msi-20201231

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________

FORM 10-K

_____________________________


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

For the fiscal year ended December 31, 2020


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

For the transition period from to

Commission File number 1-7221

_____________________________

MOTOROLA SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)

_____________________________


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

500 W. Monroe Street, Chicago, Illinois 60661

(Address of principal executive offices, zip code)

(847) 576-5000

Registrant’s telephone number, including area code:

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol(s)

Name of Each Exchange on Which Registered

Common Stock

$0.01

Par Value

MSI

New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☒ No ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant as of June 26, 2020 (the last business day of the Registrant’s most recently completed second quarter) was approximately $18.0 billion.

The number of shares of the registrant’s Common Stock, $.01 par value per share, outstanding as of February 1, 2021 was 169,028,294.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive Proxy Statement to be delivered to stockholders in connection with its Annual Meeting of Stockholders to be held on May 18, 2021 (the "Proxy Statement"), are incorporated by reference into Part III of this Annual Report on Form 10-K (this "Form 10-K").


TABLE OF CONTENTS
			Page
PART I			3
Item 1. Business			3
Overview			3
Business Organization			4
Customers and Contracts			6
Competition			6
COVID-19			7
Other Information			7
Backlog			7
Research and Development			9
Intellectual Property Matters			9
Inventory and Raw Materials			9
Government Regulations			10
Human Capital Management			10
Material Dispositions			11
Available Information			11
Item 1A. Risk Factors			12
Item 1B. Unresolved Staff Comments			22
Item 2. Properties			22
Item 3. Legal Proceedings			23
Item 4. Mine Safety Disclosures			23
Information about our Executive Officers			23
PART II			24
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			24
Item 6. Selected Financial Data			26
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations			27
Item 7A. Quantitative and Qualitative Disclosures About Market Risk			48
Item 8. Financial Statements and Supplementary Data			49
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			97
Item 9A. Controls and Procedures			97
Item 9B. Other Information			97
PART III			98
Item 10. Directors, Executive Officers and Corporate Governance			98
Item 11. Executive Compensation			98
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			98
Item 13. Certain Relationships and Related Transactions, and Director Independence			98
Item 14. Principal Accounting Fees and Services			98
PART IV			99
Item 15. Exhibits and Financial Statement Schedules			99
15(a)(1) Financial Statements			99
15(a)(2) Financial Statement Schedules			99
15(a)(3) Exhibits			99
Item 16 . Form 10-K Summary			103
Signatures			104

Throughout this Form 10-K we “incorporate by reference” certain information in parts of other documents filed with the Securities and Exchange Commission (the “SEC”). The SEC allows us to disclose important information by referring to it in that manner. Please refer to such information.

“Motorola Solutions” (which may be referred to as the “Company,” “we,” “us,” or “our”) means Motorola Solutions, Inc. or Motorola Solutions, Inc. and its subsidiaries, or one of our segments, as the context requires. MOTOROLA, MOTO, MOTOROLA SOLUTIONS and the Stylized M Logo, as well as iDEN are trademarks or registered trademarks of Motorola Trademark Holdings, LLC and are used under license.

Forward-Looking Statements

Statements in this Form 10-K which are not historical in nature are forward-looking statements within the meaning of applicable federal securities law. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and generally include words such as “believes,” “expects,” “intends,” “aims,” “estimates” and similar expressions. We can give no assurance that any future results or events discussed in these statements will be achieved. Any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. Readers are cautioned that such forward-looking statements are subject to a variety of risks and uncertainties that could cause our actual results to differ materially from the statements contained in this Form 10-K. Some of these risks and uncertainties include, but are not limited to, those discussed in “Part I. Item 1A. Risk Factors” of this Form 10-K and those described elsewhere in this Form 10-K or in our other SEC filings. Forward-looking statements include, but are not limited to, statements under the following headings: (1) “Business,” about: (a) industry growth and demand, including opportunities resulting from such growth, (b) future product development and the demand for, growth related to, and benefits of, new products, (c) growth of sales with existing customers, (d) customer spending and requests for vendor financing, (e) the impact of our strategy and focus areas, (f) the impact from the loss of key customers, (g) competitive position and our ability to maintain a leadership position in our core products, (h) increased competition, (i) our practice of subcontracting work to other companies to fulfill customer needs, (j) the continuing and future impact of the COVID-19 pandemic on our business, (k) the impact of recent acquisitions on our business, (l) the impact of regulatory matters, (m) the impact from the allocation and regulation of spectrum, particularly with respect to broadband spectrum, (n) the firmness of each segment's backlog, (o) the competitiveness of the patent portfolio, (p) the impact of research and development, (q) the availability of materials and components, energy supplies and labor, (r) the seasonality of the business, (s) our human capital management strategy and philosophy, and (t) our capital deployment model; (2) “Legal Proceedings,” about the ultimate disposition of pending legal matters and timing; (3) “Management's Discussion and Analysis of Financial Condition and Results of Operations,” about: (a) the continuing and future impact of COVID-19 on our business, (b) the impact of global economic and political conditions on our business, (c) the impact of acquisitions on our business, (d) market growth/contraction, demand, spending and resulting opportunities, (e) industry growth and demand, including opportunities resulting from such growth, (f) future product development and demand for, growth related to, and benefits of, new products, (g) the impact of foreign exchange rate fluctuations, (h) our continued ability to reduce our operating expenses, (i) expected improvements in operating leverage and operating margins, (j) the growth of sales opportunities in our Video Security and Analytics, Command Center Software and LMR Mission Critical Communications technologies, (k) the return of capital to shareholders through dividends and/or repurchasing shares, (l) our ability to invest in capital expenditures and research and development, (m) the success of our business strategy and portfolio, (n) future payments, charges, use of accruals and expected cost-saving and profitability benefits associated with our reorganization of business programs and employee separation costs, (o) our ability and cost to repatriate funds, (p) future cash contributions to pension plans or retiree health benefit plans, (q) the liquidity of our investments, (r) our ability and cost to access the capital markets, (s) our ability to borrow and the amount available under our credit facilities, (t) our ability to settle the principal amount of the New Senior Convertible Notes (as defined below) in cash, (u) our ability and cost to obtain performance bonds, (v) adequacy of internal resources to fund expected working capital and capital expenditure measurements, (w) expected payments pursuant to commitments under long-term agreements, (x) the ability to meet minimum purchase obligations, (y) our ability to sell accounts receivable and the terms and amounts of such sales, (z) the outcome and effect of ongoing and future legal proceedings, (aa) the impact of the loss of key customers, and (bb) the expected effective tax rate and deductibility of certain items, and (cc) the impact of the adoption of accounting pronouncements on our financial results; and (4) “Quantitative and Qualitative Disclosures about Market Risk,” about: (a) the impact of foreign currency exchange risks, (b) the impact of interest rate risk, (c) future hedging activity and expectations of the Company, and (d) the ability of counterparties to financial instruments to perform their obligations.

PART I

Item 1: Business

Overview

Motorola Solutions is a global leader in mission critical communications and analytics. Our technologies in Land Mobile Radio Mission Critical Communications ("LMR" or "LMR Mission Critical Communications"), Command Center Software and Video Security and Analytics, bolstered by managed and support services, make communities safer and help businesses stay productive and secure. We serve more than 100,000 public safety and commercial customers in over 100 countries, providing “purpose-built” solutions designed for their unique needs, and we have a rich heritage of innovation focusing on advancing global safety for more than 90 years.

We are incorporated under the laws of the State of Delaware as the successor to an Illinois corporation, Motorola, Inc., organized in 1928. We changed our name from Motorola, Inc. to Motorola Solutions, Inc. on January 4, 2011. Our principal executive offices are located at 500 W. Monroe St., Chicago, Illinois 60661.

Business Organization

We manage our business organizationally through two segments: “Products and Systems Integration” and “Software and Services.” Within these segments, the Company has principal product lines that also follow our three major technologies: LMR Mission Critical Communications, Command Center Software, and Video Security and Analytics.

•LMR Mission Critical Communications: Infrastructure, devices (two-way radio and broadband) and software that enable communications, inclusive of installation and integration, backed by services, to assure availability, security and resiliency.

•Command Center Software: Software suite that enables collaboration and seamless information sharing through the public safety workflow from 911 call to case closure.

•Video Security and Analytics: Cameras (fixed, body-worn, in-vehicle), access control, infrastructure, video management, software and artificial intelligence-enabled analytics that enable visibility “on scene” and bring attention to what’s important.

The Company has invested across these three technologies, evolving the Company’s LMR focus to purposefully integrate software, video security and analytics solutions for public safety and enterprise customers globally.

Our strategy is to generate value through the integration of each technology into our ecosystem, uniting voice, software, video and analytics to interoperate. While each technology individually strives to make users safer and more productive, we believe we can enable better outcomes between individuals, businesses and agencies united as one connected system. With our interplay of technologies, our goal is to help remove silos between systems, unify data, streamline workflows, simplify management and support evolving technologies. Examples of such interplay include sharing video feeds from a school to a police command center and officers’ devices in the field to improve situational awareness, uploading field reports or crime scene photos directly into an agency’s evidence system to save administration time, and connecting teams across networks to ensure messages are easily shared and teams can work as one. Our goal is to integrate technologies according to customers’ desired operational outcomes so they can work faster, smarter and more safely. Across all three technologies, we offer cloud-based solutions, cybersecurity services and managed and support services.

The principal products within each segment, by technology, are described below:

Products and Systems Integration Segment

In 2020, the segment’s net sales were $4.6 billion, representing 63% of our consolidated net sales.

LMR Mission Critical Communications

Our LMR Mission Critical Communications technology includes infrastructure and devices for LMR, public safety Long Term Evolution (“LTE”) and enterprise-grade private LTE. We are a global leader in the two-way radio category, including Project 25 (“P25”), Terrestrial Trunked Radio (“TETRA”) and Digital Mobile Radio (“DMR”), as well as other professional and commercial radio (“PCR”) solutions. We also deliver LTE solutions for public safety, government and commercial users, including infrastructure and devices operating in 700 MHz, 900 MHz and Citizens’ Broadband Radio Service (“CBRS”) frequencies. Primary sources of revenue for this technology come from selling devices and building telecommunications networks, including infrastructure, installation and integration with our customers’ technology environments.

Our technology enables voice and multimedia collaborations across different two-way radio, WiFi or public LTE and private broadband networks. We believe that first responders continue to trust LMR communications because they are purpose-built and designed for reliability, availability, security and resiliency to withstand the most challenging conditions. By adding broadband data capabilities to our two-way radios, we strive to provide our customers greater functionality and access to the information and data they need in their workflows. Examples of such functionality include application services such as GPS location to better protect lone workers and over-the-air programming and updates to optimize device uptime.

The LMR technology within the Products and Systems Integration segment represented 86% of the net sales of the total segment in 2020.

