Symbol is to become the center of Motorola’s push into enterprise computing and will add its $1.7bn a year of sales to the $6.6bn revenue achieved by Motorola’s government and enterprise mobility business in 2005, 18% of total revenue.
The internet is about to go airborne, said Motorola CEO Ed Zander, whose company believes that an enterprise mobility market that was worth $14.6bn in 2005 will more than double to $32.7bn by 2010.
Symbol shares leapt 15.4% to $14.67 on Monday after press comment that the company was up for sale and the $15 a share deal was justified by the premium on Friday’s closing price of $12.71. But Symbol CEO Sal Iannuzzi denied that Schaumberg, Illinois-based Motorola had to fight off other bidders. There was no auction for Symbol, we were not on the block, he said.
However, Motorola’s move may well prompt rapid consolidation in a sector where there are plenty of players operating in various sectors of the market but none can match Motorola’s product range.
Zander was evangelical about the prospects of the combination of Symbol’s mobility within the enterprise (wireless LAN) with his own company’s communication skills outside the plant with wireless WAN technologies (cellular and WiMAX) and the ability to offer a seamless combination across a range of technologies.
In terms of vertical markets, Zander said Symbol’s strength in retail, wholesale, and healthcare would complement Motorola’s own strengths in government and utility verticals.
Symbol has a broad product range, with 60% on its revenue coming from mobile computing (sub-laptop handhelds), 24% from data capture (barcode readers), 9% from wireless LAN infrastructure, and 2.4% from RFID, which it admits is not profitable but has enormous long-term growth prospects.
It also plans to integrate WLAN and RFID to enable a single infrastructure for environments such as warehouses. Motorola has its own RFID technology and sees the big attraction as providing the technology to track products through the supply chain, not supplying the tags themselves.
Symbol, which will retain its Holtsville, New York based headquarters, has a poor financial record. In the year to December 31, net income fell 60.6% to $32.2m on revenue that rose only 1.9% to $1.7bn. However, it is some achievement the company is still around. An accounting scandal in late 2003 caused it to restate almost five years of earnings and pay a $140m fine. The CEO at the time, Tomo Razmilovic, faced criminal charges, fled the country, and was declared a fugitive by federal prosecutors.
Symbol has seen the departure of four CEOs since 2000, a destabilizing factor for a company operating in a new market, and staff will undoubtedly welcome the security that Motorola will bring it in a deal expected by close by the end of this year or early in 2007.
Motorola, which will pay for Symbol out of its $10bn cash reserves, expects it to be accretive to earnings in the first year, before exceptional items. It is aiming at $100m of synergies by 2008.
Marco Landi, senior director of marketing for Symbol in EMEA, said there are virtually no overlaps in terms of the two companies’ product portfolios.
There is one minor one, in that they developed a rugged handheld for a particular customer in Israel, but they’ve never sold it to anyone else, he said. From his company’s point of view, he added, our technology is good but we’ve been suffering from lack of brand, particularly in the WiFi space, where we’re going up against the likes of Cisco, but now we’ll have the Motorola brand to help push us.
In terms of partnerships and OEM deals, the acquisition will presumably spell an end to Motorola’s collaboration with WLAN switch vendor Trapeze Networks, which never developed into an OEM but was talked up by Trapeze as indicating its pedigree in the market. Motorola is also among the companies that have helped fund Trapeze in more than one round.
A relationship that is expected to remain unaffected by the deal is Symbol’s OEM deal with the ProCurve networking division of HP, which launched its rebranded offering based on Symbol gear earlier this year.
