Motorola Solutions Remains Neutral


We reiterate our long-term Neutral recommendation on Motorola Solutions Inc. (MSI). The company posted mixed financial results for the second quarter of 2013. While net income surpassed the Zacks Consensus Estimate, total revenue fell below the same. Motorola Solutions currently has a Zacks Rank #3 (Hold).  

Why the Reiteration?

Motorola Solutions is the largest developer of public safety products commanding nearly half of the total market share in the U.S. The company is also the largest manufacturer of barcode readers and small rugged mobile computers.

Motorola Solutions’ business strategy to focus only on stable government enterprises will help the company to maintain its solid performance in the near future. In addition to the U.S., the Middle East provides significant market potential.

Motorola Solutions has entered into an agreement with Verizon Wireless to install a standard-based public safety broadband network for mission-critical operations leveraging on the nationwide LTE network of Verizon. This solution will offer public safety agencies real-time management and control, enhance nationwide roaming, while sharing existing mobile broadband sites.

Verizon Wireless is a joint venture between Verizon Communications Inc. (VZ) and Vodafone Group plc. (VOD). Moreover, the two companies also decided to collaborate to enhance machine-to-machine (M2M) connections, while delivering vertical enterprise solutions with wireless data and voice.

Meanwhile, a major near-term concern for Motorola Solutions is its top-line fluctuations in the Enterprise segment. Management has reduced its previous revenue guidance for full-year 2013.Motorola Solutions has delayed its next-generation Microsoft Corp. (MSFT)-developed Windows 8-based products launch from the second half of 2013 to the first half of 2014.

Therefore, considering all the merits and demerits, we believe Motorola Solutions is currently fairly valued.  

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