Video Security and Analytics

Our Video Security and Analytics technology includes network video management infrastructure, fixed security and mobile video cameras (body-worn and in-vehicle) and access control solutions. We deploy video security solutions to thousands of government and commercial customers around the world including school campuses, transportation systems, healthcare centers, public venues, utilities, prisons, factories, casinos, airports, financial institutions, government facilities, state and local law enforcement agencies and retailers. Organizations such as these utilize video security to enable continuous monitoring that can improve situational awareness, particularly across large areas, and to visually verify critical events or incidents in real-time or investigate after they happen.

Our view is that government and public safety customers in particular are increasingly turning to video security technologies, including fixed street cameras, in-vehicle cameras and body-worn cameras, to increase visibility, accountability and safety for citizens, communities and first responders alike.

We have built our video security and analytics technology through strategic acquisitions. We acquired Avigilon Corporation (“Avigilon”) in 2018. Avigilon access control solutions, in addition to cameras, sensors and infrastructure embedded with advanced video analytics, are designed to be simple and easy to use. We expanded our fixed video security technology through our acquisitions of IndigoVision Group plc and Pelco, Inc. in 2020. We grew our mobile video security technology in 2019 through our acquisitions of WatchGuard Inc., which provides body-worn cameras and in-vehicle video systems for North America law enforcement agencies, and Edesix Ltd (acquired as part of the VaaS International Holdings acquisition), a provider of body-worn cameras in Europe for both law enforcement and commercial markets.

The Video Security and Analytics technology within the Products and Systems Integration segment represented 14% of the net sales of the total segment in 2020.

Software and Services Segment

In 2020, the segment’s net sales were $2.8 billion, representing 37% of our consolidated net sales.

LMR Mission Critical Communications

LMR Mission Critical Communications services include support and managed services, which offer a broad continuum of support for our customers. Support services include repair and replacement, technical support and preventative maintenance, and more advanced offerings such as system monitoring, software updates and cybersecurity services. Managed services range from partial to full operational support of customer-owned or Motorola Solutions-owned networks. Our customers’ systems often have multi-year or multi-decade lifespans that help drive demand for software upgrades, device and infrastructure refresh opportunities, as well as additional services to monitor, manage, maintain and secure these complex networks and solutions. We strive to deliver services to our customers that help improve performance across their systems, devices and applications for greater safety and productivity.

Given the mission-critical nature of our customers’ LMR networks, availability, security and resiliency are imperative, along with keeping pace with technological advancements. We have a comprehensive approach to system upgrades that addresses hardware, software and implementation services. As new system releases become available, we work with our customers to upgrade software, hardware, or both, with respect to site controllers, comparators, routers, LAN switches, servers, dispatch consoles, logging equipment, network management terminals, network security devices such as firewalls and intrusion detection sensors, and more, on-site or remotely.

The LMR technology within the Software and Services segment represented 72% of the net sales of the total segment in 2020.

Command Center Software

Our Command Center Software suite, CommandCentral, supports the complex process of the public safety workflow from "911 call to case closure," which involves an array of roles from the moment a citizen dials 911, such as dispatchers who route calls to police, fire and emergency medical services, first responders in the field, intelligence analysts who manage real-time operations, records specialists who preserve the integrity of information and evidence, crime analysts who identify patterns and accelerate investigations, and corrections officers who oversee jail and inmate management.

CommandCentral software supports these roles through the three phases of incident response: incident awareness, incident management and post-incident resolution. Incident awareness software includes community engagement applications for tip submissions, crime mapping and evidence submission, and 911 call-handling software (including multimedia) and next-generation core services for 911 call routing. Incident management software includes computer aided dispatch (“CAD”) for dispatch and coordinating first response, situational awareness software that shows a single, real-time view of video feeds and other alerts on a map, and field response and reporting to help frontline personnel collaborate, manage incident activity and file reports from the field. Post-incident resolution software includes centralized records and evidence management for record-keeping and judicial sharing, analytics including license plate recognition, and jail and inmate management to streamline the process and enable secure inter-agency information sharing.

As the public safety market continues to evolve toward software offerings that more efficiently run their operations, reduce response times and increase officer availability, we have focused on providing cloud-based software-as-a service (“SaaS”) with ancillary implementation and managed services in addition to on-premises solutions. Our PremierOne Cloud suite, hosted in Microsoft Azure Government, includes CAD, mobile and records in a single, integrated cloud-based offering. We believe that cloud deployment delivers agencies key benefits, including faster deployment, increased security, rapid scaling in the event of an emergency and a secure investment that keeps pace as technology advances.

Another area of public safety evolution is increasing adoption of Next Generation 911 Core Services (“NGCS”), a group of products and services needed to create infrastructure connectivity in order to process a 911 call using Next Generation (“NG”) technology. The NG infrastructure is an Emergency Service IP Network ("ESInet"), which can carry voice, data and multimedia. ESInet enables 911 call takers at public safety answering points to respond to text, video and data. Our NGCS can be offered as a managed service and includes call routing, ESInet, location services, Geographic Information Services, cybersecurity and our continuous network and security operations center dedicated to public safety. We believe that our solution is differentiated through its integration with our CommandCentral software suite to simplify the agency’s workflow and ensure better incident management and real-time intelligence.

interoperability among devices across multiple networks. For example, a two-way radio network can connect with an LTE network making it possible for individuals to communicate securely and more easily across technologies.

The Command Center Software technology within the Software and Services segment represented 18% of the net sales of the total segment in 2020.

Video Security and Analytics

Video Security and Analytics software includes video network management software, digital evidence management software and advanced vehicle location data analysis software, including license plate recognition, each designed to complement respective video hardware systems.

Our video network management software is embedded with artificial intelligence (“AI”)-enabled analytics to deliver operational insights to our customers by bringing attention to important events within their video footage. Given the volume of video footage, we believe this is critical to monitor and manage to deliver meaningful, action-oriented insights. For example, AI-enabled analytics can detect unusual behavior such as a person at a facility out-of-hours, locate a missing child with our Appearance Search feature at a theme park, flag a blacklisted vehicle through license plate recognition at a school, or send an alert through access control if doors are propped open at a hospital.

Video Security and Analytics services include our video-as-service offering for law enforcement, simplifying procurement by bundling hardware and software into a single subscription. Body-worn cameras and in-car video systems can be paired with either on-premises or cloud-based digital evidence management software and complementary command center software products. Additionally, Avigilon fixed video systems connected to Avigilon Cloud Services (“ACS”) provide our customers with the ability to securely access video across their sites from a remote/central monitoring location and more easily integrate with their other systems.

The Video Security and Analytics technology within the Software and Services segment represented 10% of the net sales of the total segment in 2020.

Our Customers and Contracts

We serve government agencies, state and local public safety agencies, as well as commercial and industrial customers. Our customer base is fragmented and widespread when considering the many levels of governmental and first-responder decision-makers that procure and use our products and services. Serving this global customer base spanning federal, state, county, province, territory, municipal, and departmental independent bodies, along with our commercial and industrial customers, requires a significant go-to-market investment.

Our sales model includes both direct sales by our in-house sales force, which tend to focus on our largest accounts, and sales through our channel partner program. Our trained channel partners include independent dealers, distributors, and software vendors around the world. The dealers and distributors each have their own sales organizations that complement and extend the reach of our sales force. The independent software vendors offer customized applications that meet specific needs of the customers we serve.

Our largest customers are the U.S. government (through multiple contracts with its various branches and agencies, including the armed services) and the Home Office of the United Kingdom, representing approximately 9% and 8% of our consolidated net sales in 2020, respectively. The loss of these customers could have a material adverse effect on our revenue and earnings over several quarters as many of our contracts with these governments are long-term in nature. All contracts with the U.S. government, and certain other government agencies within the U.S., are subject to cancellation at the customer’s convenience. For a discussion of risks related to government contracting requirements, please refer to “Item 1A. Risk Factors” in this Form 10-K.

Payment terms with our customers vary worldwide. Generally, contractual payment terms range from 30 to 45 days from the invoice date within North America and typically do not exceed 90 days from the invoice date in regions outside of North America. A portion of our contracts include implementation milestones, such as delivery, installation, and system acceptance, which generally take 30 to 180 days to complete. Invoicing the customer is dependent on completion of the milestones. We generally do not grant extended payment terms. As required for competitive reasons, we may provide long-term financing in connection with equipment purchases. Financing may cover all or a portion of the purchase price. Refer to “Part 1. Item 1A. Risk Factors” in this Form 10-K for a discussion of risks related to requests by customers to provide vendor financing.

Generally, our contracts do not include a right of return, other than for standard warranty provisions. Due to customer purchasing patterns and the cyclical nature of the markets we serve, our sales tend to be somewhat higher in the second half of the year, with the fourth quarter being the highest.

Competition

We operate in highly competitive markets that are sensitive to technological advances. Competitive factors in these markets include product quality and reliability, technological capabilities, cost-effectiveness, and industry experience. In operating in these competitive markets, we have broadened how we work with our customers, expanding from our global LMR installed base to integrate Command Center Software and Video Security and Analytics. For example, our Command Center Software suite can integrate our customers’ LMR systems to provide unified voice and data information throughout the critical 911 workflow. Adding Video Security and Analytics enables multimedia collaboration and offers visibility for police officers within the

command center and in the field. The interplay of technologies, guided by our deep knowledge of the public safety workflow, delivers customers one connected system to unify their voice, data and video communication streams.

The specific solutions we integrate vary according to customers’ requirements. We support our customers from various technological starting points, for example, we may integrate a customer’s video system into a Command Center Software suite to simplify access to technologies that such customer uses to support its operations.

We experience widespread competition from a growing number of existing and new competitors, including large system integrators and manufacturers of private and public wireless network equipment and devices. As demand for fully integrated voice, data, broadband systems and video solutions continues to grow, we may face additional competition from public telecommunications carriers and telecommunications equipment providers to small video solutions startups.

As we continue to evolve our services strategy, we may subcontract work to other companies to fulfill customer needs in geographical areas that we do not have coverage or for additional services that we do not provide. For a description of risks related to our use of the services of subcontractors, refer to “Part 1. Item 1A. Risk Factors” of this Form 10-K.

Our major competitors within our LMR, Command Center Software, and Video Security and Analytics technologies include the following companies:


Technology			Competitor
LMR			L3Harris Technologies, Inc., Hytera, Airbus SE, Kenwood Corporation
Command Center Software			Central Square Technologies, Axon Enterprise, Inc., Tyler Technologies, Inc., West Corporation, Intergraph Corporation, Zetron, ComTech
Video Security and Analytics			Axis Communications, Hikvision, Dahua Technology Company, Hanwha Group, Genetec Inc., Axon Enterprise, Inc.

COVID-19

In response to the COVID-19 pandemic, there have been a broad number of governmental and commercial actions taken to limit the spread of the virus, including social distancing measures, stay-at-home orders, travel restrictions, business shutdowns and slowdowns. These actions have resulted in a significant decline in global economic activity. The COVID-19 pandemic negatively affected our sales and operating results for fiscal 2020, and may continue to have an impact on our financial condition, results of operations and liquidity in 2021. See “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-K for a discussion regarding the impact of the COVID-19 pandemic on our financial results, and “Part I. Item 1A. Risk Factors” of this Form 10-K for a discussion of the risks and uncertainties associated with the COVID-19 pandemic.

