Motorola Solutions makes returning cash a priority
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Motorola Solutions CEO Greg Brown said the company is weighing the best way to invest its $3.55 billion in net cash.
Motorola Solutions Inc., the maker of bar-code scanners, plans to make returning cash to investors a priority after selling its networks unit and shoring up its balance sheet, Chief Executive Officer Greg Brown said.
"We prioritized the establishment of investment-grade rating with all three agencies, we've done that; we prioritized the completion of the networks business, we've done that," Brown, 50, said in an interview this week. "The next priority is the opportunity to return capital to shareholders."
Motorola Solutions, which spun off its mobile-phone unit in January, says it cut its debt by $540 million this year and generated $975 million from the sale of the networks business to Nokia Siemens Networks, completed in April. Brown said he is now weighing how to best use the company's $3.55 billion in net cash, whether it's giving money back to shareholders through a dividend or share buyback or buying companies.
"We'll always look at that balance between returning capital to shareholders or acquiring," he said. Returning cash to shareholders "is both a priority and an opportunity. We're making the final determination now and stay tuned."
Motorola Solutions, based in the Chicago suburb of Schaumburg, Illinois, has $2.07 billion in debt, including $600 million that comes due in November, according to Bloomberg data.
Brown said that the January spinoff of Motorola Mobility Holdings Inc., run by his former co-CEO Sanjay Jha, has given investors the chance to recognize the more focused nature of the new business: building walkie-talkies and other communications equipment for emergency workers and radio-powered bar-code scanners for companies.
The stock has outperformed the Standard & Poor's 500 index since the Jan. 4 split, rising 9.4 percent to the S&P's 3.4 percent gain before today. In that time, Motorola Mobility dropped 36 percent. Motorola Solutions rose 88 cents to $44.38 at 12:02 p.m. on the New York Stock Exchange.
"I'm really pleased that the investment community has understood the Motorola Solutions story," said Brown, who joined Motorola in 2003. "We've had a great six months, but that's just one inning."
Motorola Solutions' sales to businesses jumped 14 percent to $695 million last quarter while sales of communications gear to government authorities climbed 5 percent to $1.2 billion.
To focus on the faster-growing enterprise market, Motorola Solutions plans to sell a device that runs on Google Inc.'s Android software, part of a bid to help retailers such as Wal- Mart Stores Inc. get more merchandise into consumers' hands. The "enterprise mobile-computing product" will likely start selling by the end of this year or early 2012, Brown said.
"In the retail segment often times the consumers are more informed than the store-operations people" because of their ability to locate product and pricing information faster on their smartphones, and Motorola wants to rectify that, he said.
The move reflects the growing popularity of Android in wireless computing, and signals the software's expansion to enterprises from the consumer market. Motorola Solutions devices and the developers who build applications for them are currently "100 percent" dependent on Microsoft Corp.'s Windows software, Brown said. The Motorola Mobility spinoff has revived sales by building a new range of Android smartphones like the Droid that resonate with consumers.
"If there are hardware or software combinations that allow us to expand and reach a dimension or segment of the market we don't serve today, we'll certainly entertain doing that," Brown said.
Motorola Solutions is spending $1 billion or more a year on research and development for new products it can sell to government agencies, freight delivery customers like FedEx Corp., and retailers like Wal-Mart and Costco Wholesale Corp.
"There's a lot of move towards the Android operating system," Gene Delaney, executive vice president, product and business operations, said in a separate interview. While Motorola's approach is to be operating-system "agnostic," the company is making "early software investments internally" to prepare for Android, he said. He declined to say how much money or resources Motorola is putting into that.
Consumers with Android phones can tap more than 200,000 different applications available in the Android market that allow them to buy music, games and browse online shopping catalogs. Android's share of global smartphone sales more than tripled in the first quarter to 36 percent, the fastest growth of any smartphone platform, according to Gartner Inc.
Delaney said improving the ability of store clerks to get shoppers the merchandise they need has room for improvement.
"We've not even scratched the surface in the enterprise space of connecting to the consumer," he said. "More and more of them have smartphones and are coming into stores much smarter because they've done research on their smartphones. Clearly there's an opportunity for enterprises to connect in a much closer relationship with consumers."
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