Motorola Solutions Inc. (MSI) has moved one step forward to divest its Enterprise Business segment (excluding iDEN network). On Apr 15, 2014, Motorola had entered into an agreement with Zebra Technologies Corp. (ZBRA) to sell its Enterprise Business for $3.5 billion in cash.
Yesterday, Zebra Technologies announced that the stipulated waiting period under the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976 has expired related to this transaction. The deal is now expected to close by the end of 2014.
The Enterprise Business segment of Motorola offersmobile computing devices, scanning devices, wireless broadband systems, RFID data capture solutions and iDEN infrastructure to large business houses. On the other hand, Zebra Technologies is a leading barcode printer maker.
In fiscal 2013, the Enterprise Business segment generated $2.7 billion in revenues, down 2% year over year and adjusted operating income was $358 million, down 9.4% year over year.
During the last couple of years, the Enterprises Business segment of Motorola has been reeling under global macroeconomic fluctuations. Uncertainties surrounding future business prospects have prompted large enterprises to postpone capital spending or place small orders instead of large ones.
Several business verticals of this division have been severely impacted by such significant spending cuts. Motorola happens to be the largest manufacturer of barcode readers and small rugged mobile computers.
We believe that the divestment of the Enterprise Business segment will generate strong cash flow for Motorola and will allow it to focus on its core public safety businesses. The company has won several lucrative contracts from various municipalities in the U.S. Moreover, the U.S. government’s decision to install a nationwide wireless network for public safety may become a long-run revenue driver for the company.
Other Stocks to Consider
Motorola Solutions currently carries a Zacks Rank #3 (Hold). Other better-ranked stocks in the wireless equipment industry include Comtech telecommunications Corp. (CMTL) and InterDigital Inc. (IDCC). Both these stocks sport a Zacks Rank #1 (Strong Buy).
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