Other Information

Backlog

Our backlog includes orders that have been received and are believed to be firm. As of December 31, 2020 and December 31, 2019, our backlog was as follows:


	December 31
(In millions)	2020		2019
Products and Systems Integration	$	3,120	$	3,158
Software and Services	8,314		8,101
	$	11,434	$	11,259

Approximately 47% of the Products and Systems Integration segment backlog and 24% of the Software and Services segment backlog is expected to be recognized as revenue during 2021. The firmness of such orders is subject to future events that may cause the amount recognized to change.

Recent Acquisitions

Technology

Segment

Acquisition

Description

Purchase Price

Date of Acquisition

Command Center Software

Software and Services

Callyo

Provider of cloud-based mobile applications for law enforcement in North America, including critical mobile technological capabilities that enable information to flow seamlessly from the field to the command center.

$63 million, inclusive of share-based compensation of $3 million

August 28, 2020

Video Security and Analytics

Products and Systems Integration

Software and Services

Pelco, Inc.

Global provider of video security solutions, adding a broad range of products for a variety of commercial and industrial environments and use cases.

$110 million

July 31, 2020

Video Security and Analytics

Products and Systems Integration

Software and Services

IndigoVision Group plc

Provider of video security solutions to enhance geographical reach across a wider customer base.

$37 million

June 16, 2020

LMR

Software and Services

Unnamed cybersecurity services business

Provider of vulnerability assessments, cybersecurity consulting, and managed services, including security monitoring of network operations.

$32 million

April 30, 2020

LMR

Software and Services

Unnamed cybersecurity services business

Provider of vulnerability assessments, cybersecurity consulting, managed services, and remediation and response capabilities.

$40 million, inclusive of share-based compensation of $6 million

March 3, 2020

Video Security and Analytics

Software and Services

Unnamed data solutions business for vehicle location information

Provider of additional data to our existing license plate recognition database.

$85 million

October 16, 2019

Video Security and Analytics

Products and Systems Integration

Software and Services

WatchGuard, Inc.

Provider of in-car and body-worn video solutions.

$271 million, inclusive of share-based compensation of $16 million

July 11, 2019

LMR

Products and Systems Integration

Software and Services

Avtec, Inc.

Provider of dispatch communications for U.S. public safety and commercial customers to communicate, coordinate resources, and secure their facilities.

$136 million

March 11, 2019

Video Security and Analytics

Products and Systems Integration

Software and Services

VaaS International Holdings

Global provider of data and image analytics for vehicle location.

$445 million, inclusive of share-based compensation of $38 million

January 7, 2019

Video Security and Analytics

Products and Systems Integration

Software and Services

Avigilon Corporation

Provider of advanced security and video solutions including video analytics, network video management hardware and software, video cameras, and access control solutions.

$974 million

March 28, 2018

Command Center Software

Software and Services

Plant Holdings, Inc.

Provider of next generation 911 solutions.

$237 million

March 7, 2018

Research and Development

We prioritize investments in R&D to expand and improve our products through both new product introductions and continuous enhancements to our core products. Our R&D programs are focused on the development of: (i) LMR Mission Critical Communications, (ii) Command Center Software and (iii) Video Security and Analytics.

R&D expenditures were $686 million in 2020, $687 million in 2019, and $637 million in 2018. As of December 31, 2020, we had approximately 6,000 employees engaged in R&D activities. In addition, we engage in R&D activities with joint development and manufacturing partners and outsource certain activities to engineering firms to further supplement our internal spend.

Intellectual Property Matters

Patent protection is an important aspect of our operations. We have a portfolio of U.S. and foreign utility and design patents relating to our products, systems, and technologies, including developments in radio frequency technology and circuits, wireless network technologies, over-the-air protocols, mission critical communications, software and services, video security and analytics and next-generation public safety. We also file new patent applications with the U.S. Patent and Trademark Office and foreign patent offices.

We license some of our patents to third-parties, but licensing is not a significant source of revenue for our business. We are also licensed to use certain patents owned by others. Royalty and licensing fees vary from year-to-year and are subject to the terms of the agreements and sales volumes of the products subject to the license. Motorola Solutions has a royalty-free license under all of the patents and patent applications assigned to Motorola Mobility at the time of the separation of the two businesses in 2011.

We actively participate in the development of standards for interoperable, mission critical digital two-way radio systems. Our patents are used in standards in which our products and services are based. We offer standards-based licenses to those patents on fair, reasonable, and non-discriminatory terms.

We believe that our patent portfolio will continue to provide us with a competitive advantage in our core product areas as well as provide leverage in the development of future technologies. While we are not dependent upon a single patent or even a few patents, we do have patents that protect features and functionality of our products and services. While these patents are important, our success also depends upon our extensive know-how, innovative culture, technological leadership, and distribution channels. We do not rely solely on patents or other intellectual property rights to protect or establish our market position; however, we will enforce our intellectual property rights when it is necessary to protect our innovation, or in some cases where attempts to negotiate mutually-agreeable licenses are not successful.

We seek to obtain patents, copyright registrations, and trademark registrations to protect our proprietary positions whenever possible and wherever practical. As of December 31, 2020, we owned approximately 6,100 granted patents in the U.S. and foreign countries. As of December 31, 2020, we had approximately 1,300 U.S. and foreign patent applications pending. Foreign patents and patent applications are mostly counterparts of our U.S. patents. During 2020, we were granted approximately 500 patents in the U.S. and in foreign countries.

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 thereof (“Motorola Marks”) and, since 2010, we have licensed the Motorola Marks from Motorola Mobility Holdings, Inc. which is currently owned by Lenovo Group Limited. For a description of the risks we face related to intellectual property, refer to “Part 1. Item 1A. Risk Factors” in this Form 10-K.

Inventory and Raw Materials

Our practice is to carry reasonable amounts of inventory to meet customers' delivery requirements. We provide custom products 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 supplier product life cycles are shorter than 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. In addition, we import materials and components that are subject to import duties, including tariffs in connection with products procured in China. The duties and tariffs we are subject to do not have a significant impact on our financial results. 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 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 significant cost increases, could affect our financial results. For a description of risks related to our supply chain, refer to “Part 1. Item 1A. Risk Factors” in this Form 10-K.

Government Regulations

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 ours are subject to various federal, state, local, and international laws governing chemical substances in electronic products. Compliance with these U.S. federal, state and local, and international laws did not have a material effect on our capital expenditures or competitive position in 2018 through 2020; however, we recorded a $57 million charge in 2018 once to address additional remediation requirements for a designated Superfund site under the Comprehensive Environmental Response, Compensation and Liability Act (commonly known as the “Superfund Act”) incurred by a legacy business.

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 is allocated to wireless services and specifically to public safety users. We manufacture and market products in spectrum bands already 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 by regulatory agencies. 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.

The U.S. federal government and many state and local governments have adopted or are considering laws or regulations governing the use of artificial intelligence, biometrics, facial recognition and license plate recognition technology, primarily based on concerns about privacy or bias. (References to privacy-related legislation or laws in this document encompass all of these technologies.) Similar laws and regulations are being considered in some jurisdictions outside the U.S., including the European Union. Based on growing demands for broadband, regulators continue to consider repurposing narrowband spectrum to broadband. There are calls for more stringent health and safety requirements for occupational equipment for public safety and commercial users. Attention in the U.S. on supply chain vulnerabilities related to country of origin and national security continues. Our entrance into new service offerings could present new or additional regulatory burdens and compliance issues. For a description of the risks we face related to regulatory matters, refer to “Part 1. Item 1A. Risk Factors” of this Form 10-K.

Human Capital Management

We have a "people first" philosophy. Our high-performing employees are our driving force, drawn from all segments of our global society to make a difference for our customers.

As of December 31, 2020, we employed approximately 18,000 people globally with 52% in the North America region and 48% in the International region. Of our total global employees, 42% were employed in engineering. We believe a diverse, equitable and inclusive workplace is one where our employees feel that their unique opinions, cultures and abilities contribute to their personal success, as well as our company’s success.

We believe our management team has the experience necessary to effectively execute our strategy and advance our product and technology leadership. Our Chief Executive Officer and senior management leaders have extensive industry experience. They are supported by an experienced and talented management team that is dedicated to maintaining and expanding our position as a global leader for government, public safety and enterprise mission critical communications and analytics. For discussion of the risks relating to the attraction and retention of senior management and key technical employees, see “Part 1. Item 1A. Risk Factors" in this Form 10-K.

We believe the next big idea can come from anyone, anywhere, at any time. We invest in our employees’ development and training at all levels, challenging them to develop and grow skills to imagine new opportunities that will keep making a difference to public and enterprise safety. Employees have access to a wide variety of technical, functional and professional skills learning resources, including virtual, self-directed courses and on-the-job learning opportunities.

We strive for business growth by creating a supportive, fair and equitable environment where employees feel they belong and are engaged, connected to our business and invested in the collective success of our customers and communities. Our human resources team works with leaders within each business function to perform annual talent reviews to assess the performance of every team member and identify the best development opportunities. This extensive process fosters growth across our company through focus on our high performing and high potential talent and the rigor of succession plan development for our most critical roles. As part of our compensation philosophy, we strive to offer and maintain market competitive wages, incentives, and benefits for our employees in order to attract and retain superior talent.

We are focused on recruiting diverse candidates into our company by incorporating best practices into our hiring and creating partnerships with diversity organizations. In 2020, we appointed our first chief diversity officer, invested in development programs for high-potential female leaders, added an unconscious bias curriculum to our global workforce, and surveyed more than 4,000 employees to help leaders better understand the employee experience, particularly as it relates to diversity, equity and inclusion. In 2019, more than 170 leaders from all parts of the Company participated in a variety of blended learning programs that included in-person training, self-paced learning and practice activities, all geared toward building their leadership skills. In 2018, over 100 human resources professionals and hiring managers received several hours of specialized training on how to remove unconscious bias from the hiring process.

Our company-sponsored employee business councils support and promote mutual objectives of both the employees and the Company, including driving inclusion and diversity, enhancing company culture and impacting business results. As of December 31, 2020, we had six business councils: Women’s Business Council, Multicultural Business Council, LGBTA Business Council, People with Disabilities and Allies Council, Veterans Business Council and Global Young Professionals Group.

In 2020 we established a cross-collaborative advisory committee, the Motorola Solutions Technology Advisory Committee (“MTAC”), to ensure our technological advancements remain aligned with our purpose and ethics, and are informed by the broader implications to our customers, the communities we serve and society at large.

Additional information regarding how our purpose and ethics informs our approach to corporate responsibility can be found in our 2019 Corporate Responsibility Report, which is available on our website at www.motorolasolutions.com/en_us/about/company-overview/corporate-responsibility.html. The information contained on or accessible through our corporate website is not incorporated by reference into and is not a part of this Form 10-K.

Material Dispositions

None.

Available Information

We make available free of charge through the Investor Relations section of 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. Our internet website and the information contained therein or incorporated therein are not intended to be incorporated into this Form 10-K.

