Inventory and Raw Materials

Our practice is to carry reasonable amounts of inventory to meet customers’ delivery requirements. We provide custom products ~~which~~that require the stocking of inventories and a large variety of piece parts and replacement parts in order to meet delivery and warranty requirements. To the extent suppliers’ product life cycles are shorter than ~~ours,~~ours; stocking of lifetime buy inventories is required to meet long-term warranty and contractual requirements. In addition, replacement parts are stocked for delivery on customer demand within a short delivery cycle.

Availability of required materials and components is generally dependable; however, fluctuations in supply and market demand could cause selective shortages and affect our results of operations. We currently procure certain materials and components from single-source vendors. A material disruption from a single-source vendor may have a material adverse impact on our results of operations. If certain single-source suppliers were to become capacity constrained or insolvent, it could result in a reduction or interruption in supplies, or an increase in the price of supplies, and adversely impact our financial results.

Natural gas, electricity and, to a lesser extent, oil are the primary sources of energy for our manufacturing operations. Each of these resources is currently in adequate supply for our operations. The cost to operate our facilities and freight costs are dependent on world oil ~~prices.~~prices and external third-party logistics rates for inbound and outbound air lanes. Labor is generally available in reasonable proximity to our manufacturing facilities and the manufacturing facilities of our largest outsourced manufacturing suppliers. Difficulties in obtaining any of the aforementioned resources, or a significant cost increase, could affect our financial results.

Environmental Quality ~~and Regulatory Matters~~

Some of our operations use substances regulated under various federal, state, local, and international laws governing the environment and worker health and safety, including those governing the discharge of pollutants into the ground, air, and water, the management and disposal of hazardous substances and wastes, and the cleanup of contaminated sites, as well as relating to the protection of the environment. Certain products of ~~our products~~ours are subject to various federal, state, local, and international laws governing chemical substances in electronic products. During ~~2016,~~2018, compliance with these U.S. federal, state and local, and international laws did not have a material effect on our capital expenditures, ~~earnings,~~ or competitive ~~position.~~position; however, we recorded a $57 million charge once we became aware of additional remediation requirements for the designated Superfund site under the Comprehensive Environmental Response, Compensation and Liability Act (commonly known as the “Superfund Act”) incurred by a legacy business. The charge was primarily due to: (i) changes in the expected timeline of the remediation activities to 30 years and (ii) additional costs for further remediation efforts, increasing the reserve to $107 million.

Regulatory Matters

Radio spectrum is required to provide wireless voice, data, and video communications service. The allocation of spectrum is regulated in the U.S. and other countries and limited spectrum space is allocated to wireless services and specifically to public safety users. In the U.S., the Federal Communications Commission (“FCC”) and the National Telecommunications and Information Administration (“NTIA”) regulate spectrum use by non-federal entities and federal entities, respectively. Similarly, ~~countries~~every country around the world ~~have~~has one or more regulatory bodies that define and implement the rules for use of radio spectrum, pursuant to their respective national laws and international coordination under the International Telecommunications Union (“ITU”).

We manufacture and market products in spectrum bands already ~~made available~~allocated by regulatory bodies. These include voice and data infrastructure, mobile radios, and portable or hand-held devices. Consequently, our results could be positively or negatively affected by the rules and regulations adopted ~~from time to time~~ by the FCC, NTIA, ITU, or regulatory agencies in other countries. Our products operate both on licensed and unlicensed spectrum. The availability of additional radio spectrum may provide new business opportunities. Conversely, the loss of available radio spectrum may result in the loss of business opportunities. Regulatory changes in current spectrum bands (e.g., the sharing of previously dedicated or other spectrum) may also provide opportunities or may require modifications to some of our products so they can continue to be manufactured and marketed.

As television transmission and reception technology transitions from analog to more efficient digital modes, various countries around the world are examining, and in some cases already pursuing, the redevelopment of portions of the television spectrum. In the U.S., spectrum historically used for broadcast television, known as the 700MHz band, has been redeveloped and deployed for new uses (the so-called “digital dividend” spectrum), including broadband and narrowband wireless communications. In 2016, this trend continued in the USU.S. and additional TV spectrum in the 600MHz band ~~is being~~was auctioned for broadband communications (part of the “Broadcast Incentive Auction”). This auction ~~is expected to finish~~closed in April 2017, but auction winners will not get access to the spectrum for several years.

In the U.S., thirty-four MHz of spectrum in the 700 MHz band is now allocated to support public safety narrowband and broadband communications systems. This includes 24 MHz of spectrum previously allocated by the FCC and an additional ten MHz of spectrum (the “D block”) allocated in February 2012 as part of the Middle Class Tax Relief and Job Creation Act of 2012 in response to public safety requests for additional broadband spectrum. The resulting law also identified up to $7 billion in funding for the nationwide public safety broadband network. The law further provides for the establishment of a centralized governance model through an independent authority within NTIA designated as the “First-Responder Network Authority” or “FirstNet” to manage deployment and operation of the network. Additional work, currently ongoing in FirstNet, is required to enable deployment of the nationwide public safety broadband network. FirstNet released its network Request for Proposal in early 2016 and an Award is projected in 2017.

The law allows for states to opt out of the plan to develop a nationwide public safety network and perform their own competitive procurements if certain criteria are met. States that opt out would still be eligible for funding and would also be allowed to generate revenue through leases to secondary users which would have to be reinvested in their FirstNet public safety network. FirstNet and the FCC have also enabled the early deployment of broadband systems in several areas so that field experience can be gained regarding the benefits of broadband communications for public safety operations. In September 2012, the State of Texas received a Special Temporary Authorization ("STA") for deployment of 14 broadband sites in the Harris County area around Houston. A Spectrum Manager Lease Agreement ("SMLA") was signed in August 2014, with FirstNet and the State of Texas on behalf of Harris County, extending the access to this spectrum for three years. The State of Texas and Harris County, with assistance from Motorola Solutions, have deployed broadband equipment and applications and successfully demonstrated the benefits such systems can bring to FirstNet and other officials. FirstNet also entered into a spectrum lease with the State of California on behalf of Los Angeles Regional Interoperable Communications System Authority ("LA-RICS") to allow for a radio system that will provide mission critical communications for the region’s more than 34,000 law enforcement, fire service and health service professionals and more than 80 public safety agencies. LA-RICS selected Motorola Solutions to develop this radio system.

Although the law has been enacted, the implementation of a nationwide public safety network under FirstNet has been slow to progress. For a discussion of risks related to the implementation of a nationwide public safety network, please refer to ~~"Item 1A, Risk Factors."~~

Internationally, the ITU World Radio Conference ("WRC") is held every three to four years to discuss and promote global agreement on the use and cooperation of spectrum usage. The most recent WRC-15 was held in November 2015. During this conference, leaders from United Nations member countries considered a number of initiatives, including whether to allocate additional spectrum for commercial broadband use as well as whether to allocate spectrum dedicated for public safety broadband. The WRC ~~has~~ agreed to support countries making individual decisions to allocate spectrum for public safety broadband in the 700MHz and 800MHz spectrum bands. ~~Studies are underway to assess whether and~~Based on the results of WRC-15, ITU has published recommendations on how much spectrum ~~is needed~~ and to ~~develop recommendations on where in~~which parts of the spectrum range the spectrum should be allocated for public safety broadband (taking into account regional and global harmonization to the extent practicable). The next WRC is scheduled to be held in October-November 2019. WRC-19 will focus on 5G, harmonizing the internet of things ("IOT"), and satellite coordination. Motorola Solutions continues to work with its customers and governments around the world to advocate for future allocations of dedicated

broadband spectrum for public safety which will provide new business opportunities for us in the ~~future.~~future and to reinforce the importance of LMR spectrum and services.

Several major markets including: Canada, the ~~United States,~~U.S., the UAE, Mexico, Singapore, and South Korea have already set aside broadband spectrum for use by public safety and the wider first-responder communities. We believe this trend will continue over time and the planned implementation of broadband public safety networks provides new opportunities for our broadband portfolio and services growth strategy. In addition, certain countries, in response to increasing security concerns, already have spectrum landscapes that permit country administrations to allocate public safety spectrum quickly without a protracted process or agreement. Some other markets including Australia and the UK are launching broadband public safety networks drawing on basic LTE infrastructure built by the carriers. These trends also provide opportunities for our broadband and services portfolio.

Employees

At December 31, ~~2016,~~2018, and December 31, ~~2015~~2017 we had approximately ~~14,000 employees.~~16,000 and 15,000 employees, respectively.

Material Dispositions

On October 27, 2014, we completed the sale of certain assets and liabilities of the Enterprise business to Zebra Technologies Corporation ("Zebra"). The financial results of the disposed business have been classified as discontinued operations for all periods presented. The results of discontinued operations are discussed in further detail in the “Discontinued Operations” footnote included in Item 8.None

Financial Information About Geographic Areas

The response to this section of Item 1 incorporates by reference Note 11, “Commitments and Contingencies” and Note 12, “Information by Segment and Geographic Region” of Part II, "Item 8: Financial Statements and Supplementary Data" of this document, the “Results of Operations—~~2016~~2018 Compared to ~~2015”~~2017” and “Results of Operations—~~2015~~2017 Compared to ~~2014”~~2016” sections of Part II, “Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 1A: Risk Factors” of this document.

Financial Information About Segments

The response to this section of Item 1 incorporates by reference Note 12, “Information by Segment and Geographic Region,” of Part II, "Item 8: Financial Statements and Supplementary Data" of this document.

Available Information

We make available free of charge through our website, www.motorolasolutions.com/investors, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, other reports filed under the Securities Exchange Act of 1934 (“Exchange Act”), and all amendments to those reports simultaneously or as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. Our reports are also available free of charge on the SEC’s website, www.sec.gov. Also available free of charge on our website are the following corporate governance documents:

Motorola Solutions, Inc. Restated Certificate of Incorporation with Amendments

Conformed Restated Certificate of Incorporation of Motorola Solutions, Inc. (amended Jan. 4, 2011)

Certificate of Amendment to the Restated Certificate of Incorporation of Motorola, Inc. (effective Jan. 4, 2011)

Certificate of Ownership and Merger of Motorola Name Change Corporation into Motorola, Inc. (effective Jan. 4, 2011)

Motorola Solutions, Inc. Amended and Restated Bylaws

Board Governance Guidelines

Director Independence Guidelines

Principles of Conduct for Members of the Motorola Solutions, Inc. Board of Directors

Motorola Solutions Code of Business Conduct, which is applicable to all Motorola Solutions employees, including the principal executive officers, the principal financial officer and the controller (principal accounting officer)

Audit Committee Charter

Compensation and Leadership Committee Charter

Governance and Nominating Committee Charter

All of our reports and corporate governance documents may also be obtained without charge by contacting Investor Relations, Motorola Solutions, Inc., Corporate Offices, 500 W. Monroe Street, Chicago, IL 60661, E-mail: investors@motorolasolutions.com. This annual report on Form 10-K and Definitive Proxy Statement are available on the Internet at www.motorolasolutions.com/investors and may also be requested in hardcopy by completing the on-line request form available on our website at www.motorolasolutions.com/investors. Our ~~Internet~~internet website and the information contained therein or incorporated therein are not intended to be incorporated into this Annual Report on Form 10-K.

Item 1A: Risk Factors

We face a number of risks related to current global economic and political conditions, including low economic growth rates in certain markets, the impact of currency fluctuations, ~~falling~~ commodity ~~prices,~~price volatility, and unstable political conditions that have and could continue to unfavorably impact our business.

Global economic and political conditions continue to be challenging for many of our government and commercial markets, as economic growth in many countries, particularly in ~~Europe and~~parts of Latin America and in other emerging markets, has remained low or declined, currency fluctuations have impacted profitability, credit markets have remained tight for certain counterparties of ~~our counterparties~~ours and ~~many~~some of our customers ~~remain~~are dependent on government grants to fund purchases of our products and services. Although we do not anticipate a significant impact to the business at this time, the possibility of a partial federal government shutdown in the U.S. could potentially delay award of contracts and timing of payments.

In addition, conflicts in the Middle East and elsewhere have created many economic and political uncertainties that continue to impact worldwide markets. The length of time these adverse economic and political conditions may persist is unknown. These global economic and political conditions have impacted and could continue to impact our business, financial condition, results of operations, and cash flows in a number of ways, including:

•Requests by Customers for ~~vendor financing~~Vendor Financing by Motorola Solutions: Certain customers of ~~our customers,~~ours, particularly, but not limited to, those who purchase large infrastructure systems, request that their suppliers provide financing in connection with equipment purchases and/or the provision of solutions and services, particularly as the size and length of these types of contracts increases and as we increase our business in developing countries. Requests for vendor financing continue to increase in volume and scope, including in response to reduced tax revenue at the state and local government level and ~~ongoing~~ tightening of credit for certain commercial customers. Motorola Solutions has continued to provide vendor financing to both our government and commercial customers. We have been faced with and expect to continue to be faced with choosing between further increasing our level of vendor financing or potentially losing sales, as some of our competitors, particularly those in Asia, have been more willing to provide vendor financing to customers around the world, particularly customers in Africa and Latin America. To the extent we are unable to sell these receivables on terms acceptable to us we may retain exposure to the credit quality of our customers who we finance.

•Customers' Inability to Obtain Financing to Make Purchases from Motorola Solutions and/or Maintain Their Business: Some of our customers require substantial financing, including public financing or government grants, in order to fund their operations and make purchases from us. The inability of these customers to obtain sufficient credit or other funds, including as a result of lower tax revenues, increases in interest rates, currency fluctuations or unavailability of government grants, to finance purchases of our products and services and/or to meet their payment obligations to us could have, and in some cases has had, a negative impact on our financial results. This risk increases as the size and length of our contracts increase. In addition, if global economic conditions result in insolvencies for our customers, it will negatively impact our financial results.

•Challenges in Budgeting and Forecasting: It is difficult to estimate changes in various parts of the U.S. and world economy, including the markets in which we participate. Components of our budgeting and forecasting are dependent upon estimates of demand for our products and estimates of foreign exchange rates. The prevailing economic uncertainties render estimates of future income and expenditures challenging.

•Potential Deferment or Cancellation of Purchases and Orders by Customers: Uncertainty about current and future global economic conditions may cause, and in some cases has caused, businesses and governments to defer or cancel purchases in response to tighter credit, decreased cash availability and de-prioritization of communications equipment within the budgeting process. If future demand for our products declines due to economic conditions, it will negatively impact our financial results.

•Inability to Operate and Grow in Certain Markets: We operate in a number of markets with a risk of intensifying political instability, including Europe (including the impact of Brexit discussed below), Russia, Brazil, the Middle East and Africa. If political instability continues in these markets and in other parts of the world in which we operate it could have a significant impact on our ability to grow and, in some cases, operate in those locations, which will negatively impact our financial results.

We are subject to laws and regulations regarding privacy, data protection and information security, and our actual or perceived failure to comply with such legal obligations could adversely affect our business.

The European Union ("E.U.") adopted the General Data Protection Regulation ("GDPR") which took effect on May 25, 2018 harmonizing data protection laws across the E.U. The GDPR strengthens individual privacy rights and enhances data protection obligations for processors and controllers of personal data. This includes expanded disclosures about how personal information is to be used, limitations on retention of information and mandatory data breach notification requirements. Non-compliance with the GDPR can trigger fines of up to €20 million or 4% of total worldwide annual revenue, whichever is greater.

Also, U.S. federal, state and other foreign governments and agencies have adopted or are considering adopting laws and regulations regarding the collection, storage, use, processing and disclosure of personal data. State governments within the U.S. are starting to enact their own versions of “GDPR- like” privacy legislation which will create additional compliance challenges, risk, and administrative burden. Even though comprehensive U.S. Federal Privacy legislation is being discussed seriously by lawmakers and other stakeholders, it is possible that a one-size fits all compliance program may be difficult to achieve/manage globally.

Because the interpretation and application of privacy and data protection laws are still uncertain, it is possible that these laws may be interpreted and applied in a manner that is inconsistent with our existing practices or the features of our products, services and software.

Any failure or perceived failure by us, our business partners, or third party service providers to comply with GDPR, other federal, state or international privacy-related or data protection laws and regulations, or the privacy commitments contained in contracts could result in proceedings against us by governmental entities or others and significant fines, which could have a material adverse effect on our business and operating results and harm our reputation.

In addition, some countries are considering legislation requiring local storage and processing of data that, if enacted, could increase the cost and complexity of offering our products, services and software or maintaining our business operations in those jurisdictions.

A security breach or other significant disruption of our IT systems, those of our outsource partners, suppliers or those we manufacture, install, and in some cases operate and maintain for our customers, caused by cyber attack or other means, could have a negative impact on our operations, sales, and operating results.

All information technology systems are potentially vulnerable to damage, unauthorized access or interruption from a variety of sources, including but not limited to, cyber attack, cyber intrusion, computer viruses, security breach, energy blackouts, natural disasters, terrorism, sabotage, war, insider trading, and telecommunication failures. As a provider of mission-critical communications systems for customers in critical infrastructure sectors of the U.S. and globally, including systems that we operate and maintain for certain customers of ours, we face additional risk as a target of sophisticated attacks aimed at compromising both our company’s and our customers’ sensitive information and intellectual property, through means referred to as advanced persistent threats. This risk is heightened because these systems may contain sensitive governmental information or personally identifiable or other protected information. While we employ a number of countermeasures and security controls, including training, audits, and utilization of commercial information security threat-sharing networks to protect against such attacks, we, along with the industry, have experienced a gradual and steady increase in the sophistication of these threats, most noticeably through well-crafted social engineering and phishing attempts. We cannot guarantee that all threat attempts will be successfully thwarted even with these countermeasures and we are therefore investing more in detection and response capabilities to minimize potential impacts. Further, we are dependent, in certain instances, upon our outsourced business partners, suppliers, and customers to adequately protect our IT systems and those IT systems that we manage for our customers. In addition, some of our customers are exploring broadband solutions that use public carrier networks on which our solutions would operate. We do not have direct oversight or influence over how public carrier networks manage the security, quality, or resiliency of their networks, and because they are an attractive high value target due to their role in critical infrastructure, they expose customers to an elevated risk over our private networks. Although we maintain insurance related to cybersecurity risks, there can be no assurance that our insurance coverage will cover the particular cyber incident at issue or that such coverage will be sufficient.

Our company outsources certain business operations, including, but not limited to IT, HR information systems, manufacturing, repair, distribution, and engineering services. These arrangements are governed by various contracts and agreements which reference and mandate Company and international standards of information protection, as appropriate. In addition, we maintain certain networked equipment at customer locations and are reliant on those customers to protect and maintain that equipment. The “attack surface” for us to protect against our adversaries is thus often extended to these partners and customers, as well as our suppliers, and we have some dependency upon their cybersecurity capabilities as well as their willingness to exchange threat and response information with us.

A cyber attack or other significant disruption involving our IT systems or those of our outsource partners, suppliers or our customers could result in the unauthorized release of proprietary, confidential or sensitive information of ours or our customers. Such unauthorized access to, or release of, this information could: (i) allow others to unfairly compete with us, (ii) compromise safety or security, given the mission-critical nature of our customers’ systems, (iii) subject us to claims for breach of contract, tort, and other civil claims, and (iv) damage our reputation. We could face regulatory penalties, enforcement actions, remediation obligations and/or private litigation by parties whose data is improperly disclosed or misused. In addition, there has been a sharp increase in laws in Europe, the U.S. and elsewhere, imposing requirements for the handling of personal data, including data of employees, consumers and business contacts, as well as imposing requirements for remediation action, including specific timing and method of notification. There is a risk that our company, directly or as the result of some third-party service provider we use, could be found to have failed to comply with the laws or regulations of some country regarding the collection, consent, handling, transfer, retention or disposal of such personal data, and therefore subject us to fines or other sanctions. The European Courts invalidation of Safe Harbor as a mechanism to legitimize cross border data flows increases the risk that our company, directly or through some third-party service provider that we use, may inappropriately transfer E.U. personal data. Any or all of the foregoing could have a negative impact on our business, financial condition, results of operations, and cash flow.

A significant amount of our international business is transacted in local currency and a significant percentage of our cash and cash equivalents are held outside of the United States, which exposes us to risk relating to currency fluctuations, changes in foreign exchange regulations and repatriation delays and costs, which could negatively impact our sales, profitability and financial flexibility.

We have sizable sales and operations in Canada, ~~and our~~ Europe, ~~and~~Middle East, Africa, Asia, ~~Middle East,~~ and Latin ~~America regions.~~ America.

A significant amount of this business is transacted in local currency. As a result, our financial performance is impacted by currency fluctuations. We are also experiencing increased pressure to agree to established currency conversion rates and cost of living adjustments as a result of foreign currency fluctuations or the requirement to transact business in local currencies.

A significant percentage of our cash and cash equivalents is currently held outside the U.S. and we continue to generate profits outside of the U.S., while many of our liabilities, such as our public debt, the majority of our pension liabilities and certain other cash payments, such as dividends and share repurchases, are payable in the U.S. While we have regularly repatriated funds with minimal adverse impact, repatriation of some of the funds has been and could continue to be subject to delay for local country approvals and could have potential adverse tax consequences. In addition, foreign exchange regulations may limit our ability to convert or repatriate foreign currency. As a result of having a lower amount of cash and cash equivalents in the U.S., our financial flexibility may be reduced.

We face uncertainty in the global geopolitical landscape that may impede the implementation of our strategy outside the United States.

In June 2016, the United Kingdom (the ~~“U.K”~~“U.K.”) held a referendum in which voters approved anthe country’s exit from the ~~European Union (“~~E.U.”), commonly referred to as Brexit. ~~It is expected that the~~The U.K. government ~~will initiate~~has so far been unable to secure a ~~process~~parliamentary majority for the withdrawal agreement. Continued uncertainty, or a U.K. exit without any agreement on terms, would risk significant disruption to ~~withdraw from the~~ U.K./E.U. ~~and begin negotiating the terms of its separation.~~trade. The ~~announcement~~prospect of Brexit has ~~resulted in volatility in the~~already caused global stock market volatility and currency exchange rate fluctuations that resulted in strengthening of the U.S. dollar relative to other foreign currencies in which we conduct business. The ~~announcement of Brexit and likely~~U.K.’s final withdrawal, ~~of the U.K. from the E.U.~~especially without any deal on terms, may ~~also create~~bring global economic uncertainty, which ~~may~~could cause our customers to closely monitor their costs and reduce their spending budgets. ~~In addition, there~~There may also be broader uncertainty ~~as to~~over the position the United States will take with respect to certain treaty and trade relationships with other countries. This uncertainty may impact (i) the ability or willingness of non-U.S. companies to transact business in the United States, including with our ~~Company,~~company, (ii) regulation and trade agreements affecting U.S. companies, (iii) global stock markets and (iv) general global economic conditions. All of these factors are outside of our control, but may cause us to adjust our strategy in order to compete effectively in global markets and could adversely affect our business, financial condition, operating results and cash flows.

All information technology systems are potentially vulnerable to damage, unauthorized access or interruption from a variety of sources, including but not limited to, cyber attack, cyber intrusion, computer viruses, security breach, energy blackouts, natural disasters, terrorism, sabotage, war, insider trading, and telecommunication failures. As a provider of mission-critical communications systems for customers in critical infrastructure sectors of the U.S. and globally, including systems that we operate and maintain for certain of our customers, we face additional risk as a target of sophisticated attacks aimed at compromising both our Company’s and our customers’ sensitive information and intellectual property, through means referred to as advanced persistent threats. This risk is heightened because these systems may contain sensitive governmental information or personally identifiable or other protected information. While we employ a number of countermeasures and security controls, including training and audits and utilization of commercial information security threat sharing networks to protect against such attacks, we have experienced a gradual and steady increase in the sophistication of these threats, most noticeably through well-crafted social engineering and phishing attempts. We cannot guarantee that all threat attempts will be successfully thwarted even with these countermeasures. Further, we are dependent, in certain instances, upon our outsourced business partners, suppliers, and customers to adequately protect our IT systems and those IT systems that we manage for our customers. In addition, some of our customers are exploring broadband solutions that use public carrier networks on which our solutions would operate. We do not have direct oversight or influence over how public carrier networks manage the security, quality, or resiliency of their networks, and because they are an attractive high value target due to their role in critical infrastructure, they expose customers to an elevated risk over our private networks.

Our Company outsources certain business operations, including, but not limited to IT, HR information systems, manufacturing, repair, distribution and engineering services. These arrangements are governed by various contracts and agreements which reference and mandate Company and international standards of information protection, as appropriate. In addition, we maintain certain networked equipment at customer locations and are reliant on those customers to protect and maintain that equipment. The “attack surface” for us to protect against our adversaries is thus often extended to these partners and customers, as well as our suppliers, and we may be dependent upon their cyber security capabilities as well as their willingness to exchange threat and response information with us

obligations and/or private litigation by parties whose data is improperly disclosed or misused. In addition, there has been a sharp increase in laws in Europe, the U.S. and elsewhere, imposing requirements for the handling of personal data, including data of employees, consumers and business contacts, as well as imposing requirements for remediation action, including specific timing and method of notification. There is a risk that our Company, directly or as the result of some third-party service provider we use, could be found to have failed to comply with the laws or regulations of some country regarding the collection, consent, handling, transfer, retention or disposal of such personal data, and therefore subject us to fines or other sanctions. The European Courts invalidation of Safe Harbor as a mechanism to legitimize cross border data flows increases the risk that our Company, directly or through some third-party service provider that we use, may inappropriately transfer EU personal data. Any or all of the foregoing could have a negative impact on our business, financial condition, results of operations, and cash flow.

A portion of our business is dependent upon U.S. government contracts and grants, which are highly regulated and subject to oversight audits by U.S. government representatives and subject to cancellations. Such audits could result in adverse findings and negatively impact our business.

