The 'New' Motorola Solutions Is Taking On the Critical Need for Safety | At Barron's
Summary
TLDRIn an interview with Andy Serwer, Greg Brown, CEO of Motorola Solutions, discusses the company's transformation from a mobile phone manufacturer to a leader in mission-critical communications, focusing on emergency services and private networks. Brown highlights their global leadership in private networks, 911 software, and video security. He attributes the company's success to strategic focus, new leadership, and smart acquisitions. Brown also addresses the impact of global security concerns, the importance of their technology in crisis situations, and the company's growth potential in a $66 billion addressable market.
Takeaways
- 📡 Motorola Solutions focuses on mission-critical communications, providing emergency radio systems for sectors like public safety, including police, fire, ambulance, and military.
- 🔐 The company specializes in private networks that remain operational during natural disasters or cellular congestion, ensuring reliable communication for emergency services.
- 🌐 Motorola Solutions is a global leader in private networks, with approximately 13,000 networks worldwide, offering encryption, security, and device refresh services.
- 🚔 They also provide 911 software solutions, managing emergency call handling, dispatch, and records in almost two-thirds of the 911 centers in North America.
- 📹 The company is involved in video security and access control, offering services for smart cities, enterprise security, and license plate recognition.
- 📈 Under Greg Brown's 17-year tenure as CEO, the company has grown significantly by focusing on mission-critical technologies and divesting from non-core areas like cell phones and cable TV set-top boxes.
- 💹 Motorola Solutions has a market cap of $64 billion and an addressable market of $66 billion, indicating substantial growth potential, especially with a strategy that excludes China.
- 🌟 The company's success is attributed to strategic decisions, focusing on public safety and security, and a commitment to superior products and operational excellence.
- 🤝 Motorola Solutions faces competition from Chinese firms like Hytera in radio communications and Hikvision and Dahua in video security, but maintains a strong position in the market.
- 🔋 The company is investing in organic growth, particularly in video and radio products, and expanding its sales force to capture opportunities in the growing public safety technology market.
Q & A
What is the primary focus of Motorola Solutions' business today?
-The primary focus of Motorola Solutions is on emergency communications and mission-critical radio systems for public safety, including police, fire, ambulance, and military services. They also provide private networks that are always reliable and operational even during natural disasters or cellular congestion.
How does Motorola Solutions differentiate their radios from traditional 'walkie-talkies'?
-While their products are sometimes referred to as 'walkie-talkies', Motorola Solutions emphasizes that their radios are much more sophisticated. They are designed for mission-critical communications, ensuring reliability and security, and are part of a broader system that Motorola Solutions installs, encrypts, secures, and maintains.
What role does Motorola Solutions play in the 911 software sector?
-Motorola Solutions is a significant player in the 911 software sector, primarily in North America. They offer software for emergency workflow in 911 command centers, including call handling, CAD dispatch, and evidentiary management, with their software present in nearly two-thirds of the 911 centers in North America.
How does Motorola Solutions approach video security and access control?
-Motorola Solutions offers video security and access control solutions for smart cities, physical security, and private security enterprises. This includes positioning cameras for security purposes and providing services like license plate recognition.
What has been the key to Motorola Solutions' success and growth under Greg Brown's leadership?
-The success and growth of Motorola Solutions have been attributed to strategic decisions such as focusing on mission-critical communications and public safety, divesting from non-core areas like cell phones and cable TV set-top boxes, and investing in organic development and accretive acquisitions.
What is the addressable market size for Motorola Solutions, and how does it compare to their current revenue?
-The addressable market for Motorola Solutions is $66 billion, not including China. Their revenue for 2024 is just under $11 billion, indicating significant room for growth within their target market.
How does Motorola Solutions compete against Chinese firms in international markets?
-Motorola Solutions faces tough competition from Chinese firms like Hytera in radio communications and Hikvision and Dahua in video security. However, they are in the seventh year of litigation against Hytera for using their technology. Additionally, the U.S. and other Western democracies are increasingly cautious about using Chinese technology due to concerns over intellectual property theft and ties to the Communist Party.
What is Motorola Solutions' stance on the integration of 4G and 5G with their radio communications?
-Motorola Solutions views the integration of 4G and 5G as an enhancement to their private radio communications. They have developed a new radio that combines private land mobile radio (LMR) with 4G or 5G, allowing for software programming over the air, improved location management, and seamless call handover to LTE networks.
How does Motorola Solutions ensure interoperability between different public safety agencies?
-Motorola Solutions supports the P25 standard, which ensures interoperability between different radio systems and agencies. This standard allows any radio to work with any infrastructure and enables seamless communication between different public safety agencies.
