been talking about this portfolio and this opportunity in new verticals now for more than 1 year, I assume the sales cycle's long. I just want to understand what traction you're having, what the catalyst might be for that to become a meaningful driver of sales. And that leads to the next question, the Government side, just listened to some of the things that you were talking about, whether it's Public Safety LTE, the portfolio, the aged infrastructure, it all points to maybe if not this year because of the comps, but going into next year and beyond, a meaningful acceleration in sales growth. Would you see it that way or what are the concerns you would highlight why you wouldn't see meaningful acceleration?

Mark F. Moon

So let me start, and then I'm going to hand to Bob. But when -- to talk about the new verticals, I think there was one chart that I didn't highlight that -- at the end of this last presentation that talked about sales across new markets. And if you look to the government and public safety market, it had 8% growth. Now if you step back and think about our Government reporting segment growth for last year, it was 12%. So that leads you to say that obviously, our growth in that portfolio, as I mentioned, ASTRO, TETRA, PCR, is spreading to these new verticals. We are growing in those new verticals. And I think you'll continue to see that as you go forward. We clearly have a good position in our core public safety vertical. But as we look for what we're doing, we see increased growth beyond the growth in public safety in these other verticals. Bob, you want to add up?

Bob Schassler

So if you look at the verticals that I showed and the examples I showed, the really verticals that we frankly have been serving for many, many years, it's just we really did not focus in terms of tailoring the products as much as we really needed to. So I think what it does for us, one of the reasons you saw some of the tremendous growth last year is we saw some of the impact of some of those verticals in the uptake. But we feel much, much more secure on an ongoing basis for long-term sustainable growth because we do have that product portfolio, that vertical diversity into the marketplace as we project out into the future.

Mark F. Moon

So I think the second piece of your question, Kulbinder, was as we go beyond this year and the tough compare to what we think about next year and beyond, and I'll be careful not to give forward guidance at this point, but I will say, like we always do, we're excited about the sand work that I showed in the work -- in the growth in the expansion category. We believe that our portfolio in the core, as Bob mentioned earlier, is as strong as it's ever been. So we're not satisfied with just maintaining share, we're looking to gain share in that core. And when you look at the expansion categories that are there, we clearly believe that this Government business can continue to be a sustained growth business in the future. #5.

Keith M. Housum - Northcoast Research

Keith Housum from Northcoast Research. Can you guys provide a little more color on the LTE opportunity? I think as we've seen in the past year or 2, FirstNet's probably developed a little bit slower than what was anticipated, I'm sure you guys included. But where around the world should we expect some of the LTE opportunities to develop fast the next year or 2? And I guess over the long term, where's the biggest opportunities outside of the U.S.? So please touch on the U.S. and what you're seeing so far, and what your experience and expectations are for the next few years?

Mark F. Moon

So Bob and Jim, why don't you talk about the U.S. first and then we'll go from there?

Bob Schassler

I'm going to comment first?

James Welch

Yes, you go ahead.

Bob Schassler

Okay. So first, in the U.S., As Mark mentioned, we are working closely with FirstNet and there's no doubt that we're disappointed that's kind of a slowdown. But we're working closely with FirstNet to make sure they understand the public safety requirements and feel very secure that our solution set and what we've developed for public safety will be the right solution for the marketplace here in the U.S. and globally, around the world, what really is driving it. And there is demand wherever I go around the world and talk to public safety leaders, they want to know about what's going on in Public Safety LTE, they want to know about what's going on in FirstNet, a tremendous, tremendous amount of interest here around the world. But what really drives the opportunities first and foremost will be where spectrum is available. And the initial opportunities for us really is really through the Middle East, we'll see some very, very large opportunities first, and then we see some throughout Asia and Australia. And it probably will be the first time in the history of technology that really, the United States will probably lag behind a little bit. But really, very, very large project activity that we see that we're very, very close to, coming close to seeing some of those large projects hit.

James Welch

Yes, just to reiterate that I think for -- in North America specifically, if you talk to our customers, the chief of police, the sheriff, in their top 3 priorities is how they're going to leverage data, video, photos, texting to do better policing, more productive policing. It's on everybody's radar screen. So our approach has been to partner and be as close as we can with FirstNet to help them be successful, but make sure that we're representing our customers in public safety so that when data becomes a critical part of policing, when the networks are there, they were in a good position with our customers. And Manuel can probably speak to demand in [indiscernible].

Manuel Torres

So in Europe, really, the limitation is lack of spectrum at this moment. So our strategy is how do we migrate the first nationwide public safety networks like in the U.K., Netherlands, Austria, we have a big install base. How do we migrate those customers that have had a network for 10 years into the future. So we've launched a series of solutions around our TETRA infrastructure that will allow us to take these customers to that next level and be ready for LTE, having a combined PMR and the LTE network in the future that will allow us to have continued growth in the next few years before that spectrum is allowed in Europe. Outside of Europe, obviously, Africa, we will have some opportunities, but clearly, financing is one of the issues there, but that doesn't mean we won't have opportunities in Africa.

Mark F. Moon

Upfront here.

Jim Suva - Citigroup Inc, Research Division

It's Jim Suva here from Citigroup. At the beginning of the meeting, Greg Brown made a comment of he's aware of the wireless -- the, yes, wireless LAN challenges that Motorola has. And then the wireless LAN, he made a comment that there are some internal challenges and you're working through those. Can you maybe go into some of the detail about what are those challenges, what are you doing about it, how should we expect it and kind of what happened, was it a change in market? What, did the market go one way and Motorola didn't see a change? Or what really happened for the wireless LAN to really have a little bit of a near-term speed bumps?

Mark F. Moon

So if I can make a general comment first and then again, I think Jim can talk about the go-to-market side and Girish, the product side. But first off, we've all been very candid that we're not pleased with our execution in WLAN, and certainly, in first quarter, we were surprised that it was not stronger than what it was. That admittedly, we also have talked about the market has been growing in a number of verticals that we weren't necessarily present in. And I made a comment in a couple of these meetings that we weren't going to go build a go-to-market expertise in new verticals just to sell WLAN. We wanted to capitalize on our portfolio in the verticals where we work. And we also, the transition that Greg was speaking of is we made a conscious decision to say as Bruce was looking at his portfolio of services, there was an opportunity with some customers to provide a managed service kind of opportunity instead of a pure play sales. And that's the piece that we said. As we transition to that piece, while we've got great, actually, around the globe prospects, the uptake on that has been slower than we expected.

James Welch

Right. I will just add to that 2 things. In wireless LAN, I think Greg said this morning as well, we're not trying to compete 802.11 versus 802.11 radio. We think that's a fast track to being in the commodity business. We're trying to add 2 things around wireless LAN services, Managed Services that Bruce spoke about, but also the applications that Bruce and Girish spoke about, connected associate, connected customer, and the ability to have voice and other applications around wireless LAN. That's good for our entire portfolio. That resonates with retail and in other markets that we're trying to expand it to. The 2 challenges that we've had, we are very dependent upon retail and we do very well in retail. Our market share in retailer is much higher than it is in the general marketplace. But if we don't execute in retail in a given market or if the business isn't there, we have a problem like we did in Q1 in terms of the numbers. And our growth rate in the new verticals like hospitality that we're going after, the takeup is taking longer than we anticipated. Still good prospect, still good demand for our product and our solutions, and we've got to do a better job executing and getting those deals across the table

Mark F. Moon

#4.

Stanley Kovler - Morgan Stanley, Research Division

It's Stanley Kovler, Morgan Stanley. A couple of questions. First of all, on the conference call, Greg, you'd actually mentioned that there were some management changes in Asia-Pac. Mark, you mentioned the 8% growth in Asia-Pac and Middle East was not what you consider good enough and you need to do better. Can you go to more detail on what those management changes were, how many positions were changed? Was that you had a field operations head of sales, was it a couple of countries, was it just China? And if you can just -- how long did -- at what point did you recognize there was an issue? And just give us more detail about management changes in that region. And then in a similar vein, we're not in Asia-Pac, now moving more to Africa, you stressed Africa and Middle East a lot in your wrap-up comments, Mark. And I'm wondering, as you do go into those areas, whether it's for LTE, whether it's for enterprise, whether it's for government solutions, is the margin profile any different there? Is it more competitive there? Are you up against a different set of competitors there? Most other companies that we look at, when they do go into emerging market countries, there is a different -- there is at least a breaking-in phase where the margin is different because you have to get into that market first. And I'm wondering, does that change anything either on the margin, ASP, any kind of front where we can see that is different as you get into those areas?

