--Motorola Solutions second-quarter profit drops from year-ago
gain on asset sale
--Government growth drives sales growth of 8.3%
--Enterprise customers remain cautious
--Foreign-exchange effects cut revenue
(Adds information throughout.)
By Thomas Gryta
Motorola Solutions Inc.'s (MSI) second-quarter net income
slumped as the year-ago quarter included a large gain from the sale
of its networks business.
The provider of public-safety radios, handheld scanners and
telecommunications-network equipment reported overall revenue
growth of 8.3%, driven by a strong performance in its core
government business. Motorola Solutions also raised its dividend
and boosted its share-buyback program.
Shares recently rose 3.6% to $46.93. The Schaumburg, Ill.,
company, however, noted that its smaller enterprise segment
struggled in the quarter with macroeconomic headwinds and
unfavorable foreign-exchange effects from Europe.
Motorola Solutions was created last year in the split of
Motorola Inc. The spinoff put the higher-profile mobile-devices and
TV-set-top-box operations into Motorola Mobility Holdings Inc.,
which was then acquired by Google Inc. (GOOG) in May for $12.5
billion.
In an interview, Motorola Solutions Chief Executive Greg Brown
said the company's business customers in both the U.S. and Europe
remain guarded in how they are spending in the current environment.
He stressed the company sells equipment and services that are
"mission critical" so they are typically hurt less by cutbacks in
discretionary spending.
"Enterprise customers in Europe are a little more cautious.
Customers in the U.S. will spend on technology that lowers costs or
allows them to be more productive," he said. "In general, the
expectation for the U.S. economy is cautious, measured and for slow
growth in the second half."
In the three months ended June 30, the company said net income
fell to $182 million from $349 million a year earlier. The year-ago
results were boosted by a gain from selling its networks business
to Nokia Siemens Networks for $975 million in April 2011. Per-share
earnings dropped to 63 cents from $1.02, although the company's
share count had fallen 15% from share repurchases.
Earnings from continuing operations rose to $177 million from
$50 million. Excluding all items, per-share earnings were 70 cents,
reaching the high end of the company's April prediction of 65 cents
to 70 cents. Analysts had expected 69 cents a share, according to
Thomson Reuters.
Revenue rose to $2.15 billion, edging out a Wall Street average
projection of $2.11 billion.
Foreign-exchange effects, mostly from Europe, cut revenue by
about $30 million in the second quarter, and the company expects a
similar figure in the next quarter.
Motorola Solutions now sees full-year revenue growing 5% to 6%,
a widening of its previous view of 5% growth. For the third
quarter, the company expects earnings from continuing operations of
69 cents to 74 cents a share on sales growth of 3%. Analysts
currently expect earnings of 78 cents a share on revenue growth of
4.4%.
Many of the company's products use Microsoft Corp. (MSFT)
software, and Mr. Brown said he is "anxiously enthusiastic" about
the coming launch of Windows Phone 8. He said he expects to work
with Microsoft when the software becomes available in the
autumn.
Government sales in the second quarter rose 13.6% to $1.46
billion, and operating margin grew to 13.5% from 8.2% in the
business. The company cited sales growth and cost efficiency for
the higher profitability. Segment sales should grow in the "upper
single digits" on a percentage basis in the next quarter, Mr. Brown
said, although the company continues to "operate under the
constraints of austerity" from world governments.
Enterprise sales dropped slightly--to $689 million from $700
million--mostly because of pressure from Europe. For the third
quarter, enterprise growth is expected to be "relatively flat" as
overseas pressures continue and the decline of its legacy iDEN
network business continues.
The company boosted its share-buyback program by $2 billion,
adding to its previous $3 billion authorization that has about $100
million left from repurchases in the last 12 months.
Motorola Solutions also raised its dividend 18%, to 26 cents a
share.
--Ben Fox Rubin contributed to this article.
Write to Thomas Gryta at thomas.gryta@dowjones.com.
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