Motorola Solutions Earnings Call Nuggets: Evolution of Operating Expenses and Net Cash Position Goals

Motorola Solutions, Inc. (NYSE:MSI) recently reported its fourth quarter earnings and discussed the following topics in its earnings conference call.

Evolution of Operating Expenses

Pierre Ferragu – Sanford C. Bernstein, Ltd.: I was wondering how you see the evolution of your operating expenses in 2013. If I look at the way you have guided the year, in top line and in operating margins, if I assume things are not going to change much at your gross margin level, I thought it would end up with OpEx growing at faster rate than it 2012. So is that just me making the wrong assumptions or do you see like expenses increasing a bit faster this year compared to last year?

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Edward J. Fitzpatrick – EVP and CFO: I think on the operating expenses side you shouldn’t see a significant changes year-over-year. The one benefit that I’d mentioned was the pension expense would be a bit better. Other than that, we will dial-up and dial-down as appropriately within R&D, marketing and selling to make that we are addressing the opportunities, but the year-over-year level should be relatively consistent, up slightly driven by annual merits and the like Pierre.

Pierre Ferragu – Sanford C. Bernstein, Ltd.: Maybe if I can just ask one quick follow-up. You have a lot of new products coming in, in your Enterprise division. Could you give us an update on these products, when do you expect them to hit the market? If you have already some perspective on whether your Enterprise clients are going to adapt to these new products relatively quickly? Or if we are in a situation where there is a risk of a very slow ramp up because of the economic environment?

Greg Brown – Chairman and CEO: Yeah, Pierre, I think that we have a couple of the new products already available now on the Enterprise Mobile Computing side. To be more specific ,and some of the new, new, the MC40, we expect to be available and shipping in Q2, which is great a front store facing operations device that will expand our portfolio, our SB1 Smart Badge should also be generally available in Q2 and then the multi-plane scanner should be available by midyear as well. So in addition to some of the new MC series mobile computing devices that are already shipping, we have these new products that will be available in a couple of quarters and we feel pretty good about the portfolio.

Net Cash Position Goals

Jim Suva – Citigroup: Congratulation to you and your team there at Motorola Solutions. I have two questions. First of all, can you talk a little bit you mentioned a little bit of pause in mobility, is that Enterprise related like the uncertain IT budget spending environments or what kind of (caused that pause) and if so is that kind of you think going to be resolved here in the next couple of months? Then the second question I had is on your net cash position, can you just kind of remind us as your goals, your leverage plans and any debt you may take out, kind of timelines you think about and using it for stock buyback accretive acquisitions?

Edward J. Fitzpatrick – EVP and CFO: Jim on the Enterprise side, I think the pause was due to a few things. Number one, fewer larger deals, which represented basically a number of smaller deals that made it difficult to compare in the previous year comp, but also the pause was around to your point IT spending acknowledging the macro environment. I think we believe that will improve as IT spend and IT hardware spend is anticipated to increase. There was also I think and I mentioned it last call anecdotally, but I think that around operating system roadmaps specifically Microsoft Windows 8, which has been remediated and we announced at NRF plans to incorporate Windows Embedded 8 into some of our devices in ’13, so I think that takes care of itself as well. So generally speaking, I think that the environment for Enterprise should improve. Remember also in Enterprise, we also have a couple of products available on Android, our ET1 tablet and new device that I just referenced with (peer), the MC40, so we feel pretty well-equipped because we have devices on Microsoft 6.5.3, devices on Android with extra enterprise security, great features that have been developed on top of Android and we also have HTML5 which is the web browser level, so we can accommodate application through a variety of different enterprise environments. Between that, new products in an improving external environment, we think it should get better. In terms of debt or net cash and debt, Ed and I have talked about we can out of the quarter with net cash of $1.9 billion gross, cash of $3.6 billion and it is our intention at some point in 2014 to go into a net debt position and the only other color I give you Jim on cash is referencing Ed’s comments in the script which talked about share repurchases of approximately in line or comparable to the previous two quarters Q3 and Q4. So that should dimensionalize where we are on net cash, where we’re headed with net debt and our planned expenditures. Very much in line with what we outlined at the financial analyst meeting last year, we’re well on our way there.

A Closer Look: Motorola Solutions Earnings Cheat Sheet>>