Item 1A: Risk Factors

You should carefully consider the risks described below in addition to our other filings with the SEC and the other information set forth in this Form 10-K, including the “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” section in Part II. Item 7 and our consolidated financial statements in Part II. Item 8. If any of the risks and uncertainties described in the cautionary factors described below actually occur or continue to occur, our business, financial condition and results of operations and the trading price of our common stock could be materially and adversely affected. COVID-19 amplifies and exacerbates many of the risks we face in our business operations, including those discussed below. Moreover, the risks below are not the only risks we face and additional risks not currently known to us or that we presently deem immaterial may emerge or become material at any time and may negatively impact our business, reputation, financial condition, results of operations or the trading price of our common stock.

Risks Related to Laws and Regulations

We are subject to complex and changing laws and regulations in various jurisdictions regarding privacy, data protection and information security, which exposes us to increased costs and potential liabilities in the event of any actual or perceived failure to comply with such legal obligations and 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. Noncompliance with the GDPR can trigger significant fines.

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 (e.g., the California Consumer Protection Act (“CCPA”) which went into effect on January 1, 2020). 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 complex and 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, software and services. Cloud-based solutions may be subject to further regulation, including data localization requirements and other restrictions concerning international transfer of data, the operational and cost impact of which cannot be fully known at this time.

Any failure or perceived failure by us, our business partners, or third party service providers to comply with GDPR, CCPA, other related privacy and security-related or data protection laws, regulations and standards, or the privacy commitments 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.

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

Existing or future legislation and regulations pertaining to AI and AI-enabled products (e.g., facial recognition technology) that apply to us or to our customers may make it more challenging, costly, or in some cases prohibit certain products or services from being offered or modified, which could adversely affect our business and results of operations. We could suffer reputational damage from negative publicity related to products and services that utilize AI, which could also adversely affect our business and results of operations.

Current or future privacy-related legislation and governmental regulations pertaining to AI and AI-enabled products may affect how our business is conducted. Legislation and governmental regulations related to AI may also influence our current and prospective customers’ activities, as well as their expectations and needs in relation to our products and services. Compliance with these laws and regulations may be onerous and expensive, and may be inconsistent from jurisdiction to jurisdiction, further increasing the cost of compliance. Any such increase in costs as a result of changes in these laws and regulations or in their interpretation could individually or in the aggregate make our products and services that use AI technologies less attractive to our customers, delay the introduction of new products, in one or more regions, cause us to change or limit our business practices or affect our financial condition and operating results.

We envision a future in which AI operating in our products and services will help our public safety and private sector customers build safer communities with stronger communication platforms. AI may be flawed and datasets may be insufficient or contain biased information. As we work to responsibly meet our customers’ needs for products and services that use AI, we could suffer reputational damage as a result of any inconsistencies in the application of the technology or ethical concerns both of which may generate negative publicity.

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

Radio spectrum is required to provide wireless voice, data, and video communications service. The allocation of frequencies is regulated in the U.S. and other countries and limited spectrum is allocated to wireless services, including commercial and public safety users. The global demand for wireless communications has grown exponentially, and spurred

competition for access among various networks and users. In response, regulators are reassessing the allocations of spectrum among users, including public safety users, and considering whether to change the allocation of certain bands from narrowband to broadband use, or to require sharing of spectrum bands. Our results could be positively or negatively affected by the rules and regulations adopted by regulators. 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. Opportunities in the public safety broadband market may also be impacted by the First Responder Network Authority (“FirstNet”) which was authorized by Congress to develop, build, and operate a nationwide broadband network for first responders.

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 or such noncompliance with such regulations and laws 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. 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 Agreements Act, Buy America 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. For contracts covered by the Cost Accounting Standards, 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 can be terminated for convenience by the government at any time.

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.

Risks Related to Our Ability to Grow Our Business

Catastrophic events, including the COVID-19 pandemic, natural disasters and other events beyond our control may interrupt our business, or our customers’ or suppliers’ business, which may adversely affect our business, results of operations, financial position, cash flows and stock price.

Our business operations, and the operations of our customers and suppliers, are subject to interruption by natural disasters, flooding, fire, power shortages, the widespread outbreak of infectious diseases and pandemics, such as the COVID-19 pandemic, terrorist acts or the outbreak or escalation of armed hostilities, and other events beyond our control. Any of these events could impair our ability to manage our business and/or cause disruption of economic activity, which could have an adverse effect on our business, results of operations, financial position, cash flows and stock price.

In particular, the COVID-19 pandemic has caused significant disruption to the global economy, including in all of the regions in which we, our suppliers, customers and business partners do business and in which our employees are located. The COVID-19 pandemic and efforts to manage it, including those by governmental authorities, have had, and could continue to have, significant impacts on global markets. While the duration and severity of those impacts on our business continue to be uncertain, they have had, and could continue to have, an adverse effect on our business, financial position, cash flows and stock price in many ways, including, but not limited to, the following:

•The COVID-19 pandemic and responses to it have significantly limited or prevented the movement of goods and services worldwide, which has resulted in and could continue to result in disruptions in our supply chain and distribution systems as well as the demand for our products and services. To date, we have been permitted to continue to operate in jurisdictions that have mandated the closure of certain businesses, and we expect to continue to do so in the future. Any future restrictions or closures could have a material impact on our business, results of operations, financial condition and cash flow and we may not be permitted to operate under such restrictions or closures. In particular, any limitations on, or closures of, our manufacturing facilities in Malaysia, Canada, Mexico and the United States (Illinois, Texas), or our distribution centers in Malaysia, Germany, Canada and the United States (Illinois, Texas), could have a material adverse impact on our ability to manufacture products and service customers. This extends as well to any potential disruptions to transportation including reduced availability of air transportation capacity and ocean freight capacity which can lead to longer transit times and increases in freight costs to deliver our products. If diminished transportation capacity levels continue, the speed at which we deliver our products will continue to be slower than the delivery times that we traditionally provide to our customers and could negatively impact our ability to meet customer demand.

•Our customers are, and continue to be, subject to significant risks and have had, and could continue to have, adverse impacts to their business operations and financial condition related to the COVID-19 pandemic, which could lead to a decrease in their liquidity and/or spending. This has resulted in, and could continue to result in, a decrease in demand for our products, solutions and services, as well as impact our customers’ ability to pay for such products, solutions and services.

•Our workforce may be unable to work on-site or travel as a result of event cancellations, facility closures, shelter-in-place, travel and other restrictions and changes in industry practice, or if they, their co-workers or their family members become ill or otherwise require care arrangements. These workforce disruptions have adversely affected and could continue to adversely affect our ability to operate, including to develop, manufacture, generate sales of, promote, market and deliver our products, solutions and services, and provide customer support.

•We outsource certain business activities to third parties. As a result, we rely upon the successful implementation and execution of the business continuity planning of such entities in the current environment. If one or more of the third parties to whom we outsource certain business activities experience operational failures or business disruption as a result of the impacts from the spread of COVID-19, or claim that they cannot perform, it may have negative effects on our business and financial condition.

Even after the COVID-19 pandemic has subsided, we could experience materially adverse impacts to our business due to any resulting economic downturns. Additionally, concerns over the economic impact of COVID-19 have caused volatility in financial and other capital markets which has and may continue to adversely impact our stock price. To the extent the COVID-19 pandemic adversely affects our business and financial results it may also have the effect of heightening many of the other risks described in the Form 10-K, such as those relating to our products, financial performance, the global nature of our business or access to capital markets.

As we expand the technologies within our Products and Systems Integration and Software and Services segments, we face increased competition and increased areas of risk that we may not be able to properly assess or mitigate, which could harm our market share, results of operations and financial condition.

The process of developing new video security and software products and enhancing existing products is complex, costly and uncertain, and any failure by us to anticipate customers' changing needs, emerging technological trends and development costs 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.

Further, we plan to continue to expand our 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 multi-year projects. Additionally, our managed services business 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 face increasing competition from traditional system integrators, the defense industry, commercial software companies, and commercial telecommunication carriers as 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.

Additionally, as our portfolio of products increases, we may be subject to new regulatory and statutory requirements and could result in additional compliance obligations and liabilities for our business, which may include additional regulation by the FCC, state regulatory commissions and foreign telecommunications regulatory bodies.

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 products of ours are characterized by changing technologies and evolving industry standards and customer preferences. For example, the software industry is characterized by rapidly changing customer preferences in favor of digital capabilities, including public and private cloud solutions. In some cases, it is unclear what specific technology will be adopted in the market or what delivery model will prevail. 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 and video security 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 research and development 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.

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, including ensuring proper integration of acquired businesses’ legal and regulatory compliance programs, (ii) risks associated with integrating financial reporting and internal control systems, (iii) difficulties in integrating information technology systems and other business processes to 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 contractual relationships or 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, (ix) the risks of entering new markets in which we have limited experience, and (x) 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, or as a result of 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.

Risks Related to Information Technology and Intellectual Property

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 cyberattack or other means, could have a negative impact on our operations, sales, and operating results.

We rely extensively on our information systems to manage our business operations. 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 and severe weather conditions, terrorism, sabotage, war, insider trading, human error and computer 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 or as a software-based service, 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. This risk is heightened because these systems may contain sensitive governmental information or personally identifiable or other protected information. Additionally, the sophistication of these threats continues to grow and the complexity and scale of the systems to be protected continues to increase. In an effort to protect against such attacks, we maintain insurance related to cybersecurity risks and employ a number of countermeasures and security controls, including training, audits, and utilization of commercial information security threat sharing networks. If we fail to effectively manage our investment in cybersecurity, our business, products, and services could suffer from the resulting weaknesses in our infrastructure, systems or controls.

Further, our company outsources certain business operations, including, but not limited to IT, HR information systems, manufacturing, repair, distribution and engineering services. 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, including the hosts of our cloud infrastructure on top of which our cloud-based solutions are built. 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. In addition, we maintain certain networked equipment at customer locations and are reliant on those customers to protect and maintain that equipment.

A cyber-attack or other significant disruption involving our IT systems or those of our outsource partners, suppliers or our customers could result in substantial costs to repair or replace our IT systems or the loss of critical data and interruptions or delays in our ability to perform critical functions. Such disruption may also result in the unauthorized release of proprietary, confidential or sensitive information of ours or our customers, or the disruption of services provided to customers and essential for their mission. Such unauthorized access to, or release of, information or disruption of services 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 without adequate indemnification from our suppliers, 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. The continued global trend to enforce data sovereignty and negate legitimate cross border data flows increases the risk that we, directly or through some third party service provider, may inappropriately transfer personal data. Any or all of the foregoing could have a negative impact on our business, financial condition, results of operations, and cash flow.

If we are unable to adequately protect our intellectual property, or if we, our customers and/or our suppliers are found to have infringed intellectual property rights of third parties, our competitive position and results of operations may be adversely impacted.

Our intellectual property rights protect our innovations and technology, and they may also generate income under license agreements. We attempt to protect our proprietary technology with intellectual property in the form of 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. 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. 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 and competitive position.