Mark F. Moon

Good. So thanks, Stanley. So first, Asia-Pacific and then I'll let -- I'll speak a little bit about Africa and I'll let Manuel speak as well. But in Asia-Pacific, we actually made a number of changes across-the-board. We began in early to mid of last year, having conversations both publicly here that we weren't pleased with our funnel activity, our strategic direction and the progress we were making in Asia last year. We changed the head of sales. I mentioned before, we -- and unfortunately, he's not here today, but we made a change to Mohammad Akhtar, who was previously running our Middle East region, but prior to that had actually served for Motorola for over 20 years, experienced leader both in the Middle East and in Asia. He was living in Tokyo. He went over to Nokia Siemens with the networks transition then came back. So a proven leader, which I thought we needed to do. We also made a number of changes at some of the country levels. We actually re-prioritized how we wanted to look at countries and moved leadership closer to the customers there so we can get a real feel for what's going on in each particular country or small subregion, because it's very different as you think about Asia-Pacific. We also recognized that we needed some other leadership changes. So at the staff level of that sales general manager, we changed 3 or 4 key positions, and we augmented with some subject matter expertise from North America and other places because we recognized that as you try to move to new technologies, just the sheer subject

[Audio Gap]

see. We'll actually build backlog in the second quarter and we got to go execute throughout the rest of this year. When you think about Africa and even the growth in the new areas of Asia-Pacific or the Middle East, when you think about the margin profile, it was kind of one of the things we talked about and the folks talked about from this new entry tier offerings across both of our portfolios. It is important that we didn't try to go after all those markets with a mid tier product, it just take margins out. It was important we had products that actually fit the marketplace, that had margin profiles, better than just down-tiering your existing portfolio. So that's one positive. Clearly, the margin profile is not as attractive as it is in some of the more developed, but at the same time, we also talked about leverage growth. So as we expand in those areas, we're really redeploying cost. So at an overall operating margin level, we actually do not see that being hurt by the growth in those areas. And Manuel, maybe you can talk a little bit more about Africa.

Manuel Torres

Yes, well, Africa, if you think about our 2 cores, Enterprise and Government. On the Enterprise side, you ask about -- or in general, you asked about competition. Enterprise, we pretty much see the same competition, so I agree with Mark, it was really about having a portfolio that would allow us to get at all the right levels within our customer base down in Africa. On the Government side, we do see 2 trends. The first one is customers have a bigger need for a complete turnkey solution. And that, in some cases, brings new competition that we don't have in other places like Western Europe or maybe in the U.S. And -- but at the same time, it's not just competitors, it's also new opportunities for us. Because let's face it, in some of these countries, it's not easy to do business, and you need some time with these big integrator companies that have much bigger operations as a prime contractor in some of these projects. And -- but our strategy is clear, we want to have a bigger presence, we want to create a hub and we are already in the process in Algeria for the Maghreb. We started opening offices in Nigeria to be the hub for Sub-Sahara Africa, in Kenya for East Africa, and obviously, in South Africa where we have a significant presence. And now with the acquisition of Psion, we have an even much bigger team.

Mark F. Moon

Now the other piece is somewhat interesting. When we talked about the partner strategy, and I didn't actually mention it, but it's easy to think about our normal distributors, our VARs, our dealers, but we also showed on that chart, global systems integrators, alliances. And as we think about that channel partner selling, we're trying to make sure, as Bruce looks it, growing the services business, we don't have conflict within general management and growing our service capabilities. So there's places where we're clearly going to work with another firm, a global systems integrator. There's places where we're going to prime and maybe bring in augmented resources to support us. And I think we're doing that very calculated, particularly in these new growth areas.

Manuel Torres

Maybe just one more comment to that. In Africa, also in addition, we do our business in U.S. dollars, which eliminates the currency issue that we may have in other places in my region.

Simona Jankowski - Goldman Sachs Group Inc., Research Division

Simona Jankowski with Goldman Sachs. Two questions. The first one is, we've seen state and local budgets actually coming in a little bit better this year. Tax receipts have been better than expected. Over what timeframe would you expect that to start showing up as better demand for the Government side of the business? And then the second question is a number of the speakers highlighted the improved R&D effectiveness, and you showed a whole bunch of products and tiering that you now have above and beyond what you had in 2009 while keeping the budget pretty flat. Can you just give us a little more insight there into what areas you're investing less in to achieve that kind of efficiency?

Mark F. Moon

So the tax receipt question, I think, is a North America question, so Jim, why don't you...

James Welch

Sure. So one of the great things that we've seen so far in North America, and last year, if you look at the state and local growth we had in Government, we had very strong growth in a period of time where budgets were incredibly tight. And so I think that's one of the things that we continue to see is spending on public safety communication systems is at the top of the list and stays at the top of the list. So to answer the question about when we'd see accelerated growth, we've seen strong growth in good times and in bad times. I think that's one of the good things about the visibility of the business. The consistency is that our -- the expenditures of our customers stays with our portfolio through the good and the bad times. So it's hard to really comment on when we'd see acceleration. But I think we have seen continuous strong growth, and those trends are continuing.

Mark F. Moon

And I think along that comment, as we've talked in the past, really, because of the essence of what we do, we're at the top of the food chain, if you will. So when it's tough, they figure how to prioritize our offerings. I would say as they get more money, sometimes, we hope to get a bigger share of that wallet, but sometimes, they do other things, too, as well. The important piece is it's been resilient through both times. Bob and Girish?

Bob Schassler

So on the R&D front, I really don't -- it's not really that we've reduced in other areas. I think that the most significant attribute is that we really look hard at how we do synergize across the entire company, really not just on the Government side, but also synergizing the Enterprise portfolio and synergizing across our ASTRO product line, our TETRA product line, our PCR product line. And frankly, when we looked at it back in 2009, we didn't do enough of that as we should have. And we're very, very synergizing, getting a lot of leverage out of it, making sure we -- the dollar that we spend, as Mark talked about, continue to get more and more leverage. But also making sure, very, very important that we don't cross the line and we leverage -- trying to leverage too much out of business. We really try and look at in kind of a window to make sure that we're investing properly into the markets that we serve.

Girish Rishi

So in addition to what Bob said, better portfolio prioritization rooted and aligned more with the sales teams is helping us focus more. The second area is around platforming. In the past, we used to start off with the discrete chipsets and start adding capabilities to it. As the chipsets have become more rounded out, it's allowing us to focus more on our true value add. That's how it does. The third area is we're a classic technology company looking at what to onshore, offshore, and we have development partners in Taiwan and China. So we have some capabilities that we have moved that are more on context in certain cases in that area. So it's a combination of efforts.

Mark F. Moon

And I think if Greg was here, not to speak for him, too, I think it's the culture we've established around we're going to continue to get operating leverage, but that's not at the expense of growing the top line and figuring out how to do more with less amount. And so I think the things that we just talked about is what we're trying to do across the organization and what we're trying to demonstrate is that we can get more efficient and effective. If we're the best today at the marketplace, let's challenge ourselves how do we get better. And I think that's really what we're trying to do as we go forward, and by the way, what we've got to continue to do as we go forward. Four?

Tavis C. McCourt - Raymond James & Associates, Inc., Research Division

Mark, Tavis McCourt, Raymond James. A couple of questions. First, a couple of your broader peers have seen a change in trend in China this year, either a combination of political and economic reasons. And I'm wondering, within your APAC region, how big and important is China, and what is the trend have been like there? And then secondly, for Girish, I don't know if you commented on the Honeywell merger yet, but how do you expect that to impact the Enterprise business going forward assumes that closes in the next couple of months here?

Mark F. Moon

Thanks, Tavis. So as you think about China, clearly, and I said last year, China and Australia had been the big kind of steady growth areas for Asia-Pacific. We had big projects like Royal Malaysia Police and otherwise, but when you look at year in and year out, they've both been good businesses for us. And in fact, China's been a good business for us for a number of years. Last year, when we were talking about the performance, China went from 20-plus percent kind of growth down into more high single-digit kind of growth rates. And I think as we go forward, we still think China's a growth region, I said that last year, I think it should be a double-digit growth region for us, but there's no doubt that we'll continue to be challenged in China from localization, the push for new standards like PDT in the radio space and other things. But we continue to believe we can compete in China, but we won't expand our coverage into other areas within the region to not be dependent on China. And I don't think we are and I don't think we will be as we go forward, we just got to maintain that position, and hopefully, fight against these competitors that we've got locally as we go forward. And we get that, we understand what we've got to do there.

