Motorola Solutions (NYSE:MSI) is scheduled to announce its Q4 FY11 results January 25. During the earnings call, we will be closely watching the company’s revenue growth numbers for any signs of weakness due to the slowdown in government spending. Even enterprise investment for the quarter may have been impacted by macroeconomic uncertainties due to the ongoing euro debt concerns. Motorola Solutions may, however, be able to meet its increased guidance for the year overall. It competes with Cisco (NASDAQ:CSCO) and Honeywell International (NYSE:HON) and sells wireless equipment such as two-way radios used by police and handheld computing devices used in retail stores.

See our complete analysis for Motorola Solutions stock here

Government and Enterprise Spending May See Near-Term Hit

During the last quarter earnings call, Motorola Solutions reported a strong 9% y-o-y growth in its government business despite our concerns that government finances might weaken given the weak political climate in the U.S. and the need to cut federal spending. This was because the products that the company sells are used in critical sectors such as public safety and emergency services, which figure very high on the priority list of the government. So, while there may be budgetary constraints that the U.S. government is grappling with, investment in mission-critical communication systems for public safety will be among the last to be hit.

Sales in the commercial segment were also strong last quarter, with 13% growth reported y-o-y. This was led by growth in its enterprise mobile computing and wireless LAN portfolios. We expect mobile computing, the company’s largest product segment within enterprise will continue to see good growth as enterprise customers increasingly find it prudent to invest in equipment that improves efficiency and reduces costs.

However, looking at the high U.S. unemployment (although improving slowly) and fragile economic conditions, it does seem that enterprises will also be adopting cost-cutting measures sooner than later. Also, a deteriorating fiscal deficit condition of the country may start impacting public safety investments sooner than anticipated, signs of which we will be looking for in this earnings call.

Increased Focus on Core Businesses Should Help Tide over Concerns

We, however, are confident in management’s guidance of 7% growth in revenues for the year, which was revised upward from earlier target of 5.5-6% after last quarter’s better-than-expected results. This can be attributed to management’s focus on core businesses after the sale of a majority of its network assets in early 2011. Further, the company announced that it was divesting its non-core wireless broadband unit (Orthogon and Canopy), a business that represented only about $170 million in annual revenues and was struggling to make profits.

However, we anticipate a near-term guidance of revenue hit, going forward into FY 2012.

The company announced a number of new products and contract wins during the quarter. At the start of the quarter, the company unveiled its first tablet computer for enterprise customers, the ET1, which runs on Google’s Android operating system.^[1] Historically, Motorola has used Microsoft’s mobile software. The simultaneous launch of RhoElements, a framework that enables developers to design applications that work on disparate platforms, will enable businesses to cost-effectively develop enterprise applications and deploy them on both legacy Windows devices and Android-based Motorola devices.^[2]

Further, the company announced it will be taking over from Nokia-Siemens Networks the development of the communication network for emergency and public safety services as part of Norway’s nationwide TETRA Nødnett project.^[3]

Understand How a Company’s Products Impact its Stock Price at Trefis

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