Motorola Solutions (NYSE:MSI) recently acquired Psion Inc, a British company that specializes in the manufacture of rugged handheld terminals, for $200 million in cash.  Psion’s shareholders will receive $1.36 per share under the terms of the deal that values Psion at a 45% premium to the market price on June 14. The acquisition is expected to close by the end of fiscal 2012, subject to regulatory approvals.
Psion has operations in Europe, the United States, Asia, Latin America and the Middle East, and it sells its products in over 80 countries. Not only will the move help Motorola Solutions strengthen its enterprise portfolio of rugged handheld terminals, but also give it an opportunity to expand its presence worldwide. At a time when government spending around the world may take a hit due to the ongoing macroeconomic concerns, this investment shows that the enterprise is an important diversification for Motorola.
Government spending may take a hit
Motorola Solutions derives most of its value from government customers, who contribute more than 65% of 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
Revenues from enterprise customers may account for only about a third of the total revenues, but they are growing at a rate much higher than government revenues. While government revenues from Motorola have grown at a 5-6% clip in the past two years, enterprise revenues have grown at a rate of more than 10%.
Motorola Solutions’ recent focus on enterprise is understood from the fact that the company has 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 and launched RhoElements, a framework that enables developers to design mobile applications for the enterprise, a quarter later.
The company has also realigned its focus to concentrate mainly on the high growth areas in enterprise with the sale of the majority of its network assets to Nokia Seimens Networks in early 2011. Further, the company divested its holdings in its 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.Notes:
- Motorola Solutions to Acquire Psion Plc. for $200 Million in Cash, Business Wire, June 15th, 2012 [↩]