• We generated operating earnings of $1.3 billion in 2012, compared to $858 million in 2011. Operating margin was 14.4% of net sales in 2012, compared to 10.5% of net sales in 2011.

• We had earnings from continuing operations of $878 million, or $2.95 per diluted common share, in 2012, compared to earnings from continuing operations of $747 million, or $2.20 per diluted common share, in 2011.

• We generated cash from operating activities of $1.1 billion in 2012, compared to $848 million of cash from operating activities in 2011.

• We returned $2.4 billion in cash to shareholders through share repurchases and $270 million in cash dividends during 2012.

• We issued $750 million of 3.750% senior notes due 2022 and redeemed $400 million of 5.375% senior notes due in

November 2012.
What were the financial results for our two operating segments in 2012?
• In the Government segment: Net sales were $6.0 billion in 2012, an increase of 12% compared to net sales of $5.4 billion in 2011. On a geographic basis, net sales increased in all regions. Operating margin improved in 2012 to 16.1% from 11.5% in 2011, primarily due to the 12% increase in net sales and increased leverage in operating expenses. Operating earnings were $965 million in 2012, compared to operating earnings of $616 million in 2011.

• In the Enterprise segment: Net sales were $2.7 billion in 2012, a decrease of 5% compared to net sales of $2.8 billion in 2011. On a geographic basis, net sales increased in Asia and decreased in North America, Latin America and Europe, Middle East, and Africa ("EMEA"). Operating earnings were $291 million in 2012, compared to operating earnings of $242 million in 2011. Operating margin increased in 2012 compared to 2011, due to a decrease in Other charges driven by lower intangible amortization, partially offset by decreased gross margins due to lower sales levels.

What were our major accomplishments in 2012?
• In the Government segment: In 2012, sales, operating earnings, and operating leverage increased compared to 2011. We saw strong growth across all of our major product lines, including systems infrastructure and subscribers. The 12% increase in net sales was primarily driven by the continued transition from analog to digital, the replacement of aged public safety infrastructure, and the tiered expansion of our product portfolio. Additionally, in North America we benefited from U.S. narrowbanding, as many existing public safety, professional and commercial analog systems were replaced with next generation digital systems, with enhanced features and a more efficient use of spectrum, providing additional channels and enabling new users to be added.

During 2012, our APCO P-25 based Astro technology continued to extend beyond North America, as we now have deployments in over 60 countries. Additionally, we shipped our two millionth TETRA terminal, and continued to expand our digital professional and commercial radio solution MOTOTRBO. Additionally, our services portfolio saw significant growth with the completion of the agreement with NSN to take over responsibility to implement and manage Norway΄s TETRA public safety network.

• In the Enterprise segment: Our sales decline in 2012 was driven by a challenging macro environment as many large customers continued to postpone deployments in the face of soft economic conditions. Despite challenges in the macro environment, our engagement with customers who continue to invest in our mobile technologies, remains strong.

Our R&D and capital investments resulted in many new enhancements to our product portfolio, including the acquisition of Psion plc ("Psion"), a U.K. based leader in mobile computing solutions. We extended retail thought leadership with innovative new products like the SB1, MC40 and ET1 tablet that help provide customer support while delivering significant operational efficiencies. Within the data capture solutions product group we continued to strengthen our product portfolio by executing on the laser to imager transition, including the recent announcement of the MP6000 multi-plane imager based scanner, which sits inside the check-out counters used by retailers.

