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Greg Brown - CEO

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Jim Suva - Citigroup

Motorola Solutions Inc. (MSI) Citi Global Technology Conference - (Transcript) September 4, 2013 10:30 AM ET

Jim Suva - Citigroup

Good morning and thank you for joining us here on the second day of the Citi Global Technology Conference. This fireside chat is with Motorola Solutions. I am Jim Suva, the IT hardware and Technology Supply Chain Analyst here at Citi. Joining me here on the stage is Greg Brown, the Chairman and Chief Executive Officer of Motorola Solutions. This is not a canned presentation. It is a fireside chat about business trends, because most of you are very sophisticated technology investors.

I am going to start things off by talking about some bigger picture questions, but importantly, we have reserved the majority of the time for you as investors in Motorola Solutions to be asking questions to the CEO of Motorola Solutions. Accordingly, we will ask that you wait for the microphone to get you so everyone can hear your question, as this is also being webcast. First of all, I want to personally thank Greg Brown for joining us. Thank you, Greg.

Greg Brown

Thank you Jim, I appreciate the opportunity.

Jim Suva - Citigroup

Can we, Greg, first start talking about big picture macro? You are sitting in a very interesting position and seat at Motorola Solutions as CEO as well as lot of pulse is on globally what's going on. Can you talk to us about what type of global demand trends that you are seeing there for your company?

Greg Brown

I think that you all know we have two businesses in the firm, our government and public safety business and the enterprise business. Jim I think the demand drivers let’s take the government business first, remain strong in terms of aged infrastructure. I think about 60% of the installed base are analog systems from a Public Safety standpoint.

We’ve talk a lot about our professional and commercial radio business, where the overwhelming amount of the installed base north of 90% remains analog. We’ve a very competitive portfolio, we believe we have the best portfolio that positions us to moving towards digital, yet also preserving and maintaining strong margin profiles.

The continuing need for interoperability, the high critical nature and prioritization of the mission-critical public safety. Internationally, we see strong demand, we are very proud of the award in L.A. recently, LA-RICS for $280 million over 15 years, which was the culmination of about 4.5 years worth of work.

So I think that’s strong, and in the enterprise business, you know it’s been more challenging for us. The business has contracted for five consecutive quarters. There’s elements of good news to that as well. I think that the category commensurately has shrunk as well, so generally we are holding share.

I believe that the companies and enterprise clients are sweating the assets longer, as it relates to mobile computing. IT hardware spend is not what was originally contemplated at the beginning of the year, and there is a Microsoft element from an OS transition standpoint that I think has allowed customers to pause a little bit longer than normal.

Having said that it’s a strong portfolio, a very good return on investment characteristics. The portfolio is industrial mobility primarily. So things around warehouse manufacturing, industrial scanning those kinds of inventory management remained constant, but there’s no question that enterprise has been a more challenging year for us. It’s a bit of the tale of two cities for us.

Jim Suva - Citigroup

And then recently, well I have actually known your company before, when you were part of Motorola before the breakup, so I’ve known you for years and years.

Greg Brown

Indeed.

Jim Suva - Citigroup

I feel like we are getting old together here through this journey. But I have known you for years, but recently you had a little bit of management changes within your company. Can you update investors on the status on what prompted some of those changes?

Greg Brown

Sure. Ed Fitzpatrick is the CFO I think was the right guy at the right time for us when we separated the company, and I think I applaud Ed and his team in doing many good things process, controls, the tax and the creation of the tax entity, the investment grade rating. Having said that, as I said, to many, I was thinking about a change for a while. It’s not a sudden decision or a snap decision.

Looking forward, I think I would look for a CFO to be strong operationally, be a strong communicator with the street, and drive some transformational change not only within the finance function in Motorola but beyond. So I am very grateful for Ed and everything he has done. Gino Bonanotte is here with me this morning, our Acting CFO, who without a doubt is the strongest operationally grounded person in the finance organization. He’s hit the ground running. He is a candidate for the CFO job, although it is more likely to not go outside and that search is very vigorous and engaged.

