Motorola Solutions’ Earnings: High Backlog And Product Upgrades Can Be A Key To Future Growth

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Motorola Solutions

Motorola Solutions (NYSE:MSI) released its Q4 and full year earnings on February 2nd. The company exceeded its own guidance for both revenues and earnings. The rise was led by the acquisition of  Airwave in the managed support and services services segment. Also, Motorola Solutions reaped the benefits of its innovations and upgrades in the core segment of LMR (Land Mobile Radio) communication system. Apart from this, the company was able to bag various ontracts for the new P25 system in North America as well as other parts of the world which helped the top line to swell.

Motorola has guided for moderate 1-2% growth  in 2017 as the synergies from Airwave will stabilize in the coming year. On the whole, huge backlog in both the products and services segment can be the key drivers for Motorola’s growth in 2017, which can be offset to some extent by slowdown in synergies from Airwave.

MSI-Q4-earn

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See our complete analysis for Motorola Solution

Huge Backlog Build Up Can Be The Key To Growth

  • Motorola ended the year with a product backlog of $1.5 billion dollars and services backlog of $6.9 billion. Overall growth in backlog came out to be $1.9 billion which was primarily driven by Airwave.
  • The total backlog amount is turning out to be 139% of the total revenues of the company which is suggesting a strong growth in the subsequent reporting periods.
  • Most of this growth in product backlog was led by LMR, and  further digital innovation in TETRA and P25 radio series can lead to a continuation in build up of backlog.

Stagnation In Benefits From Airwave Can Be A Potential Offsetting Factor

  • Going forward, it will be worth noting if the company can continue to grow in the subsequent reporting periods after a turnaround in 2016. Interestingly, if we remove the revenue additions from Airwave, then Motorola’s top line fell by 2% in 2016 as well, which was due macroeconomic headwinds in Latin America and a slowdown in iDEN.
  • The new Emergency Services Network’s (ESN) launch in the UK has also been delayed to mid-2018 which can be a slight let down for the upcoming fiscal year.

Overall, Motorola Solutions has been able to curb the potential dragging factors, which along with benefits from various new acquisitions and backlog build up can provide Motorola with an opportunity to continue on the path of long term transformation.

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