Looking Forward
In 2012, we achieved a number of key accomplishments, including solid sales growth, operating earnings expansion and earnings per share growth, generating strong operating cash flow and significant capital returns to our shareholders, which positions us well as we begin 2013. The demand drivers for our business remain solid and we remain focused on improving operating leverage through targeted investments and disciplined cost management.
In the Government segment, our focused R&D investments have led to the introduction of over 100 new products across both our subscriber and infrastructure portfolios since 2009, giving us the broadest portfolio in the industry. We believe that while regulatory mandates to improve spectrum efficiency have encouraged some of our U.S. customers to upgrade, our new product introductions and expanded portfolio will continue to be a driver for growth across our U.S. and international markets, as customers will continue to invest in our next-generation systems with the assurance that new radios with enhanced features remain interoperable and backward-compatible.
In addition to our investment in our radio communication systems, we have been investing in R&D for next generation public safety. Private public safety broadband networks based on the LTE standard are an important next generation tool for our first-responder customers, and we believe our expertise in both public and private networks makes us uniquely qualified to provide LTE solutions. The development of this market is an important part of our overall global growth strategy for the Government segment.
Our government customer base is composed of thousands of customers, predominantly at the U.S. state and local level with various funding sources. In addition, these customers are at different stages of network evolution and aging in a long cycle business. We believe the fundamentals for our business and customer base provide a significant degree of resiliency for this segment even if sequestration cuts were to occur.
In the Enterprise segment, sales declined in 2012 due to a challenging macro environment, unfavorable foreign currency fluctuations and uncertainty around operating system roadmaps. These factors led to suppressed information technology ("IT") spend and fewer large deals as compared to 2011 in the key verticals we serve, including retail and transportation and logistics. Although our 2012 results were impacted by these factors, we believe customers will continue to invest in our mobile computing, data capture, and WLAN technologies, which yield high return on investment and enable real-time information to their workforce. In addition, we believe information technology ("IT") and IT hardware spend will increase during 2013.
We feel well equipped to address the uncertainty around operating system roadmaps with our R&D investment in mobile computing technologies, which enables us to accommodate applications through a variety of different enterprise environments, including devices on Microsoft with Windows Embedded 8, Android, and at the web-browser level, HTML5. Outside of our investment in mobile computing, we continue to invest in new products across the Enterprise portfolio that serve many existing customers, but address market opportunities that are new to us.
Beyond investment in R&D, in 2012, we made acquisitions that are complimentary to our existing portfolio, including Psion. We expect that the financial results of Psion, which we report in the Enterprise segment, will be accretive to earnings by 2014, as we integrate their technology into our current Enterprise product and services offering.
For the iDEN infrastructure portfolio, which we report in the Enterprise segment, we expect to see a continued decline in iDEN infrastructure and related services.
We continue to expand our current services offerings, as both our government and enterprise customers are looking for end-to-end solutions that combine managed services and comprehensive device and network management with our existing portfolio. We believe we are uniquely positioned to provide our customers products and services that meet mobile workforce needs, as well as build successful long term relationships.
We are committed to employing disciplined financial policies, achieving our financial plan, and optimizing our capital structure. In 2013, we intend to continue the quarterly dividends that were initiated in 2011 and intend to continue to invest

organically in capital expenditures. We will also evaluate our acquisition opportunities along with the opportunities to return capital to shareholders via share repurchases. As of December, 31, 2012 we had approximately $1.5 billion of authority available for repurchases.
We conduct our business in competitive markets, facing both new and established competitors. The markets for many of our products are characterized by rapidly changing technologies and evolving industry standards. Market disruptions caused by new technologies, the entry of new competitors, consolidations among our customers and competitors, and changes in regulatory requirements, among other matters, can introduce volatility into our businesses. Meeting all of these challenges requires consistent operational planning and execution and investment in technology, resulting in innovative solutions that meet the needs of our customers globally. As we execute on meeting these objectives, we remain focused on taking the necessary action to design and deliver differentiated and innovative products and services that serve the needs of our government and enterprise customers.

