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Why Motorola Solutions Expects a YoY Revenue Decline in 4Q15

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Key highlights from 3Q15

In 3Q15, Motorola Solutions (MSI) invested $50 million for its nationwide Project P25, a digital land mobile radio (P25) system for the state police force in northern Africa that covers almost 50 cities and more than 5,000 subscribers. The company also allocated approximately $45 million to complete the build-out and final phase of a multiyear, statewide network upgrade in the eastern United States.

The firm was also awarded a $24 million contract for a P25 system that provides a combined, inter-operable radio solution for the Texas cities of Mesquite, Garland, Rowlett, and Sachse—a contract covering nearly 400,000 people.

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Focus on innovation

To ensure long-term sustainable growth, Motorola is looking to focus on innovation, having already opened a multi-tenant network operations center in North America to support the managed services business segment. It has also strengthened “Smart Public Safety” analytics offerings by partnering with Wynyard Group on big data analysis to help customers solve crimes faster and more efficiently.

Future outlook

As seen in the above table, in 4Q15, Motorola expects its revenues to decline by 6–8% YoY (year-over-year) compared to 4Q14, assuming an unfavorable currency impact of $65 million. It expects its non-GAAP (generally accepted accounting principles) EPS (earnings per share) to land in the range of $1.45–$1.50.

For fiscal 2015, Motorola changed its outlook, expecting declines of 3% compared to 2014. This outlook translates to revenue growth of 1% in constant currency. The company still expects its non-GAAP EPS from continuing operations to land in the range of $3.20–$3.25 per share.

By comparison, peer companies like Cisco Systems (CSCO) and Harris Corporation (HRS) also expect their revenues to increase in the range of 2–4% in the coming quarter. You can gain exposure to Motorola Solutions by investing in the iShares Russell Midcap Growth ETF(IWP) and the iShares S&P Global Technology Sector ETF (IXN). Motorola accounts for 0.40% of IWP and 0.30% of IXN.

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