Our U.S. government business is subject to specific procurement regulations with numerous compliance requirements.In addition, U.S. federal legislation including the National Defense Authorization Act and various "buy American" programs may impose limitations on the ability of the federal government or other parties to contract with certain foreign entities. These requirements, although customary in government contracting in the U.S., increase our performance and compliance costs. These costs may increase in the future, thereby reducing our margins, which could have an adverse effect on our financial condition. Failure to comply with these regulations or other compliance requirements could lead to suspension or debarment from U.S. government contracting or subcontracting for a period of time. Among the causes for debarment are violations of various laws or policies, including those related to procurement integrity, export control, U.S. government security regulations, employment practices, protection of criminal justice data, protection of the environment, accuracy of records, proper recording of costs, foreign corruption, Trade Act Agreement, Buy American Act, and the False Claims Act.

Generally, in the U.S., government contracts and grants are subject to oversight audits by government representatives. Such audits could result in adjustments to our contracts. Any costs found to be improperly allocated to a specific contract may not be allowed, and such costs already reimbursed may have to be refunded. Future audits and adjustments, if required, may materially reduce our revenues or profits upon completion and final negotiation of audits. Negative audit findings could also result in investigations, termination of a contract or grant, forfeiture of profits or reimbursements, suspension of payments, fines and suspension or prohibition from doing business with the U.S. government. All contracts with the U.S. government are subject to cancellation at the convenience of the U.S. government.

In addition, contacts with government officials and participation in political activities are areas that are tightly controlled by federal, state, local and international laws. Failure to comply with these laws could cost us opportunities to seek certain government sales opportunities or even result in fines, prosecution, or debarment.

Government regulation of radio frequencies may limit the growth of public safety broadband systems or reduce barriers to entry for new competitors.

Radio frequencies are required to provide wireless services. The allocation of frequencies is regulated in the U.S. and other countries and limited spectrum ~~space~~ is allocated to wireless services and specifically to public safety users. The growth of public safety broadband communications systems may be affected: (i) by regulations relating to the access to allocated spectrum for public safety users, (ii) if adequate frequencies are not allocated, or (iii) if new technologies are not developed to better utilize the frequencies currently allocated for such use. Industry growth may also be affected by new licensing fees required to use frequencies.

The U.S. leads the world in allocating spectrum to enable wireless communications including LTE. Other countries have also allocated spectrum to allow deployment of these and other technologies. This changing landscape may introduce new competition and new opportunities for us.

The Middle Class Tax Relief and Job Creation Act of 2012 (the “Legislation”) authorized an additional ten MHz of broadband spectrum for public safety use for a total of 20 MHz of broadband spectrum for public safety. In addition, public safety retained 14 MHz of the 700 MHz narrowband spectrum, subject to the FCC's authority to determine whether such spectrum should be authorized for future broadband use. The Legislation further provides for the establishment of a centralized governance model through an independent authority within NTIA designated as the “First-Responder Network Authority” or “FirstNet” but allows for states to opt out of the plan to develop a nationwide public safety network and perform their own competitive procurements if certain criteria are met. States that opt out would still be eligible for some funding and would also be allowed to help cover their operating costs by leasing unused/underused spectrum to secondary users, although revenue from such leasing arrangements would need to be reinvested in their FirstNet public safety network.

~~Longer term,~~ MSI’s opportunities to sell LTE equipment and related software and services in ~~this space will~~the U.S may be substantially impacted by: (1) whether FirstNet awards the nationwide contract to MSI’s bidding partner, although MSI will still have opportunities to sell public safety broadband devices and software solutions even if its bidding partner is not selected; (2) the winning bidder’s(i) AT&T's success in satisfying FirstNet contract requirements and milestones, including, among others, subscriber adoption rate, mandatory payments to FirstNet, ~~development of State plans,~~ and ~~covrage; (3) the timing~~coverage, (ii) Verizon and ~~number of states (if any) that choose to opt out of FirstNet,~~other commercial broadband carriers providing services for public safety, and ~~whether the FCC and NTIA approve their request, as detailed in the Legislation; (4) FirstNet’s stated intent to reduce handset prices; (5)~~(iii) fiscal, public, and regulatory policies and/or special interest politics that risk delaying ~~deployment and (6) the finally negotiated terms and conditions in the FirstNet contract and/or subcontract awarded FirstNet released its RFP in early 2016, and an award is projected in 2017.~~

deployment.

We derive a portion of our revenue from government customers who award business through competitive bidding which can involve significant upfront costs and risks. This effort may not result in awards of business or we may fail to accurately estimate the costs to fulfill contracts awarded to us, which could have adverse consequences on our future profitability.

Many government customers, including most U.S. government customers, award business through a competitive bidding process, which results in greater competition and increased pricing pressure. The competitive bidding process involves significant cost and managerial time to prepare bids for contracts that may not be awarded to us. Even if we are awarded contracts, we may fail to accurately estimate the resources and costs required to fulfill a contract, or to resolve problems with our subcontractors or suppliers, which could negatively impact the profitability of any contract ~~award~~awarded to us, particularly in the case of fixed price contracts. In addition, following the award of a contract, we have experienced and may continue to experience significant expense or delay, contract modification or contract rescission as a result of customer delay or our competitors protesting or challenging contracts awarded to us in competitive bidding.

We enter into fixed-price contracts that could subject us to losses in the event we fail to properly estimate our costs or hedge our risks associated with currency fluctuations.

We enter into a number of firm fixed-price contracts. If our initial cost estimates are incorrect, we can lose money on these contracts. Because certain of these contracts involve new technologies and applications, require us to engage subcontractors and/or can last multiple years, unforeseen events, such as technological difficulties, fluctuations in the price of raw materials, problems with our subcontractors or suppliers and other cost overruns, can result in the contract pricing becoming less favorable or even unprofitable to us and have an adverse impact on our financial results. In addition, a significant increase in inflation rates or currency fluctuations could have an adverse impact on the profitability of longer-term contracts.

The expansion of our ~~solutions and services~~software business creates ~~new competitors and new and increased areas of~~a greater risk ~~that~~than we have ~~not~~ been exposed to in the past that we may not be able to properly assess or mitigate.

The process of developing new software products and enhancing existing software products is complex, costly and uncertain, and any failure by us to anticipate customers' changing needs and emerging technological trends accurately could significantly harm our market share, results of operations and financial condition. Any failure to accurately predict technological and business trends, control research and development costs or execute our innovation strategy could harm our business and financial performance. Our research and development initiatives may not be successful in whole or in part, including research and development projects which we have prioritized with respect to funding and/or personnel.

As part of our growth strategy, we may seek to acquire new software technologies. The process of integrating acquired assets into our operations may result in unforeseen operating difficulties and expenditures and may absorb significant management attention that would otherwise be available for the ongoing development of our business. We may allocate a significant portion of our available working capital to finance all or a portion of the purchase price relating to possible acquisitions. Any future acquisition or investment opportunity may require us to obtain additional financing to complete the transaction. The anticipated benefits of any acquisitions may not be realized. In addition, future acquisitions by us could result in potentially dilutive issuances ofequity securities, the incurrence of debt andcontingent liabilities and amortization expenses related to intangible assets, any of which could materially adversely affect our operating results and financial position.

The expansion of our services business creates increased areas of risk that we may not be able to properly assess or mitigate.

We plan to continue to expand our ~~solutions and~~ services business by offering additional and expanded managed services for existing and new types of customers, such as designing, building, operating, managing and in some cases owning a public-safety system or other commercial system. The offering of managed services involves the integration of multiple services, multiple vendors and multiple technologies, requiring that we partner with other solutions and services providers, often on ~~multiyear~~multi-year projects.

Additionally, our managed services business ~~will be expanded to include~~includes the hosting of software applications. This allows the customers to “consume” the software “as a service” and avoid the costs and complexities of acquiring and operating the software.

We may ~~be unable to recognize revenue from the sale of equipment in connection with managed services contracts for a period of time, which may be several years.~~

•The managed services business is one characterized by large subcontracting arrangements and we may not be able to obtain favorable contract terms including adequate indemnities, performance commitments or other protections from our subcontractors to adequately mitigate our exposure to our customers.

•~~We may~~ face increasing competition from traditional system integrators, ~~and~~ the defense industry, and commercial software companies as ~~solutions and~~ services contracts become larger and more complicated.

•Expansion will bring us into contact with new regulatory requirements and restrictions, such as data security or data residency/localization obligations, with which we will have to comply and may increase the costs of doing business, reduce margins and delay or limit the range of new solutions and services which we will be able to offer.

•

We may be required to agree to specific performance metrics that meet the customer's requirements for network security, availability, reliability, maintenance and support and, in some cases, if these performance metrics are not met we may not be paid.

We ~~no longer own a number~~expect to continue to make strategic acquisitions of ~~our enterprise legacy information~~other companies or businesses and these acquisitions introduce significant risks and uncertainties, including risks related to integrating the acquired businesses and achieving benefits from the acquisitions.

In order to position ourselves to take advantage of growth opportunities or to meet other strategic needs such as product or technology gaps, we have made, and expect to continue to make, strategic acquisitions that involve significant risks and uncertainties. These risks and uncertainties include: (i) the difficulty or inability in integrating newly-acquired businesses and operations in an efficient and effective manner, including ensuring proper integration of acquired businesses’ legal and regulatory compliance programs, (ii) risks associated with integrating financial reporting and internal control systems, ~~including components of our Enterprise Resource Planning (ERP) system. We are planning to implement a new ERP system and we rely on complex and~~(iii) difficulties in ~~some cases aging~~integrating information technology systems and ~~networks~~other business processes to ~~operate~~accommodate the acquired businesses, (iv) challenges in integrating acquired businesses to create the operating platform for public safety, (v) the challenges in achieving strategic objectives, cost savings and other benefits from acquisitions, (vi) the risk that our ~~business. Any system~~contractual relationships or ~~network disruption could have a negative impact on~~the markets served do not evolve as anticipated and that the technologies acquired do not prove to be those needed to be successful in those markets, (vii) the potential loss of key employees of the acquired businesses, (viii) the risk of diverting the attention of senior management from our operations, ~~sales~~(ix) the risks of entering new markets in which we have limited experience, and ~~operating results.~~

~~We rely on the efficient~~(x) future impairments of goodwill of an acquired business. In particular, failure to achieve targeted cost and uninterrupted operation of complex information technology systems and networks, some of which are within the Company and some of which are outsourced. In connection with the sale of our Enterprise business to Zebra, we transferred ownership of a number of our enterprise legacy information systems including components of our Enterprise Resource Planning (ERP) system to Zebra. We are currently in a transition services agreement to co-use these systems with Zebra until 2017 which limits our ability to make changes to these systems. We are planning to implement a new ERP system to replace pieces of the systems now owned by Zebra. If this implementation is delayed or introduces defective, or improperly installed or implemented computer code, it may result in a business disruption.

We also currently rely on a number of older legacy information systems that are harder to maintain and when we begin to implement our new ERP system we will have fewer resources to maintain these older legacy systems. A system failurerevenue synergies could negatively impact our ~~operations~~business performance.

certain services businesses. Acquiring a business that has a higher relative valuation than Motorola Solutions may be dilutive to our earnings. In addition, we may not pursue opportunities that are highly dilutive to near-term earnings.

Key employees of acquired businesses may receive substantial value in connection with a transaction in the form of cash payments for their ownership interest, particularly in the case of founders and other shareholder employees, or as ~~we have outsourced more~~a result of ~~our business operations we have increased our dependence on the IT systems~~change-in-control agreements, acceleration of ~~our outsourced business partners which are not under our direct management or control. Any disruption to either those outsourced systems or the communication links between Motorola Solutions~~stock options and the ~~outsourced supplier,~~lifting of restrictions on other equity-based compensation rights. To retain such employees and integrate the acquired business, we may offer additional retention incentives, but it may still be difficult to retain certain key employees.

We may not continue to have access to the capital markets for financing on acceptable terms and conditions, particularly if our credit ratings are downgraded, which could limit our ability to repay our indebtedness and could cause liquidity issues.

From time-to-time we access the capital markets to obtain financing. Our access to the capital markets and the bank credit markets at acceptable terms and conditions are impacted by many factors, including: (i) our credit ratings, (ii) the liquidity of the overall capital markets, (iii) strength and credit availability in the banking markets, and (iv) the current state of the global economy. In addition, we frequently access the credit markets to obtain performance bonds, bid bonds, standby letters of credit and surety bonds, as well as to hedge foreign exchange risk and sell receivables. Furthermore, there can be no assurances we will be able to refinance our existing indebtedness (i) on commercially reasonable terms, (ii) on terms, including with respect to interest rates, as favorable as our current debt, or (iii) at all. There can be no assurances that we will continue to have access to the capital markets or bank credit markets on terms acceptable to us and if we are unable to repay or refinance our debt, we cannot guarantee that we will be able to generate enough cash flows from operations or that we will be able to obtain enough capital to service our debt, fund our planned capital expenditures or pay future dividends.

We are rated investment grade by all three national rating agencies. Any downward changes by the rating agencies to our credit rating may negatively impact the value and liquidity of both our debt and equity securities. Under certain circumstances, an increase in the interest rate payable by us under our revolving credit facility, if any amounts are borrowed under such facility, could negatively affect our operating cash flows. In addition, a downgrade in our credit ratings could limit our ability to: (i) access the capital markets or bank credit markets, (ii) provide performance bonds, bid bonds, standby letters of credit and surety bonds, (iii) hedge foreign exchange risk, (iv) fund our foreign affiliates, and (v) sell receivables. A downgrade in our credit rating could also result in less favorable trade terms with suppliers. In addition, any downgrades in our credit ratings may affect our ability to ~~manufacture, distribute,~~obtain additional financing in the future and may affect the terms of any such financing. Any future disruptions, uncertainty or ~~repair~~volatility in the capital markets may result in higher funding costs for us and adversely affect our ability to access funds and other credit related products. WeIn addition, we may ~~incur additional costs to remedy the damages caused by these disruptions.~~avoid taking actions that would otherwise benefit us or our stockholders, such as engaging in certain acquisitions or engaging in stock repurchases, that would negatively impact our credit rating.

Our future operating results depend on our ability to purchase at acceptable prices a sufficient amount of materials, parts, and components, as well as services and software, to meet the demands of our customers and any disruption to our suppliers or significant increase in the price of supplies could have a negative impact on our results of operations.

Our ability to meet customers' demands depends, in part, on our ability to timely obtain an adequate delivery of quality materials, parts, and components, as well as services and software from our suppliers. In addition, certain supplies, including for some of our critical components, services and software solutions, are available only from a single source or limited sources and we may not be able to diversify sources in a timely manner. If demand for our products or services increases from our current expectations or if suppliers are unable to meet our demand for other reasons, including as a result of natural disasters or financial issues, we could experience an interruption in ~~supplies~~supply or a significant increase in the price of ~~supplies,~~supply, including as a

result of having to move to an alternative source, that could have a negative impact on our business as a result of increased cost or delay in or inability to deliver our ~~products.~~products or services. This risk may increase as a result of consolidation of certain suppliers of ~~our suppliers.~~ours. We have experienced shortages in the past that have negatively impacted our results of operations and may experience such shortages in the future. In addition, credit constraints at our suppliers could cause us to accelerate payment of accounts payable by us, impacting our cash flow.

We have seen ~~and expect to continue to see~~ increases in the price of certain supplies as we no longer qualify for certain volume discounts ~~given our significant decrease in direct material spend over the last several years as a result~~compared to other customers of our ~~spin-offs~~suppliers given technology changes, our evolving portfolio and ~~divestitures. We~~lower volumes than customers in other commercial industries. For certain supplies we have also experienced less support and focus from our suppliers as our spend has diminished relative to their other customers, making it more difficult for us to resolve gaps in supply due to unforeseen changes in forecast and demand. In addition, ~~our current~~certain suppliers have and others may cancel or not extend contractual arrangements, ~~with certain suppliers may be cancelled or not extended by such suppliers and, therefore,~~which will not afford us with sufficient protection against a reduction or interruption in supplies. Moreover, in the event any of these suppliers breach their contracts with us, our legal remedies associated with such a breach may be insufficient to compensate us for any damages we may suffer.

Over the last several years we have outsourced portions of certain business operations like IT, HR information systems, manufacturing, repair, distribution and engineering services and expect to outsource additional business operations. This outsourcing limits our control over these business operations and exposes us to additional risk as a result of the actions of our outsource partners.

As we outsource more of our business operations we are not able to directly control these activities. Our outsource partners may not prioritize our business over that of their other customers and they may not meet our desired level of quality, performance, service, cost reductions or other metrics. Failure to meet key performance indicators may result in our being in default with our customers. In addition, we may rely on our outsource partners to secure materials from our suppliers with whom our outsource partners may not have existing relationships and we may be required to continue to manage these relationships even after we outsource certain business operations.

As we outsource business operations we become dependent on the IT systems of our outsource partners, including to transmit demand and purchase orders to suppliers, which can result in a delay in order placement. In addition, in an effort to reduce costs and limit their liabilities, our outsource partners may not have robust systems or make commitments in as timely a manner as we require.

In some cases the actions of our outsource partners may result in our being found to be in violation of laws or regulations like import or export regulations. As many of our outsource partners operate outside of the U.S., our outsourcing activity exposes us to information security vulnerabilities and increases our global risks. In addition, we are exposed to the financial viability of our outsource partners. Once a business activity is outsourced we may be contractually prohibited from or may not practically be able to bring such activity back within the Company or move it to another outsource partner. The actions of our outsource partners could result in reputational damage to us and could negatively impact our business, financial conditions, results of operations, and cash flows.

Our sales within a quarter are not linear, with a substantial percentage of products shipping in the final month of the quarter. This lack of linearity creates inefficiencies in our business performance and any interruption during this final month could have a substantial impact on our quarterly financial results.

On average, a substantial percentage of our quarterly sales ship in the final month of a quarter. Any interruption in our ability to ship products during this final month, such as unavailability of critical components, disruption to our manufacturing capabilities or disruptions in our distribution channel, will have a disproportionately large impact on our quarterly financial results, as we may be unable to recover in time to ship the products and recognize revenue in that quarter.

In addition, this lack of linearity results in inefficiencies in our financial performance, as we must invest in capacity and resources to support this business model, meaning we have underutilized operations during the first two months of the quarter. We also must maintain additional component inventory and engage in pre-builds of finished goods to mitigate the impact of this lack of linearity and meet potential last month demand. This could result in our carrying excess inventory, which is costly and may result in increased inventory obsolescence over time.

We no longer own certain logos and other trademarks, trade names and service marks, including MOTOROLA, MOTO, MOTOROLA SOLUTIONS and the Stylized M logo and all derivatives and formatives thereof (“Motorola Marks”) and we license the Motorola Marks from Motorola Trademark Holdings, LLC (“MTH”), which is currently owned by Motorola Mobility, a subsidiary of Lenovo. Our joint use of the Motorola Marks could result in product and market confusion and negatively impact our ability to expand our business under the Motorola brand. In addition, if we do not comply with the terms of the license agreement we could lose our rights to the Motorola Marks. Because of the change of control of Motorola Mobility, which is now owned by Lenovo, we may find that an incompatible third-party owns the Motorola Marks.

We have a worldwide, perpetual and royalty-free license from MTH to use the Motorola Marks as part of our corporate name and in connection with the manufacture, sale, and marketing of our current products and services. The license of the Motorola Marks is important to us because of the reputation of the Motorola brand for our products and services. There are risks associated with both Motorola Mobility and the Company using the Motorola Marks and with this loss of ownership. As both Motorola Mobility and the Company will be using the Motorola Marks, confusion could arise in the market, including customer confusion regarding the products offered by and the actions of the two companies. Motorola Mobility was acquired by Lenovo in 2014, which resulted in Lenovo having effective control over the Motorola Marks. This risk could increase as both Motorola Mobility's and our products continue to converge. This risk could increase under Lenovo's control if they expand their use of the Motorola Marks. Also, any negative publicity associated with either company in the future could adversely affect the public image of the other. In addition, because our license of the Motorola Marks will be limited to products and services within our specified fields of use, we will not be permitted to use the Motorola Marks in other fields of use without the approval of Motorola Mobility, which is now controlled by Lenovo. In the event that we desire to expand our business into any other fields of use, we may need to do so with a brand other than the Motorola brand. Developing a brand as well-known and with as much brand equity as Motorola could take considerable time and expense. The risk of needing to develop a second brand increases as Motorola Mobility's and our products continue to converge and if our business expands into other fields of use. In addition, we could lose our rights to use the Motorola Marks if we do not comply with the terms of the license agreement. Such a loss could negatively affect our business, results of operations and financial condition. Furthermore, MTH has the right to license the brand to third-parties and either Motorola Mobility or licensed third-parties may use the brand in ways that make the brand less attractive for customers of Motorola Solutions, creating increased risk that Motorola Solutions may need to develop an alternate or additional brand. In 2013 Motorola Mobility modified certain Motorola Marks used by the Company. Motorola Mobility may require the Company to adopt the use of the modified Motorola Marks, which would result in the Company incurring the costs of rebranding.

In addition, neither Motorola Mobility nor Lenovo are prohibited from selling the Motorola Marks. In the event of a liquidation of Motorola Mobility or the then owner of the Motorola Marks, it is possible that a bankruptcy court would permit the Motorola Marks to be assigned to a third-party. While our right to use the Motorola Marks under our license should continue in our specified field of use in such situations, it is possible that we could be party to a license arrangement with a third-party whose interests are incompatible with ours, thereby potentially making the license arrangement difficult to administer, and increasing the costs and risks associated with sharing the Motorola Marks. In addition, there is a risk that, in the event of a bankruptcy of Motorola Mobility or the then owner of the Motorola Marks, Motorola Mobility, the then owner or its bankruptcy trustee may attempt to reject the license, or a bankruptcy court may refuse to uphold the license or certain of its terms. Such a loss could negatively affect our business, results of operations and financial condition.

From time to time we access the capital markets to obtain financing. Our access to the capital markets and the bank credit markets at acceptable terms and conditions are impacted by many factors, including: (i) our credit ratings, (ii) the liquidity of the overall capital markets, (iii) strength and credit availability in the banking markets, and (iv) the current state of the global economy. In addition, we frequently access the credit markets to obtain performance bonds, bid bonds, standby letters of credit and surety bonds, as well as to hedge foreign exchange risk and sell receivables. In addition, there can be no assurances we will be able to refinance our existing indebtedness (i) on commercially reasonable terms, (ii) on terms, including with respect to interest rates, as favorable as our current debt, or (iii) at all. There can be no assurances that we will continue to have access to the capital markets or bank credit markets on terms acceptable to us and if we are unable to repay or refinance our debt, we cannot guarantee that we will be able to generate enough cash flows from operations or that we will be able to obtain enough capital to service our debt, fund our planned capital expenditures or pay future dividends.

We are rated investment grade by all three national rating agencies. Any downward changes by the rating agencies to our credit rating may negatively impact the value and liquidity of both our debt and equity securities. Under certain circumstances, an increase in the interest rate payable by us under our revolving credit facility, if any amounts were borrowed under such facility, could negatively affect our operating cash flows. In addition, a downgrade in our credit ratings could limit our ability to: (i) access the capital markets or bank credit markets, (ii) provide performance bonds, bid bonds, standby letters of credit and surety bonds, (iii) hedge foreign exchange risk, (iv) fund our foreign affiliates, and (v) sell receivables. A downgrade in our credit rating could also result in less favorable trade terms with suppliers. In addition, any downgrades in our credit ratings may affect our ability to obtain additional financing in the future and may affect the terms of any such financing. Any future disruptions, uncertainty or volatility in the capital markets may result in higher funding costs for us and adversely affect our ability to access funds and other credit related products. In addition, we may avoid taking actions that would otherwise benefit us or our stockholders, such as engaging in certain acquisitions or engaging in stock repurchases, that would negatively impact our credit rating.

We utilize the services of subcontractors to perform under many of our contracts and the inability of our subcontractors to perform in a timely and compliant manner could negatively impact our ability to comply with our performance obligations as the prime contractor.

We engage subcontractors, including third-party integrators, on many of our contracts and as we expand our solutions and services business our use of subcontractors has and will continue to increase. Our subcontractors may further subcontract performance and may supply third-party products and software from a number of smaller companies. We may have disputes with our subcontractors, including disputes regarding the quality and timeliness of work performed by the subcontractor or its subcontractors and the functionality, warranty and indemnities of products, software and services supplied by our subcontractor. We are not always successful in passing down customer requirements to our subcontractors, and thus in some cases may be required to absorb contractual risks from our customers without corresponding back-to-back coverage from our subcontractor. Even when we are able to pass down customer requirements to our subcontractors, sometimes those subcontractors have less financial resources than we do, and a customer may look to us to cover a loss or damage. Our subcontractors may not be able to acquire or maintain the quality of the materials, components, subsystems and services they supply, or secure preferred warranty and indemnity coverage from their suppliers which might result in greater product returns, service problems, warranty claims and costs and regulatory compliance issues. Any of the foregoing could harm our business, financial condition and results of operations.

Failure of our suppliers, subcontractors, distributors, resellers and representatives to use acceptable legal or ethical business practices and adhere to our Supplier Code of Conduct or our Human Rights Policy could negatively impact our business.

It is our policy to require our suppliers, subcontractors, distributors, resellers, and third-party sales representatives (“TPSRs”) to operate in compliance with applicable laws, rules and regulations regarding working conditions, employment practices, environmental compliance, anti-corruption and trademark and copyright licensing. However, we do not control their labor and other business practices. If one of our suppliers, subcontractors, brokers, distributors, resellers, or TPSRs violates labor or other laws or implements labor or other business practices that are regarded as unethical, the shipment of finished products to us could be interrupted, orders could be canceled, relationships could be terminated and our reputation could be damaged. If one of our suppliers or subcontractors fails to procure necessary license rights to trademarks, copyrights or patents, legal action could be taken against us that could impact the salability of our products and expose us to financial obligations to a third-party. Any of these events could have a negative impact on our sales and results of operations.