Results of Operations
                                                     Years Ended December 31
(Dollars in millions,                      % of                       % of                       % of
except per share amounts)    2012        sales**        2011         sales         2010        sales**
Net sales from products   $   6,363                  $   6,068                  $   5,616
Net sales from services       2,335                      2,135                      2,001
Net sales                     8,698                      8,203                      7,617
Cost of product sales         2,844        44.7  %       2,723        44.9  %       2,523        44.9  %
Cost of service sales         1,506        64.5  %       1,334        62.5  %       1,282        64.1  %
Costs of sales                4,350        50.0  %       4,057        49.5  %       3,805        50.0  %
Gross margin                  4,348        50.0  %       4,146        50.5  %       3,812        50.0  %
Selling, general and
administrative expenses       1,963        22.6  %       1,912        23.2  %       1,874        24.5  %
Research and development
expenditures                  1,075        12.4  %       1,035        12.6  %       1,037        13.6  %
Other charges                    54         0.6  %         341         4.2  %         150         2.0  %
Operating earnings            1,256        14.4  %         858        10.5  %         751         9.9  %
Other income (expense):
Interest expense, net           (66 )      (0.8 )%         (74 )      (0.9 )%        (129 )      (1.7 )%
Gains on sales of
investments and
businesses, net                  39         0.4  %          23         0.3  %          49         0.6  %
Other                           (14 )      (0.2 )%         (69 )      (0.8 )%          (7 )      (0.1 )%
Total other income
(expense)                       (41 )      (0.5 )%        (120 )      (1.5 )%         (87 )      (1.2 )%
Earnings from continuing
operations before income
taxes                         1,215        14.0  %         738         9.0  %         664         8.7  %
Income tax expense
(benefit)                       337         3.9  %          (3 )         -  %         403         5.3  %
Earnings from continuing
operations                      878        10.1  %         741         9.0  %         261         3.4  %
Less: Earnings (loss)
attributable to
noncontrolling interests          -           -  %          (6 )      (0.1 )%          17         0.2  %
Earnings from continuing
operations*                     878        10.1  %         747         9.1  %         244         3.2  %
Earnings from
discontinued operations,
net of tax                        3           -  %         411         5.0  %         389         5.1  %
Net earnings*             $     881        10.1  %   $   1,158        14.1  %   $     633         8.3  %
Earnings per diluted
common share:
Continuing operations     $    2.95                  $    2.20                  $    0.72
Discontinued operations        0.01                       1.21                       1.15
                          $    2.96                  $    3.41                  $    1.87

* Amounts attributable to Motorola Solutions, Inc. common shareholders. ** Percentages may not add due to rounding.

Geographic market sales measured by the locale of the end customer as a percent of total net sales for 2012, 2011 and 2010 are as follows:
Geographic Market Sales by Locale of End Customer

              2012    2011    2010
North America  58 %    57 %    58 %
Latin America   8 %     9 %     9 %
EMEA           21 %    21 %    21 %
Asia           13 %    13 %    12 %
              100 %   100 %   100 %

Results of Operations-2012 Compared to 2011 Net Sales
Net sales were $8.7 billion in 2012, a 6% increase compared to net sales of $8.2 billion in 2011. The increase in net sales reflects: (i) a $631 million, or 12% increase in net sales in the Government segment driven by broad based growth across the product portfolio, and (ii) a $136 million, or 5% decrease in net sales in the Enterprise segment driven by the anticipated decline in iDEN infrastructure sales, reduced information technology spending driven by macroeconomic uncertainty, and unfavorable foreign currency fluctuations. Gross Margin
Gross margin was $4.3 billion, or 50.0% of net sales in 2012, compared to $4.1 billion, or 50.5% of net sales, in 2011. The gross margin increase was driven by the 12% increase in net sales in our Government segment, offset by lower gross margin in our Enterprise segment, primarily related to a decline in volume, including the decline in iDEN infrastructure sales, and unfavorable foreign currency fluctuations. The decrease in gross margin as a percent of sales reflects higher gross margin percent from product sales and lower gross margin percent from service sales. The decline in gross margin percentage from service sales primarily relates to: (i) the expansion of managed services, which generally have lower gross margin than our traditional service contracts, and
(ii) unfavorable foreign currency fluctuations. Selling, General and Administrative Expenses Selling, general and administrative ("SG&A") expenses increased 3% to $2.0 billion, or 22.6% of net sales in 2012, compared to $1.9 billion, or 23.2% of net sales in 2011. The increase in SG&A expenses is driven by an increase in pension and employee benefit-related expenses, as well as the Psion acquisition that closed in the fourth quarter of 2012. Research and Development Expenditures
Research and development ("R&D") expenditures increased 4% to $1.1 billion, or 12.4% of net sales in 2012, compared to $1.0 billion, or 12.6% of net sales, in 2011. The increase in R&D expenditures reflects higher R&D expenditures in both segments, primarily due to: (i) an increase in employee benefit-related expenses, and (ii) increased investment in next-generation technology, including strategic acquisitions.
Other Charges
We recorded net charges of $54 million in Other charges in 2012, compared to net charges of $341 million in 2011. The charges in 2012 included: (i) $41 million of charges relating to the reorganization of business charges, and (ii) $29 million of charges relating to amortization of intangibles, partially offset by $16 million of income related to a legal matter. The charges in 2011 included:
(i) $200 million of charges relating to the amortization of intangibles, (ii) $88 million of net charges relating to legal matters, (iii) $52 million of net reorganization of business charges, and (iv) $10 million related to a long term financing receivable reserve, partially offset by $9 million in gains related to pension plan adjustments. The net reorganization of business charges are discussed in further detail in the "Reorganization of Businesses" section. Net Interest Expense
Net interest expense was $66 million in 2012, compared to net interest expense of $74 million in 2011. Net interest expense in 2012 included interest expense of $108 million, partially offset by interest income of $42 million. Net interest expense in 2011 includes interest expense of $132 million, partially offset by interest income of $58 million. The decrease in net interest expense in 2012 compared to 2011 is primarily attributable to lower interest expense driven by lower average debt outstanding, partially offset by a decrease in interest income due to lower average cash and cash equivalents during 2012 compared to 2011.

