Motorola Solutions sees COVID-19 dip in enterprise LMR but claims no LTE cannibalization

Motorola Solutions saw a notable decline in land-mobile-radio (LMR) sales during the first quarter and expects a much bigger drop during the second quarter amid the COVID-19-driven economic collapse, but the company is confident in the future of its mission-critical offerings when the pandemic is over, CEO Greg Brown said last week.

Speaking during Motorola Solutions’ first-quarter earnings conference call, Brown said the response to the COVID-19 outbreak “has confirmed the fundamental need for our mission-critical solutions” and that history of past crises have proven public-safety communications resilient to economic downturns.

“We entered this pandemic in a very secure position, and I absolutely believe that we’ll emerge an even stronger company on the other side of it,” Greg Brown said during the conference call, which was webcast.

However, company officials acknowledged that the Professional and Commercial Radio segment—serving enterprises in some of the economy’s hardest-hit segments, including hospitality, oil-and-gas, airlines and manufacturing—is struggling significantly, as many potential customers face uncertain futures.

Meanwhile, Motorola Solutions’ public-safety LMR business also has suffered, as government agencies have focused on responses to the pandemic and trying to assess the impact that the abrupt economic shutdown will have on their budgets, Brown said.

“Unlike last time, where we had the financial Great Recession [in 2008 and 2009] and things recovered, what we’ve experienced here is a little bit like the market seizing up, literally,” Brown said. “We couldn’t get in front of customers, many customers on the sales side, from an engagement standpoint. And even on services and implementations—deployments—we are pushed out, as well.”

Multiple analysts on the conference call asked about the potential impact that push-to-talk services over LTE could have on the LMR market, with one citing L3Harris CEO Bill Brown’s recent statement that fallout from the COVID-19 pandemic “could drive an accelerated shift from LMR to LTE.”

But Motorola Solutions’ Greg Brown reiterated his position that LTE growth is not cannibalizing LMR push-to-talk services.

“In fact, we see the opposite of that,” Greg Brown said. “During this time, we see the importance and criticality of land mobile radio versus any alleged migration or shift to LTE.

“I think LTE is complementary; it’s a data broadband network that’s an extension of LMR. Actually, our APX NEXT product that integrates broadband with land, mobile, radio is best positioned to take advantage of that.

I know that there’s been some speculation or commentary that suggests that LTE is starting to cannibalize. We see … absolutely no indication of that and—if anything—maybe the opposite.”

Greg Brown also expressed greater certainty and optimism about the public-safety portion of the LMR business than the future of enterprise LMR sales.

“I think the severity of Q2 isn’t so much that things have changed in public safety. I actually don’t think they have; I think they’ve been pushed,” Greg Brown said. “When you look at Q2 and see the sharpness of that decline, it’s really things pushing to the right than any structural or behavioral patterns to the changing in public safety.

“What we do is still a need-to-do versus a nice-to-do, but obviously the situation is pretty extensive, given that it’s a combination of a public health crisis, as well as a dramatic economic decline in 180-plus countries all at once … I think the product segment for the full year will be down as things push to the right. It could be down low double digits; again, we’ll have to see. But I think, with resilient backlog and an overall strength of our position with … about 75% of our business is public safety and government and 25% enterprise, I still think we’re well positioned.”

Despite this long-term confidence in its public-safety LMR business, Motorola Solutions expects its second-quarter sales to drop 14% to 17% in the second quarter. This decline primarily is attributable to the LMR business, as the video-security and software-and-services units are expected to grow, even in the face of economic issues caused by the COVID-19 outbreak.

“I think what we’re trying to say is that Q2 is a timing issue, not an evaporation issue,” Greg Brown said. “And its acute—negative 14% to negative 17%—but it’s not evaporating. It’s going to the right.

“There might be some that evaporates, but we think it’s a pretty small percentage. It’s really representative of things being pushed to the right in that Professional Commercial Radio [PCR] category.”

However, Motorola Solutions decided to withdraw its full-year guidance at this time. Greg Brown said this marks the first time he has ever not provide full-year guidance but doing so is “prudent” during this time of economic uncertainty.

Outside of the LMR business, Motorola Solutions reported that its Avigilon video-surveillance unit won a $28 million contract with a Canadian utility.

Motorola Solutions also is making notable progress in making its 911 offerings available in a cloud environment, according to Kelly Mark, Motorola Solutions’ executive vice president of software and services.

“There’s been a lot of interest and related to cloud as a result of this pandemic, where a lot of our customers in the past have been operating with their equipment on an on-prem [on-premise] basis, where they operate it there,” Mark said during the conference call. “The need to be able to operate it remotely is something that’s definitely been introduced as part of this pandemic.

“The good news is we’ve already been investing in cloud, and a good portion of our software was already cloud-enabled. We’re accelerating our investments even more in cloud, based on the demand we see now. We just launched our first CAD customer in the cloud. By the end of this year our CAD, our records portfolio will be completely cloud-enabled … Early next year,  our 911 efforts will all be cloud-enabled, as well.”

Multiple Motorola Solutions executives noted during the quarterly conference call that the company’s cash reserves put it in position to pursue further acquisitions in the future, if the opportunity arises.

Motorola Solutions will conduct its virtual annual shareholders meeting on Monday, May 11.