Motorola Solutions announced that it has entered into a definitive agreement to acquire Avigilon in an all cash-transaction valued at approximately $1 billion, intended to enhance the company’s portfolio of mission-critical communications technologies.

Vancouver-based Avigilon designs, develops and manufactures advanced security surveillance solutions, including video analytics, network video management software and hardware, surveillance cameras, and access control solutions. The company’s products are used by a range of commercial and government customers including critical infrastructure, airports, government facilities, public venues, healthcare centres and retail. It holds more than 750 US and international patents.

Motorola Solutions states that Avigilon’s video surveillance platform allows more proactive use of video, by issuing alerts in real time when a person, object or vehicle of interest is detected, thereby enabling quicker decision making.

"We’re very pleased to be joining Motorola Solutions, as their vision and strategy aligns fully with our own,” said Alexander Fernandes, Avigilon’s founder, chief executive officer and chairman of the board. “This combination will bring new opportunities to Avigilon, allowing us to accelerate our innovation and provide even more value to our customers.”

In a conference call transcript produced by Seeking Alpha, Gregory Brown, Motorola Solutions’ chairman and CEO described the strategic rationale behind the decision to acquire Avigilon.

“First of all, video surveillance and analytics is growing, it's growing rapidly. Second, the total addressable market is in well in excess of 10 or 11 billion and then some. And third, video continues to be a growing requirement of public safety customers and critical infrastructure customers that want a solution and would like Motorola to provide [it].”

“[What is] especially attractive to me is this is not a commodity business. As you've seen with other actions we've taken with the portfolio, I'm not interested in commodity businesses and I'm not interested in commodity margins. I like the market leader with an end-to-end platform orientation, and we believe this video surveillance, suite of analytics, video management and video storage is particularly strong.

"It can fit very neatly and nicely and we can take this portfolio into global public safety because they [Avigilon] have been enterprise-centric. We can take it into US military, we can take it into US federal, we can take it into our large direct sales force that serve enterprises in the commercial markets.”

Motorola Solutions states that these commercial markets include as oil and gas, transportation, utilities, manufacturing and higher education.

The transaction is expected to be completed by the end of the second quarter of 2018, subject to customary closing conditions, including regulatory, shareholder and court approvals.

Motorola Solutions has also declared its 4Q2017 and full year 2017 results on 1 February.

The company has seen its full year revenue grow by six per cent, including acquisition, while organic growth for the same period was three per cent. Revenue growth in its services segment (nine per cent) outstripped that in products (three per cent). It generated $1.3 billion in operating cash, up $181 million on 2016.

The company also reported that it ended 2017 with a record backlog of $9.6 billion, up $1.2 billion from 4Q2016, and noted that LMR demand led by the Americas continues to drive the backlog growth.

While the company’s earnings per share were slightly negative on a GAAP (generally agreed accounting principles) basis, at -$0.95 for 2017 as a whole due to charges related to tax reform, on a non-GAAP basis, they were up 11 per cent on 2016 at $5.46.

During the conference call, Brown said in response to a question about the UK’s Emergency Services Network that “We are not planning on, in our 2018 guidance, any material revenue contribution from [ESN].”

He added that Motorola Solutions expects to generate $20-40 million in revenue from its FirstNet-related activities in 2018.

In the same call, Gino Bonanotte, Motorola Solutions’ executive vice president and CFO said: “In our products segments during Q4, we were awarded a $290 million contract for an LMR system in a Middle Eastern country that recently deployed a private public safety LTE system. This significant investment in LMR is the latest example of customers further validating that LTE and LMR are complementary technologies.

“We also won several large LMR deals in North America during the quarter, including a $76 million P25 order for the city of Dallas, a $53 million P25 order for the city of Los Angeles, and a $39 million P25 order for the city of Toronto.

“In our services segment, we continue to see demand by our customers for multi-year support contracts for their LMR systems. A few notable Q4 awards include a $197 million seven-year managed services contract extension for the Melbourne Metropolitan Radio Network in Australia. A $40 million five-year managed services contract in Victoria, Australia, and an $18 million seven-year managed services contract with Dow Chemical.”

According to the company’s financial results, the latter figure includes a P25 upgrade.

Author: Sam Fenwick