Jim Suva - Citigroup

Great. Well, just to let you know I am very happy here at Citigroup, so you don’t need to be getting me a call?

Greg Brown

Shelly take that name off the list.

Jim Suva - Citigroup

Greg, this is our second day of our technology conference here, and yesterday the theme overall was kind of relatively stable visibility not getting worse, some pockets of strength some pockets of softness; globally and overall kind of a muted environment. If we indeed are in a muted environment, does Motorola Solutions have any internal levers it can pull for margin enhancement or EPS growth whether that’s cost cutting, whether that’s labor, or whether that procurement, whether it’s restructuring, stock buyback. Can you walk us through what you would run the company as CEO in kind of a more muted environment? And if this enterprise continues to be challenged?

Greg Brown

So I would concur that the environment is generally muted. I think that there are levers we can pull particularly on the operating expense side. We’ve talk about that to date we have taken action that commensurately would likely be reflected in $50 million of annualized cost savings from a 2014 standpoint. We’ve also mention that even - we are still targeting 18% operating margin even in a difficult growth year of flat to 1%.

On the full year, there is levers we can pull in terms of continued operating expense reductions that would be surgical and impactful but never impair the long term characteristics of the business and there are variable incentives as well. So obviously, since we're growing less than what we originally thought, budgets that we had for sales compensation will come in lower than we had originally projected. And quite frankly, the annual incentive program or the management bonus structure will be an incentive lever that if we don't perform to where we originally projected that too is a variable expense driver, because that drops to the bottom line.

I think that we have demonstrated some strong operating leverage, we had 14% operating margin in ‘11, 16% or 16.7% in ’12, and we have every expectation that operating margin will continue to expand. In terms of the deployment of capital, I think we've been good stewards of capital, coming out of the gate post separation, established a share repurchase program a little over two years ago.

Through Q2, we've purchased 4.5 billion of shares at an aggregate price of 49 and change shrinking the outstanding share count by 23%, and we established the dividend and then raised it 18% last year and just recently raised it 19%. So capital allocation remains first and foremost, and we are in a position where we still have excess cash. We mentioned the fact that we move towards a net debt position by the end of 2014.

So, we have more fire power there. Now having said that we always watch the amount of cash in the U.S. Of our total cash balance we had 37% in the U.S. coming out of Q2 and we have repatriation plans to bring back foreign cash by the end of this year. Although through the first half of this year, repatriation has been very small as planned. The bulk of our repatriation, Jim, is in the second half of the year.

Jim Suva - Citigroup

Great. Yes, indeed, I got to commend you. You've really done very well about your capital post spin out of the dividend and the buyback. So I think investors have really welcomed that.

Greg, you know, have a whole laundry list of questions, but for those on the webcast, just to know, I mean, it's literally standing room only in this room. So it's just absolutely fabulous attendance which is great. So I think rather than me continue down my laundry list of questions, I think it'd be appropriate to maybe open it up for some investor questions. If you have some questions, please raise your hand on the microphone will get to you. There is a question here, in the kind of the middle of the room and please wait for the microphone to get to you so everyone can hear your question, please.

Question-And-Answer Session

Unidentified Analyst

Hi, couple of questions. First is, just a little bit more detail on the stock buyback. What do you currently have authorized right now left?

Greg Brown

We've authorized coming out of Q2, $2.5 billion left. So we've purchased 4.5. The Board extended $2 billion repurchase authorization taking us from five to a total of seven since inception.

Unidentified Analyst

Okay, so $2.5 billion left and in terms of how that plan is being implemented, is it something where you guys can adjust in a material way or how you have adjusted in the past, I think that’s a significant way depending upon business fundamentals currently?