Additionally, because our products are comprised of complex technology, we are often involved in or impacted by assertions, including both requests for licenses and litigation, regarding third-party patents 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 principal 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 and services, 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. Third-parties may also seek 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. Such licenses, if available at all, may not 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 face risks relating to intellectual property licenses and intellectual property indemnities in our customer and supplier contracts, which may fail to fully protect us and subject us to unexpected liabilities or harm our financial condition and results of operations.

We obtain some technology from suppliers through the purchase of components or licensing of software, and we attempt to negotiate favorable intellectual property indemnities with our suppliers for infringement of third-party intellectual property rights. With respect to such indemnities, we may not be successful in our negotiations, a supplier's indemnity may not fully protect us or cover all damages and losses suffered by us and our customers due to the infringing products, or a supplier may not choose to obtain a third-party license or modify or replace its products with non-infringing products which would otherwise mitigate such damages and losses. Such situations may subject us to unexpected liabilities or unfavorable conditions. 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 or operations 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 may stem from non-practicing entities that engage in patent enforcement and litigation, sometimes seeking 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.

Further, competitors may be able to negotiate significantly more favorable terms for intellectual property than we are able to, which puts them at a competitive advantage. Moreover, with respect to our internally developed proprietary software, we may

be harmed if we are forced to make publicly available, under the relevant open-source licenses, some of that proprietary software as a result of either our use of open-source software code or the use of third-party software that contains open-source code.

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.

In 2010, we secured a worldwide, perpetual and royalty-free license from MTH to use the Motorola Marks as art 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 us using the Motorola Marks and our loss of ownership of the Motorola Marks. As both we and Motorola Mobility use the Motorola Marks, confusion could arise in the market, including customer confusion regarding the products offered by and the actions of the two companies. Also, any negative publicity associated with either company in the future could adversely affect the public image of the other.

Motorola Mobility was acquired by Lenovo in 2014, which resulted in Lenovo having effective control over the Motorola Marks. Our risks under the license could increase if Lenovo expands its use of the Motorola Marks, or if our products and those of Lenovo converge. In addition, because our license of the Motorola Marks is limited to products and services within our specified fields of use, we are not permitted to use the Motorola Marks in other fields of use without the approval of Motorola Mobility. As we continue to expand our business into any other fields of use, we either must do so with a brand other than the Motorola brand, which could take considerable time and expense, or assume the risk that our expanded field don’t meet the definition of permitted fields of use under our license, which could result in loss of our rights to use the Motorola Marks.

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 certain rights 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. Motorola Mobility may require us to adopt modifications to the Motorola Marks, and this could negatively impact our business, including costs associated with rebranding.

Neither Motorola Mobility nor Lenovo are prohibited from selling the Motorola Marks. In the event of a liquidation by Lenovo or the then-owner of the Motorola Marks, it is possible that a bankruptcy court would either (i) permit the Motorola Marks to be assigned to a third-party whose interests may be incompatible with ours, thereby potentially making the license arrangement difficult to administer and increasing the costs and risks of sharing the Motorola Marks, or (ii) refuse to uphold the license or certain of its terms, which could negatively affect our business, results of operations and financial condition.

Risks Related to the Operation of Our Business

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 2020, 32% 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 48% 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.

A significant amount of manufacturing and research and development of our products takes place outside of the U.S. If the operations in these facilities is disrupted, our business, financial condition, results of operation, and cash flows could be negatively impacted.

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, including but not limited to increased pressure to agree to established currency conversion rates and cost of living adjustments as a result of foreign 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, labor and employment, 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, and difficulties in securing local country approvals for cash repatriations, (vi) reduced financial flexibility given that a significant percentage of our cash and cash equivalents is currently held outside of the U.S., (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 enforcement or administrative proceedings, and (xvii) applicability of

anti-corruption laws such as the Foreign Corrupt Practices Act (“FCPA”) and the U.K. Bribery Act. Any of these risks may be heightened by our practice of outsourcing or using third-parties to help sell our products or provide solutions and services, due to limits on our ability to oversee and control such third-parties’ conduct.

Additionally, the benefits we receive under various agreements we have entered into with non-U.S. governments and agencies relate to our operations and/or sales in such foreign jurisdictions. If our operations or sales are not at levels originally anticipated, we may be at risk of having to reimburse benefits already granted, which could increase our cost of doing business in such foreign jurisdictions.

Over the last several years we have utilized third-parties to develop, design and/or manufacture many of our components and some of our products, and to perform portions of certain business operations such as IT, HR information systems, manufacturing, repair, distribution and engineering services We expect to continue these practices in the future, which limit our control over these business operations and exposes us to additional risk as a result of the actions of our outsource partners.

We rely on third-parties to develop, design and/or manufacture many of our components and some of our products (including software), and to assist in performing certain IT, HR information systems, manufacturing, repair, distribution and engineering services. As we outsource more of such operations we are not able to directly control these activities. 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 our desired level of performance or service, lack sufficient quality control or fail to deliver quality components, products, services or software on time and at reasonable prices, (iii) 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) we have difficulties transitioning operations to such third-parties.

Our reliance on third-parties could also result in reputational damage in certain instances. For example, our supply chain is complex and if our suppliers are unable to verify that components and parts provided to us are free of defined “conflict minerals” originating from the Democratic Republic of Congo (“DRC”) or an adjoining country, then we may be required to publicly disclose that we are not currently able to determine if the products we manufactured are DRC conflict-free, which could harm our reputation.

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. 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.

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 or to adhere to our Human Rights Policy could negatively impact our business.

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. In addition, it is our policy to require our subcontractors and other third-parties with whom we work to operate in compliance with applicable laws, rules and regulations, including our Human Rights Policy (and, in addition, for our suppliers to comply with our Supplier Code of Conduct).

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 or a customer may otherwise look to us to cover a loss or damage, and thus in some cases may be required to absorb contractual risks from our customers without corresponding back-to-back coverage from our subcontractor. 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. Further, one of our subcontractors or other third-parties subject to our Human Rights Policy could fail to comply with such policies or with applicable law or may engage in unethical business practices. Any of the foregoing could cause orders to be canceled, relationships to be terminated or our reputation to be damaged, which could harm our business, financial condition and results of operations.

Our future operating results depend on our ability to purchase at acceptable prices a sufficient amount of materials, parts, and components, as well as software and services, 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 software and services from our suppliers. For example, we have experienced, and could continue to experience, increased difficulties in obtaining a sufficient amount of materials in the semiconductor market, as prices of such materials increased and supply was more limited due to the expansion of server and cloud networks as a greater proportion of the global population worked remotely, the introduction of 5G and the continued electrification of vehicles. We attempted, and continue to attempt, to mitigate such supply disruptions by increasing our communications with our suppliers and modifying our purchase order coverage and inventory levels. If reduced supply of these materials in the semiconductor market continues, our ability to meet customer demand could be affected, which could negatively impact our results of operations.

In addition, certain supplies, including for some of our critical components, software and services 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 supply or a significant increase in the price of 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 or services. This risk may increase as a result of consolidation of certain suppliers of 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 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 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. Our entry into these contracts exposes us to risks, including among others: (i) technological risks, especially when, (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.

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.

In addition, privacy advocacy groups and other technology and industry groups have established or may establish various new or different self-regulatory standards that may place additional obligations on us. Our customers may expect us to meet voluntary certifications or adhere to other standards established by third parties. If we are unable to maintain these certifications or meet these standards, it could reduce demand for our products and adversely affect our business.

Risks Related to Financial Performance or Economic Conditions

We are a global company and face a number of risks related to current global economic and political conditions in the markets in which we operate that have and could continue to unfavorably impact our business, financial condition, results of operations and cash flows.

Global economic and political conditions, including the COVID-19 pandemic, continue to be challenging for many of our government and commercial markets, as economic growth in many countries and emerging markets has remained low or declined, currency fluctuations have impacted profitability, credit markets have remained tight for certain counterparties of ours and some of our customers are dependent on government grants to fund purchases of our products and services.

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 political uncertainties and conflicts include new or increased tariffs and potential trade wars, threats to national security vulnerabilities linked to country of origin (in response to which the U.S. implemented prohibitions on, via the National Defense Authorization Act for Fiscal Year 2019, the use of federal funds to purchase and/or use telecommunications equipment and services and video surveillance equipment and services from Chinese vendors), and the United Kingdom’s decision to voluntarily exit the United Kingdom on January 31, 2020 (commonly referred to as “Brexit”).

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 certain of our government and commercial customers that we provide vendor financing, including in response to financial challenges surrounding state and local governments, which may cause us to retain exposure to the credit quality of our customers who we finance if we are unable to sell these receivables on terms acceptable to us.

•The inability of certain of our customers to obtain financing in order to make purchases from us and/or maintain their business, which may negatively impact our financial results.

•Challenges we face in budgeting and forecasting due to economic uncertainties in various parts of the U.S. and world economy, which could negatively impact our financial results if such budgets or forecasts are inaccurate.

•Deferment or cancellation of purchases and orders by customers may occur due to uncertainty about current and future global economic conditions, which could reduce future demand for our products and negatively impact our financial results.

•Intensifying political instability in a number of markets in which we operate could have a significant impact on our ability to grow and, in some cases, operate in such locations, which could negatively impact our financial results.

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 1.75% senior convertible notes (“New Senior Convertible Notes”). 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 New Senior Convertible Notes. As a result, we will be required to record a greater amount of non-cash interest expense as a result of the amortization of the discount over the expected term of the New Senior Convertible Notes, and we will report lower net income because of the recognition of both the current period’s discount amortization and the New Senior Convertible Notes’ coupon interest, which could adversely affect the trading price of our shares of common stock.

Convertible debt instruments (such as the New 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 New Senior Convertible Notes are not included in the calculation of diluted earnings per share except to the extent that the conversion value of the New 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 New Senior Convertible Notes, if any, over the principal amounts of the New Senior Convertible Notes (which would be settled in cash). The conversion value of the New Senior Convertible Notes will exceed the principal amount of the notes to the extent the trading price of a share of our stock exceeds $203.50. 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 New 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 made a voluntary contribution into the U.S. pension plan in early 2018, and completed a lump sum offer for certain participants in the U.S. pension plan in 2019, 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 past 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.

Risks Related to Human Capital Management

Our success depends in part upon our ability to attract and retain senior management and key employees, including engineers and other key technical employees, in order to remain competitive.

The performance of our CEO, senior management and other key employees such as engineers and other key technical employees is critical to our success. If we are unable to retain talented, highly-qualified senior management, engineers 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 an engineer or other key employee particularly to a competitor, could also place us at a competitive disadvantage. In addition, we face increased demands for technical personnel in areas such as software development, which is an area of particularly high demand for 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. In particular, competition for experienced software and cloud computing infrastructure engineers is intense. 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.

General Risk Factors

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 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, cleanup 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, (iv) the use and transportation of batteries, and (v) debt collection and other consumer finance matters 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, due to increased public awareness and concern regarding environmental risks, including climate change, we anticipate that we will see increased demand to meet voluntary criteria related to reduction or elimination of certain constituents from products and increasing energy efficiency. Such regulations or standards could impose significant operational restrictions and compliance requirements upon us, which could negatively impact our business, results of operations, financial condition and competitive position.