Girish Rishi

Tavis, I see Honeywell Intermec expected consolidation will bring stability to the industry. As you know, a number of these companies have been struggling, and that's not good for the industry. I and my team, we have a lot of respect for Intermec, for Vocollect and the capabilities that they bring. And I think at a macro long-term level, it will be good. From an integration standpoint, I don't think I'm telling you anything new that consolidating Metrologic, HHP, LXE, Intermec, Vocollect, enterprise mobility shall be a challenge. And we've gone about our integration between Psion and Motorola in a very thoughtful way, but it's hard work for a cross-functional team that's still at it. From an innovation standpoint, I think our challenge is regardless of where the competition goes, for us to continue raising our platform, our capabilities, our go-to-market capabilities. And one thing I meant to say in the presentation is, Keith, even to your report that you put out, if you look at our platform today, if you look at the new products that we announced and shipped -- started shipping last year, they're all built on dual core processor. So if you look at our competition, nobody has launched a product in the major competitors on dual core processors. So they are running it on a single core processor. My analogy here would be of a car and engine. They have a single core engine. Our 2 cores, each core is more powerful than their single core processor, if that makes sense. So that's taking it to bits and bytes. I didn't want to mean to take it that level, we talked about use cases, we talked about higher-level differentiation, so that would be the challenge for my team. I mean the competition is very resilient, but we are looking forward to this reconsolidation that happens.

Mark F. Moon

And Tavis, you asked a very specific question about the size of China, too. When we think about the all Asia region, it's roughly 20% to 25% of that region. Other questions? Okay.

Unknown Analyst

Jeff Hager [ph], Berenstein [ph]. l do interested here about how you work together between Government and Enterprise within Motorola, how much synergies do you have between the 2 businesses. Do you share R&D projects, product platforms? Do you have like go-to-market organizations that go together? And of course, as we like, numbers of those. Could you give us a sense of is these 2 businesses were being run in separate companies, how much of today's operating earnings would you lose? So how would you quantify synergies between the 2 businesses?

Mark F. Moon

So let me start at a high level, and then I'll let a couple of the product leads kind of speak in to go-to-market. But when we think about it at the highest level, we run our go-to-market jointly. I mean when you think about the 3 regional leads, we certainly have a regional leader, and as you get down into sub regions, you have leadership that way. Clearly, as we go forward, we're talking about how we do continue to focus on verticals, so how do we gain domain expertise. So while every salesperson has access to our whole portfolio, because if we stop for a second and think about Government, well, certainly, they would buy public safety radio, there's a lot of opportunity for mobile computing within a government account as well or vice versa. Some of our largest retail accounts, when you look at the retail chart of markets a while ago which showed growth of 1%, well, the reality is, our enterprise product line declined last year, but we sell a lot of radios into retail as well. So from a go-to-market perspective, while we have vertical focus at the very lowest customer level, and as we try to differentiate with our channel partners, we run a global channel organization, we run the channels united. As we think about the product teams, we try to run the 2 businesses as 1 business, but we have a joint CTO office. As we just talked about platforming, we work that piece. As you look at Bruce's services capabilities, one of the things we just talked about is this, if we've been, for many, many years, the voice expert in public safety mission-critical radio, how we leverage that voice capability as we go into the enterprise, and I think Girish and Bob have been trying to work that, so clearly, we don't want to blend the 2 businesses, but at the same time, as we just talked about operational efficiency, we want to continue to leverage the fact that right resources across both organizations and there's ways to leverage, just like push-to-talk and otherwise, the assets that we've got as one.

Bob Schassler

So I'll mention just a couple of areas. Mark mentioned the first one, and I think it's important. On the Government side, voice quality, all of the acoustic-type engineers that we have is Girish's. portfolio. Mobile computing customers require more and more voice, there's nobody better equipped than we are in the government side, legacy Motorola, to help out in that area. On the LTE device portfolio, very similar to mobile computing, we're really trying to leverage a common platform in terms of chipsets that go into those devices, so having our engineers get more that way, clearly more leverage from an engineering developing of a product and more leverage with the suppliers that we have. And also trying to have shared engineering resource pools of certain expertise. For instance, having a common engineering resource pool or shared engineering resources for operating systems or Android or DSP kind of development and chips. That way, we don't have to have independent engineering team that have that expertise, we have one. We've selected certain pools of technology and we let those engineers really get shared across both of our businesses. And again, you can get more leverage, more efficiency out of that.

Mark F. Moon

Any other comments?

Girish Rishi

Yes, I can add a comment on the go-to-market side. When you think about a complex region like Europe and Africa with just short of 100 countries over 140 languages, as the business and the geographies get more complicated to cover, the fact that we can combine both our Government, our Enterprise organization can be a competitive advantage because not only we can have resources in places where our competitors that are only focused on one or the other area cannot have, but we can have also more senior, higher quality of people in those places. So as you go to East Europe or Africa, you will have a combined team to begin with. And when our business grows, then you will start specialization under the country level. If you look at a more developed country or fully developed country like the U.K. where our business is big, then you will have below the management in the country, the public safety side, the retail side, TmL, et cetera, et cetera.

Mark F. Moon

Bruce?

Bruce Brda

And maybe one final comment on the services side. We leverage the same tools and platforms in our solution sport centers, call centers and NOCs across both businesses as we develop Managed Service platforms for both networks, as well as devices. Again, we leverage the same platforms so there's a fair amount of synergy in the core support operations activities.

Mark F. Moon

You also had a follow-on question, I think, at the tail end. Did you? Was there a follow-on piece of that?

Unknown Analyst

Should we be able to quantify the value of these synergies you've just described?

Mark F. Moon

So I guess maybe I shouldn't have asked you for your follow-on question. I think the interesting piece is I think if you look at both from separations we continue to do, we continue to leverage across the bottom. So it's hard to quantify those exact synergies. But the reality is, as I said earlier, it's become part of our culture to say, how do we force these kind of activities so we continue to drive our cost down but our production up. So we'll continue to do that as we go forward because it's just the way we're going to operate.

Bob Schassler

And the only thing I would add is the way that we really measure it across our businesses is really what kind of engineering leverage are we getting. And we continue, as Mark showed, our engineering leverage continues to go in the right direction as we -- and a lot of that is really not any one thing, the question upfront, it's really a multitude of those things that are really contributing to that, and I think this is just one piece of it.

Mark F. Moon

Thank you. Upfront, right here.

Andrew Spinola - Wells Fargo Securities, LLC, Research Division

It's Andrew Spinola, Wells Fargo. You noted in the presentation that data is one of the big drivers of the movements from the 2G to 3G systems in government. And then we've got FirstNet sort of on the horizon. So I'm wondering when I look at your market growth estimates of 5% through 2015, how do you see that tension playing out and how much is FirstNet starting to become a part of the discussion in the sales with your U.S. customers, and whether or not they're willing to upgrade their systems from 2G to 3G because of the possibility of LTE public safety in the long run?

Mark F. Moon

Go ahead and I'll let Jim comment. Go ahead, Bob. Bob?

James Welch

Let me -- I'll start just real quick with the customer position right now, and that is the requirement for mission-critical voice is still strong, it has not deteriorated in any fashion. So our P25 transactions and our business that Bob showed in the slide is still very active, and LTE has not had a significant impact on that part of the business. What we've been doing in the field is really making sure public safety is educated on what first that's trying to do, how they're trying to get it done and what the networks will look like moving forward with data and voice together. And public safety to date has still been very interested and very active around engagement in FirstNet, making sure they're ready or data networks. But P25, the mission-critical voice, is still an important part of their operations, an important part of their budgetary process moving forward.

Bob Schassler

So just a couple of things to add, and Jim is absolutely right, wherever I go around the world, and not just here in North America, but our public safety customers will always -- they use the words, "Voice is always going to be king in critical." So nobody really sees the voice aspect going away, they just see the data operations continue to increase in terms of becoming more and more critical to their day-to-day operations. And when we think about, in our view, the analogy I use with 2G, 3G, 4G, 3G would really be the highest level of voice in TDMA technology that's there for public safety in the standard environment. When we go to that 4G level, that's how we think about Public Safety LTE. And the way that we've architected and developed our systems is really to be able to allow both 3G and 4G interoperabilities so our LTE networks will be interoperable with our ASTRO, P25 and our TETRA networks. So we'll have push-to-talk VoIP clients, if you will, on our LTE devices, so you will have some interoperability, not a mission-critical level of interoperability. And then it'll be sometime down the road. We think it's still at least 8, 10 years down the road when the technologies develop to the point where you will get more and more mission-critical voice capabilities into LTE. We've started shipping actually last year and this year for our ASTRO portfolio. And this year, we'll start shipping for TETRA, that the course that we're shipping really can be upgraded to be an LTE core. So a P25 core that we ship today really can be software upgradable to be an LTE core, which is really what our customers ask us for. They've asked us, hey, when we make these investments in the P25 networks today, those networks need to last us for a long time, or in the TETRA networks that we really want to see, what's your path to get us to that 4G? So it's very, very much part of our overall migration strategy and will be in place. And we'll be, frankly, the only vendor out there that's really positioned to really be able to migrate LmR to Public Safety LTE networks. But we see for a long time that the 2 will really be side-by-side sometime into the future.

