Hype Over Motorola Solutions Inc (NYSE:MSI) ’s $3.45B Zebra Deal Lets First Quarter Results Slide Quietly – ZBRA, GOOG


Dallas, Texas 04/16/2014 (FINANCIALSTRENDS) –  Motorola Solutions Inc (NYSE:MSI) announced the sale of its Enterprise Business to Zebra Technologies Corp. (NASDAQ:ZBRA) for $3.45 billion in an all-cash deal. The deal attracted a lot of attention, and allowed Motorola to quietly slide in a not-so-impressive preliminary earnings report for the first quarter.

Zebra Gets Stripes Over Motorola Acquisition

The acquisition of Motorola’s Enterprise Business by Zebra will be funded by $200 million cash in hand and $3.25 billion in new debt which Zebra plans to take on. The transaction was approved by the boards of both companies, and is expected to be completed by the end of the year.

It may be a smart move for Motorola, which is getting $3.45 billion in cash. It’s a big boost after the disappointment of its Mobility phone unit being discarded by Google Inc (NASDAQ:GOOG) and picked up by Lenovo Group Limited (ADR) (OTCMKTS:LNVGY) for $2.91 billion. That didn’t bode well for Motorola, but this sale to Zebra looks much better.

For Zebra, Motorola’s Enterprise Business is certainly a mouthful. ZBRA tanked hard after news of the acquisition broke. Judging by the market reaction, it’s safe to say that investors are concerned about the huge amount of debt the company is taking on. Whether it works out remains to be seen, but they’re certainly getting value for money at the moment because Motorola’s Enterprise business clocked 2013 pro-forma sales of approximately $2.5 billion, not including iDEN product sales.

The Earnings Report

Motorola, meanwhile, quietly slid in their preliminary earnings report for the first quarter. GAAP operating earnings were pegged at $170 million, which is 9.4% of sales. The company’s guidance is for $0.49 in GAAP earnings per share for the quarter.

Non-GAAP operating earnings in the first quarter were pegged at $212 million, which is 11.8% of sales. Guidance for non-GAAP earnings per share for the quarter was $0.50.

Greg Brown, chairman and CEO of Motorola Solutions, said that, “Revenues in the quarter did not meet our expectations due primarily to lower than expected volumes in our North America Government business in addition to a push out of certain Enterprise orders late in the quarter.”