Greg Brown

We have adjusted it and we continue to do it quarter-by-quarter. We purchased $550 million in Q1, $357 million in Q2. Actually, maybe that’s inverted. It's $357 million in Q1, $550 million in Q2. I’ve said that those are reasonable reference points in terms of how we're thinking about it from a share repurchase standpoint, we do a, we update every quarter, our long range plan, which talks about the growth of the firm in 2014 and beyond, we do discounted cash flows back obviously it assumes a certain cost of capital, but I think we're pretty diligent about how we’ve done share repurchase to-date and it remains a high priority.

Unidentified Analyst

Okay. And then last question just concerning, correct me if this is wrong, I thought government business overall is roughly 70% of revenues, is that about right?

Greg Brown

Government is what?

Unidentified Analyst

Government is roughly two-thirds of your business?

Greg Brown

Oh, I thought you said 7%. Yes, roughly yes.

Unidentified Analyst

Okay. How much of that is domestic roughly and how much of what's domestic is focused on local and then I just have one quick follow-up on.

Greg Brown

So our government business is the majority of it state and local. Our federal business is about $600 million. So the government business domestically here is significantly driven by state and local.

Unidentified Analyst

And then how of you, have you guys been able to stabilize, at least revenues of that business, if it hasn’t grown a little bit given in just the budget constraints that we’ve had and are likely to be ongoing for a while and do you still anticipate that that business can be relatively stable despite of budget constraints?

Greg Brown

I do think that the government business can be relatively stable, I actually think the disposition of state and local is stronger than it was two or three years ago, comparatively.

Our federal business as I mentioned is about $600 million, I think the federal budget is probably a little bit more challenged and I would call the state and local business obviously at the federal level there is sequestration and the debt ceiling and the whole host of other things that are going on at the federal level.

I think the majority our federal business is split between civilian and defense and we'll keep our eye on our federal order business, but state and local business I think is pretty solid.

Jim Suva - Citigroup

And as the microphone makes its way to the next investor here I do have to say I live in California and the property tax collector is a lot happier today than they were two years ago and they are quickly spending the money.

Greg Brown

That’s right, no, I think tax receipts are better and the good position of the government and public safety business, is it remains a high priority within the allocation of available spend within the state and local jurisdiction, so that’s a positive for us.

Unidentified Analyst

Greg would you talk a little bit more about the Microsoft OS transition, more details as to what exactly that is and the timing of it and what do you expect after that?

Greg Brown

So I think that the overwhelming majority installed base of our enterprise mobile computing business is Microsoft whether it’s Windows CE, Windows Embedded Handheld, Windows Mobile 6.5.3 and what Microsoft customers have wanted they want to stay with Microsoft is a roadmap of the next generation of OS.

I think the announcement of Microsoft Nokia recommits clearly Microsoft to the consumer smartphone base of business and solidifies their interest in prioritizing Windows Mobile 8 or derivatives and enhancements thereof. I think that’s positive to us because typically what Microsoft does is they prioritize the Windows phone version for the consumer and then the enterprise derivative follows.

So - but it's been in that transition and the elongated transition of the next generation of enterprise OS from Microsoft that some customers have hit the pause button waiting for the availability of that next OS, now having said that we've moved full steam ahead on the Android. We've got products, our MC40, our ET1 on Android 3.0 and soon Android 4.0 or 4.1.

We've also invested inorganically in a small acquisition about 18 months ago or two years ago for an HTML 5 layer of application development that's agnostic of the OS. So we can deliver Microsoft product, we can deliver Android product and we can deliver HTML 5 product. But Microsoft centric customers interested in staying with Microsoft are awaiting more clarity on the future functionality of the next OS.

Unidentified Analyst

And the Microsoft centric customer installed based that you have is the vast majority of your installed base, is that correct?

Greg Brown

Without a doubt, yes. That doesn’t mean necessarily they have a preference to stay with Microsoft but yes the space of mobile computing for Honeywell or us or others are predominantly Microsoft.

Unidentified Analyst

So, I'm sorry just so that I better understand, it's trying to take Windows Mobile 8 from that's already out in the consumer side and implementing that in the enterprise?

Greg Brown

What Microsoft has typically done is they released the consumer OS first and then an enterprise grade version built off of that.

