Motorola Solutions' profit forecast falls short, shares slide
By Devika Krishna Kumar
(Reuters) - Motorola Solutions Inc, best known as a maker of walkie-talkies and radio systems, blamed weak sales in Latin America and a strong dollar for a profit forecast for the current quarter that fell far short of expectations.
Shares of the company - which is unrelated to cellphone and set-top box maker Motorola Mobility - dropped about 9 percent in early trading on Wednesday.
Motorola Solutions' sales have been slipping as major customers, which include police and fire departments as well as other government agencies, have been hit by budget cuts.
The Schaumburg, Illinois-based company, which also provides communication services to governments, businesses and public safety agencies, has faced particular problems in Latin America.
Sales in the region fell 22 percent to $85 million in the third quarter, accounting for about 6 percent of total revenue. Latin America accounted for about 9 percent of sales in 2014.
"We saw increased softness and economic uncertainty in both Latin America and Eastern Europe, which are tempering our views of the fourth quarter," Chief Executive Greg Brown said on a conference call with analysts.
Motorola Solutions is counting on its services business to drive growth, and the company said earlier this year that private equity firm Silver Lake would invest $1 billion to boost that side of the business.
Motorola Solutions said that for the current quarter, it expected a profit of $1.45 to $1.50 per share from continuing operations, excluding items, well below the average analyst estimate of $1.57, according to Thomson Reuters I/B/E/S.
Revenue is expected to decline by 6 to 8 percent.
"I'm used to this company giving disappointing guidance ... they constantly over-forecast," MKM Partners analyst Michael Genovese told Reuters.
Overall revenue fell about 1 percent to $1.42 billion in the three months ended Oct. 3. Excluding the impact of the strong dollar, sales increased 3 percent.
Net income from continuing operations attributable to Motorola Solutions nearly doubled to $126 million, or 63 cents per share. Costs fell 1.9 percent to $737 million, and the company said it expected to cut operating expenses by $125 million in 2016.
Revenue from North America, the company's biggest market, rose 5 percent, helped by demand from the U.S. government.
Excluding items, the company earned 82 cents per share from continuing operations. Analysts on average had expected earnings of 73 cents per share and revenue of $1.41 billion.
Up to Wednesday's close of $71.36, the company's shares had risen about 6.4 percent this year.
(Reporting by Devika Krishna Kumar in Bengaluru; Editing by Ted Kerr)