What are some of the metrics Motorola Solutions uses to benchmark its business performance?
-Motorola Solutions primarily uses Total Shareholder Return (TSR) as a key metric, focusing on how it compares to the market and peer groups. Other factors include superior product quality, operational excellence, revenue growth, margin and cash flow expansion, and strategic capital allocation.
What are the main opportunities and areas where Motorola Solutions is investing for future growth?
-Motorola Solutions is investing in organic growth, particularly in video and radio product areas, as well as expanding its distribution and sales forces. They are also actively looking at acquisition opportunities that align strategically, financially, and culturally with the company.
Outlines
📡 Overview of Motorola Solutions' Core Business
In this segment, Andy Serwer interviews Greg Brown, CEO of Motorola Solutions, discussing the company's transition away from mobile phones to focusing on emergency communications, critical radio systems for public safety, and private networks. Brown explains that their services are designed to be reliable even during natural disasters or cellular congestion. The company provides infrastructure, security, and maintenance for these networks, which are owned by clients like police, fire, and military departments. Motorola Solutions is a global leader in this sector, with around 13,000 private networks. They also provide 911 software for emergency call handling and video security for smart cities and enterprises. Brown highlights the company's growth and success under his leadership since 2007, attributing it to strategic decisions to focus on mission-critical communications and public safety.
🌐 Motorola Solutions' Global Market and Challenges
Greg Brown discusses the global market for Motorola Solutions, which has an addressable market of $66 billion, not including China due to their exit over a decade ago. The company is projected to have revenues just under $11 billion in 2024. Brown emphasizes the importance of focusing on emergency and mission-critical communications, which have a long-term durability and provide a stable earnings and cash flow. He also touches on the company's success in acquisitions, which has been a core competency under his leadership. Brown addresses the challenges of competing with Chinese firms, especially in less developed countries, and the impact of geopolitical issues like the conflict in Ukraine and Gaza on the demand for security solutions. He also reflects on how the company's success is partly due to the world's increasing need for security and their position as the best in their field.
🚔 Motorola Solutions' Role in Public Safety Technology
The conversation continues with Brown explaining how Motorola Solutions' products are critical for public safety, especially during emergencies when cellular networks may fail. He discusses the importance of their private land mobile radio (LMR) networks, which are designed to work even without infrastructure, ensuring continuous communication during crises. Brown also addresses the integration of 4G and 5G technologies with their LMR networks to enhance capabilities like software programming over the air, location management, and video situational awareness. He mentions the interoperability standard P25, which allows seamless communication between different agencies and infrastructures, solving past communication barriers. Brown also talks about the company's entry into the body-worn camera market for both public safety and enterprise clients, highlighting the growing demand for video security in various sectors.
📈 Capital Allocation and Future Outlook for Motorola Solutions
In this final segment, Brown discusses the company's capital allocation strategy, emphasizing organic investment in video and radio products, as well as expanding market reach through sales forces. He is proud of Motorola Solutions' track record in share repurchase and acquisitions, which have contributed to the company's growth. Brown expresses his continued engagement and enthusiasm for his role as CEO, despite having been in the position since the financial crisis. He outlines the company's future opportunities, including the global demand for safety, technology refresh funding, and the ongoing device refresh cycle in public safety. Brown makes a case for investors to consider the company's strong growth drivers, addressable market, and commitment to innovation and customer focus as reasons to invest in Motorola Solutions.
Mindmap
Keywords
💡Motorola Solutions
💡Mission Critical Radio Systems
💡Private Networks
💡911 Software
💡Video Security and Access Control
💡Acquisitions
💡Public Safety
💡Smart Cities
💡Body-worn Cameras
💡Total Shareholder Return (TSR)
💡Capital Allocation
Highlights
Motorola Solutions focuses on emergency communications and mission-critical radio systems for public safety.
The company provides private networks and radios for police, fire, ambulance, and military services.
Greg Brown has been CEO since 2008, leading the company through significant changes.
Motorola Solutions is a worldwide leader with approximately 13,000 private networks.
The company's 911 software is used in nearly two-thirds of the 911 centers in North America.
Motorola Solutions also specializes in video security and access control for smart cities and enterprises.
The company has a market cap of $64 billion and an addressable market of $66 billion, excluding China.
Motorola Solutions has been successful by focusing on mission-critical technologies and divesting from commoditized areas.
The company has a strong leadership team and a core competency in acquisitions.
Motorola Solutions competes against Chinese firms like Hytera and Hikvision in international markets.