Unidentified Analyst

Okay, so what do you know about the timing of the enterprise grade version of that?

Greg Brown

At the moment I would characterize it as mid 2014.

Unidentified Analyst

And then just one other question, is there a risk that some of your enterprise customers are using consumer based hand held appliances with scanner features and software applications to kind of displace the core enterprise asset that you have?

Greg Brown

So, we've seen very little of that, if I think of our mobile computing business, I think of it in three large buckets primarily industrial computing, then field mobility computing and then customer facing. We've seen some customer facing experimentation with smartphone deployment. It's pretty small in nature and in fact in a couple of the cases where customers have rolled that out, they’ve actually returned in the discussion to us and entertaining consideration of the Motorola Solutions product.

So, I think it's pretty small, I think we've articulated in the past that 10% or 10% or 15% as best we can estimate would be potentially vulnerable but the overwhelming bulk would not be. Thank you.

Jim Suva - Citigroup

Additional questions in the room? It's a packed room. There's a question here towards the back and then we'll get to, we'll get to you next.

Unidentified Analyst

In terms of the wisdom of continued buyback strategy versus M&A they’ve seen a lot of industrial companies do M&A, you have a great channel into the government, but you haven't really done a lot of M&A as part of the strategy. Why continue to buy back so much stock if the return doesn't seem to be that great?

Greg Brown

Because of what was the last part?

Unidentified Analyst

The return on the repurchase hasn't been that great.

Greg Brown

What makes you say the return on the purchase hasn't been great? Just out of curiosity?

Unidentified Analyst

Stock is $56 and you've been buying back at $49 over three years.

Greg Brown

Well, I mean I, I take the point, but it's certainly better than having the inversion. I think that in terms of M&A, we've been pretty surgical about it. Psion was a good tuck-in. I liked it because it solidifies our number one position in mobile computing. It's a logical extension with our product duplication that gets us into manufacturing, cold storage, other form factors we didn’t offer. The companies were culturally compatible. So the synergy cost targets that we expected to achieve were at or tracking above them and it's right in the sweet spot in our core.

Because of the position that we have in a couple of markets as number one, acquiring or rolling up other assets are largely not available to us, given the strength of our market leading position and at the end of the day, I still think either investing in the business organically from an innovation and R&D standpoint, things like LTE where we've invested probably about $100 million over the last three years that results in a leading edge LTE position on the infrastructure as well as devices is capital well deployed and I obviously think that the business will return to stronger growth in the future which then married up against the shareholder return against where we buy back the shares in aggregate, will look even better than the way it looks today.

Jim Suva - Citigroup

There is a question I think towards the very back here.

Unidentified Analyst

Just on the enterprise, I mean, just thinking a year or so out, two questions. One, would you ever consider selling that business and secondly, as some of your clients move to IOS and Android, would you consider, perhaps, shifting to a more managed services or a VAR type role where you just help let’s say a Home Depot or a Lowe’s sort of manage those devices.

Greg Brown

So on the second one, first we do entertain more managed services engagements or what we call MLM, Mobile Lifecycle Management. We’ve done it on the device side, we’ve also done it more intently on the wireless LAN side to change the value proposition and try to compete a little bit more effectively in the segment and the business that’s challenged.

In terms of the focus on enterprise, our focus is on improving the business, and returning it to growth, and first of all retuning it from an improvement standpoint even if it’s negative x the negative y, showing a trajectory where the nose of the plane is up, getting traction with new products, having the vertical orientation by which we go to market in North America to get traction and that’s our primary area of focus.

Now having said that at the end of the day, I think that we as management, especially given our history at Motorola, we took the decision to spin-off mobile devices that was a huge decision, then made the subsequent decision to attach connected home to it, which was not contemplated in the original configuration of spinning the business office. We monetized the networks business for $1.1 billion with Nokia Siemens. We exited the backhaul business, the unlicensed backhaul business which is a good business but not for us.