Mark F. Moon

The interesting piece when you think about the technologies aren't really cannibalizing, but the struggle for our customers and for us that we'll have to enable is the competition for an x amount of dollars. So as we think about still prioritizing, customers want both. As we just said, voice and data. So how do we make sure the dollars get prioritized for both? The other piece that I think is important that we've been working hard, and Jim hit on it about educating our customers, is the confusion around what 4G sailor is and what Public Safety LTE really is. And there's a lot of noise around both. I think public safety in North America has spoken pretty loudly about what they believe are the public safety requirements. We think the work that we've done with Ericsson internally with development over the last 2 to 3 years to differentiate with public safety features. And then what Bob just said, this migration story that a government customer that's spending taxpayer dollars want to make sure that the dollars I'm spending today won't be wasted as we move to future technologies. So I think we've really built a good foundation for customers to continue to grow and to grow into the future technology.

Bob Schassler

And just one more point I want to make sure because what this group will start to hear over the next -- over this year and next year and the year after is what's called VoLTE, voice over LTE, on public carrier networks, that's what Mark was alluding to. That is much different from mission-critical voice, large group calls, running into a burning building, that type of voice, again, with large group-type communications and a lot of other requirements that go along with mission-critical voice. So you'll start seeing some of the carriers trying to leverage their LTE networks and put some voice over LTE, Verizon and AT&T will start doing that over the next couple of years. But just wanted to make it clear, that's very, very different from the type of voice that we do.

Mark F. Moon

So one final question, if we could. Or we don't have to have a final question, but if there is one final question. Okay.

Michael Genovese - MKM Partners LLC, Research Division

It's Mike Genovese, MKM Partners. Greg, you mentioned a tax rate change in your comments and I looked ahead at Ed's slides, it seems like there's a big -- seem like very few taxes are going to be -- effective tax rate's going to be almost 0 for the rest of the year with a big EPS increase as a result. And I just wanted to ask about, is this similar to what Apple has done? And they're being brought up in front of the Senate today. Any just thoughts on these kind of tax havens given the news out there?

Mark F. Moon

So I'm just going to ask you to let us hold that one to this next Q&A. Ed will join us, as well as Greg. We'll let -- we'll address that direct question, but we'll just hold that off if we can, since Greg's not paying attention in particular. So we're going to wrap for the morning. Thanks for paying attention. Thanks for following us. The announcement here for next steps will be forthcoming.

Operator

Ladies and gentlemen, thank you for your time this morning. At this time, we'll take 30 minutes for lunch. Lunch is served in the back of the room. So please plan to be back at 12:00.

[Break]

Unknown Executive

Ladies and gentlemen, please welcome Executive Vice President and Chief Financial Officer, Ed Fitzpatrick.

Edward J. Fitzpatrick

Welcome back, everybody. Welcome back. Hopefully, you guys all enjoyed your lunch. We -- as you could see, I actually, as a typical finance guy, brought backup with me just in case the video goes down. I brought backup to backup, so 2 copies of it just in case we have a problem, so I'll be prepared.

Now I know that you've all -- you all got the document in front of you. And I've already heard from probably 80% of you, you've all read the entire document, so we're just going to move right to Q&A if you have any questions for me. Kidding, of course.

So hopefully, you guys got a good chance to get a feel for the sales and field operations one level down from the team. The teams did a great job of talking about the strengths of the organization across the board, both in the go-to-market and the products side. And hopefully, most of you will be able to stay for the product demos at the conclusion of the program. I think you'll get a lot out of it. One of the main reasons we had it here was so that you could touch and feel the products and get a chance to learn the portfolio a little bit more comprehensively.

But I'm not going to talk about -- too much about the portfolio. I'm going to move to my comfort zone and probably a lot of yours, the numbers. So I'll cover a little bit on 2012, a bit of old news but really just to set the framework. I'll talk about the P&L, I'll talk about cash flow, I'll talk about capital return and give a little glimpse into the profile as we look forward. I'll cover balance sheet progress that we've made, which I think has been significant since separation. We'll give a refresh on the capital allocation thoughts and plans there. Taxes, everybody hates taxes. I guess Apple really hates them right about now. But really, we have some good news to share that many of you have already read and already heard about, but I'll give you a little bit of color of what we're looking to do to drive -- really drive improved cash flow as we look forward. And then we'll give a near-term and medium-term outlook for the company.

So 2012 in the aggregate, really a solid year. Top line growth of 6%, very much in line with what we have targeted in the aggregate. In bottom line, flow-through was terrific. You could see bottom line -- we grew top line 6%, we grew the bottom line 9.5%. And as you know, as well that 9.5% incorporated incremental pension expenses of about $50 million. So without that, almost the 2-time flow-through on operating earnings in comparison to top line growth. So really pleased with the aggregate results of 2012.

One level down, I showed similar charts last year. There was more green on there. It was more comprehensive green across both government and enterprise. 2012, a bit more challenging on the enterprise side. As you guys know, second half of the year really was where we started to run into the macroeconomic impact in enterprise. So sales, down for the full year of 5%. Not aided by the iDEN decline in FX, but still the underlying business shrunk, particularly in the second half of last year. And with the gross margins in that business that are healthy, it flows through to the bottom line, so tough year in enterprise. And as you know, that continued a bit, maybe slight improvement in the first quarter. And as we'll talk about, we are expecting that to improve, and you heard the team talk about why we expect that to improve the second half of this year.

On the other side of it, though, government, probably arguably the best year we've ever had, top line growth of 12%. And again, you heard the drivers of that from the team, pretty comprehensive drivers geographically and across multiple product lines. So really favorable top line growth. And the inverse of the enterprise is all the significant leverage you get on a significant gross margin business that flows through to the bottom line. So on that 12% top line growth, 33% operating margin improvement.

As you look to the financial profile of the company, 2013 and beyond, you heard us guide to top line growth in enterprise and government, low- to mid-single digits for '13. Two different reasons why both of those are a bit lower than the core growth that you heard us talk about of about 4% or 5%. In government, it's really the year-over-year compare that's driving us to be a bit lower. Remember, we grew 12% in 2012. We're expecting that year-over-year compare to kind of lead to a more tempered 3 to -- low- to mid-single-digit growth in 2013. On the enterprise side, it's really the macroeconomic environment that's causing us pause in why we thought it appropriate to say more low- to mid-single-digit versus the mid to high that we had thought when we started the year, really due to the turnaround that we expected enterprise taking longer than we expected.

Well, with that said, the longer-term view is that we should grow kind of in line with that core growth rate, 4% or 5%. And as we're able to capitalize on the expansion opportunities, like LTE, like managed services and like these other advanced devices that you heard Girish talk about on the enterprise side, hopefully, our view would be that we ought to be able to grow with that core growth plus down the road. And the opportunities are in front of us, as you heard the team talk about.

Operating leverage, as you guys have seen us execute over the last several years, growing from what -- where we were at the beginning, 2010, 14%, all the way to 17-plus percent in 2012, and you heard us guide to approximately 18% for 2013, really driven by leverage. It's not a gross margin increasing story. Gross margin is relatively stable, even down slightly. It's really that operating leverage that we had talked about keeping spending in check so that we flow through more of that top line growth to the bottom. And I'll talk -- I'll drill down on each of these a little bit as we go forward here. But SG&A, driving 2% of that improvement; R&D driving 1% of that. And again, in line with what we've talked about, those 2 lines, selling and marketing and G&A more leverageable than R&D.

On the balance sheet, you heard Greg talk about it, significant cash flow generation, free cash flow generation, really driven by that top line growth, flowing more of that top line growth through to the bottom in operating earnings and managing working capital. I'll talk a little about working capital later. I think we could do a better job there in certain areas, where we've done a decent job to date. And as a result, cash flow has been pretty positive.

I'll talk a little bit later on the tax benefit, the incremental tax benefits that we're now expecting to see for the rest of this year and through 2017. But to date, we've shown significant difference in the effective tax rate and our cash tax rate. Remember at our financial analyst meeting in 2010, we talked about the cash tax rate being approximately 20% for a 7-year period, which was effectively through 2017. We're going to tell you, with the benefits that we've now executed to, we're going to see a lower rate, and I'll cover that in a little bit.

And really from a balance sheet perspective, we're going to keep a solid balance sheet. We're going to be solid investment grade. With that said, as our EBITDA grows, we will have appropriate amounts of leverage on the balance sheet but in line with a solid investment grade entity, very consistent with what we talked to you about before.