The company's success is partly due to increasing global security concerns and the need for reliable emergency communications.
Motorola Solutions' products are designed to work even when cellular infrastructure is down, ensuring continuous communication during emergencies.
The company is investing in video and radio products, as well as expanding its sales force and distribution reach.
Motorola Solutions has a trailing PE of over 40, reflecting its strong growth and market position.
Greg Brown expresses his commitment to continuing as CEO, driven by the company's potential and his passion for the industry.
The company has a strong focus on total shareholder return (TSR) as a key performance metric.
Motorola Solutions has a robust capital allocation strategy, prioritizing organic investment and strategic acquisitions.
The company is well-positioned to benefit from the global trend towards increased safety and security needs.
Transcripts
[Music]
hello everyone and welcome to at Barons
I'm Andy serwer and Welcome to our guest
Greg Brown CEO of Motorola Solutions
Greg it's great to see you thanks for
having me Andy so Motorola Solutions
hasn't made phones Motorola hasn't made
phones in a very long time some people
still associate the name with phones
indeed what exactly are you doing right
now talk to us about the company so the
nucleus of the company uh is designed
around the anchor tenant is emergency
communications Radio Systems Mission
critical Radio Systems so think police
fire ambulance military NYPD Chicago PD
LA and and the like the private networks
the emergency always reliable always on
in spite of a natural disaster without
without cellular congestion these
networks are provisioned installed and
dedicated by Motorola Solutions along
with the radios some call them
walkie-talkie you don't like to say
walkie-talkies well people relate to it
but it's a much more sophisticated
product that's why I avoid it but that's
the majority of what we do and we are
the worldwide leader with there are
about
13,000 private networks not cellular not
AT&T not Verizon not T-Mobile but
private owned by the customer customer
and we put the infrastructure in we
encrypt it we secure it we monetize the
services and we refresh the devices I.E
radios and we're the leader in that
business worldwide additionally we do
911 software primarily in North America
there's about
6,000 uh 911 centers so you think 911
call handling CAD dispatch records and
evidentiary management we have a
software portfolio that does basically
emergency workflow in 911 command
centers we have software that's in
almost 2third of the 911 centers in
North America and the Third Leg of the
stool we do video security and access
control so think either smart cities
with video security think physical
security or private security where you
will have cameras positioned to secure
your Enterprise we do that
we do license plate recognition so the
new Motorola if you will I.E Motorola
Solutions is grounded in public safety
right and physical security and we
connect people in need with those who
can help that's what we do you have been
CEO I think since what 2007 200 one of8
this is my 17th year right we've talked
about previously about your trials and
tribulations and Scar Tissue right
exactly going through the business at
that point which was very challenging
and I'm wondering I mean the company's
been incredibly successful we'll talk
more about that is is this a reflection
of a growing concern and need to provide
security I mean what accounts for the
company's incredible growth over those
17 years I think it's a combination of
things um if you go back and rewind the
tape the foundation that was laid for
growth was because we knew what not to
do let's not do cell phones let's not do
commoditized cellular infrastructure
let's not do a deteriorating physical
cable TV setop box and let's focus on
all things be emergency Mission critical
emergency communications networks that I
and we knew most others didn't that had
an incredible durability and longevity
for literally decades and decades right
that would provide a
stickiness a durability of earnings and
cash flow and could be the flywheel to
re-engineer a new Motorola Solutions
around Public Safety and Security so the
reason the company has been successful
is we made the right bet on which
technology to keep and which ones to
devest and it's not necessarily the most
sexy sounding business particularly back
then and also some might say that the
opportunity was not so big how big of a
market is it I mean now you guys have a
market cap of what 64 billion something
like that but how big is the The Tam in
terms of sales so the market cap of the
firm as you said is 64 billion the
Enterprise Value is just under 70
billion and the addressable market for
all the things that we do is 66 billion
that's a 2024 addressable market number
and Andy very importantly it's zeroing
out China so Motorola was one of the
very first companies in China and we
were one of the very first companies to
leave China over a decade ago before it
was in more in Vogue and people had a uh
a greater appreciation of what was
happening around intellectual property
theft and trade secrets so the street
has Motorola doing Revenue just under 11
billion in
2024 with a $66 billion addressable
market so there's tremendous room to run
the other reason I think the company has
prospered is we have a new leadership
team motor Roland that got promoted up
from within and in the last I would say
decade we have been able to make a core
competency of the company Acquisitions
we didn't do a lot of them historically
Motorola was a conglomerate we were
cutting we weren't adding well once we
cut to the powerful muscular nucleus of
the company now we've added both organic
