Motorola Solutions Shares Rise on Optimism for Buyout

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Motorola Solutions Is Said to Explore Sale of Radio Maker
A Motorola logo sits outside the glass windows in Chineham, U.K. Photographer: Chris Ratcliffe/Bloomberg

Motorola Solutions Inc. shares rose 4.8 percent on optimism that the maker of scanners and two-way radios will draw bids from private-equity firms or contractors seeking a bigger slice of government spending.

Motorola Solutions, which has a market capitalization of $16.3 billion, is working with financial advisers as it seeks a buyer, people familiar with the matter said last week. Analysts have said that a deal could fetch a 20 percent premium on the company’s current value.

A transaction isn’t imminent and the process has been under way for several months, said one of the people, who asked not to be identified because the information is confidential.

“There should be many people who are willing to buy Motorola Solutions at a reasonable price for its special communications technology and existing customer base,” Jun Zhang, a San Francisco-based analyst at Rosenblatt Securities Inc., said in a telephone interview Sunday. “Motorola’s intellectual property should be valuable and attractive to some communication equipment makers.”

Potential buyers could include private-equity firms, which may want to strip out costs to sell it later, or companies such as Raytheon Co., Honeywell International Inc. and General Dynamics Corp. that could get more government business, said one of the people. A sale may mark the final step in the dismantling of Motorola Inc., which was split up four years ago into Motorola Solutions and a handset unit after a campaign by billionaire Carl Icahn. The handset business was sold to Google Inc., which then sold pieces of it to Lenovo Group Ltd.

It’s possible the search process will end without a deal, one of the people said.

Motorola History

Kurt Ebenhoch, a spokesman for the company, said Schaumburg, Illinois-based Motorola Solutions doesn’t comment on rumors and speculation.

The stock rose to $67.78 at the close in New York, leaving it up 4.9 percent in the past year.

The company could make a good takeover target, given its dominant position in public-safety radio and networks, according to analysts at Credit Suisse, which has the equivalent of a buy rating on the stock. In October, Motorola sold its enterprise business, which included specialized mobile computers and tablets, for $3.45 billion in cash to Zebra Technologies Corp., a bar-code label maker.

“A sale is possible for the government business as it is an attractive asset for potential partners,” Credit Suisse analysts wrote in a note.

Walkie Talkie

Sanford C. Bernstein & Co. said a sale is unlikely, given the cost Motorola could demand, according to a note Monday. The company is an “ideal asset” for being publicly traded, they said.

“We find it overall difficult to believe in a deal taking place,” said the Bernstein analysts, who rate the stock the equivalent of a buy.

Motorola Inc. was founded in Chicago in 1928 as Galvin Manufacturing Corp. to make a device for battery-powered radios to run on household electricity. The company started producing car radios and expanded into communications with public-safety radios. That led to the two-way walkie-talkie and carphones. In 1973, the company began research on a portable phone prototype, using a concept for a cellular network developed by the former AT&T Corp.

Stagnant Outlook

Motorola Solutions, which makes radio equipment for emergency workers, has struggled with earnings performance, with 2014 non-GAAP earnings per share from continuing operations dropping 33 percent as sales declined 6 percent. The outlook for this year remains stagnant -- the company projects 2015 revenue will be flat to slightly lower.

Motorola Solutions also offers technology services to clients including Prince George’s County in Maryland and the Las Vegas Metropolitan Police Department.

Motorola first announced a plan to spin off its mobile-phone business in March 2008, amid market share losses and pressure from Icahn. The company delayed the move during the recession, completing the split in January 2011.

The deal for Google’s $12.4 billion purchase of Motorola Mobility, announced just months after the split, marked an end as an independent company that helped pioneer mobile phones and introduced its first consumer handset in the early 1980s.

Google, after subsequently selling off the set-top business, said last year it would sell the remains of Motorola Mobility -- excluding the majority of the patents -- to Chinese PC Maker Lenovo.

(Corrects to remove reference to scanning devices in 14th paragraph.)
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