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We reiterate our long-term Neutral recommendation on Motorola Solutions Inc. (MSI - Analyst Report). The company posted mixed financial results for the third quarter of 2013. While net income surpassed the Zacks Consensus Estimate, total revenue fell below the same.

Why the Reiteration?

Motorola Solutions is the largest developer of public safety products commanding nearly half of the total market share in the U.S. The company is also the largest manufacturer of barcode readers and small rugged mobile computers. Motorola Solutions’ business strategy to focus only on the stable government segment will help the company to maintain its solid performance in the near future.

Motorola Solutions remains quite optimistic regarding its future growth. In addition to the U.S., the Middle East provides significant market potential. In the reported quarter, the Enterprise segment’s sales increased for the first time in seven successive quarters. The company has decided to vend its underperforming wireless LAN business.

Ongoing conversion of public safety radios to digital network technology from analog in the U.S. will act as a major product upgrade cycle for Motorola Solutions. Currently, 60% of the public safety networks in the U.S. are running on analog technology indicating huge growth potential for the company.

Nevertheless, the top line of Motorola Solutions was hurt by the poor performance of its Government segment.  The company cited reduced IT spending by several U.S. federal agencies as the main reason behind declining revenues. Management has reduced its total revenue projection for fiscal 2013 for the third time this year.  

Other Stocks to Consider

Motorola Solutions currently has a Zacks Rank #2 (Buy). Other stocks in the same industry which are also performing well include ShoreTel Inc. (SHOR - Snapshot Report), Ubiquiti Networks Inc. (UBNT - Analyst Report) and Harris Corp. (HRS - Analyst Report). ShoreTel and Ubiquiti currently have a Zacks Rank #1 (Strong Buy) while Harris carries a Zacks Rank #2.

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