And on capital return, I'll show you a chart kind of on our progression from separation through to today, we've returned significant amounts of capital to shareholders. The preferred really has been share repurchase, as we repatriated cash back from offshore, we've returned that capital to shareholders.

So as you look at the leverage, the numbers go from '10 to 2012, so growth in the mid- to upper-single digits, 6%, 7% over this period of time; and operating margins growing in the high teens, 18%, 19% over that similar timeframe, all based upon that leverage that I talked about.

And this talks to the point that I had made earlier. You can see where the leverage is coming from, R&D and G&A. 2-point improvement in SG&A, really driven by G&A efficiencies -- SG&A efficiencies, I should say; leveraging shared service centers, and that's something I think we could continue to do in a more meaningful way going forward; reducing our real estate footprint across the board, consolidating from the old Motorola facilities, trying to get it to a footprint that makes sense for Motorola Solutions; and really focusing on the core, focus on the core of what we do. You heard Bob Schassler talk about it, Girish as well, really focusing on the things that we think will drive value for the firm going forward. We could say even with that focus, the R&D number is coming down 1 percentage point as well, as a percentage of sales. So leverage across the board, a bit more on SG&A as you'd expect, but still showing it as well as we leverage the portfolio on R&D.

So here's a chart I alluded to kind of on the progression of the balance sheet. If you remember, we came out at separation with $5.7 billion of cash. 70% or thereabouts of that cash was offshore. You could see the blue -- they're both blue -- dark blue, international cash on the top, the domestic cash on the bottom, so starting out with 70% of the cash offshore. We've done a nice job of repatriating cash back to the States over the last several years such that if you look to the right, cash is more like 55% offshore, 45% onshore. So nice progress at bringing cash back, getting a better mix, getting at that cash. That repatriation activity, coupled with our divestment of non-core assets, non-core businesses like the networks business that generated that billion dollars of cash there, that helped, adding $1 billion -- $1.5 billion of free cash flow, that helped. With all that cash, with all that repatriation and having it be based in the U.S., we're able to return that capital to shareholders. That's the $3.9 billion that you see there. So nice progression from separation date through to today.

I will show you as well a chart going forward on the progress we continue to expect to make on that cash balance. It all look remarkably similar to what I showed you last year. We're just going to add a year on to what we showed you last year, so you can see the progression. So how do we think about cash flow and growing cash flow? We very much look at it with

-- as we look at operating earnings growth. As operating earnings grow and net income grows, we will expect to drive incremental cash flow. I will say that -- and you can see that progression there pretty clearly, from 2010 to '12, there's a correlation to operating earnings growth and cash flow growth. We got to continue to manage working capital, and I'll talk about that in a little bit as well.

2013, I do expect a bit of pressure on that growing cash flow -- operating cash flow in line with net income, really, as it relates to this tax structure that I've talked about to bring down our cash tax rate -- effective cash tax rate for -- effective tax rate for 2013. That would put a bit of pressure. There's about $150 million of withholding taxes that we'll pay since we're proactively planning to move certain cash or repatriate certain cash offshore to effectuate this tax holding company structure. As a result, tax will be a bit higher than we expected. So I do expect operating cash flow to be more flattish year-over-year from what we saw in 2012.

You heard Bruce talk about CapEx. Definite goal of ours is to drive more of our CapEx to success-based capital spending, so services-related, managed services-related, revenue-generating CapEx, and I'll talk a little bit about more of that -- about that going forward. And we do expect, as I've mentioned on our prior call, for pension contributions to be in and around $250 million such that we keep that at a relatively stable level over the next several years.

Working capital, I think we're doing an okay job in managing working capital. I'd say it's mixed. I think we're doing a very nice job in managing inventory. Our inventory turns are at historical highs. That's not to say we think that we're as good as we can be. I think the teams are definitely going after improvements in inventory turns, and I think you'll see us continue to progress and make improvements in that area in 2013 and beyond. I think receivables, we could do a better job. We did consolidate a lot of the activities into shared service centers in the last year or 2. And I think I like what we have in place right now, but we've taken a bit of a step back in our receivable days, and I think that's something we've made process improvements. I think we'll see progress in receivable days this year. And as you think about it, as I think about it, receivable days are in the mid-60s, mid- to high-60-day range. Our payable days, what we pay our vendors in, is in the low- to mid-50s. So there's a significant gap in how fast we were getting paid versus how fast we're paying our vendors. I think there should be better parity. With a $9 billion corporation, my view is that those 2 ought to be closer together. So we're going to have that this year.

So that success-based capital that we talked about, this is the way we see the progression 2010 to -- sorry, '11 to 2013. That bottom gray bar is our services or revenue-generating CapEx. You could see the trend is up, and we're forecasting it to be up in '13. The higher we can drive that gray bar, the better off we're all going to be. That gray bar will go up, but it will go up as we look at return on invested capital to ensure that the investments we're making have high return on invested capital. That's all part of the decision-making process.

The middle bar is IT. It's probably arguably at higher levels than you might expect, but that's due to our implementation of an Oracle ERP instance to try to consolidate many ERPs into a current single, if you will, or unlimited instance ERPs to run the business. So that -- and if you get that in place, you should see operating efficiency. We're starting to see that now as we turn -- as we go live in multiple modules in '12 and beyond.

And then the blue bar, really, facility spending, other operational manufacturing footprint-related spending. We've made progress in that regard. We expect to continue to make progress in that this year and into the future.

So you should recognize this chart. I showed this last year as well, very similar. Return of capital remains a priority. The dividend amount, 30% of operating cash flow. As we drive operating cash flow improvement, as I've talked about, the dividend should improve as well. As we look at CapEx, we'll continue to invest in CapEx. The more of it we do in success-based CapEx, the better off we're going to be to help drive organic growth within the firm. But as I've said, as we look at investments, like CapEx, like acquisitions, even share repurchase, we're going to look at return on invested capital and make sure we're allocating that capital to the best investments that we see on the table.

Speaking of acquisitions, acquisitions and/or investments, again, this shouldn't be a surprise to you. You heard us talk about this before. We're going to make strategic acquisitions in places that are in the core or close to the core, things that we can integrate easily, items or investments that have the right return on invested capital, those types of items. Cultural fit, that's important. You got to make sure these things are going to work if you're going to -- in order to be successful and drive shareholder value. So that's the criteria.

If you look at some of the examples, you heard about the top 2 on the right side from Girish. Psion, very close to our core. We think easy to integrate because it's very much in the sweet spot of what we do. The progress on that, I think, that we've made is terrific. I think we're very much line with the plan that we had set out when we made the acquisition. Rhomobile, you also heard Girish talking about that, right in the sweet spot, really more of an applications-based solution, in line with what we're trying to do as a firm.

On the investment front, we have a venture-capital organization, where we look at investments that are maybe a step or 2 away from the core, that we look to make sure that we're looking at innovations to help us drive value for the company. ShotSpotter is one example. It's a gunshot detection software for public safety officials, right in line with what we try to do or solutions we try to provide for our customers. BriefCam is a video analytics company that allows public safety officials to view hours of video in just a matter of minutes. So a few examples of the types of investments that we think makes sense to help us drive the value of the firm and we'll continue to do inorganically to grow the top line.

So another -- it's another chart that, again, should look remarkably familiar to you. I showed this chart last year. Again, we took off 2010, we added 2015, but the progression of cash balances, debt balances and pension balances are shown on this chart. I'll familiarize you with it quickly here.

The key takeaway, you heard Greg talk about it. We're still forecasting, as we talked about last year, getting to net debt by 2014. I'll take you through the progression here. The black line chart is the cash balance. If you remember, we talked about 2000 -- beginning in 2011, we were $5.7 billion. At the end of 2011, we're $5.1 billion. We brought that balance down to $3.6 billion at the end of last year. We're forecasting to be somewhere around $3 billion at the end of this year and continue to progress down through '14 and '15.

How we've done that, we've talked about, really, share repurchase has been the preferred route. As we brought cash back to the States, we've returned that capital to shareholders via the share repurchase. We'll continue to look at the share repurchases as we go forward, and that's part of that continued progression down in the cash balances, as you see on the chart there.

The debt levels are in the blue. Funded debt is in the blue. The pension obligation and other pension or other debt-like instruments are in the white, and those levels -- as we continue to make payments on the pension plan -- to the pension plan going forward, those balances should come down over time. The funded debt levels, the blue bar, as you see there, will grow over time as we grow EBITDA levels. As EBITDA levels grow, we'll grow debt very much in line with that. And you heard me talk about a debt-to-equity -- sorry, debt-to-EBITDA ratio somewhere in the 2 to 2.5 range. And that's what we'll look to guide our path going forward. The underlying premise there is that we'll maintain a solid balance sheet or solid investment grade rating, and we can grow debt and still maintain that solid investment grade rating as long as we do it responsibly and tie it to our EBITDA growth.