~~Our employees, customers, suppliers and outsource partners are located throughout the world and, as a result, we face risks that other companies that are not global may not face.~~

Most of our products that are manufactured by or for us outside the U.S. are manufactured in Malaysia. If manufacturing in our facility, or a facility manufacturing products for us, in Malaysia is disrupted, our overall capacity would be significantly reduced and our business, financial condition, results of operation, and cash flows could be negatively impacted.

Our customers and suppliers are located throughout the world. In 2016, approximately 41% percent of our revenue was generated outside the U.S. In addition, we have a number of research and development, administrative and sales facilities outside the U.S. and more than 47% of our employees are employed outside the U.S. Most of our suppliers' operations are outside the U.S. and most of our products are manufactured outside the U.S., both internally and by third-parties.

Because we have sizable sales and operations, including outsourcing and procurement arrangements, outside of the U.S., we have more complexity in our operations and are exposed to a unique set of global risks that could negatively impact our business, financial condition, results of operations, and cash flows, including but not limited to: (i) currency fluctuations, (ii) import/export regulations, tariffs, trade barriers and trade disputes, customs classifications and certifications, including but not limited to changes in classifications or errors or omissions related to such classifications and certifications, (iii) changes in U.S. and non-U.S. rules related to trade, environmental, health and safety, technical standards, consumer and intellectual property and consumer protection, (iv) longer payment cycles, (v) tax issues, such as tax law changes, variations in tax laws from country to country and as compared to the U.S., obligations under tax incentive agreements, difficulties in repatriating cash generated or held abroad in a tax-efficient manner and difficulties in securing local country approvals for cash repatriations, (vi) changes in foreign exchange regulations, (vii) challenges in collecting accounts receivable, (viii) cultural and language differences, (ix) employment regulations and local labor conditions, (x) privacy and data protection regulations and restrictions, (xi) difficulties protecting intellectual property in foreign countries, (xii) instability in economic or political conditions, including inflation, recession and actual or anticipated military or political conflicts and terrorism, (xiii) natural disasters, (xiv) public health issues or outbreaks, (xv) changes in laws or regulations that negatively impact benefits being received by us or that require costly modifications in products sold or operations performed in such countries, (xvi) litigation in foreign court systems and foreign administrative proceedings, and (xvii) applicability of anti-corruption laws including the Foreign Corrupt Practices Act (“FCPA”) and the U.K. Bribery Act.

We have a number of employees, contractors, representatives and agents in, and sell our products and services throughout, the Middle East and our operations, as well as demand for our products and services, could be negatively impacted by political conflicts and hostilities in this region. The potential for future unrest, terrorist attacks, increased global conflicts, hostility against U.S.-based multinational companies and the escalation of existing conflicts has created worldwide uncertainties that have negatively impacted, and may continue to negatively impact, demand for certain of our products.

We also are subject to risks that our operations could be conducted by our employees, contractors, representatives or agents in ways that violate the FCPA, the U.K. Bribery Act, or other similar anti-corruption laws. While we have policies and

procedures to comply with these laws, our employees, contractors, representatives and agents may take actions that violate our policies. Any such violations could have a negative impact on our business. Moreover, we face additional risks that our anti-corruption policies and procedures may be violated by TPSRs or other third-parties that help sell our products or provide other solutions and services, because such TPSRs and other third parties are not our employees, and, it is therefore more difficult to oversee [and control] their conduct.

Many of our components and some of our products, including software, are developed and/or manufactured by third-parties and in some cases designed by third-parties and if such third-parties lack sufficient quality control, change the design of components or if there are significant changes in the financial or business condition of such third-parties, it may have a negative impact on our business.

We rely on third-parties to develop and/or manufacture many of our components and some of our finished products, and to design certain components and finished products, as well as provide us with software necessary for the operation of those products and we may increase our reliance such third-parties in the future. We could have difficulties fulfilling our orders and our sales and profits could decline if: (i) we are not able to engage such third-parties with the capabilities or capacities required by our business, (ii) such third-parties lack sufficient quality control or fail to deliver quality components, products, services or software on time and at reasonable prices, or deliver products, services or software that do not meet regulatory or industry standards or requirements, (iii) if there are significant changes in the financial or business condition of such third-parties, or (iv) if we have difficulties transitioning operations to such third-parties.

Because of the long life-cycle of many of our products, we need access to limited quantities of components for manufacturing and repair and suppliers have been and may continue to be unwilling to manufacture such components or may only do so at high prices. Certain key component suppliers are reducing the expected lifetime of key components, in particular semiconductor and electrical components, on some of our products. This could result in the need for more frequent product redesigns and increased engineering costs on some products or costly last time buys, which may negatively impact our financial performance. In addition, we may be unable to meet our repair obligations to our customers.

~~We are exposed to risks under large, multi-year system and solutions and services contracts that may negatively impact our business.~~

We enter into large, multi-year system and solutions and services contracts with large municipal, state, and nationwide government and commercial customers. In some cases we may not be the prime contractor and may be dependent on other third-parties such as commercial carriers or systems integrators. This exposes us to risks, including among others: (i) technological risks, especially when the contracts involve new technology, (ii) risk of defaults by third-parties on whom we are relying for products or services as part of our offering or who are the prime contractors, (iii) financial risks, including the estimates inherent in projecting costs associated with large, long-term contracts, the impact of currency fluctuations, inflation, and the related impact on operating results, (iv) cyber security risk, especially in managed services contracts with public safety and commercial customers that process data, and (v) political risk, especially related to the contracts with government customers. In addition, multi-year awards from governmental customers may often only receive partial funding initially and may typically be cancelable on short notice with limited penalties. Recovery of front loaded capital expenditures in long-term managed services contracts is dependent on the continued viability of such customers. The termination of funding for a government program or insolvency of commercial customer could result in a loss of anticipated future revenue attributable to that program, which could have an adverse impact on our profitability.

Our success depends in part on our timely introduction of new products and technologies and our results can be impacted by the effectiveness of our significant investments in new products and technologies.

The markets for certain of our products are characterized by changing technologies and evolving industry standards. In some cases it is unclear what specific technology will be adopted in the market or what delivery model will prevail, including whether public safety LTE will be delivered via private networks, public carriers or some combination thereof. In addition, new technologies such as voice over LTE or push-to-talk clients over LTE could reduce sales of our traditional products. The shift to smart public safety and the prevalence of data in our customer’s use cases results in our competing in a more fragmented marketplace. In addition, new technologies and new competitors continue to enter our markets at a faster pace than we have experienced in the past, resulting in increased competition from non-traditional suppliers, including public carriers, telecom equipment providers, consumer device manufacturers and software companies. New products are expensive to develop and bring to market and additional complexities are added when this process is outsourced as we have done in certain cases or as we increase our reliance on third-party content and technology. Our success depends, in substantial part, on the timely and successful introduction of new products, upgrades and enhancements of current products to comply with emerging industry standards, laws and regulations, such as China's proprietary technology, PDT, and to address competing technological and product developments carried out by our competitors. Developing new technologies to compete in a specific market may not be financially viable, resulting in our inability to compete in that market. The R&D of new, technologically-advanced products is a complex and uncertain process requiring high levels of innovation and investment, as well as the accurate anticipation of technology and market trends. Many of our products and systems are complex and we may experience delays in completing development and introducing new products or technologies in the future. We may focus our resources on technologies that do not become widely accepted or are not commercially viable or involve compliance obligations with additional areas of regulatory requirements.

particularly when such activities are done through third-parties, (ii) customer acceptance of products, (iii) the development of, approval of, and compliance with industry standards and regulatory requirements, (iv) the significant amount of resources we must devote to the development of new technologies, and (v) the ability to differentiate our products and compete with other companies in the same markets.

If the quality of our products does not meet our customers' expectations or regulatory or industry standards, then our sales and operating earnings, and ultimately our reputation, could be negatively impacted.

Some of the products we sell may have quality issues resulting from the design or manufacture of the product, or from the software used in the product. Sometimes, these issues may be caused by components we purchase from other manufacturers or suppliers. Often these issues are identified prior to the shipment of the products and may cause delays in shipping products to customers, or even the cancellation of orders by customers. Sometimes, we discover quality issues in the products after they have been shipped to our customers, requiring us to resolve such issues in a timely manner that is the least disruptive to our customers, particularly in light of the mission-critical nature of our communications products. Such pre-shipment and post-shipment quality issues can have legal, financial and reputational ramifications, including: (i) delays in the recognition of revenue, loss of revenue or future orders, (ii) customer-imposed penalties for failure to meet contractual requirements, (iii) increased costs associated with repairing or replacing products, and (iv) a negative impact on our goodwill and brand name reputation.

In some cases, if the quality issue affects the product's performance, safety or regulatory compliance, then such a “defective” product may need to be “stop-shipped” or recalled. Depending on the nature of the quality issue and the number of products in the field, it could cause us to incur substantial recall or corrective field action costs, in addition to the costs associated with the potential loss of future orders and the damage to our goodwill or brand reputation. In addition, we may be required, under certain customer contracts, to pay damages for failed performance that might exceed the revenue that we receive from the contracts. Recalls and field actions involving regulatory non-compliance could also result in fines and additional costs. Recalls and field actions could result in third-party litigation by persons or companies alleging harm or economic damage as a result of the use of the products.

We expect to continue to make strategic acquisitions of other companies or businesses and these acquisitions introduce significant risks and uncertainties, including risks related to integrating the acquired businesses and achieving benefits from the acquisitions.

In order to position ourselves to take advantage of growth opportunities or to meet other strategic needs such as product or technology gaps, we have made, and expect to continue to make, strategic acquisitions that involve significant risks and uncertainties. These risks and uncertainties include: (i) the difficulty or inability in integrating newly-acquired businesses and operations in an efficient and effective manner, particularly in light of the fact that certain of our enterprise legacy information systems including components of our ERP system are owned by Zebra and we are unable to make significant changes to these systems until completion of our new ERP implementation, (ii) risks associated with integrating financial reporting and internal control systems, particularly in light of the ERP system changes, (iii) the challenges in achieving strategic objectives, cost savings and other benefits from acquisitions, (iv) the risk that our contractual relationships or the markets do not evolve as anticipated and that the technologies acquired do not prove to be those needed to be successful in those markets, (v) the potential loss of key employees of the acquired businesses, (vi) the risk of diverting the attention of senior management from our operations, (vii) the risks of entering new markets in which we have limited experience, (viii) difficulties in integrating information technology systems and other business processes to accommodate the acquired businesses and (ix) future impairments of goodwill of an acquired business. In particular, failure to achieve targeted cost and revenue synergies could negatively impact our business performance.

Certain acquisition candidates in the industries in which we participate may carry higher relative valuations (based on revenues, earnings, cash flow, or other relevant multiples) than we do. This is particularly evident in software and certain services businesses. Acquiring a business that has a higher relative valuation than Motorola Solutions may be dilutive to our earnings. In addition, we may not pursue opportunities that are highly dilutive to near-term earnings.

Key employees of acquired businesses may receive substantial value in connection with a transaction in the form of cash payments for their ownership interest, particularly in the case of founders and other shareholder employees, change-in-control agreements, acceleration of stock options and the lifting of restrictions on other equity-based compensation rights. To retain such employees and integrate the acquired business, we may offer additional retention incentives, but it may still be difficult to retain certain key employees.

We have completed a number of large divestitures over the last several years and have ongoing obligations and potential liabilities associated with those transactions and the businesses we divested. In addition, these divestitures have resulted in less diversity of our business and our customer base, which could negatively impact our financial results in the event of a downturn in our mission-critical communications business.

Over the last several years we have spun-off or sold a number of large businesses, including Motorola Mobility, our Networks business and our Enterprise business. In connection with our divestitures we typically remain liable for certain pre-closing liabilities associated with the divested business, such as pension liabilities, taxes, employment, environmental liabilities and litigation. In the case of the sale of our Enterprise business we agreed to a multi-year non-compete which may limit our ability to develop and sell products for our commercial customers. In addition, although we often assign contracts associated with the divested business to a buyer in a divestiture, often that assignment will be subject to the consent of the contractual counterparty, which may not be obtained or may be conditioned, resulting in the company remaining liable under the contract. In connection with our divestitures we make representations and warranties and agree to covenants relating to the business divested. We remain liable for a period of time for breaches of representations, warranties and covenants and we also indemnify buyers in the event of such breaches and for other specific risks. Even though we establish reserves for any expected ongoing liability associated with divested businesses, those reserves may not be sufficient if unexpected liabilities arise and this could negatively impact our financial condition and future results of operations.

Because we are now singularly focused on mission-critical communications for public safety and commercial customers we have less diversity in our business and our customer base. A downturn in this business could have a greater negative impact on our financial results than when we were a more diversified communications provider.

We face many risks relating to intellectual property rights.

Our business will be harmed if: (i) we, our customers and/or our suppliers are found to have infringed intellectual property rights of third-parties, (ii) the intellectual property indemnities in our supplier agreements are inadequate to cover damages and losses due to infringement of third-party intellectual property rights by supplier products, (iii) we are required to provide broad intellectual property indemnities to our customers, (iv) our intellectual property protection is inadequate to protect against threats of misappropriation from internal or external sources or otherwise inadequate to protect our proprietary rights, or (v) our competitors negotiate significantly more favorable terms for licensed intellectual property. We may be harmed if we are forced to make publicly available, under the relevant open-source licenses, certain internally developed software-related intellectual property as a result of either our use of open-source software code or the use of third-party software that contains open-source code.

Since our products are comprised of complex technology, much of which we acquire from suppliers through the purchase of components or licensing of software, we are often involved in or impacted by assertions, including both requests for licenses and litigation, regarding patent and other intellectual property rights. Third-parties have asserted, and in the future may assert, intellectual property infringement claims against us and against our customers and suppliers. Many of these assertions are

brought by non-practicing entities whose principle business model is to secure patent licensing-based revenue from product manufacturing companies. The patent holders often make broad and sweeping claims regarding the applicability of their patents to our products, seeking a percentage of sales as licenses fees, seeking injunctions to pressure us into taking a license, or a combination thereof. Defending claims may be expensive and divert the time and efforts of our management and employees. Increasingly, third-parties have sought broad injunctive relief which could limit our ability to sell our products in the U.S. or elsewhere with intellectual property subject to the claims. If we do not succeed in any such litigation, we could be required to expend significant resources to pay damages, develop non-infringing products or to obtain licenses to the intellectual property that is the subject of such litigation, each of which could have a negative impact on our financial results. However, we cannot be certain that any such licenses, if available at all, will be available to us on commercially reasonable terms. In some cases, we might be forced to stop delivering certain products if we or our customer or supplier are subject to a final injunction.

We attempt to negotiate favorable intellectual property indemnities with our suppliers for infringement of third-party intellectual property rights. However, there is no assurance that we will be successful in our negotiations or that a supplier's indemnity will cover all damages and losses suffered by us and our customers due to the infringing products or that a supplier will choose to accept a license or modify or replace its products with non-infringing products which would otherwise mitigate such damages and losses. Further, we may not be able to participate in intellectual property litigation involving a supplier and may not be able to influence any ultimate resolution or outcome that may negatively impact our sales if a court enters an injunction that enjoins the supplier's products or if the International Trade Commission issues an exclusionary order that blocks our products from importation into the U.S. Intellectual property disputes involving our suppliers have resulted in our involvement in International Trade Commission proceedings from time to time. These proceedings are costly and entail the risk that we will be subjected to a ban on the importation of our products into the U.S. solely as a result of our use of a supplier's components.

In addition, our customers increasingly demand that we indemnify them broadly from all damages and losses resulting from intellectual property litigation against them. These demands stem from the increasing trend of the non-practicing entities that engage in patent enforcement and litigation targeting the end users of our products. End users are targeted so the non-practicing entities can seek royalties and litigation judgments in proportion to the value of the use of our products, rather than in proportion to the cost of our products. Such demands can amount to many times the selling price of our products.

Our patent and other intellectual property rights are important competitive tools and may generate income under license agreements. We regard our intellectual property as proprietary and attempt to protect it with patents, copyrights, trademarks, trade secret laws, confidentiality agreements and other methods. We also generally restrict access to and distribution of our

proprietary information. Despite these precautions, it may be possible for a third-party to obtain and use our proprietary information or develop similar technology independently. In addition, effective patent, copyright, trademark and trade secret protection may be unavailable or limited in certain foreign countries. Unauthorized use of our intellectual property rights by third-parties and the cost of any litigation necessary to enforce our intellectual property rights could have a negative impact on our financial results.

As we expand our business, including through acquisitions, and compete with new competitors in new markets, the breadth and strength of our intellectual property portfolio in those new markets may not be as developed as in our longer-standing businesses. This may expose us to a heightened risk of litigation and other challenges from competitors in these new markets. Further, competitors may be able to negotiate significantly more favorable terms for licensed intellectual property than we are able to, which puts them at a competitive advantage.

We no longer own certain logos and other trademarks, trade names and service marks, including MOTOROLA, MOTO, MOTOROLA SOLUTIONS and the Stylized M logo and all derivatives and formatives thereof (“Motorola Marks”) and we license the Motorola Marks from Motorola Trademark Holdings, LLC (“MTH”), which is currently owned by Motorola Mobility, a subsidiary of Lenovo. Our joint use of the Motorola Marks could result in product and market confusion and negatively impact our ability to expand business under the Motorola brand. In addition, if we do not comply with the terms of the license agreement we could lose our rights to the Motorola Marks. Because of the change of control of Motorola Mobility, which is now owned by Lenovo, we may find that an incompatible third-party owns the Motorola Marks.

customers of Motorola Solutions, creating increased risk that Motorola Solutions may need to develop an alternate or additional brand. In 2013 Motorola Mobility modified certain Motorola Marks used by the Company. Motorola Mobility may require the Company to adopt the use of the modified Motorola Marks, which would result in the Company incurring the costs of rebranding.

Our employees, customers, suppliers and outsource partners are located throughout the world and, as a result, we face risks that other companies that are not global may not face.

Our customers and suppliers are located throughout the world. In 2018, 41% percent of our revenue was generated outside the U.S. In addition, we have a number of research and development, administrative and sales facilities outside the U.S. and 55% of our employees are employed outside the U.S. Most of our suppliers' operations are outside the U.S. and a significant portion of our products are manufactured outside the U.S., both internally and by third-parties.

and actual or anticipated military or political conflicts and terrorism, (xiii) natural disasters, (xiv) public health issues or outbreaks, (xv) changes in laws or regulations that negatively impact benefits being received by us or that require costly modifications in products sold or operations performed in such countries, (xvi) litigation in foreign court systems and foreign enforcement or administrative proceedings, and (xvii) applicability of anti-corruption laws including the Foreign Corrupt Practices Act (“FCPA”) and the U.K. Bribery Act.

We also are subject to risks that our operations could be impacted by our employees, contractors, representatives or agents in ways that violate the FCPA, the U.K. Bribery Act, or other similar anti-corruption laws. While we have policies and procedures to comply with these laws, our employees, contractors, representatives and agents may take actions that violate our policies. Any such violations could have a negative impact on our business. Moreover, we face additional risks that our anti-corruption policies and procedures may be violated by TPSRs or other third-parties that help sell our products or provide other solutions and services, because such TPSRs and other third-parties are not our employees, and, it is therefore more difficult to oversee and control their conduct.

We rely on third-parties to develop and/or manufacture many of our components and some of our finished products, and to design certain components and finished products, as well as provide us with software necessary for the operation of those products and we may increase our reliance on such third-parties in the future. We could have difficulties fulfilling our orders and our sales and profits could decline if: (i) we are not able to engage such third-parties with the capabilities or capacities required by our business, (ii) such third-parties lack sufficient quality control or fail to deliver quality components, products, services or software on time and at reasonable prices, or deliver products, services or software that do not meet regulatory or industry standards or requirements, (iii) if there are significant changes in the financial or business condition of such third-parties, (iv), our third party providers fail to comply with legal or regulatory requirements, or (v) if we have difficulties transitioning operations to such third-parties.

We are exposed to risks under large, multi-year system and services contracts that may negatively impact our business.

We enter into large, multi-year system and services contracts with large municipal, state, and nationwide government and commercial customers. In some cases we may not be the prime contractor and may be dependent on other third-parties such as commercial carriers or systems integrators. This exposes us to risks, including among others: (i) technological risks, especially when the contracts involve new technology, (ii) risk of defaults by third-parties on whom we are relying for products or services as part of our offering or who are the prime contractors, (iii) financial risks, including the estimates inherent in projecting costs associated with large, long-term contracts, the impact of currency fluctuations, inflation, and the related impact on operating results, (iv) cybersecurity risk, especially in managed services contracts with public safety and commercial customers that process data, and (v) political risk, especially related to the contracts with government customers. In addition, multi-year awards from governmental customers may often only receive partial funding initially and may typically be cancelable on short notice with limited penalties. Recovery of front loaded capital expenditures in long-term managed services contracts is dependent on the continued viability of such customers. The termination of funding for a government program or insolvency of commercial customer could result in a loss of anticipated future revenue attributable to that program, which could have an adverse impact on our profitability.

The markets for certain products of ours are characterized by changing technologies and evolving industry standards. In some cases it is unclear what specific technology will be adopted in the market or what delivery model will prevail, including whether public safety broadband (LTE and 5G) will be delivered via private networks, public carriers or some combination thereof. In addition, new technologies such as voice over LTE and 5G or push-to-talk clients over LTE and 5G could reduce sales of our traditional products. The shift to smart public safety and the prevalence of data in our customer use cases results in our competing in a more fragmented marketplace. In addition, new technologies and new competitors continue to enter our markets at a faster pace than we have experienced in the past, resulting in increased competition from non-traditional suppliers, including public carriers, telecom equipment providers, consumer device manufacturers and software companies. New products

are expensive to develop and bring to market and additional complexities are added when this process is outsourced as we have done in certain cases or as we increase our reliance on third-party content and technology. Our success depends, in substantial part, on the timely and successful introduction of new products, upgrades and enhancements of current products to comply with emerging industry standards, laws and regulations, including country specific proprietary technology requirements, and to address competing technological and product developments carried out by our competitors. Developing new technologies to compete in a specific market may not be financially viable, resulting in our inability to compete in that market. The R&D of new, technologically-advanced products is a complex and uncertain process requiring high levels of innovation and investment, as well as the accurate anticipation of technology and market trends. Many of our products and systems are complex and we may experience delays in completing development and introducing new products or technologies in the future. We may focus our resources on technologies that do not become widely accepted or are not commercially viable or involve compliance obligations with additional areas of regulatory requirements.

Our results are subject to risks related to our significant investment in developing and introducing new products. These risks include among others: (i) difficulties and delays in the development, production, testing and marketing of products, particularly when such activities are done through third-parties, (ii) customer acceptance of products, (iii) the development of, approval of, and compliance with industry standards and regulatory requirements, (iv) the significant amount of resources we must devote to the development of new technologies, and (v) the ability to differentiate our products and compete with other companies in the same markets.

We completed a number of large divestitures in the past and could have potential liabilities associated with those transactions and the businesses we divested. In addition, these divestitures have resulted in less diversity of our business and our customer base, which could negatively impact our financial results in the event of a downturn in our mission-critical communications business.

In the past, we have spun-off or sold a number of large businesses, including Motorola Mobility, our Networks business and our Enterprise business. In connection with our divestitures we typically remain liable for certain pre-closing liabilities associated with the divested business, such as pension liabilities, taxes, employment, environmental liabilities and litigation. Even though we establish reserves for any expected ongoing liability associated with divested businesses, those reserves may not be sufficient if unexpected liabilities arise and this could negatively impact our financial condition and future results of operations.

We may not have the ability to settle the remaining principal amount of $800 million of the ~~$1 billion of~~ 2% Senior Convertible Notes (the "Senior Convertible Notes") in cash in the event of conversion or to repurchase the Senior Convertible Notes upon the occurrence of a fundamental ~~change.~~change, which could have a material effect on our reported financial results.

Our Senior Convertible Notes are convertible any ~~time on or after two years from their issuance date, except in certain limited circumstances.~~time. In the event of conversion, the Company currently intends to settle the principal amount of the Senior Convertible Notes in cash.

conversion value of the Senior Convertible Notes will exceed the principal amount of the notes to the extent the trading price of a share of our stock exceeds the effective conversion price as of the conversion date.

If we do not have adequate cash available, either from cash on hand, funds generated from operations or existing financing arrangements, or we cannot obtain additional financing arrangements, we may not be able to settle the principal amount of the Senior Convertible Notes in cash and, in the case of settlement of conversion elections, will be required to settle the principal amount of the Senior Convertible Notes in stock. If we settle any portion of the principal amount of the Senior Convertible Notes in stock, it will result in immediate, and possibly material, dilution to the interests of existing security holders.

Following any conclusion that we no longer have the ability to settle the Senior Convertible Notes in cash, we will be required on a going forward basis to change our accounting policy for earnings per share from the treasury stock method to the if-converted method. Earnings per share will most likely be significantly lower under the if-converted method as compared to the treasury stock method.

Our ability to repurchase the Senior Convertible Notes in cash upon the occurrence of a fundamental change or make any other required payments may be limited by law or the terms of other agreements relating to our indebtedness outstanding at the time. Our failure to repurchase the Senior Convertible Notes when required would result in an event of default with respect to the Senior Convertible Notes and may constitute an event of default or prepayment under, or result in the acceleration of the maturity of, our then-existing indebtedness.

Tax matters could have a negative impact on our financial condition and results of operations.

We are subject to income taxes in the U.S. and numerous foreign tax jurisdictions. Our provision for income taxes and cash tax liability may be negatively impacted by: (i) changes in the mix of earnings taxable in jurisdictions with different statutory tax rates, (ii) changes in tax laws and accounting principles, (iii) changes in the valuation of our deferred tax assets and liabilities, (iv) failure to meet commitments under tax incentive agreements, (v) discovery of new information during the course of tax return preparation, (vi) increases in ~~nondeductible~~non-deductible expenses, or (vii) difficulties in repatriating cash held abroad in a tax-efficient manner.

