Zebra To Buy Motorola's Unit, Sees Q1 To Beat View; Motorola Cuts Sales Forecast

(RTTNews) - Inventory tracking company Zebra Technologies Corp. (ZBRA) Tuesday said it has agreed to buy the enterprise business of Motorola Solutions Inc. (MSI) for $3.45 billion in an all-cash deal. The acquisition is expected to strengthen Zebra's asset tracking portfolio by creating a major in enterprise asset intelligence for the Connected Age.

Separately, Zebra issued its first-quarter forecast for earnings and sales, above market estimates. Meanwhile, Motorola trimmed its sales forecast for first quarter and fiscal 2014.

In pre-market activity, Zebra shares gained $7.67 or 11.23 percent, and traded at $75.95. Motorola shares gained 1.57 percent, and traded at $64.75.

Regarding the acquisition, Zebra said it expects the deal to be immediately accretive on a cash earnings basis. The transaction would close by the end of 2014, subject to customary closing conditions.

Following a sale of its unit, Motorola would become singularly focused in mission-critical communications for Government and Public Safety customers. Upon the deal closure, the company intends to return the proceeds to shareholders in a timely fashion.

With 2013 sales of $1.0 billion, Zebra provides barcode and enterprise printing, asset tracking, Internet of Things or IoT solutions, and motion and location sensing. Motorola's Enterprise business, with 2013 pro-forma sales of approximately $2.5 billion, provides mobile computing and advanced data capture communications technologies and services.

A successful transaction would create a behemoth in the specialised industry for tracking, resulting in a combined group with about 7,000 employers and annual sales of close to $3.5 billion.

Motorola will retain its iDEN product portfolio that was part of its Enterprise business and will continue its Government business, including its professional commercial radio product portfolio.

Zebra expects to fund the transaction with approximately $200 million of available cash on hand and new debt.

Separately, Zebra said it expects first-quarter earnings to be in a range of $0.79 to $0.82 per share, approximately 74 percent higher than last year's $0.46 per share. Excluding $0.09 per share of acquisition expenses, earnings would be in a range of $0.88 to $0.91 per share.

Sales would be in the range of $287 million to $289 million, or 21 percent over last year's sales of $236.94 million. Analysts polled by Thomson Reuters expect the company to report earnings of $0.83 per share and revenues of $281.56 million. Analysts' estimates typically exclude special items.

Meanwhile, Motorola said it now expects first-quarter earnings per share to be $0.49, and adjusted earnings per share to be $0.50, which is within the company's previous guidance.

For the first quarter, sales are now expected to be nearly $1.8 billion, a decline of nearly 9 percent from last year.

Previously, Motorola projected adjusted earnings from continuing operations in the range of $0.46 to $0.52 per share and a revenue decline of 4 percent to 6 percent.

Analysts currently expect a first-quarter profit of $0.51 per share and revenue to be down by 4.7 percent.

The company attributed the downward revision in its sales forecast mainly to softer demand in the North America Government business coupled with lower than expected Enterprise sales due to a push out of certain orders late in the quarter. Motorola stated that its quarterly revenues did not meet expectations.

Further, for fiscal 2014, sales are now expected to decline low single digits, while operating margins are likely to be comparable to its earlier guidance.

Earlier, the company expected adjusted operating earnings of about 18.5 percent of sales and revenue growth of flat to 2 percent.

Zebra is scheduled to report its first-quarter financial results on May 6, while Motorola would provide first-quarter results on May 1.