Feature Article

April 15, 2014

Wheelings & Dealings: Motorola's Tracking Technology Goes to Zebra for $3.5 Billion

Motorola has not only gone through a lot of changes over the past couple of years, it also seems to have gone through quite a few hands as well. Back in 2011, Motorola divided itself into two separate units. One of those units dealt with mobile phones. My first cell phone in 1998 was a Motorola with a battery that lasted about 20 minutes. A lot has changed for Motorola since then.

The mobile phone unit was purchased by Google in 2012 and just recently sold to Chinese multinational technology company, Lenovo. As of last week, Rick Osterloh assumed the role of COO of Motorola Mobility. Today it looks like there will be additional changes for the company.

Zebra Technologies will take over Motorola’s mobile devices for businesses unit. According to Bloomberg, Zebra will be acquiring this unit of Motorola Solutions for $3.45 billion. The breakdown looks like this, in the deal, Zebra is set to fund about $200 million of cash and $3.25 billion in new debt.

It seems odd that a company would go into debt to purchase another company, but Zebra believes that the benefits are there. They would have to since they are basically setting themselves up with $3.25 billion of new debt when the company itself seems to be worth $3.4 billion.

An analyst for Raymond James Financial, Inc., Tavis McCourt, said, “For Zebra, this is an opportunity to bundle additional products into the portfolio they already offer their customers.” This comment stems from the fact that both Motorola and Zebra provide barcode scanning, radio-frequency identification and other technology that companies can use to control their inventory.

All of this ties into the Internet of Things. Motorola also manufactures specialized tablets and computers for various industries. This allows them to run the gambit of tracking which items need to be restocked on shelves in a brick and mortar location to hospitals recording medicine doses for their patients.

Zebra specializes in barcode, receipt, kiosk, and RFID printers and supplies for businesses. The company provides tracking technology to companies worldwide. This can be seen in the form of helping Amazon track inventory to building human-tracking gadgets. This is something that can help athletes assess their performance. The company says it is a provider of technologies that "allow customers to take smarter actions" and "provide greater visibility into mission-critical information."

As for Motorola, Michael Genovese, an analyst at MKM Partners, feels that, “Motorola does not have the enterprise focus or creativity to compete with tablets and iPhones -- I think Zebra does. This is a good transaction from that perspective.”

During a conference call this morning, Motorola CEO, Greg Brown stated, “We thought doubling down on government and public safety made sense. It allows us to be manically and singularly focused on growing the public-safety business.”

This is in reference to the fact that when I bought my first Motorola cell phone, the company was considered to be a giant in the industry. After making some divisions within the company followed by acquisitions, the only division left is Motorola’s government services unit.

This is Motorola’s unit that provides two-way radios, mobile computers, as well as various communications equipment and networks for emergency personnel, first responders, law enforcement and utilities. Motorola also still controls its iDEN network.

Integrated Digital Enhanced Network or iDEN is a mobile telecommunications technology that was developed by Motorola. It provides its users the benefits of a trunked radio and a cellular telephone. It has been called the first mobile social network by technology industry analysts. iDEN places more users in a given spectral space, compared to analog cellular and two-way radio systems, by using speech compression and time division multiple access (TDMA).

According to Motorola, it will return the proceeds of the sale to its shareholders. If all goes well, the deal should be completed by the end of the year.

Edited by Stefania Viscusi

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