Motorola closes Psion acquisition
The move will help the telecom equipment provider expand globally and bolster its enterprise portfolio of handheld terminals.
Psion has operations in Europe, the U.S., Asia, Latin America and the Middle East, and it sells its products in over 80 countries. Not only does the move help Motorola Solutions strengthen its enterprise mobile-computing portfolio of rugged handheld terminals, but also gives it an opportunity to expand its presence worldwide. At a time when government spending around the world is taking a hit due to ongoing macroeconomic concerns, Motorola is looking to diversify away from its government business with this acquisition.
Government spending may take a hit
Motorola Solutions derives most of its value from government customers who contribute more than 65% to its total revenues as of 2011. This puts a major part of its revenues at risk if the ongoing talks to reduce fiscal deficits across the world result in widespread government spending cuts.
However, Motorola Solutions participates in the safer and more stable public safety market. While government spending may be cut due to the ongoing concerns, public safety will be among the less likely areas to take a hit as it figures very high on most governments' priority lists. Still, there could be a slight impact of the spending cuts on government revenues, with the risk of a bigger hit if the macroeconomic conditions worsen.
Boost in enterprise revenues
Motorola would therefore be looking to mitigate the risk by increasing its enterprise focus. Revenues from enterprise customers may account for only about a third of its total revenues currently, but they are growing at a rate much higher than government revenues. While government revenues from Motorola have grown at a 5% to 6% clip in the last two years, enterprise revenues have grown at a rate of more than 10%.
The increasing enterprise focus can also be gauged from the fact that the company has now made two enterprise-targeted acquisitions since its split from Motorola at the start of 2011. Prior to Psion, Motorola Solutions had acquired Rhombile in mid-2011-- a move that led to the launch of RhoElements, a framework that enables developers to design mobile applications for the enterprise, only about a quarter later.
In addition to making strategic acquisitions, Motorola has not shied away from divesting or selling its non-core assets. The company realigned its focus last year to concentrate mainly on high growth areas in enterprise with the sale of the majority of its network assets to Nokia Siemens Networks in early 2011. Further, the company has also divested its holdings in non-core wireless broadband units (Orthogon and Canopy), a business that represented only about $170 million in annual revenues in 2010 and was struggling to make profits.
Trefis' $51 price estimate for Motorola's stock is roughly in-line with the market.
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