So an update on the pension, really, just the balance through the end of 2012. You can see the bar to the right is 2012, and it shows the asset balance being approximately $2.8 billion shy of a liability balance, in black. That is due solely to the change in discount rate from -- if you look in the left side of the chart, 2007, discount rate was 6.75%. So that 1.4 -- sorry, 2.4% differential in discount rate drives that -- the majority of that $2.8 million (sic) [$2.8 billion] differential. Think of about 1 percentage point is about $1 billion of liability. So over that period of time, discount rates have gone down, our deficit has gone up. As a result, we've been funding significant amounts into the pension plan. We did $340 million last year. We'll do about $250 million this year approximately, and we'll expect to kind of maintain it at that level over the next several years until we get this thing fully funded.

One of the comment I'll make on this pension expense, if you heard me talk about on the call a few months back, pension expense was $185 million. And so now we're expecting it to be approximately $120 million, so $65 million lower pension expense that's solely due to a change in the amortization period for that pension expense. Given the significant amount of divestitures that we've done, the spinoff of Mobility, the sale of Networks, et cetera, a majority of our employees are no longer active. As a result, our amortization period changed from 28 -- from 9 years to 28 years as you're supposed to amortize that liability over the life of the terminated employees or nonactive employees for FASB 87.

So taxes, everybody's favorite topic. I wish my tax -- personal tax rate was as slow as our corporate tax rate. So if you -- the key takeaway, if we take away one thing from this presentation, we're driving through the tax strategies approximately a $300 million cash and P&L benefit as a result of this international holdco structure that we put in place. Effectively, we're freeing up foreign tax credits that were trapped prior to the reorganization. So what you'll see in our Q2 P&L and the full year P&L, full year, for sure, you'll see an effective tax rate shrinking from the 32% to 33% that we had guided to approximately 10% to 15%. How that will play out in the P&L, I'll talk about in a minute as well, you'll see about -- that $300 million benefit will bleed in 1/3, 1/3, 1/3, so $100 million in Q2, $100 million in Q3 and $100 million in Q4.

The cash tax rate, the benefit of this $300 million dollars, effectively gets that 20% cash tax rate that I've talked about in 2010 down to 15%. So that $300 million benefit plus the reduced effective tax rate that I've talked about on the call, given our assertion that we're permanently reinvesting certain cash offshore, taking us from 34% to 32% to 33% is an incremental $100 million benefit. So that $400 million benefit in total between now and the end of 2017 is a 5% reduction in that cash tax rate. I think we're not done at 32% to 33%. We're continuing to look at tax strategies that we -- where we can lower the tax rate. But it's -- you got to be methodical, you got to be careful about the way you do these things. And don't know what Apple did exactly. I know what we did is not in line with what they did, and I'll talk to you about that in the Q&A more specifically, our tax strategies, but we'll look to -- if we look to bringing this thing down, we're going to do it in the right way going forward.

So our financial outlook, just want to make sure we updated you. If you remember, we guided at the $0.66 to $0.71. That guidance now goes up by that $100 million benefit or $0.35 per share in our outlook. So that's what you should expect us -- expect to see from us as we report come Q2. For the full year, the 32% to 33% effective tax rate that we talked about on the call goes to 10% to 15% for the full year. That's about $1.05. So that $0.35 per share for the full year times 3, about $1.05.

Operating margin, really, just reiterating the guidance that we gave you last financial analyst meeting, we do expect to continue to drive operating leverage and improvement in operating margins. So the 18% this year, we're expecting to drive to approximately 19% in 2014.

So to wrap up, and we'll bring Greg and Mark back up for Q&A, this shouldn't be a surprise to you. This is very much in line with what I've talked to you about last time. The story is consistent. We're going to look to grow the bottom line faster than the top line. That means improving operating margins. We'll continue to focus on cash flow, to drive net present value of cash flows and the value of the firm. Our capital allocation plan is the same, we're going to look to drive dividend growth with improvement in cash flow. We'll make disciplined investments, as I have talked about. Return on invested capital is the way we're going to measure CapEx, share repurchase, acquisitions as we go forward. We're going to do all of this with a very solid balance sheet. We need a solid balance sheet, a solid foundation to ensure that we're able to support and drive growth in the top line and also shareholder value.

So thank you very much for your attention. And I'll now invite Greg and Mark up for Q&A.

Gregory Q. Brown

So let's open it up. Number 5.

Kulbinder Garcha - Crédit Suisse AG, Research Division

It's Kulbinder from Crédit Suisse again. And a question for Greg and Ed, I guess, taking some of things that comp today, it sounds like you got a fairly decent portfolio, a decent visibility. You're trying to build a services annuity stream maybe more than the past. And you released $300 million more, it sounds like you found $300 million more of cash flow. So why not get more aggressive on the capital distribution in that context. Looking at the chart, you're still planning to have roughly $2 billion of cash even through '15, which is, I think, well above the operational level you need. So I guess my question to both of you is, what's the cautiousness of not increasing it? Or what do you need to see in the next year or 2 so that we get to '15, and you guys maybe have even ops [ph] in the level of distribution you're now thinking about? What are the puts and takes, I guess?

Gregory Q. Brown

So what I would say is what we're showing you is a guideline. I don't think you should take it too prescriptively. The gating factors are the repatriation of cash from the U.S. Obviously, another gating factor would be the expansion of EBITDA. The other thing, Kulbinder, to remember, we have the underfunded pension. And with the discount factor being where it is, we have to at least acknowledge that. And maintaining the investment grade rating with the rating agencies, we can't just ignore that. Having said that, we need approximately $1 billion to run the business, $1 billion, $1.1 billion, we think, to run the business on an ongoing basis. Ed and I always go back and forth. I wouldn't -- it's a guideline. But you're right, we have a very strong balance sheet and a steady set of businesses, and we have more firepower. On share repurchase, we bought back -- I think it was $357 million in Q1 at a price north of $60. I'm not going to guide you or give any forward-looking indication on what we're doing there, but needless to say, that with returning $3.9 billion in 18 months to shareholders, and as Ed just talked about in his presentation, putting a prioritization around a dividend growth as well, there's opportunities for us going forward. Good question. Thanks, Kulbinder. Jim?

Jim Suva - Citigroup Inc, Research Division

It's Jim Suva from Citigroup. First, a question for Greg, and then a follow-up for Ed. Greg, you mentioned in the earlier part of the presentation today of the expansion markets to grow now about 15% per year. And just looking back at last year's slide deck, I noticed that was a 20%. So can you help us understand what has changed there? Is it more macro or China or just more conservative? And does that impact your long-term guidance, which I believe, at the time, that spinoff from Motorola, it was 5% to 8% long-term? And then for Ed, on the tax rate, can you help us understand why the effective tax rate isn't lower beyond this year, why it's kind of just a 1-year or onetime event and not long-term for the effective rate?

Gregory Q. Brown

So Moon showed in his presentation the addressable market of the core and then the expansion layered on top, 2012, I think, to 2015. And the delta between the 20% last year and 15% is largely the pushout of Public Safety LTE and that's being more elongated. And the second is the moderate -- moderation in the growth of WLAN. WLAN, as a space, was growing at 30% or 40%. I think current estimates have it -- industry estimates have it more like 15% to 20%. It's about a $4.5 billion addressable market, but Jim, those are the 2 primary reasons why that 20% expansion goes to '15. In terms of thinking about long-term growth, we think about this a lot obviously. I would say you should think about the business of Motorola Solutions and the growth of our cores at 5%-plus. The degree of whether it's 6% or 7% or 8% depends on the pacing of some of the expansion opportunities largely, in our case, Public Safety LTE. Maybe it's in the secondary advanced devices that Girish is looking to invest in on the enterprise. It will be the traction of some of the services opportunities that Brda talked about, but that's what I would say longer-term. And on tax?

Edward J. Fitzpatrick

So on the tax front, it's -- Jim, it's related to -- the tax benefit relates to credits that we had existing that we couldn't get to. The international holdco structure allows us to free up those tax credits and take the $300 million benefit. What happens in that benefit is, in the P&L, you take the benefit effectively all in 1 year, 2013, so that $300 million benefit will get amortized to the P&L in the effective tax rate Q2, 3 and 4, as I've mentioned. The cash benefit of that will actually span out through 2017. So as we utilize those credits to cash, tax amounts will be lower as a result. So it's just really the way that the accounting works versus the way the cash flows from a tax payment perspective. So the benefit of it will go through '17. But once we utilize the credits, they're gone. So it's not an inter-perpetuity type of thing, unlike the effective tax rate change from 34% to 32% to 33%. That is more of a permanent change of about $20 million -- $20 million to $25 million per year. That $100 million that I've talked about through '17, that amount continues after that.

