Motorola's EMS business expects 5%+ CAGR in next few years

Motorola Inc.’s Enterprise Mobility Solutions business is predicting a compounded annual growth rate between 5% and 8% over the next few years, with opportunities to sell equipment and services into public-safety and vertical market enterprises.
Speaking at Cowen and Co.’s 38th Annual Technology, Media and Telecom Conference, Gene Delaney, president of the EMS unit, noted that Motorola’s entrenchment in the public-safety sector is likely to earn it future business because the government sales cycle is long and Motorola equipment is deeply embedded into existing equipment. “Backward compatibility is a much more important term than it sounds,” Delaney said.
“Technology continues to evolve,” Delaney noted. “Our products and our solutions become part of the way that (our customers) do their jobs … so as new technologies emerge in the marketplace you have to bring this legacy with you.”
As Motorola prepares to break its handset business and networks business into two separate companies next year, Cowen wireless equipment analyst Matt Hoffman said the research firm thinks the EMS business will be Motorola’s largest unit this year. “Investors often focus in on the handset business with Motorola when they look at the stock. But with the changing fortunes in mobile devices business, the EMS business that Gene leads has become the central engine of Motorola, something we think investors will pay greater attention to as the company’s split comes up in the first part of next year.”
While 2009 was a down year for the EMS side of the business, the unit still posted operating income of $1 billion on revenues of $9 billion, even as sales declined 13%. For the first quarter, Motorola reported sales up 6% year over year to $1.7 billion and $271 million of operating income, up 25% compared to the year-ago period.
The company continued to invest in research and development in 2009 and will do so going forward, Delaney said, noting that innovation and R&D are as essential to Motorola’s brand as its famed batwing logo.
Delaney said Motorola is the market leader in government, retail and hospitality and transport and logistics sectors, with sales of $9.2 billion, $1.9 billion and $1.8 billion, respectively. The company is strong in manufacturing ($1.7 billion), energy ($800 million) and wholesale ($500 million) segments. The equipment maker sees opportunities ahead in the telecom, healthcare, education and professional services markets.
Delaney said the move to next-generation public-safety deployments, and increased video use, is a growth opportunity for the company. Video applications are ideally suited for public-safety responders, Delaney explained. While there is plenty of video today used by emergency personnel, the opportunities ahead are immense. Video should enable police to enter a hostile situation aware of what is going on at the scene, while video could let a fireman see the fire before he confronts it. “The area for video where we calibrate the growth is spectrum.” In other words, public safety needs access to broadband spectrum to be able to deploy bandwidth-consuming video.
Motorola also sees plenty of opportunities ahead for its services business. The company has a Network Operation Center (NOC) at its Schaumberg, Ill., headquarters so it already monitors networks for public-safety agencies and enterprise users, but the company thinks it can do more hosting services for municipalities, device management for the enterprise and other services and expects an uptick in that sector of the business in the second half of this year and the 2011 timeframe.
While 57% of Motorola’s EMS business takes place in North America, the company is expanding its efforts worldwide, Delaney said, adding that a few years ago about 65% of Motorola’s business took place in North America.