So I think we’ve demonstrated kind of a dispassionate view of ways that are available to us to maximize shareholder value and I think we’ll continue to evaluate that in kind.

Unidentified Analyst

And just a quick follow-up, I mean are you guys seeing ASP pressure on the enterprise side as more people experiment with sort of white box Android devices, or iOS devices?

Greg Brown

We don’t see ASP compression, but we see - if you get some of more that substitution you will see a mix difference but not necessarily ASP contraction. By the way one other thing I should have mentioned when you asked me the levers on the expense side was pension and I meant to mention that. Pension has been a favorable benefit to us this year. From an expense standpoint we are likely to contribute at the moment our current thinking is approximately $200 million towards the pension. Given the move of interest rates the U.S. pension exiting 2012 had about a $2.8 billion liability and that’s improved with interest rates going up by a little bit more than 1 billion so that’s a favorable trend. So I just wanted to mention that one as well.

Jim Suva - Citigroup

You are not getting ready to cash in on your own pension are you?

Greg Brown

I don’t have a pension, I don’t have a pension, and no I am not.

Jim Suva - Citigroup

Okay, sounds great. There was a question here in the middle of this room and then we are going to get to this half of the room immediately following your questions.

Unidentified Analyst

Thank you. You mentioned the prior CFO at the time of the split was very strong on investment grade debt ratings and would that be a criteria for whoever you choose as a new CFO or would you be want to be more aggressive on your debt ratings?

Greg Brown

No I think the investment grade rating - the focus was getting it and establishing at a BBB. I think that our balance sheet and the inherent performance of the business gives us a lot of flexibility. I don’t have any intention or haven’t thought about lowering the investment grade, I think that’s important from a competition standpoint. It’s important to have that solid balance sheet and be able to complete all over the global; I would have no intention of changing that.

Unidentified Analyst

Thank you.

Jim Suva - Citigroup

And let’s shift it over now to this side of the room because we’ve focused over here, so why don’t we come to a question right here in the front row.

Unidentified Analyst

So given the competition on the enterprise sides from iPads etcetera, what product innovation are you guys thinking about to rejuvenate that segment instead of just defending, sort of rejuvenate and get at more wins?

Greg Brown

So we have a new product called the MC40 that is for lack of a better term it looks more like a consumer iTouch if you will with the ruggidization, with industrial scanning, with optimized voice for WLAN connectivity. We are engaged with a number of customers on that product, it’s Android based that’s one new product. We have a new Smart Badge, what we call the Smart Badge 1, which is in trial with a handful of customers that is more or less a lapel mic if you will or badge that can do scanning, inventory lookup, push to talk.

We have the ET1 LAN and WAN tablet also Android centric, that can be customized from a form factor standpoint and branded with the individual enterprise client, that’s more of a ruggedized nature of product. Those are a few of our new products. We are continually refreshing the MC series. We’ve had good traction with the MC67, with a different distribution customers and postal.

So, there are a number of things that Girish is doing on the product refresh side to make us more competitive and to get into some of the expansionary products that you are describing where maybe smartphone substitution would be – instead of just acquiescing to it, we can have a product or two to compete for that expansion grade that won’t contaminate the industrial nature of the majority of the portfolio that we have.

Jim Suva - Citigroup

There was another question on this side of the room; I know I saw a hand go up.

Greg Brown

By the way the other thing I did want to mention, and I know a lot of questions on Enterprise, as you know our iDEN segment is in the Enterprise. We have talked about it being approximately $185 million of revenue in 2013. As we look forward in 2014, we think the iDEN business will be closer to approximately $75 million. So, Sprint has obviously shutdown the iDEN network. We continue to serve NII and some other international clients in Latin America and in other theaters abroad. But that's also some visibility we have that should be incorporated into the thinking for 2014.

Jim Suva - Citigroup

And we have a question over here

Unidentified Analyst

That mic badge product that you talked about, do you expect to take that into the healthcare or hospital environment? There is a small company Vocera, would that be competitive with that product or --?

