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Motorola Solutions to Acquire Psion

Zacks Equity Research

Motorola Solutions Inc. (MSI), a leader in the lucrative U.S. Public Safety market, is planning to acquire Psion Plc for $200 million in cash. Per the deal, Motorola Solutions will make a premium offer of $1.36 per share to Psion. The deal is expected to close by the end of fiscal 2012, subject to regulatory approvals.

Psion Plc develops mobile handheld computers, which are mainly used for commercial and industrial purposes. It operates in 14 different countries and has served clients in more than 80 countries. Motorola Solutions believes that the acquisition of Psion will not only bolster its mobile computing and hardware portfolio but will also increase its presence in the international market, thereby accelerating top- and bottom-line growth.

Motorola’s business model remains compelling and we believe that the company will be able to maintain its current top-line growth going forward, primarily due to the critical nature of the public safety network in the U.S. and massive growth potential in the Middle East.  

Despite these positives, we believe that a slowdown in government expenditures due to budgetary pressures -- particularly at the state and local levels -- may significantly jeopardize the company’s overall financials as the company is heavily dependent on it. Moreover, Sprint Nextel Corporation (S), one of the company's largest customers, has decided to gradually phase out the iDEN network, thus adding to the negative pressures. We, thus, maintain our long-term Neutral recommendation on Motorola Solutions Inc.

Currently, Motorola Solutions Inc. has a Zacks #2 Rank, implying a short-term Buy rating.

Motorola Solutions Inc., based in Schaumburg, Illinois, is a leading communications equipment manufacturer, with a strong market position in bar code scanning, wireless infrastructure gear and government communications.

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