As of December 22, 2017 the U.S. enacted wide-sweeping tax law changes that will impact our provision for income taxes. Certain provisions included in the legislation, primarily related to the taxation of non-U.S. income, do not contain sufficient details for us to determine the specific financial impact on the Company in future years. The future guidance or interpretations of the new law could result in an increase to our U.S. tax liability and a resulting negative impact on our future operating results.

Tax audits may also negatively impact our business, financial condition and results of operations. We are subject to continued examination of our income tax returns, and tax authorities may disagree with our tax positions and assess additional tax. We regularly evaluate the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. There can be no assurance that the outcomes from these continuing examinations will not have a negative impact on our future financial condition and operating results.

Certain tax policy efforts, including the Organisation for Economic Co-operation and Development’s ("OECD") Base Erosion and Profit Shifting ("BEPS") Project, the European Commission’s state aid investigations, and other initiatives could have an adverse effect on the taxation of international businesses. Furthermore, many of the countries where we are subject to taxes, including the ~~United States,~~U.S, are independently evaluating their tax policy and we may see significant changes in legislation and regulations concerning taxation. Certain countries have already enacted legislation which could affect international businesses, and other countries have become more aggressive in their approach to audits and enforcement of their applicable tax laws. Such changes, to the extent they are brought into tax legislation, regulations, policies, or practices, could increase our effective tax rates in many of the countries where we have operations and have an adverse effect on our overall tax rate, along with increasing the complexity, burden and cost of tax compliance, all of which could impact our operating results, cash flows and financial condition.

Our success depends in part upon our ability to attract, retain and prepare succession plans for senior management and key employees.

The performance of our CEO, senior management and other key employees is critical to our success. If we are unable to retain talented, ~~highly qualified~~highly-qualified senior management and other key employees or attract them when needed, it could negatively impact our business. We rely on the experience of our senior management, most of whom have been with the Company for many years and as a result have specific knowledge relating to us and our industry that is difficult to replace and competition for management with experience in the communications industry is intense. A loss of the CEO, a member of senior management or key employee particularly to a competitor could also place us at a competitive disadvantage. Further, if we fail to adequately plan for the succession of our CEO, senior management and other key employees, our business could be negatively impacted.

It may be difficult for us to recruit and retain the types of engineers and other highly-skilled employees that are necessary to remain competitive and layoffs of such skilled employees as a result of divestitures, restructuring activities or cost reductions may benefit our competitors.

Competition for key technical personnel in high-technology industries is intense. As we expand our solutions and services business, we now have ~~an even greater~~increased demand for technical personnel in areas like software development, ~~than we have not historically experienced and competition~~which is an area of particularly high demand for ~~such resources is greater.~~skilled employees. We believe that our future success depends in large part on our continued ability to hire, assimilate, retain and leverage the skills of qualified engineers and other highly-skilled personnel needed to develop successful new products or services. We may not be as successful as our competitors at recruiting, assimilating, retaining and utilizing these highly-skilled personnel, which could have a negative impact on our business. In addition, as we have divested

businesses and restructured our operations we have, in some cases, had to layoff engineers and other ~~highly skilled~~highly-skilled employees. If these employees were to go to work for our competitors it could have a negative impact on our business.

~~The accounting for convertible debt securities that may be settled in cash or in shares of common stock could have a material effect on our reported financial results.~~

Under U.S. GAAP, an entity must separately account for the debt component and the embedded conversion option of convertible debt instruments that may be settled entirely or partially in cash or in shares of common stock upon conversion, such as our Senior Convertible Notes, in a manner that reflects the issuer’s effective interest cost. The fair value of the embedded conversion option is classified as an addition to stockholder’s equity. The difference between book carrying cost and face value of the debt represents a non-cash discount. This difference will be amortized into interest expense over the estimated life of the Senior Convertible Notes using the effective yield method. As a result, we will be required to record a greater amount of non-cash interest expense as a result of the amortization of their discount over the term of the Senior Convertible Notes. Accordingly, we will report lower net income because of the recognition of both the current period’s discount amortization and the Senior Convertible Notes’ coupon interest, which could adversely affect the trading price of our shares of common stock and the trading price (if any) of the Senior Convertible Notes.

Under certain circumstances, convertible debt instruments (such as the Senior Convertible Notes) that may be settled entirely or partially in cash are evaluated for their impact on earnings per share utilizing the treasury stock method, the effect of which is that the shares issuable upon conversion of the Senior Convertible Notes are not included in the calculation of diluted earnings per share except to the extent that the conversion value of the Senior Convertible Notes exceeds their principal amount. Under the treasury stock method the number of shares outstanding for purposes of calculating diluted earnings per share includes the number of shares that would be required to settle the excess of the conversion value of the Senior Convertible Notes, if any, over the principal amounts of the Senior Convertible Notes (which would be settled in cash). The conversion value of the Senior Convertible Notes will exceed the principal amount of the notes to the extent the trading price of a share of our stock exceeds $68.50. We intend to settle the principal amount of the convertible notes in cash. However, we may not have access to the capital markets for financing on acceptable terms and conditions, particularly if our credit ratings are downgraded. Accordingly, we may be forced to fully settle the Senior Convertible Notes in shares of common stock upon conversion, the effect of which would cause the dilutive impact to earnings per share to be significantly in excess of the dilutive impact reflected by the treasury stock method.

Returns on pension and retirement plan assets and interest rate changes could affect our earnings and cash flows in future periods.

Although we ~~engaged~~made a voluntary contribution into the U.S. pension plan in ~~pension de-risking activities in 2014,~~early 2018, we continue to have large underfunded pension obligations, in part resulting from the fact that we retained almost all of the U.S. pension liabilities and a major portion of our non-U.S. pension liabilities following our divestitures, including the distribution of Motorola Mobility, the sale of our Networks business and the sale of our Enterprise business. The funding position of our pension plans is affected by the performance of the financial markets, particularly the equity and debt markets, and the interest rates used to calculate our pension obligations for funding and expense purposes. Minimum annual pension contributions are determined by government regulations and calculated based upon our pension funding status, interest rates, and other factors. If the financial markets perform poorly, we have been and could be required to make additional large contributions. The equity and debt markets can be volatile, and therefore our estimate of future contribution requirements can change dramatically in relatively short periods of time. Similarly, changes in interest rates can affect our contribution requirements. In volatile capital market environments, the uncertainty of material changes in future minimum required contributions increases.

Changes in our operations or sales outside the U.S. markets could result in lost benefits in impacted countries and increase our cost of doing business.

We have entered into various agreements with non-U.S. governments, agencies or similar organizations under which we receive certain benefits relating to its operations and/or sales in the jurisdiction. If our circumstances change, and operations or sales are not at levels originally anticipated, we may be at risk of having to reimburse benefits already granted, and losing some or all of these benefits and increasing our cost of doing business.

We transferred a significant portfolio of intellectual property rights, including patents, to Motorola Mobility and Zebra and we are unable to leverage these intellectual property rights as we did prior to the distribution of Motorola Mobility or the sale of our Enterprise business.

We contributed approximately 17,200 granted patents and approximately 8,000 pending patent applications worldwide to Motorola Mobility in connection with the distribution. We also transferred approximately 2,700 granted patents and approximately 800 pending patent applications to Zebra in connection with the sale of the Enterprise business. Although we have a worldwide, perpetual, royalty-free license to these patents and other intellectual property rights, we no longer own them. As a result we are unable to leverage these intellectual property rights for purposes of generating licensing revenue or entering into favorable licensing arrangements with third-parties. As a result we may incur increased license fees or litigation costs. Although we cannot predict the extent of such unanticipated costs, it is possible such costs could negatively impact our financial results.

We are subject to a wide range of product regulatory and safety, consumer, worker safety and environmental laws that continue to expand and could impact our ability to grow our business, could subject us to unexpected costs and liabilities and could impact our financial performance.

Our operations and the products we manufacture ~~and/or sell~~ are subject to a wide range of product regulatory and safety, consumer, worker safety and environmental laws. Compliance with such existing or future laws could subject us to future costs or liabilities, impact our production capabilities, constrict our ability to sell, expand or acquire facilities, restrict what products and services we can offer, and generally impact our financial performance. Some of these laws are environmental and relate to the use, disposal, clean up of, and exposure to certain substances. For example, in the U.S., laws often require parties to fund remedial studies or actions regardless of fault and often times in response to action or omissions that were legal at the time they occurred. We continue to incur disposal costs and have ongoing remediation obligations. Changes to environmental laws or our discovery of additional obligations under these laws could have a negative impact on our financial performance.

Laws focused on: (i) the energy efficiency of electronic products and accessories, (ii) recycling of both electronic products and packaging, (iii) reducing or eliminating certain hazardous substances in electronic products, and (iv) the use and ~~the~~ transportation of batteries continue to expand significantly. Laws pertaining to accessibility features of electronic products, standardization of connectors and power supplies, the use and transportation of lithium-ion batteries and other aspects of our products are also proliferating. There are also demanding and rapidly changing laws around the globe related to issues such as product safety, radio interference, radio frequency radiation exposure, medical related functionality, use of products with video functionality, and consumer and social mandates pertaining to use of wireless or electronic equipment. These laws, and changes to these laws, could have a substantial impact on whether we can offer certain products, solutions and services, on product costs, and on what capabilities and characteristics our products or services can or must include.

These laws could impact our products and negatively affect our ability to manufacture and sell products competitively. We expect these trends to continue. In addition, we anticipate that we will see increased demand to meet voluntary criteria related to reduction or elimination of certain constituents from products, increasing energy efficiency, and providing additional accessibility.

We may be unable to obtain components and parts that are verified to be Democratic Republic of Congo ("DRC") ~~Conflict Free,~~Conflict-Free, which could result in reputational damage if we disclose that our products include minerals that have been identified as “not found to be DRC ~~conflict free”~~Conflict-Free” or if we disclose that we are unable to determine whether such minerals are included in our products.

The Dodd-Frank Wall Street Reform and Consumer Protection Act included disclosure requirements regarding the use of tin, tantalum, tungsten and gold (which are defined as “conflict minerals”) in our products and if the origin of these materials were from the DRC or an adjoining country. If the minerals originated from the DRC or an adjoining country then a company must disclose the measures it has taken to exercise due diligence and chain of custody to prevent the sourcing of such minerals that have been found to be financing conflict in the DRC. There is a limited pool of suppliers who can provide verifiable DRC ~~Conflict Free~~Conflict-Free components and parts, particularly since our supply chain is complex. As a result, we may be required to publicly disclose that we are not currently able to determine if the products we manufactured in ~~2016~~2018 are DRC ~~Conflict Free.~~Conflict-Free. For future reporting years, if the industry systems that we are relying on are not mature enough for us to make a definitive ~~Conflict Free~~Conflict-Free determination, we may have to declare our products as “not found to be DRC ~~conflict free,~~Conflict-Free,” or such other definitional standard as determined by the SEC and/or the judicial system and we may face reputational challenges with our customers, other stockholders and the activist community as a result. In addition, the ~~European Union~~E.U. has passed conflict minerals legislation which may have an impact on our reporting obligations and compliance programs in Europe.

Any system or network disruption could have a negative impact on our operations, sales and operating results.

We rely extensively on our information systems to manage our business operations. Our systems are subject to damage or interruption from various sources, including power outages, computer and telecommunications failures, computer viruses, cybersecurity breaches, vandalism, severe weather conditions, catastrophic events, terrorism, and human error, and our disaster recovery planning cannot account for all eventualities. If our systems are damaged, fail to function properly, or otherwise become compromised or unavailable, we may incur substantial costs to repair or replace them, and we may experience loss of critical data and interruptions or delays in our ability to perform critical functions, which could adversely affect our business and operating results. While we have significantly reduced our reliance on a number of older legacy information systems that are harder to maintain we could negatively impact our operations and financial results. In addition, as we have outsourced more of our business operations we have increased our dependence on the IT systems of our outsourced business partners which are not under our direct management or control. Any disruption to either those outsourced systems or the communication links between Motorola Solutions and the outsourced supplier, may negatively impact our ability to manufacture, distribute, or repair products. We may incur additional costs to remedy the damages caused by these disruptions.

Item 1B: Unresolved Staff Comments

None.

Item 2: Properties

Motorola Solutions' ~~principal executive offices are~~Global Headquarters office is located at 500 W. Monroe Street, Chicago, Illinois 60661. Motorola Solutions also operates manufacturing facilities and sales offices in other U.S. locations and in many other countries.

As of December 31, ~~2016,~~2018, we: (i) owned 2two facilities (manufacturing and office), both of which were located in ~~Europe;~~Europe, (ii) leased ~~216~~239 facilities, 98132 of which were located in ~~North America~~the Americas region and ~~South America and 118~~107 of which were located in other ~~countries;~~countries and (iii) primarily utilized three major facilities for the manufacturing and distribution of our products, located in: Penang, Malaysia; Elgin, Illinois; and Berlin, Germany. Motorola Solutions sold its Penang, Malaysia facility and manufacturing operations to Sanmina Corporation ("Sanmina") on February 1, 2016.

We generally consider the productive capacity of our manufacturing facilities to be adequate and sufficient for our requirements. The extent of utilization of each manufacturing facility varies throughout the year.

In ~~2016,~~2018, approximately ~~35%~~40% of our products were manufactured in ~~Illinois. Approximately 60%~~Illinois and approximately 55% of our products were manufactured in Penang. We rely on third-party providers in order to enhance our ability to lower costs and deliver products that meet demand. If manufacturing in ~~Malaysia~~Penang or Illinois were disrupted, our overall productive capacity could be significantly reduced.

Item 3: Legal Proceedings

We are a defendant in various lawsuits, claims, and actions, which arise in the normal course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on our consolidated financial position, liquidity, or results of operations. However, an unfavorable resolution could have a material adverse effect on our consolidated financial position, liquidity, or results of operations in the periods in which the matters are ultimately resolved, or in the periods in which more information is obtained that changes management's opinion of the ultimate disposition.

Item 4: Mine Safety Disclosures

Not applicable.

Executive Officers of the Registrant

The following are the persons who were the executive officers of Motorola Solutions, their ages, and their current titles as of February ~~21, 2017~~15, 2019 and the positions they have held during the last five years with the ~~Company:~~Company or as otherwise noted:

Gregory Q. Brown; age ~~56;~~58; Chairman and Chief Executive Officer since May 3, ~~2011; President and Chief Executive Officer from January 2011 to May~~ 2011.

Gino A. Bonanotte; age ~~52;~~54; Executive Vice President and Chief Financial ~~Office~~Officer since November 13, 2013; Corporate Vice President and Acting Chief Financial Officer from August 2013 to November 2013; Corporate Vice President, Finance, Sales and Field Operations, from October 2012 to August 2013; and Corporate Vice President, Finance, Product and Business Operations and Americas Field Operations from September 2010 to October 2012.

Bruce W. Brda; age 54; Executive Vice President, Products & Services since January 4, 2016; Executive Vice President, Systems & Products from May 2015 to January 2016; Senior Vice President, Systems & Products from December 2014 to May 2015; Senior Vice President, Government Solutions from March 2014 to December 2014; Senior Vice President, Global Solutions & Services from January 2013 to March 2014; and Senior Vice President, Global Services from July 2011 to January 2013.

Eduardo F. Conrado; age 50; Executive Vice President, Strategy & Innovation Office since August 24, 2015; Senior Vice President and Chief Innovation Officer from January 2015 to August 2015; Senior Vice President, Marketing and IT from January 2013 to January 2015; and Senior Vice President, Chief Marketing Officer from January 2011 to January 2013.

Mark S. Hacker; age ~~45;~~47; Executive Vice President, General Counsel and Chief Administrative Officer since January 21, 2015; and Senior Vice President and General Counsel from June 2013 to January ~~2015;~~2015.

Kelly S. Mark; age 47; Executive Vice President, Services & Software since August 28, 2018; Senior Vice President, Managed & Support Services from July 2017 to August 2018; Corporate Vice President, Managed & Support Services from August 2015 to July 2017; and Corporate Vice President, ~~Law, Sales and Product Operations, International and Legal Operations~~Strategy from ~~January 2013~~May 2011 to ~~June 2013; Corporate Vice President, Law, Sales and Field Operations and Legal Operations from January 2012 to January 2013;~~August 2015.

John P. "Jack" Molloy; age ~~45;~~47; Executive Vice President, Products & Sales since August 28, 2018; Executive Vice President, Worldwide Sales ~~since~~and Services from July 2017 to August 2018; Executive Vice President, Worldwide Sales from January ~~4, 2016;~~2016 to July 2017; Executive Vice President, Americas Sales & Services from November 2015 to January 2016; Senior Vice President, The Americas Sales & Marketing from September 2015 to November 2015; and Senior Vice President, North America Sales from January 2014 to August ~~2015;~~2015.

Rajan S. Naik; age 47; Senior Vice President, Chief Strategy & Innovation Officer since December 2017; Corporate Vice President, ~~Central US & Canada~~Chief Strategy Officer from March 2016 to December 2017; and ~~NA Energy Market~~Senior Vice President, Chief Strategy Officer, Advanced Micro Devices, Inc. from January ~~2013~~2012 to ~~December 2013; and Vice President, Central US & Canada Sales from July 2011 to December 2012.~~February 2015.

~~John K. Wozniak;~~Daniel G. Pekofske; age ~~45;~~42; Corporate Vice President and Chief Accounting Officer since ~~November 3, 2009.~~September 10, 2018; Vice President and Treasurer from January 2016 to September 2018; Vice President and Assistant Treasurer from March 2015 to January 2016; Vice President and Assistant Controller from February 2014 to March 2015; and Senior Director, Finance from December 2012 to February 2014.

Cynthia M. Yazdi; age 54; Senior Vice President, Chief of Staff, Marketing & Communications and Motorola Solutions Foundation since August 28, 2018; Corporate Vice President, Chief of Staff to the Chairman and CEO, Global Marketing and Communications from February 2018 to August 2018; Vice President, Chief of Staff, Global Marketing and Communications from September 2016 to February 2018; Vice President, Chief of Staff from August 2015 to September 2016; and Senior Director, Sales Operations for Asia Pacific from January 2013 to August 2015.

The above executive officers will serve as executive officers of Motorola Solutions until the regular meeting of the Board of Directors in May ~~2017~~2019 or until their respective successors are elected. There is no family relationship between any of the executive officers listed above.

PART II

Item 5: Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Motorola Solutions' common stock is listed on the New York Stock Exchange. The number of stockholders of record of its common stock on February 1, ~~2017~~2019 was ~~30,715~~26,760.

Information regarding securities authorized for issuance under equity compensation plans is incorporated by reference to the information under the caption “Equity Compensation Plan Information” of Motorola Solutions’ Proxy Statement for the ~~2017~~2019 Annual Meeting of Stockholders. The remainder of the response to this Item incorporates by reference Note 16, “Quarterly and Other Financial Data (unaudited)” of the ~~Notes~~notes to ~~Consolidated Financial Statements~~consolidated financial statements appearing under “Item 8: Financial Statements and Supplementary Data.’’

The following table provides information with respect to acquisitions by the Company of shares of its common stock during the quarter ended December 31, ~~2016.~~2018.

ISSUER PURCHASES OF EQUITY SECURITIES

Period
(a) Total Number
of Shares
Purchased

(b) Average Price
Paid per
Share ⁽¹⁾

(c) Total Number
of Shares Purchased
as Part of Publicly
Announced Plans
or Program ⁽²⁾

(d) Approximate Dollar
Value of Shares that
May Yet Be Purchased
Under the Plans or
Program⁽²⁾
9/28/16 to 10/25/16 517,419
$ 73.29
517,419
$ 2,267,280,220
10/26/16 to 11/22/16 186,610
$ 75.61
186,610
$ 2,249,547,763
11/23/16 to 12/27/16 774,730
$ 80.23
774,730
$ 2,191,014,453
Total 1,478,759
$ 77.22
1,478,759



Period	(a) Total Number of Shares Purchased	(b) Average Price Paid per Share ⁽¹⁾		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Program ⁽²⁾	(d) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Program⁽²⁾
09/27/18 to 10/24/18	—	$	—	—	$	1,642,593,206
10/25/18 to 11/20/18	485,945	$	125.97	485,945	$	1,581,377,757
11/21/18 to 12/27/18	40,254	$	124.23	40,254	$	1,576,377,038
Total	526,199	$	125.84	526,199




(1)	Average price paid per share of common stock repurchased is the execution price, including commissions paid to brokers.
(2)	Through a series of actions, ~~taken on July 28, 2011, January 30, 2012, July 25, 2012, July 22, 2013, November 4, 2014, and August 3, 2016,~~ the ~~Board~~board of ~~Directors~~directors has authorized the Company to repurchase an aggregate amount of up to $14.0 billion of its outstanding shares of common stock (the “share repurchase program”). The share repurchase program does not have an expiration date. As of December 31, ~~2016,~~2018, the Company had used approximately ~~$11.8~~$12.4 billion, including transaction costs, to repurchase shares.

PERFORMANCE GRAPH

The following graph compares the five-year cumulative total returns of Motorola Solutions, Inc., the S&P 500 Index and the S&P Communications Equipment Index.

This graph assumes $100 was invested in the stock or the indices on December 31, ~~2011~~2013 and reflects the payment of dividends.

Item 6: Selected Financial Data


	Years Ended December 31															Years Ended December 31
(In millions, except per share amounts)	2016			2015			2014			2013			2012			2018			2017			2016			2015			2014
Operating Results
Net sales	$	6,038		$	5,695		$	5,881		$	6,227		$	6,269		$	7,343		$	6,380		$	6,038		$	5,695		$	5,881
Operating earnings (loss)	1,067			994			(1,006		)	947			920
Operating earnings																1,255			1,284			1,048			916			900
Earnings (loss) from continuing operations, net of tax*	560			640			(697		)	933			670			966			(155		)	560			640			(697		)
Per Share Data (in dollars)
Diluted earnings (loss) from continuing operations per common share*	$	3.24		$	3.17		$	(2.84	)	$	3.45		$	2.25		$	5.62		$	(0.95	)	$	3.24		$	3.17		$	(2.84	)
Earnings per diluted common share*	3.24			3.02			5.29			4.06			2.96
Earnings (loss) per diluted common share*																5.62			(0.95		)	3.24			3.02			5.29
Diluted weighted average common shares outstanding (in millions)	173.1			201.8			245.6			270.5			297.4			172.0			162.9			173.1			201.8			245.6
Dividends declared per share	$	1.70		$	1.43		$	1.30		$	1.14		$	0.96		$	2.13		$	1.93		$	1.70		$	1.43		$	1.30
Balance Sheet
Total assets	$	8,463		$	8,346		$	10,423		$	11,851		$	12,679		$	9,409		$	8,208		$	8,463		$	8,346		$	10,423
Total debt	4,396			4,349			3,400			2,461			1,863			5,320			4,471			4,396			4,349			3,400
Other Data
Capital expenditures	$	271		$	175		$	181		$	169		$	170		$	197		$	227		$	271		$	175		$	181
% of sales	4.5		%	3.1		%	3.1		%	2.7		%	2.7		%	2.7		%	3.6		%	4.5		%	3.1		%	3.1		%
Research and development expenditures	$	553		$	620		$	681		$	761		$	790		$	637		$	568		$	553		$	620		$	681
% of sales	9.2		%	10.9		%	11.6		%	12.2		%	12.6		%	8.7		%	8.9		%	9.2		%	10.9		%	11.6		%

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

Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following is a discussion and analysis of our financial position as of December 31, ~~2016~~2018 and ~~2015~~2017 and results of operations for each of the three years in the period ended December 31, ~~2016.~~2018. This commentary should be read in conjunction with our consolidated financial statements and the notes thereto appearing under “Item 8: Financial Statements and Supplementary Data.”

During the second quarter of 2018, we modified our internal reporting structure to better align the way financial information is reported to and analyzed by executive leadership in part as a result of recent acquisitions contributing to the growth within the newly-aligned Services and Software segment. Previously, we had two reporting segments: Products and Services. The changes in reporting structure consist of Systems Integration-related revenue and costs moving from the old Services segment into the newly-presented Products and Systems Integration segment and software-related revenue and costs moving from the old Products segment into the newly-presented Services and Software segment.

Executive Overview

Recent Acquisitions and Developments

On January 7, 2019, we announced that we acquired VaaS International Holdings, Inc. ("VaaS"), a "video analysis as a service" company that is a leading global provider of data and image analytics for vehicle location for a purchase price of $445 million. This acquisition expands our command center software portfolio.

We have reached an agreement with the U.K. Home Office on terms for the new direction of the U.K. Emergency Services Network (“ESN”) that we expect to sign in early 2019. During the fourth quarter of 2018, we signed an agreement to extend the Airwave contract through 2022 with substantially similar terms to the prior agreement.

On March 28, 2018, we completed the acquisition of Avigilon Corporation ("Avigilon"), a provider of advanced security and video solutions including video analytics, network video management hardware and software, video cameras and access control solutions for a purchase price of $974 million.

On March 7, 2018, we completed the acquisition of Plant Holdings, Inc. ("Plant"), the parent company of Airbus DS Communications for a purchase price of $237 million. This acquisition expands our software portfolio in the command center with additional solutions for Next Generation 9-1-1.

On August 28, 2017, we completed the acquisition of Kodiak Networks, a provider of broadband push-to-talk for commercial customers, for a purchase price of $225 million.

On March 13, 2017, we completed the acquisition of Interexport, a managed service provider of communications systems to public safety and commercial customers in Chile, for a purchase price of $98 billion Chilean pesos, or approximately $147 million.

OnNovember 10, 2016, we completed the acquisition of Spillman Technologies ("Spillman"), a provider of comprehensive law enforcement and public safety software solutions, for a purchase price of$221 million. The acquisition expands our command center services and software portfolio and enables us to offer a full suite of solutions to a broader customer base.

