Motorola Reports Results, Predicts No FirstNet Revenue in 2017 or 2018
Friday, May 05, 2017 | Comments

Motorola Solutions executives reported earnings results for the first quarter of 2017 and discussed the future landscape with public-safety Long Term Evolution (LTE).

Sales increased 7 percent in total, and 3 percent excluding Airwave. The increase reflects growth in the Europe, Middle East and Africa (EMEA) region of 27 percent and the Americas of 3 percent compared with the 2016 first quarter. Asia-Pacific was flat. Product segment sales were up $1 million. The services segment grew 18 percent, including $58 million of incremental Airwave revenue in the United Kingdom. Excluding Airwave, services grew 7 percent.

In discussing its role in the First Responder Network Authority (FirstNet) contract, Greg Brown, chairman and CEO of Motorola Solutions, said the company is not expecting FirstNet revenue in 2017 or 2018. “It’s a bit too early to guide or speculate,” he said.

When asked about Motorola’s role in FirstNet, Brown said future interoperability with LMR is key. “We’re excited because this opportunity is all incremental to our core business,” he said. “It could include software and mobile applications; it could include services. I think the most critical piece will be the interoperability with the FirstNet network to interconnect and interoperate with our installed base of land mobile radio systems throughout the U.S., and it could include next-generation devices.”

Jack Molloy, executive vice president, worldwide sales, said the company’s device business remains solid. “We’ve invested from a go-to-market perspective in sales analytics,” he said. “We have a real good sense of where our legacy equipment is, and we’ve done a really good job in terms of analytics in getting after our legacy customer base, as well as the competitive customer base to move to them” to next-generation devices.

Brown also commented on devices, saying that public-safety officials wear two devices on their belts, a mission-critical communications radio and a next-generation device. “We see that scenario replicating in which case that second new device is a greenfield opportunity for us,” he said. “If those devices merge over time … we’re better positioned than anybody … to provide the integrated device. But if that happens, I see that as a long way off.”

Looking ahead to mission-critical push-to-talk (MCPTT) and when that might replace LMR, Bruce Brda, executive vice president, products and services, said MCPTT standards need to be enhanced. He noted the problems around direct mode operation (DMO) for Long Term Evolution (LTE). “That doesn't exist in LTE standards today,” he Brda. “There’s quite a long process that needs to take place before you could ever get to true mission-critical public-safety grade LTE for push-to-talk services.”

Motorola’s GAAP operating margin was 13.7 percent of sales, compared with 8.4 percent in the year-ago quarter. The improvement reflects higher sales and gross margin.

The company generated $142 million in operating cash, an increase of $129 million from the year-ago quarter on higher revenue and earnings. The first quarter also included a $52 million legal settlement. Free cash flow was up $112 million to $74 million, driven by higher revenue and earnings.

The company ended the quarter with cash and cash equivalents of $829 million and a net debt position of about $3.6 billion. The company repurchased about $178 million of its common stock, paid about $77 million in cash dividends, and invested $55 million in acquisitions.

The company ended the quarter with $8.5 billion of backlog, up $129 million from the year-ago quarter. Products backlog is up $285 million, while services backlog is down $156 million, driven by a reduction of about $650 million in Airwave backlog during the prior 12 months.

Motorola said its strategic wins included $80 million to upgrade and manage a nationwide TETRA network in Europe, $38 million for managed services with Victoria Police in Australia, $34 million for a Project 25 (P25) network with multiyear services in California and a $10 million P25 system with Central Louisiana Electric Co. (CLECO). The company had two $10 million combined P25 wins in Argentina. The company also had double-digit growth for command center software driven by Spillman, Emergency CallWorks and PremierOne solutions.

“Q1 was a strong quarter and an excellent start to the year,” said Brown. “I’m very pleased with our momentum going forward.”

In the second quarter, Motorola Solutions expects revenue growth of 2 to 3 percent compared with the second quarter of 2016. For the full year, the company now expects revenue growth of about 2 percent versus the prior outlook of 1 to 2 percent.

Motorola executives said the incremental costs of its litigation against Hytera Communications, have been built into the guidance.

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