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 loan markets at acceptable terms and conditions are impacted by many factors, including: (i) our credit ratings, (ii) the condition of the overall capital markets, (iii) strength and credit availability in the banking markets, and (iv) the 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, we may not 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. We may not 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) issue commercial paper (iii) provide performance bonds, bid bonds, standby letters of credit and surety bonds, (iv) hedge foreign exchange risk, (v) fund our foreign affiliates, (vi) sell receivables, and (vii) obtain favorable trade terms with suppliers. 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.

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 non-deductible expenses, or (vii) repatriating cash held abroad.

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 Organization 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 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.

Item 1B: Unresolved Staff Comments

None.

Item 2: Properties

As of February 1, 2021, the material properties that we used in connection with our business, serving all segments, are as follows:


Location	Approximate Size in Sq. Ft. (In thousands)	Owned vs. Leased	Purpose
Schaumburg, Illinois, U.S.	345	Leased	Research & development and customer support
Elgin, Illinois, U.S.	301	Leased	Manufacturing and distribution
Krakow, Poland	301	Leased	Research & development and corporate administrative
Penang, Malaysia	300	Leased	Manufacturing and distribution, research & development and corporate administrative
Plantation, Florida, U.S.	209	Leased	Corporate administrative
Chicago, Illinois, U.S.	206	Leased	Corporate administrative (global headquarters)
Tel Aviv, Israel	202	Leased	Research & development and corporate administrative
Basingstoke, UK	167	Owned	Corporate administrative
British Columbia, Canada	152	Leased	Manufacturing and distribution and corporate administrative
Allen, Texas, U.S.	138	Owned	Manufacturing and distribution and corporate administrative
Richardson, Texas, U.S.	136	Leased	Manufacturing and distribution

In addition to the properties described in the table, as of February 1, 2021, we leased 233 facilities, 103 of which were located in North America and 130 of which were located outside of North America.

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 or liquidity. However, an unfavorable resolution could have a material adverse effect on our 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.

Information about our Executive Officers

The following are the persons who are the executive officers of the Company, their ages, and current titles as of February 12, 2021 and the positions they have held during the last five years with the Company or as otherwise noted:

Gregory Q. Brown; age 60; Chairman and Chief Executive Officer since May 3, 2011.

Mark S. Hacker; age 49; Executive Vice President, General Counsel and Chief Administrative Officer since January 21, 2015.

Kelly S. Mark; age 49; Executive Vice President, Software and Services since August 28, 2018; Senior Vice President, Managed and Support Services from July 2017 to August 2018; and Corporate Vice President, Managed and Support Services from August 2015 to July 2017.

John P. "Jack" Molloy; age 49; Executive Vice President, Products and Sales since August 28, 2018; Executive Vice President, Worldwide Sales and Services from July 2017 to August 2018; and Executive Vice President, Worldwide Sales from January 2016 to July 2017.

Rajan S. Naik; age 49; Senior Vice President, Strategy and Ventures, since December 2017; and Corporate Vice President, Chief Strategy Officer from March 2016 to December 2017.

Daniel G. Pekofske; age 44; Corporate Vice President and Chief Accounting Officer since September 10, 2018; and Vice President and Treasurer from January 2016 to September 2018.

Jason J. Winkler; age 46; Executive Vice President and Chief Financial Officer since July 1, 2020; Senior Vice President, Finance from September 2018 to June 2020; Corporate Vice President, Finance, Global Sales & Services from February 2016 to September 2018; and Vice President and Director, North America, Finance from January 2014 to February 2016.

Cynthia M. Yazdi; age 56; Senior Vice President, Chief of Staff, Marketing and 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; and Vice President, Chief of Staff from August 2015 to September 2016.

The above executive officers will serve as executive officers of the Company until the regular meeting of the Board of Directors in May 2021 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 and trades under the symbol "MSI." The number of stockholders of record of its common stock on February 1, 2021 was 21,690. This figure does not include a substantially greater number of “street name” holders whose shares are held of record by banks, brokers and other financial institutions.

During 2020, we declared regular quarterly dividends of $0.64 per share of our common stock for each of the first three quarters of fiscal 2020, and $0.71 per share of our common stock for the fourth quarter of fiscal 2020. While we expect to continue to pay comparable regular quarterly dividends in 2021, any future dividend payments will be at the discretion of our Board of Directors and will depend upon our profits, financial requirements and other factors, including legal restrictions on the payment of dividends, general business conditions and such other factors as our Board of Directors deems relevant.

The following table provides information with respect to acquisitions by the Company of shares of its common stock during the quarter ended December 31, 2020.

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)
09/24/20 to 10/21/20	248,983	$	156.39	248,983	$	780,660,139
10/22/20 to 11/18/20	243,631	$	165.48	243,631	$	740,343,034
11/19/20 to 12/29/20	545,846	$	168.10	545,846	$	648,585,495
Total	1,038,460	$	164.68	1,038,460



(1)			Average price paid per share of common stock repurchased is the execution price, including commissions paid to brokers.
(2)			As originally announced on July 28, 2011, and subsequently amended, the board of 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, 2020, the Company had used approximately $13.4 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, 2015 and reflects the payment of dividends.


Years Ended	December 31, 2015		December 31, 2016		December 31, 2017		December 31, 2018		December 31, 2019		December 31, 2020
Motorola Solutions	$	100.00	$	123.90	$	138.08	$	179.00	$	254.52	$	273.33
S&P 500	$	100.00	$	111.95	$	136.38	$	130.39	$	171.44	$	202.96
S&P Communications	$	100.00	$	118.92	$	151.16	$	173.96	$	197.28	$	198.53

Item 6: Selected Financial Data

The following selected financial data is derived from the consolidated financial statements. The data below should be read in conjunction with “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Part I. Item 1A. Risk Factors,” and the consolidated financial statements and notes included in Part II. Item 8 of this Form 10-K.


	Years Ended December 31
(In millions, except per share amounts)	2020			2019			2018			2017			2016
Operating Results
Net sales	$	7,414		$	7,887		$	7,343		$	6,380		$	6,038







Operating earnings	1,383			1,581			1,255			1,284			1,048













Earnings (loss) attributable to Motorola Solutions, Inc.	949			868			966			(155)			560


Per Share Data (in dollars)

Earnings (loss) per diluted common share*	$	5.45		$	4.95		$	5.62		$	(0.95)		$	3.24
Diluted weighted average common shares outstanding (in millions)	174.1			175.6			172.0			162.9			173.1
Dividends declared per share	$	2.63		$	2.35		$	2.13		$	1.93		$	1.70
Balance Sheet
Total assets	$	10,876		$	10,642		$	9,409		$	8,208		$	8,463

Total debt	5,175			5,129			5,320			4,471			4,396

Other Data
Capital expenditures	$	217		$	248		$	197		$	227		$	271
% of sales	2.9		%	3.1		%	2.7		%	3.6		%	4.5		%
Research and development expenditures	$	686		$	687		$	637		$	568		$	553
% of sales	9.3		%	8.7		%	8.7		%	8.9		%	9.2		%

*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, 2020 and 2019 and results of operations for each of the three years in the period ended December 31, 2020. 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.”

Executive Overview

Our Business

The principal products within each segment, by technology, are described below:

Products and Systems Integration Segment

In 2020, the segment’s net sales were $4.6 billion, representing 63% of our consolidated net sales.

LMR Mission Critical Communications

The LMR technology within the Products and Systems Integration segment represented 86% of the net sales of the total segment in 2020.

Video Security and Analytics

The Video Security and Analytics technology within the Products and Systems Integration segment represented 14% of the net sales of the total segment in 2020.

Software and Services Segment

In 2020, the segment’s net sales were $2.8 billion, representing 37% of our consolidated net sales.

LMR Mission Critical Communications

The LMR technology within the Software and Services segment represented 72% of the net sales of the total segment in 2020.

Command Center Software

through its integration with our CommandCentral software suite to simplify the agency’s workflow and ensure better incident management and real-time intelligence.

Additional Command Center Software includes interoperability software that ensures communication is not limited by coverage area, network technology or device type. Our solutions, including Kodiak, WAVE PTX and CriticalConnect, enable interoperability among devices across multiple networks. For example, a two-way radio network can connect with an LTE network making it possible for individuals to communicate securely and more easily across technologies.

The Command Center Software technology within the Software and Services segment represented 18% of the net sales of the total segment in 2020.

Video Security and Analytics

The Video Security and Analytics technology within the Software and Services segment represented 10% of the net sales of the total segment in 2020.

2020 Financial Results

•Net sales were $7.4 billion in 2020 compared to $7.9 billion in 2019.

•Operating earnings were $1.4 billion in 2020 compared to $1.6 billion in 2019.

•Net earnings attributable to Motorola Solutions, Inc. were $949 million, or $5.45 per diluted common share in 2020, compared to earnings of $868 million, or $4.95 per diluted common share in 2019.

•Our operating cash flow was $1.6 billion in 2020 compared to $1.8 billion in 2019.

•We returned over $1.0 billion of capital to shareholders, in the form of $612 million in share repurchases and $436 million in dividends in 2020.

•We increased our quarterly dividend by 11% to $0.71 per share in November 2020.

•We ended 2020 with a backlog position of $11.4 billion, up $175 million compared to 2019.

Segment Financial Highlights

•In the Products and Systems Integration segment, net sales were $4.6 billion in 2020, a decrease of $695 million, or 13%, compared to $5.3 billion in 2019. On a geographic basis, net sales decreased in both North America and International primarily driven by lower public safety LMR and PCR, partially offset by growth in Video Security and Analytics. Operating earnings were $656 million in 2020, compared to $994 million in 2019. Operating margins decreased in 2020 to 14.2% from 18.7% in 2019 primarily due to lower sales and gross margin contribution, partially offset by lower operating expenses primarily driven by: lower employee incentive costs, indirect expenses, and travel expenses, and a $50 million gain from the sale of a manufacturing facility in Europe. The overall reduction in operating expenses was partially offset by: (i) $23 million higher reorganization of business expenses, (ii) $11 million higher share-based compensation expenses, and (iii) higher operating expenses from acquisitions.

•In the Software and Services segment, net sales were $2.8 billion in 2020, an increase of $222 million, or 9%, compared to $2.6 billion in 2019. On a geographic basis, net sales increased in both North America and International. Operating earnings were $727 million in 2020, compared to $587 million in 2019. Operating margin increased in 2020 to 26.2% from 22.9% in 2019 due to higher sales and gross margin contribution, along with reduced operating expenses primarily driven by operating leverage, inclusive of lower employee incentive costs and travel expenses. The overall reduction in operating expenses was partially offset by: (i) $6 million higher reorganization of business expenses, (ii) $5 million higher intangible amortization driven by acquisitions, and (iii) higher operating expenses from acquisitions.

