Motorola Solutions Inc. (MSI): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
Motorola Solutions posted dismal third-quarter 2014 financial results with both the top and the bottom line missing the Zacks Consensus Estimate. Also, the company continues to face declining demand across different geographical regions. Moreover, phasing out of the iDEN network and reduced government expenditure will act as further headwinds for the company. The company expects revenues in fourth-quarter to drop 1% to 3% year over year. Meanwhile, higher number of contract wins, divestiture of non-profitable segments, launch of new devices and a higher cost reduction target will boost margins and revenues going forward. Moreover, the authorization of a $5 billion share buyback plan will drive shareholders' wealth. Based on these positives, we upgrade our recommendation on Motorola Solutions from Underperform to Neutral.

Overview:

Motorola Solutions Inc. (MSI), based in Schaumburg, IL, is a leading communications equipment manufacturer, and has strong market positions in bar code scanning, wireless infrastructure gear, and government communications. The company was formed following the split-off from its parent company Motorola Inc. on Jan 4, 2011. Motorola Solutions generally provides services and solutions to the government segments and public safety programs together with large enterprises and wireless infrastructure service providers. It develops and services both analog and digital two-way radio, voice & data communications products and systems for private networks, wireless broadband systems and end-to-end enterprise mobility solutions to a wide range of enterprise markets. It also provides customized, fully integrated communication and information systems for mission-critical customers including government and public safety agencies.

Motorola Solutions reports in two segments:

Government Segment: This segment includes sales from two-way radios and public safety systems. Service revenues in the government segment are related to designing, installation, maintenance and optimization of equipment for public safety networks. The segment accounted for nearly 69.3% of the company's total revenue in fiscal 2013, primarily generated from the sale of public safety products to various state governments.


Enterprise Segment: This segment includes sales of enterprise mobile computing devices, scanning devices, wireless broadband system 1.4, RFID data capture solutions and iDEN infrastructure. Service revenues in the Enterprise segment are primarily derived from maintenance contracts associated with the above-mentioned products. The segment accounted for the remaining 30.7% of the company's total revenue in fiscal 2013, which came from the sale of products following the acquisition of Symbol Technologies.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



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