On February 19, 2016, we completed the acquisition of Guardian Digital Communications Limited ("GDCL"), a holding company of Airwave Solutions Limited ("Airwave"), the largest private operator of a public safety network in the world. All of the outstanding equity of GDCL was acquired for the sum of £1, after which we invested into GDCL £698 million, net of cash acquired, or approximately $1.0 billion, to settle all third party debt. We will make a deferred cash payment of £64 million on November 15, 2018. We funded the investment with a $675 million term loan (the "Term Loan"), which was subsequently repaid on December 30, 2016, and approximately $400 million of international cash on hand. The acquisition of GDCL enables us to geographically diversify our global Managed & Support services offerings, while offering a proven service delivery platform to build on for providing innovative, leading, mission-critical communications solutions and services to customers.

On~~November 10, 2016, we completed the acquisition of Spillman Technologies, a provider of comprehensive law enforcement and public safety software solutions, for a gross purchase price of$217 million using cash on hand. The acquisition expands our Command Center software and services portfolio and enables us to offer a full suite of solutions to a broader customer base.~~

During the year ended December 31, 2016, we relocated our global headquarters from Schaumburg, IL to Chicago, IL. The move provides us with access to key talent and allows the Company to optimize the Schaumburg campus for current space requirements.

Our Business

~~We are~~Motorola Solutions is a leading global provider of mission-critical ~~communication infrastructure, devices, accessories,~~communications. Our technology platforms in communications, software, ~~and services. Our products~~video, and services make cities safer and help ~~government,~~communities and businesses thrive. At Motorola Solutions, we are ushering in a new era in public safety and ~~commercial customers improve their operations through increased effectiveness, efficiency, and safety of their mobile workforces.~~security. We serve our customers with a global footprint of sales in more than 100 countries and ~~14,000~~16,000 employees worldwide based on our industry leading innovation and a deep portfolio of products and services.

We conduct our business globally and manage it by two segments:

~~Products:~~Products and Systems Integration: The Products and Systems Integration segment ~~is comprised~~offers an extensive portfolio of ~~Devices~~infrastructure, devices, accessories, video solutions, and ~~Systems. Devices includes two-way portable~~the implementation, optimization, and ~~vehicle mounted radios, accessories,~~integration of such systems, devices, and ~~software features~~applications, including the Company’s: (i) “ASTRO” products, which meet the Association of Public Safety Communications Officials Project 25 standard, (ii) “Dimetra” products which meet the European Telecommunications Standards Institute Terrestrial Trunked Radio “TETRA” standard, (iii) Professional and ~~upgrades. Systems includes the radio network core~~Commercial Radio (“PCR”) products, (iv) broadband technology products, such as Long-Term Evolution (“LTE”), and ~~central processing software, base stations, consoles, repeaters, and software applications and features.~~(v) video solutions, such as video cameras. The primary customers of the Products and Systems Integration segment are government, public safety and first-responder agencies, municipalities, and commercial and industrial customers who operate private communications networks and ~~manage~~video solutions typically managing a mobile workforce. In ~~2016,~~2018, the segment’s net sales were ~~$3.6~~$5.1 billion, representing ~~60%~~69% of our consolidated net sales.

~~Services:~~Services and Software: The Services and Software segment provides a ~~full set~~broad range of ~~service~~solution offerings for government, public safety and commercial communication networks including: (i) Integration services, (ii) Managed & Support services, and (iii) iDEN services. Integration services includes the implementation, optimization, and integration of systems, devices, software, and applications. Managed & Support servicesnetworks. Services includes a continuum of service offerings

beginning with repair, technical support and ~~hardware~~ maintenance. More advanced offerings include ~~network~~ monitoring, software ~~maintenance,~~updates and ~~cyber security~~cybersecurity services. Managed ~~service offerings~~services range from partial orto full operation of customer ~~owned networks to operation of~~or Motorola ~~Solutions owned~~Solutions-owned networks. ~~Services~~Software includes a public safety and ~~SaaS offerings are provided across all radio network technologies, Command Center Consoles,~~enterprise command center software suite, unified communications applications, and ~~Smart Public Safety Solutions. iDEN services consists primarily of hardware~~video software solutions, delivered both on premise and ~~software maintenance services for our legacy iDEN customers.~~“as a service.” In ~~2016,~~2018, the segment’s net sales were ~~$2.4~~$2.2 billion, representing ~~40%~~31% of our consolidated net sales.

~~Trends Affecting Our Business~~

~~Impact of Macroeconomic Conditions:~~ The stronger U.S. dollar and weakening economic conditions have had a negative impact on sales, particularly in Latin America, parts of EMEA, and China. Additionally, the strengthening dollar has reduced the purchasing power of our customers, and economic challenges have negatively impacted government budgets and funds available for the purchase of our products in these regions.

The impact of foreign exchange rate fluctuations on net earnings is mitigated by the following: (i) the majority of our revenues are derived from contracts within North America denominated in U.S. dollars, (ii) the cost of sales for the delivery of our Services offerings are predominately labor costs incurred within the same geographic region as the associated sales, resulting in minimal impact of foreign exchange rates on gross margin within the Services segment, and (iii) a significant portion of our operating expenses are denominated in foreign currencies as a result of our offshore R&D and selling, general, and administrative ("SG&A") footprint.

~~Growth of Our Services Portfolio:~~Our Services segment is expected to grow at a higher rate than our Products segment. Overall, the Services segment has a lower gross margin percentage than the Products segment, but we expect consolidated operating margins to continue to expand.

~~iDEN:~~ We have experienced a downward trend in iDEN product and services sales over recent years due to decreased demand as a result of the dated nature of the technology. We expect the downward trend to continue as service contracts expire and new technology replaces iDEN equipment in the marketplace. This trend primarily relates to our Services segment as the majority of iDEN sales are hardware and software maintenance services. The expected decline in iDEN sales of approximately $50 million in 2017 will impact both revenues and gross margins within the Services segment as iDEN services’ gross margins are generally higher than the remainder of our services portfolio.

~~Change in Presentation~~

During the first quarter of 2016, we restructured our regions operationally combining the Europe and Africa and Middle East regions into one region which is now reflected as Europe, Middle East, and Africa ("EMEA"). Accordingly, we now report net sales in the following four geographic regions: North America, Latin America, EMEA, and Asia Pacific ("AP"). We have updated all periods presented to reflect this change in presentation.

~~2016 financial results and accomplishments~~

~~Ended 2016 with a record backlog position of $8.4 billion, up 29% compared to 2015~~2018 Financial Results

Net sales were ~~$6.0~~$7.3 billion in ~~2016~~2018 compared to ~~$5.7~~$6.4 billion in ~~2015. Net sales~~2017 and grew in ~~EMEA, including $462 million from~~ the ~~acquisition of GDCL, North America~~Americas and APEMEA.

Operating earnings were ~~$1.1~~$1.3 billion in ~~2016, compared to $1.0 billion in 2015~~both 2018 and 2017.

Earnings ~~from continuing operations~~attributable to Motorola Solutions, Inc. were ~~$560~~$966 million, or ~~$3.24~~$5.62 per diluted common share in ~~2016,~~2018, compared to ~~earnings~~losses of ~~$640~~$155 million, or ~~$3.17~~$(0.95) per diluted common share in ~~2015~~2017.

~~Operating~~Our operating cash flow ~~increased $144~~decreased $271 million to ~~$1.2~~$1.1 billion in ~~2016~~2018. The decrease is driven by the $500 million contribution to our U.S. pension plan, partially offset by higher earnings.

~~Returned $1.1 billion~~We returned $469 million of capital in the form of ~~$842~~$132 million in share repurchases and ~~$280~~$337 million in dividends ~~2016~~

~~Invested $1.3~~in 2018 and invested $1.2 billion in ~~four acquisitions of software and services companies~~acquisitions.

~~Increased~~We increased our quarterly dividend by ~~15%~~10% to ~~$0.47~~$0.57 per share in November ~~2016~~2018.

Ended 2018 with a backlog position of $10.6 billion, up $988 million compared to 2017.

Segment Financial ~~results for our two segments in 2016~~Highlights

In the Products and Systems Integration segment, net sales were ~~$3.6~~$5.1 billion in ~~2016, a decrease~~2018, an increase of ~~$27~~$587 million, or 1%13%, compared to ~~$3.7~~$4.5 billion in 2015. On a geographic basis, net sales decreased in EMEA and Latin America and increased in North America and AP, compared to 2015. Operating earnings were $734 million in 2016, compared to $704 million in 2015. Operating margin increased in 2016 to 20.1% from 19.2% in 2015.

In the Services segment, net sales were $2.4 billion in 2016, an increase of $370 million, or 18%, compared to $2.0 billion in 2015. Managed & Support services grew 49% primarily due to the acquisition of GDCL. Managed & Support services grew 5% organically.2017. On a geographic basis, net sales increased in the Americas and EMEA, ~~North America, and AP and decreased in LA compared to 2015.~~partially offset by AP. Operating earnings were ~~$333~~$854 million in ~~2016,~~2018, compared to ~~$290~~$969 million in ~~2015.~~2017. Operating margin decreased in ~~2016~~2018 to ~~13.9%~~16.7% from ~~14.4%~~21.5% in ~~2015.~~2017 driven by costs related to the closure of certain supply chain operations in Europe, an increase to an existing environmental reserve related to a legacy business, and higher expenses related to acquisitions.

In the Services and Software segment, net sales were $2.2 billion in 2018, an increase of $376 million, or 20%, compared to $1.9 billion in 2017. On a geographic basis, net sales increased in every region. The increase in net sales was driven by growth excluding acquisitions in both Services and Software and also including the acquisitions of Plant, Kodiak Networks, and Interexport. Operating earnings were $401 million in 2018, compared to $315 million in 2017. Operating margin increased in 2018 to 17.9% from 16.9% in 2017 on higher sales and gross margin.

Looking Forward

Entering 2019, we believe we are well-positioned for continued leadership in mission-critical communications. Our technology platforms in communications, video, services, and software help make cities safer and enable communities and businesses to thrive. At Motorola Solutions, we are ushering in a new era in public safety and security. We are a leading provider of solutions that enable first responders, federal and local governments, as well as commercial customers, to communicate in everyday and extreme situations.

Our land mobile radio ("LMR") solutions are uniquely designed, built, and delivered for our customers’ specific needs, and we continue to expect LMR to be the preferred solution for our customers in the years ahead.

Our services and software business supplements our LMR business. As communication networks have become increasingly complex, software-centric, and data-driven, we have expanded our services offering to maintain, monitor, secure and manage our customers' networks. We expect continued growth for our value-added services going forward. Additionally, we have command center software solutions for the public safety workflow to serve the 6,000+ emergency call centers in North America. We have invested organically and via the acquisitions of Plant, Kodiak Networks and Spillman in 2018, 2017 and 2016, respectively, to add new capabilities to our command center software offering. These investments help improve efficiency for first responders by enabling them to make use of rich data content such as pictures, video, and text messages. From shorter response times to new applications such as proactive incident management, we are providing new capabilities with command center software solutions increasingly delivered as a service. Next Generation 9-1-1 is an important and growing movement that the U.S. and other countries are expected to continue prioritizing for investment. We expect our overall revenue mix to continue to shift towards services and software over time.

Our largest investment in 2018 was the acquisition of Avigilon and its video and analytics solutions, which are an increasingly powerful tool for first responders. Video devices, video management, video analytics software, and access control solutions for both government and commercial customers is a large and expanding market. There are video cameras deployed across airports, rail, streets, and public and private buildings that use advanced tools including artificial intelligence and machine learning to capture, analyze, and use all of this content in a meaningful way. Our offerings, including high-definition cameras, advanced video analytics, and video management solutions provide a scalable architecture that allow for easier and faster deployments than other point solutions that are in the marketplace today.

We remain committed to driving shareholder value with revenue growth, operating leverage, cash flow generation, and efficient capital deployment. ~~We strive to optimize our~~Our framework for efficient capital ~~structure to enable prioritized~~deployment of cash flow from operations consists of approximately: (i) 50% for acquisitions or share repurchases, (ii) 30% for dividends, and (iii) 20% for investments in the business ~~and targeted acquisitions as a source of generating solid future operating cash flows. These potential investments are balanced against returning excess~~

through capital ~~to shareholders through dividends and share repurchases.~~expenditures. We expect to continue ~~the quarterly dividends that were initiated~~a balanced approach in ~~2011, as well as the opportunity to return~~allocating capital ~~to shareholders~~ through ~~share repurchases.~~this framework. Our share repurchase program has approximately ~~$2.2~~$1.6 billion of authority available as of December 31, ~~2016.~~

Entering 2017, we believe we are well-positioned to compete in both our core markets and adjacent growth areas. We have a broad, compelling products and services portfolio specifically tailored for our mission-critical communications customer base that spans many layers of governments, public safety, and first responders, as well as commercial and industrial customers in a number of key verticals. As we add new products, features, and software upgrades, we ensure our solutions are interoperable and backward-compatible, enabling customers to confidently invest for their future needs while allowing them to utilize their prior investment in our technology.

Supplementing our traditional core business is our investment in our Managed & Support services business and software solutions in the Command Center. As communication networks have become increasingly complex, software-centric, and data-driven, we have shifted our offerings to align with this technology trend in serving our customers. We expect to continue to see growing demands for our Managed & Support services going forward. These services offerings help customers manage, support, and upgrade their networks as well as utilize features, applications, and data in new ways including predictive policing, proactive support, or smarter response strategies. We expect our overall revenue mix to continue to shift towards software and services over time. On February 19, 2016, the Company expanded our Managed & Support services business with the acquisition of GDCL, the largest private operator of a public safety network in the world, delivering mission-critical voice and data communications to more than 300 public service agencies in Great Britain. Additionally, we expanded our software solutions2018.

~~portfolio in 2016 with the acquisition of three software and services businesses that provide software solutions in the Command Center and mobile applications for public safety.~~

Another key technology trend complementing our existing business is the expanded use of broadband LTE by our customers. We have been proactively investing in next-generation public safety broadband solutions for years, as we believe public safety LTE solutions are the next-generation tool for our public safety first-responder customers. We believe our expertise in both public and private networks makes us uniquely qualified to provide these public safety broadband solutions to this customer base. We have now won the four largest public safety LTE network installations awarded to date and expect LTE sales to represent a larger portion of our revenue in the coming years.

Results of Operations


	Years ended December 31															Years ended December 31
(Dollars in millions, except per share amounts)	2016			% of Sales **		2015			% of Sales **		2014			% of Sales **		2018			% of Sales **		2017			% of Sales **		2016			% of Sales **
Net sales from products	$	3,649				$	3,676				$	3,807				$	4,463				$	3,772				$	3,649
Net sales from services	2,389					2,019					2,074					2,880					2,608					2,389
Net sales	6,038					5,695					5,881					7,343					6,380					6,038
Costs of product sales	1,649			45.2	%	1,625			44.2	%	1,678			44.1	%	2,035			45.6	%	1,686			44.7	%	1,649			45.2	%
Costs of services sales	1,520			63.6	%	1,351			66.9	%	1,372			66.2	%	1,828			63.5	%	1,670			64.0	%	1,520			63.6	%
Costs of sales	3,169			52.5	%	2,976			52.3	%	3,050			51.9	%	3,863			52.6	%	3,356			52.6	%	3,169			52.5	%
Gross margin	2,869			47.5	%	2,719			47.7	%	2,831			48.1	%	3,480			47.4	%	3,024			47.4	%	2,869			47.5	%
Selling, general and administrative expenses	1,000			16.6	%	1,021			17.9	%	1,184			20.1	%	1,254			17.1	%	1,025			16.1	%	1,044			17.3	%
Research and development expenditures	553			9.2	%	620			10.9	%	681			11.6	%	637			8.7	%	568			8.9	%	553			9.2	%
Other charges	249			4.1	%	84			1.5	%	1,972			33.5	%	334			4.5	%	147			2.3	%	224			3.7	%
Operating earnings (loss)	1,067			17.7	%	994			17.5	%	(1,006		)	(17.1	)%
Operating earnings																1,255			17.1	%	1,284			20.1	%	1,048			17.4	%
Other income (expense):
Interest expense, net	(205		)	(3.4	)%	(173		)	(3.0	)%	(126		)	(2.1	)%	(222		)	(3.0	)%	(201		)	(3.2	)%	(205		)	(3.4	)%
Gains (losses) on sales of investments and businesses, net	(6		)	(0.1	)%	107			1.9	%	5			0.1	%	16			0.2	%	3			—	%	(6		)	(0.1	)%
Other	(12		)	(0.2	)%	(11		)	(0.2	)%	(34		)	(0.6	)%	53			0.7	%	(10		)	(0.2	)%	7			0.1	%
Total other expense	(223		)	(3.7	)%	(77		)	(1.4	)%	(155		)	(2.6	)%	(153		)	(2.1	)%	(208		)	(3.3	)%	(204		)	(3.4	)%
Earnings (loss) from continuing operations before income taxes	844			14.0	%	917			16.1	%	(1,161		)	(19.7	)%
Income tax expense (benefit)	282			4.7	%	274			4.8	%	(465		)	(7.9	)%
Earnings (loss) from continuing operations	562			9.3	%	643			11.3	%	(696		)	(11.8	)%
Net earnings before income taxes																1,102			15.0	%	1,076			16.9	%	844			14.0	%
Income tax expense																133			1.8	%	1,227			19.2	%	282			4.7	%
Net earnings (loss)																969			13.2	%	(151		)	(2.4	)%	562			9.3	%
Less: Earnings attributable to noncontrolling interests	2			—	%	3			0.1	%	1			—	%	3			—	%	4			0.1	%	2			—	%
Earnings (loss) from continuing operations*	560			9.3	%	640			11.2	%	(697		)	(11.9	)%
Earnings (loss) from discontinued operations, net of tax	—			—	%	(30		)	(0.5	)%	1,996			33.9	%
Net earnings*	$	560		9.3	%	$	610		10.7	%	$	1,299		22.1	%
Net earnings (loss)*																$	966		13.2	%	$	(155	)	(2.4	)%	$	560		9.3	%
Earnings (loss) per diluted common share*:
Continuing operations	$	3.24				$	3.17				$	(2.84	)
Discontinued operations	—					(0.15		)			8.13
Earnings per diluted common share*	$	3.24				$	3.02				$	5.29				$	5.62				$	(0.95	)			$	3.24

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

** Percentages may not add due to rounding.

Geographic Market Sales by Locale of End Customer


	2016		2015		2014		2018		2017		2016
North America	63	%	65	%	61	%
Latin America	5	%	6	%	9	%
Americas							69	%	68	%	68	%
EMEA	21	%	17	%	19	%	22	%	21	%	21	%
AP	11	%	12	%	11	%	9	%	11	%	11	%
	100	%	100	%	100	%	100	%	100	%	100	%

Results of Operations—~~2016~~2018 Compared to ~~2015~~2017

Net Sales



	Years ended December 31
(In millions)	2018		2017		% Change
Net sales from Products and Systems Integration	$	5,100	$	4,513	13	%
Net sales from Services and Software	2,243		1,867		20	%
Net sales	$	7,343	$	6,380	15	%

The Products and Systems Integration segment’s net sales represented 69% of our consolidated net sales in 2018, compared to 71% in 2017. The Services and Software segment’s net sales represented 31% of our consolidated net sales in 2018, compared to 29% in 2017.

Net sales were ~~$6.0~~up $963 million, or 15%, compared to 2017. The increase in net sales was driven by the Americas and EMEA with a 13% increase in the Products and Systems Integration segment and a 20% increase in the Services and Software segment. This growth includes:

$507 million of incremental revenue from the acquisitions of Avigilon and Plant in 2018 and Kodiak Networks and Interexport which were acquired during 2017;

$83 million from the adoption of Accounting Standards Codification ("ASC") 606 (see Note 1 of our consolidated financial statements); and

$32 million from favorable currency rates.

Regional results include:

the Americas grew 17% across all products within both the Products and Systems Integration and the Services and Software segments, inclusive of incremental revenue from acquisitions;

EMEA grew 18% on broad-based growth within all offerings within our Products and Systems Integration and Services and Software segments, inclusive of incremental revenue from acquisitions; and

AP was relatively flat with growth in the Services and Software segment offset by lower Products and Systems Integration revenue.

Products and Systems Integration

The 13% growth in the Products and Systems Integration segment was driven by the following:

$318 million of incremental revenue from the acquisitions of Avigilon in 2018 and Interexport during 2017;

$78 million from the adoption of ASC 606;

Devices revenues were up significantly due to the acquisition of Avigilon along with strong demand in the Americas and EMEA; and

Systems and Systems Integration revenues increased 10% in 2018, as compared to 2017 driven by incremental revenue from Avigilon, as well as system deployments in EMEA and AP.

Services and Software

The 20% growth in the Services and Software segment was driven by the following:

$189 million of incremental revenue primarily from the acquisitions of Plant and Avigilon in 2018 and Kodiak Networks and Interexport during 2017;

$5 million from the adoption of ASC 606;

Services were up $174 million, or 9%, driven by growth in both maintenance and managed service revenues, and incremental revenue from the acquisitions of Interexport and Plant; and

Software was up $202 million, or 89%, driven primarily by incremental revenue from the acquisitions of Plant, Avigilon, and Kodiak Networks, and growth in our command center software suite.

Gross Margin



	Years ended December 31
(In millions)	2018		2017		% Change
Gross margin	$	3,480	$	3,024	15	%

Gross margin was 47.4% of net sales in both 2018 and 2017. The primary drivers of increases, with offsetting decreases, are as follows:

higher margins within the Services and Software segment primarily driven by operational improvements and efficiencies in service delivery costs of our Services portfolio and higher margin contribution within our Software portfolio from acquisitions;

lower margins in the Products and Systems Integration segment primarily driven by lower margin in Systems and Systems Integration due to certain large projects where we have taken an integrator role, partially offset by higher Devices volumes; and

$50 million of additional reorganization of business charges (see further detail in “Reorganization of Businesses” section) primarily associated with costs related to the closure of certain supply chain operations in Europe in 2018 as compared to 2017.

Selling, General and Administrative Expenses



	Years ended December 31
(In millions)	2018		2017		% Change
Selling, general and administrative expenses	$	1,254	$	1,025	22	%

SG&A expenses increased 22% compared to 2017. SG&A expenses were 17.1% of net sales compared to 16.1% of net sales in 2017.

The increase in SG&A expenditures is primarily due to increased expenses associated with acquired businesses, $72 million related to the change in classification of our third-party sales commissions from the adoption of ASC 606, and higher incentive compensation.

Research and Development Expenditures



	Years ended December 31
(In millions)	2018		2017		% Change
Research and development expenditures	$	637	$	568	12	%

R&D expenditures increased 12%. R&D expenditures were 8.7% of net sales compared to 8.9% of net sales in 2017. The increase in R&D expenditures is primarily due to increased expenses associated with acquired businesses.

Other Charges



	Years ended December 31
(In millions)	2018		2017
Other charges	$	334	$	147

The Other charges in 2018 as compared to 2017 can be summarized as follows:

$188 million of amortization of intangibles in 2018 compared to $151 million in 2017, driven by 2018 acquisitions;

$61 million of net reorganization of business charges in 2018 as compared to $33 million in 2017, with higher charges coming in 2018 as we continue to integrate acquisitions (see further detail in “Reorganization of Businesses” section);

a $57 million charge in 2018 related to ongoing remediation efforts for an environmental clean-up incurred by a legacy business (see Note 3 of our consolidated financial statements);

a gain of $47 million in 2017, related to the recovery of financial receivables owed to us by a former customer of a legacy business; and

$24 million of charges for acquisition-related transaction fees in 2018 as compared to $1 million in 2017.

Operating Earnings



	Years ended December 31
(In millions)	2018		2017
Operating earnings from Products and Systems Integration	$	854	$	969
Operating earnings from Services and Software	401		315
Operating earnings	$	1,255	$	1,284

Operating earnings were down $29 million, or 2%, compared to 2017. The decrease in Operating earnings was due to:

Products and Systems Integration was down $115 million from 2017 to 2018, driven by: (i) $69 million more reorganization of business expenses, (ii) environmental reserve expenses of $40 million in 2018, (iii) $28 million more intangible amortization driven by acquisitions, and (iv) $12 million of acquisition-related transaction fees; and

partially offset by the Services and Software segment, which was up $86 million from 2017 to 2018, driven by higher sales and partially offset by: (i) environmental reserve expenses of $17 million in 2018, (ii) $9 million more reorganization of business expenses, (iii) $9 million more intangible amortization from 2018 acquisitions, and (iv) $11 million more of acquisition-related transactions fees.

Net Interest Expense



	Years ended December 31
(In millions)	2018			2017
Interest expense, net	$	(222	)	$	(201	)

The increase in net interest expense in 2018 compared to 2017 was a result of increases in outstanding debt:

$500 million of Senior notes due in 2028, that were used to make a voluntary contribution to the U.S. pension plan, issued during the first quarter of 2018;

$400 million term loan due in 2021 ("the Term Loan") that was issued during the first quarter of 2018 and was used to complete the acquisition of Avigilon;

$400 million borrowed under our revolving credit facility at the end of the first quarter of 2018 and repaid throughout the year; and

$200 million of follow-on Senior notes due in 2028, issued in the third quarter of 2018, which were used to repurchase $200 million of Convertible Notes.

Gains (losses) on Sales of Investments and Businesses, net



	Years ended December 31
(In millions)	2018		2017
Gains (losses) on sales of investments and businesses, net	$	16	$	3

The net gains in 2018 and 2017 were primarily related to the sales of various equity investments.

Other



	Years ended December 31
(In millions)	2018		2017
Other income (expense)	$	53	$	(10	)

The net Other income in 2018 as compared to 2017 was primarily comprised of:

$75 million of net periodic pension and postretirement benefit in 2018 as compared to $46 million in 2017;

$48 million of losses on settlements within our U.K. defined benefit plan during 2017 with no activity in 2018;

$11 million of favorable fair value adjustments to investments;

a $6 million gain from the repurchase of $200 million of our Convertible Notes in 2018,

foreign currency losses of $24 million in 2018 as compared to $31 million of losses in 2017; and

a $14 million loss on derivative instruments in 2018, as compared to a gain of $15 million in 2017.