development and inorganic in a very
accretive way and in a way that's made
the company stronger and allows us to
prosper in markets like 911 software
video security physical Access Control
and markets and adjacencies to Public
Safety that we weren't in a decade ago
great people great Acquisitions security
more critical than ever and by the way
not just domestically but
internationally as well with the
conflict in Ukraine and Gaza and
migration and other uh considerations
going on I want to ask about that
International Peace cig you mentioned
China and not being there but are you
competing against Chinese firms say in
Europe in other in other markets besides
the United States and how's that playing
out it's tough the primary competitor is
a company called hia it's a radio
competitor and Chinese Chinese and they
compete with us in they compete with us
everywhere but we are in our seventh
year of
pursuing and uh closing out a
long-standing litigation it's coming
home to roost in 2024 and
2025 but outside of the US yes because
in less developed countries where rules
are more cloudy and ambiguous they still
compete but they in in the case of haera
they're doing it with our technology we
also compete with the Chinese in video
security hick vision and dawa outside of
the US but Andy there's one other very
important point the US in the National
Defense authorization act has looked at
these Chinese companies and there are
five Huawei ZTE
haera hick vision and dawa they are
banned from the US federal government
and the US federal government has banned
any use of Federal grant money to buy
those products I think other Western
like democracies whether it's the UK
Australia of course Canada and others
are very reticent and concerned about
these Chinese actors and their
relationship with the Communist party
and at all considering them either an
emergency community Communications or
video for Public Safety or critical
infrastructure this may be a funny
question to ask you Greg but in a way
isn't the success of your business
somewhat a reflection of troubles in the
world you mentioned Ukraine and Gaza but
also just increased security
concerns in the United States and
globally also climate change affecting
weather which means natural disasters so
is the bad news good news for you guys
the answer is yes um in part that's part
of why we're growing but the other half
of that loaf Andy is we're the best at
what we do and I don't mean that to be
arrogant but we've been 70 years doing
Mission critical Communications we have
a superior product portfolio we have
Market leadership we have uh spectral
efficiency by the way there was the
thesis 10 10 years ago was this boring
non-sexy Motorola walkie-talkie company
is a melting Ice Cube and the future
will be smartphones whether Android or
iOS and you'll put a posh to talk button
everybody will use them and those ugly
bricks will be in a history museum
someday the opposite is
true these why is that because these
networks these power management the
design of these networks and this
equipment is not a cellular network it
is a private Network meaning what
meaning it's dedicated to nothing but
Emergency Services meaning what meaning
that if a bomb went off for all if the
cellular infrastructure goes down in New
York City your Verizon phone going to
work or AT&T you already know the answer
in our networks they are designed where
they actually can work without
infrastructure you could eliminate the
infrastructure and still have
peer-to-peer Communications which is why
these devices are larger because they
have power management design technology
and repeater engineering so that they
can make maintain emergency
communications without an infrastructure
so yes bad news can lead to good news
for our company but that's also kind of
masks the quality the criticality and
what we do is a need to have not a nice
to have and that has elevated to the top
of the food chain lastly 4G 5G the
networks that were purported to
potentially damage or impair our
business has helped it why why because
First Responders have a brand new radio
which is LMR a private land mobile radio
network and we put 4G or 5G on it so you
could do software programming over the
air you can have improved location
management and if you roam out of the
coverage area as a police officer in
Queens or Staten Island that call can
seamlessly stay picked up by roaming
onto LTE and it can provide video
situational awareness so LTE augments
the performance of private radio
communications hence our Rising tide
what about problems where various police
forces fire safety EMS can't communicate
with each other yesterday's news not
true anymore really uh there's a new
standard well new it's probably 15 or 20
years old now p25 myself maybe p25 is
the interoperable standard where any
radio will work with any infrastructure
and there'll be interoperable between
infrastructure and radio and there'll be
interoperable inter agency so I would
say that was a problem more in the '90s
maybe 25 years ago but that that problem
has been eliminated in terms of seamless
interoperability are you in the business
of video cameras for police and other
agencies yes we're a second provider we
got into the business about four or five
years ago so we do body warn cameras as
a viable alternative to the dominant
number one who basically was in that
market 8 or 10 years without a
competitor we are now an emerging
competitor and a viable one in addition
we're doing body warn cameras for
Enterprise so uh there's High concern
around retail Smash and grab retail uh
service Personnel being concerned about
their safety Healthcare
nurses um so we are selling a lot of
body warn camera into the Enterprise
which is newer to the market bodyw warn
camera in public safety has been used
for several years being used in