Greg Brown

So, I don't know the exact product from Vocera, but yes I think it's applicable as well into healthcare. The early trials that I'm thinking about now are all retail. But I think it will have applicability into healthcare as well.

Jim Suva - Citigroup

Additional investor questions? There is a question here. The microphone will make its way to you in one quick second.

Unidentified Analyst

Hi, just one more question on the share buyback. So you guys are generating, I think it’s really a healthy amount, something like $800 million or $900 million a year free cash flow. But the buyback run rate is significantly above that. How are you guys thinking about things in terms of amount of share buyback relative to free cash flow or is that not a metric that you look at? And then in terms of shares outstanding, I imagine, it's declining given how aggressive the buyback is, but if you give me a little bit more detail on that so I can compare it to share option grants?

Greg Brown

So, the share count has declined 23% since the inception of the share repurchase. I believe the shares outstanding coming out of Q2 (inaudible), $276 million to [$266 million]. I don't know the amount issued from a share standpoint but I know that net, net we can continually contract the share base. What was the first part of your question?

Unidentified Analyst

Relative to cash flow.

Greg Brown

Right, so I think that obviously the share repurchase outstripping the cash generation is a reflection of the excess cash we have, and the disposition in the U.S. and its paste to the amount we can repatriate without friction cost. Obviously, over time, that level is out a bit. Yes, sir.

Unidentified Analyst

Greg, I wanted to ask about the operating margin target for the year. Are you guys on a calendar year?

Greg Brown

Yes.

Unidentified Analyst

So what has been the operating margin for the first six months of the year?

Greg Brown

So as 16.7% last year, full-year, and Jason what it is first half. Sorry 17.3% was last year. 16.7% was two years ago, 17.3% was last year, what's it through the first half?

Unidentified Corporate Representative

15%?

Yes.

Greg Brown

We're seasonally always heavy in the second half of the year.

Unidentified Analyst

Okay.

Greg Brown

Particularly in Q4. So I think you'll see more operating leverage given the higher volume in the second half coupled with the expense controls, coupled with the variable incentives, which are levers to pull on sales and the bonus plan. Question over here in the left.

Jim Suva - Citigroup

Can you wait for the microphone please? Thank you.

Unidentified Analyst

I just wonder if we could talk broadly about how you see the competitive dynamic in the government business, sort of what it been has been historically and maybe how you see it unfolding over the next sort of year or two, any update there will be great? Thanks.

Greg Brown

So I don’t think there's any material change in the competitive landscape for the government business. Our primary competitor here in North America is Harris. In London or in the UK or internationally, its more EADS, which was Cassidian which I guess is going to rename themselves Airbus. We compete on the subscriber side on TETRA subscriber with a small company named [Sepura] out of the UK.

The professional and commercial radio business, the competitors remain the same in ICOM and Kenwood and Hytera. So, I don’t -- all in on the P25 business, the TETRA business and the PCR business, I don’t see any material change, as it relates to traditional and mobile radio business. Thank you.

Jim Suva - Citigroup

Additional questions?

Greg Brown

Over there on the end, first row.

Unidentified Analyst

Greg, I was curious about the Enterprise business, it is something core what the company does, obviously two thirds of the company from the public safety side, the government side, so any long term thoughts on the Enterprise business since it’s structurally somewhat different from the…?

Greg Brown

Since it’s what?

Unidentified Analyst

Since it’s structurally little different from the government side.

Greg Brown

Yeah I think at the end of the day, we have a great -- we have two core businesses; one great and one very good. It’s always tough to compare any other business with the dimensions of government and public safety, given the installed base, the margin profile, the portfolio that we have, the domain expertise, the distribution channels and with the breadth. Having said that, I still think the Enterprise business is a very good business, our focus is on operationally and financially improving it.

I think the portfolio referenced the earlier question around new products as getting stronger. Having said that, I think the synergies between the two businesses are relatively low, but we have every expectation that we could improve the trajectory of growth going forward on Enterprise. By the way, it's not lost on me, it is all proof is in the pudding and we can talk all we want, but from a credibility standpoint, we have to restore some management credibility vis-à-vis our performance and that’s not lost on us.