Gains on Sales of Investments and Businesses Gains on sales of investments and businesses were $39 million in 2012, compared to $23 million in 2011. In 2012 and 2011, the net gains were primarily comprised of gains related to sales of certain of our equity investments. Other
Net Other expense was $14 million in 2012, compared to net Other expense of $69 million in 2011. The net Other expense in 2012 was primarily comprised of: (i) $13 million foreign currency expense, (ii) $6 million loss from the extinguishment of debt, and (iii) a $8 million investment write down expense, partially offset by $13 million of other net investment earnings. The net Other expense in 2011 was primarily comprised of an $81 million loss from the extinguishment of a portion of our outstanding long-term debt, partially offset by an $8 million foreign currency gain.
Effective Tax Rate
We recorded $337 million of net tax expense in 2012, resulting in an effective tax rate of 28%, compared to a $3 million net tax benefit in 2011, resulting in a negative effective tax rate. Our effective tax rate in 2012 is lower than the U.S. statutory tax rate of 35% primarily due to: (i) a $60 million tax benefit related to the reversal of a significant portion of the valuation allowance established on certain foreign deferred tax assets, and (ii) a $13 million reduction in unrecognized tax benefits for facts that now indicate the extent to which certain tax positions are more-likely-than-not of being sustained. Our negative effective tax rate in 2011 was primarily due to: (i) a $274 million tax benefit related to the reversal of a significant portion of the valuation allowance established on the U.S. deferred tax assets, and (ii) reductions in unrecognized tax benefits for facts that now indicate the extent to which certain tax positions are more-likely-than-not of being sustained, partially offset by an increase in the U.S. federal income tax accrual for repatriation of undistributed foreign earnings.
While our effective tax rate may change from period to period due to non-recurring events, such as settlements of income tax audits and changes in valuation allowances, we generally expect our effective tax rate to be close to the U.S. statutory tax rate primarily due to our current repatriation strategy and the U.S. federal income tax accrual on undistributed foreign earnings. During 2012, the Company began to reorganize certain of its non-U.S. subsidiaries under a holding company structure in order to facilitate the efficient movement of non-U.S. cash and provide a platform to fund foreign investments, such as potential acquisitions and capital expenditures. When the reorganization is complete, the tax impact of future cash repatriations from these subsidiaries may be more favorable than under the existing structure. The valuation allowances on our deferred tax assets are discussed further in Note 6, "Income Taxes," of our consolidated financial statements. Our effective tax rate will change from period to period based on non-recurring events, such as the settlement of income tax audits, changes in valuation allowances and the tax impact of significant unusual or extraordinary items, as well as recurring factors including changes in the geographic mix of income and effects of various global income tax strategies.
Earnings from Continuing Operations
After taxes, and excluding earnings attributable to noncontrolling interests, we had net earnings from continuing operations of $878 million, or $2.95 per diluted share, in 2012, compared to $747 million, or $2.20 per diluted share, in 2011. The increase in earnings from continuing operations in 2012 compared to 2011 was primarily attributable to: (i) $287 million decrease in other charges related to lower intangible asset amortization and net legal and related insurance matters, and (ii) $202 million increase in gross margin, partially offset by the $274 million benefit for the valuation allowance reversal recorded during 2011. The increase in earnings per diluted share was primarily due to the increase in earnings from continuing operations and the reduction in shares outstanding as a result of our share repurchase program. Earnings from Discontinued Operations
After taxes, we had earnings from discontinued operations of $3 million, or $0.01 per diluted share, in 2012, compared to earnings from discontinued operations of $411 million, or $1.21 per diluted share, in 2011. The earnings from discontinued operations in 2011 were primarily from the operations of and the gain on the sale of the Networks business. Results of Operations-2011 Compared to 2010 Net Sales
Net sales were $8.2 billion in 2011, an 8% increase compared to net sales of $7.6 billion in 2010. The increase in net sales reflects: (i) a $309 million, or 6% increase in net sales in the Government segment and (ii) a $277 million, or 11% increase in net sales in the Enterprise segment. Gross Margin
Gross margin was $4.1 billion, or 50.5% of net sales in 2011, compared to $3.8 billion, or 50.0% of net sales, in 2010. Gross margin dollars increased in both segments. The increase in gross margin as a percent of sales reflects higher gross margin in the Government segment, driven by the increase in sales and favorable product mix, with margins remaining flat in the