commercial Enterprises is new lastly
we've had great success on Public Safety
bodyw warn video internationally Romania
Finland so whether it's bodyw warn video
Enterprise or Public Safety dash cam
video if you're in a squad car it could
be license fight recog video where we
are the market leader um video is more
and more and more critical you have to
ingest all these input points and sensor
points you have to be able to process it
and store it in a 911 Command Center and
extract critical information and maybe
on occasion push it to a first responder
to his or her radio we have that full
Suite what metrics do you use to
Benchmark the business well number one
total shareholder return
total shareholder TSR TSR TSR is our
North Star now I know it's an
output but we are we management and the
board are maniacally focused on TSR in a
healthy way but it's not just TSR it's
TSR against the market and TSR against
your peer group so if the stock goes
from A to B and we're all happy I don't
know if that's good or bad because if
the Market's growing faster we're
underperforming if the peer group's
growing faster we're underperforming
pering now how do you get TSR Superior
product great people worldclass
intellectual property and patent
portfolio operational excellence and
revenue growth margin expansion cash
flow expansion my job Andy as CEO is two
things Capital allocation and people
that's it where do we spend the money
R&D organically inorganically and which
people lead this company and who's on
the bench to lead it in the future I was
going to ask you about Capital
allocation Greg what are the biggest
opportunities for your business in your
company and where are you laying your
bets well right now uh the biggest
opportunities are organic investment so
we're investing more in video we're
investing more in radio in the product
areas Andy we're also investing more on
uh the goto Market distribution reach
and the sales forces direct and indirect
to sell that that expanded product line
I am very proud of the fact that um one
of my favorite stats Andy mhm we've done
just under 16 billion of share
repurchase over the course of Motorola
Solutions at an aggregate price of just
under
69 and the stock is in the high 380s
today and most companies get share repo
wrong and most companies get
Acquisitions wrong 70 or 80% of the
Acquisitions in general don't meet the
business case so the other
prioritization of capital is
Acquisitions we've had a fantastic track
record we have a lot more work to do but
as I sit here with you today investing
in The Firm organically and expanding
our distribution and we have a very
attractive funnel of opportunities for
Acquisitions but we have to make sure
they make sense
strategically financially it's a
creative operationally it's culturally
compatible and we can
execute you've been CEO since the
financial crisis that's been a while are
you still engaged and want to stay in
the seat absolutely I love what I do
this is the best company in the world I
get the nvidias and the apples and the
microsofts I get that I have great
respect in two or three trillion dollar
companies but it's not about necessarily
size it's about the value you've created
and the value that you can in the future
I am very proud of everything we've 've
done to date but it doesn't matter it's
about the next year three and five and I
look at the environment I look at the
product portfolio I look at the team I
look at the opportunity the Strategic
decisions of where we play without China
and where we're focused and I'm as
energized as I've ever been to continue
to do this it's a privilege and an honor
and final question Greg we've talked
about the company's success I think the
stock is up uh what over 1,00%
over your 10 as of Friday I think it
was, 149% count I don't know versus say
400% Plus for the S&P 500 you're
relative Benchmark we talked about the
market cap you do have a trailing PE of
over 40 so make the case for us for
investors out there why they should own
the stock going forward sure well do you
think to an earlier point you made do
you think the world will be more safe
going forward or less
safe question one question two we didn't
talk about this but in the inflation
reduction act there's $350 billion that
are available in multi-e for funding for
technology refresh this runs through
2026 many of these approved funding
categories we expect it to be extended
beyond that number three you replace
your smartphone every two or three years
maybe longer Public Safety radios
typically are 7 to eight years we are in
the early stages of a device
refresh in North America in Europe and
Beyond and by the way that device
refresh captures both the emergency LMR
characteristics that are second to none
and they incorporate LTE the new higher
speed Broadband so the funding is
available the world continues to be a
challenging place you see what's
happening at the border you see what's
happening in Big City crime do we think
video will play a more prominent role
all things video bodyw warn dash cam
Enterprise Public Safety and so the
underlying growth drivers are as strong
as ever and then to the addressable
Market if you're 10 A5 billion in change
against a $66 billion addressable Market
I would suggest there's a lot of
opportunity off the top of my head those
are some compelling reasons but by the
way I want to make sure we're our own
worst critic we're not going to be
complacent we're staying continually
focused on the customer MH and having
the best talent in The Firm execute to
those needs in the market I'm excited
about our future Greg Brown CEO of
Motorola Solutions thank you so much for
joining us thank you Andy this is at
Barons I'm Andy serwer we'll catch you
next time
[Music]
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