Motorola Solutions bullish on video, control-center offerings, projects little revenue from FirstNet

Motorola Solutions’ recent purchases of companies in the video-security and command-center spaces are paying dividends, but being a partner on AT&T’s FirstNet team is not helping the company’s bottom line, Motorola Solutions CEO Greg Brown said yesterday.

Brown highlighted the acquisitions—the most recent of which was a $271 million purchase of WatchGuard, a private vehicle-camera and body-camera company—for their current positive impacts and their double-digit growth potential in the future during a call reviewing Motorola Solutions’ “outstanding” second-quarter performance.

“The acquisitions we’ve made in video-security and command-center software are having a meaningful impact on our business,” Brown said during conference call. “With our recent purchase of WatchGuard, we’ve now made acquisitions in these two areas that total $2.4 billion. These acquisitions are expected to contribute revenue of about $1 billion this year.”

Brown described the video market as “hot,” noting that Motorola Solutions now has products in several aspects of the video ecosystem.

“This market is a $12 billion to $13 billion market … that’s growing nicely. So, we are optimistic about what we can do here and it’s one of the areas. Again, we’re about building platforms, it’s not just video, it’s the edge device, it’s the storage, it’s the management, it’s the analytics, the machine learning and the A.I. that take all of that end-to-end experience and provide use cases around specific verticals to differentiate.

And that growth projection does not include a potential boost to Motorola Solutions that could come from new federal-government regulations that would ban certain Chinese manufacturers of video systems—notably, Hikvision and Dahua—from being installed in the future through the use of federal funds, Brown said.

Under the National Defense Authorization Act (NDAA), federal agencies are prohibited from procuring video-security from Hikvision and Dahua as of Aug. 13 this year, Brown said. Next August, rules are scheduled to become effective that would prevent any federal grant money—given to a state or local government entity, for instance—from being used to buy video-security solutions from one of named Chinese vendors.

Given this landscape, many industry analysts anticipate that entities will turn to Motorola Solutions’ video offerings as a non-China alternative.

“I think we will become a beneficiary of the NDAA procurement ban for Hikvision and Dahua in the video-security space, but I think that will be more likely in 2020,” Brown said. “We are encouraged by the ongoing discussions we have with our [federal] customers, and I think that will be beneficial in 2020.

Motorola Solutions received a big boost during the second quarter by signing extensions with the United Kingdom Home Office to continue delivering TETRA services via the Airwave system and to develop software solutions—notably, mission-critical voice—for the UK’s LTE-based Emergency Services Network (ESN) initiative. Those extensions accounted for “about two-thirds” of Motorola Solutions’ $1.5 billion increase in year-over-year backlog revenue for services and software, according to company CFO Gino Bonanotte.

Meanwhile, Brown said that LMR demand “remains robust,” with the company noting multiple P25 contracts.

Brown was decidedly less optimistic about the prospect of Motorola Solutions benefiting financially from its role as a partner on AT&T’s team tasked with the buildout of FirstNet, the nationwide public-safety broadband network (NPSBN) that was awarded to AT&T in March 2017.

AT&T has announced that more than 7,000 agencies are participating in FirstNet, subscribing to more than 600,000 connections. But those gains are not helping Motorola Solutions’ financial balance sheet and is not impacting the company’s LMR sales, Brown said.

“We don’t see really any benefit at all, in terms of revenue contribution for us,” Brown said. “We didn’t have really any in Q1, we didn’t have any in Q2. For the full year, we’re really projecting low single-digit millions—very, very little.

“Obviously, AT&T will continue to build out the network. They’re adding, quote-unquote, ‘connections’ or ‘subscribers.’ It’s a cellular data play, and they will look to win back customers from Verizon, T-Mobile or Sprint onto FirstNet data plans. That is separate than LMR. That is incremental to LMR, obviously—as we’ve seen, given the organic strength of land mobile radio here in the States.”

Brown said Motorola would know if public-safety users were beginning to migrate from LMR to push-to-talk-over-cellular offerings over FirstNet, because FirstNet currently offers only the Motorola-owned Kodiak platform for a carrier-integrated push-to-talk solution.

“When we look at the traction and the growth [using the Kodiak solution, we really don’t see it,” Brown said.

“So, FirstNet is obviously working for AT&T, and I think that’s great. But for us, it has no meaningful revenue contribution at all this year.”

When asked if he expects FirstNet to benefit Motorola Solutions more in the future, Brown expressed little hope.

“It’s too early to project for next year, but—from my view—expectations are pretty muted,” he said.