COVID-19

We continue to abide by a number of measures in an effort to protect the health and well-being of our employees and customers, including having office workers work remotely, suspending employee travel, withdrawing from certain industry events, increasing the frequency of cleaning services, encouraging face coverings, and using thermal scanning. We have continued to ensure customer continuity by fulfilling several emergency orders, completing remote software maintenance where possible, and continuing to service our mission-critical networks on-site as needed to ensure seamless operations. Our sales teams have also continued to improve virtual engagement with our customers. Additionally, our engineering teams have adapted our solutions offerings to equip our customers with the latest technology in an effort to protect their workplaces from the spread of COVID-19. Specifically, in Video Security and Analytics, we have adapted our software and hardware offerings to provide analytics addressing occupancy counting, face mask detection, and thermal detection capabilities.

We believe our existing balances of cash, cash equivalents and marketable securities, along with other short-term liquidity arrangements, will be sufficient to satisfy our liquidity requirements associated with our existing operations. During the first quarter of 2020, we proactively withdrew $800 million from our unsecured revolving credit facility, which we repaid during the twelve months ended December 31, 2020. We were in compliance with all applicable covenants in our unsecured revolving credit facility as of December 31, 2020. Additionally, we have no bond maturities until 2023.

We continue to evaluate our financial position during this economic slowdown. Specifically, in our Software and Services segment, with the largely recurring nature of the business and our strong backlog position, we continue to expect that the impacts on net sales and operating margin will be limited in 2021. In our Products and Systems Integration segment, the impacts on net sales and operating margin were more significant during the first half of 2020 with reduced impact in the fourth quarter of 2020. Reduced demand, particularly in our PCR business, as well as delays in engagements with our state and local customers led to a decline in net sales for the Product and Systems Integration segment in 2020 as compared to 2019. Within the Products and Systems Integration segment, we are encouraged by strong LMR backlog, and the resiliency of the Video Security and Analytics technology, that has experienced growth in the year, as we enter 2021. In 2021, COVID-19 may continue to have an impact on net sales and operating margins within our Products and Systems Integration segment. However, given the prioritization of mission critical communication solutions, we do not anticipate funding at the state and local levels to have a material, negative effect on our expected net sales for 2021. We have also taken actions in a number of areas to reduce our operating expenses, including lower variable employee compensation, travel costs, contractor spend and reducing our real estate footprint to limit the negative effect on operating margins for 2020; however, a portion of these expenses, primarily variable compensation and certain travel expenses are likely to return in 2021. In addition, our supply chain partners have been supportive and continue to work to fulfill the necessary service levels to the Company and its customers.

We continue to closely monitor the impact of COVID-19 on our business and geographies, including how it is impacting our customers, suppliers, and business partners. However, the future impact that COVID-19 will have on our financial position and operating results may be affected by numerous uncertainties, including the severity of the virus, the duration of the outbreak, governmental, business or other actions, impacts on our supply chain, the effect on customer demand, or changes to our operations. The impacts of a potential worsening of global economic conditions and the continued disruptions to, and volatility in, the credit and financial markets, as well as other unanticipated consequences, remain unknown. Further, additional outbreaks of COVID-19 in fiscal 2021 or beyond would cause many of the impacts described herein to return or be exacerbated.

For further information, please see “Part 1. Item 1. Business” and “Part 1. Item 1A. Risk Factors” in this Form 10-K. The Company’s current expectations described above are forward-looking statements and our actual results may differ.

Recent Acquisitions

Technology

Segment

Acquisition

Description

Purchase Price

Date of Acquisition

Command Center Software

Software and Services

Callyo

$63 million, inclusive of share-based compensation of $3 million

August 28, 2020

Video Security and Analytics

Products and Systems Integration

Software and Services

Pelco, Inc.

Global provider of video security solutions, adding a broad range of products for a variety of commercial and industrial environments and use cases.

$110 million

July 31, 2020

Video Security and Analytics

Products and Systems Integration

Software and Services

IndigoVision Group plc

Provider of video security solutions to enhance geographical reach across a wider customer base.

$37 million

June 16, 2020

LMR

Software and Services

Unnamed cybersecurity services business

Provider of vulnerability assessments, cybersecurity consulting, and managed services, including security monitoring of network operations.

$32 million

April 30, 2020

LMR

Software and Services

Unnamed cybersecurity services business

Provider of vulnerability assessments, cybersecurity consulting, managed services, and remediation and response capabilities.

$40 million, inclusive of share-based compensation of $6 million

March 3, 2020

Video Security and Analytics

Software and Services

Unnamed data solutions business for vehicle location information

Provider of additional data to our existing license plate recognition database.

$85 million

October 16, 2019

Video Security and Analytics

Products and Systems Integration

Software and Services

WatchGuard, Inc.

Provider of in-car and body-worn video solutions.

$271 million, inclusive of share-based compensation of $16 million

July 11, 2019

LMR

Products and Systems Integration

Software and Services

Avtec, Inc.

Provider of dispatch communications for U.S. public safety and commercial customers to communicate, coordinate resources, and secure their facilities.

$136 million

March 11, 2019

Video Security and Analytics

Products and Systems Integration

Software and Services

VaaS International Holdings

Global provider of data and image analytics for vehicle location.

$445 million, inclusive of share-based compensation of $38 million

January 7, 2019

Video Security and Analytics

Products and Systems Integration

Software and Services

Avigilon Corporation

Provider of advanced security and video solutions including video analytics, network video management hardware and software, video cameras, and access control solutions.

$974 million

March 28, 2018

Command Center Software

Software and Services

Plant Holdings, Inc.

Provider of next generation 911 solutions.

$237 million

March 7, 2018

Change in Presentation

During the first quarter of 2020, the Company restructured to realize more operational efficiencies, combining our Europe, Middle East and Africa ("EMEA"), Asia Pacific ("AP"), and Latin America ("LA") regions into one region, which is now reflected as "International." Accordingly, the Company now reports net sales in the following two geographic regions: North America, which includes the United States and Canada, and International. In addition, during the fourth quarter of 2020, the Company updated its presentation of major products and services to provide a more comprehensive view of our technologies within our reporting segments. Accordingly, the Company now reports net sales in the following three major products and services: LMR Mission Critical Communications, Video Security, and Command Center Software. The Company has updated all periods presented to reflect this change in presentation. Refer to Note 2 of our Consolidated Financial Statements in "Part II. Item 8. Financial Statements and Supplementary Data" of this Form 10-K for further information.

Looking Forward

We continue to focus on growth opportunities across our portfolio of technologies.

We expect continued growth within our global LMR installed base as a number of events such as natural disasters and large-scale incidents continue to reinforce the importance of having secure, reliable LMR for public safety. We believe our augmentation of LMR with broadband solutions will also drive growth, as we expect our customers will look to integrate valuable data capabilities. We expect to provide additional services to existing LMR customers as communication networks become more complex, software-centric and data-driven.

As public safety needs continue to evolve, we anticipate growth opportunities within the command center as our Command Center Software suite covers the mission critical workflow, from 911 intake to case closure and management. We expect increased growth in our integrated software next generation core services and our cloud-based solutions, such as the PremierOne Cloud suite.

Within Video Security and Analytics, we expect growth across our portfolio of fixed and mobile security solutions embedded with advanced analytics, and access control solutions. We believe drivers include expansion of traditional video sales beyond commercial customers to government and public safety customers. Additionally, we expect customers to continue to embrace analytics that convert video into data and the scalability of the cloud to run their operations, and we also expect continued expansion of offerings such as video-as-a-service and Avigilon Cloud Services.

Finally, we anticipate new opportunities from the investments we are making to integrate our LMR, Command Center Software and Video Security and Analytics technologies into one unified ecosystem. We have made go-to-market and research and development investments in both Video Security and Analytics and our Command Center Software technologies with growth in mind. We have made a number of acquisitions and we see opportunities to continue to rationalize costs within both segments of our business, further driving operating leverage in our businesses. We believe our integrated ecosystem for public and enterprise safety can enable strong collaboration by removing system silos, simplifying management and automating workflows.

Refer to “COVID-19” set forth in “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-K for a discussion of our outlook with respect to the continuing impact of COVID-19 on the Company’s financial condition and results of operations.

Results of Operations


	Years ended December 31
(Dollars in millions, except per share amounts)	2020		% of Sales **		2019		% of Sales **		2018		% of Sales **
Net sales from products	$	4,087			$	4,746			$	4,463
Net sales from services	3,327				3,141				2,880
Net sales	7,414				7,887				7,343
Costs of product sales	1,872		45.8	%	2,049		43.2	%	2,035		45.6	%
Costs of services sales	1,934		58.1	%	1,907		60.7	%	1,828		63.5	%
Costs of sales	3,806		51.3	%	3,956		50.2	%	3,863		52.6	%
Gross margin	3,608		48.7	%	3,931		49.8	%	3,480		47.4	%
Selling, general and administrative expenses	1,293		17.4	%	1,403		17.8	%	1,254		17.1	%
Research and development expenditures	686		9.3	%	687		8.7	%	637		8.7	%
Other charges	246		3.3	%	260		3.3	%	334		4.5	%
Operating earnings	1,383		18.7	%	1,581		20.0	%	1,255		17.1	%
Other income (expense):
Interest expense, net	(220)		(3.0)	%	(220)		(2.8)	%	(222)		(3.0)	%
Gains (losses) on sales of investments and businesses, net	(2)		—	%	5		0.1	%	16		0.2	%
Other	13		0.2	%	(365)		(4.6)	%	53		0.7	%
Total other expense	(209)		(2.8)	%	(580)		(7.4)	%	(153)		(2.1)	%
Net earnings before income taxes	1,174		15.8	%	1,001		12.7	%	1,102		15.0	%
Income tax expense	221		3.0	%	130		1.6	%	133		1.8	%
Net earnings	953		12.9	%	871		11.0	%	969		13.2	%
Less: Earnings attributable to noncontrolling interests	4		0.1	%	3		—	%	3		—	%


Net earnings*	$	949	12.8	%	$	868	11.0	%	$	966	13.2	%



Earnings per diluted common share*	$	5.45			$	4.95			$	5.62

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

** Percentages may not add due to rounding.

Geographic Market Sales by Locale of End Customer


	2020		2019		2018


North America	68	%	67	%	64	%
International	32	%	33	%	36	%
	100	%	100	%	100	%

Results of Operations—2020 Compared to 2019

Net Sales


	Years ended December 31
(In millions)	2020		2019		% Change
Net sales from Products and Systems Integration	$	4,634	$	5,329	(13)	%
Net sales from Software and Services	2,780		2,558		9	%
Net sales	$	7,414	$	7,887	(6)	%

The Products and Systems Integration segment’s net sales represented 63% of our net sales in 2020, compared to 68% in 2019. The Software and Services segment’s net sales represented 37% of our net sales in 2020, compared to 32% in 2019.