Enterprise segment driven by margin gains in certain product lines offset by the anticipated decline in iDEN, which has historically yielded strong margins. Selling, General and Administrative Expenses SG&A expenses increased 2% to $1.9 billion, or 23.2% of net sales, in 2011, compared to $1.9 billion, or 24.5% of net sales, in 2010. The increase in SG&A expenses reflects higher SG&A expenses in both segments, primarily due to (i) increased sales incentives related to the increase in net sales and (ii) increased employee benefit-related expenses. The increases in employee benefit-related expenses are primarily due to an increase in pension-related expenses and the reinstatement of our 401(k) matching contributions. Research and Development Expenditures
R&D expenditures of $1.0 billion, or 12.6% of net sales were relatively flat in 2011, compared to $1.0 billion, or 13.6% of net sales in 2010. R&D expenditures were flat in 2011 compared to 2010, which reflects higher R&D expenditures in the Enterprise segment and lower R&D expenditures in the Government segment. The slight increase in the Enterprise segment was primarily due to investment in next-generation technologies and increased employee benefit-related expenses. The decrease in R&D expenditures in the Government segment was primarily due to savings from cost reduction initiatives related to non employee expenses, partially offset by increased employee benefit expenses. Other Charges
We recorded net charges of $341 million in Other charges in 2011, compared to net charges of $150 million in 2010. The charges in 2011 included: (i) $200 million of charges relating to the amortization of intangibles, (ii) $88 million of net charges relating to legal matters, (iii) $52 million of net reorganization of business charges included in Other charges, and (iv) $10 million related to a long term financing receivable reserve, partially offset by $9 million of gains related to pension plan adjustments. The charges in 2010 included: (i) $203 million of charges relating to the amortization of intangibles, and (ii) $54 million of net reorganization of business charges included in Other charges, partially offset by: (i) $78 million of gains related to intellectual property settlements and reserve adjustments, and (ii) $29 million of income related to a legal settlement. The net reorganization of business charges are discussed in further detail in the "Reorganization of Businesses" section.
Net Interest Expense
Net interest expense was $74 million in 2011, compared to net interest expense of $129 million in 2010. Net interest expense in 2011 included interest expense of $132 million, partially offset by interest income of $58 million. Net interest expense in 2010 includes interest expense of $217 million, partially offset by interest income of $88 million. The decrease in net interest expense in 2011 compared to 2010 is primarily attributable to lower interest expense driven by lower average debt outstanding partially offset by a decrease in lower interest income driven by lower average cash and cash equivalents and lower yields during 2011 compared to 2010.
Gains on Sales of Investments and Businesses Gains on sales of investments and businesses were $23 million in 2011, compared to a gain of $49 million in 2010. In 2011, the net gain was primarily comprised of gains related to sales of certain of our equity investments. In 2010, the net gain was primarily comprised of a gain on the sale of a single investment. Other
Net Other expense was $69 million in 2011, compared to net Other expense of $7 million in 2010. The net Other expense in 2011 was primarily comprised of an $81 million loss from the extinguishment of a portion of our outstanding long-term . . .