Motorola Solutions cuts sales forecast second time in three months

Reuters News
Posted: Jul 24, 2013 7:25 AM
Motorola Solutions cuts sales forecast second time in three months

By Neha Alawadhi

(Reuters) - Motorola Solutions Inc, known for its walkie-talkies, cut its 2013 sales forecast for the second time in three months and said business customers continued to delay purchases.

Shares of the company, which depends on government spending for most of its revenue, fell as much as 10 percent on the New York Stock Exchange in heavy trading on Wednesday.

Motorola Inc spun off its cellphone arm into Motorola Mobility in January 2011 and renamed itself Motorola Solutions. Motorola Mobility was later sold to Google Inc.

Revenue from Motorola Solution's enterprise business is expected to fall by a low-single digit percentage, Chief Financial Officer Ed Fitzpatrick said on a post-earnings conference call.

Enterprise business revenue, which makes up about a third of total revenue, declined for the sixth straight quarter in the three months ended June 29.

"This demand environment we face in enterprise is not unique to us, as the broader industry is impacted by customers carefully managing their IT budgets in the face of macro uncertainty," Chief Executive Greg Brown said on the call.

MKM Partners analyst Michael Genovese said Motorola Solutions' main problem was not that businesses spending was falling but that it was taking too long to develop and launch new products.

"That's probably causing some slowdown in decision making and purchasing," said Genovese, who expects the company to cut its 2013 outlook again in the next quarter.

He cited as an example the delay in launching Microsoft Windows 8-based products from the second half of this year to the first of 2014.

Motorola Solutions' enterprise business makes and sells rugged handheld devices, tablets and security products.

The company said in April its large customers were delaying projects as they contemplate a transition to Android or Windows 8 operating systems, but it expected a recovery in the second half of the year.

Motorola Solutions said on Wednesday that it now expects 2013 revenue to remain unchanged or rise by up to 1 percent. It had forecast a revenue growth of 3-4 percent in April.

Wednesday's revised forecast implies full-year revenue $8.69 billion-$8.77 billion.

Analysts on average were expecting revenue of $8.93 billion, according to Thomson Reuters I/B/E/S.

Motorola Solutions expects its government business, which accounts for nearly two-thirds of its revenue, to grow by low-single digit percentage rate this year.

The company, which dominates the two-way radio market with its land-mobile-radio systems and walkie-talkies, said enterprise sales fell 5 percent in the second quarter to $656 million, dragging down overall revenue by 2 percent to $2.10 billion.

Net income from continuing operations rose to $258 million, or 94 cents per share, from $177 million, or 60 cents per share, a year earlier. Excluding one-time items, the company earned $1.12 per share from continuing operations.

Analysts had estimated earnings of $1.04 per share on revenue of $2.13 billion.

The company authorized a $2 billion share repurchase program in addition to the $5 billion currently in place.

Motorola Solutions shares were down 7.7 percent at $55.39 in afternoon trade. More than 910,000 shares had been traded by 1344 ET.

The stock rose 7 percent in the last three months, excluding Wednesday's trading.

(Reporting by Neha Alawadhi in Bangalore; Editing by Sreejiraj Eluvangal and Joyjeet Das)