Net sales decreased by $473 million, or 6%, compared to 2019. The 13% decline in net sales within the Products and Systems Integration segment was driven by an 11% decline in the North America region and an 18% decline in the International region. The 9% increase in the Software and Services segment was driven by a 12% increase in the North America region and a 4% increase in the International region. The decrease in net sales included:

•a decline in the Products and Systems Integration segment, inclusive of $119 million of revenue from acquisitions, driven by a decline in public safety LMR and PCR, partially offset by growth in Video Security;

•growth in the Software and Services segment, inclusive of $84 million of revenue from acquisitions, driven by an increase in Video Security and Analytics, Command Center Software, and LMR services due to strong demand in the North America region; and

•$12 million from unfavorable currency rates.

Regional results included:

•a 5% decline in the North America region, inclusive of revenue from acquisitions, driven by declines in public safety LMR and PCR, partially offset by growth in Video Security and Analytics, LMR services, and Command Center Software; and

•a 9% decline in the International region, inclusive of revenue from acquisitions, driven by declines in public safety LMR and PCR, partially offset by growth in Video Security and Analytics, Command Center Software, and LMR public safety services.

Products and Systems Integration

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

•17% decline in public safety LMR and PCR, inclusive of revenue from acquisitions, in both the International and North America regions, primarily driven by a delay in customer engagement due to the COVID-19 pandemic;

•partially offset by $143 million, or 29%, growth in Video Security and Analytics, inclusive of revenue from acquisitions, in both the International and North America regions; and

•$3 million from favorable currency rates.

Software and Services

The 9% increase in the Software and Services segment was driven by the following:

•6% growth in LMR services, inclusive of revenue from acquisitions, driven by the North America region;

•36% growth in Video Security and Analytics, inclusive of revenue from acquisitions, driven by both the North America and International regions;

•7% growth in Command Center Software, inclusive of revenue from acquisitions, driven by both the North America and International regions; and

•partially offset by $15 million from unfavorable currency rates.

Gross Margin


	Years ended December 31
(In millions)	2020		2019		% Change
Gross margin	$	3,608	$	3,931	(8)	%

Gross margin was 48.7% of net sales in 2020 and 49.8% of net sales in 2019. The decrease was driven by:

•lower gross margin contribution in Products and Systems Integration segment as a result of the decline in public safety LMR and PCR sales, as well as lower margins on projects driven by a delay in engagements from COVID-19, partially offset by lower incentive costs; and

•partially offset by higher gross margins within the Software and Services segment, inclusive of acquisitions, primarily driven by higher gross margin contribution from sales growth, driven by improved mix of service offerings and lower travel and incentive costs.

Selling, General and Administrative ("SG&A") Expenses


	Years ended December 31
(In millions)	2020		2019		% Change
Selling, general and administrative expenses	$	1,293	$	1,403	(8)	%

SG&A expenses decreased 8% in 2020 compared to 2019. SG&A expenses were 17.4% of net sales in 2020 compared to 17.8% of net sales in 2019. The decrease in SG&A expenses was primarily due to reduced employee incentive costs, travel expenses, and indirect expenses. The overall reduction in SG&A expenses was partially offset by expenses associated with acquired businesses.

Research and Development ("R&D") Expenditures


	Years ended December 31
(In millions)	2020		2019		% Change
Research and development expenditures	$	686	$	687	—	%

R&D expenditures remained consistent in 2020 compared to 2019. R&D expenditures were 9.3% of net sales in 2020 and 8.7% of net sales in 2019.

Other Charges


	Years ended December 31
(In millions)	2020		2019
Other charges	$	246	$	260

Other charges decreased by $16 million in 2020 compared to 2019 primarily due to the following:

•$50 million gain on sale of a manufacturing facility in Europe in 2020;

•partially offset by $57 million of net reorganization of business charges in 2020 as compared to $40 million in 2019 (see Note 14 of our consolidated financial statements in “Part II. Item 8. Financial Statements and Supplementary Data” of this Form 10-K for further information);

•$215 million of amortization of intangibles in 2020 compared to $208 million in 2019;

•$9 million of legal settlements in 2020 compared to $3 million in 2019;

•$9 million of charges for acquisition-related transaction fees in 2020 as compared to $3 million in 2019; and

•$5 million of fixed asset impairments.

Operating Earnings


	Years ended December 31
(In millions)	2020		2019
Operating earnings from Products and Systems Integration	$	656	$	994
Operating earnings from Software and Services	727		587
Operating earnings	$	1,383	$	1,581

Operating earnings decreased $198 million, or 13%, compared to 2019. The decrease in Operating earnings was due to:

•Products and Systems Integration decreased by $338 million from 2020 to 2019 driven by lower sales and gross margin contribution, partially offset by lower operating expenses driven by lower employee incentive costs, indirect expenses, and travel expenses. The overall reduction in operating expenses was offset by: (i) $23 million higher reorganization of business expenses, (ii) $11 million higher share-based compensation expenses, and (iii) higher operating expenses from acquisitions.

•Software and Services segment increased by $140 million from 2020 to 2019 driven by higher sales and gross margin contribution, along with reduced operating expenses due to operating leverage, inclusive of lower employee incentive costs and travel expenses. The overall reduction in operating expenses was partially offset by: (i) $6 million higher reorganization of business expenses, (ii) $5 million higher intangible amortization driven by acquisitions, and (iii) higher operating expenses from acquisitions.

Interest Expense, net


	Years ended December 31
(In millions)	2020		2019
Interest expense, net	$	(220)	$	(220)

Interest expense, net in 2020 compared to 2019 remained relatively consistent due to a one-time receipt of interest income related to a tax refund and lower interest rates on debt outstanding, offset by lower interest income earned on cash due to lower interest rates.

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


	Years ended December 31
(In millions)	2020		2019
Gains (losses) on sales of investments and businesses, net	$	(2)	$	5

The net gains (losses) in 2020 and 2019 were primarily related to the sales of various equity investments.

Other, net


	Years ended December 31
(In millions)	2020		2019
Other, net	$	13	$	(365)

The change in net Other income in 2020 as compared to net Other expense in 2019 was primarily comprised of:

•$359 million U.S pension settlement loss in 2019 (see Note 8 of our consolidated financial statements in “Part II. Item 8. Financial Statements and Supplementary Data” of this Form 10-K for further information);

•$25 million gain on derivatives in 2020 compared to an $8 million loss on derivatives in 2019;

•$4 million of investment impairments in 2020 compared to $18 million in 2019;

•partially offset by $44 million of foreign currency losses in 2020 compared to $22 million in 2019; and

•$56 million of net losses from repurchases of long term debt in 2020 as compared to a loss of $46 million in 2019 (see Note 5 of our consolidated financial statements in “Part II. Item 8. Financial Statements and Supplementary Data” of this Form 10-K for further information).

Effective Tax Rate


	Years ended December 31
(In millions)	2020		2019
Income tax expense	$	221	$	130

Income tax expense increased by $91 million in 2020 compared to 2019, for an effective tax rate of 18.8%, which is lower than the current U.S. federal statutory rate of 21% primarily due to:

•$48 million of benefits due to the recognition of excess tax benefits on share-based compensation; and

•$28 million of benefits due to the recognition of increased prior and current R&D tax credits.

Our effective tax rate in 2019 was 13.0%, which is lower than the current U.S. federal statutory rate of 21% primarily related to:

•a $77 million benefit due to the partial release of a valuation allowance to our U.S. foreign tax credit carryforward (see Note 7 of our consolidated financial statements in “Part II. Item 8. Financial Statements and Supplementary Data” of this Form 10-K for further information); and

•$27 million of benefits due to the recognition of excess tax benefits on share-based compensation.

Results of Operations—2019 Compared to 2018

Net Sales


	Years ended December 31
(In millions)	2019		2018		% Change
Net sales from Products and Systems Integration	$	5,329	$	5,100	5	%
Net sales from Software and Services	2,558		2,243		14	%
Net sales	$	7,887	$	7,343	7	%

The Products and Systems Integration segment’s net sales represented 68% of our consolidated net sales in 2019, compared to 69% in 2018. The Software and Services segment’s net sales represented 32% of our consolidated net sales in 2019, compared to 31% in 2018.

Net sales increased by $544 million, or 7%, in 2019 compared to 2018. Net sales in the Software and Services segment increased approximately 14%, which was comprised of a 22% increase in the North America region and a 6% sales increase in the International region. Net sales in the Products and Systems Integration segment increased approximately 5%, which is comprised of a 10% increase in the North America region partially offset by an 8% decrease in the International region. The increase in net sales included:

•an increase in the Products and Systems Integration segment, inclusive of $157 million of revenue from acquisitions, driven by growth in LMR and Video Security and Analytics;

•growth in the Software and Services segment, inclusive of $155 million of revenue from acquisitions, driven by an increase in Video Security and Analytics, Command Center Software, and LMR services due to strong demand in the North America region; and

•partially offset by $113 million from unfavorable currency rates.

Regional results include:

•13% increase in the North America region, inclusive of revenue from acquisitions, across Video Security and Analytics, LMR, and Command Center Software within both the Products and Systems Integration and the Software and Services segments; and

•3% decline in the International region, inclusive of revenue from acquisitions, driven by declines in public safety LMR and PCR, partially offset by growth in Video Security and Analytics and Command Center Software.

Products and Systems Integration

The 5% growth in the Products and Systems Integration segment was driven by:

•57% growth in Video Security and Analytics, inclusive of acquisitions, driven by growth in the North America and International regions;

•1% growth in LMR, inclusive of acquisitions, driven by growth in the North America region and partially offset by a decline in the International region, which had two large system deployments completed in the Middle East and Africa in 2018; and

•partially offset by $54 million foreign currency headwinds.

Software and Services

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

•223% growth in Video Security and Analytics, inclusive of acquisitions, driven by both the North America and International regions;

•26% growth in Command Center Software, inclusive of acquisitions, driven by both the North America and International regions;

•4% growth in LMR services, inclusive of acquisitions, primarily driven by the North America region; and

•partially offset by $59 million of foreign currency headwinds.

Gross Margin


	Years ended December 31
(In millions)	2019		2018		% Change
Gross margin	$	3,931	$	3,480	13	%

Gross margin was 49.8% of net sales in 2019 and 47.4% of net sales in 2018. The increase was driven by:

•higher margins in the Products and Systems Integration segment primarily driven by a favorable mix in LMR devices; and

•higher margins within the Software and Services segment primarily driven by higher software sales, inclusive of acquisitions.

Selling, General and Administrative Expenses


	Years ended December 31
(In millions)	2019		2018		% Change
Selling, general and administrative expenses	$	1,403	$	1,254	12	%

SG&A expenses increased 12% in 2019 compared to 2018. SG&A expenses were 17.8% of net sales in 2019 compared to 17.1% of net sales in 2018. The increase in SG&A expenses was primarily due to increased expenses associated with acquired businesses, including the deployment of additional sales resources to support Video Security and Analytics growth initiatives.

Research and Development Expenditures


	Years ended December 31
(In millions)	2019		2018		% Change
Research and development expenditures	$	687	$	637	8	%

R&D expenditures increased 8% in 2019 compared to 2018. R&D expenditures were 8.7% of net sales in each of 2019 and 2018. The increase in R&D expenses