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Motorola, Inc. (MOT)

Financial Analyst Meeting

November 15, 2010 9:00 AM ET


Tim Long – BMO

Mark Sue – RBC

Matt Hoffman – Cowen

Deepak – Credit Suisse

Brian Modoff – Deutsche Bank

Tavis McCourt – Morgan Keegan

Richard Kramer – Arete

Rod Hall – JPMorgan

Jim Suva – Citigroup

Jeff Kvaal – Barclays

Mark McKechnie – Gleacher & Company

Hendi [ph]

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Richard Pallady [ph] – Insurance Cowest [ph]

Matt Thornton – Avian Securities



[Presentation can be found here:


Question-and-Answer Session

Greg Brown

So let’s open it up for questions and we’ll start right here in the – okay, on number four, sorry.

Tim Long – BMO

Can you hear me?

Greg Brown


Tim Long – BMO

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Previous Statements by MOT
» Motorola Solutions Financial Analyst Meeting – Prepared Remarks Transcript
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Okay, yes, Tim Long at BMO. Could you just talk a little bit start with the Government business here, give us a little sense of that 65%? How should we look at – how does that split out Federal, state, local? And obviously there was a little bit of a firm drop in tech last week with comments about some issues at state and local level, obviously different businesses in what Cisco sees. But could you just give us your view on why it’s different? Do you see the same things? Or any perspective on that would be great.

Greg Brown

So two things before I turn it over to Mark Moon for commentary on the distribution between Federal and state and local. But again, I referenced the fact that in the third quarter we grew 1.5%. You can compare and contrast that to other providers and other things that some other folks talked about in terms of what they see.

I think the second point in what we’re trying to impart on you this morning is that, yes, the Government markets are challenged, but we have city, county, state, US Federal, international, and that we have a pretty diversified mix of “Government”, it’s not all the same.

The other thing I’d point out to you is this is a longer sales cycle business, it’s a long cycle implementation business. So if you look as a composite at Government, everybody is in a different buying cycle or implementation cycle of these respective systems. So one state might be 30% of the way through of grants they have received and they’re implementing a multiyear process, a multiyear system irrespective of some of the other exogenous factors around them.

So I think that this business is a little different, the resiliency of our Solutions are different, and the criticality where these products and services sit in the food chain, security, statewide interoperability, and mission-critical public safety, it doesn’t mean they’re not totally immune, but they move higher up in the food chain of criticality which is why I think we’ve been able to grow at a reasonable level of consistency. And Fitzpatrick showed you that even in the core, this business even through Armageddon a few years ago and economic times has been a 6% compounded annual growth rate.

In terms of distribution –

Mark Moon

Yes, I think, the first comment would be when you talk about the Government segment as we did, I think it’s important to remind you that we’re talking about product portfolios that we’ve classified as a Government section, primarily radio products that are in there as well as the services associated with that.

So immediately, some of those radio products in Government segments are being sold to utilities or other kinds and users. But to answer your question directly, from a Federal Government perspective, our US Federal Government is about 8% of our business, so the overwhelming majority of the rest of that Government business, if you will, is primarily state and local – if you think of state and local being states and counties here.

Internationally we also – well it’s not US Federal Government is part of that 8%, we feel nationwide networks as well. So, but again, to what you would call there as a local or Federal Government, so the overwhelming majority of the 65% is primarily to what you would classify is non-US Federal Government.

Greg Brown

Right here.

Mark Sue – RBC

Thank you. It’s Mark Sue from RBC.

Greg Brown

Hi Mark.

Mark Sue – RBC

Just within the Government, do you think the – all these special assessments and Federal grants actually provided a lot of the tailwind for you as it will go down to the state level? And what percent or component of that should we rely on as you try to target your 5% to 8% long-term growth rate? And then, separately Greg, as we think long-term what do you think might happen first? You have 50% digital conversion or a nice handsome 2% dividend.

Greg Brown

So let me take the second one first. You’ve seen the way we’re modeling the business longer term. It’s important – again, we’re targeting an investment grade rating at launch. So what we’re focused on and what I am focused on Mark is launch and list this firm. Launch and list the firm.

There is a reason we’re investment grade, it’s important to our customer base for continuities and stability as they look to do business with the government provider. And so, overtime, as we generate more cash and as Fitzpatrick talked about moving more toward an optimal capital structure what does that mean.

He referenced the fact that debt to EBITDA is closer to 3 at the moment. We’d like to get to 2 to 2.5. As we move towards that and make progress, we’ll give full consideration to returning capital to the shareholder including full consideration for some type of dividend at some point in time.

Mark Moon

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