Effective Tax Rate



	Years ended December 31
(In millions)	2018		2017
Income tax expense	$	133	$	1,227

Income tax expense decreased by $1.1 billion compared to 2017, for an effective tax rate of 12%. Our effective tax rate for 2018 was lower than the current U.S. federal statutory rate of 21% primarily due to:

a $79 million benefit related to updates of the provisional amounts on the impact of the Tax Act; and

a $30 million benefit due to the recognition of excess tax benefits on share-based compensation.

Our effective tax rate in 2017 was 114% primarily due to the implementation of Tax Act. As a result of the Tax Act we recorded $874 million of non-recurring charges, primarily related to:

a $471 million valuation allowance against U.S. foreign tax credit carryforwards; and

income tax expense of $366 million from the remeasurement of our deferred tax balances at the lower federal tax rate of 21%.

Excluding the income tax effects from the Tax Act, our effective tax rate was lower than the 2017 U.S. statutory tax rate of 35% (see Note 6 of our consolidated financial statements).

Results of Operations—2017 Compared to 2016

Net Sales



	Years ended December 31
(In millions)	2017		2016		% Change
Net sales from Products and Systems Integration	$	4,513	$	4,394	3	%
Net sales from Services and Software	1,867		1,644		14	%
Net sales	$	6,380	$	6,038	6	%

The Products and Systems Integration segment’s net sales represented 71% of our consolidated net sales in 2017, compared to 73% in 2016. The Services and Software segment’s net sales represented 29% of our consolidated net sales in 2017, compared to 27% in 2016.

Net sales were up ~~$343~~$342 million, or 6%, compared to ~~$5.7 billion in 2015.~~2016. The increase in net sales is reflective of growth in every region with a 3% increase in the Products and Systems Integration segment and a 14% increase in the Services and Software segment. The growth includes:

$186 million of incremental revenue from the acquisitions of Interexport and Kodiak Networks in 2017 and Spillman and Airwave which were acquired during 2016; and

$8 million from favorable currency rates.

Regional results include:

the Americas grew 7% due to increases in the Services and Software segment, inclusive of incremental revenue from acquisitions, as well as in Systems and System Integration, offset by a slight decrease in Device revenues;

EMEA ~~North America,~~grew 5% across all portfolios within our Products and Systems Integration segment, as well as within our Services and Software segment, inclusive of incremental revenues from Airwave; and

AP grew 1% due to increases in both Devices and Systems and Systems Integration within our Products and Systems Integration segment, partially offset by a slight decrease in ~~Latin America. EMEA grew on~~our Services ~~sales, partially offset~~and Software segment.

Products and Systems Integration

The 3% growth in the Products and Systems Integration segment was driven by ~~lower Products sales. The increase~~the following:

Systems and Systems Integration revenues increased 5% in ~~EMEA Services sales was due~~2017 as compared to ~~expansion~~2016 driven by system deployments in the Americas and $19 million of ~~our Managed & Support services, primarily~~incremental revenue from the acquisition of ~~GDCL which provided $462~~Interexport in 2017; and

an increase in Devices in every region.

Services and Software

The 14% growth in the Services and Software segment was driven by the following:

$167 million of ~~net~~incremental revenue from the acquisitions of Interexport and Kodiak Networks in 2017 and Spillman and Airwave in 2016;

Services were up $128 million, or 8%, driven by incremental revenue from the acquisitions of Interexport and Airwave as well as growth in maintenance services and managed service revenues; and

Software was up $95 million, or 72%, driven primarily by incremental revenue from the acquisitions of Spillman and Kodiak Networks, in addition to higher command center software sales ~~during the year ended December 31, 2016. North America and AP grew on both Services and Products sales. The decrease in Latin America was the result of lower Products and Services sales primarily due~~not attributed to ~~macroeconomic pressures.~~acquisitions.

Gross Margin



	Years ended December 31
(In millions)	2017		2016		% Change
Gross margin	$	3,024	$	2,869	5	%

Gross margin was ~~$2.9 billion, or~~47.4% of net sales compared to 47.5% of net sales in ~~2016, compared to $2.7 billion, or 47.7%~~2016. The primary drivers of ~~net sales in 2015. The~~the decrease ~~in gross margin percentage was driven by higher employee separation costs as a result of headcount reductions, offset by gross margin expansion~~are:

lower margins within the Services and Software segment driven by ~~our Managed & Support services portfolio, primarily due to~~ the acquisition of ~~GDCL,~~Interexport which ~~has~~is a managed services provider with lower gross margins than the segment total; partially offset by higher gross margin associated with the Spillman acquisition; and

lower margins within the Products and Systems Integration segment driven by a slight decline in our Devices margins due to product mix, partially offset by higher margins ~~than~~within our ~~legacy portfolio.~~Systems and Systems Integration portfolio due to a favorable mix of projects.

Selling, General and Administrative Expenses



	Years ended December 31
(In millions)	2017		2016		% Change
Selling, general and administrative expenses	$	1,025	$	1,044	(2	)%

SG&A expenses decreased 2% compared to ~~$1.0 billion, or 16.6%~~2016. SG&A expenses were 16.1% of net sales compared to 17.3% of net sales in ~~2016, compared to $1.0 billion, or 17.9% of net sales in 2015.~~ 2016.

The decrease in SG&A ~~expenditures~~expenses is primarily due to cost savings initiatives, ~~including headcount reductions,~~ partially offset by higher ~~incentive compensation and acquisitions costs.~~expenses associated with acquired businesses.

Research and Development Expenditures



	Years ended December 31
(In millions)	2017		2016		% Change
Research and development expenditures	$	568	$	553	3	%

R&D expenditures ~~decreased 11%~~increased 3% compared to ~~$553 million, or~~2016. R&D expenditures were 8.9% of net sales compared to 9.2% of net sales in ~~2016, compared to $620 million, or 10.9% of net sales in 2015.~~2016. The ~~decrease~~increase in R&D expenditures is primarily due ~~to: (i) cost savings initiatives, including headcount reductions, and (ii) the movement of employees~~ to ~~lower cost work sites.~~higher expenses associated with acquired businesses.

Other Charges

~~We recorded net other~~



	Years ended December 31
(In millions)	2017		2016
Other charges	$	147	$	224

The decrease in Other charges ~~of $249 million~~ in ~~2016,~~2017 as compared to ~~net charges of $84 million in 2015. The charges in~~ 2016 ~~included: (i) $113~~can be summarized as follows:

$33 million of ~~charges relating to the amortization of intangibles, (ii) $97 million of net~~ reorganization of business charges in 2017 as compared to $97 million including a $17 million building impairment and a $3 million impairment on our corporate aircraft, (iii) $26 million of losses on settlements within a non-U.S. pension plan, and (iv) $13 million of transaction fees on the acquisition of GDCL. The charges in 2015 included: (i) $108 million of net reorganization of business charges, including a $31 million impairment of our corporate aircraft ~~which was sold and (ii) $8~~in 2016;

a gain of $47 million in 2017 related to the recovery of financial receivables owed to us by a former customer of a legacy business;

$1 million of ~~charges relating~~acquisition related transaction fees in 2017 as compared to ~~the~~$13 million in 2016; and

partially offset by $151 million of amortization of intangibles in 2017 compared to $113 million in 2016, driven primarily by 2017 acquisitions.

Operating Earnings



	Years ended December 31
(In millions)	2017		2016
Operating earnings from Products and Systems Integration	$	969	$	762
Operating earnings from Services and Software	315		286
Operating earnings	$	1,284	$	1,048

Operating earnings were up $236 million, or 23%, compared to 2016. The increase in Operating earnings was due to the following:

Products and Systems Integration was up $207 million from 2016 to 2017, primarily driven by: (i) $73 million less reorganization of business expenses, (ii) $33 million of income related to the recovery of financial receivables owed to us by a former customer of a legacy business, (iii) higher earnings, and (iv) lower SG&A and R&D expenses; and

Services and Software was up $29 million from 2016 to 2017, primarily driven by: (i) higher earnings, (ii) $23 million less reorganization of business expenses, (iii) $14 million of income related to the recovery of financial receivables owed to us by a former customer of a legacy business, and (iv) $12 million less acquisition-related transaction fees, partially offset by ~~a $32~~$37 million ~~non-U.S. pension curtailment gain. The net reorganization of business charges are discussed in further detail in the “Reorganization of Businesses” section.~~more intangible amortization driven by acquisitions.

Net Interest Expense

~~Net interest expense was $205 million in 2016 compared to $173 million in 2015.~~



	Years ended December 31
(In millions)	2017			2016
Interest expense, net	$	(201	)	$	(205	)

The ~~increase~~decrease in net interest expense in ~~2016~~2017 compared to ~~2015~~2016 was a result of ~~higher~~lower average outstanding debt ~~balances.~~balances in 2017 as compared to 2016, as a result of the repayment of our $675 million term loan in December 2016.

Gains (losses) on Sales of Investments and Businesses, net

~~Net losses on~~



	Years ended December 31
(In millions)	2017		2016
Gains (losses) on sales of investments and businesses, net	$	3	$	(6	)

The net gains in 2017 were primarily related to the sales of ~~investments and businesses were $6 million in 2016, compared to net gains on sales of investments and businesses of $107 million in 2015.~~various equity investments. The net losses in 2016 consisted primarily of: ~~(i)~~

a $19 million loss on the sale of an investment in ~~United Kingdom~~U.K. treasury securities ~~and (ii)~~ liquidated in order to purchase Airwave;

a $7 million loss from the sale of our Malaysia manufacturing ~~operations,~~ operations; and

partially offset by $20 million of gains on the sales of equity investments. ~~The net gains in 2015 were related to the sales of equity investments.~~

Other

~~Net Other expense was $12 million~~



	Years ended December 31
(In millions)	2017			2016
Other income (expense)	$	(10	)	$	7

The increase in ~~2016, compared to $11 million in 2015. The~~ net Other ~~expense~~income (expense) in 2017 as compared to 2016 was primarily comprised of: ~~(i)~~

$48 million of losses on settlements within our U.K. defined benefit plan in 2017 compared to $26 million in 2016;

foreign currency losses of $31 million in 2017 compared to $46 million of gains in 2016;

a $46 million net periodic pension and postretirement benefit in 2017 compared to $45 million in 2016;

a $15 million gain on derivative instruments in 2017 compared to a $56 million loss ~~on derivative instruments, (ii)~~ in 2016; and

a ~~$10~~$10 million foreign currency loss on ~~currency~~British Pounds purchased and held in anticipation of the acquisition of GDCL, (iii) a $4 million investment impairment, and (iv) a $2 million loss on the extinguishment of long-term debt, partially offset by: (i) a $46 million foreign currency gain, (ii) $9 million of other non-operating gains, and (iii) a $5 million gain on equity method investments. The net Other expenseAirwave in 2015 was primarily comprised of: (i) a $23 million foreign currency loss and (ii) a $6 million investment impairment, partially offset by: (i) a $7 million gain on derivative instruments, (ii) a $6 million gain on equity method investments, and (iii) $5 million of other non-operating gains.2016.

Effective Tax Rate

~~We recorded $282 million of net~~



	Years ended December 31
(In millions)	2017		2016
Income tax expense	$	1,227	$	282

Income tax expense inincreased by $945 million compared to 2016, ~~resulting in~~for an effective tax rate of ~~33%, compared~~114% primarily due to ~~$274~~the effects of the Tax Act. As a result of the Tax Act we recorded $874 million of ~~net~~non-recurring charges that included the following:

a $471 million valuation allowance against U.S. foreign tax credit carryforwards; and

income tax expense ~~in 2015, resulting in an~~of $366 million from the remeasurement of our deferred tax balances at the lower federal tax rate of 21%.

Excluding the income tax effects from the Tax Act, our effective tax rate ~~of 30%. Our effective tax rate in 2016 and 2015 were~~was lower than the U.S. statutory tax rate of 35% ~~primarily due to lower tax rates on non-U.S. income.~~.

Our effective tax rate ~~will change from period to period based on non-recurring events, such as the settlement~~ of ~~income tax audits, changes~~33% 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 (Loss) from Continuing Operations Attributable to Motorola Solutions, Inc.~~

~~After taxes, we had earnings from continuing operations attributable to Motorola Solutions, Inc. of~~ ~~$560 million, or~~ ~~$3.24~~ ~~per diluted share, in~~ 2016~~, compared to~~ ~~$640 million, or~~ ~~$3.17~~ ~~per diluted share, in~~ ~~2015~~.

~~The decrease in earnings from continuing operations in~~ ~~2016, as compared to~~ ~~2015~~, was primarily driven by: (i) a $165 million increase in Other charges primarily due to the increase in intangible amortization expense and (ii) a $113 million decrease in Gains on sales of investments and businesses, partially offset by: (i) a $150 million increase in Gross margin, (ii) a $67 million decrease in R&D, and (iii) a $21 million decrease in SG&A. The increase in earnings from continuing operations per diluted share was driven by lower shares outstanding as a result of repurchases made through our ongoing share repurchase program, offset by a decrease in earnings from continuing operations.

~~Earnings from Discontinued Operations~~

In 2016, we reported no earnings from discontinued operations, compared to a loss from discontinued operations of $30 million, or $0.15 per diluted share, in 2015. The loss from discontinued operations in 2015 was related to the sale of the Enterprise business.

~~Results of Operations—2015 Compared to 2014~~

~~Net Sales~~

Net sales were $5.7 billion in 2015, down $186 million, or 3% compared to $5.9 billion in 2014. The decline in net sales is reflective of decreases in EMEA and Latin America, partially offset by growth in North America and AP. The decrease in EMEA and Latin America was primarily the result of lower Products and Services sales, driven by challenging macroeconomic conditions in Latin America and Eastern Europe, and foreign exchange rate unfavorability. North America grew on strong Products and Services sales and AP grew on stronger Products sales.

~~Gross Margin~~

Gross margin was $2.7 billion, or 47.7% of net sales in 2015, compared to $2.8 billion, or 48.1% of net sales in 2014. The decrease in gross margin was primarily a result of foreign exchange rate unfavorability. The decrease in gross margin percentage is primarily attributable to a decrease in gross margin as a percentage of sales within the Services segment while the gross margin percentage of the Products segment remained relatively flat. The decrease in gross margin percentage in the Services segment was primarily driven by: (i) a decrease in North America Integration services margins due to the deployment of certain large projects at lower gross margins and (ii) lower net sales in iDEN services which have a slightly higher gross margin percentage compared to the rest of the services portfolio.

~~Selling, General and Administrative Expenses~~

SG&A expenses decreased 14% to $1.0 billion, or 17.9% of net sales in 2015, compared to $1.2 billion, or 20.1% of net sales in 2014. The decrease in SG&A is primarily due to: (i) cost savings initiatives, including headcount reductions, (ii) lower pension expenses, and (iii) the favorable impact of foreign exchange rates, partially offset by higher incentive compensation accruals.

~~Research and Development Expenditures~~

R&D expenditures decreased 9% to $620 million, or 10.9% of net sales in 2015, compared to $681 million, or 11.6% of net sales in 2014. The decrease in R&D expenditures is primarily due to: (i) cost savings initiatives, including headcount reductions, and the movement of employees to lower cost work sites and (ii) the favorable impact of foreign exchange rates, partially offset by higher incentive compensation accruals.

~~Other Charges~~

We recorded net charges of $84 million in 2015, compared to net charges of $2.0 billion in 2014. The charges in 2015 included: (i) $108 million of net reorganization of business charges, including a $31 million impairment of the corporate aircraft and (ii) $8 million of charges relating to the amortization of intangibles, partially offset by a $32 million non-U.S. pension curtailment gain. The charges in 2014 included: (i) a $1.9 billion charge related to the settlement of a U.S. pension plan, (ii) $64 million of net reorganization of business charges, (iii) $8 million of legal settlement charges, and (iv) $4 million of charges relating to the amortization of intangibles, partially offset by a $21 million gain on the sale of a building and land. The net reorganization of business charges are discussed in further detail in the “Reorganization of Business” section.

~~Net Interest Expense~~

Net interest expense was $173 million in 2015, compared to net interest expense of $126 million in 2014. The increase in interest expense in 2015 compared to 2014 was a result of higher outstanding debt balances.

~~Gains (losses) on Sales of Investments and Businesses, net~~

~~Net gains on sales of investments and businesses were $107 million in 2015, compared to $5 million in 2014. The net gains in 2015 and 2014 were related to the sales of equity investments.~~

~~Other~~

Net Other expense was $11 million in 2015, compared to net Other expense of $34 million in 2014. The net Other expense in 2015 was primarily comprised of: (i) a $23 million foreign currency loss and (ii) a $6 million investment impairment, partially offset by: (i) a $7 million gain on derivative instruments, (ii) a $6 million gain on equity method investments, and (iii) $5 million of other non-operating gains. Net Other expense in 2014 was primarily comprised of: (i) a $37 million loss on the extinguishment of debt, (ii) a $4 million loss on derivative instruments, (iii) a $3 million foreign currency loss, and (iv) $6 million of other non-operating losses, partially offset by a $16 million gain on equity method investments.

~~Effective Tax Rate~~

We recorded a $274 million net tax expense in 2015, resulting in an effective tax rate of 30%, compared to $465 million of net tax benefit in 2014, resulting in an effective tax rate of 40%. Our effective tax rate in 2015 was lower than the U.S. statutory tax rate of 35% primarily due to lower tax rates on non-U.S. ~~income.~~

Our effective tax rate in 2014 was favorably impacted by: (i) state tax benefits on the pension settlement loss, (ii) $29 million in tax benefits associated with the net reduction in unrecognized tax benefits, and (iii) $19 million in net reduction in our deferred tax liability for undistributed foreign earnings primarily due to changes in permanent reinvestment assertions. These benefits were partially offset by tax expense for the establishment of a $55 million valuation allowance on certain foreign deferred tax assets.

~~Earnings (Loss) from Continuing Operations Attributable to Motorola Solutions, Inc.~~

~~After taxes, we had earnings from continuing operations attributable to Motorola Solutions, Inc. of $640 million, or $3.17 per diluted share, in~~ ~~2015, compared to a net loss from continuing operations attributable to Motorola Solutions, Inc. of $697 million, or a loss of $2.84 per diluted share, in 2014.~~

~~The increase in earnings (loss) from continuing operations in~~ ~~2015~~, as compared to 2014, was primarily driven by: (i) a $1.9 billion decrease in Other charges, (ii) a $163 million decrease in SG&A, and (ii) a $61 million decrease in R&D. The increase in earnings from continuing operations per diluted share was driven by a reduction in shares outstanding, primarily as a result of our "Dutch auction" tender offer, as well as repurchases made through our ongoing share repurchase program, and an increase in earnings from continuing operations.

~~Earnings from Discontinued Operations~~

In ~~2015~~, we reported a $30 million, or $0.15 per diluted share, loss from discontinued operations, compared to earnings from discontinued operations of $2.0 billion, or $8.13 per diluted share, in 2014. The earnings (loss) from discontinued operations in both ~~2015~~ ~~and 2014 were primarily related to the sale of the Enterprise business.~~

~~Segment Information~~

~~The following commentary should be read in conjunction with the financial results of each operating business segment as detailed in~~income (see Note ~~12, “Information by Segment and Geographic Region,”~~6 of our consolidated financial ~~statements. Net sales and operating results for our two segments for 2016, 2015, and 2014 are presented below.~~

~~Products Segment~~

~~The Products segment’s net sales represented 60% of our consolidated net sales in 2016, compared to 65% in 2015 and 2014.~~

Years ended December 31 Percent Change
(Dollars in millions) 2016 2015 2014 2016—2015 2015—2014
Segment net sales $ 3,649
$ 3,676
$ 3,807
(1 )% (3 )%
Operating earnings (loss) 734
704
(667 ) 4 % N/M

* N/M = Percent Change is not meaningful due to the comparison using prior year operating losses as a basis for the calculation.

~~Segment Results—2016 Compared to 2015~~

The segment’s net sales decreased $27 million, or 1%, to $3.6 billion in 2016, as compared to $3.7 billion in 2015. The decrease in the segment's net sales was primarily driven by: (i) a decrease in global systems sales, (ii) decreases in both devices and systems sales in Latin America primarily due to macroeconomic conditions, and (iii) unfavorable foreign exchange rates with a strengthening U.S. dollar in EMEA, Latin America, and AP, partially offset by growth in devices in NA. On a geographic basis, net sales decreased in EMEA and Latin America and increased in North America and AP in 2016, compared to 2015. The segment's backlog was $1.5 billion at December 31, 2016 and $1.2 billion at December 31, 2015.

Net sales in North America continued to comprise a significant portion of the segment’s business, accounting for approximately 69% of the segment’s net sales in 2016, up from 67% of the segment’s net sales in 2015.

The segment had operating earnings of $734 million in 2016, compared to $704 million in 2015. The increase in operating earnings in 2016 compared to 2015 was driven primarily by: (i) lower SG&A and R&D expenditures as a result of cost savings initiatives including headcount reductions, partially offset by an increase in Other charges.

~~Segment Results—2015 Compared to 2014~~

The segment’s net sales decreased $131 million, or 3%, to $3.7 billion in 2015, as compared to $3.8 billion in 2014. The decrease in the segment's net sales was primarily driven by: (i) the effect of unfavorable foreign exchange rates with a strengthening U.S. dollar in EMEA, Latin America, and AP, (ii) decreases in devices and systems sales in Latin America and EMEA impacted by the reduced purchasing power of our customers caused by the devaluation of their local currency and macroeconomic conditions, (iii) a decrease in systems sales in North America, and (iv) a decline in devices sales in AP, partially offset by: (i) growth in devices sales in North America and (ii) increased systems sales in AP. On a geographic basis, net sales decreased in EMEA and Latin America and increased in North America and AP in 2015, compared to 2014. The segment's backlog was $1.2 billion at both December 31, 2015 and December 31, 2014.

Net sales in North America continued to comprise a significant portion of the segment’s business, accounting for approximately 67% of the segment’s net sales in 2015, up from 62% of the segment’s net sales in 2014.

The segment had operating earnings of $704 million in 2015, compared to an operating loss of $667 million in 2014. The increase in operating earnings in 2015 compared to 2014 was driven primarily by: (i) a decrease in Other charges as a result of a $1.3 billion expense related to the 2014 settlement of a U.S. pension plan, (ii) lower SG&A expenditures as a result of cost savings initiatives, including headcount reductions, the favorable impact of foreign exchange rates, and reduced pension expenses, and (iii) lower R&D expenditures driven by cost savings initiatives and the favorable impact of foreign exchange rates.

~~Services Segment~~

~~The Services segment’s net sales represented 40% of our consolidated net sales in 2016, compared to 35% in 2015 and 2014 respectively.~~

Years ended December 31 Percent Change
(Dollars in millions) 2016 2015 2014 2016—2015 2015—2014
Segment net sales $ 2,389
$ 2,019
$ 2,074
18 % (3 )%
Operating earnings (loss) 333
290
(339 ) 15 % N/M

* N/M = Percent Change is not meaningful due to the comparison using prior year operating losses as a basis for the calculation.

~~Segment Results—2016 Compared to 2015~~

The segment’s net sales increased $370 million, or 18%, to $2.4 billion in 2016, as compared to $2.0 billion in 2015. The increase in the segment's net sales was primarily driven by higher Managed & Support services sales from both the acquisition of GDCL as well as organic growth. The acquisition of GDCL provided $462 million of net sales within EMEA during the year ended December 31, 2016, while the organic Managed & Support services business grew in North America and AP. This sales growth was partially offset by: (i) a decrease in Integration services sales, with a significant decrease in EMEA related to the winding down of a large system implementation, (ii) declining iDEN services sales in Latin America, and (iii) the effect of unfavorable foreign exchange rates with a strengthening U.S. dollar in EMEA, Latin America, and AP. On a geographic basis, net sales increased in EMEA, North America, and AP and decreased in Latin America in 2016, compared to 2015.The segment's backlog was $6.9 billion at December 31, 2016 and $5.2 billion at December 31, 2015. The increase in the segment's backlog in 2016 compared to 2015 was driven in part by $1.2 billion from the acquisition of GDCL.

Net sales in North America continued to comprise a significant portion of the segment’s business, accounting for approximately 54% of the segment’s net sales in 2016, down from 62% of the segment’s net sales in 2015.

The segment had operating earnings of $333 million in 2016 compared to $290 million in 2015. The increase in operating earnings in 2016 compared to 2015 was driven primarily by: (i) increased sales volume generating higher gross margin on our Managed & Support services, primarily in EMEA due to the acquisition of GDCL, and (ii) lower SG&A expenditures due to cost savings initiatives, including headcount reductions, partially offset by an increase in Other charges, including $105 million of intangible amortization expense, primarily associated with the GDCL acquisition.

~~Segment Results—2015 Compared to 2014~~

The segment’s net sales decreased $55 million, or 3%, to $2.0 billion in 2015, as compared to $2.1 billion in 2014. The decrease in the segment's net sales was primarily driven by: (i) the effect of unfavorable foreign exchange rates with a strengthening U.S. dollar in EMEA, Latin America, and AP, (ii) lower Integration services sales, primarily in EMEA, related to the winding down of a large system implementation in Norway, and (iii) declining iDEN services sales in Latin America, partially offset by an increase in Managed & Support services in North America. On a geographic basis, net sales for 2015 decreased in EMEA, Latin America, and AP and increased inNorth America, compared to 2014. The segment's backlog was $5.2 billion at December 31, 2015 and $4.6 billion at December 31, 2014. The increase in the segment's backlog in 2015 compared to 2014 was driven in part by the United Kingdom government LTE contract awarded in 2015.

