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June 7, 2010

Motorola's Enterprise Mobility Solutions (EMS) division is steadily growing and now the company is predicting a compounded annual growth rate of between 5 to 8 percent over the next few years, with opportunities to sell equipment and services into public-safety and vertical market enterprises.

As Motorola prepares to separate its wireless handset business and networks division into two separate companies in 2011, Cowen wireless equipment analyst Matt Hoffman said the research firm thinks the EMS business will be Motorola's largest unit in 2010.

Gene Delaney, president of Motorola's EMS division says “overall, investors often focus on the handset business with Motorola when they look at the stock. But with the changing fortunes in mobile devices business, our EMS division has become the central engine of Motorola, something we think investors will pay greater attention to as the company's two divisions split comes up in the first part of 2011.”

While last year was a down one for the EMS side of Motorola's sales, the unit still posted an operating income of $1 billion on revenues of $9 billion, even as sales dropped over 12.9 percent.

For the first quarter of 2010, Motorola reported a sales increase of 6 percent year over year to $1.7 billion and $271 million of operating income, up 25 percent compared to the year-ago period.

Speaking at Cowen.'s 38th Annual Technology and Telecom Conference, Delaney noted that Motorola's entrenchment in the public-safety sector is likely to earn it future business because the government sales cycle is long and Motorola equipment is deeply embedded into existing equipment.

He added “overall, backward compatibility is a much more important topic than it really sounds.”

“Technology continues to evolve all the time. Our products and our solutions become part of the way that our customers do their jobs, so as new technologies emerge in the marketplace you have to bring this legacy with you,” added Delaney.

Additionally, Motorola sees many opportunities ahead for its services business as well. The company has a NOC (Network Operation Center) at its Schaumberg, Illinois headquarters so it already monitors networks for public-safety agencies and enterprise users.

However, Motorola still thinks it can do more hosting services for municipalities, device management for the enterprise and other services and expects an uptick in that sector of the business in the second half of 2010 and for most of next year.

And while about 57.2 percent of Motorola's EMS business takes place in North America, the company is expanding its efforts globally, Delaney said, adding that a few years ago about 65 percent of Motorola's business took place in North America.

Motorola continued to invest in R&D last year and will do so going forward, Delaney said, noting that innovation and research are essential to Motorola's brand.

Delaney said the company is the market leader in government, retail, hospitality, transport and logistics sectors, with sales of $9.2 billion, $1.9 billion and $1.8 billion, respectively.

The company is strong in manufacturing ($1.7 billion), energy ($800 million) and wholesale ($500 million) segments. The equipment maker sees opportunities ahead in the telecom, healthcare, education and professional services markets.

Delaney added that the move to next-generation public-safety deployments, and increased video use, is a growth opportunity for the company.

Video applications are ideally suited for public-safety responders, Delaney explained. While there is plenty of video today used by emergency personnel, the opportunities ahead are immense. Video should enable police to enter a hostile situation aware of what is going on at the scene, while video could let a fireman see the fire before he confronts it.

“The area for video where we calibrate the growth is spectrum,” he said. In other words, public safety needs access to broadband spectrum to be able to deploy bandwidth-consuming video.

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Source: Motorola Inc.