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Motorola cuts 2013 revenue forecast on enterprise order delays

People pass by the Motorola booth during the 2011 International Consumer Electronics Show (CES) in Las Vegas, Nevada January 7, 2011. REUTER
People pass by the Motorola booth during the 2011 International Consumer Electronics Show (CES) in Las Vegas, Nevada January 7, 2011. REUTER

By Sruthi Ramakrishnan

(Reuters) - Communications gear maker Motorola Solutions Inc cut its full-year revenue forecast, citing lower revenue from its enterprise business in the first half of the year, sending its shares to a five-month low.

Shares of the company fell 13 pct to $53.50 in morning trade on the New York Stock Exchange. They later recovered to trade at $56.32.

Motorola's enterprise business, which manufactures and sells rugged and enterprise-grade mobile computers and tablets, data capture devices and security products, brought in about a third of the company's revenue last year.

Two of its enterprise business segments - retail and logistics - had a "tougher start" to the year, Chief Executive Greg Brown told Reuters.

"Retail sales in March in the U.S. softened... it has caused them to pause as they purchase new enterprise products going forward," he said.

Several large enterprise projects are also being delayed as customers contemplate a transition to Android or the future Windows 8 operating system, Brown said on a conference call with analysts.

Enterprise sales fell 4 percent to $627 million in the first quarter, but Brown said he expects the business to return to growth in the second half of the year as new products are launched.

The company cut its revenue forecast for the year to about 3 to 4 percent growth. In January it had forecast growth of 5 to 5.5 percent.

The company maintained its outlook of adjusted operating income of about 18 percent of sales for the year.

Analysts on average were expecting earnings of $3.72 per share on revenue of $9.16 billion for 2013, according to Thomson Reuters I/B/E/S.

GOVERNMENT BUSINESS SAFE

Motorola reported lower-than-expected first-quarter revenue as growth slowed in its government business.

However, the company said it is little impacted by sequestration, or the across-the-board spending cuts which the federal government began implementing last month.

"Only 7 percent of our total revenue is federal, and even of that, less than half is DoD (Department of Defense). We primarily are civil and department of homeland security, that is a lot less impacted by sequestration," Brown said.

Motorola said in January it expected growth in its government business, which brought in nearly 70 percent of its total revenue last year, to moderate in 2013 after the end of an upgrade program for two-way radios.

The company benefited over the past year as two-way radio users were required by the Federal Communications Commission to upgrade their devices for a switch to narrow bands of 12.5 kHz from wideband channels of 25 kHz by January 1.

Motorola Solutions dominates the two-way radio market with its land-mobile-radio systems and public-safety products, and the U.S. government is its largest customer.

Net income from continuing operations rose to $192 million, or 68 cents per share in the first quarter, from $159 million, or 50 cents per share, a year earlier.

Excluding items, the company earned 66 cents per share from continuing operations.

Revenue rose by about a percent to $1.97 billion. Sales in its government business rose 3 percent to $1.35 billion.

Analysts on average had expected earnings of 66 cents per share on revenue of $2.05 billion.

(Additional reporting by Lehar Maan in Bangalore; Editing by Supriya Kurane)

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