Gregory Q. Brown

Tavis?

Tavis C. McCourt - Raymond James & Associates, Inc., Research Division

Greg, it's Tavis of Raymond James. So a question on the 2014, on your slide deck, it said kind of roughly 19% operating margins. I know you guys have been ramping up margins 50 basis points to 100 basis points a year. So what I'm wondering is, to get that type of margin expansion, 100 basis points in a single year, does that require revenue growth above and beyond the core 5%? I guess, stated another way, do you need Public Safety LTE to kick in to get to that margin level in '14?

Gregory Q. Brown

No.

Tavis C. McCourt - Raymond James & Associates, Inc., Research Division

Great. And then a clarification for Ed. The 2x to 2.5x debt-to-EBITDA, was that a funded debt-to-EBITDA, yes?

Edward J. Fitzpatrick

No, adjusted debt to adjusted EBITDA.

Tavis C. McCourt - Raymond James & Associates, Inc., Research Division

Adjusted. Okay, great.

Edward J. Fitzpatrick

The tax effective -- pension tax effective -- the Standard & Poor's definition that you've heard us talk about before.

Gregory Q. Brown

Thanks, Tavis. Number 4.

Keith M. Housum - Northcoast Research

Keith Housum of Northcoast Research again. Ed, a question for you. As we've heard before, you talk about Services growing at roughly 2x the revenue growth of the traditional business. How should we think about the impact on gross and operating margins in 2014, I guess, and beyond, with the traditional thought process that the margins are lower for the Services than the power [ph] product?

Gregory Q. Brown

Ed, if you don't mind, I'll jump in a little bit on that one. But gross margins on the Services business are still very good. Sometimes, as Bruce alluded to, when we do certain services work, it may involve non-Motorola content, of which we obviously will take it will be a lower margin on that kind of profile, all in for the complete contract that we provide. But irrespective of the mix, we still are very focused on the operating margin of approximately 18% this year, targeting 19%. And we believe we can continue to expand that, irrespective of the mix. And even if Services as a percentage of the revenue inches upward, we think we can manage it.

Edward J. Fitzpatrick

I think, just to add on, what we've always said is the Services gross margins are lower, but the operating margins, because there's not a lot of R&D, it's less selling effort because some of these things are annuity stream. As you heard Bruce talk about, the operating margin profile is very similar. And we'd expect that, that are going to leverage up as well with the rest of the company as we grow from the 18% to 19%.

Gregory Q. Brown

Right here in the front. Hang on, get the mic.

Simona Jankowski - Goldman Sachs Group Inc., Research Division

Just a couple of clarifications, I think, probably both for Ed. You talked about dividend growth being tied to operating cash flow growth, which you indicated would be flat this year because of the tax issue. And I wasn't clear if we should kind of pro forma that out or should we interpret that comment to mean that there would not be a dividend increase until next year. And then the second clarification was, can you give us a sense for how much you have left in some of this international tax credits that are trapped overseas that you might be able to bring back in the future?

Edward J. Fitzpatrick

On the dividend front, it was really more of a near-term cash flow statement. We would expected to continue to drive operating cash flow up in a near-term blip. It doesn't concern me when we look at -- what amount of dividend, a dividend increase should be there. I do look at the -- some of this as anomalistic because of the $150 million tax payment we're going to make related to the structure that we're putting in place for the international holdco and also the repatriation activities. We thought we'd spread this out over a longer period of time. But given the holdco structure, we decide to proactively go after it all this year and get it in place, so we get the benefit of it near-term. So I don't see it impacting our thought process on dividend at all. And the second question was on a tax -- whether any are embedded, this was the one big kind of tax benefit that we weren't able to benefit in our P&L. There are some other tax assets that we have net operating losses on. I don't remember the exact number. I think it's disclosed in our 10-K. But there are some that if we're able to turn around certain entities that are in the loss positions that we can get to a positive income, to start getting after some of those, it's not quite as big as this. It's the single biggest opportunity we had and why we really got after the planning strategies on getting after this tax asset.

Gregory Q. Brown

Yes, number 5?

Unknown Analyst

Dwight [ph] [indiscernible] Just a quick question on the operating cash flow again and the tax credit. I have -- I seem to recall in the most recent quarter that you said that the cash costs of the taxes in Q1 were going to be returned to you at some point during the year. Therefore, for cash flow to be flat, I wouldn't -- that wouldn't seem that that's going to be an element of that just based on the rhetoric that we've heard so far. And then you -- I think you said $1 billion to $1.1 billion to run the business with sort of flat operating cash flow and $0.25 billion in pension contributions. Is it -- are you, therefore, saying that the business is not essentially self-funding this year?

Edward J. Fitzpatrick

The pension funding is incorporated in that cash flow number. So the pension is -- the operating cash flow number that we talked about includes that pension funding as we go forward. So I think that's there. And I didn't fully understand your first question. What we said is we're negative cash flow in the first quarter. We need to get after that certain -- that related to certain timing of milestone billings or long-term contracts. We think that's timing. We think that will improve throughout the rest of the year. My commentary on full year cash flow really gets to why we think we're going to be challenged in growing operating cash flow versus last year as a result of this tax payment that we're making associated with the international holdco. Ask a follow-on, Dwight [ph], if I didn't get to your question.

Unknown Analyst

Just on the business of being self-funded, if operating cash flow is flat and that's basically what you need to run the business. I know it was a balance sheet consideration. But just thinking more analytically, is the business sustainably self-funding.

Edward J. Fitzpatrick

For sure. I mean, if you look at the capital allocation pie chart that I showed you, there's a significant amount of discretionary spending in that cash flow, right? We talk about 30% going to dividend, which is why I made the comment to Simona that we're committed to continue to drive dividend growth as we grow cash flow longer-term in the business, and even near-term as we look at the current year being somewhat of anomaly. As you look at CapEx, that's 20% of the cash flow that we -- which we think is really something we need to do to grow the firm, what we want to do. And then you have 50%, that's very much discretionary share repurchases and acquisitions. With that, we feel we have significant amounts of cushion from a self-sustaining perspective. My comment on the share repurchase and what we're doing really relates more to the cash balance that we have. For cash balances, $3.6 billion, you heard Greg talk about it. He and I both know that's nowhere near what we need to run the business. We have a lot of work still to do to bring that balance down, get it to more -- to a more normalized steady state going forward, so a lot of flexibility in the balance sheet today.

Gregory Q. Brown

Right here, second row?

Unknown Analyst

You mentioned in the beginning of the presentation about the guidance and how -- you would talk about what gets you comfortable that you can achieve the guidance for the second half of the year in particular. Just wondering if you could break that down for us, so we can understand that.

Gregory Q. Brown

We spend a lot of time on this one. I think that's a combination of things. The majority of the iDEN decline is behind us in the first 6 months of the year. FX headwinds that were there in the second half of last year's comp go away or we anticipate going away. I think that was about $48 million of FX. $30 million geared toward the enterprise. Third is the disposition of the customer engagements themselves around the funnel. As Moon alluded to 90 days ago or 100 days ago, the funnel of opportunity is 20% or 25% larger than it was now. And coming upon us is we have to convert and close that -- close those businesses. But it's not lost on us. My view is we had a very good run, and a lot of you put trust and faith in the management team and in the balance sheet, in the power of the balance sheet and the differentiation characteristics and the ability for us to sustainably grow and perform. The most important thing, and this team clearly knows it with no ambiguity, it is all about performance. So whatever we say we're going to do, we need to go do. Q1 surprised us. We were in good company, but irrespective of that, we didn't do what we needed to doing in the top line. And we talked about that and the delay of -- the slippage of some other deals. So I think that -- I think we're tracking where we need to track, I guess, all in. What else? Got to be more questions, strategy, M&A. Here's one, Hoodie [ph], right here.

Unknown Analyst

I'll take you quite on your -- on the question on strategy and M&A. You threw that, then I might as well. So in a couple of M&A deals you've done, signed, et cetera, can you give us a sense as to how large would you -- you're looking for a good fit, strong execution, cultural fit, et cetera. Geography probably has something to do with it as well. Could you -- would you possibly be looking at different geographies to get into? What would you be looking for in both the government and enterprise business? Can you describe that kind of a business in terms of size, how large, revenue-wise, how much would you be willing to spend for it, what type of margins would it have to have ? Just to give a sense as to what you'd be looking for.

