When the Motorola empire broke up in 2011 with the mobile production unit being sold off to Google (GOOG, Financial), little had analysts across the globe expected that the last vestige would encounter such hard times that it would think of a prospective sale for mere survival. According to a Bloomberg report, Motorola Solutions Inc. (MSI, Financial), the $15.6 billion maker of two-way radio and other communication devices including walkie-talkies and the remnant of the empire after the mobile business unit sale in 2011 is exploring its chances of being sold off though the management is still silent regarding such a decision. Let’s explore further to find out why such a sale might be the requirement of the hour, and if there are any details available on the possible sale of MSI.
Earnings have been hit through 2014
Though the company has been able to beat quarterly estimates, it has not been able to put up a good show through the 2014 fiscal year when its annual revenue dropped over 6% year over year, and it even underperformed when compared to the industry average of 5.2%. The weakness in revenue generation got translated into softer earnings which fell almost 33% year-over-year for the fiscal year.
Even for the upcoming fiscal year, the company is not much upbeat and has provided a soft guidance in terms of both top and bottom lines. MSI expects the revenue to be flat or even negative in 2015 as consumer tastes are changing and they are no longer interested in such communication devices. Also as the foreign currency headwinds would be there in 2015, it will dampen the financial playbook of the distressed company for sure and as per predictions could have a 3% negative impact on the revenue.
As MSI is ailing to generate cash flow which went into the negative territory in the previous fiscal year, it would be better to state that its prospects seem to be fading and maybe that’s the major reason behind the sale process which seems to be under way for several months from now.
The sale plan of the remaining vestige
Motorola’s spokesperson Kurt Ebenhoch has refused to comment on the spin off plan stating that the company does not comment on speculations and rumors, but as per sources, the communications and networking company which has survived for the past 87 years is in the early stages of the sales process. However, there has been no agreement that has been reached on the acquisition process till date.
It is being projected that there are several bidders trying to acquire the age-old company during the sale and the list of potential buyers include Honeywell International Inc. (HON, Financial), Raytheon Company (RTN, Financial) and General Dynamics Corporation (GD, Financial) as per Bloomberg's report.
Among these contenders, analysts have opined that Raytheon might be the best match when it came to the Motorola Solutions acquisition, since it's already been pursuing several deals since November 2014 to expand its tech business. Also their CFO, Dave Wajsgras has commented during a recent interview: “We will continue to focus on technology-based acquisitions in areas that we see we can expand our markets and build off of our technology foundation …” But none of the possible acquirers have commented on MSI acquisition plans to date.
Final thoughts
If the potential sale actually takes place in the near future, it would mark the end of the Motorola empire that has been operating since 1928 and has survived several difficult times. As the financial playbook is not in good shape and there is a stagnant growth being felt for MSI, an acquisition by a third party might aid in keeping it alive and might improve its financial strength in the long run. Whatever the case, MSI is not a viable unit to remain as a stand-alone company as per experts, and thus its acquisition is necessary to protect its assets in the long run.
