Another surprising change has hit the mobile space; Zebra Technologies Corporation will acquire Motorola Solution’s enterprise business for $3.45 billion in an all-cash transaction. The transaction is expected to be completed by the end of 2014 and then approximately 4,500 employees are expected to join Zebra.
In a discussion with CNBC, Zebra CEO Anders Gustafsson talked about the strategic fit of the two companies, noting that they have been serving the same customers for years and both have similar channel partners.
The official comment from Motorola is, “Our Enterprise business is an ideal fit for Zebra,” according Greg Brown, Motorola Solutions chairman and CEO. “This transaction will enable us to further sharpen our strategic focus on providing mission-critical solutions for our government and public safety customers.”
Chris Hazelton, Research Director, Mobile & Wireless, 451 Group expands on the logic of this move, “Like the divestment of Motorola Solutions' Mobility Services Platform (MSP) to AirWatch, this is a similar opportunity to streamline their business and focus on divisions that are seeing growth.”
However, in this case, it’s not just about streamlining operations, but also a result of what’s been happening to IT for some time now. Consumerization has changed the smartphone and tablet environment in business and forced the evolvement of both consumer-grade devices to be more suited to the enterprise, and rugged devices to be more consumer-like.
Hazelton says, “Motorola's enterprise business that it is divesting, is focused on task worker mobility—ruggedized computing, data capture and RFID—which is increasingly being appropriated by more consumer and knowledge, worker-focused technology that is good enough and cheap enough to work.”
Enter the Enterprise
Through this transaction, Zebra will enter the segment where Motorola’s Enterprise business competes and strengthens its position in key industries including retail, transportation and logistics and manufacturing, and serves approximately 95% of the Fortune 500.
Zebra Technologies, with 2013 sales of $1.0 billion, is a leader in barcode and enterprise printing, asset tracking, Internet of Things (IoT) solutions and motion and location sensing. The combination of these technology offerings and asset tracking solutions, together with Motorola’s Enterprise business, will create a new type of organization for the “Connected Age.”
Motorola Solutions will continue to manufacture, design, integrate and deliver voice and data communication solutions for government and public safety customers worldwide. The company sells these secure, mission-critical and innovative products, services and solutions with unique software designs that are said to be cutting edge in public safety technology.
Strategic Fit for Zebra
The transaction will significantly expand Zebra’s geographic reach; the combined company will have about 20,000 channel partners in more than 100 countries, and will hold a robust portfolio of intellectual property, with approximately 4,500 U.S. and international patents issued and pending.
According to a release, key benefits to Zebra and its shareholders include:
Stronger combined platform with multiple growth opportunities
New and comprehensive product, technology and IP portfolio
Leading end-to-end solutions across key industries with global reach
Highly diversified business mix
Creating synergies by maximizing efficiencies and scale
Attractive growth and free cash flow profile
Strategic Rationale for Motorola Solutions
Brown said that the company undertook a thorough review of strategy and concluded that the synergies between our government and enterprise businesses were not as great as the value they could create by “being singularly focused on our core Government & Public Safety business.”
Hazelton notes, “Even with this divestment, MSI still expects low to mid-single digit long term growth, so this cash payment from Zebra is also a way to deliver additional value back to shareholders in the short term.”