Motorola Solutions Executive Touts Continued Services Growth
Tuesday, December 06, 2016 | Comments

With $131 million during the third quarter attributed to last December’s acquisition of U.K. TETRA operator Airwave, Motorola Solutions Executive Vice President and Chief Financial Officer (CFO) Gino Bonanotte said during a presentation hosted by Credit Suisse Nov. 30 that he’s pleased with the 8 percent increase in overall sales for the third quarter. Motorola Solutions reported $1.5 billion in total revenue during the three months.

He said incremental sales revenue has fluctuated during the quarter because of the changing value of the pound since the British Exit vote in June; however, Motorola executives expect continued sales increases from Airwave, Bonanotte said.

The comments follow similar predictions from Bonanotte last year. In 2015, he anticipated the services segment to drive higher revenue growth.

Compared with the fourth quarter of 2015, the company’s business outlook projects 9 to 10 percent full revenue growth for 2016’s fourth quarter, including nearly $120 million in revenue from Airwave. Non-GAAP earnings per share from continued operations could be in the range of $1.82 to $1.87 per share.

“The acquisition is performing exactly as expected, and revenue has been contracted into 2020,” Bonanotte said. “The only change has been the movement in the pound and the cost structure is all pound, but we continue to believe that LTE (Long Term Evolution) is incremental to LMR, and we are very pleased with the performance of this acquisition.”

The company still anticipates single-digit growth for the fourth quarter with help from services, up 23 percent in the third quarter including Airwave. To improve its command center software portfolio and further increase services’ revenue, Motorola purchased CAD and records management system (RMS) software provider Spillman Technologies in September.

“As we think of acquisitions, and this really hasn’t changed, the initial discussion is always in managed and support services, specifically public-safety communications,” Bonanotte said. “Opportunities in management services, i.e. Airwave, Spillman, continue to be our priority as we’ve worked long and hard to get a singularly focused company, and there’s no intention to add another leg to the stool.”

He said Motorola’s growth is supported by managed and support services, making up 40 percent of the revenue from all services in the third quarter.

“When we think about growth in our markets, we view MSI business into that platform with management support systems, devices, infrastructure and software …” he said. “What drives business is use cases and accountability around drivers of growth management support systems based on complexities and our ability to provide to our customers, as well as devices, infrastructure, software and our command center.”

With the approaching request for proposals (RFP) award by the U.S. First Responder Network Authority (FirstNet), Bonanotte said that any movement to deploy a nationwide public-safety broadband network (NPSBN) is beneficial to the company and its customers, and that clarity involving Motorola’s scope will come after the award.

As for the U.K Emergency Services Network (ESN), Motorola won the Lot 2 contract for user services in the U.K nationwide public-safety LTE network for more than 300,000 emergency and public-safety officials from more than 300 agencies.

“I’m hearing in the U.K. concerns from users about coverage and how it may impact the date, but we’re on track to deliver what we need to deliver,” Bonanotte said. “It’s important to note it’s part of the approval process in the Home Office to approve any acquisitions … Some of ESN is a combination of carrier LTE and services, and software we provide is on top of that. We think we have a solution regardless of how customers want to apply it.”

The Motorola executive said international growth during 2017 would differ by geographic regions, with many industrialized economies thriving in public safety, while other economies are not as mature in their public-safety deployments.

“A lot of the (business) drivers are essentially the same (globally) as some in the U.S., and there is the ability for maturity and to move up a bit,” he said.

With the U.S. presidential administration change next year, Bonanotte said the impact on public safety should generally be positive, as public safety has been supported by both Republican and Democrat administrations in the past. Infrastructure is sorely needed in the U.S. because it drives growth in vertical markets.

Recent sales force changes included a $2.1 million increase of backlog in managed support services driven by the United States, Bonanotte said. Other changes in the third quarter reflected a cost reduction in research and development (R&D) through staffing and personnel to make greater use of resources.

‘We think there’s always opportunity to move resources and tweak costs,” Bonanotte said. “Through 2012 and on into 2017, $700 million has been taken out (from R&D), a cost reduction structural in nature, and as growth continues it will return … We certainly don’t think R&D has been compromised.”

In addition to services, he expects single-digit growth for the fourth quarter and 2017, including multiyear services, earnings per share, revenue, core and software command and control. With the sizeable acquisition in Airwave and an increase of 15 percent per dividend during the third quarter, Motorola presumes its shares to be a worthy investment for shareholders, Bonanotte said.

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