Jim Suva - Citigroup

We have time for two more questions one in the middle of the room and then the last question will be all the way here in the last.

Greg Brown

Maybe three quick ones.

Jim Suva - Citigroup

Okay.

Greg Brown

Yeah, three quick ones.

Unidentified Analyst

And so from a margin perspective, can you help us think through for the back half, the implied ramp up is pretty significant. So if you can kind of help us think through from a government perspective how much margin increase we should be expecting and then similarly from an enterprise perspective and what the drivers outside of the headcount reduction would be?

Greg Brown

Well, the only other thing I'd add beyond from an operating margin standpoint, the levers that I've described is backlog is healthy, and particularly aged backlog when we came out of Q2, aged backlog is up $100 million in Q4 giving us greater visibility around some of the stronger performance that we're expecting in the back half, in particular Q4.

Unidentified Analyst

And so, the aged backlog, that is primarily on the government side?

Greg Brown

Primarily government, yeah.

Unidentified Analyst

Okay, so should we be thinking the contribution to the increase in the back half is predominantly from government?

Greg Brown

I think you should think about our business in the second half anchored in government yes, and the strength that that affords us largely anchored in government. There is one question here and then one question there.

Unidentified Analyst

How long do your products typically last at a customer installation like a handset or something like that before it either breaks or is replaced, and how long do you have to keep the same product in production so that the customer has a stream of replacement parts?

Greg Brown

So, on the government and public safety side, some of our systems are 15 and 20 years old. And on the enterprise mobile computing side, I think and Gino may correct me here, but I think on average we're seeing about four or five years lifecycle of a mobile computer. It’s a little bit of a mixed blessing. Part of reason, I think customers sweat the asset is the longevity and durability of the products that we make and my comment is more grounded in the Enterprise side since that's where I think that they're sweating the assets longer.

I think that as state and local tax receipts improve and the disposition of state and local improve and mission critical voice and land mobile radio for interoperability remains a high priority, we're seeing a healthy backlog and a good consistent drum beat of demand on the public safety side.

Jim Suva - Citigroup

There is a question all the way in the back.

Greg Brown

There's one more.

Unidentified Analyst

So just thinking long term about the impact of LTE on government business and sort of specifically referring to the Queensland contract and the LA-RICS contract, how do you see LTE impacting device sales into non-mission-critical voice?

Greg Brown

So, just since you mentioned Queensland, Queensland is not an LTE award, it's a land mobile radio award, it's roughly $400 million, we do not have the award yet. But Queensland announced their intention, Telstra is the prime, we're the subcontract that does all the LMR over 15 years, I think of our piece of the $400 million is roughly half.

I think of the LTE business as the biggest growth opportunity in our government and public safety business outside the core. I think if it is incremental, I think if it is worldwide, although I've said that I still believe that the international opportunities will be greater in the short term over domestically here in the U.S as FirstNet sorts through both the spectrum license agreements and BTOP grants. By the way, I think FirstNet is working very hard and has all the right intentions of moving forward on a nationwide broadband network. And I think that FirstNet will look to one or two early customers to be completed, largely probably BTOP customers to see, if there is a way that the customer and FirstNet and others can come to agreement to get early implementations and a reference point for LTE.

I think to your point around devices, I think they will -- LTE will afford a second device to a land mobile radio or a converged device that could be Band Class 14 for a carrier or Band Class 13 for private networks. But, I think the overall opportunity is net, net positive both on infrastructure and devices, and the domain of expertise in public safety and all the interesting and unique characteristics that first responders need play well to our hand to capitalize on that growth opportunity.

Jim Suva - Citigroup

Ladies and gentlemen, I want to thank you so much for your time here in joining us for Motorola Solutions as well as for having Greg join us. Thank you.

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Source: Motorola Solutions' CEO Presents Citi Global Technology Conference - (Transcript)
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