Net sales in North America continued to comprise a significant portion of the segment’s business, accounting for approximately 62% of the segment’s net sales in 2015, up from 59% of the segment’s net sales in 2014.

The segment had operating earnings of $290 million in 2015, compared to an operating loss of $339 million in 2014. The increase in operating earnings in 2015 compared to 2014 was driven primarily by: (i) a decrease in Other charges as a result of a $584 million expense related to the 2014 settlement of a U.S. pension plan and (ii) lower SG&A expenditures as a result of cost savings initiatives, including headcount reductions, the favorable impact of foreign exchange rates, and reduced pension expenses.

statements).

Reorganization of Businesses

In 2018, we recorded net reorganization of business charges of $120 million relating to the separation of 1,200 employees, of which 700 were indirect employees and 500 were direct employees. The $120 million of charges included $59 million recorded to Cost of sales and $61 million recorded to Other charges. Included in the aggregate $120 million are charges of $122 million for employee separation costs and $16 million for exit costs, partially offset by $18 million of reversals for accruals no longer needed.

During ~~2016~~2017, we ~~implemented various productivity improvement plans aimed at continuing operating margin improvements~~recorded net reorganization of business charges of $42 million relating to the separation of 400 employees, of which 300 were indirect employees and 100 were direct employees. The $42 million of charges included $9 million recorded to Cost of sales and $33 million recorded to Other charges. Included in the aggregate $42 million are charges of$43 million for employee separation costs and $8 million for exit costs, partially offset by ~~driving efficiencies and reducing operating costs. In~~$9 million of reversals for accruals no longer needed.

During 2016, we recorded net reorganization of business charges of $140 million relating to the separation of 1,300 employees, of which 900 were indirect employees and 400 were direct employees. The $140 million of charges included $43 million recorded to Cost of sales and $97 million recorded to Other charges. Included in the aggregate $140 million are charges of: (i) $120 million for employee separation costs, (ii) $20 million for impairments, including $17 million for a building impairment and $3 million for the impairment of ~~the~~ corporate aircraft, and (iii) $5 million for exit costs, partially offset by $5 million of reversals for accruals no longer needed.

During ~~2015,~~2018, 2017, and 2016 we ~~recorded net reorganization~~continued to implement various productivity improvement plans aimed at achieving long-term, sustainable profitability by driving efficiencies and reducing operating costs. As a result, we communicated our plan to close one of ~~business charges~~our manufacturing facilities in Europe during the fourth quarter of ~~$117~~2018, resulting in a charge of $44 million ~~relating to~~and impacting 165 employees primarily within the ~~separation of 1,100 employees, of which 900 were indirect employees~~Products and ~~200 were direct employees.~~Systems Integration segment. The $117 million of charges in earnings from continuing operations included $9 million recorded to Cost of sales and $108 million recorded to Other charges. Included in the aggregate $117 million are charges of: (i) $74 million for employee separation costs, (ii) $31 million for the impairmentremainder of the ~~corporate aircraft, (iii) $10 million for exit costs,~~initiatives impacted both of our segments and ~~(iv) a $6 million building impairment charge, partially offset by $4 million of reversals for accruals no longer needed.~~affected employees located in all geographic regions.

During 2014, we recorded net reorganization of business charges of $96 million relating to the separation of 1,200 employees, of which 900 were indirect employees and 300 were direct employees. Of these charges, $23 million was related to discontinued operations. The remaining $73 million of charges in earnings (loss) from continuing operations included $9 million recorded to Cost of sales and $64 million recorded to Other charges. Included in the aggregate $73 million are charges of: (i) $67 million for employee separation costs and (ii) $7 million related to charges for exit costs, partially offset by $1 million of reversals for accruals no longer needed.

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

Years ended December 31 2016 2015 2014
Products $ 106
$ 84
$ 48
Services 34
33
25
$ 140
$ 117
$ 73



Years ended December 31	2018		2017		2016
Products and Systems Integration	$	101	$	32	$	107
Services and Software	19		10		33
	$	120	$	42	$	140

Cash payments for exit costs and employee severance in connection with the reorganization of business plans were $65 million, $93 million, and $79 million ~~$71 million,~~in 2018, 2017, and ~~$148 million in~~ 2016, ~~2015, and 2014,~~ respectively. The reorganization of business accruals at December 31, ~~2016~~2018 were ~~$101~~$105 million, of which ~~$94~~$84 million relates to employee separation costs that are expected to be paid within one year and $7$21 million relates primarily to lease termination obligations that are expected to be paid over a number of years.

Liquidity and Capital Resources

We decreased the aggregate of our cash and cash equivalent balances from $2.0 billion as of December 31, 2015 to $1.0 billion as of December 31, 2016. The decrease is primarily due to: (i) $1.1 billion of capital returned to shareholders through share repurchases and dividends paid, and (ii) $1.0 billion paid in the acquisition of GDCL, offset by $1.2 billion of cash generated by operating activities.

As highlighted in the consolidated statements of cash flows, our liquidity and available capital resources are impacted by four key components: (i) cash and cash equivalents, (ii) operating activities, (iii) investing activities, and (iv) financing activities.



	Years Ended December 31
	2018			2017			2016
Cash flows provided by (used for):
Operating activities	$	1,075		$	1,346		$	1,165
Investing activities	(1,266		)	(448		)	(1,002		)
Financing activities	220			(722		)	(1,042		)
Effect of exchange rates on cash, cash equivalents, and restricted cash	(40		)	62			(71		)
Increase (decrease) in cash, cash equivalents, and restricted cash	$	(11	)	$	238		$	(950	)

Cash and Cash Equivalents

At December 31, ~~2016, $575~~2018, $750 million of the ~~$1.0~~$1.3 billion cash and cash equivalents balance was held in the U.S. and ~~$455~~$507 million was held by ~~the Company~~us or ~~its~~our subsidiaries in other countries, with approximately ~~$138~~$147 million held in the United Kingdom. Restricted cash was approximately $11 million at December 31, 2018 and $63 million at ~~both~~ December 31, ~~2016 and~~2017. During the year ended December 31, ~~2015.~~2018, restricted cash decreased from $63 million to $11 million due to the completion of a settlement related to our legacy Networks business.

~~We continue to analyze and review various repatriation strategies to efficiently repatriate cash.~~ In ~~2016,~~2018, we repatriated approximately ~~$288~~$502 million in cash to the U.S. from international jurisdictions. Undistributed earnings that we intend to reinvest indefinitely, and for which no U.S. income taxes have been provided for, except the tax effect of the Tax Act deemed repatriation, aggregate to ~~$1.6~~$1.5 billion at December 31, ~~2016.~~2018. We currently have no plans to repatriate the foreign earnings permanently reinvested. If circumstances change and it becomes

apparent that some or all of the permanently reinvested earnings will be remitted to the U.S. in the foreseeable future, an additional income tax charge may be necessary.

Where appropriate, we may also pursue capital reduction activities; however, such activities can be involved and lengthy. While we regularly repatriate funds, and a portion of offshore funds can be repatriated with minimal adverse financial impact, repatriation of some of these funds may be subject to delay for local country approvals and could have potential adverse cash tax consequences.

Operating Activities

~~Net~~The decrease in operating cash ~~provided~~flows from 2017 to 2018 was driven by ~~operating activities from continuing operations~~(see additional discussion under "Sales of Receivables" below):

a $500 million debt-funded voluntary contribution to our U.S. pension plan in ~~2016 was $1.2 billion,~~the first quarter of 2018, compared to cash provided by operating activities from continuing operations of $1.0 billion in 2015 and cash used by operating activities from continuing operations of $637 million in 2014. Operating cash flows in 2016, as compared to 2015, were positively impacted by high earnings from continuing operations (adjusted for net non-cash charges), offset by higher employee incentive compensation payments. Operating cash flows in 2015, as compared to 2014, were positively impacted by: (i) an increase in earnings from continuing operations, (ii) reduced pension contributions, and (iii) higher sales of accounts receivable.

~~We made $3 million of~~no material contributions to our U.S. pension plans ~~during 2016,~~in 2017;

a $51 million payment out of restricted cash related to a settlement arising from a legacy business in 2018, as compared to $3the recovery of $47 million ~~contributed~~of financial receivables owed to us by a former customer of a legacy business in ~~2015,~~2017;

$28 million of higher interest payments driven by additional debt issued in 2018 as compared to 2017; and ~~$1.1 billion contributed~~

partially offset by higher earnings in ~~2014. In addition,~~2018 as compared to 2017.

The increase in operating cash flows from 2016 to 2017 was driven by:

higher operating earnings in 2017 as compared to 2016;

improved net working capital in 2017 as compared to 2016; and

partially offset by $56 million of higher tax payments in 2017 as compared to 2016 when we ~~contributed $8 million, $10 million,~~received certain refunds in the U.S. and ~~$237 million to our Non-U.S. Pension Plans during 2016, 2015, and 2014, respectively.~~ foreign jurisdictions.

We do not expect to make ~~approximately $9 million of cash~~any material contributions ~~in 2017, primarily~~ to our ~~Non-U.S. Pension Benefit Plans~~pension plans in ~~2017.~~2019.

Investing Activities

Net cash used by investing activities from continuing operations was $1 billion in 2016, compared to net cash used by investing activities from continuing operations of $528 million in 2015 and net cash provided by investing activities from continuing operations of $3.2 billion in 2014. The ~~$474 million~~ increase in net cash used by investing activities from ~~2015~~2017 to ~~2016~~2018 was primarily due to:

a $760 million increase in acquisitions and investments, primarily driven by the purchases of Avigilon and Plant Holdings for $903 million, and $237 million, respectively, as compared to 2017 when we made acquisitions of Kodiak Networks and Interexport for $225 million and $55 million, respectively; and

$88 million of lower proceeds from sales of investments and businesses, driven by the ~~acquisition~~$60 million of ~~GDCL~~excess cash withdrawn from company-sponsored life insurance investments in 2018, as compared to $183 million of cash received from short-term government securities that were previously maintained in foreign countries in 2017; and

partially offset by $30 million lower capital expenditures in 2018 as compared 2017, due to lower information technology ("IT") spend as we completed our ERP implementation in 2017, as well as lower facilities spend.

The decrease in net cash used by investing activities from 2016 to 2017 was primarily due to:

a $1.1 billion decrease in acquisitions and investments, driven by the purchase of Airwave for $1.0 billion and ~~Spillman for~~ $217 million ~~offset~~for Spillman in 2016, as compared to 2017 when we made acquisitions of Kodiak Networks and Interexport for $225 million and $55 million, respectively;

a $487 million decrease in sales of investments and businesses, driven by the liquidation of $382 million of short-term government securities used to acquire Airwave, the sale of an investment of $382 million used to fund the acquisition of GDCL. The $3.7 billion decrease in net cash provided by investing activities from 2014 to 2015 was primarily due to proceeds provided by the sale of the Enterprise business in 2014 compared to cash used for a $401 million investment earmarked for the purchase of GDCL in 2015.

~~Acquisitions and Investments:~~We used net cash of $1.5 billion for acquisitions and new investment activities in 2016, compared to $586 million in 2015, and $47 million in 2014. We paid cash of $1.0 billion during 2016 related to the acquisition of GDCL, $217 million for the acquisition of Spillman, and $26 million related to the acquisition of other software and services related businesses. The remainder of the cash was used for several debt and equity investments. In 2015, we invested $401 million in order to partially offset our foreign currency risk associated with the purchase of GDCL. We liquidated these investments in February 2016 to partially fund the acquisition. Additionally, we paid $49 million for the acquisition of two public safety software solution providers, as well as several debt and equity investments. The cash used in 2014 was for the acquisition of an equipment provider for $22 million and a number of equity investments.

~~Sales of Investments and Businesses:We received $670~~$242 million of proceeds in 2016 compared to $230 million in 2015 and $3.4 billion in 2014. The $670 million of cash provided by investments in 2016 primarily consisted of: (i) $382 million from the sale of an investment used to finance the acquisition of GDCL, (ii) $242 million from the sales of variousshort-term debt and equity securities, and ~~(iii)~~ $46 million from the sale of our Penang, Malaysia ~~facility and manufacturing operations.~~The $230 million of cash received in 2015 was primarily comprised of: (i) $49 million reimbursement from Zebra for cash transferred with the sale of the Enterprise business in conjunction with legal entities sold through a stock sale, (ii) $107 million from the sale of two equity investments, (iii) $13 million net cash received from Zebra for the final purchase price adjustment, as well as for reimbursement of liabilities of the Enterprise business paid on Zebra's behalf, and (iv) proceeds from the sale of various debt and equity securities, partially offset by $27 million of net cash transferred in conjunction with the sale of our ownership interest in a majority owned subsidiarysupply chain operations to ~~the entity's noncontrolling interest. The $3.4 billion of cash received in 2014 was primarily comprised of proceeds from the sale of the Enterprise business.~~

~~Capital Expenditures:Capital expenditures were $271 million in 2016, compared to $175 million in 2015, and $181 million in 2014. The increase in capital spending~~an outsourced manufacturer in 2016, as compared to ~~2015, was primarily driven by a increase~~the sale of $183 million of short-term government securities previously maintained in ~~revenue-generating network expenditures, information technology spend and facilities expenditures. The~~foreign countries;

a decrease in capital spending in ~~2015, as compared to 2014, was primarily~~2017 from 2016 driven by anlower facilities spend as we completed refresh activities around our regional and corporate headquarters, lower spend on customer networks, and partially offset by higher IT expenditures as we worked towards the completion of our ERP implementation in 2017; and

a decrease in ~~revenue-generating network expenditures.~~

~~Sales of Property, Plant, and Equipment:~~ ~~We had $73 million of proceeds related to the sale~~sales of property, plant, and equipment driven by proceeds received in 2016 ~~compared to $3 million in 2015 and $33 million in 2014. The proceeds in 2016 were comprised~~ of ~~$54~~$73 million from the sale of buildings and land ~~on the Schaumburg, IL campus and $19 million received from~~associated with the sale of ~~fixed assets. The proceeds in 2015~~our Schaumburg campus and ~~2014 were primarily comprised~~the sale of ~~sales of buildings and land.~~

our aging corporate aircraft.

Financing Activities

~~Net~~The increase in cash ~~used for financing activities was $1.0 billion in 2016 compared to $2.4 billion in 2015 and $1.8 billion in 2014. Cash used for~~provided by financing activities in ~~2016~~2018 as compared to 2017 was ~~primarily comprised of: (i) $842~~driven by (also see further discussion in "Debt," "Credit Facilities," "Share Repurchase Program" and "Dividends" below):

the issuance of $500 million of 4.60% Senior notes due 2028 in the first quarter of 2018, of which the proceeds were contributed to our U.S. pension plan;

we entered into the Term Loan for $400 million in the first quarter of 2018 with a maturity date of March 26, 2021 to complete the acquisition of Avigilon;

$400 million borrowing from our revolving credit facility in the first quarter of 2018 to complete the acquisition of Avigilon, repaying the full $400 million throughout 2018;

in the third quarter of 2018, we issued an additional $200 million on the outstanding 4.60% Senior notes due in 2028, of which the proceeds were used ~~for purchases~~to repurchase $200 million of ~~common stock under~~ our ~~share repurchase program and (ii) $280~~outstanding convertible note with Silver Lake Partners;

$169 million of cash was used ~~for~~during the ~~payment~~third quarter of ~~dividends, partially offset by $93 million of net proceeds from~~2018 to pay the ~~issuance of common stock in connection with our employee stock option and employee stock purchase plans.~~

~~Cash used for financing activities in 2015 was primarily comprised of: (i) $3.2 billion used for purchases of common stock under our share~~conversion premium on the repurchase program and (ii) $277 million of cash used for the payment of dividends, partially offset by: (i) $971 million of net proceeds from the issuance of the Senior Convertible Notes and (ii) $84 million of net proceeds from the issuance of common stock in connection with our employee stock option and employee stock purchase plans.

~~Cash used for financing activities in 2014 was primarily comprised of: (i) $2.5 billion used for purchases~~ of our ~~common stock under our share repurchase program, (ii) $465~~convertible note with Silver Lake Partners;

$76 million used in the fourth quarter of ~~cash used for the repayment~~2018 to pay a contractually-defined deferred purchase price of ~~debt, and (iii) $318~~Airwave;

$168 million ~~of cash used for the payment of dividends, partially offset by: (i) $1.4 billion of net proceeds from the issuance of debt, (ii) $87 million~~ of net proceeds from the issuance of common stock in connection with our employee stock option and employee stock purchase plans ~~and (iii) $93~~in 2018, as compared to $82 million in 2017;

$337 million of ~~distributions~~cash used for the payment of dividends in 2018 as compared to $307 million in 2017; and

partially offset by $132 million used for purchases under our share repurchase program in 2018 as compared to $483 million in 2017.

The decrease in cash used for financing activities in 2017, as compared to 2016 was driven by:

$483 million used for purchases under our share repurchase program in 2017, as compared to $842 million in 2016;

a $675 million term loan issued in 2016 to complete the purchase of Airwave, of which the entire term loan was repaid by the end of 2016; and

partially offset by $307 million of cash used for the payment of dividends in 2017, as compared to $280 million in 2016.

Sales of Receivables

We may choose to sell accounts receivable and long-term receivables to third-parties under one-time arrangements. We may or may not retain the obligation to service the sold accounts receivable and long-term receivables. Servicing obligations are limited to collection activities for sold accounts receivable and long-term receivables.

The following table summarizes the proceeds received from ~~discontinued operations.~~sales of accounts receivable and long-term receivables for the years ended December 31, 2018, 2017, and 2016:

~~Current~~



Years ended December 31	2018		2017		2016
Accounts receivable sales proceeds	$	77	$	193	$	51
Long-term receivables sales proceeds	270		284		289
Total proceeds from receivable sales	$	347	$	477	$	340

The proceeds of our receivable sales are included in "Operating Activities" within our Consolidated Statements of Cash Flows.

At December 31, 2018, the Company had retained servicing obligations for $970 million of long-term receivables, compared to $873 million of long-term receivables at December 31, 2017. Servicing obligations are limited to collection activities related to the sales of accounts receivables and ~~Long-Term Debt:~~long-term receivables.

Debt

We had outstanding long-term debt of ~~$4.4~~$5.3 billion and ~~$4.3~~$4.5 billion, including the current portions of $4$31 million and $52 million, at December 31, ~~2016~~2018 and December 31, ~~2015,~~2017, respectively.

To complete the acquisition of Avigilon during the quarter ended March 31, 2018, we entered into a Term Loan for $400 million with a maturity date of March 26, 2021. Interest on the Term Loan is variable, indexed to London Inter-bank Offered Rate ("LIBOR"), and paid monthly. The weighted average borrowing rate for amounts outstanding during the year ended December 31, 2018 was 3.47%. No additional borrowings are permitted and amounts borrowed and repaid or prepaid may not be re-borrowed.

In February of 2018, we issued $500 million of 4.60% Senior notes due in 2028. After debt issuance costs and debt discounts, we recognized net proceeds of $497 million. These proceeds were then used to make a $500 million contribution to our U.S. pension plan.

On August 25, 2015, we entered into an agreement with Silver Lake Partners to issue $1.0 billion of 2%2.0% Senior Convertible Notes which mature in September 2020. ~~Interest on these notes is payable semiannually.~~ The notes ~~are~~became fully convertible ~~anytime on or after two years from their issuance date, except in certain limited circumstances including, for example, if the volume weighted average price~~as of ~~the Company's stock exceeds $85 for ten consecutive trading days, then up to 20% of the notes may be transferred or converted to shares of Company stock.~~August 25, 2017. The notes are convertible based on a conversion rate of ~~14.5985~~14.8252, as may be adjusted for dividends declared, per $1,000 principal amount (which is currently equal to ~~an initial~~a published conversion price of ~~$68.50~~$67.45 per share). The exercise price adjusts automatically for dividends. On September 5, 2018, we agreed with Silver Lake Partners to repurchase $200 million in principal amount of the Senior Convertible Notes for aggregate consideration of $369 million in cash, inclusive of the conversion premium. As of December 31, 2018, we paid $369 million of cash to Silver Lake Partners. Of the $369 million paid to Silver Lake Partners, $169 million was paid during the third quarter of 2018 using cash on the balance sheet and the remaining $200 million was paid on October 15, 2018. The $200 million that was paid during the fourth quarter was from the additional $200 million issued on the outstanding 4.60% Senior notes due in 2028. We settled the issuance of the additional Senior notes on October 5, 2018 and received net proceeds of $196 million. In the event of an additional conversion, wethe notes may be settled in either cash or stock, at our discretion. We intend to settle the principal amount of the Senior Convertible Notes in cash.

In connection with the completion of the acquisition of ~~GDCL,~~Airwave, we entered into a ~~new~~ term loan ~~credit agreement (the “Term Loan Agreement”), under which we borrowed a term loan (the “Term Loan”)~~ with an initial principal amount of $675 million. ~~Interest on the Term Loan was variable and indexed to LIBOR.~~ We ~~have~~ repaid all amounts borrowed under ~~the Term Loan~~this term loan as of December 31, 2016.

Credit Facilities

As of December 31, 2018, we had a $2.2 billion unsecured revolving credit facility scheduled to mature in April 2022, which can be used for borrowing and letters of credit (the "2017 Motorola Solutions Credit Agreement"). As of March 31, 2018, we borrowed $400 million under the facility to complete the Avigilon acquisition. The entire $400 million was re-paid during the year ended December 31, 2018. The 2017 Motorola Solutions Credit Agreement includes a $500 million letter of credit sub-limit with $450 million of fronting commitments. Borrowings under the facility bear interest at the prime rate plus the applicable margin, or at a spread above LIBOR, at our option. An annual facility fee is payable on the undrawn amount of the credit line. The interest rate and facility fee are subject to adjustment if our credit rating changes. We have investment grade ratings on our senior unsecured long-term debt from the three largest U.S. national rating agencies. We believe that we will be able to maintain sufficient access to the capital markets. Any future disruptions, uncertainty, volatilitymust comply with certain customary covenants including a maximum leverage ratio, as defined in the ~~capital markets, or deterioration~~2017 Motorola Solutions Credit Agreement. We were in compliance with our financial covenants as of December 31, 2018. No letters of credit ~~ratings may result in higher funding costs for us and adversely affect our ability to access funds.~~were issued under the revolving credit facility as of December 31, 2018.

We may, from time to time, seek to retire certain of our outstanding debt through open market cash purchases, privately-negotiated transactions or otherwise. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.

Share Repurchase ~~Program:~~Program

Through a series of actions, ~~taken on July 28, 2011, January 30, 2012, July 25, 2012, July 22, 2013, November 4, 2014, and August 3, 2016,~~ the ~~Board~~board of ~~Directors~~directors has authorized an aggregate share repurchase amount of up to $14.0 billion of our outstanding shares of common stock (the “share repurchase program”). The share repurchase program does not have an expiration date. As of December 31, ~~2016,~~2018, we have used approximately ~~$11.8~~$12.4 billion of the share repurchase authority, including transaction costs, to repurchase shares, leaving approximately $~~2.2~~1.6 billion of authority available for future repurchases.

~~During~~Our share repurchases, including transaction costs, for 2018, 2017, and 2016 wecan be summarized as follows:



Year	Shares Repurchased (in millions)	Average Price		Aggregate Amount (in millions)
2018	1.2	$	112.42	$	132
2017	5.7	85.32		483
2016	12.0	70.28		842

Subsequent to the year ended December 31, 2018, the Company paid an aggregate of ~~$842~~$125 million, including transaction costs, to repurchase ~~12.0~~1.1 million shares at an average purchase price of ~~$70.28~~$116.04 per ~~share. During 2015, we paid an aggregate~~share, leaving approximately $1.5 billion of ~~$3.2 billion, including transaction costs, to repurchase 48.0 million shares at an average price of $66.22. Shares repurchased in~~ ~~2015~~ ~~include 30.1 million shares repurchased under a modified "Dutch auction" tender offer at a tender price of $66.50~~authority available for an aggregate of $2.0 billion, including transaction costs. During 2014, we paid an aggregate of $2.5 billion, including transaction costs, to repurchase 39.4 million shares at an average price of $64.63.future repurchases.

Dividends

~~Payment of Dividends:~~We paid cash dividends to holders of our common stock of $337 million in 2018, $307 million in 2017, and $280 million in ~~2016, $277 million in 2015, and $318 million in 2014.~~2016. Subsequent to quarter end, we paid an additional ~~$77~~$93 million in cash dividends to holders of our common stock.

~~Credit Facilities~~Adequate Internal Funding Resources

AsWe believe that we have adequate internal resources available to fund expected working capital and capital expenditure requirements for the next twelve months as supported by the level of ~~December 31, 2016, we had a $2.1~~cash and cash equivalents in the U.S., the ability to repatriate funds from foreign jurisdictions, cash provided by operations, as well as liquidity provided by our $2.2 billion ~~unsecured syndicated~~ revolving credit facility (the “2014 Motorola Solutions Credit Agreement”) scheduled to mature on May 29, 2019. We must comply with certain customary covenants, including maximum leverage ratio as defined in the 2014 Motorola Solutions Credit Agreement. We were in compliance with our financial covenants as of December 31, 2016. We did not borrow under the 2014 Motorola Solutions Credit Agreement during the twelve months ended December 31, 2016. No letters of credit were issued under the revolving credit facility as of December 31, 2016.facility.

Contractual Obligations and Other Purchase Commitments

Summarized in the table and text below are our obligations and commitments to make future payments under long-term debt obligations, lease obligations, purchase obligations and tax obligations as of December 31, ~~2016.~~2018.