Gregory Q. Brown

Okay. So I think that our current bias is to continue along the acquisition consideration in the profile that you've seen. I would call those kind of surgical tuck-ins, directly related to the core. In particular, I love the Psion acquisition because it gives us more scale and density in the enterprise mobile computing market and doesn't extend us any problem of portfolio rationalization because it's complementary and additive. Girish was asked about Honeywell and Intermec. I like the fact that Honeywell is doing a roll-up. They bought Metrologics, HHP, LXE and now Intermec. They'll go through the assimilation and integration of those firms. They'll have portfolio rationalization. They have to provide a level of value proposition continuity in front of customers. We don't have that. We don't have that risk. So I think it would be more along the lines of surgical -- our current thinking is surgical tuck-ins. Some of the best investment we can make is in the core, as opposed to inorganic, for the reasons that Bob and Girish talked about in terms of the growth characteristics, the sustainability, the high return on invested capital, which in the government business is absolutely outstanding and blended even from a firm standpoint is very strong. So it doesn't mean we would never say never on anything transformational, but it would have to be pretty, pretty compelling for us to consider that. What else? I did -- by the way, Jim, you asked the earlier panel, Moon and company, about WLAN and kind of what was happening or not happening. I would tell you that I think it's -- the reason I don't think we have performed the way we should in WLAN -- and Mark mentioned this in his earlier comments -- is largely related to sales coverage. So he said in his presentation that he thought about and we evaluated deploying more incremental sales coverage to drive WLAN sales. We made the decision not to do that. So instead, we've changed the value proposition, Bruce Brda's services-led, to try to drive that. But our product line is really good, the intellectual property is strong, the voice expertise for integration of 802.11 WLAN to the voice client is very good, so I think it's more sales coverage. Now we're #4. Cisco; Aruba; HP; Motorola Solutions is #4; Ruckus is right behind us. So when we think about the deployment of capital and the biggest bang for the buck and where we can make an impact, deploying more sales coverage to drive WLAN is something we decided not to do. So we're instead going through a managed services value proposition through Bruce Brda's services team. And quite frankly, there's a couple of very good engagements right now that we're working. What else? Nothing. Going once...

Shep Dunlap

There's one over here, Greg.

Gregory Q. Brown

One over here. Where? Here?

Andrew Spinola - Wells Fargo Securities, LLC, Research Division

It's Andrew Spinola, Wells Fargo. I was curious, actually, if -- as managed services grow, if we're going to see CapEx grow as a percentage of your revenue because, I guess, it's relatively unfamiliar to me that you actually own the systems in some of these situations, like in Illinois. And then just a follow-up, I'm wondering if, longer-term, what kind of hold does iDEN leave when it goes away? Is it -- can you give us a sense of how profitable that business is? Is it a little bit more profitable than the rest of enterprise, or is it materially more profitable?

Gregory Q. Brown

So on the first one, managed services and what Brda has showed you in terms of our roadmap, we still think we can do in a financial envelope of 50-30-20, meaning the 20 being CapEx. We like success-based capital. And while we do State of Illinois or Palmetto, South Carolina, or Australia on a data network or some things around Norway, they're rare. They're rare. I don't -- what we're not saying to you is we think the business model and CapEx deployment, we still think generally, plus or minus, we can do what we need to do on a managed services value proposition. Within about -- approximately 20% of operating cash flow being deployed around CapEx, we don't expect that to materially change. On iDEN, it's more profitable, but that should not and will not impair us in terms of growing on operating margin from 17% to approximately 18% to targeting 19%. Last year, iDEN was $265 million. Coming out of the Q1 earnings call, it's down dramatically to $185 million. Sprint has talked about shutting the network off, I think, at the end of Q2 on June 30. So the majority of our iDEN is now Nextel International and outside the U.S. engagement. I think the drop next year will be similar to the drop from '12 to '13 in dollars. But -- by the way, there was an earlier question to Schassler and Girish about how are you optimizing R&D spend and staying at about $1 billion. Part of the iDEN ramp-down on revenue is we've ramped down on the R&D spend as well, and we'll continue to do that. But iDEN is a great business, and it was one that you know Motorola invented back in the early '90s. It served its purpose. It's still, in my view, the best push-to-talk solution there. We have the expertise inside the firm that we'll maintain as we deploy it on Schassler and Girish's product portfolio. But we still can grow the operating margin even with the ramp-down of the business.

Edward J. Fitzpatrick

And Greg, the only think I'd add to that on the CapEx front, for sure, our thinking is that within that 20% envelope, Greg and I both talked about, if there's opportunities in any given year that we think are attractive, back to that ROIC comment that I made, and we think it's more attractive than an acquisition or a share repurchase when we look at the total envelope, we're -- we'll -- if there's an attractive build, own and operate or whatever that's out there, that 20% isn't a barrier. We'll do more if we need to, and we'll make the investments in the right places, and we're all aligned if that's what makes sense for the firm.

Gregory Q. Brown

There was somebody who raised their hand, I thought you just...

Mark F. Moon

Over to the right, Greg.

Gregory Q. Brown

To the right, sorry. Number 4, sorry.

Unknown Analyst

I'm curious, going back to Asia for a moment. You're #1. You've obviously taken a number of steps there, and I was wondering if you could remind us on the timing of those steps. And then how long do you think it takes to rebuild the sales funnel and get that region growing again?

Gregory Q. Brown

As Mark talked about, and he and I have had a number of discussions, we started recognizing this, I'd say, mid-year last year and, in the fall, started to make some changes. I think as Hoodie [ph] mentioned, we've -- the general manager, marketing, HR, sales ops, our new positions, quite frankly, Mohammad Akhtar being new, returning back to the firm as he did his stint at Nokia Siemens, when we monetized the Networks business. I think he's doing a great job. I think the funnel is replenishing and -- I mean, it's still in transition, but there are a number of engagements he is working now that we feel pretty good about.

Mark F. Moon

I think just a further color, what we said at the last earnings call and what I would reiterate is, we do expect to be down year-on-year in the second quarter. But for full year, third quarter, fourth quarter, we'll return to growth. We'll be mid- to high-single digits for the full year. And going out of this quarter, we will have increased backlog within the regions. So the funnel has been replenished. We got to go execute on the deals, but I see that business, it's been a struggle for the last number of quarters, and we've talked about a lot, but I really see that business returning right now. And big opportunities when you take the Middle East. So we're talking about Asia as a stand-alone, so we don't want to cover it up with the Middle East. We want to be transparent about both, but I do think Asia will return in itself to good growth for full year.

Gregory Q. Brown

Number 4.

Unknown Analyst

Following up on that, I think you've talked about sales coverage growing significantly. I mean, is that a significant increase in the hedge that we really should be thinking about in terms of expenses? And then secondarily, just on kind of the capital allocation front, as stocks moved up and down, but moved up significantly within the last couple years, as we continue to go up, I mean, do you change how discretionary is that 50% buybacks and so on?

Gregory Q. Brown

Let me do the second one first. The 50% is share repurchase or acquisition. Every quarter, Fitzpatrick and I review and update the LRP, the long-range plan. We do -- we take a look at discounted cash flows and others for where we think it makes sense to either hit the accelerate or moderate on the share repurchase. So we are looking at that, literally, every quarter. And we think that there's ample opportunity and room in that regard.

Mark F. Moon

So around sales coverage, we talked about expanding coverage and geographical penetration in the Middle East and Africa and in parts of Asia. I mentioned Indonesia directly. The reason why we talked about leverage the growth strategy was we do not anticipate the selling and marketing line going up as a percentage of sales.

Gregory Q. Brown

I love to hear you say it.

Mark F. Moon

But we actually redeployed resources. And as we look at this piece, both in geographic and vertical expansion, we've said we honestly believe that we can take the resources that we've got in certain places, skill sets and geographical placement of resources, and change some of those out to build on new places. Now obviously, we want to keep growing the top line. We just won't grow the cost line as fast. But right now, we really do believe we can redeploy resources in areas we need without increasing selling and marketing as a percentage of sales.

Gregory Q. Brown

Other Questions? Then I'll close and just simply say a few things. We are really appreciative of you making the trip to Chicago and coming out here. We gave this a lot of thought. We wanted to do this because we wanted you to see the product demonstrations. So while you all have planes to catch and you invested the time, I strongly encourage you to meet some of the Motorola people, get into the product pods, see and touch the products, especially on the enterprise side, where we always talk about the cyclical versus structural, our smartphones are going to take over the world, what's the future of mobile computing, what's the substitutability on data capture, et cetera, et cetera. So I am very appreciative, and we as a management team, that you came out. I hope you found it useful. By the way, we've asked for your feedback. Be as candid as you possibly can. We want to improve it every year. Thanks for coming. Spend time with the products, and we'll see you again next year, and I'm sure we'll see a lot of you before that. Thanks.

Shep Dunlap

So for those of you who are going to stay around, look on the back of your badge, we've got you numbered 1 through 5.

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