	Payments Due by Period																Payments Due by Period
(in millions)	Total		2017		2018		2019		2020		2021		Uncertain Timeframe		Thereafter		Total		2019		2020		2021		2022		2023		Uncertain Timeframe		Thereafter
Long-term debt obligations	$	4,437	$	4	$	5	$	5	$	1,003	$	400	$	—	$	3,020
Long-term debt obligations, gross																	$	5,382	$	31	$	801	$	810	$	767	$	604	$	—	$	2,369
Lease obligations	481		62		58		52		49		42		—		218		722		131		120		112		101		54		—		204
Purchase obligations*	169		125		30		9		4		1		—		—		124		92		16		12		3		1		—		—
Tax obligations	68		29		—		—		—		—		39		—		76		11		—		—		—		—		65		—
Total contractual obligations	$	5,155	$	220	$	93	$	66	$	1,056	$	443	$	39	$	3,238	$	6,304	$	265	$	937	$	934	$	871	$	659	$	65	$	2,573



DELAWARE		36-1115800
(State of Incorporation)		(I.R.S. Employer Identification No.)



Title of Each Class		Name of Each Exchange on Which Registered
Common Stock, $.01 Par Value per Share		New York Stock Exchange



Large accelerated filer x		Accelerated filer ¨	Non-accelerated filer ¨	Smaller reporting company ¨
	Emerging growth company ¨
		(Do not check if a smaller reporting company)



	Page
PART I	3
Item 1. Business	3
General	3
Business Organization	3
Strategy and Focus Areas	4
Customers and Contracts	5
Competition	5
Other Information	56
Backlog	6
Research and Development	6
Intellectual Property Matters	6
Inventory and Raw Materials	67
Environmental Quality and Regulatory Matters	7
Employees	8
Material Dispositions	8
Financial Information About Geographic Areas	8
Financial Information About Segments	8
Available Information	8
Item 1A. Risk Factors	9
Item 1B. Unresolved Staff Comments	21
Item 2. Properties	2221
Item 3. Legal Proceedings	2221
Item 4. Mine Safety Disclosures	2221
Executive Officers of the Registrant	22
PART II	23
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	23
Item 6. Selected Financial Data	25
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 7A. Quantitative and Qualitative Disclosures About Market Risk	4447
Item 8. Financial Statements and Supplementary Data	4648
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	9196
Item 9A. Controls and Procedures	9196
Item 9B. Other Information	9196
PART III	9398
Item 10. Directors, Executive Officers and Corporate Governance	9398
Item 11. Executive Compensation	9398
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	9398
Item 13. Certain Relationships and Related Transactions, and Director Independence	9398
Item 14. Principal Accounting Fees and Services	9398
PART IV	9499
Item 15. Exhibits and Financial Statement Schedules	9499
15(a)(1) Financial Statements	9499
15(a)(2) Financial Statement Schedule and Independent Auditors’ Report	9499
15(a)(3) Exhibits	9499



Industry standard definition	The Association of Public Safety Communications Officials Project 25 standard ("APCO-25")	The European Telecommunications Standards Institute (“ETSI”) Terrestrial Trunked Radio standard ("TETRA")	ETSI, Digital mobile radio ("DMR") and professional commercial radio ("PCR") standards
Industry standard name	APCO P25	TETRA	DMR
Motorola Solutions product name	ASTRO	Dimetra IP	PCR MOTOTRBO (Digital)
Primary end users	Government, Public Safety	Government, Public Safety	Commercial
Primary geographic region of use	North America, Latin America, Asia, Middle East, Africa	Europe, Asia, Latin America, Middle East, Africa	All regions



ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



~~Integration services~~Services	~~Integration services includes the implementation, optimization, and integration of systems, devices, software, and applications. Integration services represented 33% of the net sales of the~~ Services ~~segment in 2016.~~
~~Managed & Support services~~	~~Managed & Support services~~ includes a continuum of service offerings beginning with repair, technical support, and ~~hardware~~ maintenance. More advanced offerings include ~~network~~ monitoring, software ~~maintenance,~~updates, and ~~cyber security~~cybersecurity services. Managed ~~service offerings~~services range from partial or full operation of ~~customer owned~~customer-owned networks to operation of Motorola ~~Solutions owned~~Solutions-owned networks. Services ~~and Software as a Service (SaaS) are provided across all radio network technologies, Command Center Software Offerings, and Smart Public Safety Solutions. Managed & Support services~~ represented ~~66%~~81% of the net sales of the Services and Software segment in ~~2016.~~2018.
~~iDEN services~~Software	~~Integrated Digital Enhanced Network (“iDEN”) is~~Software includes a ~~Motorola Solutions proprietary push-to-talk technology. iDEN services consist primarily of hardware~~public safety and enterprise command center software ~~maintenance services for our legacy iDEN customers~~suite, unified communications applications, and video software solutions, delivered both on premise and “as a service” and represented 1%19% of the net sales of the Services and Software segment in ~~2016.~~2018.



	December 31
(In millions)	2016		2015
Products	$	1,513	$	1,234
Services	6,858		5,241
	$	8,371	$	6,475



	Years ended December 31							Percent Change
(Dollars in millions)	2016		2015		2014			2016—2015		2015—2014
Segment net sales	$	3,649	$	3,676	$	3,807		(1	)%	(3	)%
Operating earnings (loss)	734		704		(667		)	4	%	N/M


	Notional Amount						Notional Amount
Net Buy (Sell) by Currency	2016			2015			2018			2017
British Pound	$	246		$	62		$	139		$	72
Euro	122			99			89			149
Australian Dollar							(105		)	(64		)
Chinese Renminbi	(108		)	(114		)	(55		)	(73		)
Brazilian Real	(56		)	(44		)	(41		)	(45		)
Australian Dollar	(51		)	(60		)


	December 31						December 31
(In millions, except par value)	2016			2015			2018			2017
ASSETS
Cash and cash equivalents	$	1,030		$	1,980		$	1,246		$	1,205
Restricted cash							11			63
Total cash and cash equivalents							1,257			1,268
Accounts receivable, net	1,410			1,362			1,293			1,523
Contract assets							1,012			—
Inventories, net	273			296			356			327
Other current assets	755			954			354			832
Current assets held for disposition	—			27
Total current assets	3,468			4,619			4,272			3,950
Property, plant and equipment, net	789			487			895			856
Investments	238			231			169			247
Deferred income taxes	2,219			2,278			985			1,023
Goodwill	728			420			1,514			938
Intangible assets, net							1,230			861
Other assets	1,021			271			344			333
Non-current assets held for disposition	—			40
Total assets	$	8,463		$	8,346		$	9,409		$	8,208
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current portion of long-term debt	$	4		$	4		$	31		$	52
Accounts payable	553			518			592			593
Contract liabilities							1,263			—
Accrued liabilities	2,111			1,671			1,210			2,286
Total current liabilities	2,668			2,193			3,096			2,931
Long-term debt	4,392			4,345			5,289			4,419
Other liabilities	2,355			1,904			2,300			2,585
Stockholders’ Equity
Preferred stock, $100 par value	—			—			—			—
Common stock, $.01 par value:	2			2			2			2
Authorized shares: 600.0
Issued shares: 12/31/16—165.5; 12/31/15—174.5
Outstanding shares: 12/31/16—164.7; 12/31/15—174.3
Issued shares: 12/31/18—164.0; 12/31/17—161.6
Outstanding shares: 12/31/18—163.5; 12/31/17—161.2
Additional paid-in capital	203			42			419			351
Retained earnings	1,148			1,716			1,051			467
Accumulated other comprehensive loss	(2,317		)	(1,866		)	(2,765		)	(2,562		)
Total Motorola Solutions, Inc. stockholders’ equity (deficit)	(964		)	(106		)	(1,293		)	(1,742		)
Noncontrolling interests	12			10			17			15
Total stockholders’ equity (deficit)	(952		)	(96		)	(1,276		)	(1,727		)
Total liabilities and stockholders’ equity	$	8,463		$	8,346		$	9,409		$	8,208


(In millions, except per share amounts)	Shares		Common Stock and Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Noncontrolling Interests			Shares		Common Stock and Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Noncontrolling Interests
Balance as of January 1, 2014	255.5		$	3,521		$	(2,287	)	$	2,425		$	30
Net earnings									1,299			1
Other comprehensive income						432
Issuance of common stock and stock options exercised	4.4		86
Share repurchase program	(39.4	)	(2,546		)
Excess tax benefit from share-based compensation			5
Share-based compensation expense			114
Dividends declared									(314		)
Balance as of December 31, 2014	220.5		$	1,180		$	(1,855	)	$	3,410		$	31
Net earnings									610			3
Other comprehensive loss						(11		)
Issuance of common stock and stock options exercised	2		80
Share repurchase program	(48	)	(1,147		)				(2,030		)
Tax shortfalls from share-based compensation			(155		)
Sale of controlling interest in subsidiary common stock												(24		)
Share-based compensation expense			78
Dividends declared									(274		)
Equity component of Senior Convertible Notes			8
Balance as of December 31, 2015	174.5		$	44		$	(1,866	)	$	1,716		$	10
Balance as of January 1, 2016															174.5		$	44		$	(1,866	)	$	1,716		$	10
Net earnings									560			2											560			2
Other comprehensive loss						(451		)												(451		)
Issuance of common stock and stock options exercised	3		93												3.0		93
Share repurchase program	(12	)							(842		)				(12.0	)							(842		)
Share-based compensation expense			68														68
Dividends declared									(286		)												(286		)
Balance as of December 31, 2016	165.5		$	205		$	(2,317	)	$	1,148		$	12		165.5		$	205		$	(2,317	)	$	1,148		$	12
Net earnings																							(155		)	4
Other comprehensive income																				25
Issuance of common stock and stock options exercised															1.8		82
Share repurchase program															(5.7	)							(483		)
Reclassification of stranded tax effects																				(270		)	270
Share-based compensation expense																	66
Dividends paid to noncontrolling interest in subsidiary common stock																										(1		)
Dividends declared																							(313		)
Balance as of December 31, 2017															161.6		$	353		$	(2,562	)	$	467		$	15
Net earnings																							966			3
Other comprehensive loss																				(203		)
Issuance of common stock and stock options exercised															3.6		168
Share repurchase program															(1.2	)							(132		)
ASU 2016-16 modified retrospective adoption																							(31		)
Share-based compensation expense																	73
ASU 2014-09 modified retrospective adoption																							127
Dividends paid to noncontrolling interest in subsidiary common stock																										(1		)
Dividends declared																							(346		)
Repurchase of senior convertible notes																	(173		)
Balance as of December 31, 2018															164.0		$	421		$	(2,765	)	$	1,051		$	17



(In millions)	December 31, 2017		Reclassification of Contract Assets			Reclassification of Non-customer receivables			Reclassification of Contract Liabilities			Impact of Adoption on Open Contracts			January 1, 2018
															(Unaudited)
ASSETS
Accounts receivable, net	$	1,523	$	(297	)	$	(24	)	$	—		$	(4	)	$	1,198
Contract assets	—		846			—			—			85			931
Inventories, net	327		—			—			—			1			328
Other current assets	832		(549		)	24			—			(23		)	284
Deferred income taxes	1,023		—			—			—			(41		)	982
Other assets	333		—			—			—			85			418
LIABILITIES AND STOCKHOLDERS’ EQUITY
Contract liabilities	$	—	$	—		$	—		$	1,099		$	(17	)	$	1,082
Accrued liabilities	2,286		—			—			(1,099		)	—			1,187
Other liabilities	2,585		—			—			—			(7		)	2,578
Stockholders’ Equity
Retained earnings	467		—			—			—			127			594



	Year Ended
(In millions)	December 31, 2018		Adjustments due to ASC 606			December 31, 2018 Balances Under ASC 605
Net sales	$	7,343	$	(83	)	$	7,260
Gross margin	3,480		(82		)	3,398
Selling, general and administrative expenses	1,254		(64		)	1,190
Operating earnings	1,255		(18		)	1,237
Net earnings before income taxes	1,102		(18		)	1,084
Net earnings attributable to Motorola Solutions Inc.	966		(18		)	948



(In millions)	December 31, 2018		Adjustments due to ASC 606			December 31, 2018 Balances Under ASC 605
ASSETS
Accounts receivable, net	$	1,293	$	416		$	1,709
Contract assets	1,012		(1,012		)	—
Other current assets	354		531			885
Deferred income taxes	985		41			1,026
Other assets	344		(99		)	245
LIABILITIES AND STOCKHOLDERS' EQUITY
Contract liabilities	$	1,263	$	(1,263	)	$	—
Accrued liabilities	1,210		1,275			2,485
Other liabilities	2,300		10			2,310
Stockholders’ Equity
Retained earnings	1,051		(145		)	906



(in millions)	December 31, 2018		January 1, 2018
Receivables	$	1,293	$	1,198
Contract assets	1,012		931
Contract liabilities	1,263		1,082
Non-current contract liabilities	214		162


	Amounts attributable to Motorola Solutions, Inc. common stockholders													Amounts attributable to Motorola Solutions, Inc. common stockholders
	Earnings (loss) from Continuing Operations							Net Earnings						Net Earnings (loss)
Years ended December 31	2016		2015		2014			2016		2015		2014		2018		2017			2016
Basic earnings per common share:
Earnings (loss)	$	560	$	640	$	(697	)	$	560	$	610	$	1,299	$	966	$	(155	)	$	560
Weighted average common shares outstanding	169.6		199.6		245.6			169.6		199.6		245.6		162.4		162.9			169.6
Per share amount	$	3.30	$	3.21	$	(2.84	)	$	3.30	$	3.06	$	5.29	$	5.95	$	(0.95	)	$	3.30
Diluted earnings per common share:
Earnings (loss)	$	560	$	640	$	(697	)	$	560	$	610	$	1,299	$	966	$	(155	)	$	560
Weighted average common shares outstanding	169.6		199.6		245.6			169.6		199.6		245.6		162.4		162.9			169.6
Add effect of dilutive securities:
Share-based awards	2.7		2.1		—			2.7		2.1		—		4.2		—			2.7
Senior Convertible Notes	0.8		0.1		—			0.8		0.1		—		5.4		—			0.8
Diluted weighted average common shares outstanding	173.1		201.8		245.6			173.1		201.8		245.6		172.0		162.9			173.1
Per share amount	$	3.24	$	3.17	$	(2.84	)	$	3.24	$	3.02	$	5.29	$	5.62	$	(0.95	)	$	3.24




December 31, 2016	Cost Basis		Investments
Available-for-sale securities:
Government, agency, and government-sponsored enterprise obligations	$	51	$	51
Corporate bonds	5		5
	56		56
Other investments	211		211
Equity method investments	17		17
	$	284	$	284
Less: current portion of available-for-sale securities			46
			$	238




December 31, 2015	Cost Basis		Unrealized Gains		Unrealized Loss		Investments
Available-for-sale securities:
Government, agency, and government-sponsored enterprise obligations	$	455	$	—	(11	)	444
Corporate bonds	7		—		—		7
Common stock	—		6		—		6
	462		6		(11	)	457
Other investments	203		—		—		203
Equity method investments	9		—		—		9
	674		6		(11	)	669
Less: current portion of available-for-sale securities							438
							$	231


	Fair Values of Derivative Instruments						Fair Values of Derivative Instruments
	Assets			Liabilities			Assets			Liabilities
December 31, 2015	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location
December 31, 2017							Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location
Derivatives designated as hedging instruments:
Foreign exchange contracts							$	—	Other assets	$	3	Accrued liabilities
Derivatives not designated as hedging instruments:
Foreign exchange contracts	$	6	Other assets	$	2	Accrued liabilities	$	5	Other assets	$	2	Accrued liabilities
Interest rate swap	—		Other assets	1		Accrued liabilities
Total derivatives	$	6		$	3		$	5		$	5


	December 31								Statement of Operations Location	December 31							Financial Statement Location
Gain (Loss) on Derivative Instruments	2016			2015		2014			Statement of Operations Location	2018		2017			2016		Financial Statement Location
Interest rate swap	$	1		$	1	$	1		Other income (expense)
Foreign exchange contracts	(57		)	6		(5		)	Other income (expense)	$	—	$	(3	)	$	—	Other comprehensive income (loss)
Total derivatives	$	(56	)	$	7	$	(4	)



	December 31, 2018		December 31, 2017		Adjustment			Financial Statement Location
Valuation allowance on foreign tax credit carryforward	$	400	$	471	$	(71	)	Deferred tax expense
Re-measurement of U.S. deferred tax balances at 21%	353		366		(13		)	Deferred tax expense
Transition tax on repatriation of foreign earnings	18		16		2			Current tax expense
Uncertain tax positions on foreign operations	21		21		—			Current tax expense
Disallowed deduction of covered employees' incentive plans	3		—		3			Deferred tax expense
Total	$	795	$	874	$	(79	)


December 31, 2016	Gross Tax Loss		Tax Effected		Expiration Period
December 31, 2018						Gross Tax Loss		Tax Effected		Expiration Period
United States:
U.S. tax losses	$	51	$	18	2022-2033	$	73	$	15	2022-2036
Foreign tax credits	—		510		2018-2023	—		334		2019-2023
General business credits	—		115		2026-2036	—		51		2026-2037
Minimum tax credits	—		101		Unlimited
State tax losses	1,174		34		2017-2029	—		35		2019-2030
State tax credits	—		26		2018-2030	—		32		2019-2031
Non-U.S. Subsidiaries:
Japan tax losses	98		30		2017-2021	102		32		2019-2025
Germany tax losses	53		15		Unlimited	26		8		Unlimited
United Kingdom tax losses	84		14		Unlimited	81		14		Unlimited
Singapore tax losses	40		7		Unlimited	33		6		Unlimited
Canada tax losses						46		12		2024-2025
Other subsidiaries tax losses	—		26		Various	128		36		Various
Spain tax credits	—		23		Various	—		25		Various
Other subsidiaries tax credits	—		8		Various	—		13		Various
			$	927				$	613



Jurisdiction	Tax Years
United States	~~2008-2016~~2014-2018
~~China~~Australia	~~2002-2016~~2012-2018
~~France~~Canada	~~2010-2016~~2014-2018
Germany	~~2011-2016~~2011-2018
India	~~1997-2016~~1997-2018
Israel	~~2012-2016~~2015-2018
~~Japan~~Poland	~~2011-2016~~2014-2018
Malaysia	~~2010-2016~~
~~Singapore~~	~~2015-2016~~2012-2018
United Kingdom	~~2015-2016~~2017


	U.S. Pension Benefit Plans									Non U.S. Pension Benefit Plans									Postretirement Health Care Benefits Plan									U.S. Pension Benefit Plans									Non U.S. Pension Benefit Plans									Postretirement Health Care Benefits Plan
Years ended December 31	2016			2015			2014			2016			2015			2014			2016			2015			2014			2018			2017			2016			2018			2017			2016			2018			2017			2016
Service cost	$	—		$	—		$	—		$	11		$	12		$	15		$	—		$	1		$	2		$	—		$	—		$	—		$	3		$	3		$	11		$	—		$	—		$	—
Interest cost	182			193			370			55			66			80			4			8			10			186			185			182			38			40			55			2			3			4
Expected return on plan assets	(220		)	(212		)	(381		)	(93		)	(103		)	(90		)	(9		)	(9		)	(10		)	(270		)	(229		)	(220		)	(92		)	(92		)	(93		)	(10		)	(10		)	(9		)
Amortization of:
Unrecognized net loss	37			46			97			11			17			12			5			8			9			57			44			37			15			16			11			4			5			5
Unrecognized prior service benefit	—			—			—			—			(3		)	(7		)	(27		)	(59		)	(50		)	—			—			—			—			—			—			(15		)	(18		)	(27		)
Curtailment gain	—			—			—			—			(32		)	—			—			—			—
Settlement loss	—			—			1,883			26			—			—			—			—			—			—			—			—			—			48			26			—			—			—
Net periodic cost (benefit)	$	(1	)	$	27		$	1,969		$	10		$	(43	)	$	10		$	(27	)	$	(51	)	$	(39	)	$	(27	)	$	—		$	(1	)	$	(36	)	$	15		$	10		$	(19	)	$	(20	)	$	(27	)


	All Pension Benefit Plans				Postretirement Health Care Benefits Plan				All Pension Benefit Plans				Postretirement Health Care Benefits Plan
December 31	2016		2015		2016		2015		2018		2017		2018		2017
Target Mix:
Equity securities	33	%	37	%	37	%	36	%	30	%	31	%	32	%	35	%
Fixed income securities	46	%	45	%	43	%	42	%	51	%	49	%	49	%	44	%
Cash and other investments	21	%	18	%	20	%	22	%	19	%	20	%	19	%	21	%
Actual Mix:
Equity securities	34	%	37	%	37	%	37	%	28	%	29	%	31	%	34	%
Fixed income securities	47	%	44	%	43	%	41	%	50	%	49	%	48	%	44	%
Cash and other investments	19	%	19	%	20	%	22	%	22	%	22	%	21	%	22	%


	2016 Performance Options		2015 Performance Options		2016 Market Stock Units		2015 Market Stock Units		2015 PCSOs		2018 Performance Options		2017 Performance Options		2016 Performance Options
Expected volatility of common stock	25.3	%	21.0	%	24.2	%	19.3	%	26.0	%	25.0	%	24.1	%	25.3	%
Expected volatility of the S&P 500	19.8	%	23.3	%	N/A		N/A		N/A		25.3	%	25.6	%	19.8	%
Risk-free interest rate	1.7	%	1.8	%	1.1	%	1.1	%	1.5	%	2.7	%	2.4	%	1.7	%
Dividend yield	2.8	%	2.9	%	2.8	%	2.9	%	3.1	%	3.1	%	3.7	%	2.8	%
Expected life (years)	6.5		6.5		N/A		N/A		5		6.5		6.5		6.5



	2018 Market Stock Units		2017 Market Stock Units		2016 Market Stock Units
Expected volatility of common stock	25.0	%	24.1	%	24.2	%
Risk-free interest rate	2.4	%	1.7	%	1.1	%
Dividend yield	2.2	%	2.9	%	2.8	%



	2017 PCSOs
Expected volatility of common stock	24.1	%
Risk-free interest rate	1.8	%
Dividend yield	3.0	%
Expected life (years)	3.5


	Options Outstanding				Options Exercisable				Options Outstanding				Options Exercisable
Exercise price range	No. of options	Wtd. avg. Exercise Price		Wtd. avg. contractual life (in yrs.)	No. of options	Wtd. avg. Exercise Price		Wtd. avg. contractual life (in yrs.)	No. of options	Wtd. avg. Exercise Price		Wtd. avg. contractual life (in yrs.)	No. of options	Wtd. avg. Exercise Price		Wtd. avg. contractual life (in yrs.)
Under $30	542	$	27	3	542	$	27	3	266	$	29	1	266	$	29	1
$30-$40	1,947	39		3	1,947	39		3	1,198	39		2	1,198	39		2
$41-$50	33	45		4	34	45		4	—	—		0	—	—		0
$51-$60	998	55		6	976	54		6	671	54		4	671	54		4
$61-$70	3,100	67		8	654	66		7	1,815	68		4	1,796	68		4
$71-$80	664	72		9	41	74		1	469	72		7	86	72		7
$81 and over									1,151	92		8	247	82		5
	7,284				4,194				5,570				4,264


	Stock Options				Performance Options*				Restricted Stock Units				Market Stock Units				Stock Options				Performance Options*				Restricted Stock Units				Market Stock Units
Shares in Thousands	Number of Options Outstanding		Weighted Average Exercise Price of Shares		Number of Options Outstanding		Weighted Average Exercise Price of Shares		Number of Non-Vested Awards		Weighted Average Grant Date Fair Value		Number of Non-Vested Awards		Weighted Average Grant Date Fair Value
Balance as of January 1, 2016	6,029		$	51	2,042		$	68	1,516		$	59	84		$	60
Shares Outstanding in Thousands																	No. of Options Outstanding		Wtd. Avg. Exercise Price of Shares		No. of Options Outstanding		Wtd. Avg. Exercise Price of Shares		No. of Non-Vested Awards		Wtd. Avg. Grant Date Fair Value		No. of Non-Vested Awards		Wtd. Avg. Grant Date Fair Value
Balance as of January 1, 2018																	4,604		$	52	2,678		$	72	1,257		$	70	139		$	78
Granted	459		71		246		71		699		67		64		76		272		111		159		108		484		105		53		125
Releases/Exercised	(1,005	)	57		—		—		(726	)	59		(25	)	60		(1,445	)	52		(774	)	71		(570	)	70		(101	)	73
Adjustment for payout factor																	—		—		115		67		—		—		31		73
Forfeited/Canceled	(265	)	77		(222	)	68		(156	)	63		(7	)	60		(20	)	88		(19	)	81		(74	)	82		—		—
Balance as of December 31, 2016	5,218		$	50	2,066		$	69	1,333		$	63	116		$	69
Balance as of December 31, 2018																	3,411		$	57	2,159		$	74	1,097		$	84	122		$	102

Vested or expected to vest	4,418		47		—		—		726		59		25		60		3,032		50		1,492		70		462		71		89		80


December 31, 2016	Level 2		Total
December 31, 2018					Level 1		Level 2		Total
Assets:
Foreign exchange derivative contracts	$	9	$	9	$	—	$	5	$	5
Available-for-sale securities:
Government, agency, and government-sponsored enterprise obligations	51		51
Corporate bonds	5		5		1		—		1
Common stock and equivalents					19		—		19
Liabilities:
Foreign exchange derivative contracts	$	32	$	32	$	—	$	4	$	4


December 31, 2016	Total Long-term Receivable		Past Due Over 90 Days
December 31, 2018					Total Long-term Receivable		Current Billed Due		Past Due Under 90 Days		Past Due Over 90 Days
Municipal leases secured tax exempt	$	20	$	—	$	22	$	1	$	—	$	—
Commercial loans and leases secured	43		2		11		—		—		2
Long-term receivables, including current portion	$	63	$	2	$	33	$	1	$	—	$	2



	Capital Expenditures						Depreciation Expense
Years ended December 31	2016		2015		2014		2016		2015		2014
Products	$	104	$	76	$	87	$	68	$	82	$	94
Services	167		99		94		114		60		75
	$	271	$	175	$	181	$	182	$	142	$	169